Outlook opinion of the Committee of the Regions on Success factors for local and regional restructuring strategies
Date: 2007-10-11
Institutions: European Committee of the Regions
Subjects: EU financing, aid for restructuring, regional development, regional policy, town

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Official Journal of the European Union

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Outlook opinion of the Committee of the Regions on ‘Success factors for local and regional
restructuring strategies’

(2007/C 305/07)

THE COMMITTEE OF THE REGIONS ISSUES THE FOLLOWING RECOMMENDATIONS

— It

is important

the restructuring process in cities and regions is a constant
phenomenon accompanying our socio-economic lives. Restructuring should be treated as an opportu-
nity for tackling existing and future economic problems.

to recognise that

— The CoR recommends the constant monitoring of these processes across the whole European Union,
to be carried out by bodies independent of all the stakeholders. The European Union and the Member
States should encourage the creation of local and regional partnerships between administrative autho-
rities, businesses and the social partners, thereby promoting cooperation for local development in a
globalised world, particularly in peripheral areas, where there is a danger of a loss of cultural heritage.

— Local and regional level restructuring must ensure that objectives can be achieved which are in line
with EU policies, whilst at the same time maintaining high levels of employment to secure an appro-
priate standard of living. The current restructuring process should also be a first step in a modernisa-
tion process which seeks to create an economy focused on the future and based on knowledge and
innovation; This objective cannot be achieved without increasing investment in human capital.

— An integrated approach to the restructuring of rural areas ensures (or should ensure) a minimum level
of access to services of general economic interest, in order to attract business and skilled workers and
stem depopulation. It is also imperative that ERDF, ESF and an EAFRD funding should be used to
support innovative action rather than to prop up the status quo. One important instrument in addres-
sing the immediate problems which can be caused by re-structuring is the European Globalisation
Adjustment Fund.

Rapporteur: Witold KROCHMAL, Mayor of Wolow (PL/UEN-EA)

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Policy recommendations

— the opening up of the world's economies to international

trade,

THE COMMITTEE OF THE REGIONS

— the development of the EU's internal market,

Socio-economic and political background to the opinion

1.
On 16 October 2006 the European Commission asked
the Committee of the Regions to draw up an outlook opinion
on effective restructuring strategies for Europe's cities and
regions. The Commission believes that the Committee's opinion
will provide valuable input for formulating the Commission's
approach to the restructuring processes essential
the
European economy.

for

The European Union is currently undergoing a period of
2.
fundamental economic change,
involving the restructuring of
the entire economies of cities and regions. As a result, local and
regional authorities are facing new challenges which they must
respond to in order to maintain the socio-economic and envir-
onmental balance.

3.
Restructuring should be treated as an opportunity for
tackling existing and future economic problems and for alle-
viating and eliminating their negative effects. Because of
its
grasp of grassroots reality and its ability to respond in an appro-
priate, rapid and flexible manner, the local and regional sphere
is the most effective in implementing restructuring policies,
especially when these processes are not in response to structural
problems.

Local

and regional

4.
ensure
level
that objectives can be achieved which are in line with EU poli-
cies i.e. competitiveness and innovativeness, whilst at the same
time maintaining high levels of employment to secure an appro-
priate standard of living for EU citizens.

restructuring must

These challenges particularly concern cities and regions,
5.
local authorities, which have significant scope for trans-
i.e.
forming strategic guidelines into concrete courses of action and
for mobilising local social organisations and businesses to take
such action.

factors to the debate on current

The aim of this opinion is to contribute a number of addi-
6.
tional
local and regional
restructuring processes, which have become a continual and
inevitable process and a constant accompaniment to our social
and economic lives.

7.
The main reasons behind the restructuring process which
local, regional and national authorities need to manage and
preferably predict and anticipate are:

— the expansion of the globalisation process,

— security and combating terrorism,

— energy and climate change,

— the introduction of new innovative technologies,

— higher standards in the field of environmental protection,

— the growing importance of services of general interest,

— changes in consumer demand.

Restructuring may take place at various levels and in

8.
various fields:

— at inter-sectoral level,

— at sectoral level,

— at enterprise level.

9.
Irrespective of the approach adopted for a given branch or
sector, restructuring processes mainly occur at local level. This is
because it is local and regional communities which are the most
affected by these processes.

10.
Due to the pace of events that make restructuring neces-
sary, these processes very often consist of sudden, forced action
taken by businesses in order to adapt to the requirements of the
global economy and the changing consumer market.

11.
As a result of an increasingly globalised economy, crises
in or deficits of short-term business or sectoral competitiveness
are growing in importance. Such crises are unpredictable and,
by constantly chipping away at the economic fabric of regions,
can cause serious damage to them.

12.
For the same reason, we are witnessing increasingly
frequent relocations, understood as the abrupt transfer of an
economic activity from one region to another. These unexpected
decisions are based on strategic and financial criteria, and others
such as the cost of production factors, but sometimes tend to be
encouraged by regional incentives and policies to attract invest-
ment.

13.
This type of ad hoc restructuring yields unsatisfactory
results, in spite of the existence of solid legal instruments and
professional managers in many countries. Such processes are
far-reaching negative social and regional
unable to prevent
changes and lead to short-term solutions being favoured at the
expense of more permanent and stable solutions. Such action
often results in serious social and regional problems. The reloca-
tion benefits for businesses often have serious repercussions for
the regions left behind.

The challenge is not to curb inevitable restructuring but
14.
in such a form that, as far as
rather to embrace it, albeit
possible, enables regions, municipalities and individuals to be
compensated and even to appreciate the opportunities in the
long run.

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15.
Particularly affected by ad hoc restructuring were those
countries which joined the EU in 2004 and 2007. This was in
large part due to different levels of economic development and
advancement in the field of new technology and innovation
among the EU 27. In many cases, the expected economic effects
were achieved but at the cost of adverse social consequences
caused primarily by the short period of transition.

16.
If we assume that restructuring processes are continuous,
we need to analyse cases of restructuring in the EU 15 coun-
tries, using the anticipation method, enabling the earlier recog-
nition of impending difficulties, thus partially eliminating or at
least alleviating the negative effects of restructuring.

17.
The success of a given restructuring process, particularly
the anticipation of problems, is to a great extent dependent on
dialogue between the company, the third sector, employees and
their organisations (for example trade unions), local or regional
authorities, centres of higher education and research institutes as
well as government bodies such as regional development agen-
cies. The outcome and success of the restructuring process is
very often dependent on the quality of this dialogue.

18.
Local and regional authorities play an important role in
this process. It is possible to define three types of action in the
event of impending restructuring:

— strengthening and, where necessary, diversifying the local

economic and social base and infrastructure,

— taking action to retain major employers and to strengthen

SMEs as motors for jobs,

— making the region, city or local area more attractive.

Both the above action and restructuring process require appro-
information resources and a special
priate statistical data,
strategy for gathering and sharing information with all partici-
pants in the restructuring process.

19.
The information policy should take particular account of
those small and medium-sized enterprises which, given their
specific situation, have greater difficulty in accessing information
resources which make it possible to anticipate market changes.

these stages,

20.
The SME sector deserves special protection during both
the restructuring process and the anticipated period of change.
Intervention is most needed at
to
strengthen and develop the managerial, organisational and stra-
tegic skills and abilities that can sustain SME growth, breaking
traditionally family-focused mould and
out of
the original,
is
for control and management
introducing a model
commensurate with global competition. The examples examined
show that the subcontracting strategy has proved to be the most
effective method, but only in those cases where it was possible

in order

that

to go beyond standard market relations and establish partner-
ship-based cooperation between businesses or firms within a
network, particularly at regional level.

Conclusions

21.
The restructuring processes analysed show that there is
no single approach to this process and that it is in large part
dependent on the type of
local authority concerned (region,
city, local district), the economic sector, the nature of the area in
question both in terms of its location (peripheral areas), land
use (agricultural, light industry, heavy industry) as well as the
level of economic development of the country in which the
restructuring area is located.

The current restructuring process should also be a first
22.
step in a modernisation process which seeks to create an
economy focused on the future and based on knowledge and
innovation. This objective cannot be achieved without increasing
investment in human capital through better education and by
improving skills. And this requires effective and productive
investment in the local or regional labour market, which will
make it possible to anticipate the challenges posed by the rapid
economic and social restructuring process.

23.
Broadening and increasing investment in human capital
and adapting education and training to meet the new skills
requirements arising from restructuring involve additional costs;
appropriate mechanisms are needed to ensure that these costs
are shared by business,, public-sector bodies and private indivi-
duals. Particular support should be given to comprehensive
training strategies that provide the skills needed in a knowledge-
based and innovative economy. Sharing experience and estab-
lishing partnerships between cities and regions in the area of
education and training is essential for the effective implementa-
tion of these processes.

24.
As the above examples show, activity in the area of
human capital investment is an extremely important part of the
restructuring and regeneration of urban and rural areas. It is a
key task for the organisations involved in restructuring at local
level.
Issues such as professional and economic mobility or
balancing supply and demand on the labour market at local
level have a decisive impact on the effectiveness of restructuring.
The mobility of job seekers and those facing unemployment,
particularly low-skilled workers, should be promoted through
the provision of personalised job seeking services and work
experience and training courses to adapt the skills of job seekers
and those facing unemployment to the requirements of the local
labour market. This is especially relevant to young people, who
have particular difficulty finding jobs.

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25.
Activities based on the principles of the European Youth
Action programme, covering career guidance, assistance with
completing education and access
training
courses, can facilitate the smooth transition from education to
employment in areas affected by restructuring.

to appropriate

sparsely populated peripheral areas. They make dynamic growth
in tourism possible, which then becomes a lever for local devel-
opment.

ERDF

26.
Such action should help combat adverse developments in
urban and rural areas, including, for instance, rural depopula-
tion. This is a problem not only because it may mean that rural
areas cease to function as communities, resulting in a loss of
cultural values, traditions and local character, but also because
of the risk of a loss of hydrogeological balance. The most effec-
tive means of halting these processes is through action funded
ESF
(European Regional Development
by
(European Social Fund) and EAFRD (European Agricultural Fund
for Rural Development) programmes. An integrated approach to
the restructuring of rural areas ensures (or should ensure) a
minimum level of access to services of general economic
in order to attract business and skilled workers and
interest,
stem depopulation. It is also imperative that ERDF, ESF and an
EAFRD funding should be used to support innovative action
rather than to prop up the status quo.

Fund),

One important instrument in addressing the immediate
27.
problems which can be caused by re-structuring is the European
Globalisation Adjustment Fund which offers short-term assis-
tance to regions affected by the relocation of economic activity
caused by globalisation. The Committee of
the Regions has
this instrument and has recom-
welcomed the creation of
mended to increase its volume to EUR 1 000 million/year. The
Committee of the Regions expects its first annual report on the
results achieved by the European Globalisation Adjustment Fund
in 2007 (report to be released in 2008) to analyse thoroughly
whether the intervention criteria set in Article 2 of Regulation
1927/2006 EC enable an appropriate execution of the Fund and
offers its contribution to any future debate about a possible
review of these criteria.

the

As a result of restructuring many regions are becoming
28.
increasingly dependent on tourism. Here
integrated
approach, making use of natural resources and cultural heritage,
focuses on quality, with the primary objective of satisfying the
customer. The success of such processes depends to a high
degree on the development of communications, connecting
restructured areas to major national and European networks,
and using new technologies,
including broadband Internet
access, for communication in the broad sense, and on appro-
priate education and training measures.

30.
Around 60 % of the EU's population lives in urban areas
of 50 000 or more inhabitants. Most jobs, businesses, higher
education institutions and other centres of socio-economic life
are located in towns and urban areas. These are areas which not
only offer opportunities but also harbour dangers. In addition to
activities
restructuring
carried out in European cities also includes action to regenerate
urban areas in the broader sense.

specifically related to the economy,

As the examples show,

31.
it is only by comprehensively
tackling economic, social and spatial problems that it will be
possible to achieve the results expected by residents, local autho-
rities and the EU. It is easier to find partners for restructuring in
urban areas, but only by maintaining partnerships between the
public, private and third sectors, and by using a variety of
sources of financing has it been possible to bring the process to
a successful conclusion.

32.
Those cities that have maintained a dominant position in
their regions, for example by virtue of their size or history, have
adopted a strategy of renewal as the driving force behind the
region. Their position today makes it possible for them to
support
the region, both through
direct partnerships as well as through organisations located in
these cities.

restructuring throughout

Action to increase competitiveness and promote enter-
33.
prise, innovation and the development of services has made it
possible to attract and keep a highly skilled workforce. This has
significantly improved the range and standard of services for
local residents. Appropriate planning, design and maintenance
of urban spaces have led to a fall in crime in cities, which has
made streets, parks and children's play areas more attractive. A
high-quality urban environment is an essential part of effective
restructuring as it helps guarantee an attractive environment for
work, living and investment.

Experience shows that those cities which have promoted
34.
cluster formation have managed to increase their competitive-
ness significantly. Relations between urban and rural areas
should be maintained at an appropriate level by creating a level
playing field in development conditions, thereby reducing differ-
ences between rural and urban areas.

29.
Cultural richness and natural resources should become
key instruments used in these processes. On occasion, they are
the major assets in the restructuring process, particularly in

A diversified approach to regional-level

restructuring
35.
processes should be monitored by networks that bring together
regions with similar types of restructuring (peripheral region
networks, mining region networks).

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It

is also important

36.
that businesses, partners in the
restructuring process, have increased access to sources of finan-
cing. In addition to subsidies and the available EU funds, these
should also include bank guarantees, mutual guarantees, loans
and micro-credits. The European Investment Bank and the
European Investment Fund can play a major role in this process.

No single restructuring model can provide a guarantee of
37.
the diversity of
in spite of
the
ultimate success. However,
various restructuring processes,
is possible to identify a
it
number of factors that are a characteristic of successful restruc-
turing processes:

— constant monitoring of economic processes for early antici-

pation of restructuring,

— anticipation cannot solely be limited to forecasting but must
their

also create probable scenarios in preparation for
realisation,

— the presence of organised social and civil society dialogue,
including the flow of information between parties taking
part in the restructuring process,

— the existence of structures linking together academic institu-
tions, scientific and research institutes, industry and adminis-
trative authorities at all levels,

— the existence of easily accessible high-quality education and

training structures,

— regular public reviews of
outcome of the action taken,

the quality, effectiveness and

— the existence of diversified sources of

the
restructuring processes, covering all stakeholders, which
leads to more effective action,

funding for

— the extent to which the region or city is capable of imple-
menting a territorial policy that is able to maintain the capa-
city of local businesses to produce goods, provide services
and distribute them,

— the awareness of

the local community of

the need for
constant change, expressed in the form of local or regional
identity. This ensures an integrated approach to sustainable
development from an economic, social and environmental
perspective, which represents an additional
for
attracting new investment,

factor

— a highly proactive attitude on the part of the regional and
local authorities, supported by leadership skills and the avail-
ability of competition and finance-related instruments,

— a locally-generated, comprehensive project, tailored to the
local situation, combining various aspects on a case-by-case
basis: economic development, education, social integration,
culture, spatial planning, etc.

The Committee of the Regions' recommendations

38.
It is important that the European Commission recognise
that the restructuring process in cities and regions is a constant
phenomenon accompanying our socio-economic lives.

39.
Urges local and regional authorities to develop genuine
forward planning in their areas, encompassing monitoring,
inclusion in
the existing economy and the
support
regional strategies of local action in this field, on the basis of
broad-ranging and shared city-regions projects.

for

40.
In connection with this, the Committee of the Region
recommends the constant monitoring of these processes across
the whole European Union, to be carried out by bodies indepen-
dent of all the stakeholders, and covering businesses, social part-
ners and local and regional communities by region and by
sector. This system should include an analysis of socio-economic
changes at local, regional and national level, taking into account
rural, peripheral and upland areas, and also analyse future
economic trends on the labour market.

Recommends the publication of restructuring best prac-
41.
tices for use in other cities and regions of the European Union.
Such publications should be ordered according to areas with
similar
restructuring (agricultural areas, peripheral
areas, regions with heavy industry, mining, and light industry,
textiles, urban areas).

types of

The European Union and the Member States should
42.
encourage the creation of local and regional level partnerships
between administrative authorities, businesses and the social
partners through the use of
thereby
promoting cooperation for local development in a globalised
world. This will make it significantly easier to anticipate restruc-
turing processes.

instruments,

financial

43.
The Committee of the Regions calls on the European
Commission and the Member States to pay particular attention
to the flexibility of EU funding mechanisms, especially the ESF,
to ensure, that funding is available to respond quickly to situa-
tions appearing suddenly and without warning. In these cases
the need for funding for incubators, recruiting activities, help
and advise for start ups and focused training is immediate.
Within three months the possibilities of those losing their jobs
due to restructuring to find new employment are greatest and
decline substantially after that. The application mechanisms for
the different EU-level
instruments should take this need for
responsiveness into account. The measures for speedy responses
to the hardship which can be caused by restructuring should
also include assistance to cover the immediate social needs of
the individuals concerned (housing, health-care, counselling
etc.). People affected by restructuring need social support to
enable them to start new activities and to adapt to restructuring.

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44.
Recommends taking advantage of the cross-border loca-
tion of certain cities and regions in the restructuring process
and urges the removal of all procedural obstacles impeding the
labour and capital, and hindering the restructuring
flow of
process.

Recommends that the European Commission, within the
45.
framework of
the possibilities offered by the EU structural
funds, adopt an integrated approach to co-financing restruc-
turing processes from European funds, which will make it
possible to tackle both economic and social problems, whilst
implementing the European Union's policies.

Calls on Member States to remove the legal barriers and
46.
other obstacles to the creation of public-private partnerships
(PPPs), which can provide effective and active support for the
restructuring processes.

Calls on the European Commission and other institutions
47.
which provide joint
financing for restructuring processes to
increase supervision over the effectiveness of spending, particu-
larly in the area of ‘soft projects’ financed by the ESF.

48.
Calls on the European Union to take account of aspects
relating to the restructuring processes in the European Union's
current policies and when drafting new policies, from the antici-
pation stage to completion.

Brussels, 11 October 2007.

Urges the Member States to use financial

49.
instruments
compatible with EU law for businesses affected by the restruc-
turing process, particularly in peripheral areas, where there is a
danger of a loss of cultural heritage or local or regional identity,
and where restructuring concerns the SME sector, for which this
process is particularly difficult.

50.
Expects to be consulted by the Commission when the
Community guidelines on State aid for rescuing and restruc-
turing firms in difficulty, due to expire in October 2009, will
have to be reviewed in 2007/2008.

51.
Particularly recommends that Member States and all busi-
nesses involved in the restructuring process ensure the preserva-
tion of local traditions and culture, which can also be an asset
in current or future restructuring.

52.
Recommends making use of the European Commission's
new Regions for Economic Change initiative and the networks of
cities and regions which are being created as part of this initia-
tive, and which are co-financed by the European Regional Devel-
opment Fund, whilst continuing to anticipate restructuring
processes and promote best practices for helping cities and
regions adapt to the changes brought on by globalisation.

Recommends that the Commission be particularly vigi-
incentives in

53.
lant with respect to the application of regional
relocation operations.

The President

of the Committee of the Regions

Michel DELEBARRE

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Short summary of the case studies of city and regional restructuring

APPENDIX 1

What had initially seemed like a transitional crisis of adaptation in the 1970s and 1980s actually turned out to be a recur-
ring event in the social and economic life of modern Europe. It came to be a permanent process, requiring businesses and
their environments to adapt to changing market conditions, i.e. a constant process of restructuring. For the purposes of
the opinion on restructuring in the cities and regions of the EU drawn up at the request of the European Commission, we
analysed the information received on the development of these processes along with other information contained in
numerous documents. The conclusions and recommendations have been included in the opinion.

Scotland — United Kingdom — an example of strong competition on the global market

The number of workers employed in industry fell from 276 000 to 227 000 during the years 2002-2006, whilst produc-
tion for export decreased by 36 % over the same period. Most firms transferred their production to new EU Member
States or to India and China. The Framework for Economic Development in Scotland (FEDS) is focused on ensuring
productivity and competitiveness on the global market. The PACE programme set up by the Scottish authorities (Part-
nership Action for Continued Employment) has made it possible for all organisations in the private and public sectors to
actively avert mass redundancies. Restructuring has hit the Scottish labour market, particularly industry, very hard.
However, the growth in the numbers employed in service industries and in the business sector has meant that Scotland
now has one of the highest rates of employment in the EU, while unemployment is at its lowest level for 30 years. More-
over, the Scottish economy is reaping the benefits of the globalisation process. Scottish banks have expanded abroad,
which has strengthened their standing among their competitors.

The Basque Country — Spain — restructuring of a region and its cities

Local industry, structured around the shipbuilding, steel and heavy industry, went into decline in the 1980s. The Basque
government, employers and trade unions decided to restructure and modernise these sectors of industry. Nine clusters
were created, which together made up 45 % of the Basque country's GDP. Today they remain the driving force of the
region's economy. After a process that has lasted some twenty years, the Basque country's GDP is currently the third
highest in Europe, after regions in Luxembourg and Ireland. Unemployment, which was 25 % in 1990, currently stands at
4,5 %. Much of the capital invested has been in innovation; private funds account for 66 % of total investment (the
average in Spain is 48 %; the figure for Europe is 54 %). The restructuring process was linked with the redevelopment of
the region's cities, including the capital, Bilbao. Culture and local identity played a major role in this process, which led to
a high degree of social acceptance of the process itself.

Crete — Greece — from agriculture to tourism services

Restructuring in Crete, which was financed by the national government and European funding,
is based around
cooperation between businesses and research institutes (the University of Crete, Heraklion research institute) and aims to
help people move from the agricultural sector to the services sector. This aim has only been achieved in part. The main
reason for this has been the vertical structure and top-down nature of the action. Strong centres were strengthened
further, marginalising peripheral areas lying deep within the island's interior, which only widened the gulf between the
sub-regions and did not result in any growth in competitiveness.

Tawira — Portugal

Restructuring based on redevelopment, leading to the development of tourism services, an increase in investment in this
sector, which helped finance the preservation of the region's historical and architectural heritage, which in turn led to a
further increase in tourism and an in-flow of private capital. This process was financed from the PITER, URBCOM,
INTERREG and PROALGARVE funds.

The regions of Austria

Restructuring involving transition from a one-sector economy to a diversified industrial structure based on R & D
projects, as well as transition to the tourism sector and business-related services. This process is supported intensively
through the constant development of opportunities for vocational education and training.

Porto, Portugal

A restructuring process begun only recently, made necessary by the relocation of numerous government bodies and firms
to the capital, as well as by a shrinking population and the collapse of traditional retailing in favour of supermarkets. The
aim of the restructuring process is to breathe new life into the city centre, to develop cultural services and to redevelop
the city's housing. 2004 saw the launch of the PortoVivo initiative, which aims to attract private investment to the town.
This major restructuring and redevelopment project has a twenty year time frame. The renovation of over 5 000 buildings
is planned during this period, which will help preserve a valuable cultural and historical heritage, and will in turn develop
the services sector, thereby creating new jobs.

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Liberec, Czech Republic

A restructuring process which was triggered by a change in the political system aims to bring the economy into line with
EU standards. Mainly financed by the State and regional budget and EU funding. This has led to support for the SME
sector and the development of PPPs. The main problems are debt and the state of public finances.

Wrocław, Poland

The last seventeen years have seen a change in both the city's economy and in its appearance in general. The redevelop-
ment of both the city centre and specific areas of the town has drawn private investors to the city. Hotels and restaurants
have appeared. The open policy of the city authorities, its partnership with its twin towns, regional authorities and central
government, as well as the cooperation between the city and its immediate neighbours have led to new branches of
industry being established in the city's surrounding area. The Wrocław Technology Park and the city's centres of education
and industry have launched many initiatives in the field of R&D. Unemployment has fallen from 18 % to 6 % over this
period; one drawback has been rising prices, e.g. property prices have soared by 400 %.