The 15th Baltic Development Forum Summit 29-30 June in Riga, Latvia sent a strong signal: Latvia and the Baltic States have returned to the Top of Europe, demonstrating high economic growth figures and optimism for the future as well as high hopes for regional and European integration.
Baltic Prime Ministers
One of the highlights of the Summit was the plenary session with the three Baltic Prime Ministers underlining the positive results of their tough austerity programmes and structural reforms. These reforms have enabled Latvia specifically to live up to the criteria for joining the Eurozone by 1 June 2014, as Lithuania is taking over the Presidency of the EU Council. The Baltic States are now almost out of the crisis, while many parts of Europe still suffer.
The three Prime Ministers hoped for new policies that can deepen the internal market of the EU, especially in the digital area and energy, and that infrastructure could be further developed for example in the field of railway transportation. The Eurozone is attractive to the Baltic States as it provides trust to the economies and helps boosting FDI. Stronger efforts in the educational sector, lifelong learning and R&D were also highlighted as essentials for staying competitive.
The Baltic Sea region cooperation will figure high on the Lithuanian Presidency, hosting the 2013 Annual Forum of the EU Strategy for the region. The main focus will be on sustainable development. Better relations with Eastern neighbours also figure high on the agenda. The Baltic Sea Region is dynamic, the Prime Ministers emphasised, and the next step is to keep up with policies that can maintain the present situation.
State of the Region Report – cautious optimism
Hence the overall Summit message was one of optimism but also cautiousness, realizing that Europe is deeply integrated. The State of the Region Report 2013 documents that the post-crisis recovery has slowed down significantly in the region. The crisis in the Eurozone and elsewhere has influenced the economic outlook which is still fragile. The countries of the Baltic Sea Region have relatively sustainable public finances and no severe debt burden. Unemployment has risen but much less than in the rest of Europe. The region’s competitiveness fundamentals have stayed unchanged and strong over the recent years. The trade intensity is high and the total trade is on the level before the crisis in 2008 although the region is losing global export market shares.
Photo: HASSE FERROLD
Two different modes of internationalization is emerging. Germany, Poland, and the Baltic States are strongly export-driven, engaging in global value chains at different stages. The Nordic countries are more FDI-driven, attracting knowledge-seeking investment but otherwise engaging in international value chains through activities located abroad but owned from the Nordics.
The European crisis calls for new ways of thinking how to keep Europe together. It requires different and new configurations for dialogue and cooperation. Regional cooperation has European potential as an instrument of crisis management.
Baltic Sea Award: Bildt and Sikorski
In the light hereof, the 2013 Baltic Sea Award was given to Minister of Foreign Affairs of Sweden, Mr. Carl Bildt and Minister of Foreign Affairs of Poland, Mr. Radoslaw Sikorski, for their extraordinary and several joint efforts to create an open and embracing Baltic Sea cooperation. The two have jointly taken initiatives to foster political dialogue, new configurations and cooperation in Europe. They have in particular taken initiatives to improve dialogue and partnership with Eastern neighbours and to move beyond traditional thinking.
Innovation and the Baltic Sea Innovation Award
At the Summit it was discussed how the region could maintain its world leading position in the field of innovation. Cross-border cluster cooperation and integration of companies, research institutions and universities were taken up, underlying the need to have a real flagship project in the field that matches the international reputation of the region. Exchange of best practice remains a key objective. Project development in the field was called for.
The Baltic Sea Innovation Award was given to the European consortia, ProcessIT, headed by Anders Johansson. ProcessIT is leading the biggest automation project in Europe and has taken many innovative steps. The project involves i.a. three universities in Sweden, Poland and Finland.
Political cooperation in the Region
The Summit discussed trends and directions of the regional cooperation with special focus on the EU Strategy for the Baltic See Region but also other regional cooperation frameworks, the Northern Dimension, the Council of the Baltic Sea States and the decentralized levels. The different formats creates still some confusion and the Summit message was that a pragmatic approach with focus on concrete cooperation efforts is needed.
The economic dynamics: Manufacturing and regional value chains
The Summit also presented a new understanding of the manufacturing sector (together with McKinsey) as an important driver for economic growth, research, service and employment. The call was not to return to old – protectionist – industrial policy, but to recognize the sector’s importance for export, competitiveness, FDI, R&D and for the internationalization of the economies. A message from the Summit was that this sector needs to return on the agenda as the Region has a strong manufacturing potential. The Latvian economic recovery is an example of how this sector can be a driver for growth.
Business matchmaking and Baltic Business Arena
The importance of business matchmaking is significant at the Summit where the participants were evenly divided between business and administration/politics. Many business meetings were even pre-booked within the framework of the Baltic Business Arena where SME’s from the Region met to exploit cooperation and export opportunities.
Competitiveness – at the centre of regional attention
A key message was also that the improvement of the region’s competitiveness has to stay on top of the regional and European agenda. Representatives from private and public sectors, economists and financing sector representatives from the Baltic Sea Region and beyond had a round table discussion on how this can be ensured and whether Baltic Development Forum could play a stronger role in this regard through stronger policy advocacy, conferences, research and different analysis. It is also important to ensure that this agenda has full attention within the cooperation frameworks of the EU strategy for the Baltic Sea Region. One way to ensure this can be to set up a Competitiveness Advisory Council for the Baltic Sea Region.
EU strategy for the Baltic Sea Region – need to boost the prosperity chapter
Another key message was that the chapter of the EU Strategy for the Baltic Sea Region (EUSBSR) on “Prosperity” needs further progress and vitalization. It includes regional endeavours to help implement the objectives and legislation of the internal market, entrepreneurship, SME’s in particular but also industry and manufacturing. There is a need to present new project proposals and new ideas in this field.
The digital economy: BSR inspiring Europe
The Baltic Sea Region hosts some of the world’s leading companies and clusters within ICT and the digital economy. To maintain this position and to inspire the rest of Europe the internal market can be further developed and deepened through joint cross-border projects in the region based on the national experiences within e-services, e-health and e-government, as a first step to pan-European solutions. The Summit urged national governments to push the development of joint e-services. The region can position itself as a test bed for how Big Data/Public Open Data can boost growth and new initiatives among web-entrepreneurs. National e-government initiatives are appearing, but cross-national exchange was limited and a need to link them up was identified.
Concerted investment promotion initiatives
The BSR is becoming increasingly dependent on foreign direct investment (FDI) in the internationalization of the economies. The Baltic Sea Region is becoming a well-known European model, empowering it to promote the region’s international attractiveness more widely and in a concerted manner. The cooperation between the Region’s investment promotion agencies, who met in Riga in connection with the Summit, is finding ways to attract investors. The ICT sector was taken up in this regard. City branding and promotion as part of investment attraction was also addressed with the inspiration from the work in Stockholm Business Region.
Blue growth – a need for integrated sector focus
A final summit message was that the maritime economies are essential to the prosperity of the region today. In close cooperation with the EU and DG Mare of the European Commission, this agenda is being unfolded under the headline of Blue Growth. The blue growth agenda lives up to the sustainability objective of the Baltic Sea cooperation where the main focus is a cleaner Baltic Sea. The region has the opportunity of taking full advantage of this blue economy, which is part of the EU’s 2020 strategy, and to act as a model region for integrated solutions.
On 3 October 2013 in Copenhagen, BDF will take up this issue together with the Ministers of the Environment meeting in the framework of the HELCOM Ministerial and the European Commission, DG Mare.
Finding further common ground with Russia
Regional integration and project initiatives are increasing, but more should be done to exploit the neighborhood with Russia. Russia’s Presidency of the Council of the Baltic Sea States (CBSS) has demonstrated a wish for such efforts. Also, the Northern Dimension partnership frameworks provide an opportunity that has not been fully exploited. The external dimension of the EU strategy for the Baltic Sea Region should be strengthened.
BDF and regional partners will address the issue of how stronger regional value chains can include Russia, to help upgrade the overall competitiveness of the region. The involvement of business partners and organisations is an objective in itself. These issues will have stronger emphasis at the next BDF Summit in 2014 in Turku. BDF will work in close partnership with the in-coming Finnish CBSS Presidency in this endeavour.
Photo at the top of page: H.E. Prime Minister of Lithuania, Aligardas Butkevicus, H.E. Prime Minister of Latvia, Valdis Dombrovskis, H.E. Prime Minister of Estonia, Andrus Ansip, Director of BDF, Hans Brask