84324 v2 European Union Guvernul României Competitive Cities Reshaping the Economic Geography of Romania Ministerul Fondurilor Europene The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views and position of the Executive Directors of the World Bank, the European Union, or the Government of Romania. Table of Contents Table of Contents Introduction ......................................................... 7 4 Consider building the Craiova-Pitești Highway .............................................................. 28 5 Improve connective infrastructure to Cluj-Napoca and Timișoara ................................. 28 Recommendations ............................................ 17 5.1 Build a highway connection between Cluj-Napoca and Sebeș ................................. 29 INTERNATIONAL LEVEL .........................................19 5.2 Develop a high-speed rail between Timișoara and Arad ........................................... 29 Priorities 20 LOCAL LEVEL .................................................... 30 0 Completion of the A1 Highway (Corridor IV) and the A3 Highway ................................. 20 6 Achieve basic life standards in lagging areas ................................................................ 32 7 Improve the definition and administration of functional urban areas ................................ 34 REGIONAL LEVEL .................................................. 22 8 Enable dynamic cities to enlarge their demographic and economic mass ......................... 36 1 Complete the București Ring Road ................................................................................... 24 9 Target dedicated measures at marginalized and minority groups ...................................... 37 2 Extend București’s Public Transport System to the wider metropolitan area. ......... 25 10 Promote quality of life investments in leading areas ........................................................ 38 3 Consider building the Moldova Highway ........................................................................ 26 Typology of scale economies Key lessons from economic theory teach that Type of economy of scale Example Being able to purchase intermediate growth happens when people 1. Pecuniary inputs at volume discounts Internal Falling average costs because of 2. Static Technological Technological fixed costs of operating a plant. Learning to operate a plant more 3. Dynamic technological can reach their efficiently over time. Shoppers are attracted to places 4. “Shopping” where there are many sellers. Outsourcing allows both the upstream full potential input suppliers and downstream 5. “Adam Smith” specialization firms to profit from productivity gains Static because of specialization. Localization Workers with industry-specific skills are attracted to a location where there 6. “Marshall” labor pooling is greater concentration of people with through creative, similar skills. Reductions in costs that arise from 7. “Marshall-Arrow-Romer” repeated and continuous production Dynamic activity over time and which spill over learning by doing productive between firms in the same place. External or agglomeration The more different things are done locally, the more opportunity there 8. “Jane Jacobs” innovation is for observing and adapting ideas from others. pursuit. Workers in an industry bring innovations to firms in other Static 9. “Marshall” labor pooling industries; similar to no. 6 above, but the benefit arises from the diversity of Urbanization industries in one location. Similar to no. 5 above, the main difference being that the division 10. “Adam Smith” division of labor of labor is made possible by the Under optimal conditions, cities concentrate economic resources and existence of many different buying industries in the same place. human talent in a virtuous cycle of increasing urbanization that generates The larger the market, the higher the a diverse range of opportunities, enabling people to find better-paying profit; the more attractive the location jobs, companies to recruit employees with the right set of skills, and Dynamic 11. “Romer” endogenous growth to firms, the more jobs there are; the more labor pools there are, the larger capital and ideas to flow across space more efficiently. The benefits the market - and so on. of agglomeration kick in rapidly, increasing the attraction of cities as Spreading fixed costs of infrastructure living and working spaces. As more resources concentrate around certain 12. “Pure” agglomeration over more taxpayers; diseconomies centers, vibrant local economies emerge, and growing, denser cities pull arise from congestion and pollution. the country’s economy forward with more strength and resilience than Source: Adapted in WDR ’09 from Kilkenny, Maureen. 1998. “Economies of Scale”, Lecture for ever before. Economics 376: Rural, Urban and Regional Economics. Iowa State University. Ames, IA. 7 Most counties have become less prominent in Romania’s economy 5.00% In the short term, unevendevelopment 4.00% 3.00% 2.00% across regions 1.00% 0.00% -1.00% -2.00% is both a normal Timiş Cluj Prahova Constanţa Argeş Braşov Iaşi Dolj Bihor Bacău Sibiu Mureş Arad Suceava Galaţi Dâboviţa Gorj Alba Maramureş Neamţ Vâlcea Buzău Brăila Satu Mare Olt Hunedoara Caraş-Severin Bistriţa-Năsăud Harghita Teleorman Botoşani Vrancea Vaslui Ialomiţa Sălaj Mehedinţi Călăraşi Covasna Tulcea Giurgiu and an inevitable Share of Total GDP in 2009 Change in GDP Share from 1995 to 2009 Source: EuroStat phenomenon. Distribution of employees in high-paying sectors, by locality, 2011 Cities w/ Pop. >50,000 and <100,000 Cities w/ Pop. >100,000 Satu-Mare Distribution of Employees Botoşani Suceava in High-Paying Sectors, in 2011 Baia Mare 0 - 83 84 - 309 Zalău Iaşi 310 - 751 Oradea Bistriţa Piatra-Neamţ 752 - 1,434 Regrettably, many policymakers tend to resist growing internal divergence, 1,435 - 2,325 Cluj-Napoca Roman Vaslui 2,326 - 3,775 trying to artificially spread the benefits of growth evenly across space. In Turda Târgu Mureş Bacău 3,776 - 10,532 10,533 - 21,369 practice, however, such policies rarely have the intended effects, often Oneşti Bârlad 21,370 - 32,719 Arad Alba Iulia Mediaş 32,720 - 193,313 wasting resources and slowing down the economy. Instead, policymakers Timişoara Deva Hunedoara Sibiu Sfântu Gheorghe should embrace uneven development and accept that rapid economic growth Braşov Focşani Petroşani Galaţi happens through “leading areas” that concentrate economic mass as a result Reşiţa Râmnicu Vâlcea Buzău Brăila Tulcea of market dynamics. The basic solution for “lagging areas” is to connect people living there to Târgu Jiu Târgovişte Ploieşti Drobeta-Turnu Severin Piteşti Slobozia opportunities in growing cities and offer them access to basic infrastructure Bucureşti Craiova Slatina Călăraşi Constanţa for encouraging short-term working mobility and discouraging depopulation/ Alexandria peremptory migration in favor of intra- and inter-county commuting. In the long run, convergence in living standards will occur as benefits from leading Giurgiu areas spill over to surrounding communities and people who had left lagging Data Source: National Institute of Statistics and ListăFirme areas bring back capital, jobs, and ideas. Rural and small town poverty does not have to constitute an entrenched situation. They can benefit from spillover effects from urban growth centers. 9 Exports may benefit from connective infrastructure to the EU Similar principles apply at the international level, where facilitating cross-border Share of Total Exports by County in 2010 Share of Exports going to the EU, in 2010 flows enables people and goods 0.1% - 1% 1.1% - 3% 3.1% - 7.3% 7.4% - 14.7% 15.3% - 35.6% 35.7% - 65.1% 65.2% - 82.1% 82.2% - 99.9% Source: Romanian National Institute of Statistics Total number of Romanian students abroad, 1998-2011 30,000 access to larger 25,000 20,000 15,000 markets. 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: UNESCO Outbound Mobility Data, 1998-2011 Despite some conceptions about the negative consequences of migration and opening up economies, the benefits typically outweigh the costs, Cluj-Napoca International Airport is currently expanding. as better connected countries have access to cheaper imports, more competitive exports, and remittances from nationals working abroad. As such policies should not deal only with the negative consequences of migration (e.g. aging, labor market decline, brain drain), but also find ways to encourage positive externalities of migration (capital inflow, brain regain, and improved connections to global markets). 11 three The link between urbanization and level of development across Romanian counties The dynamics 30,000 described above relate to the key dimensions Bucureşti 25,000 of economic GDP per Capita (Euro PPP) 20,000 IF TM 15,000 CJ CT development: GJ AG AR AB SB PH BH 10,000 DB CS HD SJ IS GR BR MS MM TL SV NT BT 5,000 VS density 0 30% 40% 50% 60% 70% 80% 90% 100% Urbanization Rate Sources: National Institute of Statistics and Eurostat as concentration of economic resources; distance Commuting patterns in Romania, by county, in 2002 as connectivity of areas within the country to centers of economic growth; and division as the ease of cross-border exchanges with international markets. Intra-county commuting, in 2002 Inter-county commuting, in 2002 0.7% - 8.5% 8.6% - 13.3% 13.4% - 21% 21.1% - 32.7% 0.6% - 2.6% 2.7% - 5.6% 5.7% - 10.1% 31.5% In practice, these elements manifest themselves through market forces that Data Source: National Institute of Statistics actively shape urbanization trends and patterns, namely: scale economies and agglomeration; factor mobility and migration; and transport costs and specialization. 13 Key investment priorities in Romania differ across leading and lagging areas four critical In this vein, priorities are key for Romania in the short and medium-term: 1 good connective infrastructure, internally and with European/ global economic centers; 2 stronger institutions in lagging areas (e.g., education, healthcare, land markets, water and sewage system, etc.); 3 Quality of life investments in Romanian cities: 1. Palace of Culture, Iaşi; 2. Old Town, Timişoara; 3. Council Square, Brașov; 4. Museum Square, Cluj-Napoca. measures targeted at marginalized communities throughout the country 4 quality of life investments in the most dynamic and competitive cities. 1 2 These priorities are summarized in the graph on the opposite page based on geographic reach and the development level of different areas in Romania. 15 4 3 recommendations A summary of the key recommendations is provided below, with the important caveat that the priorities mentioned are not meant as a prescriptive list of recommended investments, but as examples of a potential path to achieve Romania’s sustainable and inclusive development. 17 Economic gravitational model, with existent infrastructure (top) and with proposed highway and expressway network (bottom) INTERNATIONAL PRESENT LEVEL recommendations – shorten the distance to large markets globally by improving infrastructure and encouraging cross-border flows of people, capital, and ideas. Given that 70% of Romania’s exports go to Western Europe, Populated places 0 - 83039 it is critical to improve links to the West. An increasing share of 83040 - 190114 Romania’s trade is dependent on road infrastructure, yet the 190115 - 346867 country still has one of the least developed road networks in 346868 - 2600000 Europe. Most importantly, in 2013, a highway Access - firm revenue potential (sd) Low High FUTURE connection to the Western border was yet to be established. The gravity models on the opposite page were developed to assess which infrastructure links are most needed, looking at synergies between different cities, taking the existent infrastructure into Populated places consideration (top map) and the road network proposed from the 0 - 83039 National Spatial Plan (bottom map). A Priority 0 can be inferred 83040 - 190114 from these figures. 190115 - 346867 346868 - 2600000 Access - firm revenue potential (sd) Low High 19 The map below indicates the course the A1 and A3 highways will follow and 0 Priority the topography they will cross once finished. It is important to note that A1 connects Pitești to Sibiu through the Carpathian Mountains. However, the Completion of the gravity model above indicates that a Brașov-Sibiu highway connection would A1 Highway (Corridor IV) be also needed to leverage the strong synergies between the two cities. and the A3 Highway The A1 and A3 Highways recommendations Legend Country border (the Transylvania Highway and the Comarnic-Brașov Highway) Regional border Motorway As the map on the right shows, there are two West corridors Bucharest that seem to be for a highest-ranking priority – the A1 and A3 Selected large cities A3 Altitude highways. Iaşi Value High 2544 Cluj-Napoca Of the two, the Low: 0 A3 Highway A1 Timişoara Sibiu economic efficiency would make more sense from an Braşov Galaţi A3 Ploieşti A1 point of view, as it connects some of Romania’s most dynamic A2 Bucureşti A2 urban centers – București, Ploiești, Brașov, Târgu Mureș, Cluj- Craiova Constanţa Napoca, and Oradea (i.e., 3 of the 7 growth poles and 2 of the 13 urban development poles in Romania) – with each other and to the West. From a With respect to increasing exchanges with non-EU countries, Romania should financial efficiency aim to become a trade hub for the EU and beyond, overcoming current limitations deriving from its peripheral position within the European common market. The solution for encouraging growth in all directions (i.e., not just westward) point of view, however, it is the is to reduce divisions between Romania and neighboring countries like A1 Highway Moldova, Serbia, and the Ukraine, and further toward Turkey, Russia, and Central Asia. that makes the most sense, as it is part of the TEN-T network and is eligible for EU funding. 15 21 below gives an indication of the economic prowess of the largest functional urban areas in Romania (i.e., București and the 7 growth poles, and the areas REGIONAL around those cities that can be accessed within a 20-minute, 40-minute, and 60-minute drive). It is clear that the functional urban area of București is the most important in Romania, with around 40%-50% of firm revenues LEVEL reported there. As such, a key priority going forward would be to further improve connections to București, in addition to the A1, A2, and A3 highways recommendations that radiate westward, northward, and eastward from the capital. – Improve connections between leading and lagging areas within Romania to enable efficient concentration of resources and spillover effects. Local and regional indicators for major cities in Romania Driving time buffer from city center A second priority should be the development 60 min. 20 min. 40 min. 60 min. from city border Population 350,000 452,000 757,000 945,000 Timişoara % of National Firm Revenues 6.00% 3.16% 3.41% 5.43% of connective Population 360,000 482,000 620,000 905,000 Cluj-Napoca % of National Firm Revenues 3.29% 3.48% 3.71% 4.47% Population 328,000 423,000 582,000 943,000 Iaşi % of National Firm Revenues 1.47% 1.52% 1.60% 2.20% infrastructure to Population 302,000 470,000 787,000 1,080,000 Craiova % of National Firm Revenues 1.43% 1.60% 2.70% 2.94% Population 312,000 492,000 620,000 716,000 Constanţa the most dynamic % of National Firm Revenues 2.51% 4.12% 4.54% 4.67% Population 328,000 485,000 615,000 868,000 Braşov % of National Firm Revenues 2.65% 2.83% 2.98% 3.54% Population 305,000 556,000 2,724,000* 3,554,000* areas in Romania Ploieşti % of National Firm Revenues 2.89% 3.44% 43.17%* 47.24%* Population 1,842,000 2,150,000 2,525,000 4,020,000 Bucureşti % of National Firm Revenues 37.82% 41.15% 41.61% 50.58% Data Source: National Institute of Statistics and ListăFirme *Includes figures for București and its surroundings – i.e., the growth poles. On the one hand, improved accessibility to the growth poles will enable firms that invest there to leverage a larger, stronger labor market. On the other hand, better connections to these cities will offer a larger pool of people better access to the opportunities that these dynamic centers offer (e.g., jobs, education, healthcare, culture, entertainment, airports, etc.). This connective infrastructure should be prioritized based on the actual economic density of the respective regions. The table 23 1 2 Priority Priority Extend București’s Public Complete the Transport System to the wider București Ring Road metropolitan area recommendations The second most developed area after București is Ilfov County, Because the cost of living and land prices have grown continuously in which surrounds the capital. To enable better connections București, many people and companies have moved to the outskirts of the between the communities in Ilfov and those in București, and capital city, in Ilfov County. Ilfov is in fact one of the fastest growing areas (both to facilitate a full traffic bypass around the capital, it is critical in demographic and in economic terms) in Romania, and having better links in to complete București’s Ring Road. The ring road would allow and with this area is critical. This could entail, for example, an extension of the better access to the capital to the additional 2 million people metro network (which has recently become eligible for EU funding) and an that live within a one hour drive. extension of the bus, tramway, and trolleybus networks from București to the metropolitan area. The same argument could hold for other major cities, București Ring Road depending on their density profiles, flows of people/firms, etc. In addition, investments in bicycle and pedestrian paths would ensure the development of sustainable transport options in wider metropolitan areas. In addition to better connections to the areas immediately surrounding București, it is critical to also improve connections between the functional area of the capital and some of the lagging areas in Romania. Such connections would enable people in those lagging areas an easier access to the key opportunities that București offers (jobs, education, healthcare, transport hubs, culture, entertainment, etc.). Obviously, connective infrastructure investments should be prioritized based on the number of people who would get connected. The demographic gravitational maps below indicate the areas where the proposed highway and expressway network in the National Spatial Plan would enable the most significant synergies. It becomes immediately obvious that one of the areas that would benefit most from improved road networks is the North-East Region. Source: Creative Commons 25 3 PRESENT Priority Consider building the Moldova Highway recommendations The North-East Region is one of the least developed regions in Romania, and also one of the regions with the highest population densities in the country. Developing a highway, or maybe an Populated places expressway in a first phase, between București and Suceava- 0 - 83039 Botoșani , would not only enable people in the North-East Region 83040 - 190114 better access to the opportunities in the capital, but also function 190115 - 346867 as a vehicle for the urbanization of the region. Although the North- 346868 - 2600000 East Region is one of the most densely populated in Romania, Access - population potential (sd) it is also one of the poorest and least urbanized. A potential Low High Moldova Highway could enable key cities in the area (e.g., Iași, Bacău, Vaslui, Piatra Neamț, Suceava, Botoșani, Roman) to FUTURE gain demographic mass through improved connections to the rural hinterland. Populated places 0 - 83039 83040 - 190114 190115 - 346867 Demographic gravitational model, with existent infrastructure 346868 - 2600000 (top) and with proposed highway and expressway network Access - population potential (sd) (bottom) Low High 27 4 5 Priority Priority Consider building the Build a highway connection Craiova-Pitești Highway between Cluj-Napoca and Sebeș .1 recommendations Two other regions that are more poorly developed compared to Cluj-Napoca has strong connections to Târgu Mureș in the east and to Alba the rest are the South and South-West. The București-Constanța Iulia and Sebeș in the south. The completion of the Transylvania Highway Highway, which was recently completed, provides a transport (covered under Priority 0) would significantly improve access times between backbone for a number of key areas in the South Region. Cluj-Napoca and Târgu Mureș. The Cluj-Napoca – Sebeș Highway would The București-Pitești Highway provides another important improve connections to a number of dynamic economic areas in Alba County link in the region, and it could be continued with a connection and would also provide a link between the proposed A1 and A3 motorways. to Craiova. As the table above has shown, there are around 1 million people living within a one-hour drive of Craiova, and they stand to benefit greatly from improved connections to the capital. 5 Priority 5 Priority Develop a high-speed rail Improve connective between Timișoara and Arad .2 infrastructure to Cluj-Napoca and Timișoara Timișoara and Arad form the largest economic zone outside București- Ilfov. The two cities are already connected by a highway and it would make sense to improve public transport connections – e.g., through a high-speed Outside București, there are two cities that have set themselves rail. apart in terms of their positive growth trajectories– Cluj-Napoca and Timișoara. The former is the only large city in Romania that has registered a growing population (albeit slightly) and it has the largest economic mass within a 20-minute access area. Timișoara forms, together with Arad, the second-largest economic zone in Romania (after București). 29 (it is usually concentrated in a number of dynamic urban centers), it is critical that everybody has access to basic services such as good quality education, good basic healthcare, functioning land markets, water and sewage, etc., LOCAL regardless of location. LEVEL The map below provides an indication of the location of the more developed and less developed areas in Romania. The East and the South tend to be recommendations less developed, with a higher incidence of poor and very poor localities. As public services data indicates, these areas tend to also have a lower share of people with access to water, sewage, electricity, or central heating. They – Foster good institutions in lagging areas (basic services also tend to have an educational and health infrastructure that is in need of infrastructure, education, health, land markets, etc.); maintenance and upgrade – usually because localities in lagging areas have – Improve connective infrastructure between cities and their fewer resources at their disposal for investments in the maintenance and surrounding areas to expand their economic mass; upkeep of the infrastructure they manage. – Design and implement targeted measures for marginalized and minority groups to support their participation as active parts of the economy; The 2011 Local Human Development Index at the locality level reveals poorer areas in the South and East, and wealthier areas around major cities – Promote quality-of-life investments in leading areas to help attract and retain people. Regions LHDI Index by Locality in 2011 Large scale, large impact investments need to be doubled by Very poor Poor local projects that aim to enable people’s access to basic Lower-middle developed living standards and opportunities in their area. Particularly in Middle developed Upper-middle developed lagging areas, it is critical to provide good institutions that provide the same Developed Upper developed start in life to all people in the country. While economic activity may not be spread evenly across space Data source: Dumitru Sandu Note: The blank spots indicate localities for which no data was available 31 6 Priority Endowment with public service infrastructure Achieve basic life standards in lagging areas recommendations Ensuring that all people have access to quality public services is a critical way of creating the premises for a more productive workforce. If people do not have to spend additional time getting Share of housing units with water connection Share of housing units with sewage connection clean water, accessing healthcare, or getting to school, they have 36.8% - 50.8% 50.9% - 70.7% 70.8% - 96.8% 30.5% - 47.7% 47.8% - 70.5% 70.6% - 96.6% more time to dedicate to realizing their full productive potential. It is therefore critical to invest in educational and healthcare infrastructure, as well as in basic public services such as water, sewage, and sanitation. As the map above indicates, the regions where such investments are most needed are the North-East, the South- East, the South, and the South-West. There are, however, pockets of poverty in the other regions as well. Investments in achieving basic life standards should also take operation and maintenance (O&M) costs into consideration, and should be prioritized accordingly. For example, if water Share of housing units with electricity connection Share of housing units with central heating and sewage networks cannot cover their costs through 93.7% - 95.6% 95.7% - 97.1% 97.2% - 99.7% 16.3% - 32.4% 32.5% - 49.3% 49.4% - 961.3% the tariffs they charge, they risk quick deterioration. In this respect, it is important to take the polarizing force of cities Data Source: National Institute of Statistics into consideration. For example, the extension of water and sewage networks should be prioritized around larger urban areas, as operating costs in peri-urban localities can be subsidized by the center city’s budget. 33 would function in the same way as Regional Development Agencies do, and 7 Priority would focus on the planning and management of functional urban areas. These Improve Metropolitan Development Agencies could be tasked to do the planning for functional urban areas and to implement projects at the metropolitan level. the definition and administration Romania has recently experienced a suburbanization process of functional urban areas recommendations Cities with Population > 100,000 Localities with Population Growth Satu-Mare Suceava from 1990 to 2010 Baia Mare Botoşani 2 - 485 486 - 1,328 For cities to play a developing and polarizing role they need to Iaşi 1,329 - 2,975 Oradea be understood as dynamic functional areas. Cities, especially Piatra-Neamţ 2,976 - 5, 643 5,644 - 9,637 Cluj-Napoca the most dynamic ones, are not self-contained. As the map below Târgu Mureş Bacău Localities with Population Decline from 1990 to 2010 shows, the localities with the most significant population Arad -184,940 -184,939 - -18,628 growth are those situated around large urban areas. -18,627 - -9,637 Timişoara Sibiu Failing to define functional urban areas can undermine even Braşov Focşani Galaţi the best local strategies and can ultimately lead to suboptimal Râmnicu Vâlcea Buzău development outcomes. For example, a city may have a very Brăila Ploieşti Piteşti good General Urban Plan focusing on sustainable growth patterns Drobeta-Turnu Severin with the aid of clear planning regulations. However, if surrounding Craiova Constanţa Bucureşti localities do not also have the same planning regulations in place, the effects will be suboptimal, as development around the center city will continue in an unregulated manner. Similarly, the fact that most suburban areas continue to be defined as rural areas can lead to the wrong policy solutions. For example, the new Census results have prompted many to talk about policy measures Arad Satu-Mare Iaşi aimed at tackling the reverse urban-to-rural migration that seems Baia Mare to be taking place in Romania. A look at the data shows, however, that most of the urban-rural reverse migration is in fact the Timişoara result of a suburbanization process – i.e., people moving to the suburbs of București, Cluj-Napoca, Timișoara, Constanța, Iași, and Ploiești, with most of these suburbs still defined as rural Ploieşti areas. Galaţi Cluj-Napoca Properly categorizing functional urban areas would also require Brăila the identification of adequate institutional solutions for their management. In this vein, it may be important to talk about the Bucureşti potential of having Metropolitan Development Agencies, which Data Source: National Institute of Statistics 35 8 9 Priority Priority Enable dynamic cities Target dedicated measures to enlarge their demographic at marginalized and minority and economic mass groups recommendations To work as economic engines at the regional level, dynamic Economic growth essentially results from connecting people to opportunities functional urban areas should be helped to expand their economic and enabling them to realize their full potential. But everywhere around the and demographic mass. If a company decides to invest in an urban world, and Romania makes no exception, there are people who face special center but does not have access to a large enough labor market, challenges in sharing the benefits of development. They are marginalized, it is important to enable easy access to the regional labor pool. disenfranchised, and often overlooked by policies that are meant to promote At the same time, easier access to these center cities also means growth. Interestingly, marginalization is not always proportional to distance from that a larger number of people have access to the opportunities economic mass: indeed, many poor communities reside in the proximity of that these cities offer (e.g., jobs, education, healthcare, culture, large cities and sometimes right in the downtown areas (e.g., historical entertainment, etc.). centers). Still, despite this fact, they remain unable to access educational and professional opportunities that would allow them to break the vicious Growth poles in Romania have had positive economic dynamics cycle of poverty and reap the benefits of truly inclusive, sustainable growth. with a significant share of new investments being located in Moreover, these marginalized groups often represent a significant share of the peri-urban areas. For these cities it will be important to expand total population, and enabling them proper access to opportunities would metropolitan public transport systems (ideally to areas with a not only make social sense, but it would also make economic sense given high enough population density and with strong commuter flows), their potential contribution to local, regional, and national development. to invest in the development of new connective infrastructure (e.g. new roads and rail connections), and to invest in the upgrade To address the challenges faced by marginalized groups and integrate them (e.g. transforming a normal road in an expressway) and proper into the larger Romanian economic system, it is important to go beyond maintenance of existing infrastructure. Such investments investments in hard infrastructure (e.g., roads, public transportation, schools, should be prioritized based on careful analysis of local and hospitals, social housing). Soft measures (e.g., anti-discrimination regional trends, and prioritized according to a set of clear criteria approaches, education, public media campaigns, etc.) have to complement (e.g. the availability of resources to maintain and operate the new infrastructure investments to ensure that marginalized groups share the or upgraded infrastructure). benefits of prosperity and ultimately shed the aura of marginalization. In addition, even for hard investments, it is critical to involve marginalized groups in the process of designing and implementing projects in order to strengthen their sense of ownership and empowerment. 37 parks, cultural buildings, pedestrian areas, or bike paths) would make the Priority most sense. 10 Promote However, quality of life investments do not only have economic benefits quality of life investments (such as attracting and retaining qualified people and innovative firms), but can also have social and environmental benefits. For example, in leading areas investments in pedestrian areas, energy efficiency, bike paths, and public recommendations transport networks can help discourage the use of private cars (thus decreasing greenhouse gas emissions from transport) and can enable easier access to opportunities for poor and marginalized groups. As such, Innovation jobs have a significant role in not only driving local this type of investments can and should be considered by a larger range and regional growth, but also in spurring in the development of of cities, beyond just the most developed ones. other economic sectors (i.e., they have a high multiplier effect). As such, local authorities throughout the world undertake quality That said, it is important to place investments in quality of life within a clear of life investments to attract firms and skilled people that do list of priorities. When a significant part of a city’s or a metropolitan area’s innovation work. Usually, population still does not have access to running water and sewage, one would a larger pool of have to think twice about having as a top priority the development of, say, an integrated network of bike paths. innovating firms Quality of life indicators in selected European cities and people goes 120% 100% hand in hand with 80% a more developed 60% 40% local economy. 20% 0% ti a ţ ow n fia o ris m rid va t m es oc eş ie rin ol la So Pa ea ad sg W ap ur ap kh To tis N M Within Romania, only a handful of cities (e.g., București, Cluj- la ud uc j-N oc ra ra G B B B St lu at C Pi Napoca, Timișoara, or Iași) have managed to encourage and Satisfied with public transport Satisfied with green space This is a clean city sustain the growth of local innovation sectors. These cities are Feel safe in this city Satisfied with beauty of streets Satisfied with public space in a competition (internally, but also globally) for the country’s Satisfied with outdoor recreation brightest people. These are also places where investments Source: EuroStat in quality of life (e.g., good public transport infrastructure, 39