We have already published links to the presentations made during our last research seminar in Kyiv. Now we would like to share brief report of what was discussed by participants who came from 7 European countries and what are the major trends of the development of capital cities across Europe.
While the objective of the first research network seminar organised in Warsaw in September 2011 was to look at the crisis as an opportunity and as a challenge for the development of capital cities, second seminar was dedicated to some initial stock-taking of the effects of crisis on cities’ socio-economic development, their budgets, job markets, economy’s structure, investments and urban planning, how it affected policy decisions and reconfiguration of financial flows, influenced governance structures and city strategies.
After brief introduction - welcome words from network co-founder Dr Olga Mrinska and welcome letter from the Chancellor of Kyiv National Economic University Professor Pavlenko - colleagues from EUROREG (Warsaw University) has made first seminar presentation outlining the impact of crisis on the Central and Eastern European countries, as well as some regional patterns of its effects. Prof Grzegorz Gorzelak and Dr Maciej Smetkowski (Poland) highlighted that CEE countries have gone through the (first stage of) economic crisis in relatively good shape. Their socio-economic performance is considerably better comparing to Mediterranean EU member states and slowdown could not be compared to the one which they experienced in the 1990s while transiting to open market economy. Capital cities in most of CEE countries have done relatively well out of the crisis, mainly due to the nature of their diversified economies and prevalence of services in their structure. First morning session was concluded by presentation by Yulia Rybak (Ukraine) from Kyiv Regional Centre of Investment and Development who talked about the experience of establishing and developing clusters in metropolitan areas of Nordic countries and how it could be used in the context of Ukraine. Presentation was heavily based on international experience and provided some insights into the planned large-scale investment projects in Ukraine that are being developed by State Agency for National Projects and Investments, including science park in the capital city of Kyiv. The latter part stimulated a vivid discussion among the participants about the realities of Ukrainian 'claster landscape' and the role the Government should play in its enhancement.
Second morning session was dedicated to the governance and budgetary aspects of the capital cities’ development in the wake of the crisis. Dr Olga Mrinska (Ukraine/UK), independent research consultant (also representing Kyiv-based NGO ILORI) has talked about the governance responses of Kyiv city leadership to the crisis and the way decision-making has shifted over the last several years. The main trend is centralisation of power and deterioration of local self-government/community representation in the decision making, which is observed in the context of very negative trends of socio-economic development of Kyiv since 2008 (it lost about one fifth of its gross regional product). New strategic framework has been proposed in 2011 however despite participatory nature of the process of preparation of Kyiv Startegy-2025 its execution, as well as decisions as for distribution of resources and generating own income by the city, are very much dependent on the central government and its representatives in city administration. Dorota Celińska-Janowicz (Poland) from EUROREG, Warsaw University, then talked about the municipal budget of Warsaw and how it was transformed in the wake of the crisis.With limited opportunities for cutting the costs and dwindling income generation (via drop in personal and corporate income taxes receipts) Warsaw faces challenges of the long-term nature, rather than immediate perils of financial instability. It managed to increase resource base through external borrowings however the load on city budget is increasing as the repayment amounts are growing over time.
Dr Olga Shevchenko (Ukraine) from National institute of Strategic Studies talked about the changes in the distribution of financial flows and resources among the regions of Ukraine and how Kyiv has relatively gained from the decline of other regions. Despite facing dramatic decline in gross regional product, economic activity and investments, Kyiv remains the leader of the national economy and in some spheres has strengthened its positions but mainly due to the weakening of other cities and regions. The policy solutions will have to address the challenges of growing disparities and productive use of financial resources accumulated by capital city for the benefit of the entire country. This session was concluded by Tatiana Borodina (Russia) from the Institute of Geography of Russian Academy of Sciences who described the complex and extensive process of establishing new regulatory framework for spatial development of the city of Moscow. The mega-size of the city and its role as the economic and administrative heart of Russia is causing local residents and businesses lots of problems. Lack of modern master plan and hawkish nature of construction industry is creating further difficulties. The multitudes of actors that need to be engaged and core role of the Federal Government makes process of developing new masterplan and regulations more protracted and non-transparent.
First afternoon session was dedicated to the issues of knowledge-based economy and place-based approach in the development of capital cities. First Prof. Victor Chuzhykov and Veronika Orlovskaya (Ukraine) from KNEU presented results of their research on the global positioning of Ukrainian capital in the context of European competitive model. Based on an extensive datasets and analysis of various indexes they outlined current state of affairs and potential future developments in the innovative sector of Ukraine and Kyiv in particular – as the biggest centre of innovative production in the country. After that Tina Haisch (Switzerland) from Berne University (in co-authorship with Heike Mayer and Fritz Sager) made a presentation about evolving economies of capital cities and how they are becoming more knowledge intensive and more resilient. Presentation covered cases of Berlin and Berne where adaptability and innovative approach to linking private and public sectors in the wake of the financial crisis were the results of a smarter governance solutions based on a greater decentralisation. In these two cases changed policies and governance approach have helped capital cities to address negative consequences of the crisis and open new opportunities for the future.
Liga Baltina (Latvia) from the Centre for European and Transition Studies of Latvia University then talked about the opportunities place-based approach could bring for boosting the development of Riga. Latvia has seen one of the most dramatic recessions among the EU member states and it faces the challenges of mono-centric spatial model where too much is dependent on the capital city of Riga. Great concentration of businesses, jobs, innovations and opportunities further drives up attractiveness of Riga as a number one destination for people and companies. However its territory is not considered as an integral part of the system. Place-based approach to regional development policy in Latvia where territory is considered as an asset and essential element of the city’s economy should open new opportunities for its capital.
Final afternoon session was dedicated to the development of particular cities and sectors. Prof. Volodymyr Shevchenko (Ukraine) from Kyiv National Taras Shevchenko University presented the trends of the post-crisis linkages between the international financial markets and banking sector of Kyiv. He highlighted extreme vulnerability of Kyiv’s banking industry (which represents majority of national sector) and its dependence on the international liquidity markets and international parent banks. Due to financial crisis the number of banks has shrunk, some international operators have sold business to locals and the share of bad loans in banks’ portfolio is growing. Accompanied by general economic crisis and downgraded country and city investment ratings this creates a serious challenge to the sector and city economy in general. Then Kateryna Nykoniuk (Ukraine) from KNEU presented the case of healthcare sector of Kyiv and how it is being transformed as a result of large-scale reforms in the spheres of governance, resource allocation and network optimisation, use of multiple providers and introduction of medical insurance etc. It has been argued that in the future healthcare sector might provide a significant boost for capital’s economy due to the large concentration of highly-qualified staff, more rational use of resources, change in stimuli for healthier lifestyle, and significant role to be played by the private sector.
Last paper was presented by Vasileios Kitsos (Greece/Latvia) who is currently based in Riga in the State Agency for Regional Development of Latvia. Vasileios presented the case of urban space transformations in Riga and its surroundings. Before the crisis Riga has seen significant exodus of population from central areas to suburbia as a result of construction boom, accessible loans, rising people’s affluence and preferences for more comfortable life style. After the crisis many developers’ projects remain unfinished while mortgage commitments became unattainable for many Latvians who lost their jobs and have seen salary cuts. New phase of urban development sees some revitalisation of central areas while coherent policy approach to spatial planning in Riga is still to be developed and implemented to tap into the opportunities city’s territory offers.
The final discussion was centred on the following questions: a) What were the factors of capital cites relative success/resilience in the face of the current global economic crisis? b) What is the role of power decentralisation in the process of adapting to the external conditions? c) Which capital cities’ sectors/branches were the most vulnerable to the crisis and why? d) What austerity measures have been implemented by the capital cities’ authorities and what might be their final outcome? e) What opportunities crisis provides for the spatial planning in capital city-regions?
The variety of answers and solutions from the capital cities across Europe demonstrates the need for cities to adapt while building their crisis mitigation plans on the basis of local strengths and advantages. At the same time there is one common feature that characterises more successful scenarios of crisis mitigation by capital cities: the more autonomy cities have to respond to negative economic and social trends, the more influence they have over generating income and allocating resources, the more flexible and thus more efficient their policies are and their outcomes are more significant. Centralised governance structure with limited powers granted to regional/local authorities negatively affects the abilities of capital cities to address their challenges and plan for the future in a different and less predictable socio-economic and investment climate.