Session reports 2006

There has been a very exciting development in the financial sector of the BSR in recent years. Banks are instrumental to growth, to create liquidity and to make trade prosper. In fact, the financial sector is not only an industry, but it is also critical to the entire growth and competitiveness of the Region and therefore crucial to improve and integrate.

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Themes

Financial System of the BSR

Moderator, Partner at Bech-Bruun, Ian Tokley, started out the session by highlighting that the need for liquid funds, the ability to promote activities and to develop and encourage a private market requires a steady and strong financial market with available expertise and resources to drive the economics.

Innovation matters more and more in today’s global economy. As innovation increasingly takes place through the entry and exit of firms rather than through activities of existing firms, the BSR needs to create an economic and financial system that promotes the entry and exit of firms, Chief Economist of EBRD, Erik Berglöf, said. It is also important to enhance R&D activities and to create a financial system that can support that type of activities. In recent years, the BSR has experienced a dramatic transformation of its banking system and equity markets, especially in the new member countries of the EU. Executive Vice President of Nordea, Carl-Johan Granvik, showed Nordea’s example of moving into all BSR markets. Global competition has resulted in bigger, more international companies in the Region and in order to serve their demand, financial institutions needed to become stronger by joining forces, he said.

Granvik and Berglöf both emphasised that a lot has been done for an integrated financial market in the BSR already without a top-down steering of the process. Granvik argued that having a deeply integrated, liquid single financial market, where risk capital is available across borders, could enhance economic growth and competitiveness in the BSR over other regions. He also stressed that the BSR should not aim at creating an isolated financial market, it should rather look at it as an add-on to the European integration that we are in the process of building. However, all panelists agreed that even though a rapidly integrated financial market is emerging in the BSR, there are a number of impediments that hinder further integration.

Impediments to further integration

Creating an integrated financial market in the BSR demands a lot of coordination of regulation, supervision and harmonization. Difference in rules and regulations is an area where there is plenty of room for improvement, Berglöf emphasised. Harmonizing rules is therefore most crucial. Granvik agreed and urged all who can influence regulations not to build further barriers but rather to tear them down. Berglöf and his expert group have come up with a couple of solutions on how to diminish impediments to integration in the Region. Home country rule, meaning more focus on home country in terms of regulation and supervision, is one of the directions Berglöf suggested the BSR move in. A main challenge is how to achieve governance of such a system so that it is on one hand highly efficient and at the same time legitimate for all participating countries and market institutions, Berglöf puzzled. Governance is a particularly important issue to rise, especially in the case of the new member states of the EU, where most of the financial institutions are controlled from the outside, by foreign banks. Granvik underlined that the future of Baltic financial systems is in the hands of large Nordic banks and this is a huge responsibility.

Granvik also pointed out that liquidity is the weakest point in the BSR, partly due to too many currencies. Hans-Ole Jochumsen from OMX agreed and emphasised that more trading is needed.

Chairman of CBSS Business Advisory Council, Peter Egardt, spoke of the barriers to trade that stand in the way of integration, especially in the area of regulations and supervision. The main problem is that within the EU or the BSR the implementation of rules are different in almost all member countries, he explained. This hinders efficiency for financial institutions that operate in more than one country.

The Business Advisory Council sees two possible solutions to the problem: 1) much more detailed EU regulations or 2) better coordination of the regulatory process, the implementation and the supervision. Egardt voted for the latter. In fact, the Business Advisory Council is currently working on listing and prioritizing the most crucial barriers to trade starting with the financial market, he said. The ambition is to include as many member countries as possible in the BSR. Egardt believes that if this project succeeds, the Region can set an example to the entire EU on how to cooperate and work together in order to coordinate implementation of rules and supervision. Thus, we will be able to create a truly integrated financial Baltic Sea market that would enable us to become the hot spot for growth in the world, Egardt said.

An integrated financial market

President of Information Services & New Markets at OMX, Hans-Ole Jochumsen talked about the importance of an integrated exchange in the BSR. In fact, OMX is an operator that bases its strategies on Nordic-Baltic thinking and works towards deeper financial integration in the Region.

Hans-Ole Jochumsen stated that equity markets are becoming more international, and roughly half of the equity trading in Nordic countries is based on foreign investors. He explained that liquidity means trading and enhancing trading is all about getting more investors. If the BSR wants to attract more investments, it has to further integrate its financial markets in order to make it easier for the investors to enter. OMX believes that a larger home market will create more trading in the listed companies of the Region, it will become easier to attract more international investors who want to see a large liquidity pool, and in a longer perspective it brings the Region’s equity markets into a better position when it comes to consolidation in exchange.

Jochumsen highlighted that by implementing one integrated Nordic-Baltic exchange in 1998, new value was created to all stakeholders: “OMX believes it is an advantage to harmonize and present the Nordic and Baltic markets as one market.”

Nordic equity markets are much more mature than the Baltic markets. Thus, OMX tries to develop the more mature exchanges and at the same time it attempts to increase Baltic equity markets. The plan is to bring them together later on into one regional exchange.

 

The Baltic Sea is a central pillar of the new Northern Dimension policy program, which is seen by many as the most useful tool in enhancing the prosperity of the BSR. Cooperation with Russia has gained special focus in the new policy framework, already generating excellent results through partnerships in environment, public health and social well-being. The breakfast session discussed where the renewed Northern Dimension is heading and what the extended policies can do for the development of the BSR.

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The Renewed Northern Dimension

Secretary of State, Pertti Torstila, stressed that the renewal of the Northern Dimension policy has been the first priority of the Finnish EU presidency. The ambition has been to extend, strengthen and enrich the Northern Dimension policy program. Special focus has shifted to cooperation with Russia. In order to renew and strengthen the commitment of all partners, it was agreed under the Finnish Presidency that a new common policy document should be negotiated and signed by all partners, including Russia, Norway and Iceland. Torstila explained that the new Northern Dimension should be seen as the regional expression of the implementation of four common spaces in the EU-Russia cooperation, namely 1) economic cooperation, 2) freedom, security and justice, 3) external security, and 4) research, education and culture.

The declaration of the common policy document is close to be completed and the finalization took place in Helsinki at the end of November. This policy paper will enhance practical cooperation between Europe and Russia on the basis of equal partnership and co-financing, Torstila explained.

There are several concrete areas where cooperation with Russia is vital. Among these are marine environment, transport safety, cross-border crime, and transportation and logistics. Cooperation within the framework of the Northern Dimension has already led to the establishment of two practical partnerships on environment, and public health and social well-being. The partnership model has already proved its strength, Torstila said.

In terms of the financial support of the Northern Dimension projects, there is no budget line. However, new funding sources have been found, such as the so-called Support Fund, which has approximately 225 million Euros for seed capital, donated by several EU countries and others. Finland is preparing its additional contribution to the Support Fund, and Torstila urged other countries to do the same. He emphasised that the brilliance of the partnership and the Support Fund lies in the leverage effect. Torstila described that a small input gives a big output, and small seed money leads to big projects.

Torstila also added that Finland would like to see new partnerships in transport and logistics as well as education and research structures.

Northern Dimension – EU

MEP and Chairman of Baltic Europe Intergroup, Christopher Beazley, supported the renewal of the existing Northern Dimension. He argued that if the Northern Dimension is going to be successful, it has to be more ambitious and has to develop into a fully fledged EU-Russia policy. He also emphasised that it is of utmost important in this process that the BSR is recognized by the Commission and the council of ministers as a part of the EU, just as the Euro Med group. Alexander Stubb’s report on a Baltic Sea strategy proposes a budget line for the BSR and calls for the council of ministers of the Baltic Sea Sates to meet prior to the EU summits. Beazley argued that some formality is needed in order to gain political support from the EU. Torstila agreed that an organized forum and formality are very important.

Beazley explained that common work in the BSR is needed in the areas of environment, economy, energy, foreign policy and culture. One important aspect is to have a common understanding of our cultural and historical background. He suggested that a joint commission is set-up by historians to look at the whole range of our cultural links.

According to Beazley the renewed Northern Dimension is a vital stepping stone to a permanent EU-Russia relationship, which will be potentially of enormous benefit for all parties. To be successful, it is important to have a common understanding of how we work together and how the implementation methods are of the agreements. Thus, Beazley proposed a common judicial framework, which, he admitted, was rather futuristic, but positively ambitious.

Northern Dimension – Russia

Elcoteq is a global, industrial service company strongly represented in the BSR. Founder and Member of Board of Directors of Elcoteq, Antti Piippo, spoke of the business perspective on the impediments to cooperation and partnership with Russia. He proposed that the New Northern Dimension program focuses on eliminating duties in Russia on components and products, developing technology parks and facilitating public funding to research and development to the technological industry. These improvements would lead to a more advanced, successful technological industry in the Northern part of Europe.

Counselor at the Russian Ministry for Foreign Affairs, Dimitri Bukin, stated that the process of the renewed Northern Dimension has not always been simple, but it is an example of a real partnership, constructing pillars between Europe and Russia. He urged not to lose dynamism and to create new projects as well as revive forgotten ones. He stressed that Russia welcomes the set up of a new partnership on transport and logistics. As well, Russian proposals concerning private and financial sector development are underway. Bukin emphasised that the Northern Dimension is a qualitatively new, equal partnership between EU-Russia-Norway-Iceland. “The Northern Dimension is different in many ways, as it is based on qualitative cooperation and equal partnership”, he said positively.

Moderator Penttilä pointed out that energy is not dominantly included in the Northern Dimension. Torstila replied by stating that the EU energy policy comes first and then follows the regional perspective, which is also the reason why energy has not received more emphasis.

Generally, all panelists were very positive to the new development of the Northern Dimension and saw good potentials for successful projects and partnerships under the renewed policy program in the future. Torstila added that Norway and Iceland are and should be just as important partners in the work of the Northern Dimension as the EU member states.

 

Free movement of labour continues to be a heated topic on Europe’s agenda. Some member countries are still against the principal of labour mobility, which results in different treatment of nationalities within the EU and the BSR. The main theme behind this breakfast session was to solve some of these challenges within the scope of the Baltic Sea Region.

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Themes

Current situation in labour markets

Prime Minister of Estonia, Andrus Ansip, stressed in his opening speech that free movement of labour is a very important principle for Estonians. Currently approximately 40.000 Estonians are working outside of Estonia, which the Prime Minister talks positively about. He believes it is an advantage that Estonians gain skills and knowledge abroad, which they can use when they return to their home country. He also pointed out that this trend goes both ways. In fact, many workers and students from EU member states have moved to Estonia, where the unemployment rate is only 4,5 %, and export and growth rates are increasing rapidly.

Deputy Director General of the Confederation of Danish Industries, Kim Graugaard, spoke of the enormous need to increase labour supply and mobility in Denmark (and the rest of the BSR), which is facing the challenge of an aging labour force. He pointed out that increasing labour mobility is needed more than ever now in the BSR in order to meet the rapidly changing demand of the globalized world. He underlined the striking fact that 80% of Danish companies are facing problems due to lack of skilled as well as unskilled labour. This problem is general for almost all BSR countries with Germany and Poland as exceptions, he said. In fact, Graugaard stressed that the lack of mobility is a missed opportunity for countries and regions, as in many places possibilities of economic growth and new jobs are lost, while other regions are fighting unemployment problems.

President of Polish Confederation of Private Employers Lewiatan, Henryka Bochniarz, in her speech referred to the study presented by the EU after two years of the enlargement, which clearly showed that free flow of labour in the enlarged Europe had a very positive impact on the economic growth of all member states. She, however, stressed that even though she is very much for an open labour market, an unrestricted policy on immigration is not a sufficient solution.

Barriers to labour mobility

Despite heavy labour shortage in many European countries, several barriers to a more flexible labour circulation still remain. Bochniarz talked about the Swedish example, which shows that in spite of the growing number of immigrants looking for work, it is hard for them to get a job due to the restrictions of the heavily regulated labour market. Therefore, making it easier for immigrants to obtain employment is a crucial challenge, she stressed.

Graugaard explained that labour mobility does not only have political and regulatory barriers; there are mental and attitude-related obstacles as well. For one, companies need to change their attitudes towards cross-border recruitment. Another practical restriction of attracting foreign labour is the lack of knowledge on the different taxation, social security and pension rules in neighboring countries, which hinder labour mobility. Making work opportunities more visible and creating awareness of the local employment conditions and rules could be of help to encourage labour circulation, he stated.

Poland is the main source of skilled workers in Europe, where the rate of unemployment in very high. Bochniarz admitted that, as the representative of an employer organization, she would like to see the unemployed get jobs in Poland first, before going abroad. She stressed that without keeping skilled labour in the country, Poland will not be able to carry on with its 5% growth.

Børge Diderichsen from the audience commented on the importance of integrating North West Russia in the BSR labour force market, even though Russia is not an EU member country. Graugaard stated that Denmark is very open for highly-skilled people from all over the world, also outside of the EU.

How to increase labour force circulation

Evidence shows that the fear of a flood of workers from new member states of the EU is unfounded. On the contrary, workers from new member countries are helping to relieve labour market shortages and bottlenecks stimulating the economies of old members the same way as the workers from the old member states are stimulating each other’s economies, Graugaard said. Reports also showed that the primary reason for working abroad is to earn money in order to make a better living at home, and not to settle down in another country. Based on this, Graugaard moved to abandon transitional agreements (imposed during the accession process of new member states), so that new member countries can have the same basic rules and access to each other, as the old ones. Bochniarz agreed and pointed out that if we are talking about a common Europe, “we have to do everything on the domestic and on the European stage to, firstly, create jobs and, secondly, allow people to get jobs in other countries, and get back”. She emphasized that the biggest asset we have in the EU is the common market, including the job market, and using this asset is our only chance to compete successfully with other regions of the world. Graugaard agreed and stressed that policies supporting a positive view on labour mobility in the member states of the BSR and the EU is important to create. He pointed out that recently the Danish government has taken initiatives to use the foreign ministry and the embassies in a new way to support companies who try to recruit labour from other countries. Labour market authorities are also moving their perspective from a local and national level to a regional and cross-border scope. According to Graugaard, it is most essential to combine the needs of companies that are looking for new employees and the need of the unemployed in different regions of Europe.

Ansip pointed out that the Scanbalt Bioregion is a very good example for cross-border cooperation among scientists.

 

The first plenary session of the Summit was the traditional presentation and the official launch of the State of the Region Report 2006 (SoRR). This is only the third time the SoRR is produced, but it has already become an important source of knowledge and understanding of the trends and factors that determine where the BSR is heading. The report was prepared for the Baltic Development Forum (BDF) with the financial support of two dedicated partners of the BDF and the BSR, namely the Nordic Council of Ministers (NCM) and the Nordic Investment Bank (NIB).

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Themes

The State of the Region Report and its role

In the past three years the SoRR has become the key information source in the BSR and earned a reputation as the main benchmarking tool in the Region. It is not only an essential instrument for developing strategic actions for the Region’s 11 countries, but it is increasingly becoming a useful tool to profile the BSR externally, stated Director of Baltic Development Forum, Ole Frijs-Madsen, in his opening speech. This is especially important when identifying reasons for investors to move into our Region, he added.

Secretary General of the Nordic Council of Ministers, Per Unckel, argued that the SoRR plays an even bigger role in defining what we are not good at in our Region, thereby guiding policy makers to focus on and improve the right areas.

NIB’s Executive Vice President, Nils E. Emilsson pointed out that one of the most important factors of financial character that the SoRR describes is the significant need for risk capital in the entire Region. Mr. Emilsson stated that the broadening of markets for seed and venture capital is most essential to work on. He emphasised that there is a general need for investment in infrastructure of physical as well as of social character, not to mention the increasing need of developing better energy infrastructure in the Region.

Context of competition

Author of the SoRR, Principal Associate of Harvard Business School, Christian Ketels, pointed out that there are a number of external factors the BSR needs to deal with when competing in the global economy. Location is one of the less beneficial factors for the Region. As the BSR is located in the periphery of Europe and is not a huge market, it is difficult to attract investors. In fact, according to Christian Ketels, the BSR needs to create reasons for the global economy to move into its areas. He stressed that the Region needs to become active to earn its place in the global economy.

Ketels highlighted that globalization has not only created challenges, but also a number of opportunities for the BSR. In fact, globalization has led to significantly larger markets, which can be served by regions like the BSR. It has also made the production of goods and services more efficient by allowing relocation where these processes are executed most effectively. To take advantage of these opportunities it is increasingly important for the BSR to develop and improve its unique profile of clusters as well as business conditions, Ketels explained.

This is especially crucial in the present global competition, which itself is changing. While in the past we competed in terms of our exports, today globalization has changed the nature of this competition. Regional economies are more and more exposed to the comparison with business environment conditions in other locations. “If you are not up to speed, you don’t only lose your exports but also your economic activities, as they might relocate to other parts of the world”, Ketels stressed. The new conditions mean that many regions are becoming more vulnerable. Ketels also pointed out that “at the same time, doing the right things means that you are really able to serve the growing global demand from your location, given that you have something unique.”

The SoRR argued that the BSR has been in an advantageous position, as it has some of the factors that are lacking in many other regions of the world, among others, a highly-skilled labour force and stable institutions. Furthermore, the BSR has many multinational companies that have established linkages to foreign markets and are becoming true beneficiaries of globalization.

Current Competitiveness of BSR

Ketels pointed out that the global position of the BSR is still good, but other countries are catching up. There have been strong global demands recently, especially from the U.S, but relying on that is risky. It is crucial for the BSR to prepare for less favorable conditions in case global demand patterns change, he explained.

The BSR is especially strong in terms of prosperity and prosperity generation, and it continues to be the strongest region in Europe and in the world in this context. However, the Region is performing weakly in terms of investment levels and investment attraction as well as in terms of export position, Ketels stressed. Despite these shortcomings, figures in the SoRR show that there is no other region in the world that is both richer and growing faster than the BSR.

Ketels also emphasised that the prosperity of the BSR countries is either driven by productivity or employment. There are only two regions that outperform the BSR on these two dimensions; the NAFTA and Oceania regions. Based on these facts “we are not on top of the world, but the top of Europe on these dimensions” he said.

The SoRR showed that in the past years the BSR’s world market share has hardly changed. It has had strong growth in exports, but the position has not been strengthened over time.

In terms of FDI inflows, the Region is not performing satisfactorily. During 2000 the BSR out-competed all other regions of the world, but since then it has moved into a negative zone. This must be taken up on the regional agenda, Ketels stressed.

In terms of knowledge-creation, the BSR is one of the world’s best performers. Although patenting rates have been moving backwards, the BSR is still well-placed in the world economy. If we look at the absolute number of the Region’s universities among the top ranked universities of the world, the BSR is in a decent position, Ketels said. However, the highest number in the rankings is 45, which is far from enough if the Region aims at competing as a knowledge centre. Therefore, “we must look at ways of how we can achieve global leadership in knowledge creation” Ketels emphasised.

In terms of overall competitiveness, the Region has a stable and strong position globally, and, according to the SoRR, there is a fairly strong base to build on. Dynamism (the ability of improving competitiveness over time), however, is not as positive as expected, Ketels stated. This is a factor that must be upgraded in order to move forward in the global competition.

Furthermore, some rules and regulation seem to hinder investors to move into BSR markets, such as lack of protection of investors, or the high taxes in Nordic countries etc. Improving rules and regulations is not a time-consuming process, but can only occur with political will and support.

The BSR has one of the highest innovative capacity levels of the world. However, policies about entrepreneurship and innovation are not quite as strong as in other parts of the world and need therefore be developed, Ketels advised.

In terms of the Lisbon strategy, we are still the leading regions in Europe, although one shortcoming in this respect is the lack of regional perspective in the national Lisbon agenda strategy papers, which Ketels suggested to work more actively on in the future.

Current Policies in the BSR

“What are we actually doing in this region to make sure that we are staying competitive today and in the future?” Ketels asked. There are a lot of initiatives in place and the SoRR proved that there is a clear indication that the Region has made the move to the next stage of BSR integration. General business environment upgrading is essential in the Region and already many efforts have been seen to set up public equity funds and seed fund instruments. “This is what we have to continue doing in order to get more entrepreneurship”, Ketels stressed. Another important issue is to create new platforms for open dialogue between the private and public sectors about competitiveness upgrading and how to organize it. The Danish example of the Globalization Council has showed how to move dialogue outside of political circles and have initiated a public debate about how globalization has changed the way economies are competing in the world, Ketels pointed out. In terms of innovation, there are positive developments, especially as Poland and the Baltic countries have had a remarkable shift in trying to improve their innovative capacity. In the area of cluster policies a lot is happening in the BSR. The EU is getting fully behind cluster initiatives and hopefully the BSR can play a role in moving this forward, Ketels said. The branding initiatives in the BSR must continue as creating an identity for our location is increasingly important in the global economy. The BSR needs to send a clear message and cannot afford to be passive any longer. The SoRR states that Russia continues to be a great opportunity for the BSR. However, Russia’s political system is complex and from looking at the Russian economy, there is a need for massive restructuring of the way companies look like, stressed Ketels. It is clear that the major political dialogues will be on EU-Moscow level, but the BSR should continue to cooperate on smaller projects that already exist, thereby further developing the integration of Russia into the BSR. Companies from the Region should think of what they can do for long term prosperity of the Russian region they are operating in, besides pure profit-earning objectives, suggested Ketels.

Based on Christian Ketels’ overall assessment, it is clear that despite all the challenges the BSR is facing, the Region has already come a long way. He stressed that “we are prime beneficiaries of globalization, but the wind that was pushing us forward is not going to blow as strongly as it did in the past.”

 

Energy has been the dominating issue on the economic and political agenda in the past few years. There is, at present, more controversy in the air than in a long time. The BSR is subject to global trends and uncertainty in energy demand and supply, and our member country Russia is a key player in the on-going discussions on how to handle and distribute energy and how much to pay for it.

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Themes

Energy – EU

The challenges the EU is facing concerning the security of energy supply can be illustrated by the increase of the EU’s energy import dependency. Striking figures show that energy import dependency will increase from 47% to 67% until 2030 if no preventive measures are taken. According to the Prime Minister of Finland, Matti Vanhanen, to limit dependency, significant changes are needed in our current energy systems. First of all, the strengthening of consumer-producer relations and energy partnerships to strategically important partners of the EU is of utmost importance. Furthermore, the EU needs to act in a more coordinated and more united manner in order to gain a better position to influence the development of the world energy markets and to be better prepared to respond to short term energy disruptions. Finally, the Union must show strong leadership in combating climate changes and improving energy efficiency. According to Mr. Vanhanen the first steps towards such strategies were taken at the recently held summit in Lahti during the negotiations with President Putin, where EU member states spoke with one united voice on the energy issue.

Energy – BSR

Swedish Deputy Prime Minister, Maud Olofsson, stated that in the Swedish Government they share a strong belief in the future of the Baltic Sea Region as Europe’s strongest growth region. Energy is indeed a necessity for growth, and political and economic cooperation on the energy issue needs to be strengthened among all neighbours in the BSR. The economies and energy systems of the BSR need to be developed in a sustainable way in order to ensure the economic, social and environmental objectives as well as security of energy supply, she explained. This can be done by promoting enhanced energy efficiency in all links of the energy chain as well as developing renewable energy sources to replace the existing ones, namely fossil fuels. She stressed that the BSR has the political will and the know-how to do so and it can begin its efforts by the practical regional implementation of EU’s recently proposed energy policy and action plan for energy efficiency. In a nutshell, the BSR now has excellent conditions to improve its energy systems and to make a shift towards cleaner and more efficient use of energy. Chairman of JSC Latvenergo, Karlis Mikkelsons, explained that we are entering a high-price market in the energy industry. It seems that regional cooperation is the only way to secure energy supply in the BSR and to accelerate the use of renewable energy sources in the future, he said. Cooperation policies in the BSR should therefore concentrate on promoting strategies to attract new technology investments in energy. Furthermore, BSR power companies should raise their competitiveness and member countries shall work towards a unified Baltic Sea Region power market. Harmonization of power policies in the member countries would be an important first step in this direction, Mikkelsons stated. The Baltic Europe Intergroup, chaired by Christopher Beazley, has recently presented to the EU a proposal on a Baltic Sea Strategy claiming a concrete budget line. One of the recommendations of the proposal was to gather the ministers from the EU-BSR member states to discuss the energy issue with Russia. There are still huge differences in the member states of the BSR in terms of prosperity and there is still no integrated energy market in the region. The Baltic Sea Strategy would contribute to solving these remaining deficiencies in the region by addressing issues on how EU-Russia relations should evolve, how to tackle environmental problems, how to promote economic prosperity and how to secure energy supply in the BSR.

Energy – Russia

Chairman of Renaissance Capital, Igor Yurgens, stated in his speech that Russia wants to be a key player in the European region and the BSR when it comes to energy. However, some bilateral conflicts in the relationship between the EU and Russia have made it difficult to reach a mutually beneficial agreement on energy supply, he explained. One major problem is that the EU aims at creating a consumers’ market with equal competition and low prices. At the same time Russia is looking for a long-term commitment and security of demand as well as the assurance of a fair price. Yurgens stressed that this conflict must be solved in order to reach a stable and mutually beneficial strategic partnership. He explained that Russia has the energy resources, but does not have the technology to extract it. At the same time Europe possesses the technological know-how and is facing increasing demand in energy sources. According to Yurgens, Russia is interested in a win-win situation, where both parties gain from a fair exchange of equities. If the controversy of long versus short-term interests of Russia and the EU respectively is solved, discussions can proceed with issues on energy charter and transit protocol. Access to the Russian pipeline can only be guaranteed on an “Equity for the Resource” base, as Yurgens put it. Further, he stated that “if we can look at the Northern pipeline not as a political instrument, but as an instrument for future development, we can find answers to some very important questions”. In fact, Russia possesses 40% of the world’s gas and 18% of the world’s oil resources. If we can negotiate friendly common policies, these resources are accessible for Europe in return of investments and technology. Russia’s interest lies in an adequate swap of equities, and a partnership is the only sensible solution for such a win-win exchange.

Energy – Globally

President of the Confederation of Finnish Industries, Christoffer Taxell, stressed that without energy there is no growth, prosperity or welfare. He explained that there is an increasing gap between supply and demand, as the demand for energy has been increasing rapidly and continues to grow globally. Such rapid energy usage leads to global warming. According to Taxell, we must acknowledge that this is a global problem that needs to be tackled by global efforts. First of all, significantly more investments are needed in energy globally, he emphasised. Secondly, there is a need for new energy sources, especially in the electricity area. There is also a call for making use of all energy options. Taxell pointed out that the businesses need to acknowledge that the climate change is a global challenge that requires global action. In a nutshell, the key requirements for an efficient energy policy are the following: more investments in energy globally, a utilization of all energy options, the creation of well-functioning energy markets in the BSR and globally, and the development of energy efficiency and technology. Head of Division of the International Energy Agency, Ann Eggington, stated in her speech that one of the most significant global problems at present is that unexpected events have large effects on energy prices. Where will energy come from in the future? Eggington explained that the oil market will remain subject to the instability of the Middle East and gas supplies will come from Norway and Russia. Pressures on energy resources are growing and more demands are made from emerging economies, especially new Asian markets. Therefore, vast investments world wide are needed to meet our energy demand in the future and to develop ways of reducing energy usage, Eggington said. “We cannot afford to rest on business as usual! We have to implement new policies and implement them on an accelerated time scale”, she stressed. In fact, our global responsibility is to find new technologies to reduce energy usage as well as to develop new sources of energy.

 

This parallel session discussed how to create strategies for prosperous peripheral regions. The central question was: What remedies do we need in order to secure a balanced growth in the entire BSR? The session was hosted by four devoted regional actors; the Baltic Sea Solutions, the West Pomeranian Region, Region Skǻne and the BTV-Cooperation.

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Themes

The Changing Concept of Periphery

Commissioner for Regional Policy in the European Union, Danuta Hübner, underlined that innovation, technology, research, and education are the foundations of competitiveness, growth and sustainable jobs across Europe. According to Hübner, “the conceptual perception of the periphery has shaped out” and the transition to a knowledge-based economy brings new possibilities for the regions. Some important factors determine the success of regional development, such as ICT infrastructure, availability of educated workforce, level of cooperation of enterprises and research institutions leading to the emergence of innovation and competitive clusters. Technological progress and social and economic pressures coming from globalisation all have impact on the concept of peripherality, she argued, and acknowledged that support policies often have failed to fully address the challenges peripheral regions suffer from. “Today we need policies that function as dynamising instruments and not just purely supporting policies”, she said. Hübner stated that locally fostered development strategies and initiatives indeed play key roles in turning sluggish development trends into positive spirals of development.

Peripheral challenges

Managing Director of BioCon Valley GmbH, Wolfgang Blank, had three main messages to share with the audience. Firstly, he addressed the key challenge of demographical development (ageing and age-related diseases) in peripheral areas. He pointed out that these problems are not only faced by peripheral regions of the BSR, but will soon be faced by metropolitan regions too. Secondly, he expressed the hope that these dramatic challenges could be overcome by being innovative enough to develop products, services and technologies that also could be delivered to the metropolitan regions later. The field of life science, biotechnology and healthcare can make things possible and make life viable, he argued, when talking about their focus areas. Blank sees this as a great opportunity for peripheral regions to focus on. R&D and education in life science and biotechnology are areas that must be equally emphasised, he stated. Thirdly, Blank underlined that it would be vital for peripheral and metropolitan areas to work together on a structural basis and to enhance cooperation in the life science industry. He optimistically argued that maybe it is the peripheral regions that have the possibility to become competence hubs and metropolitan regions the competence satellites.

Managing Director of SIA Latvija Statoil, Baiba Rubess, talked about the business point of view of the peripheral challenges of the location of remote regions and the scarce labour force. She pointed out that there is a lack of man power and entrepreneurship in remote areas. Rubess believes that the most important thing for peripheral regions is to understand their people in amount, demographics, in education and knowledge, and the passion of what they do. “You can have the best ideas of the world, but if you don’t have the people to actually create them and move them further, they will not happen”. You have to have a strong vision for your peripheral area, she underlined.

Regional Development Strategies

Commissioner Hübner argued that there are three factors on which peripheral regions should construct their development strategies. 1) Local assets (e.g. unspoiled environment, local knowledge, problem solving skills etc.), 2) Networking and coordination or, in other words, the capacity to shape dynamic networks of regional and local branches of administrations, local bodies and partners, and strengthening networking inside and outside of the regions, and 3) Continuous innovation. In fact, Hübner emphasised that if the peripheral regions want to catch up, they must invest even more in innovation than the central areas. She believes that the combination of these factors will turn peripherality into an opportunity instead of a disadvantage.

Finnish Minister for Regional and Municipal Affairs, Hannes Manninen, pointed out that Finland is highly dependent on international trade and Finland’s remote location poses many challenges. The bases for their competitiveness are an open society, high standard education system and a pragmatic approach in behaviour and business, he advised. Investment in knowledge and innovation system, meaning education and R&D as well as closer cooperation between business and research institutions at the regional level are all important determinants of Finland’s success. Interestingly, he told the audience, the bases for the current regional innovation policy measures have been laid by creating a decentralised network of higher education institutions in regional centres throughout the country. Most importantly, he pointed out, the innovation policy does not only promote the development of the strongest regions and cities, but is equally important in less developed, remote regions. In Finland the national objective to maintain a network of vital centres throughout the country greatly depends on the success of regional innovation policy, he said. “A closer interaction between innovation poles and actors in more remote regions is needed!” Manninen referred to the Finnish program in Northern Finland, where a particular network of innovation centres has been developed. This ‘Multipolis’ model connects smaller innovation centres in sparsely populated areas. This model could be used as an example of development in peripheral areas, Manninen argued.

The question of how to create quality of life in the smaller peripheral areas was also discussed; creating an attracting environment is crucial in order to attract people. Commissioner Hübner pointed out that public investment is not enough. In fact, the involvement of the private sector is most vital. Thus, the question of how to attract private investments to the local and regional level is even more important, she stated. Minister Manninen brought up the example of Ireland and said that good incentives will make people return to their home regions.

EU’s role in peripheral development

Hübner talked about the ways the new European Regional Policy for 2007-13 can address the challenges of peripheral areas. She underlined that the new thematic strategic concentration of policy investment in the development of ICT and innovation, human capital and modern infrastructure is one way to help. She pointed out the importance of the newly proposed legal instrument, the European Grouping of Territorial Cooperation, which will allow more cross-border cooperation among the regions of the BSR than ever before. Another new instrument that can dynamise the local and regional strategies, the Regions for Economic Change, is a creation of a national and transnational platform for networking and sharing best practices.

Hübner stated that local strategies greatly benefit from international cooperation with other regions and municipalities. In fact, transnational cooperation and knowledge transfer can help regions to find the necessary inspiration and tools to successfully develop and implement their own strategic initiatives. She strongly believes that network creation and the exchange of best practices would not only be beneficial for the regions but for the entire EU. Even though there are many success stories of constructive cooperation, there is still room for new ideas and new cooperation constellations. Although peripheral regions cannot change their geographical location, they can change their comparative advantages. The Commissioner finally stated that whether the new regional policy of the EU will be an essential instrument in boosting innovation and competitiveness in the periphery or not depends on “all of us, all the actors that are involved in this policy”.

Minister Manninen reminded the audience that innovation policy is a key priority of Finland’s EU presidency.

Moderator, Research Fellow at Nordregio – Nordic Centre for Spatial Development, Tomas Hanell, summarised the session by stating that joining forces and networking can make even the smallest areas large. He added that personal enthusiasm and will need to be there from the policy side as well as the business side. Policies have to build not only the fundamental conditions, but they also need to become catalysts in the process of getting the local initiatives up and running. Finally, he underlined, more investments and businesses are needed in remote areas.

 

The session aimed at demonstrating the successful outcome of the Baltic Sea Region Transnational Cooperation Programme under the umbrella of the Interreg. Moderator Wiktor Szydarowski pointed out that the session should discuss to what extent this particular programme has been able to boost the development and competitiveness of the BSR. The themes of the session also revolved around the possibilities of the new transnational programme, which runs from 2007 until 2013.

Main Messages:

Themes

BSR Transnational Co-operation

Wilfried Görmar from the German Federal Office of Building and Planning, Steering Committee of the BSR Interreg IIIB Neighbourhood Programme, spoke of the achievements and challenges of transnational cooperation in the BSR in the light of the BSR Interreg programme. The programme area comprises the 11 member states of the BSR as well as Belarus. The need for transnational cooperation stems from real processes, such as the growing integration of Europe, Görmar pointed out. In fact, many problems today cannot be solved in a local context, but must be tackled through transnational solutions, especially when it comes to environmental or transport related issues. This was the main idea behind the programme, which aims at focussing on problems that need a transnational strategy. Görmar underlined that transnational cooperation is an excellent tool to integrate Europe through working together in joint projects. The projects under the Interreg IIIB programme run until 2008 and have altogether attracted 2800 partners, among these 150 from the private sector. This indicates an improving private sector involvement. Görmar emphasised that there is a need for more flexibility in the future towards bigger projects with less direct partners and more indirect ones. He also stressed that the programme aims for pilot solutions and pilot investments in order to create solutions transferable to other projects. Further, more involvement of the private sector is a desired goal as well as stronger involvement of national authorities. In the next coming period, Görmar stated, the programme should focus on four key issues: innovation, accessibility, environment and urban-rural co-operation. This programme will be much more open for pan-Baltic organisations who are working on their own projects, he said. One of the four key topics in the next programme period will be innovation. More precisely, objectives like building enhanced cluster infrastructure, facilitating transfer of innovation and strengthening social foundations for better generation and absorption are going to be dominating the next planning period.

Concrete projects under the Interreg IIIB programme

Manager, Baltic Spatial Development Measures for Enterprise project, Hanseatic Parliament in Germany, Max Hogeforster, talked about their successful project that sets the goal of strengthening SMEs in the BSR. There are three areas of action:

1. community (public-private co-operation and networks),
2. qualification (to improve academic background and practical knowledge of SME managers),
3. concrete support of SMEs (matchmaking events, seminars and courses etc.).

His experience with the Interreg IIIB program was very positive in terms of structuring the project as well as getting consultancy from the secretariat.

Manager, Eurobaltic II project, Swedish Rescue Services Agency, Anneli Bodin, stressed that when dealing with civil protection, a strongly regional perspective must be taken. In order to finance the regional and transnational gaps in services, it was necessary to find a project that could develop certain areas. That was the initiative behind applying for the BSR transnational programme, she said. The Eurobaltic II project deals with cross-border disasters and daily-life accidents. The project focuses on three areas: 1) risk management in spatial planning, 2) building transnational capacity and 3) promoting safety cross-borders and cross-sectors. Some important results have already been achieved especially in the area of transnational training and planning, initiated networks and in developing safety study material for children. She asked for continuous flexibility towards project structures. Involving Russia, Belarus and Ukraine would also be important, she said.

Manager, Baltic Biomass Network project, Potsdam Chamber of Commerce and Industry in Germany, Stephen Dahle, informed the audience that this project deals with renewable energy and the development of bio energy in the BSR. Dahle underlined that there is a need to catch up in terms of capacity building in the area of bio energy development, which was also the main idea behind the project. There is a global biomass market developing in the BSR, and the project’s objective is to implement a common vision for bio energy development in the Region. The project works with regional decision makers providing them with planning tools for bio energy investment projects. Their task is to make a spatial planning analysis in order to see what the most appropriate bio energy product lines are. The project produces biomass action plans at the local, national and regional level. The success behind the project depends on the fact that the method for developing these plans was created at the transnational level under the Interreg project, Dahle said. Another activity of the project is to make multinational companies aware that there is a huge potential for biomass investment in the BSR. The project idea has proved very successful. The Interreg transnational programme was a perfect platform for the project as it was flexible enough to allow regions to cooperate together and employs a multidisciplinary approach.

The transnational cooperation programme has now implemented its own legal framework. Görmar also pointed out that they are working hard on reducing bureaucratic burdens, but, due to the transnational scope of the projects, it is difficult to diminish all administrative obstacles. Good project management is extremely important already from the start. Bodin agreed that the bureaucratic issues can hinder the progress of the project, many problems occur especially on the national level. Hogeforster pointed out that project management can play an important role in reducing administrative and bureaucratic burdens. There will be more Russian and Belarusian involvement in the next period, Görmar said.

 

Main Messages:

Themes

Innonet

Special Adviser for Vinnova, Jens-Erik Lund, talked about the BSR Innonet project, which aims at establishing a shared conceptual framework for cluster policy formation, evaluation and operational activities across national borders in the BSR. The main purpose of the initiative is to create more transnational innovation programme(s) among the partner countries in the BSR.

Head of Unit in EU’s DG Enterprise and Industry, Innovation Policy Department, Reinhardt Büscher, stated that there is a lack of world-class clusters in Europe, even though many regions have the ambition to become number one in this field. Mr. Büscher underlined that there is a need for transnational cooperation among the different clusters, as smaller regions do not have the sufficient capacity to build world-class clusters alone. Cooperation across borders remains difficult and public authorities must take this into account. He emphasised that cluster identity building should also be part of cluster policies, especially in sectors that are not always in the centre of attention.

Clusters in BSR

Secretary General of Nordic Council of Ministers, Per Unckel, pointed out that it is important to realise the strength of learning within a common cultural framework in the BSR. “Only the best is good enough”, he said, when referring to the education system of the BSR. Mr. Unckel righteously underlined that in a cluster based on high technology, there has to be a world-class university. Furthermore, he urged policy makers to tear down boundaries between research and innovation as these two should go hand in hand.

Unckel finally stressed that creating critical mass is most vital in the Region and therefore a decisive cluster policy in all BSR countries need to be in place. In an area of small countries it is evident that a useful cluster will cover more than one country. Therefore, BSR members need to realise that there is a need for cluster policy and cooperation on combining those.

Challenges in the field of Innovation

Deputy Director General at Vinnova, Lena Gustafsson, listed a number of challenges that need to be overcome if the BSR wants to achieve the highest quality of innovation. Gustafsson stressed that leading-edge science is needed as an input in innovation processes. She underlined that freedom and creativity are vital factors in this area, and setting up processes that allow freedom for creativity is therefore essential. She also pointed out that the implications of globalisation pose many challenges. Going from national processes to global processes is not easy. Furthermore, Gustafsson stated that industries and universities need to work closely together, especially with SMEs. She argued that there should be a better balance between science and technology as well as environmental and energy sustainability. At last, she pointed out that there is a lack of methods for evaluating the impact of innovation policies.

Director of Innovation Norway, Svein Berg, stressed that “Regions don’t cooperate, countries’ don’t cooperate – people do!” Innovation Norway was the result of the merger of many institutions three years ago. Norway is special in the field of innovation with a very high number of SMEs. Innovation Norway tries to give local ideas global opportunities, and global ideas local opportunities. Their business model builds on facilitation of the internationalisation of local companies. They try to create clusters in Norway based on regional innovation system approach, Berg told.

Director General of Latvian Investment and Development Agency, Andris Ozols, was pleased that Latvia was invited to the BSR Innonet project. He emphasised that for Latvia BSR is a value, based on historical, economic and cultural cooperation, which strengthens the competitiveness of the region in the global market. Capacity should be used to work on new tools to promote our competitiveness in the global market, he said. Ozols’ expectation of the BSR Innonet project is a new methodology on how to make successful cross-border cooperation, especially when it comes to common work between private companies in one country and scientific institutions in another country. He pointed out that there is an underestimated potential of Latvia’s research institutes. The challenge is to find out how existing clusters in Latvia could become organic parts of BSR clusters, Ozols said. He described that the Innonet project is a win-win situation.

Büscher pointed out that there is much more scope for cooperation in the cluster field than what one may expect. However, cluster initiatives need political recognition, he said. According to Per Unckel the most important goal of cluster policies is to create the right conditions for clusters to occur in the BSR. Ozols disagreed that clusters will “just happen”, and he promoted the importance of exchanging experiences and strengthening national innovation systems that facilitate the creating of clusters. Gustafson pointed out that we should look for inspiration in extra-regional areas as well, such as the Indian Bangalore cluster, which has managed to become extremely attractive. Both Unckel and Gustafsson stressed the need for more entrepreneurs.

 

The main topic of the session was how to attract and train the best talents in Top of Europe. The knowledge based economy requires flexibility and adaptability to the changing global competitive environment. The key to these is talent and knowledge. Europe and the BSR are losing competitiveness in the area of higher education to other regions, like the U.S and Asia. Discussions focussed on possible ways to restructure and improve the education system of the BSR in order to attract and keep talented people.

Main Messages:

Themes

The knowledge base

Moderator, Vice President at Novo Nordisk, Børge Diderichsen underlined that in the changing environment of global competition the BSR needs to be adaptive to the new speed and the changing conditions. This flexibility should be one of the competitive advantages of the Region, he stated. Diderichsen stressed that the key to this adaptability is people with talent. In fact, he argued that the creative class requires talent, technology and tolerance. He also pushed for accepting the diversity in the Region and embracing our neighbours in all regards; “Talent is in short supply”. Diderichsen referred to an article in the Economist, which states that Europe is losing talent particularly to the US. The education system is not as advanced as we would like it to be, and that is one of BSR’s major weaknesses, Diderichsen pointed out. Unless Europe reforms its universities, other regions like the US and Asia will outcompete us before long.

President of the Royal Institute of Technology, KTH, Anders Flodström, pointed out that productivity today is created by constantly producing new products to the market. In fact, knowledge and competent people are the two determinants of productivity.

Polish Undersecretary of State at the Ministry of Economy and Higher Education, Andrzej Kaczmarek, agreed and underlined that in entering the knowledge-based era the development of science, high technology and technological services of the information society are the bases for new economic strategies.

Estonian Minister of Education and Research, Mailis Reps, stressed that the knowledge based economy is the key to sustainable success and emphasised that “no knowledge, no future” is absolutely valid in the entire BSR. Kaczmarek argued that a country’s capacity to take advantage of the knowledge economy depends on how quickly it can become a learning economy.

Strategies to implement

Minister Reps highlighted the rapid economic growth of Estonia in the past decade. She pointed out that Estonia needs similar growth rates in the long run. The Estonian government is soon implementing a higher education strategy focussing on the strength of institutions, quality improvement, internationalisation and the facilitation of the participation of Estonian scientists and students in international networks for competitiveness. Another strategy to be implemented is the Research & Development and Innovation strategy, which aims at achieving competitive quality and high intensity in R&D. Reps recognised that Estonia’s strength lies in ICT applications, biomedicine and material technologies. In the R&D and Innovation strategy a new type of instrument will be introduced, the so-called National R&D programs, which will allow the implementation of measures that support and foster cooperation between enterprises and innovation. Reps drew the attention to the fact that the Estonian government is highly supportive of and contributing to any companies that plan to start high-tech production or R&D activities in the country.

Kaczmarek pointed out that education and research are today part of the business process, and knowledge should not only belong to universities. He stressed that Poland needs to find new competitive advantages, and the only way is through knowledge and innovation. He stressed that accomplishing a change in mentality is the hardest part, and, therefore, building a knowledge economy is the most significant challenge for the Polish economy. Poland has recently adapted a strategy for increasing the innovativeness of the Polish economy. The knowledge economy sector will receive special attention and education is going to be improved. An important element of the process is the coordinating mechanism. He stressed that there is a need for better cohesion and integration in knowledge creation, in coordination and adjustment of the different social economic aspects of science and innovation, and in combining knowledge from different branches and science. Kaczmarek pointed out that the role of the universities is changing, as they are becoming the production factors of knowledge. Therefore, main structural changes in the education system are needed. Best practices from the surrounding members of the BSR are important to learn from in the Polish process.

Rector of St. Petersburg State University, Ludmila Alekseyevna Verbitskaya, said that the Russian government’s focus is increasing on science and education. The strategic aim of the so-called National Program of Development of Education 2006-2010 is the development of the content and methodology of education, the upgrading of the quality of education and management in education. She added that the prestige of teaching is growing and there is a positive trend towards involving more young people in science. She also emphasised that signing the Bologna declaration in 2003 was a very big step for Russia, yet not all universities joined. Verbitskaya stated that the St. Petersburg State University is aiming to promote the Bologna process to others. The university actively participates in cross-border cooperation, particularly with Finland, and it is also a part of the BSR university network. Russia’s policy today builds on strong cooperation between academia and businesses both on the national and international level. Verbitskaya justly advised that besides learning from the best practices of other countries in the BSR, it is important not to lose the best practice of the traditional Russian education. Moderator Diderichsen supported this idea and felt it was valid for the entire Region to learn from the best practices of others, but at the same time keep its own identity. Verbitskaya underlined that cooperation in education is vital for the BSR to become the most successful knowledge region in Europe.

Concrete Goals for the Future

Flodström drew the attention to the budget recently created by the EU to establish a European Institute of Technology from 2008, a European institution equivalent to MIT. The initial idea was to build one single university, but it was later changed into creating three to six knowledge communities throughout Europe. These communities will be in the areas of biotechnology, ICT, material science and so on. Flodström underlined that the BSR needs to attract some of these knowledge communities, as these will be favourable research environments for companies. This is a concrete goal to work for in the BSR, he said. Flodström also advised that the BSR prepare for the challenge of attracting the best students to the Region. He believes that one important step is to increase student exchange from inside and outside of the BSR. He also suggested a more functional cooperation in education in the BSR. Another main challenge for the Region is to find a balance in being a strongly integrated region while also being a part of Europe, he stressed.

Minister Reps stated that the next step for the BSR is to divide strategic points and agree on concentrations in education. Each country has its strength, but, realistically, it must be agreed upon which areas to concentrate on and what institutions to develop, she said. One important answer is to attract private sector involvement and to get the companies interested in investing in brains.

Moderator Diderichsen pointed out that attracting students from the Eastern part of the BSR to the Western parts would be highly beneficial, as many companies would be interested in training and employing Baltic and Polish students, particularly in these problematic times of labour shortage.

 

One of the most important challenges of the BSR at present is to create a more efficient and well-integrated transport and logistics system. This is an urgent issue on the agenda of The Baltic Metropoles (BaltMet). Initiatives are being taken under the umbrella of the new project BaltMet Infra. The session discussed ways of improving the BSR infrastructure system in the light of the BaltMet Infra project.

Main Messages:

Themes

Infrastructure – Baltic Sea Region

Lord Mayor in the City of Helsinki, Jussi Pajunnen, concentrated on infrastructure development in the BSR and the contribution of BaltMet. He stated that their clearly defined goal is to integrate the BSR internally towards the European mainland and Russia. The BaltMet Infra project aims at providing best cost benefit value for improving the internal and external connections of the BSR, Pajunnen emphasised. There is a priority of 24 projects on developing transport and environment that was approved by the Mayors’ meeting just before the Summit. Pajunnen acknowledged that the cities are most dependent on good connections. They are presently facing several challenges in terms of missing links to Russia, inadequate capacities, poor access, bad connections, ineffective logistical chains, and emissions to the Baltic Sea. Poor access from cities to the main corridors is the common problem in Baltic metropolises, Pajunnen stated. Most importantly, he pointed out, there is still an underdeveloped pan-Baltic infrastructure despite the many players in the Region, and BaltMet will make efforts to put this highest on the agenda. Pajunnen called for the upgrading and development of corridors between the cities and better coordination between financial institution and the national governments.

Environment

Pajunnen underlined that “our common concern is the emissions to the Baltic Sea”. The sea is not recovering and Pajunnen encouraged continuous efforts and investments in the Baltic Sea environment. He stated that the major cities are key actors contributing to the state of the environment. He emphasised that the successful wastewater treatment plant that opened last year in St. Petersburg as a result of a transnational project has set a good example for future projects. Also, Senior Vice President, Head of Area Europe & Eurasia, Nordic Investment Bank, Harro Pitkänen, pointed out that the environmental impact of bigger investments in infrastructure needs to be taken into account.

Infrastructure – Russia

Chairman of the Committee for Transport and Transit Policy in the Government of St. Petersburg, Andrey Karpov, talked about the possibilities of St. Petersburg being a logistical centre. The problem of the growing cargo traffic through the city and the insufficient income of the city budget forced the government to create a committee. Karpov explained that a shift had to be made from the model of “the city as port” to the new model of “the city as logistical and distribution centre”. The main idea was to understand that if we “cannot directly make money on the ports, we have to make money on the cargo that the ports attract. He pointed out that to strengthen its competitive advantage, St. Petersburg will have to integrate deeply into the transport and logistics network of Europe and most importantly the BSR. Karpov stated that he believes it is very important for the BSR to see which Russian region can speed up the development of the transportation and logistics area. Pajunnen agreed and found that St. Petersburg is especially important, as it is the main Western logistical centre in Russia.

Karpov pointed out some challenges that need to be tackled between Russia and Europe. Firstly, sea border custom procedures must be simplified along with land border procedures. Secondly, he suggested creating a common space of standards that would ensure the safety of transport activities in the BSR. Furthermore, he pointed out that a clear understanding of the conditions and the monitoring of the transport and logistics infrastructure of the BSR are two important factors along with professional education in this area.

Pajunnen explained that RailBaltica is the biggest missing link in the BSR traffic network. In fact, BaltMet calls for further development of the project and urges St. Petersburg and Berlin to join. Pajunnen also stated that bottlenecks in connection to Russia are becoming a large problem especially in terms of customs and logistical services.

Future action in infrastructure

Vice-Rector of Transport and Telecommunication Institute of Riga, Igor Kabashkin, spoke of three main aspects of transport infrastructure in the BSR. Figures show that trade will be increasing intra – and extra-regionally in the near future. One of the main reasons is the emerging economy of China. In the future we must think about logistics centres and regions, and not local logistics points when it comes to linking Europe to Asia, he said. There is a paradigm shift in transportation towards ‘mobility’ from the classical concept of “movement of passenger and goods”, he explained. One key issue in the future is to build an integrated transport information system for the whole BSR. It is of course also important to have the right political decision before starting to build a new type of infrastructure, and BDF could be a sufficient accelerator in this process, he stressed.

Senior Vice President, Head of Area Europe & Eurasia, Nordic Investment Bank, Harro Pitkänen, talked about the importance of an effective transport scheme. Transport corridors are chains and one little missing link can ruin the efficiency of such a chain, he explained. A deeper integration in the BSR requires an efficient transport and logistics system in the future. It has to be kept in mind that the effective utilisation of natural resources in the Region also requires effective modes of transport and communications. Pitkänen explained that metropolises have multiple roles; they are project initiators, investors and lobbyists at the same time. Metropolises also have the role of regulators that set the playing field. He recognised that there is a need for substantial capital investment over the next years in the BSR. There is a multitude of financial sources, but for viable investment there is a need for a substantial base of own capital, he pointed out. Pitkänen underlined that public-private partnerships in transport and logistics are often the answer, but the right structure of these partnerships are very important to build at an early stage. He also pointed out that the role of local and international financial agencies is significant in infrastructure-related projects.

Moderator, Director General in the Finnish Ministry of Transport and Communication, Juhani Tervala, stressed that a Northern Dimension partnership on transport and logistics would be an important start for common work on infrastructure in the BSR.

 

The environment has been high on agenda of both European as well as global politics. The parallel session aimed to discuss how we, in the BSR, can facilitate an agenda that combines a healthy environment, growth and technological progress.

Main Messages:

Themes

State of the Environment and challenges

Moderator, Secretary General of HELCOM, Anne Christine Brusendorff, stated that a healthy environment including a healthy Baltic Sea is a goal in itself. Not only is it important for its citizens, but it is a perquisite for a sustainable long-term economic development, she underlined. She stimulated the panel and the audience with provoking questions on very pressing issues: Do we have a common vision and are we able to quantify what we would like to achieve? How can we acknowledge and value the benefits of a healthy environment especially when it comes to non-marketed services such as the sea as a climate regulator or provider of oxygen? How can we put market value to it? How can we promote and ensure that government, business and academia jointly develop more specific strategies, for example through creating partnerships? And most importantly, how can we reward pro-activity within this field?

Chairman of European Environmental Agency, Lars-Erik Liljelund, has given an overview of the state of environment in the BSR. The European Environmental Outlook report from last year clearly indicated that the nations in the BSR are doing fairly well in Europe from an environmental point of view. However, the future of the Baltic Sea itself does not look promising, he said. There are many pressures on the sea from agriculture, fishing as well as pollution. He underlined that these problems threaten the foundation of the economic and social success of the Baltic Sea Area.

Director of Business Development at Krüger A/S, Poul Erik Sørensen, talked about the wastewater industry and the important role environmental standards play. Most of the plants around the Baltic Sea are now living up to the HELCOM requirements. However, the portable water quality is still not good in Russia and the Baltic States. Sørensen pointed out that it is becoming very cheap to make fresh water out of salt water, which is changing the world. It is also becoming possible to clean and reuse wastewater for agricultural purposes. It is the improvement in traditional water technology for fresh water supply that has made all this possible.

Chairman of Baltic Sea States Subregional Co-operation, Arne Øren, had deep concerns about the coming generation. The so-called ‘factor-10 society’ will have to meet serious global challenges on a regional scale. The global population is growing; the global economy will increase and at the same time the pressure on the environment must be decreased significantly. We have to invest ten times more per economic unit if we are to have environmental and resource effectiveness in 2050, he underlined. It is a question of quality of life for the coming generation, he pointed out.

How to approach the environmental challenges?

Minister of Justice, Employment and European Affairs of Land Schleswig-Holstein in Germany, Uwe Döring, pointed out that environmental standards and advanced technology cannot be discussed without talking about the European Maritime Policy. This policy seems to be the right instrument to use for reaching the goals of the Lisbon strategy, building on environmental conservation and sustainable development, he stated. Döring referred to the conference of the Baltic Sea Area on the European Green Paper on maritime policy, held in Kiev, where an important declaration was adapted. The first part is a 10-point road map suggesting to the EU how to shape the future of a European maritime policy. The second part is a letter of intent on how to develop the BSR into Europe’s maritime best practice region by 2015. It aims at making the Baltic Sea the cleanest and safest sea in Europe by 2015 and developing the BSR into a pilot area for sustainable coexistence of competitive economy and effective eco-system conservation. He underlined that “we must do more to protect the Baltic Sea”. He welcomed the Marine Strategy Directive from the EU as well as HELCOM’s initiative on a Baltic Sea action plan. Øren agreed and pointed out that as a consequence of regulations that set standards and demands to the private and public sector, innovation will occur technically and culturally, as well as a change in attitude. He underlined that the new Lisbon agenda and HELCOM’s action agenda should be two important starting points for local and regional actions. According to Øren, cooperation, partnerships and Triple Helix working together is the only solution to overcome environmental challenges in the BSR. Döring also pointed out that it is possible to combine advanced technology and protection of the marine environment.

Business Unit Director, Environment, Water and Energy, Carl Bro Group, Hans-Martin Friis Møller, talked about some main threats for growth and prosperity in the BSR Including climate change and energy supply and prices. “We have to establish an environment where we generate winners”, he said. Cross-border cooperation is crucial to an innovative environment and producing radical innovations of new technology that can solve some of the environmental problems. Carl Bro is ready to share its knowledge in partnerships and Friis Møller urged others to do the same in order to create an environment where innovation can occur.

Liljelund stressed that “what we need is joint efforts and common decisions”. He also underlined that a good and healthy environment is important for the quality of life; there is no empirical evidence that high environmental standards, regulations and other instruments to achieve this are in conflict with economic development and growth. The trick is decoupling, he stressed, meaning further growth, but less pressure on the environment. According to Liljelund, market-based instruments many times seem more efficient than others. There is clear evidence that environmental technology is seen as more risky and incentives therefore are needed to stimulate the design and marketing of innovative and more eco-efficient technologies. Liljelund emphasised that most of the barriers to implementation of market-based instruments can be overcome by progressive removal of subsidies and regulations that contribute to environmental damage, recycling, better design of instruments etc. How to approach the environmental challenges in the BSR? First of all, sector integration and responsibility are important principles. However, according to Liljelund, to solve the environmental problems in the BSR, we must have a cross-sector, cross-disciplinary, cross-boundary, integrated approach. To conclude, he underlined that the institutions that can handle this are already in place in the BSR!

During the discussions, many speakers pointed out that there is good business potential in the field of environment protection. Someone in the audience suggested that if we want to change attitudes toward the environment and create an awareness of it, we need to start educating our children from an early age. Moderator Brusendorff summed up the session by stressing that the environment should come on the top agenda of politicians. In order to convince politicians to take action, there is a need to make an assessment of the social and economic value of a healthy environment and what the costs of negligence are. She also added that interdisciplinary research is needed in the environmental field and that for innovation to happen, structures and regulations need to be in place.

 

Main Messages

The recommendations of the panelists on how to stay competitive in the new era of globalization can be summarized in the following points:

Themes

New Context of Globalization

Minister for Foreign Affairs of Sweden, Carl Bildt, set the scene by describing the characteristics of the third phase of globalization, which we are entering. There are three important determinants of this new wave. Firstly, due to the rapidly growing, emerging markets no less than 40% of the world’s population is now entering the global system of production and consumption, which clearly shapes the global economy. The second important factor is the enormous advantages in science and technology, which is transforming everything. The third feature is the aging population which has created a global pension-driven capitalism, hunting for returns all over the world. Besides these changes, we are faced by/situated in a truly integrated European economy, where competitive forces are increasing faster than anywhere else in the world. Bildt pointed out that we have a single market of 450 million people and Europe is by far the biggest trader and exporter in the world. “It is within this context our Region, our countries and companies must be competitive: in a bigger, more competitive and very dynamic environment.

To highlight great achievements from an integrated BSR, he used the story of Skype as a perfect example. It is Northern European, much faster, more entrepreneur-driven and much more global than what we have seen before, he said.

The Baltic Sea Region in the New Wave of Globalization

Bildt emphasised a couple of factors that are critical to the success of the BSR. He stressed that we must 1) support the Single Market of the EU that integrates our economy, 2) work towards a fully integrated Russia, 3) ease rules and regulations in our economies, 4) improve venture capital environment, 5) do more for R&D and make certain that it is effective, 6) allow free mobility of people, and 7) solve the environmental challenges of the Baltic Sea. He stated that “when we can leverage the Nordic-Baltic base within the global context, then we can be highly successful.”

President and Group CEO of Nordea, Lars G Nordström added a practical issue to Bildt’s recipe and he addressed the competition authorities to let big companies in smaller countries to become even bigger, so they can compete on a European and a global scale. “We must also see to it that those companies are supported when they try to go cross boarder”, he said. Nordström also pointed out that the large substantial gap between the declarations from politicians on national/EU level and the local level must be closed. He believes we have to get rid of the “we are so special” syndrome, as he called it. “If we want to compete on a larger scale, we must go much more for unification, determination and get rid of the “we are so special” syndrome.” He stated that growth is a prerequisite of success, but it must be sustainable, broadly founded and well-balanced. It must be based on sound principles when it comes to costs and investments. The “unsophisticated growth” approach will not help us to compete on the European or global arena.

MEP from Finland, Alexander Stubb started out by saying that after the enlargement of the EU we have a window of opportunity. It is of utmost importance that the BSR brands itself as a forward-driving, competitive region now, when the focus of the EU is very strong on the Northern part of Europe. He expressed that using the Baltic Sea to re-brand the Northern dimension would be extremely important. A Baltic Sea Strategy was recently proposed to the Commission based on the following 10 commandments for the BSR:

1. We need an EU initiative, a so-called Baltic Sea Strategy
2. We need to rationalize the cluster of councils in the BSR
3. We need a budget line for the Baltic Sea Strategy
4. We need to protect the environment
5. We need a common energy market
6. We need a borderless Baltic Sea with smooth border crossing
7. We need to support all infrastructure projects
8. We need to implement free movement of goods, services, labour & capital
9. We need centres of excellence
10. We need a stronger Europol presence to fight organized crime

Secretary General of Nordic Council of Ministers, Per Unckel’s recommendations for the BSR were 1) to implement IVY league universities, 2) to have a knowledge policy that is able to attract all European research investments (if we managed to move these investments to our part of Europe it would mean that we could lay the foundation of something that could develop around these research investments), 3) to work on cluster development (we need to look at the Region as a whole, as most of our countries are too small to become a world-class cluster), 4) to establish a plain field for competitive activities, especially within financial markets, in order to attract investments, 5) to support those that are in less favourable situation.

The Cluster of Councils

“We have a cluster of councils in this part of the world!” Bildt said when describing the many bodies and institutions that exist in the BSR. He added that the informal networking effect of leading politicians and businessmen within the BSR is immensely more important than the formalities and the papers they produce. Per Unckel agreed that the structures of all these councils are too heavy and it would be beneficial to put more attention on substance and less on the formal structures. Nordström disagreed with these ideas and stressed that it is not the formalities or the structure that is the problem, but the lack of pressure on the councils from the outside claiming concrete actions. During the end discussions, Bildt stressed that he believes the clusters of councils can play an effective role in lobbying inside the EU for the policies we need. He added that through the activities of the councils “we can highlight our special needs, potentials and perspectives of this particular Region”.

 

Branding has been the buzzword of recent years, without a doubt, but the term has primarily been used with regard to companies or products. However, more and more frequently we have started to talk about branding cities and countries. The Baltic Development Forum has initiated regional branding with ambitious efforts to establish a branding strategy for the 11 countries of the BSR under one umbrella. The process has not been easy or clear, but awareness has been raised on branding as a tool and many stakeholders have become active supporters of the process development.

Main Messages

Themes

Branding – The concept

Government Advisor on Nation Branding and Public Diplomacy, Simon Anholt, suggested that we start talking in real practical terms about how we can use branding to help make BSR an economic, social and cultural reality. According to Anholt, branding is a problematic word. It is not the brand that matters but the competitiveness of cities and nations and regions. However, brand is a very good metaphor for reputation, which is extremely important for nations and regions, he explained. Anholt stated that human beings do things for two reasons: the good reason and the real reason. The good reason is the practical and logical reason, the real reason is something we cannot even express most of the time. Succinctly, the head and the heart is a mix of decision-makers in human beings. The good reasons for buying things is what our head tells us, but it is actually the heart that determines our decisions nine out of ten times, even when it is about major decisions and investments. Decisions are made partly or mainly with the heart, because the heart is a very good calculator, while the head is a very primitive calculator, Anholt explained. The surge of feeling you get when you try to find out which decision to make is a mass of data, all of your lifetime experience, or otherwise called instinct, which tells us what to do, he continued.

Branding is the study of the heart. It is the attempt to understand the emotional and not the rational side of the decisions, – Anholt explained. Nation Brand is about brand image – it is the image the public has in its mind of a city, a nation, a region or a product etc., and it is this image that drives the public behavior. Not the fact that they know and not the information they receive, Anholt clarified. If you somehow understand that image or how this image works, you are half way to figuring out how to achieve prosperity and competitive advantages. In fact, it is the context in which your message is received and not the message that is important.

Branding the BSR

When we talk about the BSR, we mean the context in which everybody’s message is received. One must understand that brand image is infinitely complex and not just good or bad. You can control brand image to some extent, but brand image also comes naturally. Could we have a Region of Origin affect in the BSR? – Anholt asked; so when people know that something comes from the BSR, it adds value to it, it adds interest and trust? Anholt pointed out that it is not enough to wait for the BSR reputation to come naturally, because reputation takes a long time to build. He explained that in the case of the BSR we are not talking about branding in terms of a promotional campaign, advertising, marketing or propaganda. In fact, there is already a lot of bodies and organizations with money, skills, the necessity and the habit of doing promotions in the Region. No more promotion is needed. The tourist boards are promoting, the investment agencies are promoting. By joining forces, we can leverage commercial spending of many millions of Euros, he argued. If we can tell one good, coherent story of what kind of region the BSR is, we can leverage commercial spending of many billions. Anholt believes that the system that will allow the BSR to require a good and positive reputation, or buzz, is by having a single strong story to tell; a common message, a common belief, a common story. When we talk about creating a brand strategy for the BSR, we are trying to find the true, compelling, distinctive, fascinating story about the Region that could align all of the existing communications of the thousands and thousands of stakeholders so that they are all pulling in the same direction. “By aligning our efforts we can build the reputation of the BSR much faster”, Anholt said.

The stories of the BSR

The three stories presented by Simon Anholt are meant to represent what the world will say about the BSR.

E+W=B2! The Baltic Sea Region is the optimal cultural mix, merging the vigour, hunger, talent, creativity and resources of emerging Baltic States, Poland and Russia with the cultural, technical, economic, social, political maturity, stability, experience and confidence of Scandinavia and North Germany. It’s the ideal combination of developing and developed; the best of both worlds; a wise head on a young body.

Born in the age of globalisation. The Baltic Sea Region is the only economically significant place on earth that was born for, and into, a global world. Unlike most other regions, it’s not struggling to cope in a different world order than the one it grew up in, but it is itself a product of globalisation, and so has global competitiveness in its veins.

Smartest region in the world. The Baltic Sea Region is the paragon of the talent economy; its chief resource is its brainpower. So there can be absolute confidence about the long-term sustainability of growth in the region, the skill of its workforce, the breadth of its focus, the stability of its policy framework: this region is smart enough.

The panel discussed vividly whether these stories are true and distinctive, and which one is the most believable. Ambassador and Director of the Latvian Institute, Ojars Kalnins, felt that the first story is the most interesting one, as it identifies the players and the dynamic environment of the BSR. Director of Market Communication of Invest in Sweden, Annika Rembe, felt that having one united story is extremely useful in the promotion agencies’ work when attracting investors to the Region. CEO of Visit Denmark, Dorte Kiilerich, emphasised the importance of tourism in the branding of the Region and suggested to find which of the three stories has most bearing in reality. Executive Vice-President of Nordea, Thomas Neckmar, pointed out that the BSR needs something to unite around. In his view it was story one. Vice President at Novo Nordisk, Børge Diderichsen, stated that the BSR needs to establish itself as a region with reputation, image and remarkable feature in the minds of people inside and outside the Region. He voted for the third story, but he also emphasised that being “smart” is not entirely enough and we should not be self-satisfied. However, the third story contains two key elements: sustainability and talent. Diderichsen believes that the basic concept of the BSR is to combine the Nordic values with the Baltic drive and the talent mass in the Eastern part of the region. Excellent economic performance can and should be combined with responsibility, when it comes to social affairs and environmental matters, he said. “This way of thinking is how we can bring this Region forward.”

Henrik Lax, MEP Finland, felt that story number one is easy to feel ownership about. Getting the head and the heart together is important and people should feel ownership about the BSR identity. To build an identity you need a story, but it only works if the people in the region are able to perceive it, he said. There are still large mental gaps within the region which need to be reduced.

A very important fact was pointed out by Ojars Kalnins, namely that all countries are establishing their own national identities and the BSR identity should add value to the national identity. As a reaction, Simon Anholt stressed that multiple approaches are completely fine in the branding process, but the overall regional strategy must be kept in mind when building your own national brand identity.

Baiba Rubes from Statoil in the audience suggested that the story of being the smartest region in the world is appealing and inspirational to tell.

Simon Anholt suggested forming a committee, which would locate the best stories and examples in the Region, support them, link them and help the countries to find their own voices. This is not an expensive solution, he said. It must include all countries of the Region. The way you want to tell the stories is by showing proof of success, for example letting people know the achievements of the companies in the BSR. Anholt emphasised that a branding strategy is not a replacement for a tourism strategy. It has to be in harmony with the individual countries’ tourism strategies.

Christian Ketels from the audience suggested that the story of the BSR build on the notion that we combine skills, sustainability and dynamism, which is something others envy about our Region.

Speed and decisiveness are two crucial factors in global competitiveness, which means we need to take action now to turn the branding process into reality, Børge Diderichsen urged.

The majority of panelists voted for story number one. The next step is to find proof for such a story and, as Samuel Rachlin righteously pointed out, companies such as Skype are already branding our Region in a very sufficient way.

 

An efficient and intelligent transport and logistics system is a key determinant of a competitive and well-integrated Baltic Sea Region (BSR). Regional projects on transport and logistics have been actively working with the improvement and integration of these systems in the past few years.

Main messages

Themes

Background

The existence and dynamic development of a coherent and intelligent transport system tied up with a strong transport infra¬structure is a crucial element for economic growth and quality of life in the Baltic Sea Region. However, a snapshot picture reveals that significant gaps currently exist. Studies, including the report from Baltic Development Forum’s Round Table process, have decisively shown that the transport system in the Region barely lives up to present needs, and steps are needed to improve it. In addition, today’s challenges are global. A rapidly increasing flow of goods from emerging players such as China and Russia are transported to and through the Region, putting additional pressure on the system.
Against this background, the session focussed on opportunities for improved intermodality and interoperability – how we can bridge the gaps in a global context. In this regard, the need and requirements for a pan-Baltic transport strategy were addressed. Interreg-projects Baltic Tangent, Baltic Gateway and InterBaltic were presented and the role of EU-supported transnational co-operation as a tool for transport strategy development and implementation through increased public-private partnerships provided a basis for the discussion.

What is being done?

State Secretary at the Finnish Ministry of Transport and Communications, Pertti Puro, presented a Finnish national action program agreed on in 2005 that includes 35 concrete measures, focussing on the role of the public sector in strengthening Finland’s logistics position and competitiveness. Mr. Puro was pleased to announce that, in response to the Finnish proposal, the European Commission has promised to draw up a concrete action plan during the German presidency. Transport and logistics have also been on the agenda of the EU-Russia dialogue, and for the first time one has agreed on creating a joint working group to identify obstacles to freight transport between Europe and Russia, with a view to eliminate them. This includes the ever-ongoing problem of border-crossing from Europe to Russia. Mr. Puro also drew the attention to the renewed Northern Dimension policy framework, which maintains special focus on a possible transport and logistics partnership, in which international financing institutions (IFI:s) such as NIB should play an important role. He stated that the main role of the public sector is to create a stable and favourable legal and policy framework alleviating for companies to offer logistical services.

In Finland four main areas were identified where public sector can influence logistics:

1. Research, development and education (e.g. ICT innovation in logistics)
2. Legislative frameworks
3. Improving infrastructure and connections (e.g. border-crossing points between the EU and its neighbours)
4. International cooperation in logistics (the BDF summit is an excellent forum for dialogue between stakeholders, he said)

Shortcomings and bottlenecks in the Region

Mr. Puro stated that the Finnish side is deeply concerned with the efficiency of the logistics system in the BSR. Logistics is a more and more important factor for competitiveness and economic growth, he argued. He added that it is important to acknowledge that the logistics sector, as an industry, is a major source of employment in Europe. He recognised that sustainable logistics also strongly support the goals of EU’s transport policy.
CEO of Maersk Nordic & Baltic, Thomas Dyrbye, stressed that the BSR is at the ‘end of a side road’ when looking at the global logistics chains. “It is a long way from here to where the main cargo flows are moving”, he said, referring to Hamburg as the destination where a lot of goods is turning. In fact, this leads to additional costs when importing goods and should therefore not be underestimated, he emphasised. Mr. Dyrbye pointed out that although the main cargo routes cannot be moved, a lot of bottlenecks in cargo flow and obstacles in the logistics chain can be removed with regional efforts. He, therefore, opted for more investments in logistics and transport.
State Secretary at the Lithuanian Ministry of Transport and Communications, Alminas Maciulis, focussed on the bottlenecks in cooperation and utilisation of the transcontinental transport system. He underlined as shortcomings the fact that customs, freight documents and tariffs are not harmonised, and that there is a high level of bureaucracy and unbalanced traffic. According to Maciulis, these bottlenecks are undermining effective cooperation and utilisation of the transnational transport system.

What should be done?

Mr. Maciulis spoke of the Lithuanian perspective on transport development and its impact on the competitiveness of the BSR. He raised the important question: “How can the BSR become a gateway for Europe and the emerging Eastern economies in the global transportation chain?”
He pointed out that better interconnections create opportunities for integration of the logistics chains, and underlined four important aspects, namely:

1. development of trans-national transport links,
2. improvement of transport and logistics services,
3. elimination of physical as well as non-physical trade barriers from emerging regions,
4. increasing demand for international trade from emerging regions.

He also praised the Finnish presidency for putting railway interoperability on the EU transport agenda. This is especially important in the dialogue between the EU and Russia, he argued. Maciulus advised that in Lithuania’s long-term strategy for transport and infrastructure, the development of two main priorities were identified: 1) Development of North-South transport access including the construction of the new railway line, RailBaltica, and 2) modernisation of the East-West transport corridor. These two priorities reflect the efforts to create a modern transport network and to ensure the development of an intermodal infrastructure.
Director of Business Development at Södra Cell, Gustav Tibblin, stressed that transportation is extremely important for the forest industry. In fact, for Södra Cell, 25% of all the costs stem from transport. Taking care of infrastructure, therefore, is of vital importance. He underlined that it is not only important to improve the big ports but the smaller ones too. “We have to have the right conditions to be competitive”, he stated.
Mr. Tibblin strongly proposed more investments in infrastructure of road systems both in the emerging as well as in the developed countries. This could lead to increasing maximum truck weight in, for example, the Baltic States. He also called for improvements of port roads, in smaller ports as well, and an openness towards new industry ports. Discussions after the speeches drew upon the fact that there should be more efficient concentration of important ports in the BSR instead of many small ones.

During the session three EU-funded transport projects (Interreg IIIB) were presented:

Baltic Tangent
Presentation by CEO of the Regional Council in Kalmar County & Chairman of Steering Committee in the Baltic Tangent project, Hǻkan Brynielsson

The basic idea behind the project is the need for economic development in the East-West corridor of the BSR; in Russia, Baltic States and Scandinavia. China was added later. One restriction is the poor accessibility by road, rail and sea to the main TEN-T (Trans-European Network) roads. The goal of the project is to improve this accessibility in a sustainable way. The project is built on a strong partnership between public institutions and businesses. Transport infrastructure is important for many industrial actors who support this initiative. Five important bottlenecks were identified by the project:

1. border crossing difficulties to Russia and the Far East,
2. the restricted capacity of rail and road transport in the Baltic States,
3. the traffic congestion around Riga,
4. the access to ports and ferry capacities in Latvia.

The project aims at finding ways of eliminating these bottlenecks. The BSR should be the gateway between China and Europe. The Trans-Siberian railway is an important connection in this regard.

Baltic Gateway
Presentation by Region Blekinge, Project Coordinator for Baltic Gateway/East-West, Bengt Gustafsson

The Baltic Gateway project has formed a joint action plan with the objectives of capacity building, improving the Southern Baltic ports as growth centres and connecting these. Mr. Gustafsson pointed out that the BSR must be better connected to Russia, the Far East and China. He acknowledged the importance of the Tran-Siberian railway for the BSR. The success factors identified by the Baltic Gateway are:

1. the access to infrastructure,
2. access to good public transport services,
3. access to markets
4. the stability in prices and lead times.

InterBaltic
Presentation by Transport Coordinator, CPMR North Sea Commission and Partner in InterBaltic, Jon Halvard Eide

The project has three thematic work packages: megatrends and strategy, intermodal toolbox development and action-oriented business development. Its four focus areas are the North-South transport axis, intercontinental intermodal transports, the motorways of BSR and the strengthening of the ‘Baltic Ring’.
InterBaltic has a lot of features in common with the other projects. However, InterBaltic differs from the others in terms of its pan-Baltic scope, its analysis of global megatrends, its intermodal toolbox development and its explicit integration of existing knowledge.

 

If we want to develop and market the Baltic Sea Region jointly as an important international tourist destination, something must be done. The tourism sector is too fragmented and there is a lack of integration in both the private and the public sector. ‘How should we proceed to integrate the tourism sector in the BSR’ was the central question of the parallel session.

Main Messages:

Themes

Changing tourism

Director of Port Development and Integration with EU at Port of Gdynia Authoritiy S.A., Krzysztof Gromadowski, pointed out that the concept of ‘tourism’ has changed and that there is an emergence of new types of tourism products. Tourism trips are becoming shorter and more intense; people combine their holidays with business. There is a new concept of medical tourism often combined with visiting interesting places. The basic thing is to allow people to move between the countries, to create positive conditions and feelings for them, Gromadowski said. “We should feel as a Baltic family and develop the spirit of hospitality”. He also argued that transferring knowledge is of vital importance and stated that the Port of Gdynia is open for cooperation.

Cooperation

Director UK & Irleand, Visit Denmark, Henrik Kahn, told the audience about an initiative in the UK, built on the concept of the Baltic Cruise project, which is a successful cooperation initiative between cities and ports in the BSR. Kahn’s team is trying to move this one step further, and the next level is to initiate cooperation between the countries. Visit Cruise Baltic, which is an initiative officially launched in February, is a framework that builds on cooperation on the national level in the cruise industry. Activities that have been done are press, web and online inter-linkages with all ten nations of the project. Also, online promotion and agent training are among the activities. The cruise industry is the fastest growing tourism sector today and is expected to continue growing in the future. Kahn pointed out that a huge amount of money is spent in conjunction with the cruise-ship operations in the destination cities, spread between the ten countries. It is an easy platform for cooperation as “there is money in it for all of us”, he said. He also underlined that tourism is the best tool for branding. In fact, tourists are the best ambassadors. Kahn believes that the Baltic Sea cooperation should be further enhanced. Getting the knowledge of each other on the market place and doing activities together is very efficient, he argued.

Director of Latvian Tourism Development Agency, Uldis Vitolins, stressed that one of the reasons for the success of the Latvian tourism industry, besides the accession to the EU and low fare airlines, is the deeply integrated cooperation among the three Baltic countries. He pinpointed that when it comes to the tourism industry, these countries are partners and each year they go deeper and deeper in their cooperation process. Examples of close cooperation are the opening of common representation offices abroad, having common exhibition stands in foreign countries. In fact, they are looking for partners when they move into non-European regions. The USA and China are high on the agenda, and a Baltic Sea Region cooperation strategy to approach these regions would be an interesting possibility. He advocated more brainstorming on the promotion possibilities for Baltic Sea Region especially overseas. Common product development is also important. He underlined that a regional perspective is needed.

What next?

Expert of the International Association of Scientific Experts in Tourism, Tomasz Studzieniecki, talked about the threat of our competitors in tourism, such as the Mediterranean area, the Black Sea and the North-East Atlantic regions. However, he stressed that in the BSR “we have competitive tourism products, but there is at the same time a need for identifying our destinations, which are currently not clear”. To promote transnational regions as destination is very difficult, he added, as they should rather be umbrellas than destinations. Studzieniecki raised the vital question: Do we need leadership or networks? He argued that there is still a need for a Baltic Sea Tourism Cooperation or a Baltic Tourism Academy, which builds on the concept of networking tourism schools in the BSR. He stressed that the only obstacle is money. Studzieniecki underlined that there is a good level of cooperation in several sectors of the BSR, but the amount of financial resources that all actors are looking for is limited. Therefore, he called for the coordination of the existing initiatives and projects in the BSR and to create more synergies. Knowledge sharing and developing the marketing concept of the BSR are very important next steps in tourism development.

President of the Baltic Sea Tourism Cooperation, Niels Lund, did not support the idea of a Think-Tank, but was in favour of more projects like the Baltic Cruise Associate Director of the Baltic Development Forum, Jørgen P.T. Christensen, drew attention to BDF’s branding initiative in which tourism plays a major part. BDF is not an expert on tourism, but an expert in bringing people together from all sectors and areas. BDF considers putting up a think-tank where people can discuss the possibilities of concrete actions, such as policy recommendations and better coordination between existing initiatives.

Moderator, Former Director of Finnish Tourist Board, Bengt Philström, pointed out that if we want further cooperation in the tourism industry, the National Tourism Boards will need to work together. He proposed that BDF collects information on all the tourism projects and initiatives that exist in the BSR in order to make a clear overview of them. That way it is easier to see how to cooperate and coordinate the current projects. He also urged BDF to create some kind of platform, where the most essential ideas on how to proceed and how to promote the region to overseas areas under one umbrella could be further discussed.

Stimulating Growth – How to Increase Labour Force Circulation in the Baltic Sea Region

The free movement of labour continues to be both an imperative and sensitive topic in Europe. There was a general agreement that the flow of labour leads to economic and social advantages, and helps face rapidly changing demands of the globalised world.

Approximately 40,000 Estonians work abroad, and Andrus Ansip, Prime Minister of Estonia, pointed out that the labour circulation is a win-win situation for the Estonian economy. Not only do those Estonians send money back home, those who return, also return with new skills and know-how. Henryka Bochniarz, President of Polish Confederation of Private Employers Lewiatan, agreed with Mr. Ansip and referred to the positive results published in an EU study two years after the enlargement. But she also made it clear, that though she adheres to an open labour market, she is not in favour of an unrestricted policy on immigration. Kim Graugaard, Deputy Director General of the Confederation of Danish Industries, also said that workers from new member countries help relieve labour market shortages and bottlenecks, thereby stimulating the economies of the old members countries.

However, despite the positive impact on growth and an enormous need for increasing labour supply in Europe, some of the member countries still uphold a heavily regulated labour market due to political and regulatory barriers. Mr. Graugaard said that another obstacle, besides the political and regulatory barriers, was an old-fashioned way of thinking. Companies need to change their attitude towards cross-border recruitment, if they want to keep up with growing demands. Surveys show that the prevalent myth, that there is a flood of workers from new member countries, who emigrate with plans of a long-term permanent residence elsewhere, is wrong. Research shows that the primary reason for working abroad is to earn money in order to make a better living at home. Mr. Graugaard urged abolishing the transitional agreements imposed during the EU accession process. He suggested making work opportunities more visible by making people more aware of local employment conditions and rules.

 

With its geographical location North West Russia is often called the “gateway” to Europe or the “pilot region” for cooperation between Europe and Russia. In fact, under the wings of the Northern Dimension EU policy program, many regional challenges are addressed through partnerships in economic as well as social areas between Europe and North West Russia. Along with the enormous potential of the region many obstacles remain hindering faster development. The main theme of the plenary session was to highlight challenges and find solutions on how to improve cooperation and regional initiatives between Europe and North West Russia.

Main Messages:

Themes

Northern Dimension and Russia

Finnish Minister for Foreign Trade and Development, Paula Lehtomäki, focused her speech on the political significance of the development of cooperative relationship between EU and North West Russia as a “springboard for growth and prosperity in this region”. Sustainable development, stability, welfare and security in the Northern part of Europe are in the interest of the EU as a whole and the BSR, she said. This was the main idea behind the Northern Dimension policy program, which she called a “true example of EU’s regional cooperation”. Lehtomäki stated that the existing Northern Dimension partnerships on environment and social well-being have been important in their own right in addressing acute challenges in the region. She stressed that the instrumental value of these partnerships in laying the grounds for sustainable growth and a favorable business environment in Northern Europe are even more pronounced. The work in the areas of environment, diseases, narcotics and alcohol abuse through the Northern Dimension partnership in public health and social well-being has far-reaching impacts on the well-functioning of the society and the stability of the business environment. Head of office, Nordic Council of Ministers, Arne Grove, pointed out that the Nordic Council of Ministers is working with concrete projects within the social sector under the same partnership.

Lehtomäki suggested that a new Northern Dimension transport and logistics partnership would contribute to the competitiveness and economic potential of the BSR as a whole, by enhancing the integration of the transport and logistics networks in the Region. She also stated that with the successful Northern Dimension partnerships and hopefully Russia’s accession to WTO in the near future, all actors now should be able to use the enormous potential of Russia. Arne Grove agreed with Minister Lehtomäki and spoke of the enormous developments and opportunities of Kaliningrad. He underlined that the Nordic Council of Ministers focuses on knowledge-building, environmental issues and the development of small and medium size industries as well as cultural policies in the Kaliningrad area.

Potentials of the North West

North West Russia was the historical, industrial, cultural and political centre of Russia for many years. The current administration of Russia, with President Putin in front, has done a lot for the success of this Region, Group Vice President of Renaissance Capital, Igor Yurgens said. Yurgens spoke of the economic performance of the North Western region and gave a snapshot of the region’s current economic state. The figures show that North West Russia has been growing rapidly in recent years. The development of domestic and foreign trade, as well as the recent construction boom, allows the regional economy to prosper, he said. In fact, the region beats the rest of the country by wide margin in developing its industries. Yurgens pointed out that future growth is most likely to continue, especially in industrial sectors. He stressed that the North West Russia is the oldest industrial area of Russia with well-established machine-building companies. Moreover, the region is the key transit artery with a well-developed infrastructure. Very importantly, Yurgens urged the region to be conscious of being ecological, safe and sufficient in the further development of the infrastructural platform. In terms of tourism, he stated there is a lot to be done in the Kaliningrad area. The tourism infrastructure, in particular, requires substantial investments. While St. Petersburg has an amazing cultural and architectural scene, the rest of the region is underdeveloped in terms of tourism.

All panelists agreed that there is an enormous potential in North West Russia. Yurgens believes that the region will benefit from public infrastructural projects and new Public Private Partnerships.

Remaining challenges

Among the remaining main challenges Lehtomäki highlighted custom procedures and other lengthy bureaucratic problems related to border crossing for companies towards Russia. She also emphasised that establishing and conducting foreign business in Russia is still highly bureaucratic and costly, which does not only decline the profit margins of foreign companies but also reduces employment opportunities for local people. She stressed that practicalities of doing business in the Russian business environment must be improved, if we want to reap the full benefits of North West Russia’s economic and commercial potential. Lehtomäki argued that even though the EU stands as a willing partner in this work, it is, in the end, the responsibility of local leadership to secure more favourable environment for both local and foreign businesses. Arne Grove added to the list of challenges the special location and the small size of Kaliningrad, which makes it difficult to attract investments. Lehtomäki drew the attention to the fact that even though the St. Petersburg area is well-developed, the rest of North West Russia has not got enough attention from Moscow in terms of development efforts. Yurgens identified some barriers in terms of financial infrastructure, which needs further development. Currently, banks have special focus on getting project financing in tourism, real estate, ports and pipelines, he said. Strategic partnerships and direct investments in ports and tourism projects are especially needed.

How to improve the current situation

Lehtomäki believes that one very important step to improve the Russian business environment would be Russia’s accession to the WTO, which would solve some of the unpredictability in Russian markets. Yurgens added that the whole business community in the region fights against corruption, bureaucratic abuse and administrative barriers, which he called the “curse of Soviet Russia”. He described the results insignificant in terms of administrative reform and stressed that the only hope is the self resistance of the growing entrepreneurial class which fights for its rights together with foreign colleagues for de-bureaucratization. The new generation shows a lot of flexibility, openness and transparency, he said, which will hopefully win this battle. As to how to solve some of the regional challenges, Yurgens and Grove agreed that Baltic Development Forum can play an important role in trying to develop a dialogue with the region, especially with the new governor of Kaliningrad, Mr. Boos. Platforms and forums such as the BDF Summit are extremely important in achieving higher involvement and deeper integration from the Russian side, Yurgens pointed out.