Enhancing Strategic Planning and Innovation Services

Executive summary

Romania’s eight development regions are each composed of vastly different economies, demographics and industrial structures. In 2021, gross domestic product (GDP) per capita in the Bucharest-Ilfov region was EUR 28 300, more than double the national average of EUR 12 600 and over 3 times larger than the least-performing region (North-East), with a GDP per capita of EUR 8 300. The majority of Romanian regions also lag behind OECD averages, with lower GDP per capita and labour productivity, and the European Commission’s Regional Innovation Scoreboard classified all eight regions as “emerging innovators” – the lowest performing category of the Scoreboard – in 2023. In addition, Romania’s population has been shrinking since 2012, by around -0.6% per annum, and by more in the southern and western parts of the country. Only Bucharest-Ilfov has managed to avoid population loss in the last decade.

Romania’s counties and municipalities – the two tiers of subnational government – are critical investors in their regions’ development. In 2020, subnational government investment represented over half of the total public investment in Romania and 2.5% of its GDP, in line with the OECD average (54.6% and 1.9% respectively). However, many of them, especially small towns and communes (municipal level), have limited capacity to manage and implement public investment. Romanian municipalities are relatively small, averaging fewer than 7 000 inhabitants, and county councils are responsible for the overall co-ordination of their constituent local councils. The large number of municipalities in each county (over 75 municipalities per county on average) also places significant capacity demands on the counties. Stronger co-ordination among these subnational government units at the regional level could help address capacity gaps and optimise investment outcomes to advance regional development goals.

Romania’s eight Regional Development Agencies (RDAs) are non-governmental, non-profit organisations accountable to their region’s Regional Development Council, on which representatives from the relevant county and local councils sit. The RDAs are professional, well-established institutions respected by leaders and stakeholders, and with excellent knowledge of their respective regions. Among their diverse responsibilities are drafting regional development plans and smart specialisation strategies (S3), supporting innovation actors to design and implement innovation initiatives, and fostering partnerships among regional and local actors. For the 2021-27 EU programming period, the RDAs have taken on the role of Managing Authorities for European Union Cohesion Policy Regional Programmes. Each RDA will be responsible for managing over EUR 1 billion to advance development in its region and design investment programmes that are specifically tailored to its development needs.

Key findings

Romania’s RDAs are well-positioned to take on additional regional development responsibilities, but their capacities will need to be further developed and expanded. Implementing regional-level strategies (i.e. regional development plans and Smart Specialisation Strategies) to advance regional priorities is complex and depends on mobilising a wide range of actors (e.g. counties, municipalities, businesses, civil society, academia, clusters and, to some extent, national actors that fund regional development and innovation initiatives) to deliver the initiatives proposed in the strategies. This complex environment, combined with insufficient financial resources dedicated to regional development initiatives, calls into question the likelihood of regional development objectives being met. According to the various regional development plans, there is an estimated investment need of EUR 12.3 billion by 2027 in the Bucharest-Ilfov region, EUR 3.7 billion in the North-East region, EUR 5.5 billion in the West region and EUR 8.2 billion in the South-Muntenia region. However, there is no dedicated budget for regional development plans. Cohesion Policy funds for the 2021-2027 Regional Programme are the only funds which RDAs can fully dedicate to implementing the regional development plans. However, these funds provide, on average, EUR 1.4 billion per region. To address the funding shortfall, RDAs will need to mobilise the national government, regional and local actors to access the additional resources required to support regional development activities.

Strengthening innovation can also help address regional disparities. Innovation is a fundamental driver of productivity growth, and its role is likely to be strengthened as production becomes increasingly digitalised, and as countries and regions advance in their green and industrial transitions. However, the innovation ecosystem of each Romanian region varies widely and is not always fully understood by policy makers and stakeholders. Many stakeholders equate innovation with high-tech sectors and scientific research. This can limit the pool of innovation actors, lead to difficulties for the RDAs offering support to these actors, and impede the ability of regions to reach their innovation potential.

Key recommendations

The RDAs are well-established entities with a deep knowledge of their region’s strengths and challenges, as well as longstanding relationships with these actors. Building on these assets the RDAs need to establish a renewed focus on ensuring the effective implementation of regional development strategies and a targeted approach to innovation services through two main areas:

1. Increase the quality and impact of their regional development plans and capitalise on the Regional Programmes and their close relationships with regional and local stakeholders.

• Promote a vision for their region in a succinct manner among stakeholders, clearly link financial resources to regional initiatives, and set out robust monitoring and evaluation frameworks, which could be communicated to a wide range of stakeholders to demonstrate progress in achieving the regional vision.

• Provide more input on major projects of strategic significance for their regions (e.g. infrastructure and those that support innovation ecosystems) and play a stronger co‑ordination role among county and local authorities, such as initiating and facilitating cross-jurisdiction co‑operation.

• Use the Regional Programmes to demonstrate regional-local synergies and encourage local actors to invest in projects that could complement regional ones. This requires the RDAs to closely engage with stakeholders when designing calls for investment proposals, understand their capabilities and capacities, as well as offer them more tailored support related to technical expertise and project management.

• Promote coherence between regional and local development strategies by, for example, conducting capacity-building initiatives with local governments on how to design local development plans based on needs while aligning with regional priorities.

2. Use region-specific, long-term innovation strategies to engage regional actors, improve their understanding of innovation’s benefits and provide support services tailored to their unique circumstances. A long-term approach is particularly important because the potential benefits of innovation support will require several years to be realised.

• Improve RDA employee knowledge and skills in innovation and innovation support by, for example, mapping and analysing the staff skills, experience and areas of expertise required to improve RDA capacity for regional innovation support.

• Map the existing innovation ecosystem to better understand its precise makeup and identify opportunities for collaboration. For example, RDAs could develop an online survey of quadruple helix actors to gather information on regional innovation ecosystems, their needs and challenges. This could lead to an inventory of the specific characteristics and needs of all quadruple helix actors in the region, including their distribution across different sub-regions. It could also help identify the innovation mix that could best help advance development in each region.

• Enhance the RDAs’ position as network leaders and reinforce their position, improve connectivity and strengthen existing innovation partnerships and collaborations. A regional survey of the current population of innovation actors and their dynamics is an important first step that all RDAs could undertake to better understand regional innovation needs.

• Develop and strengthen an innovation brand for the region through repeated, targeted and easily digestible messages. Doing so will require RDAs to pursue continuous interactions with innovation stakeholders to build and solidify productive relationships, as well as design, organise and facilitate events and discussions to help improve knowledge and trust across quadruple helix actors.

Beyond the RDAs – Key recommendations to higher-level bodies

RDAs need support from both ROREG and the national government to succeed. ROREG should work with the RDAs to strengthen capacity, particularly in stakeholder engagement, monitoring and evaluation. It is in a good position to facilitate deeper and more regular exchanges to help RDAs overcome knowledge and capacity gaps through mutual learning and the sharing of good practices, both from other regions as well as countries. By doing so, ROREG itself would gain valuable insights on the key challenges, skills gaps, needs and requirements that span across the RDAs and thus be able to better support RDAs with initiatives designed and delivered in a more effective and targeted way. ROREG is also in an ideal position to champion common RDA needs and initiate greater assistance from the national government. Many of the barriers faced by RDAs, such as a cumbersome strategic planning methodology and poor access to local and regional data, have roots at the national level and are similar across regions. ROREG could leverage its experience more strongly as an advocate for all RDAs to have greater influence in technical matters affecting RDA performance and regional development. For example, ROREG could work with the RDAs, the Ministry for Development, Public Works and Administration, Ministry of European Investment and Projects, and the National Institute of Statistics to develop an updated methodology for regional planning, as well as to identify regional data gaps.

In conjunction with more active support from ROREG, Romania’s RDAs could benefit from stronger investment co-ordination by the national government to promote synergies between regional development plans and funding decisions made by national ministries. The national government could collect and publish a wide range of regional and local data, which would contribute strongly to addressing identified regional data gaps. It can also consult RDAs and ROREG more actively on major new policies and investments. Many national initiatives have specific regional implications. A better understanding of upcoming projects can help in drafting long-term plans and provide better services and information to stakeholders. Ultimately, RDAs can help support national government programmes and projects but require information about their potential impacts and opportunities.

In the medium- and long-terms, ROREG and the national government could further support RDAs to access additional resources and fund projects that can advance regional development in addition to those associated with Regional Programmes. This could include creating a central fund dedicated to regional development, supporting RDAs in exploring of new investment partnerships or contracts with the private sector, and facilitating the pooling of resources for public investment among county and municipal authorities within each region.