Storm Clouds Gathering Over Baltic
By Angelina Davydova
Special to The St. Petersburg Times
Baltic Sea countries are losing out to their Asian competitors because of underdeveloped cooperation, it was revealed at the 7th annual Baltic Development Forum, which took place last month in Stockholm. According to European Commission President, Jose Manuel Barroso, “While things look relatively sunny in some corners of the Baltic Sea area, storm clouds continue to gather elsewhere. Look at competitiveness… all of Europe’s major economies are slipping down the competitiveness rankings, or even worse, stagnating pretty far down. Or how about research? The EU’s 500 largest companies cut research and development investment by 2 percent, while research investment in China is growing by 20 percent a year,” he said. Participants agreed that the main problem facing the area is falling investment in Research and Development, growing competition from Asia and a lack of a successful model of cooperation in the region, as well as the branding of the region as a whole. “Europe is flourishing on openness and declining on protectionism,” said Pehr Gyllenhammar, of chairman of Aviva plc group. “A single market of financial services doesn’t yet exist. Neither does a free labor market. It’s a waste of money to protect domestic employment, it would be better to invest it in new technologies,” he added. All these opinions got strong support from the analytical State of the Region Report 2005 on Competitiveness and Cooperation in the Baltic Sea Region, prepared by Dr. Christian Ketels from the Harvard Business School and Stockholm School of Economics and Professor Orjan Solvell from the Stockholm School of Economics. By the “region” researchers take into account the Nordic countries, the Baltic countries, the northern part of Poland and Germany and the Northwest of Russia. “There are increasing signs that we need to realize that high economic performance is no inherited right, but needs to be earned again and again year on year. In the report, there are already signs that the momentum is starting to cool and moving in a more negative direction for the region. Specific examples included a stagnant export position, the drop of inward FDI flows and the worsening position of business competitiveness as measured by the global competitiveness report,” according to Ketels. The report also points out the specific areas where countries can do more together than they can do alone: cluster development, improved efficiency of entrepreneurship, R&D, positioning the region and Russian integration. “Russia provides an enormous economic opportunity to the other parts of the Baltic Sea Region, but it is one of the opportunities that it is hardest to realize. Working on concrete cross-border projects and with Russia’s Northwestern District in general is highly recommended. Northwest Russia should be integrated as a part of the region, and not as a partner in the region,” said Ketels. According to Natalia Taranova, an expert of the Baltic Research Center, Russia’s natural resources can complement the information-based economies of Baltic countries, especially since the future competitiveness of Russia is in any event dependant on information technologies, Taranova said. According to the Baltic Development Forum director Ole Frijs-Madsen, the high professional level of academic research in the Northwest Russia is widely acknowledged in Scandinavia, and it is understood that this potential should be used in the interests of the Baltic Sea region in general. Although Russia provides a huge market with high growth rates, according to the Swedish Trade Council research, bureaucracy remains a central concern for further development and trans-border cooperation. On top of this are barriers hindering trade, travel and investment between Russia and its neighbors. Moreover many summit participants felt that the ability of Northwest Russia to integrate fully into the Baltic Sea region cooperation process is largely limited by the processes of centralization in the country itself.
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