AGRICULTURAL UNIVERSITY OF ATHENS

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1 AGRICULTURAL UNIVERSITY OF ATHENS DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL DEVELOPMENT IERA ODOS 75, VOTANIKOS , ATHENS - GREECE TEL (301) FAX (301) sefst@aua.gr DORA - DYNAMΙCS OF RURAL AREAS National Summary Greece Sophia Efstratoglou (National coordinator) Apostolos Papadopoulos Angelos Efstratoglou Emmanouela Kouroussi With the financial support of the European Commission (FAIR6-CT ) Athens September, 2001

2 GREECE (NATIONAL SUMMARY) 1.1 Introduction Context Analysis: National and EU context General features Rural areas characteristics and dynamics Institutional and Administrative structures European, National and Regional policies Environmental protection Planning mechanisms Contextual differences between mountainous and plain rural areas Location, profile and DEP of the predominantly plain study areas Location, profile and DEP of the predominantly mountainous study areas...8 PREDOMINANTLY PLAIN AREAS (KORINTHIA FTHIOTIS) Analysis of factors Natural resources Human resources Economic structures and organisation Infrastructure Investment Institutions Networks Market performance (labour, land, capital and good & services markets) Community Quality of life Themes and dynamics of predominantly plain areas Demographic dynamism, in-migration and endogenous potential Economic structures, entrepreneurial capacity and market-driven investment Institutional effectiveness, networks and community Conclusions PREDOMINANTLY MOUNTAINOUS AREAS (TRIKALA ARKADIA) Analysis of factors Natural resources Human resources Economic structure Infrastructure Investment Institutions Networks Market performance (labour, land, capital and good & services markets) Community Quality of life Themes and dynamics of predominantly mountainous areas Population maintenance and mobilisation of human resources Natural resources valorisation and their perceptions as assets Economic structures, entrepreneurial capacity and investment: Institutional performance, innovative networks (partnerships), local initiatives Conclusions Regional comparisons and Synthesis Conclusions and recommendations Conclusions...41 ii

3 Key issues deriving for policy consideration Research implications References List of tables, maps and diagrams: Table 1.1 Key features and indicators of rural areas by land morphology Table 1.2 The economic profile of Korinthia and Fthiotis... 7 Table 1.3 The economic profile of Trikala and Arkadia... 8 Table 1.4 Distribution of land by type of use in Korinthia and Fthiotis... 9 Table 1.5 Population growth, natural balance and apparent migration, in Korinthia and Fthiotis Table 1.6 Employment distribution and changes by branches of economic activity in Korinthia and Fthiotis Table 1.7 Distribution of land by type of use in Trikala and Arkadia Table 1.8 Population growth, natural balance & apparent migration in Trikala and Arkadia 24 Table 1.9 Employment distribution and changes by branches of economic activity in Trikala and Arkadia Map 1. The Greek study areas... 2 Diagram 1. Contribution of factors to differential economic performance in plain areas Diagram 2.Contribution of factors to differential economic performance in mountainous areas...43 iii

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5 1. GREECE (NATIONAL SUMMARY) 1.1 Introduction Economic growth of rural areas has been identified very often with the capacity of the local economy to generate employment and maintain a viable socio-economic fabric. As the economic performance and growth of rural economies differ significantly in employment creation, achieving a more balanced development in terms of employment remains one of the biggest challenges for the EU (European Commission, 2001). Understanding processes and forces that generate employment creating growth in rural areas is also a key priority objective of the European Employment Strategy (European Commission, 1996) with the intention that the achieved output growth is translated into more jobs in rural and urban areas. Based on the above, the identification and enlightment of the driving forces (factors) underlying economic performance and employment growth in rural areas, becomes a key issue in rural development policy agenda. This issue takes an even higher priority in Greek rural areas, which maintain still significant human resources (40% of the country s population live in rural areas) and continue to have a high dependence on agriculture. Structural changes in agriculture and pressures on farm incomes from the CAP reforms and markets liberalization, tend to accelerate exodus from farming. Some rural areas have succeeded in absorbing this exodus through increases in nonagricultural employment and in total employment as well, while others were less successful. In these cases, total employment has declined, followed by increases in unemployment and depopulation in some areas. Rural areas in Greece present significant diversity in geographical conditions, natural resource endowments and socio-economic structures, and have been characterised also by significant differences in their historical evolutions and dynamics. Differential Economic Performance (DEP) in terms of net employment creation varies also significantly among rural areas. Specifically between , employment changes in the predominantly rural regions (NUTS III level) ranged from 2.43% to 2.71% (average annual rate of change), compared to 0.53% national average. Reducing regional imbalances and stimulating economic performance and job creation in rural areas are also key policy objectives reflected in the Community Support Frameworks ( and ), as well as in the Regional Operational Programmes implemented in Greece. This chapter presents the summative analysis of the DORA research project and is based on the National Report 1 prepared by the Greek research team. The objective of this chapter is to identify factors explaining DEP between successful and less successful in performance Greek rural areas and in particular (a) to investigate the role and the contribution of tangible and less tangible factors in DEP and (b) to identify factors relationships (themes and dynamics) as well as to interpret them in different contexts. Based on these findings, issues for policy considerations and action are proposed to improve economic performance and stimulate employment growth in rural areas. The research carried out was based on a common methodology. Within this methodology, two pairs of study areas were selected, a pair of predominantly plain areas with contrasting economic performance and a pair of predominantly mountainous rural areas, also with DEP. This selection was necessary in order to assure homogeneity in geographical features in each pair of study areas. Following the selection of the study areas a more detailed desk-based research investigated the socio-economic profile and evolutions in the study areas in relation to the tangible and less tangible factors. However, significant data and information was derived from the field survey, which was used as the main research tool to investigate relationship between factors and variables at local level. For the field survey, a semi-structured questionnaire was derived from the common schedule and interviews were conducted in each study area. Main reason for constructing a semistructure questionnaire instead of using the common schedule in open interviews (as the other research teams), has been the general reluctance of interviewees, observed from past field work 1 Efstratoglou S., Papadopoulos A., Efstratoglou A., Kouroussi E., (2001), Dynamics of Rural areas, (DORA), National Report Greece, Agricultural University of Athens, Athens, June,

6 experience, particularly in rural areas to tape recording open interviews. In total 146 interviews (36 of which with women) were conducted with interviewees from the four categories selected. A data base in SPSS form was formed and processed. Meetings with the National Steering group (local practitioners from our study areas), during the research, concerned exchanged of views on methodological aspects, research findings and results. The rural areas selected to analyse DEP and factors behind it, were: (a) a pair of predominantly plain areas with contrasting economic performance, Korinthia (successful) and Fthiotis (less successful) and (b) a pair of predominantly mountainous areas, Trikala (successful) and Arkadia (less successful). All study areas selected are prefectures (NUTS III level) and are administrative units (Map 1). Trikala (mountainous, successful) Map 1. The Greek study areas Fthiotis (plain, less successful) Arkadia (mountainous, less successful) Korinthia (plain, successful) 1.2 Context Analysis: National and EU context General features Greece is a peripheral country within the EU context. All Greek regions are under 40% of the EU average accessibility index (European Commission, 2001). As an Objective 1 country (policy status), its GDP per capita remains at lower levels (67% of the EU average), despite the convergence achieved during the last ten years (GDP per capita increased from 58% to 67% of the EU average in 1999). Greece is also characterised by less-favoured structures, lower levels of infrastructure and lower labour productivity compared to EU standards. The Greek economy maintains still a high dependence on agriculture, which accounts to 17.8% (agricultural employment in 1999), compared to only 4.5% of the EU15 (European Commission, 2001). During the period of analysis, total employment in the country has been increasing, but at a lower rate than the labour force, resulting in increases in unemployment from 4% (1981) to 8% (1991) and to 11.7% in These changes are due to the overall transformation the Greek economy is undergoing. 2

7 1.2.2 Rural areas characteristics and dynamics Rural areas of Greece 2 cover 95% of the country s total area and 41% of the population resides in them. Similar estimates are obtained when the OECD criterion on rurality is applied (population density below 150 persons per km 2 ). Moreover, with the OECD criteria, most regions of Greece (10 out of 13 total) are characterised as predominantly rural, two regions as significantly rural and only one as urban (OECD, 1994). Rural areas of Greece present significant diversity due to differences in their geographical features, natural resource endowments, degree of dependence on agriculture, dependence on tourism and proximity to urban centres. Despite these prevailing differences between rural areas, some common characteristics and dynamics tend to be common and these are: i) The low diversification of the rural context and its still high dependence on agriculture, despite its declining trend. ii) The reversing of the de-population trends rural areas experienced during 60s and 70s (outmigration, urbanization) and their population increase, with the exception in mountainous and remote rural areas. iii) The population dynamism of the rural small and medium towns and the role of SMEs. iv) The increasing role of services performing as a key job provider in rural areas v) The tendencies for the valorization of rural amenities vi) The emerging importance of the protection of the environment, which developed into a key issue during the 90s. And this has become a pressing issue as a result of the non-satisfactory up to now management of the natural resources Institutional and Administrative structures Greece has a long tradition in a highly centralised administrative system. Administratively, the country is divided into 51 prefectures (NUTS III level), which form the second level of local government, the first being the municipalities and communes. For planning purposes and for implementing Regional Plans (within the Community Support Framework), the country is divided in 13 Regions (NUTS II level). The bulk of decision-making however, takes place at the central level. Main local authorities (second level of local government) are the elected authorities at the prefectural level, headed by the Prefect (elected), and who presides over an elected Prefectural Council. The Prefect supervises all prefectural divisions of central authorities (Ministries) and controls their daily operations. Together with the Prefectural Council, the prefect decides upon the prefecture s development priorities and strategies, methods of policy implementation and in some cases, on additional measures to be financed by the prefectural budget. The prefecture s regular budget depends on the central government allocations, since no significant sources of regular revenues exist at that level (with the exception of very low local tax revenues). The allocation of funds within this budget between different activities is decided by the Prefectural Council. The prefect represents the prefecture at the Regional Council of the Region that the prefecture belongs, where the regional development priorities and allocations of regional funds are decided (Efstratoglou S., Psaltopoulos D., 1997). At the municipal / communities level (first degree local government), are the elected bodies of the municipality councils, headed by mayors and presidents of communes. Their financial autonomy is extremely limited, as they depend to a large degree on funds granted by the central government. In 2 National Statistical Service of Greece, defines rural areas as the areas with municipalities/communities of population below 2,000 inhabitants, as semi-urban, municipalities / communities between 2,000-10,000 inhabitants and as urban those with population over 10,000 inhabitants. However, more recent approaches to defining rurality tend to include also municipalities/communities with a population between 2,000-10,000 inhabitants, which are really larger villages and small towns, dispersed in rural space and being a vital part of it. (Ministry of Physical Planning and Environment, 1998) 3

8 order to secure more funds and expand their role, municipalities tend to create municipal enterprises and in recent years they participate in the local development agencies (LDA). In many LDA, the municipalities have the initiative for their establishment of LDA and they are the main partners in the partnership. In recent years, there has been a trend for decentralisation of the regional administrative mechanisms in Greece, mostly induced by the implementation of Community Support Framework and Regional Programmes. Since 1986, the country has been divided into 13 Regions (NUTS III), headed by the Regional Governor, appointed however by the government. In each Region, a Regional Council operates, consisting of the regional governor, the prefects of the Region, the representatives of the Unions of Municipalities (TEDK) and the representatives of regional chambers, farm unions and trade unions (social actors). Main functions of the Regional Council are the development of policy priorities (Regional Plan), the approval of regional projects and programmes and indirectly the allocation of funds to prefectures. The administrative work of the Region is carried out by the Directorate of Regional Development, main functions of which are the preparation of Regional Development Plans and Regional Operational Programmes (ROP) and the monitoring of their implementation. ROP are negotiated-approved by the central government within national priorities and agreed with the EU. Thus, the allocation of funds in the regions and in the prefectures depends to a large extend on the central government European, National and Regional policies Community Support Framework Regional Operational Programmes: Since the Reform of the Structural Funds (1988), all Greek regions are Objective 1 and regional and sectoral policies are implemented within the Community Support Frameworks (CSF). Two CSF have been implemented during the period of our analysis, the First ( ), the Second ( ), while the Third ( ) has been approved and its implementation has started. CSF consists of 13 Regional Operational Programmes and of National Sectoral Operational Programmes (e.g. on Agriculture, on Tourism, on Infrastructure, on Human resources etc). Based on that, policies/programmes implemented in rural areas derive from the ROP as well as from the National Sectoral ones. And it is up to the capacity of regional and local authorities to benefit from this framework. ROP are very important policy tools for the development of regions and prefectures. The capacity of the prefectures' authorities to formulate a development strategy for their areas, to identify key opportunities, and to exploit them through the implementation of policies and programmes, is a determining factor for the areas economic development and performance. ROP are structured around priorities axes and sub-programmes and aim to support agricultural and rural development, tourism, SMEs, infrastructure, human resources, environmental protection, innovation and technology, etc. They consist of multi-funded programmes (FEOGA, Social Fund and Regional Fund). Under the 2 nd CSF, the planned funds allocation to Regional Development Plans amounted to 40% of the total CSF budget but the realized spending reached 50% of it. Under the 3 rd CSF ( ), the planned allocation to Regions fell to 26%, while Sectoral Operational Programmes (Human Resources, Infrastructure, Health, Environment, Agriculture and Rural Development, Tourism, Information Society, Research and Technology, Culture, Energy etc) were allocated the largest share (74%) of the funds. Rural areas benefit also from the Sectoral Operational Programmes, under which they can implement policies and submit projects for financing. Due to the high dependence of rural areas on agriculture, the Sectoral Operational Programme on Agriculture and Rural Development is also an important policy tool for the rural areas. The Sectoral Operational Programme for Agriculture and Rural Development ( ) has been developed within EC Reg. 1257/99 on rural development. Along with the CAP markets policy, it is the main source of financing of agricultural investment and transfers in rural areas. It should be stressed that the implementation of the Regional and Sectoral Operational programmes at prefectural level depends to a large degree on the capacity of local institutions and actors and their ability to respond and exploit this framework. Regional Investment Incentives Law: Another main policy tool for reducing regional disparities and achieving convergence is the national Investment Incentives Law 1892/90 (which replaced 1262/82). It is the key national policy tool for the mobilisation of private investments at regional 4

9 level, as it provides incentives (investment subsidy, subsidization of interest, higher tax discount and depreciation rates) for investment undertaking. According to this law, the country is divided into four zones (A, B, C, D) in relation to development characteristics, and investment incentives are regionilised, the stronger incentives being offered to zone D and the lower ones to zone A (Skountzos, 1998). The LEADER Initiative: Since 1992, the LEADER programme is being implemented in Greek rural areas, with priority in mountainous ones. LEADER has been a very important initiative for Greek rural areas, with significant value-added. Its main contribution was the initiation and the formation of Local Development Agencies (LDA) on a partnership level. Till then, the Local Development Agencies that existed (less than five) were initiated from top-down. Under LEADER I, twenty five Local Action Groups were performing, while under LEADER II they are fifty (50) of them, undertaking important local initiatives and stimulating bottom-up processes (Efstratoglou S., 1998). Support for SME: As small-medium enterprises consist the main body of enterprises in Greece, there is separate national policy for the support of SME. This policy is integrated into the CSF and is implemented under the Sectoral programme on Industry. Investment incentives are granted for the modernisation of SMEs, the promotion of information technology, formation of networks etc Environmental protection Planning mechanisms The protection of the environment in Greece has been a rather difficult and complex problem, as many administrative bodies with overlapping authorities co-exist. The national legislation provides a significant number of laws for the protection of rural environment e.g. on protected forests and national parks (law 996/71), on environmentally sensitive areas (law 998/79) as well as the EU directives 79/409 and 92/43 on NATURA However, the implementation of this legal framework is lagging behind. Under Natura 2000, almost 18% of the country s area will be protected areas, but the environmental management of these areas is not still in effect (Efstratoglou S. et al., 1998b) Land uses in Greece is not institualized, as there are not mechanisms that determine indicative or obligatory land uses, with the exception for the protected areas. Alternative land use demands determines to a large degree land uses. However, since 1990, the required pre-approval for the location of investments or projects and the approval of their environmental terms is the main mechanism for controlling the location of activities and indirectly land uses. There are also some other mechanisms, which determine zones of productive activities such as industrial zones, tourism zones etc. Also the prefectural Committees on Physical Planning and Environment act as advisory bodies for indicating the agricultural land with high productivity for maintaining its status. However, the final decision for it remains to the Ministries Contextual differences between mountainous and plain rural areas According to their land morphology, municipalities / communities in Greece are classified as level (plain), semi-mountainous (hilly) and mountainous ones 3. However, a clear distinction between mountainous and level prefectures is almost impossible, as most prefectures have mountainous or hilly parts (limited or extended) as well as level parts. So, with regards the mountainous study areas in our research they are predominantly mountainous as more than 50% of their land is mountainous, and same for the level ones. In Table 1.1, some key features and characteristics of areas appear, according to their land morphology. 3 National Statistical Service (NSSG), defines mountainous those municipalities / communities, the area of which (total or main part) has an altitude 800 meters and over. Mountainous are also those in which their land is strikingly steep broken by ravines or covered by precipitous peaks, which create deep and multiple ground undulations for an altitude difference of more than 400 meters at certain parts of the commune. As semi-mountainous (hilly), those at the feet of a mountain divided between a plain and a mountain at an altitude not exceeding 800 meters and as plain level those municipalities / communities totally or mostly situated on a plain. 5

10 Mountainous areas are characterised as remote and peripheral, within the national context. They cover 42% of the country s total area but only 9% of the total population resides in them. They are areas with low population density (17 persons/km 2 compared to 78 persons/km 2 at national level), with low accessibility due to their land morphology and harsh climatic conditions. They have poorer infrastructures and lower economic and social opportunities compared to level areas. Mountainous areas have experienced significant depopulation trends during the 60s and 70s, which slowed down during the last two decades. However, demographic evolutions are not common for all mountainous areas as some they have managed to maintain their population (and even increase it) and integrate their economies into the level areas and national ones. This means that they are also other factors than geographical features that modulate conditions for maintaining or increasing population in the mountainous areas. Table 1.1 Key features and indicators of areas by land morphology. Level Hilly Mountainous Total Total area surface (%) Demographic characteristics Population, 1991 (%) Population density (persons per km 2 ) * Population of age over 65 (%) * Population changes (%) Land use, 1991 (%) Agricultural land * Grazing land * Forest * Other lands * Total Irrigated land, 1997 (%) * % of farms Farm size (in ha) * Source: Statistical Yearbooks and Population Census, NSSG, 1991 * National average Due to out-population trends, they tend to have a stronger aging problem, compared to level areas. Their production base depends very often on low-income agriculture, with extensive cropping and livestock practices. However, some of them have more diversified economy as forestry, crafts and tourism contribute to it, along with farming. Their distance from the main markets, and their poorer economic and social infrastructures imply higher transfer costs, higher cost of supplies and often of production. These constrain mountainous areas competitiveness and the possibilities for attracting exogenous investments. It is important, however, to note that despite these constrains, they present development potential in the framework of the new trends for the valorization of rural amenities. Their potential for development relates to their natural resources, clean environment, rich biodiversity, beautiful landscapes as well as rich cultural and historical heritage. Organic farming, local quality products, crafts, recreational activities and tourism present development potential for the mountainous areas. Level areas in Greece cover less than one third of the country s area (29%) and concentrate 69% of its population, as they include large cities as well. Level rural areas tend to be dynamic areas as they concentrate significant natural resources (more than half of the total agricultural land and two thirds of the irrigated one). Also more than half of the farms (53%) are located in level areas. They tend to be larger size farms with intensive farming and higher farm incomes. Level rural areas have been experiencing population increases and in-migration trends (they attract both mountainous population and economic migrants), which have resulted in an favourable population age structure

11 Level rural areas have a more diversified context compared to the mountainous ones, due to the presence of small and medium towns that concentrate services (administration, secondary education, health services) and industrial activities (natural resource-based processing activities as well as other industrial activities). These areas have better infrastructure (as construction and maintenance costs of infrastructure are lower compared to mountainous areas), both businessoriented and consumer one, and they tend to attract exogenous investment, particularly if they have a proximity to large urban centers or are located on national transportation axes. However, due to the intensive agriculture and the industrial diffused activities, combined with the non-satisfactorily developed planning and environmental protection mechanisms, they face -some of them- problems related to the over-exploitation of natural resources, water supply and conflicts from environmental degradation. As a lot of them tend to face saturation problems, the effective planning of their activities and protection of their natural resources and environment become high priorities for their further development Location, profile and DEP of the predominantly plain study areas As it has been stated before, study areas selected in this project as predominantly level areas were the prefectures of Korinthia (successful) and Fthiotis (less successful). Both study areas are located on the main national development and transportation axis of Thessalonimi Athens Patras. Korinthia is located at the north-eastern part of the Region of Peloponnisos, at an average distance of 120 km to Athens (1.5 hour). The prefecture s proximity to Athens has played an important role in its development. Fthiotis is located in the central-north part of the Region of Sterea Ellada (central Greece) at an average distance of 220 km from Athens (2-3 hours). Both can be accessed by road or train (no air access). Their socio-economic profile appears in Table 1.2. Table 1.2 The economic profile of Korinthia and Fthiotis Korinthia Fthiotis Country 1. Size (in km 2 ) 2,290 (1.7%)* 4,441 (3.4%)* 131, Population size of which in % (1991) 141,823 (1.4%)* 153,941 (1.4%)* 171,274 (1.7%)* 178,896 (1.6%)* 10,259,900 10,939,771 - Level areas 59% 53% 69% - Hilly areas 20% 34% 22% - Mountainous areas 21% 13% 9% Total 100% 100% 100% 3. Density (persons/ km 2 ) Population change (%) Employment change (%) % 15.3% 8.5% 7.0% 8.6% 4.0% 4.8% 5.7% 4.5% 3.5% -5.4% -4.5% 11.1% 5.3% 6.5% 7.8% 5.4% 0.5% Non-agricultural employment (average annual rate) % 2.1% 2.0% 7. Rate of unemployment % 3.0% 4.4% % 8.1% 8.1% 8. GDP growth (constant prices, average annual rate) % 1.7% 2.0% 9. GDP per capita (million drs) 1996 country index= Employment in agriculture (%), Main towns and population (1991) Korinthos28,903 (20.4%) Lamia 44,084 (25.7%) Loutraki 11,068 (7.8%) Atalanti 6,446 (3.8%) Source: Population Census 1981, 1991 and National Regional Accounts of Greece. * Percent of national total 7

12 The two study areas have shown significant differences in their economic performance 4 during the period of analysis. Korinthia s population increased almost three times over the population of Fthiotis during and about twice during Its labour force and employment have also shown high increases, while in Fthiotis they decreased. Moreover, GDP per capita is above the national average for both study areas, but at higher level in Korinthia. A shift share analysis of the employment change ( ) in the two study areas has shown a high positive differential component for Korinthia (12.32) and a negative one for Fthiotis (-1.42). The better economic performance (in employment terms) in Korinthia can be attributed to local factors (both tangible and less tangible) that explain this DEP, when compared to Fthiotis Location, profile and DEP of the predominantly mountainous study areas As reported above, study areas selected as predominantly mountainous areas were the prefectures of Trikala (successful) and Arkadia (less successful). Both are characterised as peripheral rural areas with non-favourable geographical features, located outside the national development axis. Trikala is located in the west part of the Region of Thessaly, km from Athens (4-5 hours). Arkadia is located in the centre of the Region of Peloponnisos, at an average distance of km (2-2.5 hours). Both areas can be accessed only by road and train (no air access). They both have a high proportion of mountainous land (71% in Trikala and 63% in Arkadia), as well as of mountainous population (23% and 38% respectively). Their economic profile appears in Table 1.3. Table 1.3 The economic profile of Trikala and Arkadia Trikala Arkadia Country 1. Size (in km 2 ) 3,381 (2.6%)* 4,419 (3.3%)* 131, Population size of which in % (1991) 138,946 (1.4%)* 139,548 (1.3%)* 105,309 (1%)* 101,223 (0,9%)* 10,259,900 10,939,771 -Level areas 60% 37% 69% -Hilly areas 17% 25% 22% -Mountainous areas 23% 38% 9% Total 100% 100% 100% 3. Density (persons/ km 2 ) Population change (%) Employment change (%) % 3.4% 0.4% -2.5% -7.5% -2.3% -3.0% -2.5% -3.9% -2.9% -15.8% -3.7% 11.1% 5.3% 6.5% 7.8% 5.4% 0.5% Non-agricultural employment (average annual rate), % 1.6% 2.0% 7. Rate of unemployment % 3.1% 4.4% % 7.2% 8.1% 8. GDP growth (constant prices, annual rate) % 1.2% 2.0% 9. GDP per capita (million drs) 1996 country index= Employment in agriculture (%), Main towns and population Trikala 44,232 (32%) Tripolis 22,463 (21%) (1991) Kalampaka 6,000 (4%) Megalopoli 4,684 (4.5%) Source: Population Census 1981, 1991 and National Regional Accounts of Greece. * Percent of national total 4 Korinthia and Fthiotis were selected and analysed as case study areas under RUREMPLO project (FAIR CT ), from which valuable knowledge was drawn (Efstratoglou et al., 1998e, Efstratoglou et al. 1998f, Efstratoglou S. Efstratoglou A., (2000). 8

13 Trikala and Arkadia present differences in their economic performance. Population in Trikala has been increasing against the general trend of population decline in mountainous areas, while that of Arkadia has been declining in line with this trend. Employment and labour force evolution are negative in both areas but the decline is about twice higher in Arkadia than in Trikala. GDP growth remains at similar levels in both areas. Trikala has a higher GDP per capita compared to Arkadia, however, both are below the national GDP per capita. The shift share analysis of the employment change ( ) in the two study areas has shown that while national and structural components are almost similar between the two areas, Arkadia has a high negative differential component (-9.4), while for Trikala this differential component was slightly positive (0.3). This difference seems to have affected the employment evolution in both areas and it could be attributed to the interplay of the local factors (tangible and less tangible), which will be analysed below. PREDOMINANTLY PLAIN AREAS (KORINTHIA FTHIOTIS) 1.3 Analysis of factors Natural resources Availability and exploitation: Both study areas are rich in natural resources. Their agricultural land covers more than one third of their total surface (Table 1.4) with irrigated land, being recorded at higher level in Fthiotis than Korinthia (33% compared to 26%). Irrigation allows the intensive cultivation of permanent crops in the plain areas of Korinthia (citrus, fruits, vegetables, grapes) and of annual crops (cotton, tobacco, cereals) in Fthiotis. In the hilly and mountainous zones of both study areas, extensive farming prevails (olive trees, vineyards, sheep raising). Table 1.4 Distribution of land by type of use in Korinthia and Fthiotis (area in thousand ha) Land use Korinthia Fthiotis Greece Area % Area % Area % Agricultural land * of which irrigated , Pastures , Forests , Water Land for settlements Other land Total , Source: NSSG, Land Use Census, * Agricultural land includes the cultivated and fallow land. Both areas are endowed with rich ecosystems, forests of natural and recreational value, cultural heritage, historical sites and traditional settlements. Both have protected areas (Natura 2000). Korinthia s coastline of 80 km length is touristically developed (tourism and second house settlements). Fthiotis coastline, extending over 215 km, is partly touristically developed. Fthiotis is also rich in mineral resources, which are exploited only to some extend (chromium bauxite). Also, some of the most important thermal springs (spa) are found in Fthiotis, not touristically though developed. Availability of natural resources seems to be rather at similar levels. What however, differs between the two study areas, that explains their DEP, is the degree of exploitation and valorisation of their natural resources. Korinthia shows a higher degree of exploitation of its agricultural land, reflected in the higher added value per ha of cultivated land (75% higher compared to Fthiotis) and in the higher percentage of its agricultural products that are processed locally (33% compared to 29% in Fthiotis). Also, tourist resources are better exploited in Korinthia than in Fthiotis. Korinthia has a somewhat higher number of beds per 1000 inhabitants (52 against 48 for Fthiotis, compared to 59 natural average) but their exploitation is twice over that of Fthiotis (659 thousands tourist 9

14 overnights in Korinthia compared to 316 thousands in Fthiotis). Respondents from the empirical research (field work) recognise in both study areas the richness in natural resources. However, a higher percentage of Korinthians argues that their natural resources have contributed to the prefecture s economic development. In other words, more Korinthians perceive their natural resources as assets and tend to exploit them (higher valorisation) than Fthiotians. Land ownership, environmental legislation and planning: In both areas agricultural land is privately owned and small scale farming prevails, as all over Greece (average farm size in Korinthia 3.7 ha, in Fthiotis 4.9 ha, compared to national average 4.3 ha). Pastures are mostly community land and forests state land. No differences appear in land ownership status, in environmental legislation and planning that could constrain local economic performance. The only difference observed is the lack of water supply in Korinthia and the over concentration of some activities (industry, housing) in its level zone. Both require better management of natural resources and more effective planning mechanisms Human resources Demographic evolution and labour force: Korinthia has experienced significant population increase in the last thirty years and high inflow of population from other areas, due to its better economic and social opportunities. Fthiotis, on the other hand, lost population and experienced high out-migration during the 60s, while its population increase trends in the following decades were much lower compared to Korinthia s (Table 1.5). Due to these demographic evolutions, Korinthia has had more favourable demographic structures compared to Fthiotis (lower aging index, higher vitality index, and lower dependence index). The demographic dynamism of Korinthia has played a major role for boosting local population and had a large impact upon the take off of Korinthian economy (TEDK, 1995, Kassimis et al. 1998), as population increases stimulated further economic activities in the area. Table 1.5 Population growth, natural balance and apparent migration, in Korinthia and Fthiotis (in %) Period Korinthia Fthiotis Greece Population change Natural balance Apparent migration Population change Natural balance Apparent migration Source: NSSG, Census of Population, Statistical Yearbook. Population change The above population evolution resulted in an increase in the labour force in Korinthia, while labour force remained more or less the same in Fthiotis. During the same period, employment has increased also considerably in Korinthia, while it declined in Fthiotis, resulting in higher unemployment in Fthiotis. Also, participation rates in Korinthia has been higher than of those in Fthiotis, particularly that of women, reflecting higher adjustment of the Korinthian economy. In both study areas there has been an inflow of foreign economic migrants, which represent about 11% of the labour force in Korinthia and 14% in Fthiotis (Kavounidis, 1999). The demographic dynamism of Korinthia can be considered as a cause and an effect to its economic performance and development. Human capital: The educational level of Korinthia is slightly higher that that in Fthiotis (e.g. 31% of the population in Korinthia have secondary education against 28% in Fthiotis, moreover, in Fthiotis 21% has an incomplete primary education, compared only to 15% in Korinthia). With regards to skills available in the study areas, enterprises tend to hire labour from the local labour market and train it on the job, while more qualified personnel (managers, specialised personnel) for the large enterprises is recruited from the national market. Although, there are small differences in the educational level and skills available in both areas, the perceptions of respondents differ. Korinthian respondents indicate more frequently than their counterparts in Fthiotis that the educational and training system in the area is inadequate or that the skills of the locals are 10

15 inadequate to enterprises. However, in both areas lack of managerial and specialised staff appear to be the main problem related to the lack of skilled labour force, perceived by the respondents Economic structures and organisation Structure and evolution of employment by sector: The better economic and social opportunities that have prevailed in Korinthia are reflected in the higher (above the national average) total employment increases during the last two decades, which is also considered a key indicator of economic performance. Fthiotis, on the opposite, during the same period had a decline in its employment (Table 1.6) As the sectoral distribution of employment is quite similar in both areas (almost one third of the employed are still in agriculture), total employment changes are mainly attributed to the differences in the dynamics of their economic sectors and activities, as it appears from Table 1.6. Table 1.6 Employment distribution and changes by branch of economic activity in Korinthia and Fthiotis Branches Korinthia Fthiotis 1991 % Change % Change Agriculture Primary sector Mining Manufacturing Electricity Water Construction Secondary sector Trade-Res/nts-Hotels Transport Finance-Insurance Other Services Tertiary sector Non-Declared Total Total number 50,117-57,035 - Source: NSSG, Population Census, 1981, During , Korinthia had a slower exodus from agriculture (-25%), due to higher farming incomes, while Fthiotis lost more than one third (-35%) of its employed from farming due to lower farm incomes ( push factors ). At the same period, Korinthia managed to maintain its employment in the secondary sector (marginal decline of 3%), while Fthiotis was caught up in the deindustrialization process, the country was going through, and lost on fifth (20% decline) of its jobs in manufacturing The service sector in both study areas had the leading role in job creation. However, the service sector in Korinthia had a more dynamic expansion compared to Fthiotis. Service sector development in Korinthia is related to the more developed tourism compared to Fthiotis, as Korinthia managed to develop a tourist strategy and upgrade its tourism facilities, both missing in Fthiotis. It is also related to increase in services (education, health, entertainment and other private services). The industrial base of Korinthia is broader, with stronger upward and downward linkages, and more stable compared to that of Fthiotis. Korinthia s industrialization has been significantly affected by the spill over effect of Attica s (Athens) industrial development (Efstratoglou S. and Efstratoglou A., 2000), during the 60s and 70s. Fthiotis industrial base expanded significantly during the 70s due to the regional investment incentives law, that attracted important shares of exogenous investment. However, its industrial activity suffered from lower competitiveness and is under restructuring. Sectoral employment dynamics and forces behind differ between the two study areas, resulting in DEP. Social formation of production: Due to the prevailence of small family type enterprises and the high presence of agriculture, self employed amount to about 40% of the total employment, while 11

16 salaried/waged employees vary from 42-45% (small size of labour market). From these, it appears that no differences exist in the social formation of production that could explain DEP. Enterprise structure and entrepreneurship: No differences appear in enterprise structures, as small and medium enterprises (SMEs) prevail in both areas, as also in the national economy. Almost 95% of all enterprises in the two study areas have a size of less than 10 persons employed. Moreover, between , the number of manufacturing industries with more than 10 employees declined in both areas. Thus, the new employment positions created in both areas seems to have been in small enterprises. Respondents opinions on the role of SMEs in their area differ as more respondents in Korinthia consider their role positive, while Fthiotians are divided between positive and negative attitudes, as a lot of them believe that large enterprises tend to create more jobs than small enterprises. The majority also of Korinthian respondents argue that there are innovative enterprises in their area against only a minority in Fthiotis. An important difference recorded among respondents refers to whether your area is characterised by entrepreneurship. More than two thirds of the respondents in Korinthia (68%) recognise the existence of entrepreneurial capacity in their area, compared only to one third in Fthiotis (33%). The responses of Korinthians with regards entrepreneurship are recorded in the following remarks: Establishment of many small enterprises yearly, in Xylokastro this year there have been 30 new shops, Significant trends towards trade. The son of the farmer comes to the town and opens a shop, Establishment of service bureaus, of tourist enterprises and some new manufacturing ones devilish entrepreneurs, They open shops, small enterprises. Korinthians are vibrant, The young people and all farmers try to modernize, No enterprise closures. Stabilisation of the situation with tendencies towards growth, There are some who create enterprises because the communication is facilitated and activities are transferred [in the area] from Athens. Accordingly, Fthiotians responses are: Oversupply of shops, many self-employed due to unemployment, New enterprises are established. Their viability is the problem.. It is a difficult time, Everybody is searching. New jobs are opening. Establishment of shops. The young farmers have been modernised. These remarks stress the existence of an indigenous entrepreneurship spirit in Korinthia that can be placed opposite to a less dynamic one in Fthiotis. This is also supported by the experiences of the staff of the Centre for promoting youth and female entrepreneurship and employment, in Korinthia, which recognise a high response from women and young population for entrepreneurial initiatives Infrastructure Accessibility, transport and business related infrastructure: Because of the significant geographic diversity, the large mountainous zones and the spatial fragmentation of Greek national surface, it is evident that the relative position of each area in respect to the North-South transport and development axis (Thessaloniki Athens Patras) plays a basic role for its economic development. Korinthia is an area with direct and easy access to the main transport axis and to the largest market of the country, the city of Athens ( km). Fthiotis is placed on the same axis but at a larger distance from Athens ( km). The national road and railway network service a larger proportion of the Korinthian surface than of Fthiotis, offering a relatively better access to Korinthia. In any case there is a slight geographical advantage of Korinthia to Fthiotis, which explains their historical development but it cannot be considered the reason for Fthiotis lower economic performance (DEP) during the period of analysis. There are not important differences in business-related infrastructure, with the exception that Fthiotis has an industrial site, not existing in Korinthia. Consumer related and tourism infrastructure: There are no major differences in the consumerrelated and tourist infrastructure in the two areas, as it is assessed by a number of indices 5. What really differs are respondents perceptions with regards contribution of infrastructure to the attraction of private investment. Two thirds of the Korinthians respondents argued that the existing 5 See National Report Greece, DORA research project. 12

17 infrastructure constrained investment, while the same percentage of Fthiotian respondents argued that existing infrastructure contributed to investment attraction and undertaking. Similar patterns of findings were recorded with regards to the positive or negative influence of infrastructure on economic performance (DORA National Report Greece). These perceptions can be interpreted within the more dynamic economic performance of Korinthia, the lack of an industrial site in it (although available in Fthiotis) and the higher exploitation of local resources (agriculture, tourism, processing industries) that put higher pressures in existing infrastructures Investment Past investment (private-public), regional spending: The analysis of public / private investments is an important indicator as investment is highly related to economic performance (Gabriel Tondl, 1999). The pattern and level of investment undertaking during the period of analysis presents differences between the two study areas. Korinthia has higher levels of total private investment, while Fthiotis of public one. This is attributed to the capacity of Korinthian local economy to attract marketdriven investment, while more public supported investment is directed to Fthiotis, which concerns mainly infrastructure. Moreover, this market-driven investment in Korinthia is also reflected in the higher per farm investments under the Guidance Fund, compared to Fthiotis. On the average, annual payments under the Guidance Fund in Korinthia amount to 4% of the agricultural GDP, while the relevant percentage for Fthiotis is only 1.7%. Also average annual Guidance payments per farm are three times higher in Korinthia than Fthiotis. This investment performance reflects higher entrepreneurial capacity, more intense structural changes and modernization - innovation trends in Korinthia compared to Fthiotis. This finding is contrasted with CAP price support spending (Guarantee Fund) and it shows that the higher the CAP price support per farm, the lower the investment undertaking (structural change) under the Guidance Fund. Specifically, Fthiotis had 47% higher price support compared to Korinthia Guarantee spending ( ). This finding requires however, careful interpretation as investment capacity relates to other factors too (Institutions, Networks etc). If investments under the Regional Investment Incentives Law are analysed, Fthiotis seems to attract more supported private investment than Korinthia, as higher investment incentives are granted for Fthiotis (Fthiotis belongs to zone C while Korinthia to zone B and to zone A 6 ). Also, more funds were allocated in Fthiotis under the Regional Operational Programmes (twice as high total and per capita investment) compared to Korinthia, the largest part of which has been for transport improvements. It is worth noting that under the Regional Operational Programmes, higher shares of funds in Korinthia have been devoted in sub-programmes on Agriculture and Rural Development, on Local Government, on Human Resources and on Tourism, compared to Fthiotis where the emphasis on spending was in Infrastructure. Investment on SMEnterprises: As small enterprises prevail in both local economies, private investment undertaken in the study areas concerning SME during , is another strong indication of the mobilisation and capacity of small local entrepreneurs. Under the Initiatives on SMEs, the number of investments realised in Korinthia was twice that of Fthiotis (number and total budget), while under all policies for SMEs, Korinthian small entrepreneurs succeeded to absorb more funds (20%) compared to Fthiotians. Capital availability: Capital availability in both study areas is mainly through the Regional Operational Programmes and Sectoral Programmes of the CSF, which follow common incentives (support) and mechanisms in both areas, as both have an Objective 1 status. Only exception and difference that appears is the Regional Investment Incentives Law, that provides higher investment incentives to Fthiotis (zone C) compared to Korinthia (zone A and B). Of course capital availability is also related to level of incomes and saving patterns of local population (private contribution) as well as financial institutions. These, however, do not seem to have been a constrain for the lower 6 Investments incentives are higher in zone C, lower in B and no incentives in zone A. More data and information on the levels of investment (public-private), on regional spending (ROP and CAP), on investments under the National Investment Law and SMEs are presented in the National Report Greece of this project. 13