ROM-Netherlands: regions that work together win

Budget cuts

"The new cabinet does not realise how important innovation is," De Jong told Het Financieele Dagblad in June. It pulled the plug on the National Growth Fund and is cutting back on education and research. "It's a paradox," she told Binnenlands Bestuur. "This cabinet talks a lot about innovation, but it's allocating little or no resources to it. And this in a knowledge-based country, where innovation is our lifeline. I think that's short-term thinking."

Broad prosperity

It is quite a remarkable development: the government of a knowledge-based country deciding to invest less in innovation, but also in education and science. It is no surprise that ROM-Nederland, the partnership of nine regional development agencies responsible for strengthening regional economies, is concerned about this. 'What we are actually doing is promoting a future-proof economy, for example by investing money in innovative companies that focus on social issues. In this way, we are promoting innovation in the agricultural sector. With robotics for farms, but also for nitrogen-reducing solutions. That is the key to broad prosperity.'

In the regions

‘And that happens in the regions, not in The Hague. What we are seeing now is a government that says it cares about those regions, but at the same time, by cutting innovation budgets, it is shifting the responsibility for a strong local and regional economy to municipalities and provinces.’ The ROMs will also have to make concessions. The national budget includes future cuts to the budgets of development companies. The alarming message from ROM-Nederland can therefore also be interpreted in part as an attempt at self-protection. However, according to De Jong, the economic results for the ROMs speak for themselves.

Public investors understand the role of patient capital.

‘Every year, we see that the public investments made by the ROMs attract enormous private investments. Local administrators are well aware of the value of this. You see that new administrators, after elections for example, sometimes initially question the use of public funds for innovative companies. But when you explain the economic spin-off in the region from activities in collaboration with the government, those doubts quickly disappear. The ROMs are the largest venture capital investors in the Netherlands, with a portfolio of 2.5 billion euros.’

Government and market

The way ROMs work differs from everyday practice within the government. Whether decentralised or at national level, domestic administration is not usually a place where large sums of money are spent on experiments and innovations that regularly fail to deliver results. Nevertheless, according to De Jong, governments understand how this works. ‘Public investors understand the role of patient capital. They understand that entrepreneurship sometimes involves failure. If you do that yourself, you will quickly end up in a political quagmire. That is why they prefer to invest from a distance, via the ROM.’

In the middle

ROMs operate in the complex domain between the business community and the government. It is complex for companies because they have to comply with all kinds of subsidy requirements, rules and laws, but the world of private investment is no easy matter for the government either. A ROM not only has the noble task of supporting the business community in manoeuvring within the web of rules, but also of supporting the government in finding the right private partners.

Supporting local authorities

‘Local authorities encounter all kinds of issues when it comes to stimulating their own business community. The question of space: is there enough space available and are the business parks suitable for the demand that exists within the market? Network congestion is becoming an increasingly significant problem. And in many border regions, international cooperation with businesses is often something with which local authorities have relatively little experience. We can provide support in this area, and we also try to contribute to overcoming these challenges through investments.'

Accelerating transitions through investment

‘Take grid congestion, for example. That is not something we are responsible for, but we are working hard on innovations aimed at reducing the load on the energy grid. That is an indirect way of accelerating transitions of that kind. A more direct form is, for example, our role in promoting investment in Smart Energy Hubs. In the municipality of Barneveld, for example, this has enabled the municipality to build a whole new business park.’

Regions must distinguish themselves

Why Barneveld? Regions need to distinguish themselves in order to attract investment, says De Jong. Especially at a time when the government is cutting back on innovation funding, municipalities will have to think beyond their borders and come up with a joint vision. Tough choices will have to be made. ‘There are a number of large clusters: Brainport, the port of Rotterdam, Chemelot, which are the eye-catchers. It doesn't have to be that big, but as a region you do have to move in that direction: towards a single narrative. What is your key sector that you want to highlight and strengthen?’

One story

You notice that many local authorities find it very difficult to present a unified message, but this is really important when you are asking an investor for money. This means that, as a local authority, you must be prepared to work together and also be willing to sometimes give up a little for the greater good. An initial investment may not always go directly to your own local authority, but it will go to the region. That has to be the priority. Because ultimately, your residents and businesses will also benefit from those regional investments. And secondly, you really have to go to The Hague, because The Hague won't come to you.'

Success factor

According to De Jong, it has been demonstrated that regions that follow these two 'rules' are much more successful in stimulating the local economy. The ROM can help identify where the opportunities lie. 'We are deeply embedded in the regions. We know what entrepreneurs need and what challenges they face. We also know how they can strengthen each other. Today's problems are so complex that we can only tackle them together, and bottom-up power is essential in this regard.'

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