Regional Development in Perspective: Romania and Moldova

Previously on this blog I discussed the regional development policy in Japan. Last week I had the opportunity to learn first-hand about regional development in Romania in a study tour to the North-Eastern Development Region. Regional development in Romania was initiated in 1998 with passing of a related law, establishing 8 development regions. The process was driven by the availability of pre-accession European funds for large-scale development projects with regional impact. After passing of the law, each regional development council (decision-making body) created a regional development agency (executive body) to design and implement regional development for their respective regions.

I visited the North-Eastern Regional Development Agency, and was positively impressed by a couple of things: the organizational set-up and institutional capacity (excellent human resources management, result-oriented organizational culture, and partner-focused operations), the number of projects implemented (about 600), and the amount of funding invested in the region (over 130 million Euro). The most important indicator that is reported by regional development agencies is the absorption (of funds) rate, which for this region is as high as 85%. The key factors of success in case of the North-Eastern Development Region are: availability of funds, decentralization in planning and implementation, and institutional capacities.

How is this eight-year-Romanian experience in regional development relevant to Moldova where the law on regional development came into force just recently (16th of February 2007)? Although it is indeed too early to talk about the results of regional development in Moldova, one cannot ignore the current unknown variables that make any forecast of the impact of this policy an extremely difficult task. Although the Romanian and Moldovan laws are somewhat similar in their provisions, there are several underlying issues that might make regional development policy in Moldova a totally different story: 1) because Moldova is not an EU accession candidate country, it cannot benefit from the pre-accession funds available via PHARE, ISPA and SAPARD instruments which supported the regional development in Romania, 2) lack of access to these ‘traditional’ funds increases the need of the Moldovan central government to negotiate an individual development funding menu with the European Commission, which determines a high level of centralization and unpredictability in spending future regional development funds, 3) such a high degree of centralization and unpredictability will disallow proper institutional capacity building and development at the regional level, which in turn might result in inefficient project implementation and overall failure of regional development policy.