Blog on regional development and policy
with a focus on Mediterranean countries

by Dr. Maximilian Benner

Reuniting Cyprus: a case for regional development
19 October 2017

There are a couple of conflicts that catch the world's attention. The unresolved Cyprus question is not one of them. However, the fact that one member state of the European Union continues to suffer from de facto division after more than four decades deserves more international attention than it gets. Alas, the most recent round of negotiations for reuniting the island ended last July without an agreement. Still, the very fact that negotiations have been taking place over and over again demonstrates the political momentum that might eventually lead to a settlement.

If and when the island finally is reunited, regional policy will be a major field of action to implement reunification and to facilitate the necessary process of upgrading the northern part's economy. While reunification holds considerable economic opportunity for both parts of the island, the large disparities in economic performance between regions in the southern part and those in the northern part of the island pose a challenge for economic policy. In any case, making regional development a priority in implementing a possible settlement if and when it were to occur is highly recommended. Building on the endogenous potential of regions in the northern part of the country may be preferable to attracting investment from the southern part, though the latter is likely to play a certain role in upgrading the northern part's economy.

It is worth noting the the northern part's economy does have its strengths. Tourism is comparatively developed in Kyrenia and Northern Nicosia but structured differently from tourism in the southern part. In contrast to the mass package tourism found in the southern part of the island and particularly in Aya Napa, the northern part offers opportunities for eco-tourism, while casino tourism has gained importance in recent decades. Kyrenia and Northern Nicosia sport attractive old towns, and Northern Nicosia's Ercan Airport might eventually become the island's third major gateway for tourist arrivals besides Larnaca and Paphos airports. Prior to the 1974 crisis, Famagusta was the island's major hub for tourism and industry as well as the island's main port. The latter role has since shifted to Limassol, while mass tourism has become concentrated mostly in Aya Napa and Paphos. Still, Famagusta might regain some of its economic strength after a settlement.

After a settlement, full market access to the EU may offer significant economic opportunities for companies from the northern part, while companies from the southern part might benefit from market access to Turkey. In both cases, however, small and medium-sized enterprises (SMEs) will have to be prepared to seize these new opportunities. Regional development agencies can play a major role upgrading SME competitiveness through training and assistance programs. Unifying the national innovation system will be another challenge. Cyprus's national smart specialization strategy will have to consider the state of the northern part's economy after a settlement. Depending on the degree of political autonomy of either part of the island accorded in an eventual settlement, it might be worth considering the elaboration of two sub-national but complementary smart specialization strategies. EU cohesion policy can be an important tool for upgrading the northern part's regional economies. Applying lessons from successful regional innovation projects supported by the European Regional Development Fund (ERDF) can inform schemes for endogenous regional development in urban centers such as Northern Nicosia, Famagusta, and Kyrenia. Rural development projects following the Community-led Local Development (CLLD) method can be applied in rural regions and contribute to upgrading agricultural or agri-food value chains.

In any case, whenever an agreement for reuniting the island is reached, creating common macro-economic framework conditions for the whole island will not be sufficient to achieve economic convergence. Attention should be paid to the meso level of the economy through endogenous regional development, in particular in regions of the island's northern part. Even today, while a settlement is not yet in sight, developing viable approaches towards endogenous regional development in the northern part is important to prepare for the time being.

As an old caravansary, Northern Nicosia's Büyük Han is a symbol for trade and economic exchange in Cyprus

Evaluating local and regional development strategies: how to account for contingency and multiplicity?
11 October 2017

In recent years policymakers have increasingly come to accept the necessity to evaluate local and regional development strategies. This is a welcome development: since local and regional development uses public money, its effectiveness should be assessed and justified. However, evaluating complex evolutionary processes in local or regional economies and the often indirect and systemic effects of policies and strategies on them is a highly complex task.

While it is easy to measure outputs, what really counts is impact. Take, for instance, a business planning competition. Measuring the numbers of business plans submitted is straightforward, but not an end in itself. Evaluating the impact of such a measure requires establishing ultimate policy objectives and eventually assessing the contribution of the competition to the achievement of these objectives. Ultimate policy objectives of a business planning competition within the framework of a local or regional development strategy can include the creation of jobs, the generation of value-added and income, enhanced innovation, higher export competitiveness, and many more. Each of these impacts can be measured on the aggregate level, but assessing the direct contribution of the measure at hand – in this example, a business planning competition – is fraught with uncertainty. Of course, it is possible to look at the enterprises established according to the business plans developed and to measure employment or revenue generated by implementing them. Yet, it cannot be established with certainty to which degree the business planning competition has actually contributed to these impacts. First, there is the problem of additionality: is it safe to assume that the enterprises would not have been set up or would not have developed equally successfully without the competition? Answering this question requires establishing a counter-factual scenario which is per definition uncertain. Second, apart from the direct impact there may have been indirect impacts much less easy to spot. For instance, teams of entrepreneurs whose participation in the business planning competition has not led to the successful setup of an enterprise might have benefited from the competition in other ways. For example, they might have acquired entrepreneurial skills or established professional networks that benefit their professional careers as employees. We might then assume positive effects on intrapreneurship but these effects are so indirect that they cannot systematically and reliably traced.

The latter point implies a major feature of systemic local or regional development policies in today's complex and interregionally and internationally interrelated economy. Local or regional development is not an exercise in engineering where clear-cut and regular relationships between actions and outcomes exist. Outcomes are uncertain and subject to multiplicity. A policy action might not achieve its original objectives but – indirectly and rather in the long term – lead to other outcomes, some of which may be beneficial to local or regional development and some not. This insight leads to the aspects of contextuality, path dependency and contingency of local and regional development that Harald Bathelt and Johannes Glückler have pointed out. Planning or predicting these multiple and contingent outcomes a priori with any degree of certainty is impossible, but that does not mean they should not be evaluated a posteriori. Measuring the direct and indirect, multiple and contingent impacts of local or regional development strategies then becomes a highly complicated matter, but it is not impossible. Relying less on quantitative output data and more on qualitative, explorative methods to gain an understanding of the multiple and contingent impacts of policy interventions, and doing so regularly and in the long run is probably the way to go. Such an approach to evaluation is far more sophisticated than simply counting the number of participants to network events or the number of submissions to business planning competitions, but it is far more likely to provide a meaningful assessment of policy effectiveness and, most importantly, offer useful lessons for iterative policy learning.

Haifa: from industrial city to cultural hub
07 October 2017

Haifa has a long tradition as an industrial city. With its port, shipping and logistics sectors, and chemical and oil refining industries, Haifa for a long time was known as a blue-collar city and has suffered from a reputation of air pollution.

Things are changing, however. Urban renewal has set in during recent years with the restoration of the historical German Colony quarter where boutique hotels and restaurants have popped up. The port area is currently experiencing a revival. The city's economic landscape has been transformed by high-tech companies such as Microsoft, Intel, Google, Apple, or IBM which have located research and development facilities in the city. Haifa's MATAM technopark played a major role in this development.

The most remarkable transformation Haifa has gone through is its rise as a cultural hub for the North of Israel. The city's social climate of coexistence between Jewish Israelis and members of Arabic-speaking minorities has arguably facilitated the emergence of an art scene around entities such as the Beit HaGefen Arab Jewish Cultural Center. The old Arab-style Wadi Nisnas neighborhood has turned into an open-air gallery for street art. The city hosts the Haifa International Film Festival and the inter-faith "Holiday of Holidays" festival. The city's two universities, the renowned Technion and Haifa University with its significant share of students from Arabic-speaking minorities, provide the backdrop to the city's newfound cultural vibrancy.

The city's cultural turn has attracted the attention of the New York Times which in a 2016 article described the city's "liberal Arab culture". The article brought forward the idea that for members of the country's Arabic-speaking minorities, Haifa offers opportunities for cultural expression and experimentation in much the same way Tel Aviv does for the country's secular Jewish population. Following this idea, both cities are attracting what Richard Florida has dubbed the "creative class", although both in their own way and from different groups of society. Both are "bubbles" that allow for cultural diversity and creativity.

Haifa thus provides an important lesson for local development in cities. A social climate of coexistence between diverse cultural groups, or what is commonly called "multi-culturalism", can act as a driver for local development and complement efforts to renew a city's economic fabric.

Haifa: an industrial city turned into an information technology and cultural hub

Tourism development: from quantitative to qualitative growth
03 October 2017

Quite a few tourist destinations in the Mediterranean seem to reach their limits to quantitative tourism development. Dubrovnik is a prominent example for a destination overwhelmed with growing demand, and demonstrations against "too much" tourism in Spanish or Italian destinations such as Barcelona or Venice show how congestion and rising price levels make local populations call for limits to tourism development.

This debate seems to me comparable to the debate on limits to growth of the industrial economy in the 1970s after the Club of Rome's seminal 1972 report. The report's basic argument that industrial economies have to reorient from quantitative growth to qualitative growth, or what could simply be rephrased as passing from "more production/consumption" to "better production/consumption" has become the mainstream of thinking in industrial development in the era of the knowledge-based economy. Yet, in tourism - one of the major growth industries of our time - a similar debate seems to set in only now.

Traditionally, tourism development strategies have tended to target higher numbers of tourism arrivals. There may well be a case for continued quantitative tourism development in destinations that can accommodate more tourists. For smaller, ecologically sensitive destinations, however, reorienting the focus of tourism policy from quantitative towards qualitative tourism development will become a necessity.

Take for example small Greek islands in the Aegean such as Santorini. The growth of cruise tourism in recent years has made the island host several thousand cruise tourists during each day of the season, but local value-added from cruise tourists is low because they sleep and eat on board and only spend several hours on the island. For such a small and ecologically sensitive destination, permanently inceasing the number of tourist arrivals is not a sustainable strategy in the long term. A sustainable strategy focused on qualitative tourism development might include, for example, attracting tourists interested in local culture and cuisine and staying in small, family-owned boutique hotels. Santorini, the case at hand, features a great number of such small hotels as well as assets in high value-added niches such as wine tourism, and is thus well positioned to pursue such a strategy. Other destinations might focus on different higher value-added niches to pursue the goal of qualitative tourism development: Increasing tourism value-added instead of increasing tourist arrivals, and doing so in a sustainable and ecologically friendly way.

The flip side of the coin for these small and sensitive destinations is to limit their capacities for large-scale cruise tourism and low-cost carriers. In a global perspective, the challenge for tourism policy will be to redirect these forms of tourism or transport towards less sensitive destinations that can accomodate further quantitative growth. Doing so will call for some degree of international coordination of tourism policy or even some form of an international planning framework for tourism development.

Cruise tourism in Santorini: how much is too much?

Welcome to my new blog!
03 October 2017

Welcome to my new blog on regional development and policy! Here I will regularly share some thoughts on how to develop regions and localities with a particular focus on Mediterranean countries, and introduce some ideas from interesting cases I come across in my research. I hope you will enjoy my blog!

Maximilian Benner, e-Mail: post(a)
Disclaimer: I take no responsibility whatsoever for links from this website.
All images used on this blog are my own.