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Danuta Hübner

European Commissioner responsible for Regional Policy

"Regions of the future: Innovation, Regional Development and Cohesion Policy"

IANIS+ Annual Conference
Bilbao, 15 June 2007

Ladies an Gentlemen, "EGUN ON" (Buenos Días in Basque),

It is a pleasure to be here today, addressing the IANIS+ conference recapping two years of its activity. It is so not only because of the quality of this conference and good audience it attracts but also because it is a well timed event. There is still enough room for the ideas and good practice you will be sharing these days to find their way to the operational programmes for 2007-2013, which regions and Member States are currently negotiating with the Commission.

Today I would like to speak about the key challenge for the new European regional policy – fostering innovation across EU regions. As the Commission adopted two weeks ago 4th Cohesion Report, it may be worthwhile to take as a starting point one of the questions which this Report puts for a debate. Namely, what are the critical competencies that European regions should develop in order to be globally competitive?

It is clear – as we just heard from Mr Aho - that economic competitiveness should be analyzed in terms of the key ingredients of knowledge, creativity and infrastructure. But why examine regions? The answer is that looking at regional level and taking regional economies as units of analysis brings us much closer in line with the current and future nature of economic growth and the role of governance in economic development.

Globalisation is reinforcing localization, giving more importance to localized productivity advantages – this is the paradox of modern economic development. But this localization is driven by new factors. Historic factors, such as proximity to inputs and markets or low labour costs are loosing importance. Today economic development is increasingly driven by the availability and concentration of such local resources as academic institutions, innovative businesses and skills – and the way they interact one with another. The proximity to specialized inputs, employees, information, public institutions encourages firms to cluster and encourage innovation within clusters.

This tendency is matched by the evolution of economic governance. It has become clear in recent years that development is best driven through multi-level governance, through the co-ordinated actions of the Union, Member States and local and regional authorities. Member States themselves have recognised this by devolving an increasing amount of responsibility for public investment to the regional and local level over the past decade. This evolution brings in more economic efficiency and growth.

The result of these two trends is that the competition for creative people, innovative companies, young researchers – the assets which are key to innovation capacity – is taking place today at the regional and sometimes local levels. We are well placed to assess the relevance of this finding if we look at the Guggenheim Museum, only a few kilometres away from the pioneer Technology Park in Spain. I would argue that both infrastructures are complementary and that they have spearheaded the successful economic transformation of the Basque country towards the knowledge-based economy.

The significance of the Guggenheim Museum type of project can be seen against the backdrop of the increasing importance of ICT which, by reducing the constraint of the geographical distance, allows companies to choose more freely the place in which they are located. This means, as put by Richard Florida in his book on quality of place and the new economy", that: "Quality-of-place – particularly natural, recreational, and lifestyle amenities – is absolutely vital in attracting knowledge workers and in supporting leading-edge high technology firms and industries". So, my first message is that regions should invest in creating unique regional brand, in order to build an image of a place attractive to live and work.

Clearly, companies and people are looking also for other factors, such as good roads, developed business environment, technological parks, right combination of local skills, research facilities, firms with which they could cluster. The obvious conclusion here would be that fostering regional innovation requires an integrated approach and a right investment mix, based on a critical assessment of our territories. But fostering innovation needs more than just skills and infrastructures; it needs networks of relationships. Knowledge and innovation can only spread if underpinned by networks linking different experts, producers and clients, business and science.

Therefore the second message I would like to pass to you is that your development strategies for 2007-2013 should not only focus on investment in business or R&D infrastructures, but also on the various internal and external networks of relationships. We all know examples of internal networks which often take a shape of regional clusters. They are particularly important for small and medium sized enterprises, which generate innovation in the form of new or improved products, processes or services.

But regional economies need also to find their place in European and global networks which link them to external world and allow them to measure their strengths and weaknesses against global challenges and opportunities. As surveys show this is not always understood by the less advanced regions which often think their main competitors are the neighbour regions while the most advanced regions know that there are outside the European Union.

Therefore regional authorities should be all the time reaching beyond traditional forms of co-operation and chart new territories. An example here is recently created European Enterprise Platform, involving major blue chip companies such as Motorola, Hewlett Packard and Microsoft which, together with regional authorities, are exploring how public private collaboration can enhance regional competitiveness.

These two types of networks – reinforcing co-operation within the region and linking the region to the external world – are critical to the regional competitiveness because they help our regions to pool knowledge necessary for managing complex change. As demonstrated in the Cohesion Report in the future our regions will be confronted with new challenges which will redraw the regional map of Europe and overshadow the traditional descriptions we are using today – such as those referring to new and old Member States.

The impact of increasing economic pressure from global competitors, the ageing of our societies, the developments in the energy market, climate change and social polarisation will be felt, with diverse intensity, in all parts of the Union. All these changes will overlap and create a new, complex map of challenges and opportunities. Managing them will require a lot of co-operation of different activities such as financial engineering, PPP or research consortia. Well developed innovation infrastructures and networks are of key significance in this approach.

Therefore, reducing innovation deficit is a key challenge for the new European regional policy. Cohesion Report identifies as many as 86 regions out of 268 (with 123 million people) with an innovative performance below the EU average, the great majority being located in new Member States, Spain, Greece, Portugal and southern Italy. Particularly low is the performance in 17 regions, half of them in Greece, the rest including Podkarpackie in Poland, Calabria in Italy, Extremadura, Castilla la Mancha and Illes Baleares in Spain.

But the report shows also that European regions are among world leaders in innovation. Regions in Finland, Sweden, Denmark and Germany have higher capacity for innovation than US and Japan. This is the potential which the new cohesion policy should exploit in the coming years. Thus the challenge for the 2007-2013 period is to build the "system effect" of lagging regions catching up with the most innovative regions and Member States. To do this – as I was trying to demonstrate – European regions should focus their development strategies for 2007-2013 on creating an attractive image, invest in innovation capacity and position themselves in different types of networks.

As we are at the conference organized under the title" Innovation, ICT and Creativity" I should say now couple of words about the role of ICTs within this approach.

Information Society in a way embodies these two key preconditions for the building of innovation capacity – the innovation infrastructure and the network of relationships. It is about providing technology, in particular in lowly populated or isolated peripheral areas. But it is also about content, creativity, learning processes, cultural exchanges and networking. It revolves first and foremost about information sharing and use and its transformation into economically relevant knowledge and technologies.

So, my third message to you would be that the investment in ICT – and the information networks it can create – is the most efficient way of accelerating catching up and overcoming the persistent barriers to innovation, such as those encountered by remote or rural areas. ICT is a chance for European regions lagging behind to leapfrog into a new stage of economic development.

That is why the Information Society has been a priority for the cohesion policy for more than a decade. The nineties were the years of an increasing awareness about the opportunities and challenges brought by ICT. An opportunity for regions to catch up and improve their competitiveness but also a risk of exacerbating social and territorial exclusion – the digital divide. Therefore cohesion policy helped the regions to upgrade and complete their telecommunication networks but also recognized the contribution of ICT to innovation and concentrated the effort on the demand side and on providing an access to ICT for all.

For the 2000-2006 programming period around seven billion euros was directly invested in ICT infrastructures and services. In Spain alone one billion was invested, significantly reducing the gap with the EU average level of infrastructure provision. This is a sizeable amount of investment, but this is not enough. That is why, for the new programming period we have introduced an earmarking approach, which ensures that the predominant share of policy resources is invested in key drivers of growth and jobs agenda.

The good news is that Member States and regions have clearly responded to this call for innovation. According to our estimates, during the 2007-2013 period almost 5% of the cohesion policy resources - 14 billion EURO - will be invested in priorities directly linked to the information society with a novel shift from infrastructure to services. This is a substantial, absolute and relative increase compared to the past period 2000-2006, where the percentage in relation to the global financial envelope was only 2.5%.

Some Member States like Slovakia, Denmark or Finland use nearly 10% of their financial allocation for investing in ICT. Importantly, Member States in their programmes for ICT, broadband and e-learning are moving more and more from infrastructure to services. This shall result in more projects in services and applications for citizens (e-health, e-government, e-learning and e-inclusion) than in pure broadband networks and information and communication technologies.

Ladies and gentlemen,

Research, information society, innovation, dynamic SMEs – are better set in motion at the local or regional level. It is at this level that we find the essential knowledge for identifying problems and appropriate solutions. Besides, information technologies and human capital are the glue and the means to foster communication, collaboration and creativity, essential conditions to ensure productivity gains and leverage competitiveness.

And it is in the regions and cities where we find best innovative projects and creative ideas. In 2007-2013 the Commission will contribute to their dissemination across the Union through the Regions for Economic Change. Therefore, I would like to use this opportunity to update you on the latest developments concerning this initiative.

As you know, the networking activities of RFEC will be delivered through the future INTERREG IVC and URBACT II programmes. Following the consultation both draft programmes were submitted to the Commission in April and we hope to adopt them by the early autumn. Next step will be calls for proposals launched by the Managing Authorities of these two programmes so that interested partners can submit applications. This is bottom-up approach, allowing partners in regions and cities to propose their own networks.

Thus our partners in regions and cities shall do two things in the coming weeks:

- identify the themes relevant for them and to start to prepare partnerships ready to submit project applications to the INTERREG IVC and URBACT II programmes;

- ensure that the networks they would like to create fit the priorities of the regional Operational Programmes and that these regional Operational Programmes have the scope to mainstream the outputs of the RFEC networks.

Your network is the best proof of the role which networks such as those which will emerge under RFEC initiative can play in the dissemination of creative ideas. During last 9 years eris@ acted as collaboration platform for regions interested in fostering creativity and innovation through the investment in information society, making true what Thomas Eliot once said "Only those who will risk going too far can possibly find out how far one can go".

Thank you very much.

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