Presentation in Kiev Oblast State Administration, for the "Centre for training and advanced education of employees, public authorities, local governments, public enterprises, institutions and organizations in Kyiv Oblast State Administration". The presentation deals with regional development of smaller non capital cities, with a best practice of the restructuring of the economy of the city of Enschede in the eastern part of The Netherlands, from mono-industrial city to a more diversified innovation driven economy. The second half of the presentation deal with the necessary political and economic preconditions for Ukraine to get real and sustainable economic development in its regions (based on the theory from Why nations fail of Acemoglu & Robinson).

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Regional Development
A best practice from The Netherlands
Jacques Bazen
Lecturer Entrepreneurship / International Economic Relations

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Overview of the presentation
I. Example of regional development in The
Netherlands: Case study Region Twente
II. Regional development in Ukraine: conditions
III. Discussion

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I. Regional development
in The Netherlands:
Case study of the Region Twente

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Region Twente

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Region Twente

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Regional development:
Focus on Enschede
The story of the making of a regional
innovation hub:
From a mono-industrial city to a diversified
innovation driven economy.

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Location of Enschede
Enschede
Number of inhabitants:
Enschede: 158 004
Network city: 365 414
Twente region: 625 840

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Enschede today

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How it began

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Enschede as emerging textile center

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Enschede as example of a boom-town

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Largest factory

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Disappearance of the textile industry

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How was the economy diversified?
• Long term approach of the government, no quick
fix
• Strong investment in education & high tech
• Took several decades to reform the economy
Three ingredients for Enschede

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1. Investment in education

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Education was not enough…
Alumni migration of the University Twente

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Stopping the brain drain

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2. Entrepreneurial university
Management policy:
Supporting entrepreneurship
among students and staff
Rector Van den Kroonenberg

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High Tech campus development

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Twente region is cooperating
with the region Osnabrück and
Münster for a long time.
The regions created a new
cooperation platform called
EURegio in 1958. The first of its
kind.
Now, almost 100 Euroregions
Alfred Mozer
3. International cooperation

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– Positive correlation between innovation and
internationalisation in enterprises
– New enterprises that export are an
important factor for regional economic
growth
– International start-ups are more ambitious
than non international start-ups
– Positive correlation between
internationalisation and succesful
entrepreneurs
Research into International cooperation

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– Attention for internationalisation: support
international institutions like WTC and
internationalisation of the Chamber of
Commerce
– Support cooperation in international
clusters
– More attention for the link between
internationalisation and entrepreneurship
– Open the networks of government and
higher education for SMEs
Implications for regional policy

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Nano netwerk Twente – Münster

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Enschede today
0
2
4
6
8
10
12
14
16
18
20
1960 1970 1980 1990 2000 2005 2010 2012
PER1000
Population growth Enschede, Twente
and The Netherlands
Nederland Region Twente Enschede
-4
-2
0
2
4
2009 2010 2011 2012 2013
Growth of number of jobs in NL,
Twente and Enschede (in %)
The Netherlands Region Twente Enschede

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II. Regional development in Ukraine

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Regional policy in Ukraine
Would the Enschede approach work for smaller
cities in Ukraine?
These three ingredients are no rocket science…
Shouldn’t be too difficult in itself, just takes time.

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Prerequisites
However, for real and long term sustainable
development, there are some conditions:
Most important: Stable and fair political system
and institutions that provide opportunities for
everyone, regardless of their social background.

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Institutional theory
To illustrate this I would like to
speak about the idea of Extractive
and Inclusive institutions.
Theory of Acemoglu & Robinson,
Why nations fail, 2012

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Inclusive versus Extractive institutions
Inclusive countries: Extractive countries:
- Rule of law - Rule of elite
- Equality for all: - Some are more equal
Solid property rights than others
- Aimed at effectiveness - Aimed at interests of
and efficiency the ruling class
- Encouragement of - Encouragement of clientelism:
Entrepreneurship: incentive to be government
Incentive to invest official or politician.

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-50
-40
-30
-20
-10
0
10
20
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Economic growth (%) of four countries (Worldbank)
GEO NLD RUS UKR

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-5
-3
-1
1
3
5
7
9
11
13
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Economic growth (%) in three post-Soviet countries
Georgia Russian Federation Ukraine

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Explanation: The difference
Kolomoyski, Pinchuk, Akhmetov

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Regional development in Ukraine
Real reforms are needed before real development:
- Building of a meritocracy based on the Rule of
Law, not on the Rule of Money: Building a non-
clientalistic state
- Fighting monopolies that block competition and
new entries to the market
- Giving people real incentives to innovate: Solid
property rights and intellectual property
protection.

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Hans Holbein – Basel town hall, king Rehoboam

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III. Questions & Discussion