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.

What's Wrong with Moldovan Media?

Just as I was wondering whether to write or not about my own frustration and disappointment with Moldovan media and journalists’ professionalism, I visited Sandu Culiuc’s blog where he addresses a similar issue. His story is that a well-respected media agency, Infotag , used some information from his blog to make a news article, distoring his name, position and the key message of his blog post. Furthermore, that article was distorted even more by a local news portal Moldova Azi

My story is not so personal, but just as outrageous. Since my return to Moldova, I’ve been professionally involved in regional development policy making, so I believe I’ve had time to develop a pretty good understanding of the situation in Moldova. According to my own assessment and given the current political, economical and social circumstances, the progress is significant. In this sense, I was pretty surprised when I came around this article in Logos Press, which gives a completely erroneous description of what’s going on in regional development in Moldova. Based on this example, I question the professional quality of the journalist who published this article, and consequently, the newspaper as a whole. If everything else in this newspaper is as true as the facts in this article, then I guess I won’t be reading it seriously any longer.

Moldova to Develop a National Development Plan

The President of Moldova announced that starting next year the Moldovan government will begin working on a 4-5-year national development plan. I took this as good news as I’m not very happy with the current national document that everyone refers to as Moldova’s major development plans: the Economic Growth and Poverty Reduction Strategy. This document is narrow in scope and, as the title suggests, its aim is far from setting national development objectives, priorities and guidelines. As a result, Moldova has had no national development plan, which means that development throughout the country has remained largely unplanned, unaccounted for, and thus stagnant. And this is a big problem, which is finally starting to draw some attention.

The regional development policy, slowly but surely taking shape within the Ministry for Local Public Administration, is another approach to the same problem. Addressing regional underdevelopment through targeted public investment programs and support to regional and local capacities is a practice that has worked successfully in many countries, including EU, US, Japan. However, I noticed a high level of resistance to regional development in Moldova. Skepticism and distrust are the attitudes that people most commonly display regarding the Moldovan regional development policy in making. In my view, this resistance is based on lack of information and misunderstanding of the concept itself, as well as on the general distrust towards any governmental policies. I see it as a big challenge for the Moldovan government to try to regain people’s support, and persuade the public opinion about the positive outcomes of its development policies.

Understanding Regional Development

Our group had just returned from a field trip in Hokkaido countryside. In the course of four days, we visited Kushiro and Obihiro cities, as well as many other interesting locations and sites. You can find details on this field trip, as well as some pictures on the left, on Jauntlet.

In the evenings, I’ve been reading a very good book on regional development, which I’m happy to have discovered, entitled Regional Development in Third World Countries: Paradigms and Operational Principles. The author, Haruo Nagamine, was a distinguished Japanese development professional and trainer, who attempted to understand and approach the challenge of achieving balanced prosperity and well-being in the developing countries. Although his work and research was focused on South Asian countries, I find his analysis, conclusions and recommendations relevant to current realities in Moldova – a low-income country in transition. Here is Nagamine’s list of constraints that developing countries have to consider (and overcome) in designing and implementing their regional development policies:

Economic constraints
Poverty
Disparity
Stagnant manufacturing industries
Low level of technology
Insufficient employment opportunities
Shortage in basic means of production

Social Constraints
High population growth (not the case in Moldova)
Inadequate provision of basic needs
Inappropriate school curriculum
Inflated material desires

Physical Constraints
Concentration in primate cities
Poor infrastructure
Inadequate maintenance and operation of infrastructure
Deforestation

Constraints in Development Administration and Finance
Ill-defined administrative responsibilities
Inadequate coordination among administrative bodies
Dependence of regional budgets on central governments (in Moldova, it is local governments)
Political system inimical to democratic representation (less applicable to Moldova)
Bottlenecks to community participation
Corruption
Promotion in civil service

General Constraints
Limited availability of information
Vicious cycles of entrenched constraints

Nagamine states that until now – that is in the past five-six decades – regional development policies of South Asian countries have not been very effective, and provides the reasons why. Why has it been so difficult for Japan’s neighboring Third World countries to replicate Japan’s success in regional development, particularly given Japan’s persistent and active mentorship? What can Japan and its ODA recipient government change in their approach of regional development? The lesson for Moldova is that planning and managing regional development should be approached in the most engaged, professional, disciplined, creative, and consistent way. Nagamine expressed this very well:

“Effectiveness of development planning largely depends on the leadership of the government and the willingness of people to act toward a common goal.”

Development and Decentralization

In the last five decades, Hokkaido, one of Japan’s forty seven prefectures (second tier of government), has received a huge amount of funding for development from the central government. Development includes public works such as road improvement, ports, airports, railways, afforestation, housing, municipal services, agriculture, forestry and fisheries. In 2005, Hokkaido received USD 6.3 billion (10% of Japan’s public works budget), while it accounts for 4.4% of Japan’s population and 4% of national GDP. Over the years, Hokkaido has been perceived as extremely important in terms of national security (military, food) and consolidation, which has justified the high level of spending on its development from the national budget. The outcome of Japan’s development policy in Hokkaido today is a high level of well-maintained infrastructure. To me, everything looks brand new. In comparison, infrastructure in New York City and Paris looks rather worn out. Moreover, the Hokkaido prefecture has asked the central government to reduce the amount of public investment in Hokkaido because it can no longer afford its share (15-20%) in financing these projects.

These being the facts, the next question concerns how this huge amount of money is spent. Until recently (mid 90s), in Japan, the decision-making in the public sector had been highly centralized. The central government had once decided that Hokkaido was of high national interest, and since then it had managed and financed the entire endeavor. Basically, the top-down approach had been consistently used. The central government developed national and regional development plans, created implementation bodies, deconcentrated a part of spending authority to the regional level, and provided the bulk of resources. All capital investment projects were designed and decided upon by the central government with almost no input from the local governments or private sector. The negative outcome of such a policy – decreasing self-reliance of local communities, and lack of sustainability – has been duly acknowledged in Japan.

The current plan, the 6th-term Hokkaido Regional Development Plan (1998-2007), includes a bottom-up approach, and is said to reflect the shift from the public sector to the private sector, and from the central government to the local government. The local governments and public sector are encouraged to take greater responsibility for the sustainable development of their regions. In short, decentralization is on the agenda of the Japanese government now. Although decentralization is a new approach for the Japanese, my bet is that they will successfully manage this process.

Moldova’s decentralization process started in the 90s, too. After 15 years of independence, the level of decentralization in Moldova is considered very low, despite continuous efforts, discussions and promises. Keeping in mind that decentralization is a means to a more efficient and sustainable development, rather than a goal in itself, I am wondering whether the failure of decentralization in Moldova is a consequence of erroneous understanding and planning of national development. In fact, which are the development objectives and priorities of Moldova? Or, a more difficult question: what are the national interests of Moldova?

Regional Development in the World and the Public Servant Profession

Today, our group met with the staff of the Hokkaido Regional Development Bureau, which is the local branch office of the Ministry of Land, Infrastructure and Transport. After listening to each participant make a presentation on regional development structures and processes in their countries (Indonesia, Phillipines, Myanmar, Sri Lanca, Tanzania and Macedonia), I made the following conclusions:

1. Each of these countries has some type of regional development policy with a corresponding legal and instititutional framework.


2. Regional development is a central government initiative & responsibility, and requires significant efforts and resources. Donors trust and prefer this approach.


3. Ensuring local participation is a challenge everywhere, even in Japan.

The work day ended nicely in a typical Japanese restaurant where, while enjoying sashimi (a typical Japanese dish of raw fish) and discussing public administration, it turned out that Moldova was the only country (of those represented) whose public servants did not have to take a professional examination before starting their jobs. While in the other countries a position in the government is prestigious and highly competitive, in Moldova a public servant is not even considered a distinct profession.

Does Moldova Need Regional Development?

A regional development policy begins with the decision of a national government to provide additional support to less developed areas of a country. Everywhere in the world, even in the richest countries, disparities in the development levels of various regions exist. These disparities are generated by various geographic, historic, economic, social and cultural factors. The governments all over the world intervene to reduce these disparities by focusing additional resources and investments into these disadvantaged regions.

Development disparities among regions exist in Moldova as well, the most pronounced one being between Chisinau Municipality and the rest of the country. The Moldovan government has made the political commitment to support the less-developed regions via the regional development approach. This commitment is reflected in its key national policy documents, such as the Partnership and Cooperation Agreement (art. 67), Economic Growth and Poverty Reduction Strategy (ch.6.10), and Moldova-EU Action Plan (ch.22).

Beside an acute need for a regional development policy in Moldova, its mere existence can secure access to a great amount of international donor funds. Many donors, including EU, UK and Japan, are aware of the effectiveness of the regional development approach, and are willing to make significant financial contributions via a regional development institutional infrastructure.

Therefore, the next thing the Moldovan government must do is develop and implement the most appropriate regional development policy. Although efforts have been made during the last three years, the country cannot report any significant achievements. The recently created Ministry for Local Public Administration has been charged with this mandate. The world experience in regional development is huge, so everyone genuinely interested in regional development has the opportunity to learn from this pool of readily-available knowledge.