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Roberto Villarreal, Ph.D.
Presentation for Reflection and DiscussionInstitute of Electrical and Electronic Engineers (IEEE), New York Section
New York City, 27 July 2010
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2
◦
All responsibility for the contents of this presentation is solely theauthor’s, as these may not necessarily reflect the official positionof institutions where the author has collaborated or is presentlyassociated with.
◦ Head of the Units for Public Sector Investment, and Privatization (Ministry of Finance, FederalGovernment of Mexico, 1995-1997)
◦
Member of the Board in several parastatal enterprises and regulatory commissions of Mexico (oil andgas, electricity, railroads, airlines, water, rural development, technological research, etc., from 1995 to2007)
◦ Head of the Unit for Social and Regional Development (Office for Public Policies, in the Office of thePresident of Mexico, from 2002 to 2005)
◦ Undersecretary for Urban Development (Secretariat for Social Development, Federal Government of Mexico, 2006)
◦ Liaison of the Federal Executive with the Senate and the National Governors Association in Mexico , in a
task force to reform the National Planning Law to address regional development strategies (2006)◦ Head of the Division for Territorial Development at the Organization for Economic Cooperation and
Development (OECD, Directorate for Government and Territorial Development, 2008)
◦ Chief of the Branch for Development Management (United Nations, Department for Economic and SocialAffairs, Division for Public Administration and Development Management, 2009-2010).
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Thanks for the kind invitation to make this presentation
◦ Institute of Electric and Electronic Engineers (IEEE), New YorkSection
◦ In particular, to Amitava Dutta-Roy, Ph.D., who contacted me and
was in charge of all communications and preparations
The objectives are to foster:
◦ An interdisciplinary analysis on regional development
◦ Some knowledge sharing and learning
◦ Perhaps, networking to strengthen an active community of practice on regional development management
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
4
1.
INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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Development is a very complex process aimed atrising the living conditions of people
◦ Improving standards of life
Private goods and services: Food, housing, clothing, energy, transportation…
Public services: Education, healthcare, water, sanitation…
Public goods: Security, clean and safe environment…
◦ Enhancing freedoms and rights
Human rights: rights to life, physical integrity, self-determination, equalitybefore the Law, non-discrimination, transit, private property, justice…
Social rights: Education, health, decent work, social insurance andprotection…
Political rights: Freedoms of expression, association, petition before publicauthorities, vote and be voted in elections for public office, access to publicinformation…
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Development is gradual and can assume manydifferent styles
◦ Some basic attributes to be considered comprise:
Dynamism Inclusiveness
Equity
Sustainability
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Development is fostered by the people◦ Acting as individuals, or organized in many different forms to
pursue specific tasks
Community organizations, firms, corporations, labor organizations,
producers associations, consumers associations, schoolassociations, professional associations, sports clubs, other types of civil society organizations, political parties, etc.
◦ Success* depends on a variety of fundamental factors:
Skills and knowledge
Attitudes and values Organization and coordination
Rules, informal and formal institutions
Vision, creativity and leadership
7* Specifically, in their efforts to pursue development, both inexclusive (private) and non-exclusive (public) matters.
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◦ One very important and particularly complex organization
among these is government Constituted to deal, on behalf of the people, with public affairs
Delivering determined public goods
Security, maintenance of the Rule of Law, justice, public health, monetary system,macroeconomic and financial stability, international relations, etc.
Securing, through public policies, an adequate provision, by both non-
government and government stakeholders, of goods and services of fundamental importance for development
Water, sanitation, healthcare, transportation, telecommunications, energy, scienceand technology research and development, etc.
Providing public administration on determined matters
Taxes, public budget, public finance, registrations, licenses, permits,concessions, public information, etc.
To these aims, people need to secure that effective conditions are permanently in place to maintain an effective and satisfactory people- government relationship Responsiveness, people-centered approaches to public administration and
development, transparency, accountability, efficiency, engagement of non-government actors in specific activities, etc.
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
9
1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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HIGH INCOMESLOW GROWTH
II
HIGH INCOMEFAST GROWTH
IIII
IV LOW INCOMESLOW GROWTH
LOW INCOMEFAST GROWTH
* Territorial Level 2 (TL2, equivalent to Federal States in Mexico). The referenceaxes to distinguish the quadrants correspond to the average income level and theaverage growth rate among all TL2 OECD regions.
Federal States, Mexico.
Other TL2 OCDE regions.
Level of per capita income, log-values in 2005
E c o n o m i c g r o w
t h r a t e s , a n n u a l a v e r a
g e 1 9 9 5 - 2 0 0 5
LEVELS AND TRENDS OF PER CAPITA INCOME IN OECD REGIONS*,1995-2005
SOURCE:Villarreal and
Sanchez-Reaza,OECD (2008)
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There are several reasons:
◦ Equity: to offer people in different regions opportunities toattain comparable living conditions
◦ Efficiency:
to facilitate the use of untapped resources in some regions to benefit from positive inter-regional externalities and reduce
negative ones Environmental, social, local public finance, market access, etc.
◦ Cohesion: to preserve unity and solidarity within regions in
a supra-regional coalition country level large inter-national regions globalization
11
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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A region is essentially constituted (and is to bedetermined) by 3 fundamental elements◦ Territory◦ Resources◦ Governance
◦ Regions and administrative-political demarcations need notgeographically coincide Sub-national
Metropolitan regions
Supra-national or international
◦ Approximating a region by the largest administrative-political demarcation in its territory may seem to makepractical sense in some cases, yet this approach risksoverlooking crucial aspects of resources and governancethat fundamentally affect its development
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Territory
◦ Topology Location
Bordering and farther away regions
Size
Integration Continuity
◦ Geography Surface and beneath features
Climate
Natural risks
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STATICFEATURES
DYNAMICFEATURES(opportunities
for publicpolicy
interventions)
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Resources
◦ Natural Land Water Mineral Energy Ecosystems
◦ Human/social Population Skills and knowledge
Technologies
Culture and values Governance
◦ Economic Physical capital
Infrastructure
National or internationalsavings and finance
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……………………………… Wooden, agricultural, arid, etc.
……………………………… Salt, soft; underground, rivers, lakes, seas; rain, etc.
…………………………… Coal, hydrocarbons, gas, hydraulic, eolic, solar, etc.
……………………… Different supports for biodiversity
……………………… Size, age, sex, growth, migration, settlements, etc.
……… Education, training, learning attitudes, etc.
………………… Orientation to science, R&D, innovation, etc.
………… Beliefs, traditions, aspirations, historical experiences,social psychology, relationships, do’s and don´t’s,etc.
………………… Constructions, machinery and equipment forexclusive use.
………………… Constructions, machinery and equipment for non-exclusive use (in water and sanitation, transportation,telecommunications, energy, public health, publiceducation, public administration, security anddefense, etc.
Produced goods and services kept for future use byproducer or made available to others
……………… Each in many different types: Resources
◦ Natural Land Water Mineral Energy Ecosystems
◦ Human/social Population Skills and knowledge
Technologies
Culture and values Governance
◦ Economic Physical capital
Infrastructure
National or internationalsavings and finance
MOTHNMOLTO
OYNRAHRCOTYWA
(o
uteopcpcnevo
MOREINFO
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
16
1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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Infrastructure consists of diverse facilities to
perform support activities, which bundled, permitthe production and delivery of determined services extraction, collection, storage, processing, transportation and distribution of water, for agricultural,
industrial, urban or human uses
loading and unloading, fueling, dispatching, transit, monitoring and parking vehicles for land, rail,water or air transportation
extraction, transportation and processing of carbon, oil or gas as primary sources for the production of
energy, in the forms of heat or electricity
processing of primary energy from nuclear, wind or solar sources for generation of electricity
transportation and distribution of electricity
transmission and processing of signals to provide fixed or mobile telephony or internettelecommunications
collection, transportation, processing and treatment of solid or liquid residual materials of differentgrades of toxicity, as part of the maintenance of conditions of sanitation and public health
first, second and third level medical and para-medical interventions for healthcare
research, codification and dissemination of new knowledge, and education and training of professionals, for scientific and technological innovation
Etc.
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Infrastructure investments exhibit important specialcharacteristics
◦ Planning Long gestation lags
Technical complexity
Long useful life
◦ Finance High capital intensity
Capital costs constitute a large proportion of total unit service cost
(continues…)
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◦ Strong linkages of infrastructure to regional development
Non-moveable, their services circumscribed to determined technicaland economic efficiency geographical ratios
Rates of utilization and return largely dependent on (uncertain)local/regional demand
High income-elasticity (demand for these services growths proportionatelyfaster than local/regional income)
Unless installed capacity evolves closely with regional growth, lowutilization and return rates would be attained, or supply bottleneckswould be observed
As a result, as long as demand or market risk is considerable, capital costs are
relatively high and services prices tend to be also high
Given that infrastructure services are usually inputs to production ordistribution activities for all industries, as well as for final consumption, thesituation in which service prices are relatively high is very worrisome
It impacts negatively on regional competitiveness and wellbeing
(continues…) 19
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◦ Infrastructure industries require regulation to address situations of potential abuse of market power*
SUPPLY SIDE: Production of services from infrastructure inmany cases exhibit considerable economies of scale Efficient production tends to be concentrated in few large
producers
Competition within determined geographical ratios is low
DEMAND SIDE: Services from infrastructure often have few andinefficient substitutes Low price elasticity: service demand lowers relatively slightly when
prices increase
Thus, production and demand features make it likely that
monopolistic pricing occurs Consequently, public regulation is needed to attain fair and efficient service
prices
This adds regulatory risk, and in turn rises capital costs and servicecosts, depending on the quality of regulation and predictability of itsenforcement
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* Of course, there are needs for other types of regulation stemmingfrom matters like public safety, service quality and consumer
protection. These are not discussed here to keep focused on the mostimportant matters for regional development.
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
21
1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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Public governance for development◦ consists in the set of informal or formal rules,
mechanisms, regulations, laws and institutions bywhich decisions are made by all stakeholders on
matters related with development affairs
◦ Thus, it is not circumscribed to decision making bygovernment or within the government sector
Rather, it encompasses overall decision making by allrelevant stakeholders
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Public governance may exhibit different features
over time and across regions◦ So, some forms of public governance may be in some cases
more or less conducive to development and affect itattributes Dynamism
Inclussiveness
Equity
Sustainability
◦ Among key elements of good or effective governance are thefollowing:
1. Laws and regulations which are adequate*, clear and effectivelyapplied
2. Well functioning legal and juridical system for the delivery of justice and the enforcement of contracts and property rights
(continues)
23*In the sense that they relate to existing culture and values, arerealistic in terms of compliance costs and enforcement, etc.
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◦ Among key elements of good or effective governance are thefollowing (continued…)
3. Responsive, efficient, transparent, accountable andcoordinated* government
4. Sound public finance, with tax and public incomeproportionate to the efficient cost of public goods andservices that are required
5. Adequate and effective regulations on land use, and soundrules for transparent and efficient planning of infrastructure
6. People-public-private partnerships (PPPP)
7. Adequate and effective means for consultation, informationsharing and engaging of civil society and the private sector
in public decision making8. Stable economic and financial envirinment
9. Good financial markets (credit, capital, leasing, etc.)
10.Fair and effective ways for resolution of conflicts andcontroversies
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Multi-level governance1
◦ Government is usually organized in different levels (forinstance, national, state, local) and over differentdemarcations
Historically these tend to be constituted following notions of sovereignty, acquired rights, power, bounded autonomy,culture, etc.
This reflects in diverse constitutional arrangements which define the
roles for each government levels, their responsibilities and faculties
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Multi-level governance3
Re-organizations of government at several levels take place onexceptional extraordinary cases, and sometimes political-administrative demarcations are simultaneously re-structured
Leading considerations come from regional development needs
Horizontal re-structuring (across entitities at every level of government)
Aimed at enhancing uniform and effective implementation anddelivery of public policies
Public expenditure and finance, public services, etc.
Examples
Metropolitan regions: Toronto, Ottawa, Milano, Paris, Mexico City,etc.
Inter-state regions: Canada, Mexico, etc.
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Multi-level governance4
Vertical re-structuring (across levels of government)
Intended to distribute and combine responsibilities among the supra-national, national and sub-national levels in ways that best use of theircomparative advantages
leverage on law making and regulation
capacity to generate tax and public income
knowledge of specific development priorities and investmentneeds
capacity to make multi-stakeholder partnerships, etc.
27
NATIONAL
LOCAL
Effective coordination implies collaboration and communicationwithin and across levels of government
to jointly support a shared vision of development, both horizontallyand vertically
Political factors (redistribution of power) may work in differentdirections and facilitate or hinder these changes
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Multi-level governance5
◦ Engagement of non-government actors (private sector, civil
society, international organizations, etc.) is important toenhance regional development strategies
To improve public information for decision making Needs and priorities
Proposals, initiatives, new ideas
To bring in additional resources for investment Public private partnerships
Strategic projects (infrastructure, science and technology research anddevelopment, social integration, etc.)
To constitute checks and balances on public sector decisions
and actions Monitoring, evaluation, social auditing
Reduce inefficiencies
To strengthen accountability
To extend and diversify ownership over strategies, thus
reducing opposition and favoring their continuityover time 28
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Multi-level governance6
◦ Engagement of non-government actors to be fully successfulrequires:
Presenting to everyone a positive net gain investment from their time
By design, regional development strategies should provide gains for adiverse community of stakeholders and not only to narrowly definedgroups
Fair and inclusive methods to attract participation To avoid corruption and capture of public strategies by interest groups
Preserving commitment, trust and continuing support
Accountability is fundamental, to effectively observe expected results
Transparency, including timely reporting and disclosure of impartialperformance, output and outcome evaluations
Efficient organization of the participation and engagement of thesenon-government stakeholders, as well as effective coordination withcorresponding government actors
Multi-lateral contracts (alliances, covenants, partnerships), councils orobservatories, online forms of e-participation, etc.
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
30
1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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Macroeconomic policies are not enough to achievedynamic, inclusive, equitable and sustainable
development
◦ Monetary policy, trade liberalization, social protection, etc.
◦ Evidence from all countries shows that development andgrowth remain regionally uneven (and there is no convergence)
Need to complement coherently with other policies
◦ International experience shows that mechanical incometransfers or subsidies to lagging regions have majordisadvantages*
If operated on scales to significantly narrow inter-regional gaps,these policies are not sustainable over long periods of time
Constitute inefficient use of scarce fiscal and financial resources
Provide inadequate incentives to both lagging and progressingregions
31
* Although politically, and election wise, may be attractive in somecircumstances for politicians.
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◦ Rather, international attention is increasingly directed to otherkinds of public interventions at the regional level
Seeking to enhance in permanent manners competitiveness, incomegrowth, private investment, job creation and fiscal revenues
Most common public policies in this regard include:
A. policies to enhance local public goods (safety, law enforcement, publichealth, social cohesion, clean and safe natural environment, culture of innovation, public information dissemination, etc.)
B. policies to enhance governance
Effective government organization and coordination
Local government quality (responsiveness, efficiency, transparency,accountability, etc.)
Institutions, procedures, actions to facilitate cordination among non-government stakeholders and between these and government
Adequate local laws and regulations
C. policies to increase human capital
• Besides its local importance, it s portable and thus efficient under uncertainlocal conditions, and fair to people
(continues) 32
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D. policies to provide sufficient, efficient annd quality servicesfrom infrastructure*
• Based on the analysis offered in Section 4 of this presentation,policies to this aim would look at:
1. Disseminating trustworthy information about likelyperspectives of development in the region, as to diminish
demand risk or uncertainty
• This may be achieved on the basis of:
• laws and regulations that result in credible planning in specificsectors
• public strategy making and delivering, supported by wide
consensus among relevant stakeholders
• Regional multi-stakehioilders councils, observatories,conferences, etc.
33
* This is is evidently a different focus than expanding
local infrastructure or increasing investment
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2. Having clear and sound criteria and policies regarding theroles of public and private investments in infrastructuresectors and projects
• Considering constitutional, legal and strategic frameworks
• Looking at the overall public investment budget and public debttrends
• Prioritizing public resources to regions with weaker regional
development perspectives, and within these prioritizing projectswith highest rates of socioeconomic return
• Looking at the feasibility of promoting private infrastructure orefficient public-private partnerships• Assessing public regulatory capacity
• Directing private resources to regions with stronger development
outlooks• Enforcing adequate public regulations, in ways that minimize
regulatory risk and corruption
• Promoting adequate finance in terms of sound contracts and funding
• Overall investment risks must be efficiently shared amonginvestors, owners and public authorities
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E. policies to maintain an open, inclusive andcompetitive economic and social environment
• Economic competition
• Transparent government
• Anti-corruption mechanisms
• Social inclusion programs
•
Political competition
F. Organized engagement of diverse non-government actors (private sector, civil society,international organizations)
Transparency and accountability Enhanced information for decision making
Innovation
Ownership of strategies, support and continuity
Better governance
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1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
36
1. INTRODUCTION
2. WHY IS REGIONAL DEVELOPMENT IMPORTANT?
3. BASIC CONCEPTS ON REGIONAL DEVELOPMENT
4. A CLOSER LOOK AT INFRASTRUCTURE
5. ATTENTION TO PUBLIC GOVERNANCE
6. WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT?
7. FINAL REMARKS
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Promoting regional development is important globally andfor countries to enhance the living conditions of thepeople◦ Creativity and leadership are called for
There are no scientifically researched proposals on how to
promote it◦ But there is significant activity and innovation going on at sub-
national, national and supra-national levels in different parts of the world
It would be extremely valuable to create a world repositoryof knowledge to be publicly available online, to facilitateinformation sharing on existing practices◦ Professionals in infrastructure sectors, regional development
management and public administration, as well as academicresearchers in these areas, can make numerous contributions,stemming from respective communities of practice
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CLASSES OFRESOURCES
STATIC DYNAMIC
IN THE PAST NOW IN THE FUTURE IN THE PAST NOW IN THE FUTURE
BOVILITYMinerals
Energy
Minerals
Energy
Water
Internationalsavings
Finance
Internationalsavings
Finance
Population
Knowledge
Technologies
Internationalsavings
Finance
Population
Knowledge
Technologies
Skills
NOMOBILITY
Land
Water
Minerals
Energy
Ecosystems
Land
Water
Ecosystems
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