Roberto Villarreal, Ph.D.

Presentation for Reflection and Discussion Institute of Electrical and Electronic Engineers (IEEE), New York Section New York City, 27 July 2010

 All responsibility for the contents of this presentation is solely the authors, as these may not necessarily reflect the official position of institutions where the author has collaborated or is presently associated with.

Head of the Units for Public Sector Investment, and Privatization (Ministry of Finance, Federal
Government of Mexico, 1995-1997)

Member of the Board in several parastatal enterprises and regulatory commissions of Mexico (oil and Head of the Unit for Social and Regional Development (Office for Public Policies, in the Office of the
President of Mexico, from 2002 to 2005) Mexico, 2006)

gas, electricity, railroads, airlines, water, rural development, technological research, etc., from 1995 to 2007)

Undersecretary for Urban Development (Secretariat for Social Development, Federal Government of 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) Development (OECD, Directorate for Government and Territorial Development, 2008)

Head of the Division for Territorial Development at the Organization for Economic Cooperation and Chief of the Branch for Development Management (United Nations, Department for Economic and Social
Affairs, Division for Public Administration and Development Management, 2009-2010).

Thanks for the kind invitation to make this presentation

Institute of Electric and Electronic Engineers (IEEE), New York Section 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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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

Development is a very complex process aimed at

rising 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, equality before the Law, non-discrimination, transit, private property, justice Social rights: Education, health, decent work, social insurance and protection Political rights: Freedoms of expression, association, petition before public authorities, vote and be voted in elections for public office, access to public information

Development is gradual and can assume many different styles

Some basic attributes to be considered comprise:
Dynamism Inclusiveness Equity Sustainability

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, school associations, 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

* Specifically, in their efforts to pursue development, both in exclusive (private) and non-exclusive (public) matters.

 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 Securing, through public policies, an adequate provision, by both non Security, maintenance of the Rule of Law, justice, public health, monetary system, macroeconomic and financial stability, international relations, etc.

government and government stakeholders, of goods and services of fundamental importance for development

Providing public administration on determined matters

Water, sanitation, healthcare, transportation, telecommunications, energy, science and technology research and development, etc.

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 peoplegovernment relationship

Responsiveness, people-centered approaches to public administration and development, transparency, accountability, efficiency, engagement of nongovernment actors in specific activities, etc.
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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

LEVELS AND TRENDS OF PER CAPITA INCOME IN OECD REGIONS*, 1995-2005

Economic growth rates, annual average 1995-2005

III

LOW INCOME FAST GROWTH

HIGH INCOME FAST GROWTH

IV

LOW INCOME SLOW GROWTH

II
Level of per capita income, log-values in 2005

HIGH INCOME SLOW GROWTH

* Territorial Level 2 (TL2, equivalent to Federal States in Mexico). The reference Federal States, Mexico. axes to distinguish the quadrants correspond to the average income level and the Other TL2 OCDE regions. average growth rate among all TL2 OECD regions.

SOURCE: Villarreal and Sanchez-Reaza, 10 OECD (2008)

There are several reasons:

Equity: to offer people in different regions opportunities to attain 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

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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

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A region is essentially constituted (and is to be determined) by 3 fundamental elements

Territory Resources Governance

Regions and administrative-political demarcations need not geographically coincide

Sub-national Supra-national or international
Metropolitan regions

Approximating a region by the largest administrativepolitical demarcation in its territory may seem to make practical sense in some cases, yet this approach risks overlooking crucial aspects of resources and governance that fundamentally affect its development
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Territory
Topology

STATIC FEATURES

Location Bordering and farther away regions Size Integration

Continuity
DYNAMIC FEATURES
(opportunities for public policy interventions)

Geography

Surface and beneath features Climate Natural risks

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MOST HAVE NO MOBILITY, OR ONLY IN RATHER COSTLY WAYS

(opportunities for public policy interventions)

Each in many different types: Resources

Natural
Land Water Mineral Energy Ecosystems
Wooden, agricultural, arid, etc. Salt, soft; underground, rivers, lakes, seas; rain, etc. Coal, hydrocarbons, gas, hydraulic, eolic, solar, etc. Different supports for biodiversity

Human/social

Size, age, sex, growth, migration, settlements, etc. Population Education, training, learning attitudes, etc. Skills and knowledge

Culture and values Beliefs, traditions, aspirations, historical experiences,

Governance

Technologies Orientation to science, R&D, innovation, etc.

Economic

social psychology, relationships, dos and donts, etc.

MORE INFO

Constructions, machinery and equipment for exclusive use. Constructions, machinery and equipment for non Infrastructure exclusive use (in water and sanitation, transportation, National or international telecommunications, energy, public health, public education, public administration, security and savings and finance defense, etc.

Physical capital

Produced goods and services kept for future use by producer or made available to others

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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

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Infrastructure consists of diverse facilities to perform support activities, which bundled, permit the 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 internet telecommunications collection, transportation, processing and treatment of solid or liquid residual materials of different grades 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 special characteristics

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 technical and economic efficiency geographical ratios

Rates of utilization and return largely dependent on (uncertain) local/regional demand

High income-elasticity (demand for these services growths proportionately faster than local/regional income)

Unless installed capacity evolves closely with regional growth, low utilization and return rates would be attained, or supply bottlenecks would 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 or distribution activities for all industries, as well as for final consumption, the situation in which service prices are relatively high is very worrisome It impacts negatively on regional competitiveness and wellbeing
(continues)
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 Infrastructure industries require regulation to address situations

of potential abuse of market power*

SUPPLY SIDE: Production of services from infrastructure in many 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 and inefficient 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 service costs, depending on the quality of regulation and predictability of its enforcement
* Of course, there are needs for other types of regulation stemming from matters like public safety, service quality and consumer protection. These are not discussed here to keep focused on the most 20 important matters for regional development.

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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

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Public governance for development

consists in the set of informal or formal rules, mechanisms, regulations, laws and institutions by which decisions are made by all stakeholders on matters related with development affairs Thus, it is not circumscribed to decision making by government or within the government sector
Rather, it encompasses overall decision making by all relevant 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 it attributes
Dynamism Inclussiveness Equity Sustainability

Among key elements of good or effective governance are the following: 1. Laws and regulations which are adequate*, clear and effectively applied 2. Well functioning legal and juridical system for the delivery of justice and the enforcement of contracts and property rights
(continues)

*In the sense that they relate to existing culture and values, are realistic in terms of compliance costs and enforcement, etc. 23

 Among key elements of good or effective governance are the following (continued) 3. Responsive, efficient, transparent, accountable and coordinated* government 4. Sound public finance, with tax and public income proportionate to the efficient cost of public goods and services that are required 5. Adequate and effective regulations on land use, and sound rules for transparent and efficient planning of infrastructure 6. People-public-private partnerships (PPPP) 7. Adequate and effective means for consultation, information sharing and engaging of civil society and the private sector in public decision making 8. Stable economic and financial envirinment 9. Good financial markets (credit, capital, leasing, etc.) 10.Fair and effective ways for resolution of conflicts and controversies
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Multi-level governance1
Government is usually organized in different levels (for instance, national, state, local) and over different demarcations
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 on exceptional extraordinary cases, and sometimes politicaladministrative 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 and delivery 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 supranational, national and sub-national levels in ways that best use of their comparative advantages leverage on law making and regulation NATIONAL capacity to generate tax and public income knowledge of specific development priorities and investment LOCAL needs capacity to make multi-stakeholder partnerships, etc.

Effective coordination implies collaboration and communication within and across levels of government
to jointly support a shared vision of development, both horizontally and vertically Political factors (redistribution of power) may work in different directions and facilitate or hinder these changes
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Multi-level governance

Engagement of non-government actors (private sector, civil society, international organizations, etc.) is important to enhance 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 and development, 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 continuity over time

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Multi-level governance6
Engagement of non-government actors to be fully successful requires:
Presenting to everyone a positive net gain investment from their time
By design, regional development strategies should provide gains for a diverse community of stakeholders and not only to narrowly defined groups

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 impartial performance, output and outcome evaluations

Efficient organization of the participation and engagement of these non-government stakeholders, as well as effective coordination with corresponding government actors
Multi-lateral contracts (alliances, covenants, partnerships), councils or observatories, online forms of e-participation, etc.
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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

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Macroeconomic policies are not enough to achieve dynamic, inclusive, equitable and sustainable development
Monetary policy, trade liberalization, social protection, etc. Evidence from all countries shows that development and growth remain regionally uneven (and there is no convergence)

Need to complement coherently with other policies

International experience shows that mechanical income transfers or subsidies to lagging regions have major disadvantages*
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 progressing regions
* Although politically, and election wise, may be attractive in some circumstances for politicians.
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 Rather, international attention is increasingly directed to other kinds of public interventions at the regional level
Seeking to enhance in permanent manners competitiveness, income growth, 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, public health, 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 nongovernment 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 uncertain local conditions, and fair to people (continues)
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D. policies to provide sufficient, efficient annd quality services from infrastructure*

Based on the analysis offered in Section 4 of this presentation, policies to this aim would look at:
1. Disseminating trustworthy information about likely perspectives 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 specific sectors public strategy making and delivering, supported by wide consensus among relevant stakeholders Regional multi-stakehioilders councils, observatories, conferences, etc.

* 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 the roles of public and private investments in infrastructure sectors and projects
Considering constitutional, legal and strategic frameworks Looking at the overall public investment budget and public debt trends
Prioritizing public resources to regions with weaker regional development perspectives, and within these prioritizing projects with highest rates of socioeconomic return

Looking at the feasibility of promoting private infrastructure or efficient 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 among investors, owners and public authorities
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E. policies to maintain an open, inclusive and competitive economic and social environment
Economic competition Transparent government Anti-corruption mechanisms Social inclusion programs Political competition

F. Organized engagement of diverse nongovernment 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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INTRODUCTION
WHY IS REGIONAL DEVELOPMENT IMPORTANT? BASIC CONCEPTS ON REGIONAL DEVELOPMENT A CLOSER LOOK AT INFRASTRUCTURE ATTENTION TO PUBLIC GOVERNANCE WHAT TO DO TO PROMOTE REGIONAL DEVELOPMENT? FINAL REMARKS

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Promoting regional development is important globally and for countries to enhance the living conditions of the people
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 subnational, national and supra-national levels in different parts of the world

It would be extremely valuable to create a world repository of knowledge to be publicly available online, to facilitate information sharing on existing practices
Professionals in infrastructure sectors, regional development management and public administration, as well as academic researchers in these areas, can make numerous contributions, stemming from respective communities of practice

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CLASSES OF RESOURCES

STATIC
IN THE PAST NOW IN THE FUTURE IN THE PAST

DYNAMIC
NOW IN THE FUTURE

BOVILITY

Minerals Energy

Minerals Energy Water

International savings International savings Finance Finance Population

International savings Finance Population Knowledge Technologies Skills

Knowledge
Technologies

Population Skills Knowledge Land Technologies Land Water Ecosystems Land Ecosystems Culture Values Governance Physical capital Infrastructure National savings
BACK TO PRESENTATION

Skills Culture Values Governance

Culture Values Governance Physical capital Infrastructure

NO MOBILITY

Water Minerals Energy Ecosystems

Physical capital
Infrastructure

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