DELIVERABLE 4.1 A REVIEW OF EU POLICY APPROACH TO IMPROVE INTERNATIONAL COMPETITIVENESS IN EUROPE

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1 DELIVERABLE 4.1 A REVIEW OF EU POLICY APPROACH TO IMPROVE INTERNATIONAL COMPETITIVENESS IN EUROPE Report for: European Commission Directorate-General Research & Innovation B-1049 Brussels/Belgium PUBLIC 31 August 2013 Authors: Aleksandra Kozlak Barbara Pawlowska Przemyslaw Borkowski Monika Bak Jan Burnewicz Elzbieta Adamowicz

2 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 2 Change log Version Date Author Reason for change AK, BP, PB, MB, JB, EA Preliminary draft AK, BP, PB, MB, JB, EA Final draft AK, BP, PB, MB, JB, EA Comments from partners AK, BP, PB, MB, JB, EA Comments from Advisory Committee

3 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 3 Table of contents LIST OF TABLES... 5 LIST OF FIGURES... 5 LIST OF ABBREVIATIONS... 6 EXECUTIVE SUMMARY INTRODUCTION EU POLICIES AND INITIATIVES MAP IN THE CONTEXT OF IMPROVING THE EUROPEAN COMPETITIVENESS THE MAIN DIRECTIONS OF EU ACTIVITIES IN THE CONTEXT OF THE EUROPE 2020 STRATEGY IDENTIFICATION OF EU POLICIES CONTRIBUTING TO ACHIEVE THE GOALS OF THE EUROPE 2020 STRATEGY Regional/cohesion policy Economy, finance and tax policies Single market policy Research and innovation policy Enterprise policy Industrial policy Employment policy Education policy Trade Policy Transport policy Energy policy Environment policy CONCLUSIONS ASPECTS OF COMPETITIVENESS SHAPED BY POLICY INSTRUMENTS ANALYSIS OF ACTIONS AND MEASURES OF EU POLICIES INFLUENCING EUROPEAN COMPETITIVENESS AND REGIONAL GROWTH INTRODUCTION POLICY MEASURES FOR IMPROVING INFRASTRUCTURE ENDOWMENT AND ACCESSIBILITY Introduction European schemes of infrastructure Increasing capacity and quality of infrastructure Financial instruments for infrastructure investments POLICY MEASURES FOR IMPROVING LABOUR PRODUCTIVITY Introduction Changes in the education system Investments in human capital - training and adult learning Increasing labour market efficiency POLICY MEASURES IMPROVING PRODUCTIVE ENVIRONMENT Introduction... 43

4 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Improving entrepreneurship environment Supporting R&D and innovation Supporting application of advanced technologies Increasing internationalization level REVIEW OF EXAMPLES OF POLICY INSTRUMENTS INFLUENCING COMPETITIVENESS IN MEMBER STATES CROSS-RELATIONS AMONG DIFFERENT EU POLICY INTERVENTIONS AND TRANSPORT INFRASTRUCTURE INVESTMENTS IDENTIFICATION OF THE RELATIONSHIP BETWEEN THE VARIOUS EU POLICY MEASURES CONCLUSIONS REFERENCES ANNEX 1 A REVIEW OF EU AND NATIONAL POLICY MEASURES INFLUENCING COMPETITIVENESS AND REGIONAL GROWTH ANNEX 2 TEMPLATES OF PRACTICES AIMING TO IMPROVE THE COMPETITIVENESS IN EU MEMBER STATES

5 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 5 List of Tables Table 1 The relationships between flagship initiatives of Europe 2020 Strategy and EU policies Table 2 Possibilities of influence on competitiveness factors at different policy levels Table 3 Sub-categories and examples of infrastructure (transport, energy and telecommunications) and accessibility improvement measures Table 4 Financing TEN-T Network Table 5 Sub-categories and examples of improving labour productivity measures Table 6 Sub-categories and examples for improving productive environment measures Table 7 Examples of practice from the range of different policies measures used in Member States to improve competitiveness Table 8 Relationships among analysed measures of EU policies influencing EU competitiveness List of Figures Figure 1 Key EU initiatives in view of priorities of Europe 2020 Strategy Figure 2 EU policy goals, EU policy measures and factors of competitiveness... 34

6 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 6 List of Abbreviations Abbreviation CEF CIP EAP EIB EIT ERA ERDF ERTMS Full term Connecting Europe Facility the Competitiveness and Innovation Framework Programme Environment Action Programme European Investment Bank European Institute of Innovation and Technology European Research Area the European Regional Development Fund the European Rail Traffic Management System ESF FDI FTA ICT ITS KETs NMS RIS RTTI SafeSeaNet SESAR SMEs TSO VET the European Social Fund Foreign direct investment Free Trade Agreements Information and Communications Technology Intelligent Transport Systems Key enabling technologies New Member States River Information Services Traffic and travel information services a European Platform for Maritime Data Exchange between Member States' maritime authorities Single European Sky Air Traffic Management (ATM) Research small and medium-sized enterprises Transmission System Operator Vocational Education and Training VTMIS Vessel Traffic Monitoring and Information Systems

7 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 7 Executive summary International competitiveness still remains a valid objective of the EU policy, especially in the context of the recent financial crisis. Europe has realized that it must overcome a number of challenges if it wishes to remain competitive with the rest of the developed and developing world. The new European strategy Europe 2020 is aiming at smart, sustainable, inclusive growth with greater coordination of national and European policy. The strategy targets are in turn broken down into the seven flagship initiatives. The transport sector should play a significant role in realization of these flagship initiatives. In a globalising and interrelated world economy, however, competitiveness also depends on building links with other regions to ensure that common assets are used in a coordinated and sustainable way. Cooperation along the flow of technology and ideas as well as goods, services and capital is becoming an ever more vital aspect of regional development and a key factor underpinning the long-term and sustainable growth performance of the EU as a whole (European Commission, 2008g). This is the first deliverable of Work Package 4 of the I-C-EU project. I-C-EU is a European project that tries to clarify the relationship between transport infrastructure investment and its wider economic impacts, in particular in terms of competitiveness and economic growth. The aim of this deliverable is to perform a systematic and comprehensive review of EU policy approach to the enhancement of international competitiveness of Europe from the perspective of the ability to produce competitive goods/services and to attract foreign domestic investment. The analysis of horizontal and sectoral policies is provided especially from the international competitiveness of Europe point of view. The expected result of the studies within this task is determination of individual policies impacts on shaping of the international competitiveness of Europe. This deliverable describes factors of competitiveness in the context of policy measures. Not all determinants of competitiveness are susceptible to the impact of policy instruments, so it is crucial to indicate these appropriately. Competitiveness factors are grouped into three broad categories: 1) infrastructure endowment and accessibility, 2) human resources, and 3) productive environment. In each group it is possible to identify such determinants, which can be influenced through appropriate policies. Others are not flexible to such impact in short/medium term or this impact is very limited. Most of the factors can be influenced through policy instruments at national and sub-national level. EU activities to improve competitiveness is the largest in the range of development and modernization of technical infrastructure, the increase of innovativeness level, the improvement of skills and productivity of labour forces and the support for SMEs. Having provided an overview of the EU policies contributing to achieve the goals of Europe 2020 and factors of competitiveness, which can be shaped by policy instruments, the report looks for policy measures for improving competitiveness. Sections describing EU policy measures are divided into subcategories of measures: 1) Policy measures for improving infrastructure endowment and accessibility; 2) Policy measures for improving labour productivity and 3) Policy measures improving productive environment. Each of these sections provides flagship measures overview, while the detailed description of them can be found in Annex 1.

8 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 8 In addition, and in order to anchor the theoretical discussion to practice, examples of policy instruments influencing competitiveness in Member States were reviewed (templates with such examples of practices are presented in Annex 2). Attention has been paid to the economic, social and environmental impact of these instruments. Such approach allows observing real effects of use of different instruments, both direct in a given sector, and indirect in other sectors and in the whole economy. The examples clearly show that most of the effects which were identified are direct impacts. This leads to the conclusion that it is very difficult to separate wider economic benefits from basic direct results of analysed measures. For this reason cross-relations among different EU policy interventions and transport infrastructure investments have to be identified. On the one side transport infrastructure investments help to realise goals of others policies (regional, industrial, trade etc), and on the other side other policies (than transport policy) support creating infrastructure objects (e.g. regional policy through funding). Improved transport links between regions and countries facilitate access to EU-wide markets, which is likely to create new opportunities for growth. It also, however, increases competition between regions, which may adversely affect both businesses and workers. The overall effect depends on a region s capacity to exploit and further develop its comparative advantage. Policy measures/activities interact with each other in different ways. Three main definitions that describe how the different measures in policy packages combine with each other are introduced. These are: complementarity, additively and synergy. They can either strengthen or lighten the impact of various measures. The overall intention of this task is therefore to build an analytical framework for competitiveness policy instruments on which analysis of effects of different policy measures on competitiveness could be conducted by taking into account interrelations between different measures. The second important objective is to take a closer look at the role of transport infrastructure investments on competitiveness enhancement. This instrument is in the centre of interest of further tasks of the ICEU project and for this reason here the interrelation of this instrument and other policy measures is discussed much more than the effects of other policy tools. This is a preliminary step for the formulation of an assessment method of infrastructure investments wider economic benefits. The presented in this report analysis points at different levels of interrelations between transport infrastructure instrument and other competitiveness enhancing instruments this must be remembered while developing tools to assess wider economic benefits resulting from infrastructure development especially because it increases the possibilities for double counting of effects. This should be taken into consideration in further work on this project.

9 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Introduction The European Union turned a new page with the start of the Europe 2020 Strategy. It replaces the previous Lisbon Strategy ( ) and the transition process between the two strategy plans coincides with the EU s serious economic crisis. The objective of getting out of the crisis in the context of fiercer competition on the global market with the new emerging economies has made Europe s competitiveness and economic performance fundamental issues. Europe has realized that it must overcome a number of challenges if it wishes to remain competitive with the rest of the developed and developing world. Based on the Lisbon Agenda experience, Europe 2020 Strategy was proposed on 3 March 2010 by the Commission aiming at smart, sustainable, inclusive growth with greater coordination of national and European policy. Several targets of the new strategy have been fixed (European Commission, 2010b): To raise the employment rate of the population aged from the current 69% to at least 75%. To achieve the target of investing 3% of GDP in R&D in particular by improving the conditions for R&D investment by the private sector, and develop a new indicator to track innovation. To reduce greenhouse gas emissions by at least 20% compared to 1990 levels or by 30% if the conditions are right, increase the share of renewable energy in final energy consumption to 20%, and achieve a 20% increase in energy efficiency. To reduce the share of early school leavers to 10% from the current 15% and increase the share of the population aged having completed tertiary from 31% to at least 40%. To reduce the number of Europeans living below national poverty lines by 25%, lifting 20 million people out of poverty. These targets are in turn broken down into the seven flagship initiatives. The transport sector plays an important role in some of the flagship initiatives. In line with the Europe 2020 Strategy flagship initiatives, the White Paper of 2011 summarizes the main objectives of the European transport strategy. The objectives help to establish a system that underpins European economic progress and offers high quality mobility services, while using resources more efficiently. As a consequence, it is essential to clarify the relationship between investments in transport infrastructure, economic growth and competitiveness. I-C-EU is a project that clarifies the relationship between transport infrastructure investment and its wider economic impacts, in particular competitiveness and economic growth. The aim of this Work Package is to evaluate background for competitiveness analysis in Europe with in-depth analysis of transport infrastructure development role in strengthening Europe s competitiveness. This will be made possible by exploring the state-of-the-art of the assessment tools, analysing the current and future situation of European economy and competitiveness, and taking into account the current European strategy to improve its economic performance and competitiveness. This concept allows I-C-EU to

10 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 10 provide recommendations to the European Commission on making political interventions in order to enhance competitiveness of Europe in relation to the rest of the world as well as between its member countries and regions. This deliverable aims to give an outline of the efforts required to complete Task 4.1 of Work Package 4 of the I-C-EU project. The objectives of Work Package 4 are: Objective 1: To provide a review of EU policy approach to improvement of international competitiveness of Europe, Objective 2: To identify weaknesses of current Cost Benefit Analysis (CBA)/Multi-criteria Analysis (MCA) methodology in assessment of transport investment projects, Objective 3: To formulate advice on how assessment methodology can be modified or adapted to avoid underestimating the impact of transport infrastructure. The Task 4.1 contributes to Objective 1. The aim of task 4.1 is to perform a systematic and comprehensive review of EU policy approach to the enhancement of the international competitiveness of Europe from the perspective of the ability to produce competitive goods/services and to attract foreign domestic investment. The analysis of horizontal and sectoral policies will be provided especially from the international competitiveness of Europe point of view. The expected result of the studies within this task will help to determine individual policies impacts on shaping the international competitiveness of Europe. In this report, the relationship between actions undertaken under the various European policies will be analysed in the context of improving the competitiveness of the European economy. Special attention will be given to the impacts of transport infrastructure investment on competitiveness and regional growth. As argued in (Smit, 2013) in the first work package of the I-C-EU project, there is no clear agreement in the literature regarding the definition of competitiveness. Competitiveness can be defined in a narrow sense at the firm level. However, the concept of competitiveness has been extensively used by policymakers and thus a broad definition of competitiveness is needed at the country or regional level. In this deliverable the definition presented in (Smit, 2013) is taken as basic working definition: Competitiveness is the extent to which firms in a particular region can compete with those elsewhere. Critical factors for competitiveness are those that determine the level of productivity in a region in relation to other regions. Competitiveness has been a central preoccupation of governments, regional authorities and firms. Thus, many indices, models and indicators have been proposed in the literature to measure national and regional competitiveness. However, it has been argued that single measures of competitiveness do not capture all the elements. Instead, composite indicators are proposed. Following conclusions and analysis conducted in D 1.3 it is worth to underline that two leading composite indicators measuring national competitiveness can be distinguished: The IMD s World Competitiveness Yearbook indicator and the WEF s Global Competitiveness indicator. Both studies consider transport infrastructure investment an important variable when measuring national competitiveness. The role that transport infrastructure has in national and regional competitiveness is also related to questions of accessibility and connectivity. Thus, some accessibility and connectivity indices have been analyzed.

11 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 11 The structure of this deliverable is as follows: Chapter 2 discusses the improvement of competitiveness in EU policies through analysis the main directions of EU activities in the context of Europe 2020 strategy where identification of EU policies contributing to achieve the goals of strategy are included. Chapter 3 provides a review of aspects of competitiveness shaped by policy instruments. Chapter 4 gives the analysis of actions and measures of EU policies influencing European competitiveness and regional growth. Some examples of individual measures and their effects are described in this part of the report. The details of the chosen instruments used in the framework of horizontal and sectoral policies that have an impact on competitiveness and regional growth are included in Annex 1. Annex 2 contains the examples of policy instruments influencing the level of competitiveness in Member States. In this part of work also the cross-relations to transport infrastructure investment are reviewed. Chapter 5 reviews the relationships between the various EU policy measures. Chapter 6 provides conclusions.

12 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP EU policies and initiatives map in the context of improving the European competitiveness The issue of how improving competitiveness of the European economy still remains valid. The goal of this chapter is to identify horizontal and sectoral EU policies, which are aimed to improve economic competitiveness. Hence, this chapter is divided into three parts. The first section discusses priorities for further development of the European Union and locates competitiveness in these priorities. It describes main directions of activities undertaken in order to realise the Europe 2020 Strategy and its seven flagship initiatives. The second part of this chapter concentrates on selected EU policies. They are shortly described in the context of their relation to the implementation of flagship initiatives. Conclusions on the impact of individual policies on the implementation of the strategy are included at the end of the chapter. 2.1 The main directions of EU activities in the context of the Europe 2020 Strategy 1 Over the years, the EU has devised a number of strategies to make its economies more competitive. The objective of the Lisbon Strategy, launched in 2000, was to make the European Union the most dynamic and competitive knowledge-based economy in the world by 2010, capable of sustainable economic growth with more and better jobs and greater social cohesion and respect for the environment, therefore the issue of European competitiveness was emphasized strongly (Presidency Conclusions, 2000). Few years later it was clear, that this very ambitious objective would not be achieved. The Lisbon Strategy was criticized as an overly complex structure with multiple goals and actions. Additionally, the crisis has wiped out years of economic and social progress and exposed structural weaknesses in Europe's economy. Launched in March 2010 by the European Commission, the Europe 2020 Strategy was designed as a European exit strategy from the global economic and financial crisis. It succeeded the Lisbon Strategy and built on the objectives and toolbox of the revised Lisbon Strategy of 2005 (focused on growth and jobs). Like the latter, it was driven by international competitiveness concerns and the promotion of productivity, growth and sustainability (Bongardt and Torres, 2010). The Europe 2020 Strategy is subtitled A European Strategy for Smart, Green and Inclusive Growth and accordingly its priority strategies are (European Commission, 2010b): Smart growth: developing an economy based on knowledge and innovation. 1 This section is based on the following documents: European Commission, 2010b; European Commission, 2010c; European Commission, 2010d; European Commission, 2010e; European Commission 2010i; European Commission, 2010k; European Commission, 2010l; European Commission; 2011).

13 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 13 Sustainable growth: promoting a more resource-efficient, greener and more competitive economy. Inclusive growth: fostering a high employment economy delivering social and territorial cohesion. The Europe 2020 Strategy is based on three priorities that come to clarify the nature of growth and headline targets that serve as benchmarks for the EU in 2020 on employment, education, social inclusion, research and development, and climate and energy. These lead to seven flagship initiatives that are to promote smart, sustainable and inclusive growth and guide policymaking in the EU and the Member States (Bongardt and Torres, 2010). These flagship initiatives are: 1. Innovation Union to improve framework conditions and access to finance for research and innovation to ensure that innovative ideas can be turned into products and services that create growth and jobs. 2. Youth on the Move to enhance the performance of education systems and facilitate the entry of young people into the labour market. 3. A Digital Agenda for Europe to speed up the roll-out of high-speed Internet and reap the benefits of a digital single market for households and firms. 4. Resource-efficient Europe to help decouple economic growth from the use of resources, support the shift towards a low-carbon economy, increase the use of renewable energy sources, modernize the transport sector and promote energy efficiency. 5. An Industrial Policy for the Globalization Era to improve the business environment, notably for SMEs, and to support the development of a strong and sustainable industrial base able to compete globally. 6. An Agenda for New Skills and Jobs to modernize labour markets and empower people by developing their skills throughout the life cycle with a view to increase labour participation and better match labour supply and demand, including through labour mobility. 7. European Platform against Poverty to ensure social and territorial cohesion such that the benefits of growth and jobs are widely shared and people experiencing poverty and social exclusion are enabled to live in dignity and take an active part in society. Figure 1 presents these flagship initiatives divided in three priority pillars: smart, sustainable and inclusive growth. Figure 1 Key EU initiatives in view of priorities of Europe 2020 Strategy Source: Own elaboration.

14 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 14 The first pillar of Europe 2020 is about smart growth, which means boosting the EU s competitiveness by improving its performance in: education (encouraging people to learn, study and update their skills), research/innovation (creating new products/services that generate growth and jobs and help address social challenges), digital society (using information and communication technologies). The initiatives in this field aim to improve the general conditions as well as access to financing of research and innovation, to better the results of higher education systems and the international attractiveness of European higher education. The third of them endeavours to accelerate the implementation of high-speed internet and a digital single market at the service of families and enterprises. Two initiatives promote sustainable growth one on climate, energy and mobility and another on competitiveness. Resource efficiency contributes to decoupling economic growth from resource use, decarbonising the economy, raising the use of renewable energy sources, modernising the transport sector and promoting energy efficiency. The Industrial Policy for the Globalization Era aims at improving the firm environment, in particular for small and medium-sized enterprises, and supporting the development of a solid and sustainable industrial base capable of facing up to global competition. Inclusive growth entails initiatives on employment and quality of human capital, as well as on actions against poverty. Modernisation of labour markets, facilitation of labour mobility and the lifelong development of qualifications can increase labour market participation and achieve a better match between demand and supply. The fight against poverty should improve social and territorial cohesion. 2.2 Identification of EU policies contributing to achieve the goals of the Europe 2020 Strategy The EU is active in a wide range of topics. European Commission aggregates them in 15 areas of policies. All areas of policies were carefully reviewed for their contribution to the implementation of the Europe 2020 Strategy and the most suitable of them were subject to deeper analysis. The policies which can be indentified as crucial to Strategy implementation are: regional/cohesion policy; economy, finance and tax policies; single market policy; research and innovation policy; enterprise policy; industrial policy; employment policy; education policy; trade policy; transport policy; energy policy and environment policy.

15 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Regional/cohesion policy 2 The regional policy/cohesion policy of the European Union provides a framework for financing a wide range of projects and investments with the aim of encouraging economic growth in EU Member States and their regions. Regional policy has already been closely aligned with the objectives of the Europe 2020 Strategy, because achieving them requires active involvement across all regions of the EU. The success is determined to a great extent by decisions made at local and regional levels. Especially from a financial point of view, regional policy can significantly contribute to the Europe 2020 goals. The European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund together account for more than one third of the EU's overall budget. EU regional policy supports cutting edge research and innovation, the development of new technologies, high-speed internet access, smart transport and energy infrastructure, energy efficiency and renewable energies, business development and job creation by improvement of skills and training. This list of areas of support shows that all flagship initiatives are implemented by regional policy in a smaller or larger degree. Regional policy is a key instrument in turning the priorities of Innovation Union initiative into practical action on the ground. Regions have a central role as they are the primary institutional partner for universities, other research and education institutes and small and medium-sized enterprises (SMEs), which are a key to the process of innovation. The European Commission wants national and regional authorities across Europe to draw up research and innovation strategies for smart specialization (RIS3), so that the EU s structural funds can be used more efficiently and synergies between different EU, national and regional policies can be increased. As part of EU cohesion policy in , the European Commission proposed to make smart specialisation a pre-condition for supporting investments for two key policy objectives: strengthening research, technological development and innovation (the R&I target) and enhancing access to and use of quality of information and communications technology (the ICT target). Europe is facing an investment challenge in the financing of high speed internet infrastructure. High amounts of investments are needed to achieve ubiquitous coverage of state-of-the-art competitive broadband networks. Member States can use the structural funds to invest in ICT infrastructures and services, especially to finance the roll-out of high-speed networks, what is in line with A Digital Agenda for Europe initiative. Access to an affordable, good-quality and open ICT infrastructure for all citizens will contribute to cohesion policy aims and to increase innovation and productivity of regional actors. Smart growth needs a strong focus on human capital. Human capital is a crucial factor for productivity growth and innovativeness of the economy. The intervention of the EU structural funds in the area of human capital is mostly by the European Social Fund and takes place in a variety of forms and measures. Youth on the Move is implemented in close synergy with the other flagship initiative An Agenda for New Skills and Jobs. Increase of human capital is achieved mostly thanks to the policies within the educational and training system. Regional policy is also important in this range, because EU cities and regions are increasingly challenged to support youth employment (the number of unemployed young people is dramatically rising as a result of the crisis). 2 This section is based on the following documents: European Commission,2010j; European Commission, 2010m; European Commission, 2011d.

16 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 16 Regional policy also supports the sustainable growth objective, which aims at enhancement of resource efficiency and low-carbon economy, while preventing environmental degradation and biodiversity loss. Resource-efficient Europe initiative should help to identify and create new opportunities for economic growth and greater innovation to boost the EU's competitiveness. To achieve a resource-efficient economy technological improvements and a significant transition in energy, industrial, agricultural and transport systems should be made. Projects in the field of environment, energy and sustainable transport can have a significant contribution to the development of a sustainable European economy which uses its resources in an effective way. Regional policy is an important instrument to stimulate the implementation of projects in these sectors. These sectors are significant beneficiaries of ERDF. Many of supported projects have a significant direct or indirect impact on the more rational use of resources, energy conservation, energy efficiency, the reduction of CO 2 emissions and the enhancement of ecosystem services. The priority Inclusive growth within the Europe 2020 Strategy is convergent with goals of cohesion policy. The Europe 2020 Strategy has a strong focus on employment creation, skills and labour market reform and explicitly targets reducing poverty and exclusion. The initiative An Agenda for New Skills and Jobs aims to increase employment rates and the quality of jobs. It is necessary to creating conditions for modernising labour markets with a view to raising employment levels and ensuring the sustainability of social models. This means empowering people through the acquisition of new skills to enable workforce to adapt to new conditions and potential career shifts, reduce unemployment and raise labour productivity. Cities and regions often provide guidance to jobseekers, finance training and job programmes, and invest in education. These activities can be co-financed by the ESF. In some cases, the help from the EFS takes form of direct support to companies, especially for lifelong learning programmes. The objective of the initiative European Platform against Poverty is to ensure economic, social and territorial cohesion. Certain groups are more exposed to the risk of poverty, mostly the unemployed, children, households with no market income, single parents, the youth, the disabled, certain minorities and people with migrant background. Each of the identified target groups requires a different approach in tackling the risk of poverty and different instruments to counteract the poverty. The fifth cohesion report argues that an efficient Europe 2020 Strategy requires close coordination between cohesion policy and other EU policies. In many domains, public policies have a greater overall impact if they are closely coordinated rather than being implemented in isolation. It is important to combine investment in transport infrastructure with support for businesses and human capital development to achieve sustainable economic and social development (European Commission, 2010o).

17 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Economy, finance and tax policies 3 In the economy, finance and tax policies the following issues are taken into consideration: a single market for capital, budget, competition, customs, economic policies and euro and fight against fraud. A lot of specific policy actions within this policy area are closely related to flagship initiatives. Conditions and access to finance for research and innovation can be improved with the correspondent reforms of the EU budget. In the domain of the economy, finance and tax policies special attention should be paid to the competition policy. This policy uses measures and instruments, which are important both for protection the fair competition and better functioning of products and services markets within the EU and influencing for improving EU competitiveness in the global scale. In particular, EU competition policy is an essential part of and a complement part to the Single Market and contributes to its development and improvement of its efficiency. All the instruments of the EU competition policy such as for instance antitrust and merger enforcement or State aid control are deployed as levers across significant parts of the Single Market. Lately, competition policy has been focused in particular on sectors of systemic and cross-cutting importance to the EU economy, such as financial services, key network industries (energy, transport, telecoms and postal services) and knowledge-intensive markets (smartphones, e-books and pharmaceuticals). In those sectors, EU competition enforcement complements Single Market regulation. The EU competition policy is also crucial in allowing the EU to reinforcement its position at international markets. Competition policy in such areas as information for consumers, international agreements, liberalisation, mergers or rules for state aid potentially can influence the realisation of almost all flagship initiatives. But depending on the business environment the support can be expected especially for developing digital agenda, decoupling economic growth from the use of resources and especially in supporting the development of a strong and sustainable industrial base. In regard to customs regulation - this policy objective facilitates trade and protects interests of the EU and its citizens which are in line with An Industrial Policy for the Globalisation Era initiative. Current objectives of the economic policy of the EU could be identified as: strengthening economic policy coordination, integration in the euro area, but also response to the crisis. Regarding the crisis the main EU response is the set of rules on enhanced EU economic governance including: strengthening preventive actions through a reinforced Stability and Growth Pact, stronger corrective actions, minimum requirements for national budgetary frameworks and prevention and correction of macroeconomic and competitiveness imbalances. In a short term there are no direct relations between these policies and flagship initiatives. In the long term it would be difficult to realise any initiative without efficient improvements of EU economic policy. 3 This section is based on the follows EU documents: European Commission, 2011e; European Commission, 2012a; European Commission, 2013c.

18 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 18 Finally the fraud prevention policy is an important operational policy conducted in order to improve a climate for access to finance for research, to develop a digital single market, to promote energy efficiency and to improve business environment Single market policy 4 In regard to Youth on the Move initiative single market reforms should contribute to sustainable development, based on a highly competitive social market economy which in turn should contribute to social progress and employment. There are a number of actions undertaken within this policy which support A Digital Agenda for Europe initiative. Firstly the objective of inducing smart growth through single market policies can be identified. Secondly a part of the single market is the digital single market e.g. mutual recognition of electronic identification and authentication across the EU and review of the Directive on Electronic Signatures, new legislative framework to ensure confidence in electronic transactions. Thirdly works on intellectual property protection under single patent contribute to the goals of a digital agenda. The Resource-efficient Europe initiative is reflected by revision of the legislation on the European standardisation system, to extend it to services and to make standardisation procedures more effective, efficient and inclusive. Also the very idea of a competitive internal market could be considered as a cornerstone of the resource efficiency policy due to the general economic principle of increased efficiency resulting from competition. Within actions oriented at single market there are those activities which also influence strongly on An Industrial Policy for the Globalisation Era initiative. One of them is facilitation and establishment of unified conditions, improving not only security of supply and market integration but also energy efficiency and renewable-energy consumption. Important role is attributed to development of SMEs which contribute to an efficient internal market. Also the main aim of the proposed revision of the directives on accounting rules is to reduce the administrative burden stemming from accounting requirements on micro and small public limited companies and limited liability companies. The potential savings generated by this proposal amount to EUR 1.5 billion per year for 1.1 million small companies and EUR 5.2 billion per year for 5.9 million micro-enterprises (European Commission, 2011f). The single market policy documents point directly that within the framework of European Platform against Poverty and Social Exclusion, the Commission will support the development of the social economy as an instrument for active inclusion by proposing, in 2011, a Social Business Initiative and by facilitating access to the Union's financial programmes for use in this area. 4 This section is based on the following documents: European Commission, 2011f; European Commission, 2012b; European Parliament, 2012.

19 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Research and innovation policy 5 There is a very strict and reciprocal relationship between research policy of the EU and the Europe 2020 flagship initiative Innovation Union. The aim of this initiative is to re-focus R&D and innovation policy on the challenges facing the society, such as climate change, energy and resource efficiency, health and demographic change. There is an urgent need for better coordination of education, R&D and innovation efforts, more coherence in science, technology and innovation cooperation with the rest of the world, a global approach to societal challenges, the establishment of a level playing field for R&D and innovation, an enhanced access to finance and risk capital, and an appropriate focus on both competitiveness and societal challenges. To support the Innovation Union flagship initiative, the next framework programme for research and innovation Horizon 2020, is due to start on 1 January Horizon 2020 is a complementary programme consisting of EU Framework Programme, Competitiveness and Innovation Framework Programme (CIP) and European Institute of Innovation and Technology (EIT). The flagship initiative A Digital Agenda for Europe illustrates the challenges and proposes policy remedies in the field of information society. Information and Communications Technology (ICT) provide vital tools to recover from the current economic slowdown, to build robust economies, bring the efficiency gains needed in public sector and cut the rising costs related to e.g. ageing, energy and the environment. Investments in ICTs are a key factor in driving innovation in companies, driving productivity growth, honing competitiveness and creating jobs. The research and innovation is one of the pillars of A Digital Agenda for Europe. The research and innovation policy contributes to implementation of this initiative mainly by realization of A Strategy for ICT R&D and Innovation in Europe. The strategy seeks to step up the effort in ICT research and innovation and to maximise its impact in the economic context. It forms part of the preparations for a European plan for innovation and research, encompassing the main technologies of the future including ICT. Europe has a leading position in scientific research, but the timely deployment and take-up of these technologies throughout EU industry needs to be ensured. The flagship initiative An Industrial Policy for the Globalisation Era proposes a new approach to industrial policy. Closer cooperation on technology policies and programmes, better access to financing, and strengthened support for pilot and demonstration projects are essential to accelerate the development of commercial technologies. A key challenge is to urgently develop and bring to the market Europe s research strengths in emerging technologies. Key enabling technologies (KETs) (industrial biotechnology, nanotechnology, advanced materials, photonics, micro- and nano-electronics) and advanced manufacturing systems can provide the basis for a wide variety of new processes and goods and services, including the development of entirely new industries over the next decade. Key enabling technologies play an important role in the R&D, innovation and cluster strategies of many industries and are regarded as crucial for ensuring the competitiveness of European industries in the knowledge economy. The European Commission tabled its strategy to boost the industrial production of KETs-based products. European strategy for KETs is built upon three pillars: technological research, product demonstration and competitive manufacturing activities. 5 This section is based on the following documents: European Commission, 2009a; European Commission, 2011g; European Commission, 2012c; European Union, 2012; European Commission, 2012d.

20 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 20 The flagship initiative Resource-efficient Europe creates a framework for policies to support the shift towards a resource-efficient and low-carbon economy, which will help to boost economic performance while reducing resource use. To achieve a resource-efficient Europe, it is necessary to make technological improvements, a significant transition in energy, industrial, agricultural and transport systems. To improve the way in which the resources are used, it is crucial to boost innovation in technology, especially by investing in eco-innovative solutions. New technologies are needed to create advanced functionalities in existing or new application fields, to substitute existing technologies and to facilitate novel products and processes with higher efficiency. Many projects funded in the context past and ongoing Framework Programmes for Research and Technological Development already address a wider range of resource efficiency issues, including projects on sustainable natural resources management, innovative resource-efficient and energy-saving processes in important industrials sectors, environmentally friendly energy production and storage and solutions for substitution of raw materials Enterprise policy 6 The common enterprise policy has three broad objectives, 1) to create a legal framework which lends itself to the setting up and development of enterprises; 2) to create an economic environment which will help enterprises reach their full development in the single market; 3) to promote cooperation between enterprises situated in different regions of the European Union (Moussis, 2011). The EU enterprise policy aims to improve the business environment for enterprises and SMEs in particular. This policy comprises: promoting entrepreneurship throughout the EU, reducing red tape at European and Member State level, stimulating the adoption of information/communication technologies and electronic commerce, improving innovation, research and development, improving access to finance for SMEs, stimulating the internationalisation of European businesses, improving the access to the Internal market for SMEs, offering top-class business support services (The European Association of Craft, Small and Medium-sized Enterprises, 2013). Enterprise policy is strictly connected with internal market policy, industrial policy, competition policy and innovation policy. The resulting synergy increases the value added of European businesses and strengthens their competitiveness. Many companies in Europe and worldwide realise that sustainability and responsibility are becoming critical drivers of stable economies and sustainable growth. They are therefore striving to make a positive contribution to society through innovative solutions and sustainable products and services. In support to the Europe 2020 Strategy, a joint Enterprise 2020 initiative was launched. This initiative is a strategy to help companies tackle present and future sustainability challenges through a platform for action. This platform should allow companies to develop innovative business practices, products and services by working together with stakeholders to provide concrete solutions for societal needs. Meeting the challenges of global competition and increased sustainability requires the achievement of excellence in innovation. Innovation is a key driver for productivity, increased energy and material efficiency, the improved performance of goods and services, and the generation of new markets. In this aspect the enterprise policy is strictly connected with the Innovation Union flagship initiative. 6 This section is based on the following documents: European Commission,2008a; European Commission, 2009f; European Commission, 2011o; European Commission, 2011h; European Commission, 2012e.

21 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 21 Improved use of ICT for enterprises competitiveness, resource optimisation and innovation will be essential for future competitiveness, as set out in the Europe 2020 flagship on A Digital Agenda for Europe. There are a number of actions which support this initiative. A special focus is put on clusters and networks, which improve industrial competitiveness and innovation by bringing together resources and expertise, and promoting cooperation among businesses, public authorities and universities. Stimulation of resource-efficient investments throughout companies is an important aim of Resourceefficient Europe initiative. EU companies must speed up their transition to the low-carbon, resourceand energy-efficient economy. Combating climate change and increasing resource efficiency they can achieve cost reductions and reduced environmental impact. These are increasingly essential both to deliver sustainable growth and jobs and to gain competitive advantage in response to increasing global competition for resource and environmental constraints. Encouraging sustainable growth implies giving consumers the information they require to purchase environmentally friendly goods and services. This should include information on the ecological footprint of products and services. Enterprises play an important role in lifelong learning programmes and increasing the adaptability of workers, so they contribute significantly to the implementation of the initiative An Agenda for New Skills and Jobs and increasing employment rates. They can receive a special support for companies in many forms, with the aim to facilitate employee s participation in education and training activities, increase adaptability of the company and its human capital level. Particular attention should be given to establishing partnerships between the worlds of education and training, and of work. Regarding to European Platform against Poverty initiative, European companies should take into account their contribution to inclusive growth and job creation and consider the interests of the employees and citizens affected by business decisions. The help to mitigate the social effects of the current economic crisis, including job losses, is part of the social responsibility of enterprises (CSR). CSR offers a set of values on which to build a more cohesive society and on which to base the transition to a sustainable economic system. By promoting CSR, the Commission aims to create conditions favourable to inclusive growth, responsible business behaviour and durable employment generation in the medium and long term Industrial policy 7 Industry and a wide range of related services are central to the European competitiveness, as an engine for European growth and job creation, a driver of productivity and innovation and a provider of solutions to societal challenges. The role of the industrial policy is to promote and enhance the growth of European industry. Industrial policy is especially in line with the initiatives: An Industrial Policy for the Globalisation Era and Resource-efficient Europe. A new approach to European industrial policy is essential to achieve the objectives of the Europe 2020 Strategy and, in particular, to ensure the transition towards a safe and 7 This section is based on the following documents: European Commission, 2010a; European Commission, 2010d; European Commission, 2012f.

22 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 22 sustainable, low-carbon, resource- and energy-efficient and competitive, knowledge-based European economy with a high level of growth and employment (Council of the European Union, 2010). The communication An Integrated Industrial Policy for the Globalisation Era Putting Competitiveness and Sustainability at Centre Stage sets out a strategic framework for a new integrated industrial policy. Integrated industrial policy is understood in its wider sense due to the importance of competitiveness effects of all other policy initiatives such as transport, energy, environmental, social and consumerprotection policies, single-market policy and trade policies. They are crucial components of the overall package as they can have an important influence on the cost, price and innovative competitiveness of industry. On 10 th October 2012 the Commission adopted an Update of the Industrial Policy flagship initiative "A Stronger European Industry for Growth and Economic Recovery", which focuses on four pillars: Investments in innovation, with a focus on six priority areas with great potential (advances manufacturing technologies for clean production; key enabling technologies; bio-based products; sustainable industrial and construction policy and raw materials; clean vehicles and vessels; smart grids). Better market conditions, both in the Internal Market, with special reference to goods, entrepreneurship and Intellectual Property Rights protection, and in international markets. Access to finance and capitals, by a better mobilising and targeting of public resources, including from the EIB, and by unlocking private funds. Human capital and skills, to promote job creation and better anticipation of, and investments in, the skills needed to promote industry's competitiveness Employment policy 8 Three of five key targets that the EU aims to achieve by 2020 relate to employment and social policy. While employment and unemployment levels depend on the level of economic activity and the structure of the economy, the EU can help improve the way in which labour markets function. Employment policy is in line with the initiatives: An Agenda for New Skills and Jobs, Youth on the Move and European Platform against Poverty. In response to the high level of unemployment in Europe, the European Commission launched in April 2012 an Employment Package, which is a set of policy documents looking into how EU employment policies intersect with a number of other policy areas in support of smart, sustainable and inclusive growth. There are proposed measures in the following areas: 1. Support job creation (reducing taxes on labour, using hiring subsidies effectively, exploiting the potential of key sectors, such as green economy, ICT, or health and care sector). 2. Restore the dynamics of labour markets (helping workers succeed when changing jobs or getting back into work, mobilising all actors to implement the reforms required, investing in skills based on better forecasting and monitoring of needs, promoting the free movement of workers). 8 This section is based on the following documents: European Commission, 2008b; European Commission, 2010l; European Commission, 2012g.

23 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Strengthen the governance of employment policies (reinforcing coordination and multilateral surveillance in employment policy, effectively involving the social partners, strengthening the link between employment policies and relevant financial instruments). The European Union s approach to improve the efficiency of labour markets is given by the concept of flexicurity. Flexicurity is defined as a policy strategy to enhance, at the same time and in a deliberate way, the flexibility of labour markets, the work organization and employment relations on the one hand, and security (employment security and social security) on the other hand (Wilthagen and Tros, 2004). Flexicurity aims at ensuring that all citizens can enjoy a high level of employment security, i.e. the possibility to easily find a job at every stage of active life and have a good prospect for career development in a quickly changing economic environment. The EU tries to reduce unemployment and to increase the employment rate to achieve the target of 75% employment rate for the working-age population (20-64 years). EU actions cover different initiatives on education and employment for young people in Europe. It receives the financial support of the relevant EU programmes on education, youth, and learning mobility, as well as the Structural Funds Education policy 9 Within the education policy, there are a number of actions which support the following flagship initiatives of Europe 2020: Youth on the Move, An Agenda for New Skills and Jobs, European Platform against Poverty and Innovation Union. Creating a well-functioning knowledge triangle of education, research and innovation and helping all citizens to be better skilled are crucial for growth and jobs, as well as for equity and social inclusion (Council of the European Union, 2010a). Education policy recognizes that knowledge, and the innovation it sparks, are the EU's most valuable assets, particularly in light of increasing global competition. EU Member States and the European Commission strengthened co-operation in 2009 with strategic framework for European cooperation in education and training ("ET 2020") a follow-up to the earlier Education and Training 2010 work programme launched in The approach recognises that high-quality pre-primary, primary, secondary, higher and vocational education and training are fundamental to Europe's success. However, in a rapidly changing world, lifelong learning needs to be a priority it is the key to employment, economic success and allowing people to participate fully in society. The main objectives of EU education and training policies are (European Commission, 2013f): Promoting lifelong learning. Improving the quality and efficiency of education and training. Strengthening entrepreneurship, at all levels of education and training. These challenges should be addressed in a joined-up policy across the systems as a whole (schools, higher education, vocational education and training, and adult learning). 9 This subchapter is based on the following documents: European Commission, 2008c; Council of the European Union, 2009; Council of the European Union, 2011; Council of the European Union, 2012; European Commission, 2012h; Council of the European Union, 2013.

24 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 24 Policy cooperation at European level in the areas of education and training has, since 2002, provided valuable support to countries educational reforms and has contributed to learner and practitioner mobility across Europe. Education and training, including universities, should become more open and relevant to the needs of the labour market and society at large. A special focus is put on education and employment for young people in Europe and creation of key competences necessary for personal fulfilment, active citizenship, social inclusion and employability Trade Policy 10 Trade policy determines the rules that the EU adapts in its external trade relations. Some of those actions are in line with a number of EU key initiatives. For instance Resource-efficient Europe initiative goals are advanced due to adoption of measures to promote the sustainable management of some key natural resources such as timber and fish traded into the EU. Promotion of the actions aimed at the elimination of tariff and non-tariff barriers on goods and services that can deliver environmental benefits. This will support efforts to ensure improved access to green technology for developing countries.this goal is also supported by cooperation with other countries which are important markets for natural resources in order to promote similar standards. An Industrial Policy for the Globalization Era intiative is influenced by a new series of Free Trade Agreements (FTA) negotiations with more advanced developing countries and regions that might have some impact on industrial policy. Talks are on-going with India and Mercosur. Because of slow progress under the region-to region approach with ASEAN, negotiations are now advancing bilaterally with Singapore and Malaysia. Concluded negotiations on comprehensive FTAs with Peru, Colombia and Central America as well as with Ukraine. European Platform against Poverty initiative is supported by specific trade policy actions. Trade can foster growth and poverty reduction, depending on the structure of the economy. EU achieves this goal by appropriate sequencing of trade liberalisation measures and complementary policies. One of the measures used by EU is the policy of aid for trade programme Transport policy 11 Transport and its infrastructure investments can boost economic growth, competitiveness and enhance trade and the creation of wealth. Without effective networks, citizens of more remote regions or geographically challenged areas risk being cut off from services and jobs. The White Paper: a Roadmap to a Single European Transport Area published in 2011, announces a sizeable package of new policy initiatives. The aim of them is to ensure a more competitive and integrated transport system providing increased mobility and lowering emissions by The initiatives cover 40 different areas necessary for 10 Trade policy has been analysed through the strategic document (European Commission, 2012i). 11 This section is based on the following documents: European Commission, 2008e; European Commission, 2008f; European Commission, 2009c; European Commission, 2011p; European Commission, 2011r.

25 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 25 the transformation of Europe s transport system and address challenges such as reducing dependence on oil, tackling congestion and improving infrastructure. A well-developed transport system ensures mobility of researchers across countries and sectors to ensure Innovation Union. Transport research and innovation policy should increasingly support in a coherent way the development and deployment of the key technologies needed to develop the EU transport system into a modern, efficient and user-friendly system. To be more effective, technological research needs to be complemented with a systems approach, taking care of infrastructure and regulatory requirements, coordination of multiple actors and large demonstration projects to encourage market take-up. The White Paper of 2011 presents a vision for a competitive, resource-efficient and sustainable transport system in Europe. It will help to achieve the goals within the initiative Resource-efficient Europe. According to the document all these improvements can be achieved through: improving the energy efficiency performance of vehicles across all modes, developing and deploying sustainable fuels and propulsion systems, optimising the performance of multimodal logistic chains and using transport and infrastructure more efficiently through use of improved traffic management and information systems The synergies with other sustainability objectives such as the reduction of oil dependence, the competitiveness of Europe s automotive industry as well as health benefits, especially improved air quality in cities, make a compelling case for the EU to step up its efforts to accelerate the development and early deployment of clean vehicles. These all activities are crucial to ensure realization of An Industrial Policy for the Globalization Era and An Agenda for New Skills and Jobs within Europe 2020 Strategy. EU transport policy can contribute to economic and territorial cohesion by the development of a core trans-european network of corridors, carrying large and consolidated volumes of freight and passenger traffic with high efficiency and low emissions, spanning the entire continent. This will ensure efficient multimodal links between the EU capitals and other main cities, economic centres, ports, airports and key land border crossings. It will represent the backbone of the 'Single European Transport Area' and will strengthen the cohesion between all regions. This is especially important to realize European Platform against Poverty Energy policy 12 EU policy on energy aims at pursuing the following objectives: 1) ensure the functioning of the energy market, 2) ensure security of energy supply in the Union, 3) promote energy efficiency and energy saving and the development of new and renewable forms of energy, 4) promote the interconnection of energy networks. One of the fundamental objectives of EU energy policy is to ensure that the energy system contributes to the competitiveness of the EU economy by ensuring competitive domestic and 12 This section is based on the following documents: European Commission, 2010g; European Commission, 2010h; European Commission, 2011i; European Commission, 2011j); European Commission, 2011k; European Commission, 2011l; European Commission, 2012j; European Commission, 2013b.

26 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 26 international energy markets and prices which are internationally competitive and represent affordable energy for final consumers. EU energy policy is closely related to the flagship initiative Resource-efficient Europe. Energy efficiency is one of the central objectives for 2020 as well as a key factor in achieving long-term energy and climate goals. The Commission has proposed several measures to increase efficiency at all stages of the energy chain: generation, transformation, distribution and final consumption. The measures focus on these sectors, where the potential for savings is greatest. There is significant potential for reducing consumption, especially in energy-intensive sectors such as buildings, manufacturing, energy conversion and transport. A strong accent should be put on investments in infrastructure, in particular in networks, that will deeper EU market integration and ensure sustainability, competitiveness and security of supply. Modern energy infrastructure is crucial for an integrated energy market and to enable the EU to meet its broader climate and energy goals. Europe must modernise and expand its energy network to absorb energy from renewable sources and ensure secure supplies everywhere. Improving the energy efficiency of the EU economy needs to take advantage of new scientific solutions and innovations presented in the flagship initiative Innovation Union. With a view to achieve the EU 2020 objective, the Commission intends to launch innovation partnerships in key areas addressing major societal challenges, such as: deployment of smart grids, new systems for using energy from renewable source, smarter & cleaner urban mobility, equip Europe with seamless door-to-door travel and effective logistics by promoting the broad and coordinated development and deployment of Intelligent Transport Systems (ITS), increased energy efficiency of buildings. The next flagship initiative closely associated with effective implementation of the EU's energy policy is An Industrial Policy for the Globalisation Era. The competitiveness of European industry crucially depends on the quality and efficiency of the energy, transport and communication infrastructure services. Energy networks must be upgraded and modernised to incorporate smart grids, facilitate the integration of renewables, ensure a fully functional internal energy market and improve security of supply. The Commission will step up its efforts to liberalise EU energy markets in order to enhance competition in the energy sector and avoid putting the EU s manufacturing industry at a significant disadvantage in the global markets. Green Paper of March 2013 A 2030 framework for climate and energy policies puts the accent on progress towards a competitive economy and a secure energy system by creating more demand for efficient and low carbon technologies and spurring research, development and innovation, which can create new opportunities for jobs and growth.

27 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Environment policy 13 The state of Europe s economy and the condition of the environment affect the lives of all Europeans. A clean and healthy environment is essential for maintaining prosperity and a high quality of life. But the strength and competitiveness of the economy is also essential if this quality of life is to be maintained. The EU has demonstrated its clear commitment to sustainable development and has successfully mainstreamed this sustainability dimension into many policy fields. The revised strategy for Sustainable Development will continue to provide a long term vision and constitute the overarching policy framework for all Union policies and strategies. A number of observed unsustainable trends require urgent action. These all actions are in line with the initiative Resource-efficient Europe. The supply of resources is limited, and the natural resource base is being reduced. Growing global demand is adding to the pressure on the environment, and competition for many resources is increasing. It is perfectly possible to produce more value with fewer inputs, to lessen an impact on the environment, and to consume in a more intelligent way. Economic stability will increase, as resource efficiency is a way to tackle security of supply issues and market volatility in critical resources. This is important for European consumers, and for those sectors that depend on rare earth metals, fresh water, fish and food. Growth and job creation will result through new business opportunities. The construction sector, ecosystem and resource management, renewable energy, eco-industries and recycling all have a particularly high potential for employment growth. Environment policies contribute to job creation and social inclusion in the EU. It can create new demand for environmentally-friendly goods and services, allowing eco-industries to expand their business and take on new workers. It should be mentioned here that also it will lead that other firms will employ fewer people as policy shifts demand away from polluting goods and services. All these activities will favour An Agenda for New Skills and Jobs and An Industrial Policy for the Globalization Era. Better resource efficiency will sustain the economic health of key sectors. It will bring the benefits in the context of Resource-efficient Europe initiative. The EU industries that use their output rely on available stocks of land, soil, water and biodiversity, so higher efficiency will bring greater rewards. Adjusting to global changes in the pressures on resources will also improve long-term economic competitiveness. More efficient use of resources and pollution control can be major drivers of economic growth, as is shown by Europe s eco-industry. The environmental protection market is a worldwide opportunity for European firms: the global market for eco-industries, currently worth around billion per annum, is expected to triple by 2030 (European Commission, 2011b). 13 This section is based on the following documents: European Parliament, 2003; Council of the European Union, 2006; European Commission, 2009b; European Parliament, 2009; European Commission, 2010f; European Commission, 2011j; European Commission,2011l; European Commission, 2012l; European Parliament, 2012; European Commission, 2013g.

28 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 28 The European Commission at the end of 2012 put forward a proposal for an Environment Action Programme (EAP) to guide EU environment policy up to In the Action Programme nine priority objectives are identified. Among them protecting nature and strengthening ecological resilience, boosting sustainable, resource-efficient, low-carbon growth and effectively addressing environmentrelated threats to health are stressed as the priorities. Improving the way in which environmental concerns and requirements are reflected in other policies is especially underlined in the programme. The programme also aims to boost efforts to help EU cities become more sustainable, and improve the EU's capacity to meet regional and global environment and climate challenges. In the EU Strategy on adaptation to climate change published in April 2013 (European Commission, 2013g), such issues as disruptions to supply chains or impaired access to raw materials, energy and food supplies, and their repercussions on the EU are taken into consideration. The overall aim of the EU Adaptation Strategy is to contribute to a more climate-resilient Europe. This means enhancing the preparedness and capacity to respond to the impacts of climate change at local, regional, national and EU levels, developing a coherent approach and improving coordination. One of the greatest challenges for cost-effective adaptation measures is to achieve coordination and coherence at the various levels of planning and management. The recommended instrument at global level, under the UN Framework Convention on Climate Change, is national adaptation strategies. These are key analytical instruments designed to inform and prioritise action and investment. Accordingly the EU will provide financial support for adaptation through the proposed LIFE instrument, which includes a climate action sub-programme. The Commission will use multi-annual work programmes to define strategic goals and thematic priorities. 2.3 Conclusions Flagship initiatives are implemented by different horizontal and sectoral policies. It can be underlined that some of EU policies have a direct strong impact on flagship initiatives implementation. The assumptions of initiatives can be found among main goals of these policies and appropriate measures and instruments are predicted in their programmes. Table 1 summarizes those direct impacts. If there are such strong relationships between certain initiatives and policies it is marked as very relevant. In cases, when EU policy only indirectly contributes to implementation of initiatives, it is determined that there is some relation. When direct link cannot be made 0 marking is used.

29 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 29 Table 1 The relationships between flagship initiatives of Europe 2020 Strategy and EU policies EU Polices Innovation Union A Digital Agenda for Europe Resourceefficient Europe An Industrial Policy for the Globalization Era Youth on the Move An Agenda for New Skills and Jobs Regional/cohesion policy Economy, finance and tax policies Single market policy Research and innovation policy Enterprise policy Employment policy Educational policy Industrial policy Trade policy Transport policy Energy policy Environment policy : no impact +: there is some relation ++: very relevant Source: Own elaboration European Platform against Poverty The Europe 2020 Strategy and its flagship initiatives focus on investments in education, research and innovation as the key to achieving smart, sustainable and inclusive growth. The flagship initiative Innovation Union in particular is implemented in the framework of EU research and innovation policy. A full deployment of the European Research Area (ERA) would trigger substantial efficiency gains in knowledge and technology capacities. It is one of the key structural reforms to drive growth in Europe. The Commission s proposal for the Horizon 2020, an integrated research and innovation framework programme, contributes to the establishment and functioning of ERA. The Horizon 2020 is the financial instrument implementing Innovation Union. Innovation Union is also closely associated with effective implementation of the EU's energy policy, because improving the energy efficiency of the EU economy needs to take advantage of new scientific solutions and innovations presented. EU regional policy is also important for successful implementation of Innovation Union, because it facilitates the establishment of regional innovation strategies and provides funding from ERDF for improvement of innovativeness of European regions. A Digital Agenda for Europe is implemented mainly through single market policy, research and innovation policy and enterprise policy. A digital single market is one of the parts of the single market and many actions within this policy are addressed to digital market. Enterprise policy stimulates the adoption of ICT technologies and electronic commerce. It is difficult to point out the most important policy for Resource-efficient Europe initiative, because the majority of analysed policies have direct or indirect impact on this initiative. The sectoral policies: energy, industrial, transport and environment, because they cover sectors consuming large quantities of resources, including non-renewable resources and many actions aimed to decrease resource use are very important. Research and innovation policy contributes to invention of innovative solutions to reduce the

30 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 30 consumption of resources and to increase their efficiency. Regional policy and its financial instruments allow carrying out the actions, including investments in infrastructure, which help to implement this initiative. The initiative An Industrial Policy for the Globalization Era is closely connected with industrial policy. In the most strategic documents of this policy we can find reference to the flagship initiative. One of them sets out a strategic framework for a new integrated industrial policy. Industry policy interacts with enterprise policy and combines instruments from different areas. It is necessary to improve an entrepreneurship environment to improve competitiveness of European industry. Important role is attributed to development of SMEs. Research and innovation policy aims to increase innovativeness and competitiveness of European products on international markets. The implementation of Youth on the Move and An Agenda for New Skills and Jobs initiatives is connected with education and employment policies. The Youth on the Move aims to improve young people s education and employability. A New Skills and Jobs initiative considers how to improve effectiveness of the labour market and increase the employment rate. It includes implementation of flexicurity, improving job quality and working conditions and job creation. The European Platform against Poverty initiative is in line with goals of cohesion policy (improving the economic well-being of regions and decreasing regional disparities), where social cohesion includes issues of social inclusion, social capital and social mobility. The fight against poverty is a central component of social inclusion, since poverty can trigger a number of processes of exclusion in the areas of education, employment as well as in different areas of social life.

31 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Aspects of competitiveness shaped by policy instruments This chapter describes factors of competitiveness in the context of policy measures. Not all determinants of competitiveness are susceptible to the impact of policy instruments, so it is crucial to indicate these appropriate. The main goal of this section is to single out factors which can be influenced through the EU policy. The concept of competitiveness was discussed in (Smit, 2013) and theoretical background for the project was drawn. The basic working definition, that is used within the I-C-EU project as a whole is: Competitiveness is the extent to which firms in a particular region can compete with those elsewhere. Critical factors for competitiveness are those that determine the level of productivity in a region in relation to other regions. The critical factors for competitiveness of regions and nations were examined in (Betancor et al., 2013). The conclusion is that many indices and indicators have been proposed in the literature to measure competitiveness. The most popular are two leading composite indicators that measure national competitiveness: the IMD s World Competitiveness Yearbook indicator and the WEF s Global Competitiveness indicator. Changes in competitiveness are driven by different factors and measures of impact on these factors also are different. The pyramidal model (Lengyel, 2004; Lengyel, 2013) systematizes the impact factors of exceedingly complex processes affecting welfare, labour productivity and employment and it has been adopted by many authors in international literature. This model is established on the basis on the inputs outputs outcomes relationships, where outcomes are the standard of living (the prosperity of any region depends on its competitiveness) and outputs are the revealed competitiveness indicators: regional GDP per capita, labour productivity and employment rate. Inputs influencing regional competitiveness (sources of competitiveness) can be divided into direct and indirect components. Competitiveness factors with a direct and short-term influence on regional competitiveness are basic, but social, economic, environmental and cultural processes and with an indirect, long-term impact on competitiveness are also important (Lengyel, 2013). One of the sets of competitiveness factors presented in (Betancor et al., 2013) was given by the Regional Competitiveness Hat of Cambridge Econometrics et al. (2004). This model provides a visual overview of the way one could address competitiveness through indicators. On the basis of this study we grouped competitiveness factors into three broad categories: Infrastructure endowment and accessibility. Human resources. Productive environment. In each group it is possible to identify such factors, which can be influenced through appropriate policies. Others are not flexible to such impact in the short/medium term or this impact is very limited, like in respect to demographic trends. Accordingly, in the next step we try to designate which factors of competitiveness are sensitive to policy instruments at different policy levels. There are specified three levels of policy impact: EU level, national level and sub-national level (regional or local). On the basis of

32 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 32 conducted analysis of horizontal and sectoral policies it can be noticed, that effects received by implementation of individual policy measures may be assessed as direct or indirect and this division strongly affects possibilities of impact on factors of competitiveness. Therefore, we determine the influence as strong, when particular factor can be influenced by direct policy instruments (for example financial instruments, Transeuropean network schemes). If policy measures cover only creating some policy framework or specifying standards, the implementation of which is not obligatory (for example the Bologna Process), the impact is determined as moderate. The results of the analysis are presented in table 2. Table 2 Possibilities of influence on competitiveness factors at different policy levels Competitiveness factors Infrastructure endowment and accessibility Basic infrastructure (transport, energy) Technological infrastructure (ICT, telecoms, internet) Knowledge infrastructure (educational facilities) Quality of place (housing, natural surroundings, safety) Human resources Demographic trends (migrations, aging population) Level and nature of education (high skilled workforce) High participation rates in post school education (tertiary education, vocational training) Labour force characteristics (productivity and flexibility) Management skills (internationalized, levels of professionalism, levels of efficiency) Productive environment Entrepreneurial culture (low barriers to entry, risk taking culture) Specialisation and sectoral structure (sectoral concentration, employment concentration, high value-added activities) Nature of competition (market structure, regulation of competition) Internationalisation (exports/global sales, investment, business culture, nature of FDI ) Technology (application, management) Innovation (patents, R&D levels, research institutes and Universities, linkages between companies and research) Capital availability Governance and institutional capacity - Strong influence - Moderate influence - No policy impact or very limited Source: Own elaboration based on Cambridge Econometrics et al. (2004) EU Level of policy Regional National or local As it can be noticed the most of factors can be influenced through policy instruments at national and sub-national level. At these levels possibilities are the most diversified. EU activities to improve competitiveness are the largest in the range of development and modernization of technical

33 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 33 infrastructure, the increase of innovativeness level, the improvement of skills and productivity of labour forces and the support for SMEs. EU financial instruments are very important, especially in New Member States (NMS), which can improve their competitiveness thanks to structural funds and Cohesion Fund. In more cases EU policy measures are much soft and involve the creation of certain legal frameworks and providing organizational instruments. Over the years, the EU seeks to improve the competitiveness of the European economy. The Europe 2020 strategy puts an emphasis on the need for a new growth path that can lead to a smart, sustainable and inclusive economy, a path that can overcome the structural weaknesses in Europe's economy and improve its competitiveness and productivity. EU policy impact on different factors of competitiveness listed in the table 2 can be connected with implementation of flagship initiatives of the Europe 2020 Strategy presented in chapter 2. The achievement of smart growth by EU needs strengthening knowledge and innovation as drivers of future growth. This requires improving the quality of education, strengthening research performance, promoting innovation and knowledge transfer throughout the European Union, making full use of information and communication technologies and ensuring that innovative ideas can be turned into new products and services. This must be combined with entrepreneurship, finance, and a focus on market opportunities. Sustainable growth is associated with raising energy and resource efficiency, decarbonising the economy, modernising the transport sector and with all measures supporting development of the EU industry and improving the firm environment. High quality infrastructure endowment must be ensured. These require changes especially in energy policy, environment policy, transport policy and industrial policy. Inclusive growth covers activities connected with improving competitiveness factors such efficiency of labour market and quality of human capital. Policy instruments which influence modernisation of the education system, promotion of life-long learning, and facilitation of labour mobility can increase labour market participation, as well as reduce poverty and social exclusion. As we grouped competitiveness factors into three themes, we do the same with EU policy goals relating to the improvement of competitiveness and measures for improving this. These measures will be overviewed in chapter 4. The schematic relationship between policy goals, measures and factors of competitiveness is shown on Figure 2.

34 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 34 Figure 2 EU policy goals, EU policy measures and factors of competitiveness Source: Own elaboration. The EU is not a homogeneous entity in terms of competitiveness. On the contrary, large disparities exist among Member States, with some countries performing much better than others and well above the EU average or that of other advanced economies The identification of thematic drivers of competitiveness and their associations with different types of regions has significant implications for public policy making and investment which will lead to facilitate the choice of actions and instruments improving the level of national competitiveness.

35 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Analysis of actions and measures of EU policies influencing European competitiveness and regional growth 4.1 Introduction Having provided an overview of the EU policies contributing to achievement of the goals of Europe 2020 and factors of competitiveness, which can be shaped by policy instruments, this part of the report pays attention to policy measures for improving competitiveness. The chapter is divided into six sections: starting with short introduction, then three sub-chapters are devoted to measures for improving respectively: 1) infrastructure endowment and accessibility, 2) labour productivity, 3) productive environment. Next section is dedicated to present applications and effects of particular instruments from the range of horizontal and sectoral policies. The last part of this chapter describes the cross-relations among different EU policy interventions and transport infrastructure investments. Sections describing EU policy measures are divided into sub-categories of measures. In the section on Policy measures for improving infrastructure endowment and accessibility three main groups of measures have been identified: Schemes of infrastructures. Capacity and quality of infrastructure. Financial instruments for infrastructure investments. The section on Policy measures for improving labour productivity consists of the review of measures in the range of: System of education. Training and adult learning. Improving efficiency of labour market. Productive environment is the most expanded category of competitiveness factors. This section includes the following groups of measures: Entrepreneurship environment. R&D. Technologies and innovation. Internationalization. Each of these sections provides an overview of flagship measures, while the detailed description of the measures can be found in Annex 1. Assessment of measures consists of the following fields: short measure description, expected results, and barriers and difficulties which have been identified. In Annex 2 examples of measures from different sub-categories implemented in practice are presented. In the conclusions some remarks concerning these examples are drawn in the context of improving EU competitiveness.

36 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Policy measures for improving infrastructure endowment and accessibility Introduction According to the Green Paper on Territorial Cohesion increasingly competitiveness and development of the region/nation depend on the capacity of the people and businesses located there to make the best use of all of territorial assets (European Commission, 2008g). In a globalising and interrelated world economy however, competitiveness also depends on building links with other regions to ensure that common assets are used in a coordinated and sustainable way. Cooperation along with the flow of technology and ideas as well as goods, services and capital is becoming an ever more vital aspect of regional development and a key factor underpinning the long-term and sustainable growth performance of the EU as a whole. All those actions demand enabling solutions like transport, energy and telecommunication infrastructure which represents the base for development of cohesion strategies in the European Union. In table 3 sub-categories of measures related to infrastructure are listed. The detailed descriptions of those measures are included in Annex 1. The point of this exercise is to describe through the analysis of these examples the impact of measures on competitiveness. Table 3 Sub-categories and examples of infrastructure (transport, energy and telecommunications) and accessibility improvement measures Sub-category Schemes of infrastructures Financial instruments for infrastructure investments Capacity and quality of infrastructure Source: Own elaboration. Examples Pan-European transport axes TEN-T Trans-European Transport Networks TEN-E Trans-European energy networks eten Trans-European telecommunications network TEN budget line Cohesion Fund European Regional Development Fund The European Energy Programme for Recovery Connecting Europe Facility Deploy large scale intelligent and interoperable technologies (SESAR, ERTMS, RIS, ITS, etc.) to optimize the capacity and the use of infrastructure, broadband internet European schemes of infrastructure The European Network consists of three parts: transport, energy and communication networks. Transport infrastructure is fundamental for the smooth operation of the internal market and for the mobility of people and goods. There are about km of paved roads in the EU, out of which 65

37 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP km are motorways, km of rail lines, out of which km are electrified lines, and km of navigable inland waterways. Despite important efforts towards improvement, European rail and inland waterway networks are still lacking capacity and efficiency. Only the road network is nearly complete and provides access to intermodal nodes, albeit significant improvements are still needed in EU12 (from 1 st of July 2013 EU13). The air and sea transport networks are available, but no priorities have been given to establish a 'hierarchy' within those networks and/or a good interconnection (European Commission, 2011a). EU has placed huge emphasis on infrastructure investment, in general, and, especially, on transport infrastructure as a means to bring about territorial cohesion, reduce economic disparities, and promote economic development and growth. Europe's economic growth and the creation of jobs also depend on its international competitiveness, which needs to be supported by good transport connections with other parts of the world. Good connections to all of Europe's immediate neighbours, are furthermore vital from an economic, political and security point of view. The TEN-T program is an important element of the European initiative for growth. Also an efficient energy infrastructure is essential for the internal energy market to work properly. It is vital to achieve the European Union's targets for sustainable development, competitiveness and secure energy supplies. Interconnection of networks allows the transmission of electricity and gas between markets usually organised on a national basis. It requires considerable investment in the existing gas and electricity networks along with rapid development of their interconnections. The trans-european networks are currently underdeveloped as a result of insufficient funding. ICT infrastructure development is considered the most important outcome for both regional and rural development. Broadband internet connections are a prerequisite for the information society. Broadband could potentially provide: new applications and improvements to existing ones, new services and new investment and job opportunities and greater productivity for many existing processes. Given the Commission's objective to achieve 100% broadband coverage by 2013, substantial investments will be required to build new networks, especially in rural and remote areas. Funding levels must therefore be maintained in order to achieve this target and boost investments in broadband infrastructure Increasing capacity and quality of infrastructure Information and communication technologies have a crucial role to play in tackling the development challenges faced by European societies, also in the transport sector. Intelligent Transport Systems (ITS) apply information and communication technologies to transport. Computers, electronics, satellites and sensors are playing an increasingly important role in transport systems. Innovation helps to make transport more sustainable and more efficient. The potential of ITS to help realise broader transport policy goals lies in their wide variety of applications in the different modes of transport, for both passengers and freight. In road transport ITS applications include for instance electronic tolling, dynamic traffic management (including variable speed limits, parking guidance and reservation, and real-time navigation support), real-time information and other driver-assistance systems like electronic stability control and lane-departure warning systems. ITS can

38 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 38 also make it easier to link the various transport modes, for example by means of integrated multimodal trip planners or tracking services for co-modal freight transport. Though ITS are not limited to road transport, the focus in the present exercise is on the Road Transport System and its interfaces with the other modes. Other modes already have similar initiatives such as the Single European Sky ATM Research (SESAR) for air, the European Rail Traffic Management System (ERTMS) for rail, River Information Services (RIS) for inland waterway transport and SafeSeaNet and Vessel Traffic Monitoring and Information Systems (VTMIS) for maritime transport. ITS clearly demonstrates a potential to support achievement of transport policy objectives, on condition that they are rolled out in a consistent, harmonised and synchronised way all over Europe. EU intervention is therefore required to guarantee interoperability, to ensure continuity across borders and modes, and to foster synergies (implying cost reductions) to be obtained for both public and private applications and services. The following transport policies and application areas will clearly benefit from a supra-national approach: Traffic management services (tools for reducing congestion, pollution and accidents); Traffic and travel information services (RTTI) (tools for reducing congestion, pollution and accidents); Traffic safety (in-vehicle) applications and services (tools dedicated to avoiding accidents or reducing their effects, and therefore non-recurrent congestion too); Other policy objectives that will benefit from a broad harmonised roll-out of ITS are: - City logistics and e-freight; - Innovation, by stimulating cross-border knowledge transfer on effective deployment; - The expansion and improvement of the European transport infrastructure and the completion of priority cross-border projects; - The encouragement of a sustainable use of resources Financial instruments for infrastructure investments In the context of EU policy, projects on the TEN-T, TEN-E and eten networks are supported through different programmes and they can receive EU grants, as a rule in a form of co-financing, notably from: TEN budget line, Cohesion Fund (only transport), ERDF, European Energy Programme for Recovery (only energy) or loans and guarantees from the European Investment Bank (EIB). Moreover, TEN-T and TEN-E projects can benefit from the results of the Community Framework Programme on RTD. For the next financial perspective there will be provided new instruments like for instance Connecting Europe Facility (CEF). The use of each source was different in different budget perspectives. Under the current financial perspectives ( ), TEN-T projects are financed mostly through Member States budgets with limited support from EU instruments. The TEN-T Programme provides 8 billion, while the European Regional Development Fund and the Cohesion Fund account for about 43 billion. In NMS EU funds play a much more important role than in EU as a whole. In these countries transport infrastructure is lagging behind EU-15 and EU funds have to accelerate the process of compensation of differences. Table 3 presents amounts and structure of financing TEN-T network in the financial perspectives from 1993 to 2013.

39 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 39 Table 4 Financing TEN-T Network Funds * EUR billion Share (%) EUR billion Share EUR billion Share (%) TEN-T budget Cohesion Fund** EFRR EIB Other sources Total *** * Indicative figures, ** Including ISPA, *** Total investment needs from Implementation Report Source: DG for Energy and Transport (2008). To improve the situation of energy networks there are several sources of funding at the European level for financing investments. These cover private and public funding as well as co-financing schemes and comprise the EU and national budgets, the Transmission System Operators (TSO s) own resources (the traditional instrument under which equity of % of the total investment is required, depending on the investment scale), private equity, and bank loans (from the European Investment Bank, the European Bank for Recovery and Development or from private commercial banks) (Hirschhausen, 2011). Member States in most cases do not participate directly in financing TEN-E projects as these are usually undertaken and financed by the TSOs. Grants from the European Union play a limited role as a source of funding for energy infrastructure investments. This situation might change, because of an urgent need for the EU to develop its own internal energy infrastructure. Presently, the EU is dependent upon energy imports to meet its demand for energy, and if current trends and policies continue, this external dependency is likely to increase. Investments in ICT infrastructure through the structural funds have risen considerably. The amount of expenditure on hard infrastructure has risen from over 2.7 billion in period to over 6.1billion in The European Commission co-finances broadband projects through the ERDF and European Agricultural Fund for Rural Development (DTI, 2009). Especially in remote and rural areas and in new Member States, structural funds aim at ensuring availability of ICT infrastructure where the market fails to provide it at an affordable cost and to an adequate level to support the required services. The private sector is reluctant to invest in the deployment of broadband networks because of: 1) high risks: infrastructure sharing by private sector operators or resulting from public-private co-operation, are perceived as higher risk transactions,2) longer pay back periods, 3) insufficient experience: promoters may be too small and inexperienced to attract the interest of large financial institutions. The EU and the European Investment Bank funds are used alongside national funding instruments to compensate for the lack of private sector financing. EU intervention is also necessary to ensure that areas outside urban conglomerations benefit from the deployment of ultra fast internet (European Commission, 2013a).

40 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Policy measures for improving labour productivity Introduction Human capital is seen as the primary determinant of the competitiveness of the modern world. For this reason, it is essential to identify the factors influencing the development of human capital. The existing system of education is the main factor influencing the human capital development, which should be adapted to current and future labour market needs. The knowledge, skills and aptitudes of the European workforce are the main factors in the EU s innovation, productivity and competitiveness. A welleducated workforce should be reflected in the high skilled workforce and it is essential for a wellfunctioning labour market with high labour productivity. To achieve high level productivity of Europe, EU had implemented many initiatives in the different levels of education and training early childhood, school, higher, vocational and adult education. The benchmarks for 2020 are: At least 95% of children between the age of four and the age for starting compulsory primary education should participate in early childhood education. The share of 15-years olds with insufficient abilities in reading, mathematics and science should be less than 15%. The share of early leavers from education and training should be less than 10%. The share of year olds with tertiary educational attainment should be at least 40%. An average of at least 15 % of adults (age group 25-64) should participate in lifelong learning. Policy measures for improving labour productivity concentrate not only on education system and lifelong learning but also on increasing efficiency of labour market. For this reason, the description of policy measures for improving labour productivity was divided into three groups presented in the table 5. A special focus is put on the framework of skills and competences implementation and lifelong learning as a priority in achievement of high skilled workforce. Special emphasis is placed on increasing the adaptability of young people into the labour market and extension of the period of employment in an aging society. EU actions cover different initiatives on education and employment particularly for young people in Europe. Essential to unleash the potential of all young people are high quality education and training, effective labour market integration and increased mobility. Table 5 presents sub-categories of measures for improving labour productivity and examples of those measures (for further in-depth discussion see Annex 1). Table 5 Sub-categories and examples of improving labour productivity measures Sub-category System of education Training and adult learning Improving efficiency of labour market Source: Own elaboration. Examples European Framework for Key Competences Bologna Process Transnational learning mobility for young people Vocational education and training Adult learning Conception of flexicurity Increasing labour mobility

41 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Changes in the education system European Union institutions play a supporting role in shaping education in Member States, but Member States are responsible for their education systems. The European Union contributes to the development of quality education by encouraging cooperation between Member States, through designing joint study programmes, establishing networks, exchanging information or teaching languages of the European Union and promoting the mobility of citizens. Changes in the education system are intended to improve quality of citizens education, increase their social and professional competences and a better adjustment to the needs of the labour market. The necessity for a unifying pattern of principles targeting, a consensus in terms of educational goals, teacher accreditation and comparable learning outcomes contributed to the changes in the education system. First of all establishing framework for key competences was important for long life learning in Europe. A framework of key competencies consists of a set of specific competencies, bound together in an integrated approach. The notion of key competence is used to designate competencies that enable individuals to participate effectively in multiple contexts or social fields, and that contribute to an overall successful life for individuals and to a well-functioning society i.e. that leads to important and valued individual and social outcomes. High competences improve the quality of human capital. Competences are developed through action and interaction in formal and informal educational contexts. Key competencies in EU were formulated in response to an increasing interest in information about education outcomes and their effects. Special attention is paid to higher education. Higher education plays an essential role in society, creating new knowledge and fostering innovation. In the period all the efforts were targeted to create the European Higher Education Area. The Bologna Process is an important driver of changes and reforms in European higher education. The intention is to improve transparency between higher education systems, as well as facilitate recognition of degrees and academic qualifications for better mobility and exchanges between institutions. The mobility and exchanges of higher education staff and students are supported under different programmes and more and more people use them. Changes in the education systems should strengthen the competitiveness and attractiveness of European higher education and help to achieve the target of Europe 2020 Strategy: at least 40 % of year olds should have attained higher education by Investments in human capital - training and adult learning Training and adult learning are important elements of long-life learning program. Concentration of human capital of adequate quality is an important reason for the location of businesses, especially innovative ones, which are the most desired by regions. The role of the EU in this range is to strengthen vocational education across Europe and to encourage adults to participate in different forms of formal, non-formal and informal learning. The Copenhagen process has played a crucial role in raising awareness of the importance of Vocational Education and Training (VET) at national and European level. Progress is made in the common European

42 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 42 tools, principles and guidelines which have been developed to make qualifications more transparent, comparable and transferable, as well as to improve flexibility and quality of learning. Transparency and a common approach to quality assurance are necessary to facilitate mobility and recognition of skills and competences between systems in different Member States. VET policies alone do not suffice to address socio-economic challenges and improve mobility and lifelong learning. There is needed approach, which link VET to other policies, in particular employment and social policies. Adult learning can help in achieving the Europe 2020 goals, by enabling adults to improve their ability to adapt to changes in the labour market and society. Adult learning provides a means of up-skilling or reskilling those affected by unemployment, restructuring and career transitions, as well as makes an important contribution to social inclusion, active citizenship and personal development. This applies particularly to the low-skilled and the low-qualified citizens. Low participation in adult learning is a great problem in most European countries and the EU supports education policies in this range in Member States. Measures undertaken by EU are aimed at better coordination of cooperation between different stakeholders to ensure high quality of education and training systems. This also responds to the needs of modern economy and to changing requirements in the labour market Increasing labour market efficiency The Member States must have efficient labour markets to improve their competitiveness. The efficiency and flexibility of the labour market is important in ensuring allocation of workers to their most effective use in the economy and achieving higher productivity. Labour migration leads to better deployment of economic resources and increases production. In this context, the most important is enabling mobility occupational, sectoral and geographical. This is connected with flexibility of labour forces. At the European level, opinion of the need to maintain a solid balance between social and economic goals was expressed and thus conception of flexicurity is promoted. The EU has proposed a set of flexicurity pathways, addressing different challenges and possible solutions in Member States. Member States should assess their own situation and identify their own meaningful flexicurity pathways to cope with different labour market challenges (Bekker and Wilthagen, 2008). Mobility is an important part of the flexibility of labour force. A crucial role in successful occupational and sectoral mobility plays education and training particularly within the system of lifelong learning. Labour mobility in geographical meaning should enable workers in Europe to move to another country in order to reduce unemployment in countries where unemployment rates are high, and offer a new labour force where there is a lack of workers (Bekker and Wilthagen, 2008). However, labour mobility in Europe is weak, and does not allow a balancing between European countries. The mobility between different countries is dependent on full implementations of the recognition of qualifications and portability of supplementary pension rights. Labour market mobility is essential for sustainable economic growth and the global competitiveness of Europe, and it will be increasingly important in the future due to Europe s changing demographics.

43 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Policy measures improving productive environment Introduction Productive environment constitutes all external factors influencing the probability of success. In the case of EU productive environment this comprises direct measures connected with companies activities (e.g. taxation, financing etc.) as well as wider social background (like knowledge ability of the society, quality of science pro-innovativeness). While direct factors which influence companies and EU regions competitiveness are most visible measures due to the fact that results of those measures are almost at once transmitted into the markets, the role of indirect factors building business environment remains crucial. For instance the quality of overall market workforce, the availability of technologies, and the possibility to innovate are all primary competitiveness factors. Those are directly connected with the quality and effectiveness of national research systems and analysis of examples of good practice. Evaluation of the implementation of the research activities at national level was developed in recent years in some comparative analysis. Related to problems such as globalization and the knowledge economy, reforms of higher education institutions, innovation, research funding and the academic profession, are debates on the national R&D strategies and policies. Another area which dictates the business chances is the structure of foreign markets and position of EU companies on those. This position could be hindered by foreign regulation (e.g. through discriminatory policies). Still there are instruments (like international trade agreements between EU and other countries) which might bring those barriers down. The summary of measures influencing competitiveness which are a function of business and social environment is given in table 6. Table 6 Sub-categories and examples for improving productive environment measures Sub-category Entrepreneurship environment Examples Improved access to financial means for SME s, The European Action Plan on Modernising Company Law and Enhancing Corporate Governance, regulatory framework of competition, Supporting new businesses in crucial lifecycle phases, Unified taxation. R&D Technologies innovation Internationalization and Science policy, Implementation of innovations into EU products, Transnational research networks. Pro-innovative industrial policy, EU technology intensive and innovative investments. Supporting EU enterprises at foreign markets, Cooperative agreements with third-part countries. Source: Own elaboration.

44 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Improving entrepreneurship environment The entrepreneurship environment plays an important role in shaping competitiveness due to its direct impact on market position of enterprises. A better entrepreneurship environment could be achieved by positive actions or through abstaining from actions which could possibly harm enterprises. For the former group this means easier access to finance, speeding up of administrative procedures related to business, reduction of taxation, reduction of number of permits needed etc. As the next noninterference of restrictive bureaucracy, refraining from introduction of contradictory laws can be enumerated. In practice within EU Member States this measures are often limited to local (country level) impacts. The matters from the overall EU perspective are unification of legal rules and EU wide action plans aimed at creation of equal chances regardless of the country of origin of particular company. The instruments which have the most significant impact are: taxation (especially EU drive to unify tax rates among Member States) and special financial instruments improving access to the financial means. While those measures could be potentially very efficient it is doubtful that they could be finalized in short term perspective due to the national governments strong belief that tax policy is and should remain internal competence of Member State. The EU's rules on competition are designed to ensure fair and equal conditions for all businesses. The rules applicable to firms and these concerning state aid are very important. European Commission has legal possibilities to undertake efficient actions to prevent or prohibit anti-competitive practices. Its measures cover monitoring of agreements between companies which restrict competition, prevention of the abuse of a dominant position and also financial support for companies from EU governments. The crucial goal of these actions is liberalisation of monopolistic markets. This leads for improving their efficiency and external competitiveness. Much more success could be achieved in equalizing competitive environments through unification of corporate law. Such actions like supporting cross-acceptance of licences and professional conduct standards or the push towards establishment of single European enterprise law bring closer to achieve setting goals. The examples of these tools are EU action plan for modernising company law or proposals for improved corporate governance standards Supporting R&D and innovation The role of R&D in creation of economic growth is becoming more and more important because EU science policy has to play more significant role in provision of knowledge to the EU industry. The main measure which is used as instrument for achieving research on the EU wide level is science policy. Quality science policy should establish EU as a leading knowledge-based economy. The crucial role could be attributed to EU framework research programmes which create excellent opportunities for networking dispersed national science resources and channel them into research useful from the perspective of Europe. Those transnational research networks allow for combining forces of public and private stakeholders and stimulate free movement of scientists and ideas. What is however missing is a better influence of research results into commercial products. While theoretical research within EU is on a good level the practical implementation of results creating actual innovations is lacking. The non-fulfilment of the Lisbon Agenda is most visible in unsuccessful attempts to

45 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 45 make the EU primary science-based economy of the World. Thus although general science creation instruments, like transnational networks and EU research initiatives, work quite well there is need for significant strengthening of instruments which will ensure better practical use of the created knowledge. Implementation of innovations into EU products is dependent not only on R&D policy but to high extent must be enabled through supportive actions like unitary patent, faster standard setting, modernised EU procurement rules and a European passport for venture capital funds Supporting application of advanced technologies This area is directly related to the R&D. The results of science advancements have to be introduced into the industry. The mechanisms for this transfer should be established. One could be a tax deduction for innovative companies, and another, an introduction of a common European patent. Yet another proinnovative industrial policy measures that might accelerate technology diffusion and tighten links between technology developers and users can be specified (for details see Annex 1). The instrument which is available directly to the EU is funding of innovative projects from EU level financial means. EC could tender application projects which are modern and innovative. One of the examples of such projects could be a Galileo programme. However this instrument has limitations- firstly EU budget is rather limited and there are few innovative projects which could be supported through it. Secondly the diverging needs of Member States often make good coordination of those innovative projects difficult causing delays Increasing internationalization level Internationalization policy impacts on competitiveness in regard to external entities. On the one hand the strong market entry barriers protect EU based companies from foreign competition but, at the same time, the existence of similar barriers on foreign markets could handicap EU enterprises. The most direct measure removing those obstacles is simply removal of said barriers (this is being realized for instance by currently started EU-US trade negotiations which aim at establishing Transatlantic Trade and Investment Partnership). Full removal of trade barriers is however distant future and will be applied only selectively. Therefore more traditional measures should be used in order to improve EU enterprises position on foreign markets. Those are mostly tools either supporting EU enterprises activities abroad or cooperation agreements with other countries effective in regard to certain industries or certain geographic regions.

46 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Review of examples of policy instruments influencing competitiveness in Member States This section of the report presents applications of particular instruments from the range of horizontal and sectoral policies. The objective is to present some of the practices in measures implementation. These instruments were used in certain locations at national or regional level in different European countries. The attention has been paid to the economic, social and environmental impact of these instruments. Such approach allows observing real effects of use of different instruments, both direct in a given sector, and indirect in other sectors and in the whole economy. The examples are fully reviewed in Annex 2 which consists of templates with examples of practices representing use of different measures aiming to improve the competitiveness in EU Member States. The aim of these templates is: To present the concrete measures which are able to improve competitiveness. To provide an illustration of conditions to implement individual measures and barriers which can occur. To identify the relevant economic, social and environmental impact of measure implementation. Each of the templates contains 12 sections: 1. Measure description: some details about measure assumptions. 2. Location of measure implementation: concrete place/region. 3. Institution responsible for the measure implementation. 4. Concept and dimension of competitiveness addressed. 5. Policy under which the measure is used. 6. Level of implementation: international/national/regional/local. 7. Assumed target. 8. Conditions for implementation: some technical/financial/ legal/organisational assumption to implement the measure. 9. Effects: describing the type of impact: economic (including wider economic benefits), social, environmental; 10. Barriers and difficulties in implementation. 11. Social and political acceptability. 12. Any additional information or comment. In table 7, a summary of the results from templates is presented. The table is divided into three parts, which correspond to policy measures identified in chapter 4: Policy measures for improving infrastructure endowment and accessibility (7 examples). Policy measures for improving labour productivity (5 examples). Policy measures for improving productive environment (11 examples). The examples of practices are very diverse and represent activities undertaking within different policies.

47 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 47 Table 7 Examples of practice from the range of different policies measures used in Member States to improve competitiveness Name of measure (country of implementation) Transport Infrastructure Project German Reunification (Germany) Multi-Year Programme for Infrastructure, Spatial Planning and Transport (MIRT) (Netherlands) Infrastructure Transport and Housing Plan ( ) (Spain) Policy guideline for the funding of intermodal terminals (Germany) Short description Project was intended to improve the road, rail and inland waterway infrastructure network connecting East and West Germany The MIRT aims to improve the coherence between investments in spatial planning, the economy, mobility and liveability. The Plan focuses on mobility needs and the housing access of the Spanish society. This Plan includes different measures to contribute to the economic recovery with special attention to the liberalization of these markets to increase competitiveness and sustainability. Under the guideline a government subsidy can be allocated for the construction or extension of intermodal terminals owned and managed by private companies. Policy under which the measure is used Economic impact of measure (including wider economic benefits) Policy measures for improving infrastructure endowment and accessibility Transport policy Reduced the journey time to and from destinations in the former GDR significantly. Promoted transit routes through Germany in an east-west direction. Caused a significant upturn in the construction sector. Created the necessary conditions for private investment in the former GDR. Transport policy Regional and international accessibility contributes to competitiveness and economic growth. Transport infrastructure and housing policy Transport investment will enhance the economic activity during the construction and the operation period because of increases of the productivity. The Plan will have impact on the competitiveness of the economy in the long run. Transport policy Reduction of handling/ transhipment cost by EUR10 at locations in the vicinity of a sea port. Reduction of handling/ transhipment cost by EUR22 at locations in the hinterland/at ferry ports. Social impact of measure Project could not serve as a sole and sufficient condition for a hoped-for fast economic recovery in Eastern Germany accompanied by an alignment of living standards to West German levels Quality of life and safety, both mentioned as targets of the programme, improve welfare. Increase the territorial cohesion. Increase the access of population to the housing market, particularly low-income population. Environmental impact of measure Transport projects help to create an integrated transport network and promote intermodal transport Negative environmental impacts are mitigated by sub-measures. Some projects in the programme are explicitly intended to improve environmental values, e.g. ecoproducts (wildlife crossings). Transport infrastructure is associated to environmental costs and new infrastructures have to consider them in order to minimize the negative environmental effects. Reduction of greenhouse gas emissions by 1.2 million t

48 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 48 Name of measure (country of implementation) Short description Policy under which the measure is used Economic impact of measure (including wider economic benefits) Social impact of measure Environmental impact of measure Return on investment (benefits due to modal shifts, CO2 reduction, employment effects): EUR16.71 per EUR1 of public funding. Road Investment Fund (Poland) RIF has been created in order to facilitate investments in road networks and to ensure more efficient allocation of public funds for national road development programme. It is currently the main source for financing road investments in Poland. Transport policy Building on the concept that better infrastructure facilitates economic growth the following benefits could be identified: better interconnectivity for passenger travel, savings in VoT both passenger and cargo, more direct transport of goods, improved logistics resulting in Just in Time operations, better access to markets. Better access to administration. Better access to culture. Decreased fuel consumption and emissions due to reduced congestion. Increased fuel consumption and emissions due to overall growth in number of km travelled. The overall effect is unclear as the network is not yet completed and measurement could only be hypothetical anyway (comparison to hypothetical baseline scenario no investment and no new roads) Road charging in Stockholm (Sweden) The primary purpose of the road charging in Stockholm is to reduce traffic congestion and improve the environmental situation in central Stockholm. The funds collected will be used for new road constructions in and around Stockholm. Urban policy The system was found to be extremely cost effective, with the primary benefits being shorter travel times valued at 600 million SEK ($85 million USD) annually, increased road safety valued at SEK 125 million ($18 million U.S.) and health and environmental benefits valued at SEK 90 million ($13 million USD). Operating costs are 25 percent of annual revenues. Upfront investments included $300 million USD in buses, transit and park and ride lots, plus $200 million USD in system operations. Improvement quality of life. CO 2 emissions were reduced by about 15 percent, with reductions in other pollutants such as nitrogen oxides (NO x ) and PM 10 as well.

49 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 49 Name of measure (country of implementation) Credit facilities for renewal of tourism infrastructure (Spain) Bologna process in the Netherlands (Netherlands) Government program of the contracted faculties (Poland) Policy guideline for the funding of training of mariners (Germany) Short description This financial instrument for infrastructure investments is designed to guarantee the sustainability of the Spanish tourist model in an international competitive environment. The aim was homologation of the higher education system in a large group of European countries. For Netherland problems are: low acknowledgement of Dutch titles, lack of possibilities to switch midway through studies, low (inter)national student mobility This project supports faculties of study of key importance for the knowledge based economy. The programme covers the list of faculties in mathematical-natural and technical sciences (SMT). High education institutions leading contracted courses receive financial support to improve attractiveness of education. Under the guideline the government can give a subsidy for certain trainee positions set up by a German shipping company to increase the number of training positions for mariners. Policy under which the measure is used Tourism development policy Economic impact of measure (including wider economic benefits) The increase of the international competitiveness of the tourist industry what it has direct effects on economic growth considering the importance of this sector in the Spanish economy Policy measures for improving labour productivity Education policy Forming a European Area of Higher Education increases mobility and collaboration, and increases the competitiveness of European institutes of higher education. Increasing education is good for human capital, which in turn is important for innovation, productivity and growth. Education policy National ocean shipping policy Graduates from SMT faculties play a key role in the development of the competitive position and innovation of Polish economy. Improving the quality of education drives the innovation, investment, technological change, enterprise development, economic diversification and competitiveness that economies need to accelerate the creation of more but also better jobs and thereby improve social cohesion. The number of training positions could be increased with the introduction of the measure. Maritime industry can be strengthen by securing expert knowledge and experienced workers. Social impact of measure More international mobility increases European outlook Better education improves the chances for a good job and higher wages, increases adaptability and occupational mobility, ensures higher social status and contributes to a better quality of life. For economy increases labour force participation rates and reduces unemployment rates, increasing social cohesion Environmental impact of measure The improvement of the sustainability of the tourist destinations implies to improve the environment and to consider the environmental consequences of renewal on the destination More mobility will mean more travel, which might have negative environmental consequences Graduates in engineering (especially environmental engineering and environmental protection) have a greater environmental awareness, actively participate in the public consultation on the economics project. They promote improvement of environmental relationships and foster the implementation of standards ISO or EMAS

50 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 50 Name of measure (country of implementation) Active Labour Market Policies (Netherlands) Teleworking for public firms in Flanders Special economic zones (Poland) Short description Active Labour Market Policies programs to activate the unemployed and they include job search assistance, labour market training, wage subsidies and direct job creation in the public sector are four main strategies The collective agreement, Collectieve Arbeidsovereenkomst (NL) or Collective de travail (FR), aims to lay down the key principles governing teleworking. It also contains various proposals on issues that need to be governed by laws or regulations, and which cannot therefore lie within the competence of the social partners. The Polish SEZs are based on the simplicity and effectiveness of the tool being the tax exemption for businesses. The interested entities may conduct business activity on preferential conditions in comparison to conducting business activity outside the SEZ. Preferential terms of business within the zones mean that investors can take advantage of state aid. Such aid mainly is granted in the form of income tax exemptions and property tax exemptions. Policy under which the measure is used Employment policy Labour policy Economic impact of measure (including wider economic benefits) Lower expenditure on welfare. Higher tax income. Average productivity per worker may go down, as the quality of employees previously unemployed is typically below average. Decrease in congestion costs is mentioned as the main effect. Every year more than 900 million Euros are saved in Flanders thanks to teleworking in comparison to the situation without teleworking implementation. The biggest part of this saving (more than 850 million) comes from congestion avoidance. The rest come from pollution reduction and safety improvement. Policy measures improving productive environment Regional and By the end of June 2011, industrial policy entrepreneurs operating in the zones had invested over PLN 75 billion and employed over 230,000 people. The rate of unemployment in the SEZ regions is lower than in other regions. Sub-region where a SEZ is located has a 3.9% to 7.5% higher GDP per capita than the average GDP per capita in Poland in other sub-regions. Social impact of measure More social coherence. Increase in health of previously unemployed is possible but not guaranteed. The benefits in terms of increased productivity, reduced stress, better balance between work & private life, increased work motivation and certain autonomy in the implementation of working assignments are emphasized by society. There is also the impact of teleworking on the employment opportunities of certain groups in the active population, especially people with physical disability or handicap, rural area residents and for women with children. The increase in the number of jobs is significant. Environmental impact of measure Decrease in other transport externalities (pollution, accidents). Promoting of innovative solutions, also eco innovations.

51 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 51 Name of measure (country of implementation) Canary Islands Special Zone (ZEC) (Spain - Canary Islands) Pieken in de Delta (Netherlands) National Scientific Research, Development and Technological Innovation Plan (Spain) German Universities Excellence Initiative (Germany) Short description The ZEC is a tax incentive of the Economic and Fiscal Regime (REF-In Spanish Régimen Económico y Fiscal) of the Canary Islands whose main purpose is to promote the economic and social development of the Islands and diversifying their production structure This document earmarked the start of a new Dutch approach to regional innovation policy to contribute to establishing a dynamic and competitive economy National R & D & I plan have to help to increase the competitiveness and to invest in research, development and technological innovation is a compulsory policy to create economic growth based on innovation. The Excellence Initiative aims to promote cutting-edge research at German universities. It intents to strengthen some selected universities raising their international visibility and promote Policy under which the measure is used Tax incentives policy Economic growth policy Research, Development and Technological Innovation policy Research and innovation policy Education policy Economic impact of measure (including wider economic benefits) Impact is not clearly quantified. The main impact is to increase the creation of employment and to change the productive structure of the Canary Islands Strengthening regional clusters in the triple helix increases local productivity and growth. As coherence and collaboration between firms and other stakeholders are fostered, agglomeration benefits increase. Some projects created extra employment, but mainly in the short term. Some collaborations were set up across sectors within the predefined regions, leading to possible Jacobs externalities Increase of the competitiveness of the economy. It will allow to promote the economic growth and the employment The visibility of universities has been enhanced. The number of scholars was increased. Innovation has been triggered in the higher education system. Social impact of measure Regions left outside the programme might have suffered setbacks because of this. Environmental impact of measure To achieve a sustainable growth is directly linked to the environment preservation.

52 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 52 Name of measure (country of implementation) Short description Policy under which the measure is used Economic impact of measure (including wider economic benefits) Social impact of measure Environmental impact of measure groundbreaking research in Germany. Measures taken by the institutions focus on basic research without targeting teaching, entrepreneurship, and other activities to a larger extend. Tax exemptions for innovative firms (Poland) WBSO (Wet Bevordering Speur-en Ontwikkelingswerk (Netherlands) Measure aimed at supporting the R&D activities or innovative activities that allows special tax exemptions and monthly write-off of expenditures to an Innovative Fund. This act provides a fiscal facility for companies, knowledge centres and self-employed persons who perform R&D work. Research and innovation policy, Regional policy Economic Affairs policy Increase of the percentage of innovative goods and services on the internal Polish market and in Polish exports, and as a result improve the Polish place in the international rankings of innovation and competitiveness R&D and innovation are important determinants of productivity, hence competitive advantage, and as such for competitiveness and economic growth. The programme might have a positive influence on location choices of foreign (R&D) firms. The creation of new jobs for university graduates Wages of researchers might increase slightly. Promoting of innovative solutions includes also eco innovations Some of the increased R&D will be focused on environmental innovations, but this is not specifically targeted ISETEC II - Application of innovative technologies in ports (Germany) Under the measure research projects aiming to develop, adapt or apply innovative technologies and IT-systems in ports, on terminals and in hinterland transport are funded. The measure was intended to support ports in their efforts to increase capacity and productivity by introducing innovative technologies and logistical concepts in seaports, on terminals and along the maritime supply chain. Research and innovation policy Transport Policy Positive employment effects if, as assumed, additional freight volumes can be generated. Increases of knowledge and qualification levels. Reduced waiting times at terminals. Reduction of workplace accidents. Potential to reduce CO 2 emissions per year. Reduced land use due to more efficient terminal operations. Capability to reduce noise levels.

53 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 53 Name of measure (country of implementation) Tristar implementation of ITS solution in transport (Poland) Strategic Plan ICEX ( ) Energy Taxation Directive (2003/96/EC) Short description The essence of the project is to build a traffic management and control system based on the signalling infrastructure development with the construction of telecommunications infrastructure and the construction of two cooperating management and traffic control centres (for Tricity). The Strategic Plan is the main tool to determine what the next challenges in the internationalization policy are, and to recommend measures in order to improve and to diversify the Spanish exports. The highest minimum tax rates were introduced for energy products and electricity Policy under which the measure is used Research and innovation policy Regional policy Trade policy Energy policy Economic impact of measure (including wider economic benefits) Integrated and comprehensive implementation of the system leading to the improvement of the socio-economic development at the local and regional level. To increase the capacity of the Spanish economy to export goods and services that impacts on employment and economic performance of the country In relation to the transport sector, the economic impact concerns the increase of transport costs and sectoral competitiveness may decrease in short perspective. Public income will increase and this will enable further improvements in the transport system. Increase of energy costs forces improving energy efficiency. Source: Own elaboration based on Work Package 4 templates collected in Annex 2. Social impact of measure Integration of the authorities of cities, local institutions, operators and transport users is necessary to implement the system efficiently. There is a need for education of road users, including drivers of public transport in the range of operation of control systems and priorities for public transport vehicles. In relation to the transport sector, the social impacts are limited to an improvement of health and well-being for the society as a whole, but also for residents near motorways or power plants. Environmental impact of measure Promoting of innovative solutions, also eco innovations. In relation to the transport sector, the environmental impacts will show an improvement of air quality (fewer emissions), climate change and the use of nonrenewable resources.

54 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 54 Examples of policy instruments for improving infrastructure endowment and accessibility mainly cover transport infrastructure investments. The development of infrastructure impacts on the reduction of transport costs and the growth of businesses productiveness, a rise in employment, an improvement in safety and a reduction in ecological harm. The travel time, vehicle operating costs and safety are the main direct user benefits. In templates, attention often was paid to improving accessibility, which is an important factor of competitiveness of territorial units. Economic impact of programmes for funding infrastructure investment includes many projects decreasing the cost of transport, handling and transhipment. There are also social effects discussed, such as raising the level of mobility in society, an increase in the comfort of travel and an improvement in the general standard and quality of life. Besides, other benefits of infrastructure investment include its effects on environmental sustainability, for instance through reduction of greenhouse gas emissions, changes in the modal split and promotion of intermodal transport. Besides positive effects on productive capacity as the major reason for the infrastructure investment s contribution to the economic growth, transport infrastructure investments cause relatively large multiplier effects on the overall economy. Investments in the development of transport infrastructure make it possible to achieve objectives associated with increasing the competitiveness of regions and the entire economy as well as social goals that are not directly linked to competitiveness, although they are also extremely important. Effects of investments in infrastructure are noticeable in the performance of other sectors of economy, served by transport and they usually are classified as indirect effects. By raising productivity and reducing production costs, a decent infrastructure helps to hold a competitive position in the global trade. The second group of examples constituted practises for improving quality of human capital and labour productivity. It deals with instruments implemented under education and employment policy which increase collaboration and mobility of students and staff, and increases the competitiveness of European institutes of higher education. Better quality of higher education drives the innovation, investment, technological change, enterprise development, economic diversification and competitiveness that economies need to accelerate the creation of more but also better jobs. It increases labour force participation rates and reduces unemployment rates increasing social cohesion. From a social point of view, better education improves the chances for a good job and higher wages, increases adaptability and occupational mobility, ensures higher social status and contributes to a better quality of life. The wider group of example instruments belongs to policy measures for improving productive environment. These instruments were implemented mainly under economic policy, regional policy, research and innovation policy, industrial policy and trade policy. Besides typical instruments under this theme some special instruments prepared for specific regions, such as especial economic zones or programmes contributing to improving innovativeness are explained. For instance special economic zones were created in regions less developed, faced with different socio-economic problems. The economic impact of this kind of instrument primarily relied on increase of employment and new productive investments, often foreign direct investment (FDI). Other instruments targeted at creation of a better environment for implementation of innovation (i.e. Pieken in de Delta in Netherlands) lead to strengthening regional clusters in the triple helix and increase local productivity and growth. Coherence

55 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 55 and collaboration between firms and other stakeholders are fostered and agglomeration benefits increased. Improving productive environment for firms also occurs by supporting application of advanced technologies. Here the interrelation with transport infrastructure is most visible. The examples provided like Tristar - ITS solution for a traffic management in Polish Tricity agglomeration show that the main direct effect of their implementation relies on decrease of congestion and reduction of travel time and thus improvement of accessibility. Another example - supporting instrument for projects aiming to develop, adapt or apply innovative technologies and IT-systems in ports, on terminals and in hinterland transport in Germany presents effects of innovative technologies and logistical concepts along the whole maritime supply chains. Application of new technologies influences increase capacity, reduce waiting times at terminals and additional freight volumes generate positive employment effects. Implementation of such projects as exemplified above gives also benefits for environment, like reduction of land use due to more efficient terminal operations, capability to reduce CO 2 emissions and noise levels. Some of the instruments can decrease the competitiveness in the short term, but increase it in the long term perspective. Such an example is the implementation of a tax directive, which caused increase of energy cost in transport and other sectors in a short timeframe. But in the long run higher costs of energy forces to look for ways to use cheaper sources of energy and more economically viable ones. In transport, it can lead to wider application of alternative fuels and changes in modal split, with benefits for energy-efficient modes of transport. Majority of effect which were identified through examples were direct effects yet it should be concluded that it was very difficult to point at wider economic benefits resulting directly from different measures. Proving that the wider economic effects occur requires in-depth research of indirect effects. For a categorization of wider economic impacts see (Betancor, Hernández and Socorro, 2013). Different policy measures and different practical applications have impact on competitiveness. One could argue that although they are often interrelated there are some policy instruments which are more effective or/and are enabling instruments e.g. without them the whole process of improving competitiveness is not possible. One of such instruments is transport infrastructure and its interrelation with other policies impacting competitiveness must be analysed in-depth.

56 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Cross-relations among different EU policy interventions and transport infrastructure investments Territorial cohesion is about ensuring the harmonious development of all EU places in different Member States and about making sure that their citizens are able to make the most of inherent features of these territories. As such, it is a means of transforming diversity into an asset that contributes to sustainable development of the entire EU. Increasingly, competitiveness and prosperity depend on the capacity of the people and businesses located there to make the best use of all of territorial assets. In a globalising and interrelated world economy, however, competitiveness also depends on building links with other territories to ensure that common assets are used in a coordinated and sustainable way. Cooperation along with the flow of technology and ideas as well as goods, services and capital is becoming ever more a vital aspect of territorial development and a key factor underpinning the long-term and sustainable growth performance of the EU as a whole (European Commission, 2008g). The discussion of the role of transport infrastructure in regional economic development and improving competitiveness very often tends to concentrate on questions of accessibility and the effect which changes in transport costs will have on the region's industries (Quinet and Vickerman, 2004). Transport policy actions are concentrated on the full range of interventions in the transport market: those concerning the development of infrastructure and those concerning the use of infrastructure. Examples of the first type are construction or maintenance of roads, inland waterways, sea and air ports and railways (TEN-T network). These types of initiatives usually aim at enhancing the capacity of a network so as to improve the accessibility of cities or regions. Examples of the second type are transport pricing, speed reductions, ICT solutions or improved timetables. These aim to change traveller behaviour and/or improve the quality of service provided by the network. Both categories are very important to optimizing the transport system. Network effects of improving transport infrastructure are complex and multi-dimensional. The first reason for this is the large number of relationships and responses which occur when the transport system is improved. The second is that transport is a network that can be good both, in the sense that there is a physical transport network, and in the sense that since transport is an intermediate good, it is related to the final production, consumption and factor markets which it serves. This section explores the chain of common relationships among a policies initiatives and transport infrastructure investments. The effects of improvements of transport infrastructure could be divided into direct transport network effects and indirect transport network effects. The central issue in the economic evaluation of transport infrastructure investment is the identification and assessment of the direct economic effects of projects like time savings and operating costs. We have to remember that there are also other effects that stimulate economic activity, increase productivity or relocate businesses. Indirect economic effects are those that appear in secondary markets because of complementarily or substitutability relationships with the primary one (de Rus, 2009).

57 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 57 Looking at the effects both direct and indirect of transport infrastructure development we have to bear in mind that the relationship between transport and the economy and society is double-ended. Transport facilitates realisation of undertaken actions within different policies, but also activities within other policies influence transport policy goals especially in the infrastructure area. Most notable example of this interrelation is given by regional policy and transport infrastructure investments. Relationships between them are bidirectional. Transport infrastructure investments are an important instrument of regional policy, because transport accessibility is a key factor of socio-economic development and regional competitiveness. Regions with better access to markets are likely to be more productive, more competitive than others and have better conditions for economic growth. Investments in transport infrastructure are essential for reducing the costs of transporting cargos between regions, especially those located at the peripheries and those with a central location and thus improving the difficult situation of peripheral areas. Transport improvements have particularly strong impacts on regional development where they result in removing a bottleneck. The impact of changes in the transport accessibility on the development of regions depends on the specifics of each country, i.e. the initial infrastructure endowment, investments co-financed from EU funds, socio-economic problems and development gap with the more developed EU countries. On the other side, EU funds as an instrument of regional policy help to provide funds for transport infrastructure investments. The regional policy provides support for transport in the Member States mainly through investments in transport infrastructure by means co-financed by the European Regional Development Fund and the Cohesion Fund. These funds don t play an important role in EU15, but in NMS they are a crucial form of financing of transport infrastructure investments, where investment needs are considerable. This is due to both, insufficient level of network development, high level of depreciation of infrastructure and inadequate spatial distribution of elements of the network. Insufficient financial resources are usually the main reason of refraining from new investments and delays in the implementation of started investments. The financial barrier often can be overcome only if additional funds will be provided from private sources or EU funding. In regard to measures aimed at improving the entrepreneurship environment it has to be said that their impact on transport infrastructure development is mostly potential and conditional. For instance the measure improved access to financial means by enterprises might result in a more active posture of those companies on markets, thus creating more demand for transport services and infrastructure. Similarly support for new businesses in crucial life-cycle stages measure has only an indirect impact on transport infrastructure. It could be expected that this should result in higher number of enterprises active on markets which might generate additional demand for transport services and in turn, for infrastructure provision. Another effect could be attributed to the European Action Plan on Modernising Company Law and Enhancing Corporate Governance measure which has an indirect impact on infrastructure provision. This measure allows for better access to the internal national markets for infrastructure construction for the companies from other EU countries. Similar effects will result from implementation of unified taxation which will have strong influence on transport infrastructure providers because it equalizes competitive advantages currently resulting from lower taxation in some countries. The transport sector benefits heavily from the state aid. This applies to both infrastructure development and operations of public utility. Application of the competition rules is often seen as a factor of

58 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 58 uncertainty that impedes the investment of private capital into transport networks. This happens because of the specific features of each project which should be taken into consideration and analysis carried out. In particular it takes place where individual exemptions are to be granted within the meaning of Article 85 of the Treaty. The EU s competition policy rules are crucial for providing access to infrastructure for different operators. They are intended to prevent market partitioning through anticompetitive practices such as unjustified refusals to allow third parties non-discriminatory access to infrastructure facilities (European Commission, 1997). The group of measures aimed at improving EU R&D policy has often a direct effect on transport infrastructure provision. EU science policy for instance, if directed at the transport sector could be highly effective. EU science policy impact on transport infrastructure is visible in the introduction of new materials in construction. Another direct influence is change in infrastructure design in response to research results (for instance introduction of acoustic screens, double purpose tracks for rail/trams, changes in motorway design incorporating pro-environmental components, etc.). There are also huge impacts on infrastructure policy. For instance, the new methods of cost calculation for the use of infrastructure, lead to new charging schemes. Increasing knowledge about environmental impacts might lead to changes in taxation. Research on safety has a direct impact on infrastructure planning and operational management (especially in road sector). The measurement of noise has direct impact on decisions regarding location of airports etc. Actions aimed at introduction of innovations into EU products also might have direct impact on transport infrastructure in regard to products which are used directly in the provision of this infrastructure. The impact of measures aimed at implementation of innovations in infrastructure investments result from close cooperation between businesses and science. This is visible especially in preparation of new technical plans for infrastructure development and in production of new materials for infrastructure construction. On the organisational level especially new risk management methods related to the infrastructure investment and management could be implemented. Also transnational research programmes could strongly influence transport infrastructure planning. The very best example are Framework Programmes which have addressed many important transport policy issues in many cases directly related to transport infrastructure (e.g. regarding transport policy instruments, pricing of infrastructure, costs and charging in regard to infrastructure). In regard to measures supporting application of new advanced technologies the impact of pro-innovative industrial policy on transport infrastructure development is indirect the less advanced technical knowledge and expertise is available within the infrastructure construction sector the lower is the quality of infrastructure product. But individual technology intensive investments (e.g. Galileo) have high impact on infrastructure provision and operations. EU technology intensive investments might have this significant impact on transport infrastructure development depending on priorities adopted. In case priorities are set for innovative investments directly impacting transport system (new propulsion, decarbonisation of transport etc) this effect will be stronger than if priorities are with supportive measures (e.g. step-by step improvement in engine efficiency, better technical parameters of used construction materials etc.). In other words it will rather follow the path of slow change than revolution in transport infrastructure provision unless substantial (and economically viable) breakthrough (e.g. ultra speed trains etc.) is achieved.

59 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 59 In the area of instruments increasing internationalization level only indirect infrastructural effects could be recognized. For instance the measure of supporting EU enterprises on foreign markets has only indirect effect on transport infrastructure investment. It may result in better expertise of construction companies which work abroad and then move back to produce infrastructure in the EU. Another measure the cooperative agreements with other countries has only a limited indirect effect on the transport infrastructure. Those agreements most notably result in increased flows of goods therefore increased use of existing infrastructure could be expected as well as need to develop external infrastructure links. Labour market plays significant role in shaping the European Union's competitiveness. The effect of investment in transport infrastructure on economic performance among others depends on the human capital. Interaction between transport infrastructure investments and labour markets extends in two directions: Labour resources are an integral part of any economic activities; implementation of any transport infrastructure investments requires the involvement of human capital. Transport infrastructure investments improve the accessibility of regions reflected the scope of labour market; strengthening the mobility of workforce. A good transport system is recognized as a key factor for regional and national economic development. It reduces journey times and, accordingly, production costs, thus increasing competitiveness. It improves access to markets for consumers, workers and business and it is an important aspect of the attractiveness of a region for investors. From this point of view, the gravity areas of enterprise, education and other activities of life are divided into different travel times for example 60 min, 90 min and 120 minutes. It depends on the transport accessibility. Improving transport in the regions increases the range of commuting to the cities. Resolving modern problems of transport and employment is increasingly dependent on the knowledge resources and the ability to create innovative solutions. It should be mentioned that there are also side effects - the results of innovation policy and transport policy often influence the decrease of job s numbers (for example the automated container terminals). Moreover the liberalization of markets stimulates competition and consequently forces the entrepreneurs to reduce costs mainly by reducing the labour resources. Improved transport links between regions and countries facilitate access to EU-wide markets, which is likely to create new opportunities for growth. It also, however, increases competition between regions, which may adversely affect both businesses and workers. The overall effect depends on a region s capacity to exploit and further develop its comparative advantage.

60 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Identification of the relationship between the various EU policy measures Policy measures/activities interact with each other in different ways. Here we introduce three main definitions that describe how the different measures in policy packages combine with each other. These are: complementarity, additivity and synergy. These concepts will now be defined. Complementarity Complementarity exists when the use of two instruments gives greater total effects than the use of either alone. This can be represented using the following notation: and Additivity Effect gain (A+B) > Effect gain A, Effect gain (A+B) > Effect gain B Additivity exists when the effect gain from the use of two or more instruments in a policy package is equal to the sum of the effect gain of using each in isolation. This can be represented as: Effect gain (A+B) = Effect gain A + Effect gain B Synergy Synergy occurs when the simultaneous use of two or more instruments gives a greater benefit than the sum of the benefits of using either one of them alone: Effect gain (A+B) > Effect gain A + Effect gain B Additivity and synergy can therefore be considered as two special cases of complementarity. Table 8 presents the relationships among different measures which were analysed in the previous sections of the report.

61 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 61 Table 8 Relationships among analysed measures of EU policies influencing EU competitiveness European schemes of infrastructure Financial instruments for infrastructure investments Increasing capacity and quality of infrastructure Changes in education system Investments in human capital - training and lifelong learning Increasing labour market efficiency Improving entrepreneurship environment Supporting R&D and innovation Supporting application of advanced technologies Increasing internationalization level European schemes of infrastruc ture Financial instruments for infrastructure investments C Complementarity; A Additivity; S Synergy; Source: Own elaboration Increasing capacity and quality of infrastructure Changes education system in Investments in human capital - training and lifelong learning Increasing labour market efficiency Improving entrepreneur ship environment Supporting R&D and innovation Supporting application of advanced technologies Increasing internationali zation level S S C C C C A S A S S C C C A A A A S S C C C A S S A C C C S S S A A A C C C S S S S S A C C C S S S S A A C A A S S S A A S A A S A S S A S A S A S A S A A S A A A A A A A S A A

62 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 62 Complementarity of EU policy measures is a typical value of EU policy evaluated over previous decades. Of course, one can identify some policy measures implemented at the EU level which generate some barriers of further development in a given specific area and which are in opposite to other policies. But there are only some rare exceptions. In general policy measures aiming at realisation of differentiated strategic objectives stimulate policies realisation in other areas. Taking EU policy packages into consideration there are some policy packages at the top from the perspective of the positive impact and relations with other policies. These synergy effects are mainly noticed for measures related to increasing capacity and quality of infrastructure, investment in human capital-training and lifelong learning as well as improving entrepreneurship environment. Also supporting R&D and innovation may stimulate significantly realisation of other policies. Additivity is a characteristic relationship for measures connected with increasing internationalisation level. Then one can observe the sum of the effect gains of using each policy measures in isolation.

63 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Conclusions As stated at the beginning of the report the concept of improving competitiveness of the European economy still remains valid, so there is need to know what actions and instruments should be used within the policy framework to improved EU position in changing world economy and on the global market. The European Union turned a new page with the start of the Europe 2020 Strategy. The Strategy sets out the vision of a social market economy for Europe in the 21st century. It aims at transforming the EU into a smart, sustainable and inclusive economy with high levels of employment, productivity and social cohesion and at reinforcing the EU as an actor in global governance. At the same time and in line with the Europe 2020 Strategy flagship initiatives, the White Paper of 2011 summarizes the main objectives of the European transport policy. The objectives help to establish a system that underpins European economic progress and offers high quality mobility services, while using resources more efficiently. As a consequence, it is essential to clarify the relationship between investments in transport infrastructure on economic growth and competitiveness. This is one of the main aims of I-C-EU project. In this deliverable the activities undertaken by EU aimed at improving its international competitiveness were discussed as a method to setup framework for further analysis of specific measures and their impact on competitiveness and more importantly for assessment of interrelations of transport infrastructure (one of the measures itself) and other policy instruments. As the conclusions of conducted EU policy review it can be underlined that: 1. Some of EU policies have direct, strong impact on flagship initiatives implementation, because aims of initiatives can be found among main goals of these policies and appropriate measures and instruments are predicted in their programmes. Others can be assessed as to follow the objectives established in the strategy. Undertaken in the framework of their activities facilitate or enable the realization of initiatives. 2. The analysis of the various initiatives provides insight into crucial action areas for each initiative. To name the few - in the case of the initiative Innovation Union especially important actions are taken in the framework of EU research and innovation policy. A Digital Agenda for Europe is implemented mainly through single market policy, research and innovation policy and enterprise policy. 3. It is difficult to point out the most important policy for Resource-efficient Europe initiative, because the majority of analysed policies have direct or indirect impact on this initiative. The sectoral policies: energy, industrial, transport and environment are very important because they cover areas of activities consuming significant quantities of resources, including non-renewable energy resources and many actions undertaken within these policies are aiming to decrease use of resources. 4. Another significant finding of conducted analysis is that not all of the factors of competitiveness can be controlled equally by the policies and activities undertaken within them. Thus, it is important to determine what factors and to what extent can be affected by use of policy instruments. Factors critical for competitiveness of regions and nations were examined in (Betancor et al., 2013) and based on the findings of this deliverable we ve divided

64 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 64 competitiveness factors into three broad categories: infrastructure endowment and accessibility, human resources and productive environment. The individual measures are described in Annex Bearing in mind that usually divers measures interact with each other in different ways, the authors have identified and briefly described three main forms of relationships that potentially can exist among the individual measures of EU policies influencing its competitiveness. These were complementarity, additivity and synergy. Unfortunately the authors were able to determine only in qualitative terms the ways and forms the various policy measures interact with each other. It turned out again that the direct quantitative measurement of such relationships in terms of statistical indicators determining the level of correlation among these measures is not possible, yet. 6. Another finding is that the EU is not a homogeneous entity in terms of competitiveness. On the contrary, large disparities exist among Member States, with some countries performing much better than others and well above the EU average or that of other advanced economies. The identification of thematic drivers of competitiveness and their associations with different types of regions has significant implications for policy making and investment. 7. From the objectives of the ICEU project s other work packages the most important driver has to be attributed to transport infrastructure. There are many attempts to assess the full impact of investment in transport infrastructure on growth and competitiveness. As it was concluded in (Betancor et al., 2013a) it is a difficult task. 8. The above analysis points at different levels of interrelations between transport infrastructure instruments and other competitiveness enhancing instruments this must be remembered while developing tools to assess wider economic benefits resulting from infrastructure development especially because it increases the possibilities for double counting of effects. This should be taken into consideration in further work on this task.

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70 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 70 European Commission (2012l), Proposal for a Decision of the European Parliament and of the Council on a General Union Environment Action Programme to 2020 "Living well, within the limits of our planet", Brussels, , COM(2012) 710 final; European Commission (2013a), Digital Agenda for Europe, Action 43: Funding for high-speed broadband, [ funding-high-speed-broadband]; European Commission (2013b), Green Paper - A 2030 framework for climate and energy policies, Brussels, , COM(2013) 169 final; European Commission (2013c), Legislation on competition policy, [ European Commission (2013d), Research & Innovation, [ European Commission (2013e), Research and Innovation performance in EU Member States and Associated countries. Innovation Union progress at country level 2013, [ European Commission (2013f), Strategic framework for education and training, [ European Commission (2013g), Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions: An EU Strategy on adaptation to climate change, Brussels, , COM(2013) 216 final; European Commission (2013h), Report on Competition Policy 2012, Brussels, , COM(2013) 257 final; European Parliament (2003), Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, OJ L 275, ; European Parliament (2004), Decision No 884/2004/EC of the European Parliament and of the Council of 29 April 2004 amending Decision No 1692/96/EC on Community guidelines for the development of the trans-european transport network; this Decision was replaced by Decision No 661/2010/EU of the European Parliament and of the Council of 7 July 2010 on Union guidelines for the development of the trans-european transport network (recast). The recast consisted mainly of a codification of the existing Guidelines, the only change of substance consisted in adjusting the indicative target dates, from 2010 to 2020, for Member States that acceded on 1 May 2004; European Parliament (2006), Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999, , L 210/1; European Parliament (2009), Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006, OJ L 140; European Parliament (2010), Directive 2010/40/EU of the European Parliament and of the Council on the framework for the deployment of Intelligent Transport Systems in the field of road transport and for interfaces with other modes of transport; European Parliament (2011), European Parliament resolution of 20 April 2012 on our life insurance, our natural capital: an EU biodiversity strategy to 2020 (2011/2307(INI)); European Parliament (2012), European Parliament resolution of 14 June 2012 on Single Market Act: The Next Steps to Growth (2012/2663(RSP)); European Private Company (2013), [

71 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 71 European Union (2012), Consolidated version of The Treaty on the Functioning of the European Union. OJ C (2012)326/1; Hirschhausen Ch. von (2011), Financing Trans-European Energy Infrastructures Past, Present and Perspectives, Notre Europe; Høst Sarup D. (2012), Policy for Research and Technological Development. European Parliament 2013, [ Lengyel, I. (2003), The Pyramid-model. Enhancing Regional Competitiveness in Hungary. Acta Oeconomica, no. 3, pp ; Lengyel, I., Rechnitzer J. (2013), The competitiveness of regions in the Central European transition countries, The Macrotheme Review, vol. 2, iss. 3; Mejlgaard N., Bloch C., Degn L., Ravn T., Nielsen M.W. (2012), Monitoring Policy and Research Activities on Science in Society in Europe (MASIS). Final synthesis report. European Commission, [ Moussis, N. (2011), Access to European Union. Law, economics, policies, 19th updated edition, Euroconfidentiel, Rixensart 2011; Owen G. (2012), Industrial Policy in Europe Since the Second World War: What Has Been Learnt? Department of Management, London School of Economics. ECIPE Occasional Paper No. 1/2012, [ Presidency Conclusions (2000), Lisbon European Council 23 and 24 March 2000, [ Quinet E., Vickerman R. (2004), Principle of Transport Economics, E. elgar, Cheltenham 2004; Roland Berger Strategy Consultants (2011), The structuring and financing of energy infrastructure projects, financing gaps and recommendations regarding the new TEN-E financial instrument. Final report, [ Smit, M. (2013), Issues of competitiveness and regional growth in relation to transport infrastructure investment: a literature review on assessment methodology. Deliverable 1.1 for the I-C-EU project. Leuven: TML; The European Association of Craft, Small and Medium-sized Enterprises (2013), Enterprise policy, Wilthagen, T., Tros F. (2004), The concept of flexicurity : a new approach to regulating employment and labour markets. Transfer, European Review of Labour and Research, Vol. 10, No. 2, pp ; World Economic Forum (2012), The Europe 2020 Competitiveness Report: Building a More Competitive Europe 2012 Edition, World Economic Forum, Geneva, [

72 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 72 Annex 1 A REVIEW OF EU AND NATIONAL POLICY MEASURES INFLUENCING COMPETITIVENESS AND REGIONAL GROWTH Authors: Aleksandra Kozlak Barbara Pawlowska Przemyslaw Borkowski Jan Burnewicz Monika Bak Elzbieta Adamowicz

73 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 73 Table of contents 1. INTRODUCTION POLICY MEASURES FOR IMPROVING INFRASTRUCTURE ENDOWMENT AND ACCESSIBILITY EUROPEAN SCHEMES OF INFRASTRUCTURE INCREASING CAPACITY AND QUALITY OF INFRASTRUCTURE FINANCIAL INSTRUMENTS FOR INFRASTRUCTURE INVESTMENTS POLICY MEASURES FOR IMPROVING LABOUR PRODUCTIVITY CHANGES IN EDUCATION SYSTEM INVESTMENTS IN HUMAN CAPITAL - TRAINING AND ADULT LEARNING INCREASING LABOUR MARKET EFFICIENCY POLICY MEASURES FOR IMPROVING PRODUCTIVE ENVIRONMENT IMPROVING ENTREPRENEURSHIP ENVIRONMENT SUPPORTING R&D AND INNOVATION SUPPORTING APPLICATION OF ADVANCED TECHNOLOGIES INCREASING INTERNATIONALIZATION LEVEL REFERENCES... 97

74 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Introduction Annex 1 pays attention to policy measures for improving competitiveness. The document is divided into thee sections starting with short introduction. Three sub-chapters are devoted to measures for improving respectively: 1) infrastructure endowment and accessibility, 2) labor productivity, 3) productive environment. Sections describing EU policy measures are divided into sub-categories of measures. In the section on Policy measures for improving infrastructure endowment and accessibility three main groups of measures have been identified: Schemes of infrastructures. Capacity and quality of infrastructure. Financial instruments for infrastructure investments. The section on Policy measures for improving labor productivity consists of the review of measures in the range of: System of education. Training and adult learning. Improving efficiency of labour market. Productive environment is the most expanded category of competitiveness factors. This section includes the following groups of measures: Entrepreneurship environment. R&D. Technologies and innovation. Internationalization. Each of these chapters provides a detailed description of flagship measures while the overview of the measures can be found in main deliverable 4.1. The assessment of measures consists of the following fields: short measure description, expected results, and barriers and difficulties which have been identified.

75 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Policy measures for improving infrastructure endowment and accessibility 2.1 European schemes of infrastructure Trans-European Transport Network (TEN-T) Policies impacted: transport policy, cohesion policy Stakeholders: EU authorities, governments of all levels, Member States, users, transport operators, private investors Level on which measure could be adopted: international, national Policy goals to be achieved: better accessibility, territorial cohesion, supporting mobility, improving EU global competitiveness Measure description: Transport infrastructure has been for a long time and to a large extent still remains the cornerstone of the regional development policy (Crescenzi and Rodríguez-Pose, 2012). The European transport infrastructure effort has taken many forms and guises. Most of it can be considered as part of the European Spatial Development Perspective (ESPD, 1999). Trans-European transport network (TEN-T) policy is one of the EU policies aimed at provision of the infrastructure needed for the internal market to function smoothly and for fulfilment of the objectives previously listed in the Lisbon Agenda and now present in the strategy Europe It also sets out to help ensure accessibility and boost economic, social and territorial cohesion. It supports every EU citizen's right to move freely within the territory of the Member States. Furthermore, it integrates environmental protection requirements with a view to promoting sustainable development (European Commission 2009b). The Trans-European transport network (TEN-T) policy has been developed since the mid 80 s of XX century. The first support framework was set up in 1990, leading to the insertion of trans-european networks in the Maastricht Treaty (1992) and the adoption of a list of 14 major projects at the European Council in Essen in The first Guidelines defining the TEN-T policy and infrastructure planning were adopted in In 2004, a thorough revision of the Guidelines took into account the EU enlargement and the expected changes in traffic flows. The list of priority projects was extended to 30 in order to cover the 12 New Member States. Apart from these 30 priority projects, which are declared to be of "European interest", the Guidelines include detailed maps of projects for each Member State for each transport modes. All these are declared to be "projects of common interest". The TEN-T Guidelines are linked with instruments to facilitate the implementation of projects identified as being of common interest. These are: a) Various financial instruments based on the relevant legislation, including the TEN Financial Regulation and the Cohesion Fund, ERDF and loans from the European Investment Bank. b) Non-financial instruments, such as coordination initiatives taken by the Commission. Expected results: EU has placed huge emphasis on infrastructure investment, in general, and, especially, on transport infrastructure as a means to bring about territorial cohesion, reduce economic disparities, and promote economic development and growth. Europe's economic growth and the creation of jobs also depend on its international competitiveness, which needs to be supported by good transport connections with other parts of the world. Good connections to all of Europe's immediate neighbours, are furthermore vital from an economic, political and security point of view. The TEN-T program is an important element of the European initiative for growth. The network should: Ensure the sustainable mobility of people and goods within an area without internal frontiers under the best possible social and safety conditions, while helping to achieve the Community's objectives, particularly in regard to the environment and competition, and contribute to strengthening of economic and social cohesion. Offer users high-quality infrastructure on acceptable economic terms. Include all modes of transport, taking account of their comparative advantages. Allow the optimal use of existing capacities.

76 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 76 Be, insofar as possible, interoperable within modes of transport and encourage intermodality between different modes of transport. Be, insofar as possible, economically viable. Cover the whole territory of the Member States so as to facilitate access in general, link island, landlocked and peripheral regions to the central regions and interlink without bottlenecks the major conurbations and regions of the Community, be capable of being connected to the networks of the European Free Trade Association (EFTA) States, the countries of Central and Eastern Europe and the Mediterranean countries, while at the same time promoting interoperability and access to these networks, insofar as this proves to be in the Community's interest. Barriers and difficulties: Financial barriers - so far, the instruments available have not been sufficient to deliver full completion of projects of common interest within the timeframe agreed in the TEN-T Guidelines. Responsibility for completing the large numbers of projects concerned rests almost entirely with the Member States, whose investment decisions are essentially driven by national objectives. Investment efforts by Member States on their respective territories are mostly seen as national investments rather than as contributions to a Community objective. The situation has been different with priority projects, which have been at the centre of Community efforts both financially and in terms of coordination. Although the Community financial resources available are still not sufficient to meet the needs of these projects in full, action directed towards more limited and commonly agreed objectives has been far more effective and visible. Institutional barriers, especially in border-crossing parts of TEN-T - there is no deep co-ordination between institutions, especially between cross-border regions authorities. There is no spatial planning at European level. Reviewing TEN-T policy with the central question of how to shape the future multi-modal network and how to ensure timely completion requires a sophisticated combination, at the different levels involved, of planning approaches, implementation capacities and know-how. While duly respecting Member States' sovereign rights for projects concerning their territories, the increasing complexity, innovative nature and geographical scope of the tasks at stake also call for a strong Community role. Trans-European Energy Networks (TEN-E) Policies impacted: energy policy Stakeholders: EU authorities, governments of all levels, Member States, users, transport operators, enterprises Level on which measure could be adopted: international, national Policy goals to be achieved: ensuring security of supply of energy, improving EU global competitiveness Measure description: The interconnection, interoperability and development of trans-european networks for transporting electricity and gas are essential for the effective operation of the internal energy market in particular and the internal market in general. The main aim of TEN-E is to ensure users access to higher-quality services and a wider choice as a result of the diversification of energy sources, at more competitive prices. TEN-E also play a crucial role in ensuring the security and diversification of supply. Interoperability with the energy networks of third countries (accession and candidate countries) is also essential. In the implementation of this measure a particular attention should be given to projects of European interest that contribute to the development of the network to strengthen economic and social cohesion by reducing the isolation of the less-favoured and island regions of the Union and to the optimisation of the capacity of the network and the integration of the internal energy market, in particular concerning cross-border sections. Expected results: This measure will encourage the effective operation and development of the internal market, reinforce the security of supplies and the diversification of energy suppliers and routes, facilitate the development and reduce the isolation of less-favoured regions, contribute to sustainable development and protection of the environment, inter alia by involving renewable energies. Special results will be expected: For both electricity and gas networks: Adapting and developing the energy networks in support of the operation of the internal energy market and, in particular, solving the problems of bottlenecks especially transfrontier bottlenecks,

77 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 77 congestion and missing links, and taking account of the needs arising from the functioning of the internal market for electricity and natural gas and the enlargement of the European Union. Establishing energy networks in island, isolated, peripheral and ultra peripheral regions while promoting the diversification of energy sources and the use of renewable energy sources, together with the connection of those networks, where necessary. For electricity networks Adapting and developing networks to facilitate the integration and connection of renewable energy production. Ensuring interoperability of electricity networks within the European Union with those in the accession and candidate countries and other countries in Europe and in the Mediterranean and Black Sea basins. For gas networks Developing natural gas networks in order to meet the EU's natural gas consumption needs and to control its natural gas supply systems. Ensuring interoperability of natural gas networks within the EU and with those in accession and candidate countries and other countries in Europe, in the Mediterranean Sea, Black Sea and Caspian Sea basins, as well as in the Middle East and the Gulf regions, and diversification of natural gas sources and supply routes. Furthermore, it will promote the interconnection, interoperability and development of trans-european energy networks and access to such networks in accordance with current EU law. Barriers and difficulties: The internal energy market is still fragmented and has not achieved its potential for transparency, accessibility and choice. Companies have grown beyond national borders, but their development is still hampered by a host of different national rules and practices. There are still many barriers to open and fair competition. The infrastructures are increasingly operated at the limit of their physical capacities which hampers the integration of additional energy resources necessary for market growth. Trans-European Telecommunications Networks - eten Policies impacted: it is part of the information society technologies research programme. Stakeholders: EU authorities, governments of all levels, Member States, users, Level on which measure could be adopted: international, national, regional and local. Policy goals to be achieved: integration into the information society. Measure description: The Trans-European telecommunications networks (known as TEN Telecom or eten Programme - eten) was initially set up to support the interconnection of telecommunications infrastructure networks, and later in the area of establishment and development of interoperable services and applications and access to them. The function of eten is to create a modern and effective infrastructure to link European regions and national networks. They are essential to proper operation of the common market, since they ensure free movement of goods, persons and services. Expected results: The deployment and enhancement of trans-european telecommunication networks (broadband networks and digital service infrastructures) shall contribute to fostering economic growth, creating jobs and achieving a vibrant digital single market. In particular, their deployment will grant faster access to the internet, bring about information technology-enabled improvements in daily life for citizens, including children and young persons, businesses and governments, increase interoperability and facilitate the alignment or convergence to commonly agreed standards. Investment in these networks will bring about more competition and more innovation in the economy, will deliver more efficient and effective public services, contribute to the EU goals on a low carbon economy and to the overall EU competitiveness and productivity. Barriers and difficulties: Investment in broadband infrastructure has been undertaken predominantly by private investors and it is expected that this will remain the case. However, the achievement of the Digital Agenda targets will require investment in areas for which there is not a clear business case or where a business case may need to be enhanced within the time frame of the targets.

78 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Increasing capacity and quality of infrastructure Intelligent transport systems (ITS) Policies impacted: transport policy, environmental policy, research policy Stakeholders: EU transport sector, society, enterprises, DG Mobility and Transport, DG Information Society and Media, DG Research, DG Enterprise and Industry and DG Climate Action Level on which measure could be adopted: national, regional, local Policy goals to be achieved: energy efficiency, safety Measure description: Intelligent transport systems (ITS) are applicable to all modes of transport as they help to optimise the individual modes and make for seamless connection. ITS has potential to enhance the efficiency of operations, to improve safety, security and users comfort. The ITS systems form the bridge between the hard infrastructure and the increasingly intelligent vehicles making use of it. But most importantly, ITS is also key to achieving major Community policy objectives in transport and beyond, in the field of safety (better informed and supported users), security (tracing, identification), efficiency of operations, tackling congestion (effective demand management and cross-modal network balancing through pricing, implementation of legal provisions) and fighting climate change (energy efficiency, eco-driving, green corridors and a more efficient and effective European co-modal transport system through e-freight, e-maritime). In the air sector, for example, a European network system approach is essential if the targets of efficient, safe and environmentally sustainable traffic performance are to be achieved. As regards intelligent transport systems TEN-T policy has helped in particular to prepare the various modal intelligent transport systems (ITS) projects such as European Railways Traffic Management System (ERTMS), the Single European Sky Air Traffic Management Research (SESAR), Vessel Traffic Management and River Information Services. Expected results: The potential of ITS applications has encouraged the European Commission (EC) to refer to them in its 2006 mid-term review of the Transport White Paper. Innovation for more efficiency and sustainability is a main objective. Intelligent Transport Systems can significantly contribute to a cleaner, safer and more efficient transport system. Barriers and difficulties: While advanced ITS are used in many places throughout Europe, regional and national ITS services still form a fragmented patchwork. There have been significant barriers to the effective deployment of ITS across Europe, with a lack of standardisation, of interoperability between modes and countries and of cross-border continuity of services hindering broader ITS uptake and market penetration. Because of that the Commission adopted on 16 December 2008 an Action Plan for the Deployment of Intelligent Transport Systems in Europe (COM (2008)886). Whereas the Action Plan outlines six Priority Areas and the related measures for speeding up the deployment and interoperability of ITS in road transport across the EU: the provision of EU-wide multimodal travel information services, the provision of EU-wide real-time traffic information services, data and procedures for the provision, where possible, of road safety related minimum universal traffic information free of charge to users, the harmonised provision for an interoperable EU-wide ecall, the provision of information services for safe and secure parking places for trucks and commercial vehicles, 2.3 Financial instruments for infrastructure investments TEN budget line Policies impacted: transport policy (TEN-T Programme), energy policy (TEN-E Programme) Stakeholders: Member States, investors Level on which measure could be adopted: international, national Policy goals to be achieved: completion of TEN-T and TEN-E projects Measure description: EU budget includes a budget line for Trans-European Networks (TENs) which covers both TEN-T (transport) and TEN-E (energy). These programmes are addressed to all Member States. In the programming period , financing of trans-european networks is governed by Regulation (EC) 680/2007 of the European

79 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 79 Parliament and of the Council of 20 June 2007 laying down general rules for granting Community financial aid in the field of trans-european transport and energy networks. According to it, Community financial aid for projects of common interest can take one or more of the following forms: Grants for studies or works. In the field of transport, grants for works in the framework of availability payment schemes. Interest rate rebates on loans given by the EIB or other public or private financial institutions. Financial contribution to the provisioning and capital allocation for guarantees to be issued by the EIB on its own resources under the loan guarantee instrument. Risk capital participation for investment funds or comparable financial undertakings with a priority focus on providing risk capital for trans-european network projects and involving substantial private sector investment. Financial contribution to the project-related activities of joint undertakings. European Commission establishes multiannual and annual work programmes for trans-european transport and energy networks. The financial aid from this instrument for the period 2007 to 2013 amounts to EUR million, of which majority - EUR million is dedicated to TEN-T and only EUR 155 million to TEN-E. Past and current TEN-T policy has allocated a large part of the available resources to high speed rail and the preparation of major projects in the field of intelligent transport systems. This has greatly helped to advance cross-border projects and to remove bottlenecks, as well as to prepare the ground for new generation traffic management systems that boost the efficiency of infrastructure use. Under the TEN-E framework, the EC has to date focused its financial support on funding feasibility studies. The grants under the TEN-E framework focus on electrical energy infrastructure projects: 58% of funds in the period 2007 to 2009 were allocated to the electricity sector and 42% to the natural gas sector. Co-financing studies (by up to 50% per study) accounted for 65% of the total amount spent. Some 35% was allocated to co-financing works (Roland Berger Strategy Consultants, 2011). Expected results: It is expected that the granting of support will contribute to the timely and efficient completion of a number of TEN-T projects, will support the realisation of a robust and resource efficient European transport system, and will contribute to addressing climate change. The financing of projects will contribute to the achievement of important transport policy objectives, such as (European Commission 2013a): Establishing major interoperable transport axes interconnecting national networks and facilitating the functioning of the internal market; the optimal use of existing infrastructure capacities. Improving the safety and reliability of the network. Enhancing accessibility of peripheral areas of the EU. Facilitating congestion relief on rail infrastructure and more balanced modal distribution. Savings in terms of the environmental effects of transport, in particular contributing to addressing climate change decongesting certain roads, as a consequence of redistribution between modes. Financial support of TEN-E programme should positively contribute to the development and operation of the internal energy market. The eleven completed cross-border electricity projects accelerated by TEN-E policy framework have permitted increased energy trade and more competition, contributing to the convergence of average energy prices and stimulating market integration and thus the development of a true internal energy market. Barriers and difficulties: The major problems hindering the successful implementation of the TEN-T, TEN-E are to a large degree interrelated with insufficient budget to complete the infrastructure networks within the originally foreseen time frame. The lack of funding makes it necessary to seek private financing to realise the TEN-T projects, and this is difficult (relatively low private sector participation). Cohesion Fund Policies impacted: cohesion policy/regional policy Stakeholders: Member States whose GNI per inhabitant is less than 90% of the Community average (12 NMS, Greece, Portugal and Spain) Level on which measure could be adopted: international, national Policy goals to be achieved: reducing disparities between EU countries in level of development and improvement of their competitiveness Measure description:

80 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 80 Cohesion Fund (CF) is the instrument which has been, since 1994, helping the Member States to reduce the economic and social differences and stabilise the economy. The Cohesion Fund as an instrument of the economic and social cohesion policy provides financial contribution to the projects in the field of environment and trans-european transport infrastructure networks. Cohesion Fund is very important source of transport infrastructure investments in less developed European countries. Investment projects must be in the trans- European transport network, or to provide access to it, significantly improving the conditions of the transit country and the availability of particular regions. Expected results: It is expected that the granting of support will contribute to the timely and efficient completion of a number of TEN-T projects, will support the realisation of a robust and resource efficient European transport system, and will contribute to addressing climate change. It is also expected that higher economic, social and territorial cohesion will be achieved. Barriers and difficulties: Some countries have problem with absorption of funds. This is mainly due to poor coordination between relevant authorities and lack of experience in regulatory, technological and state aid fields. European Regional Development Fund Policies impacted: cohesion policy/regional policy Stakeholders: all European regions, but more of funds is designated for Convergence regions, where GDP per inhabitant is less than 75% of the Community average Level on which measure could be adopted: international, national, regional and local Policy goals to be achieved: reducing disparities between EU regions and improvement of their competitiveness Measure description: The ERDF is an instrument of EU regional policy and aims to strengthen economic, social and territorial cohesion in the European Union by correcting imbalances between its regions through support for the development and structural adjustment of regional economies, including the conversion of declining industrial regions and regions lagging behind, and support for cross-border, transnational and interregional cooperation. The ERDF contributes towards the financing of: (a) productive investment which contributes to creating and safeguarding sustainable jobs, primarily through direct aid to investment primarily in small and medium-sized enterprises (SMEs); (b) investment in infrastructure; (c) development of endogenous potential by-measures which support regional and local development. These measures include support for and services to enterprises, in particular SMEs, creation and development of financing instruments such as venture capital, loan and guarantee funds, local development funds, interest subsidies, networking, cooperation and exchange of experience between regions, towns, and relevant social, economic and environmental actors. ERDF co-finances both TEN-T sections and connecting secondary and tertiary nodes to TEN-T infrastructure. In energy sector it helps to modern infrastructure to meet goal of sustainable development. ERDF is important instrument of financing ICT infrastructure in less developed regions Expected results: It is expected that accessibility of many regions will be improved and they will be better integrate with all Community, efficiency and competitiveness of firm, sectors and territorial units will be improved. Barriers and difficulties: Some countries have problem with absorption of funds. For example, recent figures suggest that funds earmarked for development of broadband internet infrastructure are not being absorbed quickly enough, particularly in Poland, Romania, Bulgaria, Greece and Latvia. This is mainly due to poor coordination between relevant authorities and lack of experience in regulatory, technological and state aid fields. The European Energy Programme for Recovery Policies impacted: energy policy Stakeholders: Transmission System Operators (TSO s) Level on which measure could be adopted: national Policy goals to be achieved: progress towards EU energy and climate policy objectives Measure description: In the context of the recent economic crisis, the European Commission launched a financial package dedicated

81 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 81 to the support of investments in the energy sector. The European Energy Programme for Recovery (EEPR) provides financial support to selected highly strategic projects in the energy sector. EEPR was establish by Regulation (EC) No 663/2009 of the European Parliament and of the Council of 13 July 2009 establishing a programme to aid economic recovery by granting Community financial assistance to projects in the field of energy. Budget for the implementation of the programme for 2009 and 2010 amount EUR million (European Parliament 2009). The programme had to help the European Union to progress towards its energy and climate policy objectives, such as: security and diversification of energy supply, completion and smooth operation of the internal energy market and reduction of greenhouse gas emissions. The goal was to finance measures that rapidly addressed both the economic crisis and energy policy objectives. The emphasis was on mature projects capable of making efficient and effective use of significant amounts of financial assistance by the end of 2010 and of catalysing significant amounts of investment from other sources, including from the European Investment Bank (Deloitte, 2011). Most of the budget available was allocated to 59 projects in the following sub-programmes: gas infrastructure ( 1363 million); electricity infrastructure ( 904 million); offshore wind energy ( 565 million) and carbon capture and storage ( 1000 million). Overall, by the end of 2010, grant decisions and grant agreements had been made for a total amount of 3833 million i.e. 96.3% of the total EEPR budget. An amount of 146 million that could not be committed to projects in these sectors by the deadline of 31 December 2010 was reallocated to a new financial facility, the European Energy Efficiency Fund, focusing on energy efficiency and renewable energy investments. The EEEF will invest in energy saving, energy efficiency and renewable energy projects, particularly in urban settings, achieving at least 20% energy saving or GHG/CO2 emission reduction. The fund will offer a wide range of financial products such as senior and junior loans, guarantees or equity participation to local, regional and (where justified) national public authorities to promote sustainable energy investments (European Commission 2013e). Expected results: EEPR grants should help to reduce the amount of equity financing required for specific projects financing which is usually difficult to obtain due to the risk associated with the development and construction phase. In this way, the grants will help companies face the challenge of obtaining further debt. Barriers and difficulties: Many investments supported from EEPR are delayed because of technical, regulatory and commercial difficulties. The current low carbon price under the Emissions Trading System has made investment unattractive in the short- and medium term for the private sector. The Connecting Europe Facility (CEF) Policies impacted: transport policy, energy policy, information society policy Stakeholders: Member States, investors Level on which measure could be adopted: international, national Policy goals to be achieved: completion of core transport, energy and high-speed internet networks Measure description: Within the next financial framework ( ) the European Commission proposed the establishment of the Connecting Europe Facility, as part of its EU budget proposal for the next multi-annual financial framework. The CEF is a 50 billion plan for strategic infrastructure investment in transport, energy and broadband infrastructures, removing bottlenecks and filling in the missing links in the EU's Single Market (European Commission 2012c). Table 1 Connecting Europe Facility in figures 50 billion (total) CEF Transport CEF Digital CEF Energy 31.7 billion (transport infrastructure) CEF billion 9.1 billion (energy 10 billion (broadband & infrastructure) 21.7 billion (earmarked from digital services) the Cohesion Fund) Source: (European Commission 2013c). CEF investments are intended to act as a catalyst to attract further funding from the private sector and other public sector actors through a number of financial risk-sharing instruments, including special lending, guarantees and equity investments. These instruments aim to give credibility to infrastructure projects and to

82 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 82 lower their risk profiles. The goal is to offer an alternative to traditional grant funding and to plug financing gaps for strategic infrastructure investments (European Commission 2012c). The use of funds will be organised over the 7 years multi-annual financial perspective by means of multiannual and annual work programmes, to be adopted by the Commission after the approval of the Member States under the examination procedure. The support for TEN-T projects will take mainly the form of grants. Non-refundable EU contributions are necessary to help develop projects of important European added value, but for which the available national, regional public and private resources are not sufficient. Grants may amount to up to 50% of the total project implementation costs, depending on the type of project. Direct subsidies for TENT-E, will be applied to fill in the gaps in commercial viability of the projects that are particularly relevant for Europe. The use of grants to support construction costs of will be strictly restricted to situations where regulatory solutions prove insufficient and financial instruments cannot help adequately. In contrast to the domains of transport and energy, CEF Digital will deploy predominantly financial instruments to roll-out the high-speed network throughout Europe, rather than focusing on grants. Grants, however, will be used for technical assistance and for the development of Digital Services Expected results: CEF investments will have a significant economic impact through its support to increasing the accessibility and improving the efficiency of network industries. Improved infrastructure connections will contribute to reducing transport costs. Improved energy transmission infrastructure by 2020 will translate into at least 0.42 percentage points of GDP increase in the EU, while just the deployment of e-procurement, an EU-wide digital service, could lead to an estimated minimum 50 billion euros of savings (European Commission 2012c). High speed internet will enable businesses, especially small ones, to remain competitive and will allow consumers to benefit from many advanced online services that will improve their quality of life. High speed broadband investments create jobs in the short term as they are installed, but the transformative impact is in their boost to productivity, in the modernisation of public administration, and in the improvements to the quality of life by tackling the exclusion of isolated communities. These investments generate a higher sustainable level of employment in all sectors of the economy. The investments in high speed internet will close the gap with Europe s leading competitors (e.g. Japan, Korea and China). Barriers and difficulties: The award of financial support in the form of grants will be done by the Commission via a competitive process. Calls for projects will be organised regularly for both the annual and the multi-annual work programmes. It will be difficult for smaller countries to have a project big enough to benefit. 3. Policy measures for improving labour productivity 3.1 Changes in education system European Framework for Key Competences Policies impacted: education policy, cohesion policy, enterprise policy Stakeholders: Member States, institutions of higher education Level on which measure could be adopted: international, national, regional, local Policy goals to be achieved: developing skills for the knowledge society, decreasing unemployment, developing lifelong learning, with a particular focus on active and preventive measures for the unemployed and inactive persons Measure description: The European Framework for Key Competences for Lifelong Learning identifies and defines eight key competences (European Parliament 2006): Communication in the mother tongue. Communication in foreign languages. Mathematical competence and basic competences in science and technology. Digital competence. Learning to learn. Social and civic competences. Sense of initiative and entrepreneurship.

83 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 83 Cultural awareness and expression. Adequate skills and competence are crucial in order to participate in working life, but also in social and civic life. They are the basis of community cohesion, based on democracy, mutual understanding, respect for diversity and active citizenship. Creativity, openness and interpersonal competences are also necessary for personal fulfilment and happiness (Gordon et al 2012). People s competences also contribute to their motivation and job satisfaction in the workplace, thereby affecting the quality of their work. Expected results: Developing skills for the knowledge society and specific objectives for promoting language learning, developing entrepreneurship and the overall need to enhance the European dimension in education. Increasing mobility of learners and workers. Increasing access to, and participation in, lifelong learning. Reducing barriers between education and training providers e.g. between higher education and vocational education and training, which may operate in isolation from each other. Increasing transparency of qualifications awarded outside the national systems, for example by sectors and multinational companies. Barriers and difficulties: Limits of information. Differentiation of the scope of the key competences as they are defined and used in different countries; for example similar terms (once translated into English for the purposes of comparative work) may not cover the same content and approach. Differentiation in the learning environments in an educational setting. Financial barrier - differentiation in the using technology enhanced learning environments as a result of costs involved (because of the costs poorer schools and students can end up being disadvantaged). Social resistance against changes. Bologna Process Policies impacted: education policy, cohesion policy Stakeholders: Member States, institutions of higher education Level on which measure could be adopted: international, national Policy goals to be achieved: improvement of transparency between higher education systems, facilitation of recognition of degrees and academic qualifications, mobility, and exchanges between institutions Measure description: The Bologna Process is an important driver of changes and reforms in European higher education, establishing the three-cycle framework, recognition of qualifications, transparency in quality assurance and credit-based systems based on learning outcomes. Launched in 1999 by the Ministers of Education and university leaders of 29 countries, the Bologna Process aims to create a European Higher Education Area (EHEA) by Taking part in the Bologna Process is a voluntary decision made by each country and its higher education community to endorse the principles underlined in the European Higher Education Area. The Bologna Process does not aim to harmonise national educational systems but rather to provide tools to connect them. The intention is to allow the diversity of national systems and universities to be maintained while the European Higher Education Area improves transparency between higher education systems, as well as implements tools to facilitate recognition of degrees and academic qualifications, mobility, and exchanges between institutions (Benelux Bologna Secretariat 2009). The reforms are based on ten simple objectives which governments and institutions are currently implementing. Most importantly, all participating countries have agreed on a comparable three cycle degree system for undergraduates (Bachelor degrees) and graduates (Master and PhD degrees). Expected results: Improving transparency between higher education systems. Improving recognition of degrees and academic qualifications. Strengthening cooperation between institutions of higher education. Strengthening of the competitiveness and attractiveness of European higher education. Fostering student mobility and employability through the introduction of a system based on undergraduate and postgraduate studies with easily readable programmes and degrees. Shaping of a future professional career in accordance with the demands of the labour market.

84 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 84 By 2020 at least 40 % of year olds should have attained higher education (DG for Education and Culture 2010). Barriers and difficulties: Lack of financial resources. Taking part in the Bologna Process is voluntary. Transnational learning mobility for young people Policies impacted: education policy, cohesion policy, enterprise policy Stakeholders: institutions of higher education, students Level on which measure could be adopted: international Policy goals to be achieved: to increase mobility and exchanges between institutions of higher education, strengthening their future employability and acquire new professional competences Measure description: Learning mobility is an important way in which young people can strengthen their future employability and acquire new professional competences. It helps them to access new knowledge and develop new linguistic and intercultural competences. Europeans who are mobile as young learners are more likely to be mobile as workers later in life (European Commission 2010b). The EU has a long experience of supporting learning mobility through various programmes and initiatives. Mobility and exchanges of higher education staff and students is supported under different programmes (Comenius, Erasmus, Leonardo da Vinci, Grundtvig, Tempus). In addition, the European Commission has helped to develop a number of tools to facilitate mobility, such as the Europass, the European Credit Transfer and Accumulation System (ECTS, for higher education), the Diploma Supplement, the European Qualifications Framework for Lifelong Learning, the European Credit System for Vocational Education and Training (ECVET), Youthpass, EURAXESS (European Commission 2009a). The Erasmus Programme is the best known programme of transnational learning mobility for young people in EU. It was incorporated into the Socrates programme established by the European Commission in 1994 (actually it is part of Lifelong Learning Programme). Erasmus is a program for universities, their students and staff. To promote international cooperation in higher education institutions enables student mobility abroad for part of their studies and practice, promotes the mobility of university staff, provides universities with numerous opportunities to participate in projects with foreign partners. In some of these actions may also attend other institutions, organizations or companies that collaborate with universities (European Commission 2010b). Taking part in the Erasmus Programme is a voluntary decision made by each country and its higher education community. Expected results: At least 20 % of students graduating in the European Higher Education Area should have had a study or training period abroad by Increasing mobility, and exchanges between institutions of higher education. Creation of conditions conducive to the mobility of students. Possibility of spending part of the study period at a selected European university. Shaping of a future professional career in accordance with the demands of the labour market. Barriers and difficulties: Limited financial resources. Poor knowledge of foreign languages. Different intercultural condition.

85 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Investments in human capital - training and adult learning Vocational education and training Policies impacted: employment policy, education policy, enterprise policy Stakeholders: education institution at all levels, public authorities at all levels, enterprises Level on which measure could be adopted: national, regional, local Policy goals to be achieved: equip young learners with skills directly relevant to evolving labour markets and adults must be able to update their skills and competences Measure description: Vocational education and training (VET) must play a dual role (European Commission 2010a): Of a tool to help meet Europe's immediate and future skills needs. Of a measure to reduce the social impact of and facilitate recovery from the crisis. Forecasts of future skills needs show a greater demand for medium and high level qualifications up to The continuing ICT-driven evolution of products and processes, coupled with the need for a low-carbon economy as well as population ageing will mean that jobs and social structures will change: education and training, including VET, must adapt accordingly. This adjustment is implemented in two forms (European Commission 2010a): Initial vocational education and training (IVET) must equip young learners with skills directly relevant to evolving labour markets, such as e-skills, and highly developed key competences; such as digital and media literacy to achieve digital competence. Continuing vocational education and training (CVET) for adults, to help them to update their skills and competences. CVET includes a range of vocationally-oriented training provided by a variety of training providers. IVET takes place within relatively regulated frameworks while CVET is often unregulated. Expected result By 2020 reducing the share of early school leavers to 10% in both general education and VET. Implementation of IVET as an attractive learning option with high relevance to labour market needs and pathways to higher education. Easily accessible CVET for people in different life situations facilitating skills development and career changes. Implementation of flexible systems based on the recognition of learning outcomes, including diplomas, and supporting individual learning pathways. Strengthened cross-border mobility as an integral part of VET practices. Barriers and difficulties: Integration of some groups, such as disabled people or people from migrant backgrounds might require additional support, for instance validation of non-formal and informal learning and specific language courses for migrants. Adult learning Policies impacted: employment policy, cohesion policy, education policy, Stakeholders: institutions of higher education, public authorities at all levels, enterprises Level on which measure could be adopted: national, regional, local Policy goals to be achieved: improvement in particular the low-skilled and older workers ability in adaptation to changes in the labour market Measure description: Lifelong learning and skills development are recognized as key elements in response to the current economic crisis, to demographic ageing and to the competitiveness of European Union. Adult learning provides a means of up-skilling or reskilling adults affected by unemployment, restructuring and career transitions, as well as makes an important contribution to social inclusion, active citizenship and personal development. There is a need for adults regularly to enhance their personal and professional skills and competences. Given the current instability in the labour market and the need to reduce the risk of social exclusion, this applies

86 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 86 particularly to the low-skilled, the low-qualified and immigrants. However, all adults (including the highly qualified) can benefit significantly from lifelong learning (Council of the European Union 2011). Expected results: Increasing the participation in adult learning by 2020 should achieve 15% of the year-old population (Council of the European Union 2011). Stimulating demand, and developing comprehensive and easily accessible information and guidance systems, complemented by effective outreach strategies aimed at raising awareness and motivation among potential learners, with specific focus on disadvantaged groups, early school leavers, young people not in education, employment or training (NEETs), low-qualified adults, particularly those with literacy difficulties, and followed up with second-chance opportunities leading to a recognised EQF level qualification. Promoting the engagement of employers in workplace-based learning, with a view to developing both job-specific skills and broader skills, including by means of more flexible work schedules. Promoting flexible learning pathways for adults, including broader access to higher education for those lacking mainstream access qualifications and diversifying the spectrum of adult learningopportunities offered by higher education institutions. Putting in place fully functional systems for validating non-formal and informal learning and promoting their use by adults of all ages and at all qualification levels, as well as by enterprises and other organisations. Improving the quality and efficiency of education and training. Barriers and difficulties: Low motivation. Lack of care facilities to help women and men combine family and work responsibilities with learning. Lack of financial resources. Reducing those barriers needs also ensuring a viable and transparent system for the funding of adult learning, based on shared responsibility with a high level of public commitment to the sector and support for those who cannot pay. 3.3 Increasing labour market efficiency Concept of flexicurity Policies impacted: employment policy, education policy, cohesion policy, enterprises policy, social policy Stakeholders: public authorities at all levels, institutions of higher education, enterprises Level on which measure could be adopted: national, regional, local Policy goals to be achieved: to combine employment and income security with flexibility in labour markets, work organisation and labour relations Measure description: The labour markets in the EU Member States significantly differ from each other, both in terms of policy and of outcome. The objective of flexicurity strategies focus on measures that offer sufficient flexibility on the labour market while at the same time offering sufficient security, regardless of whether this flexibility or security (job, income and employment security), is demanded by employees or by employers (Mandl and Celikel-Esser 2012). The European Commission presented Flexicurity as an integrated approach that combines four main components (European Commission 2007): Flexible and reliable contractual arrangements through modern labour laws, collective agreements and work organisation. Comprehensive lifelong learning strategies to ensure enduring adaptability and employability of workers. Effective active labour market policies to assist the labour force to cope with rapid change and to reduce and ease the transition from unemployment to (new) jobs. Modern social security systems that provide sufficient income support, encourage employment and facilitate labour market mobility. The concept of flexicurity pathways suggests different roads countries can take to improve their labour

87 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 87 markets, based on different challenges, priorities and possibilities. The idea of pathways signals that the EU is aware that different countries face different challenges (Bekker and Wilthagen 2008). Expected results: EU would like to increase the employment rate in line with the target of achieving a 75% employment rate for the working-age population (20-64 years), including the greater involvement of women, older workers and the better integration of migrants in the work force. Developing lifelong learning, with a particular focus on active and preventive measures for the unemployed and inactive persons. Imply a balance between rights and responsibilities for all actors of the labour market (employers, workers, job seekers, public authorities). Offering equal opportunities for vulnerable groups including women, migrants, older workers, the young and the disabled and should offer possibilities to combine work with family life (Mandl and Celikel-Esser 2012). Flexibility can benefit both workers and employers, as long as workers can turn to lifelong learning, job-search support, re-skilling programmes and income support while they are unemployed or looking for a different job. Barriers and difficulties: Difficulties of transferability good practice between countries - due to the complexity of many flexicurity arrangements and the specific historical, social and political backgrounds of country, simple transfers of institutions or policies are rarely feasible. Political barrier-inherent in the principal policy actors ability to impose or negotiate change. Political institutional capacity in the form of mutual trust between the social partners and the government. Flexicurity requires a well-developed social dialogue and climate of trust between social partners and public authorities. Differentiation in social models between countries. Labour mobility Policies impacted: employment policy, home affair policy, external policy Stakeholders: enterprises, workforce Level on which measure could be adopted: international, regional Policy goals to be achieved: increasing mobility; establishing a framework for legal migration. Measure description: The free movement of workers is defined as one of the four fundamental freedoms of the European Union. Mobility is an important part of the flexibility of labour force. To overcome the problems of lacking mobility in the EU labour markets, some initiatives have to be taken to mobilize the domestic market. Mutual recognition of professional qualifications and the full and transparent portability of social entitlements are not the only steps that should belong to the political agenda. The creation of a European online job exchange platform through a crosslinking of national agencies may help to stimulate mobility as well as an Europeanization of education policy programs. Obligatory stays abroad in the educational sector and a strong promotion of exchange programs will certainly be effective (Zimmermann 2009). Despite the current economic crisis and unemployment rates, European Countries are facing labour market shortages and vacancies that cannot be filled by the domestic workforce in specific sectors, e.g. in health, science and technology. Migration is already of key importance in the EU, with net migration contributing 0,9 million people or 62% of total population growth in 2010 (European Commission 2011c). All indicators show that some of the additional and specific skills needed in the future could be found only outside the EU. A crucial role in successfully integrating migrants into society and the labour market play education and training particularly within the system of lifelong learning. Recent efforts to improve geographical mobility within and outside of EU focuses on the removal of legal and administrative obstacles (e.g. in the area of recognition of qualifications and portability of supplementary pension rights) (European Commission 2011c). The EU Commission has since then recognized and advocated more mobility within Europe proposing a blue card for highly qualified skilled workers. Expected results: Giving greater access to learning or employment opportunities in different countries.

88 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 88 Encouraging greater mobility for individuals, businesses and other organisations. Decreasing the level of unemployment. Establishing the framework for legal migration. Barriers and difficulties: Legal and administrative barriers. Financial barrier. Intercultural conditions. 4. Policy measures for improving productive environment 4.1 Improving entrepreneurship environment Improved access to financial means for SME s Policies impacted: enterprise policy, single market policy. Stakeholders: EU based SME s, EU financial institutions. Level on which measure could be adopted: national, regional. Policy goals to be achieved: fostering SME s and entrepreneurship. Measure description: This measure is directed at improvement of starting conditions for European enterprises, especially for SME s. The recent research data shows that over 75% of the Europeans find it difficult to start own business due to financial constraint (European Investment Fund 2013). European financial market is poor in providing adequate instruments for start-ups. There is also a noticeable lack of supporting environment to let companies grow. This relates to equity as well as access to debt financing. In spite of the growing importance of alternative sources of debt financing, the majority of European SMEs still depend on bank credit. Furthermore, SMEs have a competitive disadvantage to big companies as regards the costs of financing. Provision of cheap and easy accessible funding for starting businesses through EU sponsored programmes and instruments could fill this gap. Expected results: Fostering the expansion of micro-credit across the EU. Enhanced usage of JEREMIE & JEREMIE like instruments. Speeding up action to facilitate the creation of a truly European venture capital market. Speeding up the development of mutual guarantee societies. Barriers and difficulties: Lack of EU funds to be channelled into this instrument. Need to attract national governments to participate financially. Relative reluctance of private capital to participate. Need for robust control and evaluation system in order to avoid financing of businesses which will likely fail. The European Action Plan on Modernising Company Law and Enhancing Corporate Governance Policies impacted: enterprise policy, cohesion policy. Stakeholders: EU based companies, EU and national legal authorities. Level on which measure could be adopted: national. Policy goals to be achieved: improving cross-border competitiveness. Measure description: In order to improve competitiveness of companies on EU and global level several changes in existing legal environment are necessary. Those measures should be aimed at creation of more flexible legal framework and realise principle of minimum regulation. The most relevant measures in this area could be introduced through adoption of the European Private Company Statute. Because EU enterprises are more and more frequently working across the national borders and are present on the whole internal market they should be subjected to similar regulations in all EU Member States. Principle of contractual freedom augmented by equal law and

89 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 89 soft-law would allow them to organise themselves into European groups or networks of companies and to form joint European enterprises. The projected common European company would be a limited liability company with excellent organisational flexibility, open to both natural and legal persons and adaptable to the needs of business leaders. Expected results: Removal of the current need for limited companies to reincorporate themselves in the corresponding legal form in all the EU member countries in which they want to trade. Removal of different national rules for the operation of a company which make day-to-day management more expensive. Accordingly to EU wide consultation on EPC 69% of EU companies finds this barrier important (EBTP 2007). Reduction of difficulties in dealing with different company law systems. Better trust in foreign legal forms in relation with business partners from other Member States. Barriers and difficulties: Limited support by national governments due to fear of lack of control over business sector and preference of national regulation (e.g. German mini-gmbh concept). Need to standardize regulation across differing legal systems of the EU Member States. Supporting new businesses in crucial lifecycle phases Policies impacted: enterprise policy, economy, finance and tax policies, and education policy. Stakeholders: EU based companies, national administrations. Level on which measure could be adopted: regional, national. Policy goals to be achieved: strengthening and supporting EU based enterprises. Measure description: Small and medium-sized enterprises (SMEs) are the main drivers of job creation, economic growth and social cohesion in Europe. They have local roots, provide local jobs but also exploit the benefits of globalisation. SMEs are the dominant category of business organisation in all EU countries with some 23 million enterprises (99.8%). Their share in total employment creation is at 81.6% and their contribution to the EU-GDP is up to 60% (Eurochambres 2013). Due to their impact on EU economy there is a need for adequate public policy to help them stay in business. This action includes measures aimed at supporting the cooperation between clusters and business networks and reinforcing the partnerships and capabilities of the Enterprise Europe Network. Additional action seemingly necessary are those oriented at strengthening of the rules prohibiting misleading marketing practices and better enforcement against such practices in cross-border cases. EU participation in cross-border education and training (e.g. Erasmus programme) Expected results: Making the administrative and tax authorities more customers (business entity) oriented. Possible changes in law (especially taxation) allowing for more favourable tax rules for companies experiencing problems. The option for owners of new enterprises to request adjustments of payment schedules for social contributions. Reducing regulatory burden. Abolishing of burdensome public document authentication requirements that enterprises must tackle to conduct cross-border business. Barriers and difficulties: Preference of national regulation by Member States governments. Unified taxation Policies impacted: enterprise policy, economy, finance and tax policies, single market policy. Stakeholders: EU based companies, national tax administrations. Level on which measure could be adopted: national, regional. Policy goals to be achieved: creating equal competitive environment. Measure description: Enterprises across EU should be facing the same taxation rules and similar rates. The difference in taxes across Member States could be considered as handicap instrument for some enterprises based at countries with lower rates and less complicated taxation systems.

90 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 90 Expected results: Tax coordination to ensure that inconsistencies in tax treatment do not lead to double taxation or other harmful tax practices that hampering cross-border businesses and cross-border venture capital investments. Reassessment of corporate income tax regimes to consider extending the statute of limitation of losses and deductions. Barriers and difficulties: Possible tax unification is opposed by governments believing that they could create more competitive environments thus attracting foreign investors. Governments oppose the idea of unified taxation due to the fear that they will have to increase/decrease tax rates exceeding socially acceptable levels in given country. Different Member States have different economic priorities: some may want low taxes to encourage enterprise while others want higher taxes to pay for welfare or healthcare. 4.2 Supporting R&D and innovation Science policy Policies impacted: research and innovation policy, energy policy, transport policy, environment policy, health and safety policy, information society policy. Stakeholders: the EU DG for Research and Innovation, national ministries (departments) of science and research, academia & research institutions, high-level R&D policy coordination councils, strategic committees identifying high technology opportunities, R&D societies and associations. Level on which measure could be adopted: international, national, regional. Policy goals to be achieved: establishment of the European Union as a leading knowledge-based economy, better use of research applications to benefit other policies, promotion of the role of science in modern societies. Measure description: Europe needs more scientists and more people skilled in science and technology in order to compete in the global arena. The thesis of the stimulant effects of scientific research on the competitiveness of the country business is quite often present in the subject literature. Scientific policy can influence competitiveness only indirectly, so it is difficult to describe and fix a close correlation between expenditure on science and research and the competitiveness of the sectors or regions. The relationship between instruments of the scientific research policy and the national competitiveness are included at least two major links: (a) influence of science policy on the results of the research, (b) link between the research results and competitiveness of products and services (their quality and prices). In the communication of 2000 (European Commission 2000) the current level of organisation of the European system of science and research was rated highly critically: fragmentation, isolation and compartmentalisation of national research efforts and systems and the disparity of regulatory and administrative systems were the main deficiencies. In order to change this picture European scientific policy has to mobilise: resources (financial, human, and organisational) through innovation orientated programmes and projects; information (road-mapping, technology diffusion activities, coordination) which is geared towards innovation activities; institutional processes (legal acts, regulatory rules) designed to explicitly influence environment for innovation (ERAWATCH 2013). For the development of the scientific research key importance are the resources available at European and national level, the marginal importance are the resources available to regional and local level. CORDIS website presents for each member country a National R&D information service. In 2011, the average level of expenditure on research in the EU-27 amounted to 2.1% of GDP (in Finland 3,8%), while in the EU-12 only 1.0% of GDP (EUROSTAT 2013). Expected results: Effects of the EU policy in the field of science and research could be realized only with a lot of delay (at least 10 years). For instance in the years research projects, financed from the resources of the 1-7 Framework Programmes, enriched in the EU in a detailed theoretical knowledge in many areas. Thanks to this new resource of knowledge, it is possible to create faster more efficient new systems responding to changes in the global marketplace. EU research programs generate high return on the investment (Stajano 2009). It is

91 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 91 estimated that current Community contribution of 7 billion/year might generate a GDP increase of 200 billion/year in the 2030s. The results of EU-funded research are of very differentiated nature: ideas, standards, technologies, patents, components, materials, processes, systems, applications, and networking of people and of firms, to name a few. Barriers and difficulties: When setting up a research study, it is important to identify potential barriers and have plans to overcome them. There are many potential and real barriers: researchers' careers and mobility, research infrastructures, cross-border operation of research actors, knowledge circulation, international cooperation and cross-cutting governance issues, access to desired materials. Moreover the effects of growth of the knowledge resource are seriously wasted through delays in political and social decision-making by the institutions of the EU and in many cases by the dominance of the political arguments over the scientific. Implementation of innovations into EU products Policies impacted: industrial policy. Stakeholders: EU research community, enterprises. Level on which measure could be adopted: national, regional, local. Policy goals to be achieved: More innovative product, efficient industry utilizing modern technologies Measure description: Policy of strong promotion of science and research not always increases the manufacturing skills of competitive goods and services. The European Union is a region with high labour costs. The possibility for competing in world markets depends on the capacity to demonstrate the superiority of European products and services with reference to their quality, design, innovativeness, and ability to satisfy the requirements of an ever-changing market demand. The greater quality of European products and services might give them the possibility of being competitive despite their cost, originated by high salaries and high standard of living within the EU. EU research shall encourage EU industry to become more competitive and strengthen its scientific and technological bases. The experience of the past years shows that there is a need for a different approach to theoretical (academic) research and the creation of the innovative concepts and different approach in supporting the business development of advanced technologies. Since the Single European Act the aim of the Union's RTD policy has been to strengthen the scientific and technological basis of European industry and to encourage it to become more competitive at international level. The business environment in Europe should become more innovation-friendly thanks to Single Market measures such as the unitary patent, faster standard setting, modernised EU procurement rules and a European passport for venture capital funds. The most widely-used measures are fiscal incentives for R&D investments or innovation vouchers for companies wishing to buy services from R&D, technology and innovation services providers. Some Member States are also reducing tax rates on profits from patents and other types of intellectual property. There is strong support for providing easier access to risk capital for companies at their seed, start-up and early-growth stages, and for innovative projects (European Commission 2013b). Expected results: The benefits results from the use of such instruments as: financial Instruments, business support services, programme support grants, data collection and analysis, strategic studies and policy advice through expert and high level groups, awareness campaigns, thematic networks and cluster development, exchange of best practice, market replication projects, procurement support. The main measure in this regard is programmes like the Competitiveness and Innovation Framework Programme (CIP) running from 2007 to 2013, with a budget of approximately 3600 million. CIP as a whole has become a major vehicle for promoting innovation, particularly as this is now best conceived as a relatively open process that goes beyond the simple focus on technological development that characterised earlier conceptions towards the more balanced perspective that encompasses developments in the service sector as much as in manufacturing and relates to processes and business models as much as products. This should ensure that infusion of technology from research to business sector is achieved. This in turn should be a major contribution to the competitiveness of the European economy (CSES 2011). Barriers and difficulties: Lack of interest on part of business and/or science. Lack of funding. Poor cooperation tradition between research and business. High risk associated with introduction of innovative ideas.

92 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 92 Transnational research networks Policies impacted: research and innovation policy, energy policy, transport policy, environment policy, health and safety policy, information society policy. Stakeholders: the EU DG for Research and Innovation, national ministries (departments) of science and research, academia & research institutions, high-level R&D policy coordination councils, strategic committees identifying high technology opportunities, R&D societies and associations. Level on which measure could be adopted: international, national, regional Policy goals to be achieved: combining the forces of all public and private stakeholders across the board, best possible R&D cooperation at every level and creation of research networks; stimulation the free movement of persons and ideas. Measure description: An effective mean for the promotion of research in Europe has become a trans-national research process integration. The European Commission, Member States and the European Parliament, the scientific community and industry should work jointly towards the creation of a European Research Area (ERA). The ERA can be likened to a research and innovation equivalent of the European "common market" for goods and services. Its purpose is to increase the competitiveness of European research institutions by bringing them together and encouraging a more inclusive way of work, similar to what already exists among institutions in North America and Japan. For instance The EU 2010 Budget Review proposed that the full range of EU instruments for research and innovation work together in a Common Strategic Framework. Improvements for future programmes should focus on (European Commission 2011a): clarifying objectives of research, reducing complexity of procedures and management, avoiding duplication and fragmentation, simplifying participation, better uptake and use of results by companies, investors, public authorities, other researchers and policy makers. But a key tool in implementing the Innovation Union flagship initiative plays Horizon This tool bundles together all existing Union research and innovation funding, including the Framework Programme for Research, the innovation related activities of the Competitiveness and Innovation Framework Programme and the European Institute of Innovation and Technology (EIT). Horizon 2020 has a number of new features that make it fit for the purpose of promoting growth and tackling societal challenges: major simplification through a simpler programme architecture, an inclusive approach open to new participants, the integration of research and innovation by providing seamless and coherent funding from idea to market, more support for innovation and activities close to the market, leading to a direct economic stimulus, more possibilities for new entrants and young, promising scientists to put forward their ideas and obtain funding (European Commission 2011b). Much will depend on the way it will be implemented. But the European Commission s proposal for the new 7- year and 88 billion Framework Programme for Research and Innovation, Horizon 2020, is a courageous attempt to shed some of the old ways that have increasingly troubled the successive Framework Programmes. Loaded with too many objectives, insufficiently sensitive of what really is best done at the European level, and implemented through ever-changing and increasingly complex mechanisms, the Framework Programmes had become examples of something European researchers needed because of national funding shortages, yet feared for their bureaucracy (Euroscience 2012). Expected results: Framework Programme, has evolved from adding value to national efforts through scale and networking to recognising a role in coordinating Member State policies and taking wider actions in support of EU-level policy. The scale of the Framework Programme has grown from ECU 2.75 billion in FP1 ( ) to 51 billion for FP7 ( ) (European Commission (2011d). Overall, the benefits of the ERA can be described as follows (European Commission 2012d; Zenker A., Muller E. 2008): benefits for research: a) benefits from efficiency gains (larger pool of selection, gains from specialization, visibility and critical mass; b) benefits from reduction of efficiency losses (reduction of excess duplication); benefits for economy and society - direct effect on socioeconomic growth (more R&D investment from the corporate sector, faster growth of young innovative companies, increase in productivity in services, addressing Societal Challenges). Structural effects promoted by the Framework Programme include the creation or strengthening of knowledge networks often evolving into long-term strategic alliances; the integration of research and industry communities cross-sectoral, interdisciplinary or transnational that took up the task of developing research roadmaps and providing strategic input for the research agendas of public agencies and private enterprises; collaboration networks between and among European and national R&D policy-makers. Barriers and difficulties:

93 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 93 In 2012 European Commission published a report on the results of the research effects consultation (European Commission 2012a). Accordingly the most important gaps for the achievement of ERA are: 80% of respondents believe that research careers in the public sector are comparatively unattractive because of the current uncompetitive working conditions and the lack of career prospects (other obstacles relate to the lack of information on social security and pension rights as well as to the lack of recognition of diplomas in other countries). The lack of political commitment is considered by 68% of respondents to be the major difficulty for transnational coordinated research (another important issue is the consistency between priorities in national and joint research programmes). 79 % of respondents consider that EU support for transnational access to research infrastructures of pan- European relevance should be increased; respondents consider that researchers should be better informed about knowledge transfer and that knowledge transfer activities should be professionalised, thereby allowing knowledge transfer offices to play a stronger role. 4.3 Supporting application of advanced technologies Pro-innovative industrial policy Policies impacted: EU technology policy, research and innovation policy, industrial policy. Stakeholders: the EU DG for Research and Innovation, national ministries (departments) of science and research, academia & research institutions, community business technology centres. Level on which measure could be adopted: international, national, regional. Policy goals to be achieved: support the research on future and emerging technologies (FET) in Europe. Measure description: Industrial policy is closely linked to technology policy. A central question in the industrial policy debate is how far the market failure argument justifies intervention downstream, to support the production of goods or services which would normally be supplied through the market for example, to create or enlarge industries which are potentially valuable to the economy but in which private companies are reluctant to invest. The actions which support pro-innovative industrial policy are for example two initiatives at the European level aimed at improving European industrial performance. One was what became known as the European Strategic Programme for Research in Information Technologies (ESPRIT). The other was the Single Market Programme, an attempt to create an integrated European market by removing the remaining obstacles to the cross-border movement of goods, capital and people. ESPRIT was followed by other collaborative programmes, including RACE (Research into Advanced Communications for Europe) and BRITE (Basic Research in Industrial Technologies for Europe), and all these activities were brought together in what was called the Framework Programme. Expected results: The effective deployment of technology has been associated with industrial competitiveness, productivity and efficiency, economic development, business growth, business flexibility, quality, the maintenance of highwage jobs, and the support of further rounds of innovation. Attention should be paid not only to specific policy measures that might accelerate technology diffusion and tighten links between technology developers and users, but also to the creation and nurturing of supportive systems and infrastructures for technology diffusion. Many recent technology diffusion measures should be particularly focused towards small and medium-sized enterprises (Shapira and Rosenfeld 1996). The Commission seeks to reverse the declining role of industry in Europe from its current level of around 16% of GDP to as much as 20% by This should be driven by substantial recovery in investment levels (gross capital formation and investment in equipment), an expansion of the trade in goods in the Internal Market (to reach 25% of GDP in 2020) and a significant increase in the number of SMEs exporting to third countries. At the same time, policy measures may be needed to accompany ongoing structural change within and across industries. Delivering the new industrial policy also calls for more effective European governance. The concepts of national sectors and national industries with little interaction with other sectors or the rest of the world are becoming less relevant. It is now increasingly important to identify strategic European industrial interests, and uncoordinated national policy responses must give way to coordinated, European policy responses (European Commission 2010c). Barriers and difficulties:

94 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 94 Modernising Europe s industrial base and the infrastructure on which it relies will require substantial new investment, entailing more private capital for productive investments, in particular through venture capital markets. This applies especially to the financing of start-ups, dynamically growing firms and research and development and innovation that often cannot be financed out of cash-flow. Given the current very significant deterioration in the state of public finances in several EU Member States, new and innovative solutions should be explored (European Commission 2010c). Access to finance has been identified by most Member States as an important bottleneck especially for SMEs, particularly those producing very novel products and technologies or relying on advanced knowledge in the technologically most advanced EU Member States. Firms in industries where external finance is important are more likely to report financial barriers in Member States with less developed financial systems. Most importantly, firms that are engaged in both innovation and internationalisation are also more likely to report that their innovation activities are hampered by financial issues. Outside of financial issues application problems often arise while introducing new industrial solutions. Those problems are in particular visible in case of SMEs, where there are often considerable barriers which slow down, if not hinder, the absorption of new technologies and techniques, especially when compared with larger enterprises. At the firm-level, managers of smaller firms face problems of time, cost, and technical expertise in accessing information on available technologies and on possible solutions, whether involving hardware, software, process control, management methods, or training. Some managers have insufficient information about their own manufacturing processes or are unaware of best technologies and practices applied elsewhere. In other situations, firms may lack receptivity to new ideas and to the idea of change itself. Even when SMES have good traditional skills, processes or product, these may be rapidly obsoleted by advances in technology (for example, in shifts from electro-mechanical to electronic technologies). Finally intellectual property right protection, standards and regulations are important institutional factors affecting innovation at the firm level. The current European IPR system has several characteristics that are unfavourable for innovation. There is strong evidence by now that the lack of a single European Patent affects firms incentives to innovate and raises financial barriers to innovation. Implementing the single European patent comes therefore with a double dividend (WIFO and Fraunhofer ISI 2010). EU technology intensive and innovative investments Policies impacted: technology policy, research and innovation policy, industrial policy. Stakeholders: national governments, enterprises, the EU DG for Research and Innovation. Level on which measure could be adopted: national, sectoral & regional; Policy goals to be achieved: introduction of technology intensive solutions into the market; Measure description: The re-launch of the Lisbon agenda in 2005 was followed by several initiatives aimed at encouraging European industry to exploit new technological opportunities. Although the Commission supported some expensive projects such as Galileo or Iter, much of its activity was devoted to improving the environment for entrepreneurial firms in high-technology industries. Since 2003, more than 400 million has been co-invested by the European Commission into more than 130 European research projects to develop innovative, smart systems technologies to reinforce European scientific excellence and competitiveness of its industry. Expected results: Better coordination of research policy. Concentration on important research areas. Sponsoring development and implementation of capital intensive innovative technologies (e.g. Galileo). The selected primary investments could be found being mentioned across various EU policy documents. For instance in the so called "Europe 2020" Strategy, a new economic strategy for Europe there are 7 flagship initiatives of which one is An industrial policy for the globalisation era (European Commission 2010c). This flagships initiative acknowledges that EU industry must speed up its transition to the low-carbon, resourceand energy-efficient economy, which can lead to cost reductions and a reduced impact on the environment. For this reason many investments will be likely concentrated in technologies aimed to deliver an ambitious decoupling of carbon and resource use from economic growth. Many concepts of future EU investments could be derived from the communication of the European Commission from October 2012 (European Commission 2012b). In which six priority action lines for investments are described: advanced manufacturing technologies, key enabling technologies, bio-based products, sustainable industrial and construction policy and raw materials, clean vehicles, smart grids. The priority areas are highly correlated with the areas of investment for

95 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 95 Cohesion policy They are all markets where new technologies are ready to deliver new products or increase productivity. These new technologies will revolutionize engineering (e.g. intelligent materials) and transform the production of goods (e.g. 3D printing), as well as providing game-changing new foundations for traditional markets, such as smart grids, clean vehicles or bio-based plastics. Barriers and difficulties: Extremely high capital expenditure is needed. The economic crisis and difficulties in the banking sector have had a negative impact on lending to the real economy especially in regard to technology intensive projects. Unclear ownership rights to the EU sponsored high technology projects. 4.4 Increasing internationalization level Supporting EU enterprises at foreign markets Policies impacted: enterprise policy, trade policy. Stakeholders: EU based companies, EU international administration, national foreign services. Level on which measure could be adopted: regional, national. Policy goals to be achieved: improving EU global competitiveness. Measure description: In the era of globalized economy the EU enterprises need to be able to confront an increasing competition from developed and emerging economies and to plug into the new market opportunities these countries will provide. There is a direct link between internationalization and increased performance of the company. International activities reinforce growth, enhance competitiveness and support the long term sustainability of companies. The measures supporting EU enterprises operations on foreign market include; legal advice, help in establishing contacts with foreign partners, provision of information on legal and business environment of host countries. Expected results: Increase in presence of EU based enterprises on foreign goods and services markets. Increased overseas sales. Increasing share of EU external trade in overall EU Member States foreign trade. Barriers and difficulties: Regulatory barriers on foreign market. Soft barriers on foreign market (e.g. culture related barriers). Discriminatory policies. Cooperative agreements with third-part countries Policies impacted: trade policy. Stakeholders: EU international administration, national foreign services. Level on which measure could be adopted: regional, national. Policy goals to be achieved: improving EU global competitiveness. Measure description: Cooperative agreements with selected groups of countries are aimed at improving business environment on bilateral (or limited multilateral) basis with selected countries. One of the examples of those measures is initiatives including EU and non-eu EEC countries. Other examples are special trade relations in the Mediterranean (Euro-Mediterranean Partnership) or Eastern Partnership. Bilateral agreement with Russia or China also helps to foster EU global competitiveness. Those agreements are accompanied by special projects/initiatives aimed at exploring possibilities that cooperative agreements offer. For instance there is The China IPR SME Helpdesk project funded by the European Commission's Directorate-General for Enterprise and Industry under the Competitiveness and Innovation Framework Programme (CIP). The Helpdesk arranges training on China IPR protection and enforcement in Europe and China. It specializes in intellectual property problems and helps in issues like (China IPR SME helpdesk 2013): IP registration and establishing an IP protection strategy; practical business challenges such as choosing a Chinese business partner, attending a

96 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 96 trade fair, licensing. Another level of activity is visible with the creation of The Union for the Mediterranean which promotes economic integration and democratic reform across 16 neighbours to the EU s south in North Africa and the Middle East (European Union External Action Service 2013). The UfM has a wide variety of initiatives on its agenda, for instance: Reduction of sea pollution. Cooperation in prevention of natural and man-made disasters. Establishment of sea motorways. Solar energy programme. The Mediterranean Business Development Initiative, providing technical assistance and access to finance for SME s in the region. Expected results: Easier access to foreign markets for EU based companies. Reduction of trade tariffs in bilateral relations. Barriers and difficulties: Lack of interest on the part of foreign countries. Need to open internal EU market to international competition.

97 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 97 References Bekker S.,Wilthagen T. (2008), Europe s Pathways to Flexicurity: Lessons Presented from and to the Netherlands, [ Benelux Bologna Secretariat (2009), Bologna beyond 2010, Report on the development of the European Higher Education Area, Leuven/Louvain-la-Neuve Ministerial Conference April [ beyond 2010.pdf]; China IPR SME helpdesk (2013), [ Council of the European Union (2011), Council Resolution on a renewed European agenda for adult learning, Brussels, , OJ C 2011/C 372/01; Crescenzi R., Rodríguez-Pose A. (2012), Infrastructure and regional growth in the European Union, Regional Science, vol. 91, no 3; CSES (2011), Final Evaluation of the Competitiveness and Innovation Framework Programme. Final Report, Centre for Strategy & Evaluation Services, Kent, [ Deloitte (2011), Mid-term evaluation of the European Energy Programme for Recovery, Final Report, [ DG for Education and Culture (2010) The EU's contribution to the European Higher Education Area, European Union 2010, [ EBTP (2007), European survey on European Private Company, European Business Test Panel, [ ERAWATCH (2013), The European Inventory of Research and Innovation Policy Measures, [ ESDP (1999), ESDP European Spatial Development Perspective, Towards Balanced and Sustainable Development of the Territory of the EU, EC, Potsdam, May 1999; Eurochambres (2013), [ European Commission (2000), Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: Towards a European Research Area, Brussels, , COM(2000) 6 final; European Commission (2007), Towards Common Principles of Flexicurity: More and better jobs through flexibility and security, COM (2007) 359 final; European Commission (2009a), Green Paper: Promoting the learning mobility of young people, Brussels, , COM(2009) 329 final; European Commission (2009b), Green Paper: TEN-T: A policy review, Towards a better integrated Transeuropean Transport Network at the service of the Common Transport Policy, Brussels, , COM(2009) 44 final; European Commission (2010a), A new impetus for European cooperation in Vocational Education and Training to support the Europe 2020 strategy, Brussels, , COM(2010) 296 final; European Commission (2010b), Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Youth on the Move An initiative to unleash the potential of young people to achieve smart,

98 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 98 sustainable and inclusive growth in the European Union, Brussels, , COM(2010) 477 final; European Commission (2010c), Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: An Integrated Industrial Policy for the Globalisation Era, Putting Competitiveness and Sustainability at Centre Stage, Brussels, , COM(2010) 614 final; European Commission (2011a), Green Paper: From Challenges to Opportunities: Towards a Common Strategic Framework for EU Research and Innovation funding, Brussels, , COM(2011) 48 final/2; European Commission (2011b), Horizon The Framework Programme for Research and Innovation. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Brussels, , COM/2011/0808 final; European Commission (2011c), The Global Approach to Migration and Mobility, Brussels, , COM(2011) 743 final; European Commission (2011d), Understanding the Long Term Impact of the Framework Programme, Final Report To the European Commission, [ long_term_impact_of_the_fp.pdf]; European Commission (2012a), Areas of untapped potential for the development of the European Research Area (ERA), Analysis of the response to the ERA Framework public consultation, [ European Commission (2012b), Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Stronger European Industry for Growth and Economic Recovery. Industrial Policy Communication Update, Brussels , COM(2012) 582 final; European Commission (2012c), Connecting Europe Facility. Investing in Europe s growth, [ European Commission (2012d), High Level Panel on the Socio-Economic Benefits of the European Research Area, Final Report, [ European Commission (2013a), Commission Implementing Decision of establishing a Multi-Annual Work Programme 2013 for grants in the field of trans-european Transport Network (TEN-T) for the period , Brussels, , C(2013) 1675 final; European Commission (2013b), Communication from the Commission to the European Parliament, The Council, the European Economic and Social Committee and the Committee of the Regions: State of the Innovation Union Accelerating change, Brussels, COM(2013) 149 final; European Commission (2013c), Connecting Europe Facility, [ European Commission (2013d), Digital Agenda for Europe, Action 48: Use structural funds to finance the roll-out of high-speed networks, [ European Commission (2013e), European Energy Efficiency Fund (EEE F), [

99 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 99 European Investment Fund (2013), EU finance for small and medium-sized enterprises (SMEs), [ European Parliament (2006), Recommendation of the European Parliament and of the Council on key competences for lifelong learning, , OJ L 2006/962/EC; European Parliament (2009), Regulation (EC) No 663/2009 of the European Parliament and of the Council of 13 July 2009 establishing a programme to aid economic recovery by granting Community financial assistance to projects in the field of energy, , OJ L 200/31; European Union External Action Service (2013), [ Euroscience (2012), Euroscience s Position on the Horizon The EU Framework for Research and Innovation, A Euroscience Position Paper 23/01/2012, [ oscience%20on%20horizon%202020%20with%20layout.pdf]; EUROSTAT (2013), EU27 Total intramural R&D expenditure (GERD) by sectors of performance [rd_e_gerdtot],[ ation/data/database]; Gordon, J., Rey, O., Siewiorek, A., Vivitsou, M., von Reis Saari, J. (2012), KeyCoNet, Literature Review: Key competence development in school education in Europe, [ 024fde000111&groupId=11028]; Mandl, I., Celikel-Esser, F. (2012), The second phase of flexicurity: an analysis of practices and policies in the Member States, European Foundation for the Improvement of Living and Working Conditions, [ Proposal for a Regulation of the European Parliament and of the Council on guidelines for trans European telecommunications networks and repealing Decision No 1336/97/EC, COM(2011) 657 final, 2011/0299 (COD) Brussels, , Shapira P., Rosenfeld S. (1996), An Overview of Technology Diffusion Policies and Programs to Enhance the Technological Absorptive Capabilities of Small and Medium Enterprises, [ Stajano, A., (2009), Research Policy: a Bottom-up Contribution to European Integration and to Successful Implementation of Other EU Policies. Eleventh Biennial International Conference of the European Union Studies Association. Los Angeles, California, April 23-25, 2009, [ WIFO, Fraunhofer ISI (2010), Barriers to internationalisation and growth of EU's innovative companies, Final Report, [ innovation-intelligence-study-1_en.pdf]; Zenker A., Muller E. (2008), European Research Area and Applied Research: Context and Opportunities, Draft Version, Fraunhofer ISI, [ Zimmermann, K.F. (2009), Labor Mobility and the Integration of European Labor Markets, Discussion Paper no. 862, Deutsches Institut für Wirtschaftsforschung, Berlin, [

100 ANNEX 2 TEMPLATES OF PRACTICES AIMING TO IMPROVE THE COMPETITIVENESS IN EU MEMBER STATES UG: FEDEA: CML: TML: VU: PANTEIA: A. Kozlak; B. Pawlowska; P. Borkowski; J. Burnewicz; M. Bak O. Betancor; A. Hernández; P. Socorro L. Kretschmann J. Purwanto M. J. Smit; H. L. F. de Groot J. Kiel Authors:

101 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 101 Table of contents 1. INTRODUCTION POLICY MEASURES FOR IMPROVING INFRASTRUCTURE ENDOWMENT AND ACCESSIBILITY SCHEMES OF INFRASTRUCTURE Transport Infrastructure Project German Reunification (CML) INCREASING CAPACITY AND QUALITY OF INFRASTRUCTURE Multi-Year Programme for Infrastructure, Spatial Planning and Transport (VU Amsterdam) Infrastructure Transport and Housing Plan ( ) (FEDEA) Implementation of road charging in Stockholm (TML) FINANCIAL INSTRUMENTS FOR INFRASTRUCTURE INVESTMENTS Policy guideline for the funding of intermodal terminals (CML) Road Investment Fund (KRD Krajowy Fundusz Drogowy) (UG) Credit facilities for renewal of tourism infrastructure (FEDEA) POLICY MEASURES FOR IMPROVING LABOUR PRODUCTIVITY CHANGES IN EDUCATION SYSTEM Bologna process in the Netherlands (VU Amsterdam) Government program of the contracted faculties (UG) INVESTMENTS IN HUMAN CAPITAL - TRAINING AND ADULT LEARNING Policy guideline for the funding of training of mariners (CML) INCREASING LABOUR MARKET EFFICIENCY Active Labour Market Policies (VU Amsterdam) Teleworking for public firms in Flanders (TML) POLICY MEASURES IMPROVING PRODUCTIVE ENVIRONMENT IMPROVING ENTREPRENEURSHIP ENVIRONMENT Special Economic Zones in Poland (UG) Canary Islands Special Zone (ZEC) (FEDEA) Pieken in de Delta (VU Amsterdam) SUPPORTING R&D AND INNOVATION National Scientific Research, Development and Technological Innovation Plan (FEDEA) German Universities Excellence Initiative (CML) Tax exemptions for innovative firms (UG) Wet Bevordering Speur- en Ontwikkelingswerk WBSO (VU Amsterdam) SUPPORTING APPLICATION OF ADVANCED TECHNOLOGIES ISETEC II - Application of innovative technologies in ports (CML) Tristar implementation of ITS solution in transport (UG) INCREASING INTERNATIONALIZATION LEVEL Strategic Plan ICEX ( ) (FEDEA) IMPROVING ENERGY EFFICIENCY (PANTEIA)

102 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Introduction According to the DOW, the aim of the task 4.1 is to perform a systematic and comprehensive review of EU policy approach to the enhancement of international competitiveness of Europe from the perspective of the ability to produce competitive goods/services and to attract foreign domestic investment (FDI). The analysis of horizontal and sectoral policies will be provided in the D4.1, especially from international competitiveness of Europe point of view. The expected result of the D4.1 within this task will be determination of individual policies impacts on shaping the international competitiveness of Europe. The templates illustrate practices undertaken within EU Member States in using different measures aiming to improve the national/regional/local competitiveness. The goal of this template is threefold: To present the concrete measures which are able to improve competitiveness. To provide an illustration of conditions to implement individual measures and barriers which can occur. To identify the relevant economic, social and environmental impact of measure implementation. Each of the templates contains 12 sections: 13. Measure description: some details about measure assumptions. 14. Location of measure implementation: concrete place/region. 15. Institution responsible for the measure implementation. 16. Concept and dimension of competitiveness addressed. 17. Policy under which the measure is used. 18. Level of implementation: international/national/regional/local. 19. Assumed target. 20. Conditions for implementation: some technical/financial/ legal/organisational assumption to implement the measure. 21. Effects: describing the type of impact: economic (including wider economic benefits), social, environmental; 22. Barriers and difficulties in implementation. 23. Social and political acceptability. 24. Any additional information or comment.

103 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Policy measures for improving infrastructure endowment and accessibility 2.1 Schemes of infrastructure Transport Infrastructure Project German Reunification (CML) The name of the measure: Transport Infrastructure Project German Reunification (Verkehrsprojekt Deutsche Einheit) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Schemes of infrastructure The Transport Infrastructure Project German Reunification was initiated in 1991 shortly after the reunification of Germany. The measure comprises of 17 infrastructure projects - 9 rail projects, 7 road projects and 1 waterway infrastructure project. All projects involve infrastructure links across the former border between the two German states. Germany Bundesministerium für Verkehr, Bau und Stadtentwicklung (Federal Ministry of Transport, Building and Urban Development) Established bodies (under private law) responsible for the implementation: Deutsche Einheit Fernstraßenplanungs- und -bau GmbH (DEGES) (German Unity motorway planning and construction company). Planungsgesellschaft Bahnbau Deutsche Einheit (PBDE) (German Unity rail planning and construction company). Since the 1970s the investment in transport infrastructure within the GDR had only taken place very selectively. At the time of reunification the transport network was in a bad state. Further the separation of the German territory had resulted in an evolvement of individual transport networks that lacked interconnectivity. Within West Germany emphasis had laid on the strengthening of north-south axis and an alignment of the network towards Western Europe. The Transport Infrastructure Project German Reunification was intended to improve the road, rail and inland waterway infrastructure network connecting East and West Germany. Verkehrspolitik - Bundesverkehrswegeplan 1992 Transport policy Federal Transport Infrastructure Plan 1992 National After the German reunification the Transport Infrastructure Project German Reunification was set up to: Renew the East German transport infrastructure. Integrate it with the network of former West Germany. Upgrade links running in east-west direction. The Transport Infrastructure Project German Reunification was passed into law in This led to an acceleration of the infrastructure planning procedure since several steps in the process where shortened or skipped. Technical feasibility Financial feasibility The cost was expected to be approximately 39 billion (rail: 20.2 billion, road 16.7 billion, waterway 2.3 billion ). Of the 17 projects 11 involved an extension of existing infrastructure, 6 comprised a new construction. Assessments had demonstrated a favourable cost benefit ratio for all chosen

104 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 104 Organisational/legal feasibility Assumed effects: projects. Improving transport infrastructure was assumed to play a key role for an integration of the two German states and the economic recovery of the former GDR. Aim was to: Quantitative effects Build new and extend existing road, rail and inland waterway infrastructure. Qualitative effects Improve transport infrastructure in East Germany. Help to create an integrated transport network in Germany. Improve infrastructure links in an east-west direction. Absorb rising traffic volumes due to an opening of the borders in Eastern Europe. Promote intermodal transport. Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation: Social and political acceptability Any additional information or comment The Transport Infrastructure Project German Reunification has: Reduced the journey time to and from destinations in the former GDR significantly. Promoted transit routes through Germany in an east-west direction. Caused a significant upturn in the construction sector. Created the necessary conditions for private investment in the former GDR. On the other hand the project could not serve as a sole and sufficient condition for a hoped-for fast economic recovery in Eastern Germany accompanied by an alignment of living standards to West German levels. Promote the economy in the new eastern Federal States. Maintain as much of industrial substance as possible. Facilitate the alignment of living standards within the reunited Germany. Some of the projects are controversial due to their dimensions, financial extend and environmental impact. All 17 projects are under construction or completed. 2.2 Increasing capacity and quality of infrastructure Multi-Year Programme for Infrastructure, Spatial Planning and Transport (VU Amsterdam) The name of the measure: Multi-Year Programme for Infrastructure, Spatial Planning and Transport (Meerjarenprogramma Infrastructuur en Transport) Sub- category: Measure Description: Increasing capacity and quality of infrastructure The Multi-Year Plan for Infrastructure, Spatial Planning and Transport (MIRT) is an investment programme set up by the national government. The rules laid down under the MIRT specify the main process steps for projects and programmes wishing to qualify for government funding. The MIRT lists all plans to improve infrastructure and mobility. It presents

105 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 105 Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Organisational/legal feasibility Assumed effects: Quantitative effects Qualitative effects Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment issues in the field of spatial planning, infrastructure and transport, possible solutions, and the associated investments. Each year on Prince s Day, when the Budget Memorandum is presented to the house of representatives, an updated project book is sent as an annex to parliament. The time horizon was 2020 from , but has been extended since to Netherlands Ministry of Infrastructure and the Environment (IenM), Improvements to national roads, railroads and waterways contribute to accessibility, quality of life and safety. The programme seeks to maximize regional integration of policies (Spaans et al., 2012). Transport policy National, but in strong coordination with regional and, where necessary, local partners. The MIRT aims to improve the coherence between investments in spatial planning, the economy, mobility and liveability. Not applicable The programme is the main expenditure of the Ministry of IenM, accounting for 6 billion. Minor contributions come from the Ministry of Economic Affairs, ERDF, ESF, Cohesion Funds, TEN-T, regional governments, and tolls. ( cieringsbronnen/) Ministry of IenM prepares the list, but the list contains more projects than budget allows. The Minister is sometimes forced by parliament to adjust priorities, especially where regional equity is involved. No effects quantified on programme level. Improved infrastructure. Regional and international accessibility contributes to competitiveness and economic growth. Quality of life and safety, both mentioned as targets of the programme, improve welfare. Negative environmental impacts are mitigated by sub-measures. Some projects in the programme are explicitly intended to improve environmental values, e.g. ecoducts (wildlife crossings). Tight budgets require choices to be made. Every year, several projects are thus delayed (but seldomly scrapped). However, regional governments are allowed and do sometimes provide prefinancing. Scenarios used to project future mobility are of large influence on the decision to advance a project, and such scenarios have been criticized (Wortelboer-Van Donselaar et al., 2009). High Agenda", conference presentation at EURA 2012, Vienna, 20 September 2012, [ 877f-f5072b363862/ pdf] [ Spaans, M., W. Zonneveld, & B. Waterhout (2012), "Regional Integrative

106 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 106 Territorial Strategies in Regional Development and Governance: a Closer Look at the Dutch MIRT Territorial Agenda", conference presentation at EURA 2012, Vienna, 20 September 2012, [ Wortelboer-Van Donselaar, P., J. Francke, H. Gordijn, P. Jorritsma, & F. Savelberg (2009), Mobiliteitsscenario's Heroverwegen?, Kennisinstituut voor Mobiliteitsbeleid [ Infrastructure Transport and Housing Plan ( ) (FEDEA) The name of the measure: Infrastructure Transport and Housing Plan ( ) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Increasing capacity and quality of infrastructure The economic context characterized by a national budgetary adjustment affects the transport and housing policies. Therefore, the main goal of this Plan is to enhance the economic performance to improve the actual economic situation. The Plan focuses on mobility needs and the housing access of the Spanish society. This Plan includes different measures to contribute to the economic recovery with special attention to the liberalization of these markets to increase competitiveness and sustainability. Spain Ministry of Development C FA0/113351/PITVI.pdf The economic context forces the Spanish Government to review its economic policy in transport infrastructure and housing. Particularly, the financial crisis has affected the housing market because of the sub-prime crisis and a new regulation is needed. Transport infrastructure and housing policy National The aim of this plan is twofold: Transport Infrastructure. The aims of the Plan in terms of Transport Infrastructure are to improve the efficiency and the competitiveness of the global transport network optimizing the existent capacities; to promote the economic development to enhance the economic recovery; to promote sustainable mobility respecting the environment; to increase the territorial cohesion and the mobility between regions, and, to promote the functional integration of the transport system considering an intermodal approach. Conditions for implementation: Technical feasibility Financial feasibility Housing. The aims are to enhance housing rehabilitation, and to increase the efficiency of the rental market. Non-specified The Plan estimates a total investment in transport infrastructure for the whole period between 119,720 million of Euros and 144,826 million of Euros depending on the economic conditions. It is expected that private companies participate in the above transport

107 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 107 infrastructure investment contributing with the 16% of the total volume. In the case of the Housing Plan, the investment will be around 1,000 million of Euros per year. Organisational/legal feasibility The Central Administration will create two observatories (Transport and Housing) in order to follow the development of the Plan. Assumed effects: Quantitative effects Non-specified Qualitative effects To promote infrastructure and transport modes those reduce the negative impacts of transport on environment. To increase the security of the transport system. To increase the access of the population to the housing market improving the social cohesion. To increase the value of the Spanish cultural heritage what it may have effects on some particular sectors such as tourism industry. Type of impact: Economic (including wider economic benefits) Transport investment will enhance the economic activity during the construction and the operation period because of increases of the productivity. Effects in the long run on the competitiveness of the economy. Social To increase the territorial cohesion. To increase the access of population to the housing market, particularly low-income population. Environmental Transport infrastructure is associated to environmental costs and new infrastructures have to consider them in order to minimize the negative environmental effects. Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment The uncertainty regarding the economic situation may introduce difficulties in the implementation of the Plan. Regarding the housing market, it is possible that the excess of supply and the high levels of private debt may introduce some difficulties for the proposed measure to achieve the qualitative goals. The Plan will be discussed with the regional administration. The objective is to achieve the maximum political acceptability but the aim of territorial cohesion introduces a political debate of the convenience of some investments. [ C FA0/113351/PITVI.pdf] Implementation of road charging in Stockholm (TML) The name of the measure: Implementation of road charging in Stockholm Sub- category: Increasing capacity and quality of infrastructure Measure Description: All motorized vehicles moving in a central, highly congested area and period of time have to pay a city toll. In most cases, city toll addresses congestion, urban/regional air pollution, national energy security and global climate change. The objectives of the city toll are travel time reduction, air quality improvement and greenhouse gas emission decrease. The Stockholm congestion charge was first introduced as a trial between 3 January 2006 and 31 July A referendum on the future of the congestion charge was held in September 2006; the residents of Stockholm municipality voted yes, and 14 other municipalities voted no to implement it permanently.

108 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 108 In October 2006, the Swedish government declared that the Stockholm congestion charge was to be introduced permanently during the first half of The incomes from the reintroduced congestion charges in Stockholm are to be used in partly financing a new bypass road, 'Förbifart Stockholm'. Stockholm Cordon Pricing Scheme is applied to an area in the city centre of around 34 square kilometres with a charge up to 20 SEK(approximately 2,4) to vehicle passing one of 17 charging points while entering or leaving the city s central area with a daily maximum of 60 SEK (around 7,2). Figure 3 Stockholm System (source: Swedish Transport Agency) The system initially used a combination of automatic license plate recognition and transponders before shifting primarily to cameras that automatically detect license plates. The Stockholm city toll system has the shorter travel times valued at 600 million SEK ( 72 million) annually as the main benefits. In Stockholm program, the operating costs are 25% of annual revenues. Upfront investments included around 240 million in buses, transit, and parkand-ride lots, plus around 160 million in system operation. Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation (international/national/regional/local) Assumed target: Conditions for implementation: Technical feasibility Stockholm, Sweden The Vägverket (Swedish Road Administration) is the body responsible for the administration of the charge and its systems, while IBM was involved as prime contractor responsible for solution design, development and operation. The primary purpose of the congestion tax is to reduce traffic congestion and improve the environmental situation in central Stockholm. The funds collected will be used for new road constructions in and around Stockholm. Congestion tax Local Already mentioned Payment is via a number of channels including by direct debit triggered by the recognition of the on-board electronic tag that is loaned to drivers. Q-Free cameras can also detect and record car number plate images using Automated Number Plate Recognition (ANPR) software to identify those vehicles without tags, and are also used to verify tag readings and provide evidence to support the enforcement of non-payers. The use of the transponders fitted in vehicles means the system has a more reliable capture rate and a more cost-effective back-room operation than congestion charging systems that do not use such devices. It also makes it far

109 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 109 easier to operate variable charging with automated direct debit after the passage. Financial feasibility Investment cost= $262 M. Net annual financial surplus = $75 M. Investment will be recovered in 3,5 years. Net present value of benefits = $1104 M. Benefit / cost ratio = 4;3 (Source: Decorla-Souza, P., 2006, Congestion Pricing in London and Stockholm, IBTTA Transportation Finance Summit) Organisational/legal feasibility An expert panel identified the following beneficiaries among transportation users: Public transit users who benefit from more options and faster travel speeds. Drivers who value their time savings more than the charge or who receive the benefits of reduced traffic without passing the cordon and paying a charge. Cyclists who benefit from an improved traffic environment. Commercial drivers who benefit from and improved work environment. Transportation users who may be negatively affected include: Drivers who pay the charge rather than choosing alternatives and value their time savings less than the cost. Drivers who forgo a trip due to the charge. Public transport users who encounter more crowded conditions due to increased ridership (Stockholmforsoket 2006). Assumed effects: Quantitative effects - decrease in traffic to/from city centre Qualitative effects Type of impact: Economic (including wider economic benefits) Social Environmental (source: IBM/ Decorla-Souza, 2006) See organization /legal feasibility The system was found to be extremely cost effective, with the primary benefits being shorter travel times valued at 600 million SEK ($85 million U.S.) annually, increased road safety valued at SEK 125 million ($18 million U.S.) and health and environmental benefits valued at SEK 90million ($13 million U.S.) (Stockholmsforsoket 2006). Operating costs are 25% of annual revenues (Replogle 2008b). Upfront investments included $300 million U.S. in buses, transit and park and ride lots, plus $200 million US in system operations. No effect on retail sales was observed (Jenstav, 2007). Non-specified. CO 2 emissions were reduced by about 15%, with reductions in other pollutants such as nitrogen oxides (NO x ) and PM10 as well (EDF 2007).

110 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 110 Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment No special difficulties considered in the implementation. The Stockholm experience is unique because the system was turned off after an initial six month trial during the first half of During the trial, the system reduced traffic volumes by about 20%, with vehicle speed increases of the same amount or more, and transit ridership growth between 6 and 9% (U.S. Federal Highway Administration, 2008). When the trial ended, traffic rebounded by a similar amount. This correlation was likely responsible for a significant shift in public opinion. In autumn 2005, before the trial took place, about 55% of all Stockholm residents viewed the congestion charging scheme negatively. After the trial 53% of Stockholm city residents viewed the idea favourably, while 41% viewed it unfavourably, providing enough public support for the system to be implemented permanently (Stockholmsforsoket 2006). No 2.3 Financial instruments for infrastructure investments Policy guideline for the funding of intermodal terminals (CML) The name of the measure: Policy guideline for the funding of intermodal terminals. Richtlinie zur Förderung von Umschlaganlagen des Kombinierten Verkehrs (Förderrichtlinie KV) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Financial instruments for infrastructure investments Under the guideline a government subsidy can be allocated for the construction or extension of intermodal terminals (road/rail/inland waterway) owned and managed by private companies. Up to 80% of the eligible investment can be granted as a non-reimbursable subsidy. Germany Bundesministerium für Verkehr, Bau und Stadtentwicklung (Federal Ministry of Transport, Building and Urban Development) Eisenbahn-Bundesamt (The Federal Railway Authority) Wasser und Schifffahrtsverwaltung des Bundes (Waterways and Shipping Administration of the Federal Government) Addressed goals of transport policy: Enable a seamless transport of goods as a condition for growth and employment. Create a transport system that contributes to achieving environmental and climate goals and facilitates intelligent transport chains. Promote a modal shift towards rail and inland waterways. Ensure the quality of the transport network and resolve bottlenecks. Verkehrspolitik - Aktionsplan Güterverkehr und Logistik Transport policy action plan freight traffic and logistics National Subsidizing the construction or extension of intermodal terminals supports the establishment of an intermodal transport network within Germany and Europe. Goal is to enable a shift of freight from the road towards more environment friendly transport modes. An extension of the network of intermodal terminals eases transhipment between modes, allows more transport relations to be served by intermodal transport and thus increases the

111 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 111 transport volumes of combined transport. Conditions for implementation: Technical feasibility Preconditions for a subsidy are: The subsidy does not distort competition. The construction has not begun prior to an allocation of public funding. The intermodal facility is deemed eligible for a public funding by the responsible government authority. Financial feasibility Solely private funding of the facility would not be economical. A proof of the macroeconomic benefit of the measure. Organisational/legal feasibility The facility is under legal and commercial ownership of the recipient of the subsidy. The accessibility to the intermodal transport network is ensured. Assumed effects: Quantitative effects Construction of new intermodal terminals. Expansion of existing intermodal terminals. Modal shift of cargo from road to rail/inland waterway with positive economic, social and environmental effects. Reduction of handling / transhipment cost at intermodal terminals. Reduction of greenhouse gas emissions. Qualitative effects Upgrading of the intermodal terminal network resulting in a higher attractiveness of combined transport. Wider economic benefits Benefits due to employment effects. Type of impact: Effects of the public funding of intermodal terminals: Construction or extension of 69 terminals from 1998 to Additional handling capacity of 4.56 cargo units per year billion tkm shifted towards rail and inland waterway transport. Reduction of road transport by 2.3 million truck-trips. Economic (including wider Reduction of handling/transhipment cost by EUR10 at locations in economic benefits) the vicinity of a sea port. Reduction of handling/transhipment cost by EUR22 at locations in the hinterland / at ferry ports. Return on investment (benefits due to modal shifts, CO2 reduction, employment effects): EUR16.71 per EUR1 of public funding. Social Environmental Reduction of greenhouse gas emissions by 1.2 million t. Barriers and difficulties in implementation: Social and political acceptability Any additional information or comment

112 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Road Investment Fund (KRD Krajowy Fundusz Drogowy) (UG) The name of the measure: National Road Investment Fund KFD (pol. Krajowy Fundusz Drogowy) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Financial instruments for infrastructure investments National Road Fund has been created by the law of 27 th October 1994 on Paid Motorways and National Road Fund (pol. Ustawa o autostradach płatnych oraz o Krajowym Funduszu Drogowym, Dz. U. z 2012 r., poz. 931 z późn. zm.). KFD has been created in order to facilitate investments in road networks and to ensure more efficient allocation of public funds for national road development programme. It is currently the main source for financing road investments in Poland Poland The fund is financial instrument under BGK bank (Bank Gospodarstwa Krajowego (BGK) is Poland's only state-owned bank whose objectives are defined as: to provide banking services for the public finance sector, in particular through the support of the government's economic programs, as well as local government and regional development programs implemented with the use of public funds, including those of the European Main task of the Fund is to gather funds for building and rebuilding of national road network. More specifically the funding could be utilized to finance: Building or rebuilding of road engineering structures or road ferries or for road weights for heavy goods vehicles. Information systems for data collection on road networks and systems improving road safety. Building and maintenance of toll collection systems for road networks (both electronic and manual). Transfers to the companies involved in road construction and/or road management schemes (including payments for maintenance of accessibility). Research and advisory groups in relation to road building and rebuilding. Creation of special purpose vehicle (company created and designated to realize road construction tasks). Operations on financial instruments created in support of KFD (e.g. special Road bonds, credit instruments etc.). Compensation for sub-contractors in case contractors fail to pay (e.g. due to the bankruptcy of main contractor). Transport policy National The aim of this instrument is to finance development of national road network. Not applicable The main source (80%) of funding is incomes from fuel tax which is charge on producers and importers of fuels. Additional sources of funding are provided through: Credit instruments and bond emissions. EU funding from funds assigned for road infrastructure investments.

113 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 113 Electronic charges levied on paid motorways from heavy vehicles (<3.5 t) and buses (via the use of viatoll electronic tolling system). Charges from vehicles charged on the paid roads managed by GDDKiA (General Directorate for Roads and Motorways) collected on the basis of manual toll collection system (gates). Organisational/legal feasibility No problems with legal feasibility. KFD was introduced based on special law (law of 27 th October 1994 on Paid Motorways and National Road Fund (pol. Ustawa o autostradach płatnych oraz o Krajowym Funduszu Drogowym, Dz. U. z 2012 r., poz. 931 z późn. zm.). The use of BGK bank as managing body for the Fund allowed for good organisational design. Assumed effects: Quantitative effects Creation of modern road network. Accordingly to the latest strategic document Strategy for development of transport system till 2020 (with perspective of 2030) (pol. Strategia Rozwoju Transportu do 2020 roku z perspektywą do 2030 roku, Ministerstwo Transportu i Budownictwa, Warszawa 22 stycznia 2013) assumed goals are: Total motorways length c.a km in 2020 (with baseline 857km in 2010) and 2800 expressways (with baseline of 675 km in 2010) Accordingly to the Information on the progress of the Programme of Road Development for years (pol. Informacja dotycząca stanu realizacji Programu Budowy Dróg Krajowych na lata raport za 2012.) at the end of 2012 there were 1115,6 km of road investment finished. The total involvement of KFD financing amounted to thousand PLN (investments realized in ) and thousand PLN (investments in 2012). For comparison direct financing from budged for those periods was correspondingly: thousand PLN for and thousand PLN for KFD is therefore predominant source of financing of infrastructure development. The involvement of KFD will remain strong in coming years with assumed goals of million PLN expenditure for Qualitative effects Modernisation of road network to the standard of 11.5 N/axle, rebuilding of national road network. Motorways and expressways build in excellent standard. Type of impact: Economic (including wider Building on the concept that better infrastructure facilitates economic economic benefits) growth the following benefits could be identified: Better interconnectivity for passenger travel. Savings in VoT both passenger and cargo. More direct transport of goods. Improved logistics resulting in Just in Time operations. Better access to markets. Social Better access to administration. Better access to culture. Environmental Decreased fuel consumption and emissions due to reduced congestion. Increased fuel consumption and emissions due to overall growth in number of km travelled. The overall effect is unclear as the network is not yet completed and measurement could only be hypothetical anyway (comparison to hypothetical baseline scenario no investment and no new roads) Barriers and difficulties in Insufficient financial transfers to the fund. Escalation of road construction implementation : costs which created additional burden on the fund and led to postponement of many planned investments. The fund faces funding gap as incomes are

114 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 114 Social and political acceptability lower than expenses (for instance the perceived gap for 2012 will amount to as much as PLN). High Any additional information or comment Credit facilities for renewal of tourism infrastructure (FEDEA) The name of the measure: Credit facilities for renewal of tourism infrastructure Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Financial instruments for infrastructure investments Tourism industry is an important sector in the Spanish Economy and this measure, part of in the 'Spanish Tourism Plan Horizon 2020", supports the creation of a competitive and sustainable tourism sector. To do this, Financial instruments for infrastructure investments is designed to guarantee the sustainability of the Spanish tourist model in an international competitive environment. In Spain, there are mature tourist destinations and the measure pursues to drive the transformation of such destinations, to suit an increasingly competitive environment and to ensure the generation of economic, social and environmental benefits. Modernization plans will be developed in parallel by the local authorities and private tourism companies. They may also financially support projects that are developed in the framework of a conversion plan or comprehensive modernization of a mature tourist destination, which are performed by a consortium or entity organized for the purpose by the Central Government. Technically, the financial mechanism are the following: a) The social capital of companies that the Central Government may constitute or may participate. b) Loans of long duration with low interest rates and grace periods. c) The creation of a collateral to secure loans granted by the Official Credit Institute (ICO) in favour of the beneficiaries. Spain Ministry of Tourism, Energy and Industry The problem addressed was explained above. Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Tourism development policy National The aim of the measure is primarily to provide financial support for renovation and modernization plans of mature coastal tourist destinations. These plans are designed and executed by the joint initiative between Public Administrations and private sector. One important aspect is to determine what type of tourist destination can be considered as mature and therefore, it is suitable to receive the financial support. The tourist destination must have at least three of the following characteristics: Excess of urban and environmental overload. Over-exploitation of resources.

115 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 115 Obsolescence of tourist facilities. Low private investment in the tourism sector. Constant or decreasing tourist supply and demand. Financial feasibility The loans of long duration with low interest rates and grace periods will have the following characteristics: In case of local entities, public investment projects will be financed entirely, with a maximum limit of 6 million of Euros and a minimum of 300,000 per entity and year. In case of joint public societies, loans will have a limit of 25,000,000 per entity and year. Organisational/legal feasibility Legally, the beneficiaries will be public local entities, public local companies and local societies. Moreover, there other beneficiaries such as consortium or entities organized to implement projects that are developed in the framework of a restructuring plan or comprehensive modernization of a mature tourist destination, formed by Central Government Administration together with other public authorities or other public or private entities. Assumed effects: Quantitative effects To increase the international competitiveness of a central industry in Spain. Qualitative effects To increase the sustainability of the industry. To improve the diversity of the industry supply. Type of impact: Economic (including wider economic benefits) To increase the international competitiveness of the tourist industry what it has direct effects on economic growth considering the importance of this sector in the Spanish economy. Non-specified Social Environmental To improve the sustainability of the tourist destinations implies to improve the environment and to consider the environmental consequences of renewal on the destination. Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment No special difficulties considered in the implementation. High. This measure was discussed and approved by the Sectoral Conference of Tourism that includes public entities (Central Administration, Regional Administrations) Policy measures for improving labour productivity 3.1 Changes in education system Bologna process in the Netherlands (VU Amsterdam) The name of the measure: Bologna process in the Netherlands Sub- category: Measure Description: Changes in education system The Netherlands was among the Bologna group that proposed homologation of the higher education system in a large group of European countries. International student mobility forms an important part of this (Papatsiba 2006). The process started in 1999, and has by now been completed in most countries (Rauhvargers et al. 2009).

116 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 116 Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility The Netherlands, and other countries. The Bologna process is not an official EU policy, but partly financed by it. Ministry of Education (OC&W) Low acknowledgement of Dutch titles (single-phase structure led directly to a Master s, which posed problems), lack of possibilities to switch midway through studies, low (inter)national student mobility. Education policy National, with large role for individual universities. Students, graduates. The Dutch situation had an additional issue: the binary structure of higher education, with universities and hogescholen ( universities of applied sciences ). The former used to hand out the drs. title, now Master s degree; the latter gave no titles (with minor exceptions). Now both hand out Bachelor s degrees, and hogescholen feature small Master s programmes as well something they did through UK universities before the Bologna process started (Onderwijsraad 2000). Financial feasibility Total spending unknown, cannot be traced in accounts ( html) Organisational/legal feasibility Ministry of IenM prepares the list, but the list contains more projects than budget allows. The Minister is sometimes forced by parliament to adjust priorities, especially where regional equity is involved. Assumed effects: Quantitative effects No effects quantified on programme level. Qualitative effects Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment Increase international status of Dutch degrees; increase actual quality of graduates; increase student mobility (Schomburg & Teichler, 2011). Forming a European Area of Higher Education increases mobility and collaboration, and increases the competitiveness of European institutes of higher education (van Egmond, 2009). Increasing education is good for human capital, which in turn is important for innovation, productivity and growth. More international mobility increases European outlook (King & Ruiz-Gelices, 2003). More mobility will mean more travel, which might have negative environmental consequences. Process was voluntary (van Egmond, 2009), and universities had to do a lot of work for small direct benefits. Medium [ King, R. & E. Ruiz-Gelices (2003), "International Student Migration and the European 'Year Abroad': Effects on European Identity and Subsequent Migration Behaviour", International Journal of Population Geography, vol. 9, no. 3, pp Onderwijsraad (2000), Invoering Bachelor-Master Systeem in Het Hoger Onderwijs no /528, Onderwijsraad, Den Haag [

117 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 117 h.pdf] Papatsiba, V. (2006), "Making Higher Education More European Through Student Mobility? Revisiting EU Initiatives in the Context of the Bologna Process", Comparative Education, vol. 42, no. 1, pp Rauhvargers, A., C. Deane, & W. Pauwels (2009), Bologna Process Stocktaking Report 2009, European Commission, Leuven/Louvain-la-Neuve [ /follow-up-bologna-2009-leuven.pdf] Schomburg, H. & U. Teichler (2011), Employability and Mobility of Bachelor Graduates in Europe: Key Results of the Bologna Process: Springer van Egmond, J. (2009), Waarom Gaan Landen Over Tot Beleidsaanpassing Door Middel Van Harmonisatie? Een Casestudy Aan De Hand Van Het Bolognaproces in Nederland, MA dissertation, Utrecht University Government program of the contracted faculties (UG) The name of the measure: Government program of the contracted faculties Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Changes in education system Government program of the contracted faculties has been led since It supports faculties of study of key importance for the knowledge based economy. The programme covers the list of faculties in mathematical-natural and technical sciences (SMT), established by the Ministry of Science and Higher Education. Commissioned courses are for example: control engineering and robotics, biotechnology, building engineering, chemistry, physics/ engineering physics, power engineering, computer science, materials engineering, environmental engineering, mathematics, mechanics and machine design, mechatronics, environmental protection and industrial design. High Education Institutions (HEIs) who implement education on contracted faculties are selected in contests. HEIs leading contracted courses receive financial support. They implement projects improving attractiveness of education at SMT faculties due to: Creation of grant schemes for students (motivation scholarships for the best students - even PLN 1000 per month). Organization of compensatory courses for 1st year students for improving competences necessary to continue education at those faculties. Implementation of new or amended curricula. Study travels to companies offering employment to graduates. Participation in branch vocational trainings allowing students to acquire competence certificates from the industry. Participation of students in scientific and technical conferences. Modernization of laboratories and other education related infrastructure. Poland Ministry of Science and Higher Education ( ) The National Centre for Research and Development (

118 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 118 Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Poland has a relatively small proportion of graduates in the areas of exact science, math and computing, engineering, manufacturing and construction in the contrast to social sciences, business and law. Education profile of graduates is inadequate for the requirements of the labour market and knowledge economy. A mismatch between skills demand and supply has high economic and social costs and contributes to structural unemployment, lower productivity and thus competitiveness. It became necessary to stimulate demand for graduates of exact sciences and adjusting of education at the tertiary level to the needs of the economy and the labour market. Due to the low popularity of SMT faculties Ministry decided to encourage candidates to choose this career path through incentive scholarships and HEIs to prepare good education offers for students by financial support. Education policy National The aim of this project is to increase the popularity of math, natural science and technology faculties, thus ensuring a sufficient number of graduates prepared to work in selected sectors of the modern economy. Not applicable Financial feasibility The programme is co-financed from European Social Fund in the framework Human Capital Operational Programme (Sub-measure Increasing the number of graduates from faculties of key importance for knowledge-based economy). The total subsidies in the programme will exceed PLN 1 billion. Organisational/legal feasibility National Centre for Research is responsible for coordination and management of the contracted specializations program and conduction of competition for education institutions. For the competition must be prepared criteria for the evaluation of university s offers Assumed effects: Quantitative effects Qualitative effects Wider economic benefits Targets: Increasing to 22 % the proportion of graduates from mathematicalnatural science and technical faculties. Decreasing by 33% the share of students who do not continue education after first year of mathematical-natural science and technical faculties. Graduates are better prepared to take up work in the modern sectors of the economy. Type of impact: Economic (including wider economic benefits) Social Graduates from mathematical, natural science and technical faculties, which are most important for knowledge economy, play a key role in the development of the competitive position and innovation of Polish economy. Improving the quality of education drives the innovation, investment, technological change, enterprise development, economic diversification and competitiveness that economies need to accelerate the creation of more but also better jobs and thereby improve social cohesion. Better education improves the chances for a good job and higher wages, increases adaptability and occupational mobility, ensures higher social status and contributes to a better quality of life. For economy increases labour force participation rates and reduces unemployment rates, increasing social cohesion.

119 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 119 Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment Graduates in engineering (especially environmental engineering and environmental protection) have a greater environmental awareness, actively participate in the public consultation on the economics project. They promote improvement of environmental relationships and foster the implementation of standards ISO or EMAS The programme increased interest of graduates in SMT faculties. After three editions of the competition in contracted faculties a total of 60 thousand students were admitted at contracted courses. However technical studies are more difficult for students and many of them do not finish education. Next difficulty is insufficient cooperation between education institutions and business to increase qualifications of students by the practical vocational training High [ [ 3.2 Investments in human capital - training and adult learning Policy guideline for the funding of training of mariners (CML) The name of the measure: Policy guideline for the funding of training of mariners (Ausbildungsplatzförderung in der deutschen Seeschifffahrt) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Investments in human capital - training and adult learning Under the guideline the government can give a subsidy for certain trainee positions set up by a German shipping company. Funded is the training of: ship mechanics (Schiffsmechanikerin/zum Schiffsmechaniker), nautical officers (nautische Offiziersassisten), technical officers (technische Offiziersassistenen). For every trainee position filled on board of a ship a grant of: EUR for ship mechanics, EUR for nautical officers, EUR for technical officers can be applied for. Germany Bundesministerium für Verkehr, Bau und Stadtentwicklung (Federal Ministry of Transport, Building and Urban Development) Bundesamt für Seeschifffahrt und Hydrographie (Federal Maritime and Hydrographic Agency of Germany) Due to outflagging and high cost of training the offered number of apprenticeships for mariners by German shipping companies had been declining in the past. To maintain a high level of maritime expertise and knowledge in Germany it is assumed that sustaining a certain level of German nationals in maritime professions on board is necessary. Accordingly a sufficient number of nautical and technical mariners have to be trained per year. This requires that enough apprenticeship positions are provided by German shipping companies. In order to reduce the cost of setting up vocational training positions on a ship the government bears part of the cost. In return the shipping industry agreed to increase the number of training positions.

120 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 120 Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Organisational/legal feasibility Assumed effects: Quantitative effects Qualitative effects Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation: Social and political acceptability Any additional information or comment Nationalen Seeschifffahrtspolitik National ocean shipping policy National The measure aims to maintain or extend the number of vocational training positions within the German merchant fleet. This shall ensure that maritime knowledge is preserved and employment of German and European mariners is promoted. The target form an economic point of view is to ensure a quantitatively sufficient level of qualitative human capital for the maritime industry. The knowledge of seafarers and officers is of high value for the land based part of the maritime industry where many mariners take on positions after they retire form working on board. A ship has to be recognized as qualified for the training by the responsible authority. Budgets are allocated according to the first come first serve principle. A ship has to be: Listed in the German ship register and fly the German or an EU member state flag. Owned or chartered by a German shipping company. Ensure that a sufficient number of training positions within the German merchant fleet are provided. Accordingly a certain number of German nationals educated in maritime professions can be ensured in the future. Maintain a qualitatively high level of education of seafarers. The number of training positions could be increased with the introduction of the measure. In training contracts where sponsored which increased up to 292 in The downturn in the maritime industry in the wake of the financial crisis of 2007/2008 led to a decrease of training contracts. In where sponsored. Strengthening of the maritime industry by securing expert knowledge and experienced workers.

121 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Increasing labour market efficiency Active Labour Market Policies (VU Amsterdam) The name of the measure: Active Labour Market Policies Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Organisational/legal feasibility Assumed effects: Quantitative effects Qualitative effects Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment Increasing labor market efficiency Active Labour Market Policies programs to activate the unemployed exist across Europe, forming a central part of the Union s European Employment Strategy. Job search assistance, labour market training, wage subsidies and direct job creation in the public sector are four main strategies (Kluve, 2010). EU, Switzerland, Norway, but also in all other countries. Practical implementation differs. Mainly national government, often aided by (regional) labour offices, tax authorities, etc. Unemployment, with associated social issues. Employment policy National and below Reduce unemployment Different types of policies have different expectations of success (Kluve 2010). Reducing unemployment lowers welfare expenditure ( passive labour market policy ) and raises taxes. Some special budget is often available for youth and the disabled (Kluve 2010). Several countries within the EU spend more than 1% of their GDP on activating programs (the Netherlands leading with 1.85%), some countries spend considerably less (UK, Greece, Czech Republic tailing at.17%) (Kluve, 2010) Heterogeneous policies make it difficult to pinpoint specific legal issues. Reduce unemployment to the base level of frictional unemployment. Reduce associated social issues. Lower expenditure on welfare, higher tax income. Average productivity per worker may go down, as the quality of employees previously unemployed is typically below average. More social coherence. Increase in health of previously unemployed is possible but not guaranteed (Pavalko & Smith, 1999). None. The effectiveness of measures differs between long, medium and long term, and effects differ e.g., training seems ineffective in the short term, but is effective in the medium term (Card et al., 2010). Programmes also influence non-participants ( general equilibrium effects, Kluve 2010). High, although subsidies to employ the disabled have drawbacks (Lunt & Thornton 1994). Card, D., J. Kluve, & A. Weber (2010), "Active Labour Market Policy Evaluations: A Meta-Analysis", Economic Journal, vol. 120, no. 548, p. F452-F477 Kluve, J. (2010), "The Effectiveness of European Active Labor Market Programs", Labour Economics, vol. 17, pp Lunt, N. & P. Thornton (1994), "Disability and Employment: Towards an

122 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 122 Understanding of Discourse and Policy", Disability and Society, vol. 9, no. 2, pp Pavalko, E.K. & B. Smith (1999), "The Rhythm of Work: Health Effects of Women's Work Dynamics", Social Forces, vol. 77, no. 3, pp Teleworking for public firms in Flanders (TML) The name of the measure: Teleworking for public firms in Flanders Sub- category: Increasing labour market efficiency Measure Description: From m : In Belgium, the employers and workers organisations represented on the National Labour Council (Conseil National du Travail/Nationale Arbeidsraad, CNT/ NAR) concluded a collective agreement on teleworking that came into force on 1 July This new collective agreement, Collectieve Arbeidsovereenkomst (NL) or Collective de travail(fr), aims to lay down the key principles governing teleworking. It also contains various proposals on issues that need to be governed by laws or regulations, and which cannot therefore lie within the competence of the social partners. The agreement first sets out what is understood by teleworking. It is defined as a way of organising and/or carrying out work using information technology, and within the framework of a contract of employment under which the work could have been performed on the employer s premises, but is in fact performed off the premises on a regular, non-occasional basis. It follows that the agreement is not aimed at mobile workers, that is to say those like sales representatives, the representatives of pharmaceutical firms and home-call nurses, whose mobility is an integral feature of the performance of the contract of employment. Teleworking may be carried out at the teleworker s home or in any other place that she or he chooses, and will be performed on a voluntary basis as far as both the worker and the employer are concerned. A written agreement will need to be drawn up in respect of each teleworker. The existing contract of employment will have to be amended. Teleworkers shall enjoy the same rights in respect of terms and conditions of employment as comparable workers employed on the employer s premises. Specific (collective and/or individual) additional agreements may need to be concluded to take account of particular features of teleworking. The collective agreement also states that teleworkers shall be responsible for the organisation of their work within the framework of working hours that apply in the enterprise. The workload and performance criteria shall be equivalent to those for comparable workers employed on the employer s premises. The employer will be obliged to measures to protect the data used and processed by teleworkers for professional purposes, and will also have to inform teleworkers of the enterprise s occupational health and safety policy. Teleworkers will have the entitlements to training and career opportunities, and will enjoy the same collective rights, as workers employed on the employer s premises. Lastly, the collective agreement sets out how expenses relating to

123 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 123 Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation (international/national/regional/l ocal) Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Organisational/leg al feasibility Assumed effects: Quantitative effects Qualitative effects equipment, connections and communication and associated with teleworking will be borne. In Flanders there were in 2004, persons uncommon (less than half of the week) or usually (more than half of the work week, but not permanent) working from home, and can be considered as teleworkers. This number, in %age, is very low in comparison to the other European countries, such as the neighbouring countries such as Netherlands or Germany. Region of Flanders, Belgium Federal government (Ministry of Employment) Vlaams Kenniscentrum voor Telewerk Labour policy National, regional and local See description of measure The firm should create the right framework conditions to allow implementing teleworking in its working. Based on the survey in Flanders, two mains constrain in conducting teleworking are the nature of the job and human resource (HR) policy does not allow teleworking. ICT requirement does not seem to play too much role as technical constraint. (Source: Urbain, L., 2012, Telewerk in Vlanderen: A hell of a job?, Antwerp University) No See technical feasibility, i.e. HR policy. Decrease in congestion cost Decrease in other transport externalities (pollution, accidents) Type of impact: Economic (including wider economic benefits) Social Every year more than 900 million Euros are saved in Flanders thanks to teleworking in comparison to the situation without teleworking implementation. The biggest part of this saving (more than 850 million) comes from congestion avoidance. The rest come from pollution reduction and safety improvement. (Source: Verbeke, et. al, 2006, De impact van telewerken op de verkeersexternaliteiten in Vlanderen, Vrij Universiteit Brussel, Solvay Business School) A majority of teleworkers in Flanders evaluates their teleworking experience as positive, both in private as well as professional level. They emphasize the benefits in terms of increased productivity, reduced stress, better balance between work & private life, increased work motivation and certain autonomy in the implementation of working assignments. There is also the impact of teleworking on the employment opportunities of certain groups in the active population. Most employees are

124 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 124 Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment convinced that teleworking creates more employment opportunities for people with physical disability or handicap, rural area residents and for women with children. (Source: Walrave, M., M. De Bie, 2005, Mijn kantoor is waar mijn laptop staat: Mythe en realiteit van telewerk, PSWpaper 2005/9, Communicatiewetenschappen, Universiteit Antwerpen) Pollution reduction (see Economic ) No HR policy doesn t allow implementing teleworking. No 4. Policy measures improving productive environment 4.1 Improving entrepreneurship environment Special Economic Zones in Poland (UG) The name of the measure: Special economic zones (SEZ) Sub- category: Measure Description: Improving entrepreneurship environment A Special Economic Zone (SEZ) is a geographical region that is designed to export goods and provide employment. SEZs are exempt from federal laws regarding taxes, quotas, FDI-bans, labour laws and other restrictive laws in order to make the goods manufactured in the SEZ at a globally competitive price. The Polish SEZs are based on the simplicity and effectiveness of the tool being the tax exemption for businesses. The interested entities may conduct business activity on preferential conditions in comparison to conducting business activity outside the SEZ. The first SEZ in Poland was the one in Mielec, founded in All other SEZ operating in Poland were established in 1990s. Initially, the Council of Ministers established 17 SEZ, out of which 15 actually began operations. Currently 14 SEZ are still in operation in Poland. Preferential terms of business within the zones mean that investors can take advantage of state aid. Such aid is granted in the form of income tax exemptions and property tax exemptions. An income tax exemption means that businesses pay no tax on their income earned from operations within the SEZ between the date of permit and either the end of regional aid or the termination of the SEZ. Regional aid for a SEZ business may be also granted in the form of a real property tax exemption. This exemption is granted by the municipal authorities which adopts a relevant resolution. In that case, entrepreneurs wishing to get established in a SEZ should notify the competent tax authority of their intent to use this aid and should do so before commencing any investments. The rules of this exemption are defined in the Council of Ministers ordinance of 5 August 2008 on conditions of granting tax exemptions on real property tax and means of transport tax, representing regional investment aid (Dz.U. Polish Official Journal of 2008, No. 146 item 927). The real property tax exemption is also granted under the so called de minimis aid. Initially, SEZ were established for a period of 20 years. The existence of most zones was supposed to end in either 2016 or in The amended SEZ Act of 30 May 2008, which introduced significant modifications to zone regulations, extended the operation of SEZ until the end of 2020.

125 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 125 Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Fourteen Special Economic Zones have been created in Poland: (1) EURO- PARK Mielec, (2) Suwałki, (3) Katowice, (4) Legnica, (5) Łódź, (6) Wałbrzych, (7) Kamienna Góra, (8) Kostrzyn-Słubice, (9) Słupsk, (10) Starachowice, (11) Tarnobrzeg, (12) Pomeranian, (13) Warmia-Mazury and (14) the Krakow Technology Park. Ministry of Economy (Pursuant to Article 4 of the Act on SEZs a zone shall be established by means of a regulation of the Council of Ministers, issued upon request of the Minister of Economy). The initial assumption regarding the establishment of the SEZs was an increase in investment and economic recovery in selected locations. Over time, SEZs have emerged all across Poland, the result of which is the adjustment of the regulations to the needs of the SEZ investors. SEZ in Poland were established primarily in order to: Accelerate economic growth of the country s regions. Make use of post-industrial property and infrastructure. Create new jobs. Attract foreign investors. Regional and industrial policy The basis for creating SEZs in Poland is the Act of 20 October 1994 on Special Economic Zones, which indicates the rules and manner of establishing and managing of economic zones, as well as conducting business activity on the territory of the special economic zone. The detailed rules of the functioning of the zones are indicated in the legal acts regarding the individual economic zones. Local/regional The Polish governments efforts are aimed at increasing investment in the Polish economy, as well as promoting an increase in employment through new investments, both domestic and foreign. This has resulted in legal solutions aimed at promoting the Polish economy and creating conditions for investment development in SEZs. The main objectives of the zones are to restructure the old industrial regions, to activate lagging regions, to do productive research and scientific potential and to make use of already existing industrial infrastructure. Not applicable Financial feasibility The amount of aid granted under income tax exemptions has a limit defined as the eligible expenses and the maximum state aid intensity allocated for each respective zone. Eligible expenses are established on the basis of the costs of a new investment or the two years worth of labour costs for newly employed staff. State aid intensity is computed as the %age of eligible expenses. Maximum thresholds of state aid intensity are defined in the Council of Ministers ordinance of 13 October In Poland, those figures are higher than elsewhere in the EU given the lower GDP levels in the country. Organisational/legal feasibility From the point of view of the law, special economic zones constitute an administratively separate territory of the state, in which a special system of legal norms, the objective of which is to enable or facilitate the completion of the state s economic tasks and objectives, is in force. Assumed effects: Quantitative effects Developing exports. Creating new places of employment. Qualitative effects Developing new technical and process solutions and their implementation in the national economy.

126 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 126 Wider economic benefits Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation: Social and political acceptability Any additional information or comment Increasing competitiveness of goods produced and services rendered. Developing the existing industrial assets and economic infrastructure. Developing unused natural resources subject to environmental regulations. Developing certain areas of economic activity. By the end of June 2011, nearly 1,400 permits had been issued for all SEZ in Poland. Entrepreneurs operating in the zones had invested over PLN 75 billion and employed over 230,000 people. Since the very start, the zones showed a sustained upward trend in terms of the number of permits issued, expenditures incurred or the number of people employed. In recent years, this upward trend was distorted as a result of the global economic crisis. Some companies completely abandoned new investments whereas others suspended their decision about undertaking new investments for a few months or even a year or so. The analysis of the impact of the functioning of the SEZs in Poland on the economic performance at sub-region and county levels the following effects of the SEZs have been mentioned: The rate of unemployment in the SEZ regions is an average of 1.5 to 2.8 %age points lower in the case of sub-regions and 2.3 to 2.9 %age points lower in the case of counties. The level of GDP per capita is an average of approximately PLN 1,300 to 2,500 higher in the sub-regions in which the SEZs operate than in other sub-regions. This means that the sub-region where a SEZ is located has a 3.9% to 7.5% higher GDP per capita than the average GDP per capita in Poland in other sub-regions. The available data enables an assessment that tax exemptions in the SEZs are a relatively effective form of aid because the average level of support for enterprises in the SEZs is approximately 12% of capital expenditure incurred. In other words, every zloty of the tax exemption has resulted in more than PLN 8 invested in the SEZs. In 2010 the number of jobs in SEZ exceeded 225,000 and went up by 8% in comparison with the difficult year of The increase in the number of jobs was so significant that it allowed exceeding the figures recorded before the economic downturn. According to the declarations of SEZ boards in 2011 the number of jobs may increase by nearly 20,000 in comparison with 2010, which will be equivalent to a 9% increase. Promoting of innovative solutions, also eco innovations. According the study conducted by KPMG, investors operating in SEZ enjoy various incentives, most notably tax exemptions which drive high interest in the zones. However, given the applicable legislation, investors often face many problems which they would otherwise not experience. Last year, over a half of the entrepreneurs mentioned legal barriers and vague regulations, e.g. those related to taxation. [ [ [ [ CD0/%24File/446.pdf] [

127 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP Canary Islands Special Zone (ZEC) (FEDEA) The name of the measure: Canary Islands Special Zone (ZEC - Zona Especial Canaria) Sub- category: Measure Description: Location of measure implementation: Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Financial feasibility Organisational/legal feasibility Improving entrepreneurship environment The ZEC is a tax incentive of the Economic and Fiscal Regime (REF-In Spanish Régimen Económico y Fiscal) of the Canary Islands whose main purpose is to promote the economic and social development of the Islands and diversifying their production structure. Spain (Canary Islands). Ministry of Public Administrations and Regional Department of Economy and Finance. The Canary Islands Special Zone (ZEC) is an economic tool that is part of the Economic and Fiscal Regime (REF) of the Canary Islands whose main goal is to promote the economic and social development of the Islands through diversifying of the productive structure. The ZEC was authorized by the European Commission in 2000 and it will expire in Particularly, the most interesting tax benefits offered by the ZEC are: Reduction of Corporate Income Taxes to a fixed rate of 4% compared to 25% - 30% applied the rest of the Spanish territory. Exemption of Transfer Tax and Stamp Duty. Exemption from Canarian General Indirect tax (IGIC) for sales among ZEC businesses and for imported goods. Repatriation of dividends without restraint. Support with other tax incentives of the REF, as the Free Zones and the Canary Investment Reserve (RIC). Support for government aid and subsidies. Tax incentives policy It is a regional policy with international perspective. To promote the economic and social development of an outermost region trying to diversify the economic structure of the Canary Islands. Beneficiaries must be a newly-created entity with its registered address and effective management in the geographical ambit of the ZEC. At least one member of the administration must reside in the Canary Islands. It is necessary to create, at least, five job positions (in Gran Canaria and Tenerife) or three (on the other islands) during the first six months and this average must be maintained during the period of benefits. It is necessary to conduct activities that are permitted in the ZEC. It is necessary to present a descriptive report of the economic activities to be carried on, which justifies their solvency, viability, competitiveness and its contribution to the economic and social development of the Canary Islands. It must make a minimum investment of 100,000 (in Gran Canaria and Tenerife) or 50,000 (in the rest of the islands) in fixed assets related to the activity within the first two years, following registration in the Official Registry of ZEC Entities. It is needed a prior authorization to install a new firm in ZEC area. The procedure for obtaining prior authorization is initiated on presentation of the following documents at the offices of the Consortium: Application for authorisation to constitute a ZEC entity.

128 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 128 Report describing the economic activities to be carried out. Receipt of having made a deposit, or a guarantee, with the amount of the fee for registering in the Official ZEC Register. Assumed effects: Quantitative effects Number of companies: 415 Jobs undertaken within 3 years: Committed investment within 2 years: 627,179,502 Origin of its capital: Local capital: 41%. External capital: 49%. Mixed capital: 10%. Retail establishments: 19%. Qualitative effects Non-specified Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation : Social and political acceptability They are not clearly quantified. The main impact is to increase the creation of employment and to change the productive structure of the Canary Islands. Non-specified Non-specified No special difficulties in the implementation. High Any additional information or comment Pieken in de Delta (VU Amsterdam) The name of the measure: Pieken in de Delta Sub- category: Measure Description: Location of measure implementation: Improving entrepreneurship environment From 2004 to 2011, a regional component existed within national RTDI policy that was focused on turning existing regional strengths into economic 'peaks' of worldwide recognition. The policy document 'Pieken in de Delta' (PiD) described the economic agenda of the Dutch government in relation to six regions in The Netherlands. This document earmarked the start of a new Dutch approach to regional innovation policy, with the message that national resources were no longer to be used for regions to 'catch up' anymore, but rather to support regional strengths ('peaks') and (industrial) innovation. Netherlands. Focused on six core regions, with areas of lesser importance also indicated. (Map from Smit. 2010). Budget divided between national government and provinces (

129 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 129 Institution responsible for the measure implementation: Concept and problems addressed: Policy under which the measure is used: Level of implementation Assumed target: Conditions for implementation: Technical feasibility Ministry of Economic Affairs, after 2007 through Agentschap NL (NL Agency). However, for the northern Netherlands: SNN, which also distributes associated ERDF co-financing. Through this economic agenda focused on regional strengths the Dutch government wanted to contribute to establishing a dynamic and competitive economy, i.e. the Lisbon Agenda. Economic growth policy National, regional Peaks, actually pre-identified local clusters where specific sectors are strong. Clusters are regionally defined, with sectors grouped together. As an example: the East cluster comprises Food (Wageningen), Health (Nijmegen- Arnhem) and Technology (Enschede) Projects could apply for funding if they fell under one or more of eight tasks that had been pre-identified; among these, knowledge valorisation and expanding the knowledge infrastructure were the tasks counting the largest numbers of projects. Regional clusters had budget limitations (see below), but the shares of different sectors were not predefined. In the end, the allocation across sectors was as follows (Geerdink et al., 2010):

130 I-C-EU Impact of Transport Infrastructure on International Competitiveness of Europe contract number FP7 130 Financial feasibility Total budget was 300 million, distributed as follows by year and region (where NVR and ZVR are the Amsterdam and Rotterdam areas, respectively; table from Geerdink et al., 2010) for the first years: Organisational/legal feasibility Each of the six regional peaks has its own programming committee with up to ten members from the triple helix. Assumed effects: Quantitative effects Qualitative effects No targets had been set, and none were measured, but Geerdink et al. (2010) found that most project managers claimed their project would not have taken place without the subsidy. Type of impact: Economic (including wider economic benefits) Social Environmental Barriers and difficulties in implementation : Social and political acceptability Any additional information or comment Strengthening regional clusters in the triple helix is nowadays a standard method to increase local productivity and growth. As coherence and collaboration between firms and other stakeholders are fostered, agglomeration benefits increase. Some projects created extra employment, but mainly in the short term (Geerdink et al., 2010). Some collaborations were set up across sectors within the predefined regions, leading to possible Jacobs externalities (Glaeser et al., 1992). Regions left outside the programme might have suffered setbacks because of this. None The project finished in Medium. Some regions did not get to join the bandwagon. [ Smit, M.J. (2010), Agglomeration and Innovation: Evidence From Dutch Microdata, PhD dissertation, Vrije Universiteit, Amsterdam Boode, G., G. van Oortmarssen, M. van Leeuwen, L. Smeets, & W. Vergeer (2012), Tweede Evaluatie Pieken in De Delta, Agentschap NL, Den Haag [ default/files/terugkoppeling_pid_evaluatie.pdf] Geerdink, M., P. Krauss, J. Krebbebx, R. van der Mark, M. Soentken, & M. van der Wilt (2010), Pieken in De Delta: Evaluatie Subsidieregeling no , Berenschot [ b44f5d1b ] Glaeser, E.L., H.D. Kallal, J.A. Scheinkman, & A. Shleifer (1992), "Growth in Cities", Journal of Political Economy, vol. 100, no. 6, pp

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