sou · GLB3160d2 · 1998-01-01 00:00:00 — This summary falls into five parts. The first of these analyses the potential economic impact on Swedish regions of a possible enlargement of Union. An empirically oriented analysis of the international competitive position of different branches of the economy is related to the heterogeneous branch structure possessed by local labour markets in . Conclusions are drawn concerning the development of trade - above all in the Baltic region - the spatial distribution of regions with, respectively, a dynamic and a contracting economy, effects on income developments, and the prerequisites of developing regional attractiveness. Part Two deals with Swedish regional policy in relation to the common regional and structural policy of the EU and the radical transformation of the applicant countries. This part can also be viewed in relation to the structural picture presented in the opening section. Central topics of inquiry concerning the development of the concentration and implementation of supranational support in and the possibilities of effectively using measures of regional support. The third part will illuminate the problems respectively created by and facing an eastward enlargement. This is done by considering experience from previous enlargements and the example of German reunification. This section discusses the political and fiscal costs of enlargement and the necessity of its being preceded by more thoroughgoing changes to the structural policy of the Union. Part Four summarises the analysis of the applicant countries capacity for coping with the new regional policy situation which membership implies. Particular interest attaches here to the present deficiencies of all applicant countries at regional and local levels and ways in which Swedish and other border regions can contribute to development in this respect. Lastly the analysis is summed up in a number of policy recommendations. 3WEDISH REGIONS AND THE OF %5 ENLARGEMENT EASTWARDS How will the incorporation of ten Eastern European states in the EU affect developments in different regions of ? This is of course a complex issue, and a detailed forecast is feasible. It is possible, on the other hand, to describe the present-day regions in terms of their economic structure and sectorial specialisation. 4ABLE Sectorial specialisation trends in Swedish industry, 1985-1994 Highly specialised (1994) Low specialisation (1994) Source: Adapted from SCB (Statistics ) 5TRIKESHANDEL OCH )NDUSTRISTATISTIK international dependence is manifested above all in the industrial sectors. A study of the degree of specialisation - that is to say, output value divided by the value of domestic consumption, in the various sectors shows knowledge-based, research and, to a certain extent, capital-intensive industry to be in the best position for holding its own in the international market. Moreover, the competitive advantages of these sectors have been reinforced over the past ten-year period; see Table 1. 4ABLE Export-import ratios by sectors of industry, 1994 Source: SCB Utrikeshandel Note: Dynamic Asian countries (DA) consists of , , , South , and This pattern of specialisation is clearer still in relation to the applicant countries as a group. Table 2, giving exports by percentages of imports, shows to have a large export surplus, above all in knowledge- and research-intensive production and a deficit in labour-intensive production. Exchange with these countries, taken as a group, is, however, small, with only 3 per cent of Swedish exports and imports respectively in 1994 accounted for by the applicant countries, as against no less than 60 per cent of the EU. The short-term effects of an enlargement, therefore, are likely to be relatively small, but trade with Central and Eastern Europe has a considerable potential in the longer term, due above all to the geographical proximity of the applicant countries to , but also because, prior to , the applicant countries were closely integrated with economy. Our calculations indicate a possible growth of trade exchange by up to five times during the coming ten-year period. Even a doubling of trade would raise the applicant countries as a group to a level corresponding to trade with or . These calculations, however, have to be interpreted with care and may only be looked on as rough estimates. It is a good deal to say in which product categories trade will develop and in what direction. Short-term growth, presumably, will lie in the utilisation of the respective comparative advantages of and the applicant countries, i.e. exploitation of differences in technology, demand and factor availability. In the longer term there are also possibilities of developed two-way trade, i.e. an interchange of functionally similar products, with enterprises taking advantage of the economies of scale afforded by a bigger market. Opportunities for exhaustively analysing the competitive potential of the applicant countries are very limited at present, but previous studies have shown that until 1994 the countries of Central and Eastern Europe specialised in labour-intensive production, whereas the pattern of specialisation in capital-intensive industry was ambiguous. It is further confirmed that, between 1981 and 1994, the applicant countries were net importers of goods based on knowledge- or research-intensive production. The analyses which have been performed do indicate, however, that the effects of enlargement on are in line with the long-term trend for Swedish industry. Table 3 shows the labour-intensive and capital-intensive sectors losing employment shares to the knowledge- and research-intensive sectors between 1965 and 1990. 4ABLE Changes in numbers of job opportunities in various sectors of Swedish industry, 1968-1990 -25,2 -14,0 -2,9 Source: Adapted from 3#" )NDUSTRISTATISTIK. In order to gain a more complete picture of regional conditions in , we also have to take into account the increasingly important service sector. Reduced interaction costs and rising incomes in an international market have led to a considerable change in the products delivered from industrial enterprises and in the way in which industrial activities are organised. Firms are tending to develop into co-ordinating organisations, with extensive networks of and suppliers occupying a central position. This is making it more and more difficult to draw a clear line of demarcation between production of goods and production of services. On the contrary, the fact of industrial enterprises basing their competitive strength more and more in elements of advanced services testifies to the necessity of focusing on these connections. The growing importance of services for employment is evident from the proportion of persons employed in the service sector having grown by 20 per cent between 1965 and 1990, whereas the commodity-producing sectors have reduced their shares of employment by the same percentage. Service occupations, like industry, have developed in a variety of ways. Human-capital-generating public services and company-oriented private services showed positive development between 1986 and 1995, while other service sectors lost employment shares. Employment growth has thus been strongest in those service sectors which are extensively relatable to the dynamic side of industry. Thus the past 25 years have seen a significant change in the structure of the enterprise mix at national level. At the same time as the contraction of the commodity-producing sectors continues, there are signs of a concentration in favour of scientifically more advanced industrial production. In the service sector, it is above service activities catering partly or to other enterprises which have gained ground, reflecting the ever-closer integration of service production with commodity production. The rapid growth of human-capital-generating public services also points to the strategic role of knowledge and information in a modern commodity- and service-producing society. This review shows that it is above all labour-intensive, and to some extent also capital-intensive, industry that may encounter growing competition from Central and Eastern Europe, at the same time as knowledge-intensive, research-intensive industry will have the possibility of finding new markets. Looking slightly further ahead, however, these parts of industry will also be faced with growing competition, competition which will have to be parried by greater specialisation in particular market segments which, with rising demand, may permit growth for a wider spectrum of industry. The outcome of this balancing act between growth stimuli, resulting from a growth of demand, and the increasing pressure of competition will ultimately depend on the development of competitive capacity in sectors generating incomes above the present-day average. Thus there is some likelihood of the industrial developments outlined above being accentuated parallel to the opening up of the Eastern economies. The fact of industrial enterprises basing their competitive strength more and more in elements of advanced services means that service activities can have a crucial bearing on the of coping with increased regional pressure for change. In addition, the ongoing development of information technology is bringing an international market within reach of certain service sectors. The export base of the Swedish regions may therefore come to be further diversified, so as also to include a variety of service activities. The rapidly expanding human-capital-generating public service sector - higher education, in other words - is also strategically important for the development of enterprise. This sector has a critical bearing on the development of regional factors of production and, accordingly, on the long-term comparative advantages of the regions. The in many respects far-reaching specialisation of regions means that they will be differently affected by an enlargement of the EU and an ongoing integration of the states of Central and Eastern Europe. In order to arrive at a coherent picture of the future development of the regions, the Committee has divided the stagnant and expansive branches respectively, as previously identified, into two groups. The stagnant ones are taken to include primary economic activities together with labour-intensive and capital-intensive industry, while the expansive ones consist of knowledge- and research-intensive industry, business- oriented private services and human-capital-generating public services. Map 1 shows the local labour markets with high shares of employment in the branches which are expected to encounter the biggest adjustment problems. A line has been drawn at an employment share of more than 25 per cent, which means more than one out of every four economically persons being employed in one of the stagnant sectors. Leaving aside one or two scattered regions of , practically all the 46 local labour markets are to be found in and the Bergslagen region. A number of typical industrial and small manufacturing BRUK communities occupy something of a special position, with employment shares of between 50 and 65 per cent. This extreme group consists of , , , , and . -AP Regions with high employment shares in stagnant sectors, 1995 -AP Regions with high employment shares in expanding sectors, 1995 Map 2 shows the regions presenting a large proportion of employees in sectors which are expected to benefit from integration. limit has been put at an employment share of at least 15 per cent. Apart from a number of very scattered industrial regions, the 22 local labour markets also include all the university towns and cities. , , , (), and are regions with more than a quarter of the work force employed in potential growth sectors. One of the main points of inquiry in this study concerns the implications for regions of the applicant countries becoming EU members. has argued that membership and its effects have to be viewed in the context of a considerably more comprehensive and long-term process, a process which advanced by a leap following the collapse of the . The applicant countries and the rest of Eastern Europe, in which , for example, considerable weight, will, with their population, their geographical proximity and their structural differences compared to Western Europe, regardless of EU membership, impact on the pattern of Swedish trade and actively influence regional developments in . The frames of this inquiry have not permitted numerical calculations of the aggregate welfare effect on regions of the whole of this process or of the individual part of it represented by the applicant countries EU membership. Such calculations, in any case, are not really possible at present, except as illustrative mathematical examples. Instead the main contribution of this study to knowledge and understanding concerning the complex course of events consists in a description of existing structures in the regions of . Basic processes and tendencies in the dynamics of economic geography can be exposed by dissolving the economic branches of the national aggregate into their more abundant regional diversity. What, then, will be the consequences of the applicant countries joining the EU? The answer to this question hinges, of course, on the chronological perspective. In the short term, the relatively limited size of the applicant countries in relation to the EU economies must mean that membership will above all accelerate their structural transformation, following the disappearance of the protection which non-membership affords. Membership can thus entail a strain on the internal work of the EU and on its resource-demanding structure and welfare-equalising policy measures. As has already been remarked, this can mean regions which today receive grants finding their support reduced. The impact of this on different regions, however, will have to be evaluated in relation to the function of the supportive arrangements. It is important that support should contribute towards positive structural change, as opposed to perpetuating stagnant structures in the regions. The ongoing structural transformation has a distinctly place-hierarchic dimension. The dynamic and expansive sectors are tending to congregate within a small number of urban regions, while the stagnant ones are far more widely distributed. There is much to suggest that the dynamic productive environments of the future will encompass knowledge- and research-intensive industry together with business-oriented private services and human-capital-generating public activity. In this connection, the relatively few urban regions with a satisfactory structure constitute dynamic productive environments in which expansive sectors congregate and reinforce one another. Good communications, an attractive urban environment and a flourishing cultural sector are other factors reinforcing their attractiveness. The smaller regions are characterised by greater one-sidedness and a larger element of price-competitive activity at the end phase of the product cycle, which renders them appreciably more vulnerable to economic fluctuations. The one-sided productive environment also creates structural problems of a more long-term nature. The phasing-in of new activities is impeded by lack of access to various growth markets and a greater element of outmoded factors of production. In this respect, larger communities are better equipped for conversion, renewal and expansion. #ONSEQUENCES FOR REGIONAL POLICY IN 3WEDEN For a long time now, regional policy in has been on the horns of a dilemma which is not directly concerned with the EU and its enlargement, namely the problem of deciding whether regional policy is primarily to reallocate support funding or whether it is to initiate change through competence development. The gap between these two working approaches has become clearly visible in recent decades. The political scene was until quite recently dominated by the top-down perspective, but today a pronounced bottom-up perspective leaves the field clear for alliances and initiatives of all kinds which are not amenable to supervision and control from the political centre. The task of central level then becomes more that of supporting good initiatives with rules and funding. The public sector becomes one of several parties with which these questions can be discussed and translated into practical policy. Partnership is something which is highlighted through the EUs policy for the regions. This means looking for effective processes rather than policy measures of a particular kind. The regional policy which is now developing is characterised by this view of a highly co-ordinated partnership on local and regional foundations. has stated that membership and the way to it require democratic understanding and acceptance at local and regional levels in the applicant countries. They also require effective co-ordination of regional policy measures in each country. If these requirements can be adequately met, the new members will be well equipped for the future with a modern organisation of well-trained, enthusiastic people. In the medium term this can enhance the regional competitive strength of the new members, and it is therefore essential for to continue the work of reform at its own regional level. The experiments to be conducted in between 1998 and 2002 have the makings of an appropriate regional organisation. If those experiments are successful, should be ripe for the introduction of a general order establishing and strengthening its regional development process. regional policy in its present form will not be changed as a direct consequence of enlargement. On the other hand it is important that the Swedish process of regional development should be co-ordinated across sectorial boundaries, regardless of EU enlargement, and that clear responsibility for policy measures and results should be created within the Government. Both locally and regionally, the regional development process must rest on democratic foundations, and this calls for a distinct regional tier, elected by the people. A nationally co-ordinating distribution of resources between the countrys regions must conform to a clear principle of fairness. Research into this extensive process of change must be conducted with the greatest possible commitment of resources, and there must be better co-ordination between research and practice. needs a forceful, dynamic regional policy to harness all the countrys resources, as progressively will make clear. In order to cope with the demands of the future, the EU has issued new directives for its regional policy. The Swedish Government has endorsed those directives and feels that there is scope for improving the efficiency of the . This can be done by amalgamating existing funds and by introducing uniform rules on administrative routines. Thus the drift of the Governments thinking is that there will have to be a co-ordination and concentration of regional development measures, at least within the EU. There ought, as the Government sees it, to be no more than three objectives: ·Objective A, focusing on programmes and measures in the economically least developed countries and in sparsely populated regions. ·Objective B, focusing on regions and areas with certain long-term, widespread structural problems, regardless of economic sector. Area boundaries should coincide with those of the present Objectives 2 and 5. In addition, measures defined as Objective C should also be considered for the Objective B areas. ·Objective C, focusing on competence development in with the measures taken under the present Objectives 3 and 4. At the same time, the number of Community initiatives should be reduced, concentrating exclusively on transnational and cross-border co-operation, development in city regions with major structural problems, and rural development. The Government wishes to give top priority to transboundary co-operation. The intention is for every measure within the framework of the various EU programmes to imply an effective adjustment to the problems and possibilities of every and its regions. It is important that both planning and implementation should comply with the subsidiarity principle, i.e. on an appropriate level in each system, and that partnership should be defined for all participating states. The elevation of quality which the Government is aiming for will improve the possibilities of using the large sums of money now being channelled through policy. The Governments wishes are very closely in line with the proposals put forward by the Commission. One tangible consequence of the order now proposed is that support to may come to be reduced. The Government therefore maintains that a choice will have to be made between geographically oriented measures and national programmes, in order to solve the problem of unemployment and settle the allocation of resources among regions which may find themselves receiving less support. Objective A, in the Governments opinion, should comprise the north of , where regional differences are most pronounced. There is every reason for the EU to continue measures for the improvement of competitive strength in what at present constitutes Objective 6, i.e. the sparsely populated regions of and . The low head of population now used as a criterion, namely fewer than 8 inhabitants per sq. km., should be supplemented by other conditions qualifying for continued support. The regions at present classified as Objective 6 command great natural resources of importance to the whole of the EU. Objective B must be aimed at coping with structural change in many different economic sectors. This objective is to focus on regions which worries of this kind or are expected to encounter them. The measures taken shall create long-term employment and augment the competitive strength of the regions. The geographical distribution cannot be determined now. Objective C, lastly, is to be solely concerned on conferring superior competence and will comprise regions with special needs. Together with Objectives A and B, this objective will play an important part in achieving the Unions employment target. Parallel to the viewpoints tendered by the Government, there are the demands made for a reduction of contributions. contribution has been phased in since its admission to the Union but, as the rules now stand, is expected to level out at some as from 1998. is not the only nation now demanding a reduction of its contributions. The biggest threat in this respect comes from , but the are also seeking to pay less. Both these states are among the big net payers in the Union, with alone bearing an estimated 29 per cent or so of the EU budget. Thus the Government argues that the present Objective 6 must have continuing support, at the same time as wishes to pay smaller contributions to the EU. It is impossible at present to judge the compatibility of these standpoints. With an extensive enlargement, however, mere reallocation of existing supportive measures will not, in the Committees opinion, be enough. If, moreover, several large net payers carry out their threats to reduce their payments to the EU, a GNP growth percentage high above the estimated 2.5 will be sufficient to cover the financing of new members. In this case it will be difficult to justify receipt of support covering a total of 62 per cent of its territory but affecting only 12.5 per cent of its population, at the same time as Eastern and Central Europe are wrestling with enormous problems. Objective 6 alone covers 55 per cent of the countrys area but affects only 5 per cent of its population. It is also difficult to plead for support based on low population density, because that problem will not be solved within the foreseeable future.