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Baltic Sea Region Real or Unreal?: 

Baltic Sea Region Real or Unreal? BCCA ECONOMIC FORUM Turku Friday September 22, 2006 Hans Jeppson Vice President, Stockholm Chamber of Commerce

On the previous subject ….: 

On the previous subject …. What´s wrong with Sweden? Why is Sweden not in the Euro zone?

Way back…..: 

Way back….. Sweden was ”neutral” Soviet Union knew we weren´t Swedish people belived we were! European Community was appealing to business but not to Social Democrats EC was not ”neutral” not progressive 1990 Sweden applied for membership without any previous debate Early positive sentiments turned during negotiations ”Sweden negotiated on the conditions for EU to join Sweden!” Bildt government failed to make people enthusiastic for EU as such

1994 referendum on EU: 

1994 referendum on EU September 1994 Carl Bildt´s 4 party government defeated Starting a referendum campaign 13 november 1994 Referendum. Difficult campaign General belief EMU would fail Reduce difficult issues – a promise about a national decision on EMU 52,3 % voted YES, 46,8 % NO Big cities + southernmost Sweden positive

Euro became real: 

Euro became real 1 January 2002 final phase of EMU – notes and coins Already 1997 Carl Bildt had favoured a referendum on the Euro 2002 Prime Minister Göran Persson believed in his authority to convince and decided on a referendum 2003

Referendum 14 September 2003: 

Referendum 14 September 2003 YES Conservative Party Liberal Party Social democratic Party (but divided) Business organisations A couple of Trade Unions Substantial money 42,0 % No Left Party Green Party Center Party Some Trade Unions (many social democrats) Media support 55,9 %

Now then…: 

Now then… Sweden in breach of the Accession Treaty from 1995! Political unity on not raising the issue until after 2010. No earlier than 2013 Maintains a floating currency Very strong suspicion against fixed exchange rate (unlike DK)

What about the Baltic Sea Region?: 

What about the Baltic Sea Region? A phrase reborn around 1990! A political symbol! Baltic Sea ….. Lots of organisations CBSS BSSSC UBC BPC BPO BCCA BASTUN BTC BIPA BaltMet ScanBalt Common feature: weak!

From Trieste to Swinoujscie + In the Baltic Sea: 

From Trieste to Swinoujscie + In the Baltic Sea 1990´s opened new business opportunities all along the old iron curtain Old ties re-established Investments Trade / Services Labour Dynamic border regions

Size of markets: 

Size of markets

Is BSR really a market?: 

Is BSR really a market? No common language Different cultural traditions Different levels of economic development A discontinuity when transporting goods (the Baltic Sea) European union Geographical proximity Historical ties Cultural similarities A potential for flexible transport (the Baltic sea)

New format!: 

New format! Companies want to operate across borders Sharing resources Gaining strength by market size Customers gradually more “look-a-like” EU provides the framework

Business strategies: 

Business strategies Some companies see Baltic Sea Region as a natural extended home market.

Aggregations and Domination: 

Aggregations and Domination Financial services: Sweden Retail: Sweden, Finland, Norway Food/drink: Denmark, Sweden Real Estate: Norway Telecom: Sweden, Finland Transport: Germany, 3 Nordic Forestry: Finland, Sweden

Big firms: 

Big firms Global companies: BSR is marginal: Ericsson, Nokia, Volvo, Atlas Copco, Maersk, National companies going out Size matters Nordic Countries, Baltic Sea Region Motives Proximity logic Goodwill in the countries due to government support in 1990´s Stability Cultural affinity

Medium sized firms - Outsourcing: 

Medium sized firms - Outsourcing Buying from Far East Low price Long transport Difficult to supervise and communicate Counterfeiting and potential competition No presence on Far East Markets Producing in Baltic 3 or Poland Higher cost but still lower than home Short transport Supply integration Supervise and communicate Possible to integrate production and development Defence against competition Establish own sales on market where product made.

Competitiveness: 

Competitiveness Competitiveness of a region or country is a kind of misnomer. Competitiveness is company based – ability to compete = survive. Business idea + performance. Governments can create supportive conditions for competitiveness of companies. But aggregated company ability = country ability A simple but reasonable measure = GDP/capita Average growth rate (GDP/Capita) over a few years is a good measure on improvements.

Are we competitive?: 

Are we competitive? Baltic Countries on top of European Growth list Nordic countries doing well Germany still low growth figures but very good export Poland better but still problems In a short term perspective we appear to be competetive

What about Russia?: 

What about Russia? Is part of Russia part of the Baltic Sea Region? Population Potential trade

Russia: 

Russia 143 million inhabitants -0,6%/year Average life 66 years health Russia is mainly Russian! 30 million minorities 15 million muslims ¼ of population on country-side Migration to big cities Great-Moscow 9-14 millions inhabitants Great-S:t Petersburg 4-5 milion inhabitants +7 other cities with over a million inhabitants

Russia our common interest?: 

Russia our common interest? Russia is our neighbour in the Baltic Sea Region Political Economic Cultural A Northern Dimension/Neighbourhood EU policy A smooth situation along EU-Russia border Mutual economic benefits

Russia is different!: 

Russia is different! High oil price = high economic growth rate in Russia Raw material economy Some islands of high tech Excellent business opportunities, but .. High entry costs Competitive Legal uncertainties

No giant in trade: 

No giant in trade Russia has a low share of world trade Domestic supply Very small mutual trade in products Russia account for 2,7% of world GDP (PPP-adjusted)

Russia – a country of its own?: 

Russia – a country of its own? Striving West WTO (symbol) Social concern Alignment with China Concern over Islam fundamentalists Sliding East Customs walls Only Formal democracy Corruption Confiscations Near East ambitions

Russia = Putin?: 

Russia = Putin? Very strong constitutional power to the president The Duma is a rubber stamp Government ministers are administrators Local governors are appointed by Putin, mayors soon by governors Army is loyal Former KGB men in key positions The Press/Media is not expressing political opinions Oligarchs/magnates are in exile or servile!

What does he want?: 

What does he want? Peace and order Fear of Muslims in south Russia China has suddenly become a partner? Wants influence in Ukraine, Byelorussia and Central Asia Contain criminals but is there any strong efforts to combat corruption? Modernise Russia Gradual Russian national interest Natural resources not in foreign hands Rights are for changing Doing business is a privilege

Is Russia interested in BSR?: 

Is Russia interested in BSR? Seeking partners in big countries not in 8 small! Limited capacity to participate in common action in BSR Very small Russian investment in BSR except energy in Baltic Countries

No time to rest!: 

No time to rest! Complacency is dangerous in business as well as politics Ericsson crises Social Democratic defeated in Sweden Unemployment Lisbon is boring but necessary! Reforms and improvements

Economic growth: 

Economic growth How to live up to Lisbon ambitions? National and local: Taxes, social welfare systems, corruption, subsidies, privileges education, regulation…. European Regulation, protectionism Global Protectionism, cleptocracy, war Baltic Sea Region cross border barriers Not fulfilling EU rules Not covered by EU rules

Barriers to investments: 

Barriers to investments Slow, complicated, unreliable legal procedures Poland Corruption Supply of educated labour force Inadequate infrastructure Overheated economies

Business Advisory Council BAC: 

Business Advisory Council BAC Not an organisation An advisory body established in 1997 in the framework of the Council of Baltic Sea States www.chamber.se/bac Peter Egardt, chairman of BAC

Financial Markets: 

Financial Markets High degree of commercial integration Many companies active in several countries 8+2 have the same basic regulation requirements Basle II and EU Different administrative applications and traditions Fragments markets Costly

BAC effort: 

BAC effort BAC has a ”project” in BSI Banking First group in Stockholm: 5 banks Stock Markets Insurance Method: Listing problems underway in Stockholm Open dialogue with regulatory authorities Hopefully authorities will align their rules Reporting through BSI and to CBSS

Baltic Sea Region co-operation: 

Baltic Sea Region co-operation Improvements EU sets a minimum degree of harmonization Baltic Sea Region countries can go further in harmonization Implementation of EU directives Building common public institutions? Technical/reguatory agencies Education

Can political cooperation do …?: 

Can political cooperation do …? Main cooperation structure in BSR is EU. 5 Nordic countries has an expensive and formal veichle for co-operation – Nordic Council of Ministers BSR has a small and unfunded structure for co-operation – CBSS

Perhaps?: 

Perhaps? One structure for BSR co-operation with Russia. Regional application of EU neighbourhood policy Cross border cooperation One structure for BSR cooperation for economy, environment etc. Harmonization Supporting business integration

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