Economic challenges in CENTROPE

Beyond the era of convergence: future challenges for a prosperous CENTROPE region

Transition to a “high-end” knowledge economy and deeper internal integration: the CENTROPE Regional Development Monitoring provides key recommendations for co-ordinated economic policies. Already the first results of the CENTROPE Capacity pilot project show its value as a tool for in-depth understanding of the economic situation in CENTROPE.

Albeit exhausting for the region, the recent financial and economic crisis has had at least the one positive effect of mercilessly revealing the strengths and weaknesses of CENTROPE as an economic area and thus helping to identify the measures that need to be taken in order to boost the economy and minimise cyclical risks. As Peter Huber of the Austrian Institute of Economic Research, representing the four-country research consortium of the pilot project, stated so clearly at the Győr Summit, returning to sustainable growth essentially means achieving lasting structural changes.

The knowledge economy as the foundation for a sustainable economic future in CENTROPE

Findings show that CENTROPE is fully engaged in the internal convergence process: the “new” EU Member State regions are rapidly catching up with the economic situation in Austria. CENTROPE thus increasingly resembles other European regions. Therefore the benefits resulting from the peculiar comparative advantage that had its source in the close proximity of highly developed Austrian regions and rapidly growing post-communist regions will soon be a thing of the past. In 2000, Vienna e.g. was still the area with the highest GDP per capita in the region (over € 14,000 in excess of the GDP of the second richest region, Bratislava). However, ten years later, Bratislava has taken Vienna’s position as the richest area.

Seen from this angle and in order to assure its international longer-term competitiveness, CENTROPE should primarily work on its transition towards a knowledge-based economy. Deeper integration of the research systems in the region and more collaboration among its numerous universities – which already are its undeniable asset – should be developed, and exchange programmes for researchers and students should be fostered. These measures would furthermore enhance the attractiveness of the region’s tertiary education facilities and might even prevent brain drain, which currently endangers CENTROPE’s economic stability – young people preferring to leave the region for other EU countries rather than stay or relocate within it.

Efficient use of FDI: a cornerstone of future policies

CENTROPE is also one of the most attractive European regions regarding foreign direct investments (FDI). Five out of the 15 “NUTS 3” regions in CENTROPE are among the top recipients of FDI in the EU, with Bratislava in the lead. Yet notwithstanding the success of CENTROPE in attracting these investments, only around 35% originate from within the region itself and only a small fraction of FDI received by the CENTROPE partner regions actually becomes part of value-added chains encompassing more than one CENTROPE country. This is mostly due to rather feeble interconnectivity within the region. This weakness can be tackled by efficient policies supporting cross-border entrepreneurial networks and platforms, which would help to tie FDI to the region more strongly and on a larger scale.

CENTROPE Pilot Project "Regional Development Report"