Will the Baltic Sea Region Stay Competitive?
Despite numerous growth initiatives, including the Lisbon Strategy for Growth and Jobs, Europe continues to be outperformed by several parts of the world. While many political leaders often pay lip-service to economic reform in principal, little is done in practice. The results can be seen on the negative trajectory in world competitiveness as shown in the World Competitiveness Report and the State of the Region Report. On an aggregate level, the Baltic Sea Region is ahead of the European Union when it comes to implementing the Lisbon goals. This is not enough to be competitive in the world economy, most of the business leaders agreed. In their view, Europe is in a deadlock of decision-making on the service directive, Turkish membership and the EU Constitution. Furthermore, as Hans Skov Christensen, Chairman of the Confederation of Danish Industries, expressed it “The Baltic Sea Region is doing well compared to the rest of Europe, but our region is interdependent with the rest of Europe”. Klas Eklund, Chief Economist at SEB, stressed the urgency of immediate action and requested more political leadership. “The diagnosis is clear and evident as well as the medicine”, he said. Mr. Eklund’s conclusion was strongly supported by Algirdas Brazauskas, Prime Minister of Lithuania. The President of the National Bank of Poland, Leszek Balcerowicz, suggested that all EU Member States finalise the implementation of already existing treaties, referring to the completion of the Single Market and the freedom of movement of goods, capital, labour, and services. The need for liberalising the service market in the European Union as a pre-requisite for competitiveness was echoed in practically every session at the summit. Another strong point was the need for creating a better entrepreneurial environment in the Baltic Sea Region, since it is the small and medium-sized enterprises that produce the largest growth and employment in today’s economy. But though most agree on this in theory, there are still few incentives for entrepreneurs to start or grow businesses. Charles Wessner, Director of the National Academy of Science in the US expressed it as “small businesses grow jobs, generate taxable wealth, create welfare-enhancing technologies, transform the composition of the economy, and develop products to ensure our wellbeing and productivity in the future. This is why we punish them!”
Innovation Fundamental for Competitiveness
Innovation performance in the Baltic Sea Region remains strong and dominated by the Nordic countries. However, there are a number of challenges that need to be addressed in order for us to stay ahead. José Manuel Barroso, President of the European Commission, pointed at the need to increase spending on R&D. “Those who argue that we cannot compete with countries like China on cheap goods, and should therefore concentrate on high-tech, high value goods, are in for a shock very soon, unless we manage to turn the situation around.” R&D, as well as available and accurate information, are fundamental pre-requisites for innovation. Christian Ketels, Principal Associate at Harvard Business School and the main author of the State of the Region Report, pointed at another area for possible improvement for the region in terms of innovation. “Research is about turning money into ideas; innovation is about turning ideas into money. We are pretty good at the first one, but not quite as good at the second one.” In terms of how to stay ahead on innovation and competitiveness, Kim Østrup, Vice President of IBM Denmark, proclaimed that a paradigm shift that can make the Region move up the value chain was needed. From his perspective, the new opportunities lie in service innovation and service exports, which depend on “strong service clusters that can create the complex ecosystem required for service innovation”.
Russia, EU and the Region
Trade and economic integration with Northwest Russia with its 12 million people, untapped markets, and growing middle class continues to constitute a major opportunity for the Baltic Sea Region. Göran Persson, Prime Minister of Sweden, named it “the greatest potential for growth and development in our region”. But the relationship is not uncomplicated and a great number of barriers must be torn down before this potential can be realized. Part lies in bulky technical requirements, cumbersome visa procedures, and insufficient and ineffective infrastructure. However, these issues can only be resolved through an improved relationship between Europe and Russia, built on mutual recognition and respect. Sergey Yastrzhembsky, Special Representative of the President of the Russian Federation, expressed high hopes for a stronger relationship between Russia and the EU, especially after the recently concluded agreement on the four common spaces and the renewed PCA discussion within the framework of the Northern Dimension. As a concrete suggestion for further integration, Mr. Yastrzhembsky suggested that the Kaliningrad Oblast should be treated as a pilot area for accelerating the creation of the four common spaces, and urged that Baltic Development Forum keep Northwest Russia as a prominent part of its agenda. Gerhard Lohan, Head of Unit in DG Relex in the European Commission agreed that the EU-Russia relationship had been raised to a new level and welcomed the Kaliningrad transit agreement for persons and goods.
Building a Baltic Sea Region Brand
For too long, the Baltic Sea Region has been a well hidden secret. Already at the Copenhagen summit in 2002, Principal Deputy Assistant Secretary of State in the US, Charles P. Ries, recognized this and stated that “this region is a beacon for what can be accomplished through co-operation and partnership”. At the 2005 Stockholm Summit, Baltic Development Forum announced that it would devote a lot of resources to support the development of a regional brand-building exercise lead by Simon Anholt, co-founder of the GMI-Anholt Brands Index. Kai Hammerich, Chairman of the Baltic Sea Regional Investment Promotion Agencies (BIPA), supported this idea and announced that BIPA would set up a joint office in India to promote investments into the Baltic Sea Region. The initiative was also strongly supported by Christopher J. P. Beazley, Chairman of the ‘Baltic-Europe Intergroup’ in the European Parliament, who looked forward to a close co-operation with the Baltic Development Forum on Baltic Sea strategies.
