SPEECH/08/663

Danuta HÜBNER

European Commissioner responsible for Regional Policy

"Energising the climate for business in the Baltic Sea Region"

Baltic Development Forum Summit
Copenhagen, 1 December 2008

Dear Prime Minister Kirkilas,

Dear Prime Minister Ansip,

Ladies and Gentlemen,

It is a great pleasure for me to be with you, to address the Baltic Development Forum summit for 2008 and honoured to do so at your 10^th anniversary. I am particularly pleased that this year you have co-organised it with the European Commission.

Today's round table on "How to make the Baltic Sea Region a prosperous place" has become even more topical at the current economic juncture. What started as a banking crisis turned into a financial crisis and has now become an economic crisis. As in all crises, mistakes made in the past and missed opportunities become painfully visible. The Baltic Sea region is no exception. But times of crisis can also represent a turning point into a better future. If there is any positive aspect of the current crisis, then it is the sea shift in the political willingness, imposed by mere necessity, to take joint action. We have witnessed this at the EU level, we are seeing this at the global level, and I am optimistic that we will see it in the Baltic Sea region, too. For this reason, I am glad that this summit is part of our consultation process on the EU Strategy for the Baltic Sea Region. And I sincerely hope we will achieve a breakthrough in terms of action, after a long debate.

Prosperity and competitiveness are closely linked. And there is a pressing need to discuss how the Baltic Sea Region can exploit its synergies and complementarities; how it can "energise the climate for businesses" as the overall theme of your conference rightly indicates.

Prerequisites

Overall, the economic preconditions of this region are strong despite huge disparities, which are among the highest across the EU. Let me mention a few impressive facts:

• First, a particularly strong feature is the high share of spending on R&D in terms of GDP. Amounting to 2% of GDP for the Baltic region, this clearly outpaces the respective shares for the EU-27 (1.76%) and also outpaces the EU-15 share (of 1.9%). Many of the Baltic Sea regions top these results by a large margin, in particular in Sweden, Norway and Denmark.
• Second, I would mention the employment rate, which is very high in some regions in the Nordic countries. It is also high in the Baltic states compared to the other EU-12 Member States. So, except for Poland, the countries of the Baltic Sea region have reached or are close to reaching the employment rate target of 70% set by the Lisbon strategy.
• Third, the figures about the share of highly educated people and consequently the share of employment in the knowledge intense services tell the same story. I would argue that the highly educated workforce is one of your most valuable assets.
• No wonder, and this is my fourth point, that the Baltic Sea region includes some of the most innovative economies in the world. Some of them have been among the fastest growing.
• Fifth, the region generated a nominal GDP of €1.6 billion^[1] in 2005 (without Belarus, Russian data 2002) which corresponds to an impressive 71% of Germany's output in the same year, the EU's largest economy. In recent years, trade, investment and other linkages between the countries in the region have increased substantially.
• And finally, this macro-region is also extremely rich in natural resources and you have extensive knowledge on how to utilise them. For example, 90% of the iron ore in Europe comes from the northern part of the region and the mining industry is growing. The region's vast forests can be used in new and innovative ways. The Baltic Sea Region can find ways to produce more ‘clean’ energies, building on progressive technologies using wind, water or the sun - here in Denmark you have a special niche. Scrap wood for example could be used to produce energy in biomass plants.

[I hope that the audience will forgive me that these figures do not cover Russia, for which we have not yet received regional data.]

Challenges

So, you might argue, if things are so great, why should we bother?

I hold that the Baltic Sea region could and should be a main driver for the EU's growth and jobs agenda - actually a forerunner - if it manages to overcome the remaining obstacles. And the Baltic Sea Strategy is there to help.

To unlock the untapped potential for sustainable economic growth, several steps are necessary.

First, the integration of the Baltic Sea markets needs to go further. Businesses are still too inward-looking, with too many products and services aimed only internally or at neighbours. Data show that, for example, Lithuanian trade is concentrated on its immediate EU neighbours, Latvia and Poland, and also Russia and Belarus. There is ample evidence that the exposed sectors of the economy have to adapt quickly to competitive pressures in order to survive which results in high-productivity gains. To continue with the example of Lithuania, closer trade ties also with the Nordic countries would make it leapfrog in terms of productivity, would lead to positive externalities in terms of knowledge spill-overs and consequently innovation. A large export sector would also lead to economies of scale, and also scope, particularly important for a small open economy. In short, such closer trade ties would ultimately make it fitter to withstand global competition.

Second, synergies and complementarities need to be exploited. Clusters are a great means to this end. While there are already successful examples, more clusters must be supported that benefit from all different strengths in the region. There are already important transnational examples in the region, such as ScanBalt and CruiseBaltic^[2]. There are also very successful cross-border clusters, not least in the region where we are today, with Medicon Valley and the Öresund Science region showing what can be achieved through co-operation. We must, however, extend this, especially in the fields of biotechnology, ICT, food industry and wood production and furniture. The Baltic Sea Region can build on its special opportunities to work transnationally.

Third, the single market is not fully working, not only but also in the Baltic Sea region. Obstacles to trade in goods and services still exist at the practical level. There is a lack of coherence in the implementation of legislation. There are too many burdensome administrative processes at national level. SMEs have particular problems: Figures from the Chambers of Commerce clearly show that administrative difficulties are a major obstacle for companies trying to export^[3]. Although this problem is not confined to the Baltic region, we must help also small companies to export but also import easily. The EU initiative for better regulation should be mirrored at the national level to make rules more user-friendly. Networks must be created that ensure that solutions are found. We must build, for instance on the SOLVIT centres against inadequate implementation of the Internal Market rules.

Fourth, even the marketplace for ideas is too localised. Yet, we all know that the best ideas are generated through exchange, ideally in a diverse team. Hence, if the region wants to exploit its greatest asset – highly educated people - then universities need to network more; researchers need to move around. A critical mass in competence is needed, which is particularly important for small countries wanting to high standards in a field. I am glad to see that you devote a session to this at this Summit. We must make sure that our young talented people see the entire region as being their home.

What role for the Baltic Sea Strategy?

In my view, the Baltic Sea Strategy is a great tool help the region to become one of the most prosperous in Europe. And here I am focussing only on one of the four objectives, the topic of today's round table.

The European Commission can act as a partner for macro-regional development, facilitating organisation and - above all - concerted action. Let's not forget, the EU Baltic Sea strategy aims at results. We can help align policy design and funding, we can insist on better implementation of EU legislation. We can push for better use of EU - third countries relationships.

So what are our proposals? What do you need to discuss here today and tomorrow?

First, the Baltic Sea Region must think and act in a more coordinated way. We are convinced of the value of this macro-region approach in the overall approach to European regional development. There are over €50 billion of EU Cohesion Policy Funds already programmed for the region 2007-13, and it could lever in much extra national, regional and private funding if it is well coordinated. If this strategic approach works in the Baltic, we see its potential for other sea areas e.g. the North Sea, and also for mountain areas like the Alps or river basins like the Danube.

Second, we must move from debate to action. In the Baltic Sea Region there are many fora for meetings, analysis and discussion. Many studies and reports have been produced. But action has been patchy. If we are serious in our work, with a comprehensive plan of action over the next decade – and I know you are serious – we must have good organisation at the core of our work. Too often I hear people say they want results, they want impact, but they want no new institutions, I hope they don't mean that they don't want organisation. Otherwise we will fail.

Third, there should be wide involvement of many partners. To make this big undertaking a success, we need the support of all, of regions, of cities, of interest groups, of the private sector, and of the people themselves. My own Directorate General in the European Commission is the hub of a Baltic Sea inter-service group with 20 counterparts present, plus the European Investment Bank. We also have an instrument – the European Grouping for Territorial Cooperation, the public sector equivalent of a European Economic Interest Group – to help make all this work better.

Our idea together should be an Action Plan to 2020, with a timetable of who does what, public and private, national and local. People should be held to their obligations by a set of shared objectives, overseen by a focused and streamlined management group.

But your views of course are important. As you know we have launched a public consultation on our website and I would like to invite you to send us your views on the EU Strategy for the Baltic Sea Region.

Conclusions

And to conclude, I thank all of those who have provided us with their rich contributions to the work to date. I have been extremely impressed by the enthusiasm and commitment to all our work together so far. I can see from you that this will certainly continue here. You have my commitment that we will work to ensure that this strategy becomes the success that you all so clearly need and want.

Thank you for your attention.

^[1] Excl. Russia: GDP 2005 current (constant) prices € 1.56 (1.44) bn = 70% (66%) of Germany
^[2] ScanBalt is a network of networks covering 11 countries in the Baltic Sea region, promoting the development of ScanBalt BioRegion as a globally competitive meta-bioregion. ScanBalt members are networks between universities, biotech/life science industry, hospitals and other important actors in the biotech/life science arena. ScanBalt Campus, supported by INTERREG, is to be seen as a tool, an umbrella or platform, for universities and other institutions to cooperate and cluster competencies and resources to reach "state of the art" within life sciences and biotech in the Baltic Sea Region.

CruiseBaltic The 10 countries of the Baltic Sea Region have joined forces in order to create a cruise option with fully integrated operations between ports and cities. (also supported by INTERREG)
^[3] Generally speaking this is a EU wide problem but since the countries in the Baltic Sea Region are relatively small and depend heavily on export the consequences are worse here. A more integrated market is needed to secure the future competitiveness of the region.