The Economic Waves of the Baltic Sea

The history knows many great statesmen and their names are passed in our memories from generation to generation. But we should recognise the fact that we have visionaries living next to us. I am speaking about two great liberals whose decisions influence us here today; us, the people living on the coast of the Baltic Sea. You may understand that I am talking about the proposal that was made slightly after the collapse of the Soviet Union by Hans Dietrich Genscher and Uffe Ellemann Jensen. Both were Foreign Ministers of their countries in 1992 when they came up with the idea to create a model of certain co-operation among the countries of the Baltic Sea. If we analyze today, 15 years later, the changes that have resulted from that proposal, then we can conclude that enormous change have taken place not only in the countries of the ex-Soviet bloc, the Baltics and Poland, but also in the Nordic countries, EU and NATO . In addition to the structural reforms in the countries of the Baltic Sea, we have experienced the opening relationship between people.

Earlier this year I was attending similar type of conference in Bornholm organised by Danish Radikale Venstre. We discussed exactly the same topic as we do here today. But the striking example that I want to give from that meeting is the following. At the conference I met an old man who has lived his whole life on that little lovely island. He told me about living in Bornholm in the years of the Cold War. He said frankly that in the 80-ies, ordinary Dane would not have been able to make a difference between the Baltic Sea countries, let alone to know their capitals. 20 years later everything has changed. Our people are free and they live in democratic countries. The periphery of the 20th Century has become fastest growing region of the EU.

However, today we face the question of how to keep going in a sustainable and competitive way.

Year by year we see increasing co-operation among the Baltic Sea countries, we have certain transport corridors, we protect the environment of the Baltic Sea and we have more joint projects in the field of education, research and development. Our common challenge is how to guarantee energy security. We all know that the supply depends on the will of Russia, and so far we lack the European energy grid. We know all too well that our region is the only one in the EU, which has a physical border with Russia, and that Russia is drifting away from the European values. There are many other figures and arguments which unite us.

BUT, there the question of do we do enough still remains. Are we able to propose ideas, which meet the expectations of our citizens?

I think that the economic growth and competitiveness of the region is something that should remain at the core of the Baltic Sea Strategy. According the World Economic Forum and the Baltic Development Forum we have several advantages in comparison with the other similar same size regions in the EU:

- high labour productivity
- scientific innovation
- strong physical infrastructure
- skilled labour force
- low level of corruption
- strong clusters

According to international research, the competitive and economic freedom indexes are high in individual countries. For example, in the report “Doing business in 2008” by the World Bank, among the 178 countries Denmark ranks 5th, Iceland -10th Norway – 11th, Finland – 13th, Sweden – 14th and Estonia – 17th. The report takes into account the expenses of the entrepreneur in 10 fields: for example from creating a company, registration of an ownership to hiring and firing labour. It is also important to know that the countries like Singapore, New Zealand, the USA and Hong Kong are heading up the list. And that means we have not been able to fully exploit our potential. The key weakness of the region is the low level of internal competitive pressure. None of the countries in the region have separately a market big enough to promote needed competition. The only solution is to improve integration of the markets in the region.

I would also like to say that competition among the BSC in the field of taxation would add some fresh blood. Like it or not, but if we want to keep investments in our region in the long-term perspective, then taxation policies have to be kept attractive. Policies should also be simple and promoting investments.

The other motivating factor for the faster development is the difference in living standards of the countries of the Baltic Sea region. There are rich Nordic Countries and wealthy Northern Germany and poorer Baltic countries and Poland. This may sound strange, nevertheless human, that the poorer countries want to catch up as fast as possible. This desire makes countries and the people work harder. For example, my party set a political goal that Estonia would be among five wealthiest countries of the EU in 15 years. This is a vision, and at the same time it is a concrete goal with certain action plan. Ambitions of this kind keep wealthy Baltic Sea countries in the process of development and ready for competition. I believe that this situation creates a special synergy for growth and competitiveness.

Transport, energy and innovation

The current transport system is designed to meet the needs at the national level, and is not optimal for a modern situation in which transport is becoming more and more international. The development of cargo transport by creating efficient transport chain in the Region, promoting combined means of transportation and establishing the Baltic Sea Region as a central transport link between the East and the West should be supported. A new railway “Rail Baltica” which would connect the Baltic countries to the other Member States is vital.

We need a common strategy for innovation. As long as our human potential is limited, we need to provide it with real challenges in the field of innovation and scientific research. We are too small to do it alone. Brain potential should be concentrated to avoid brain drain into places were modern and sufficient conditions for creation exist. We should also be able to harmonise our educational systems.

And last, but not least, part of common strategy should be creating an E-Baltic Sea Region. The new IT solutions like e-government, e-elections, e-medicine, e-services, e-signatures, e-banking, e-schools should be implemented immediately. Because the Baltic Sea countries are well equipped in the field of IT, we should be aware of the cyber attack threats and cooperate against possible attacks in the future.