Presentation on Regional development policies: The Case of Sweden and the NSPA by Chris McDonald, Regional Development and Tourism Division, Centre for Entrepreneurship, SMEs, Local Development and Tourism.

1. REGIONAL DEVELOPMENT
POLICIES: THE CASE OF
SWEDEN AND THE NSPA
Chris McDonald
Swedish Parliament, Stockholm
23 November 2017

2. 1. Rural areas - places of opportunity
2. NSPA findings and recommendations
3. Findings and recommendations for Sweden
4. Next steps
2
Presentation outline

3. 3
Part 1: Rural areas - places of opportunity

4. 4
Regions outside of the ‘big hubs’ are important to
aggregate growth

5. 5
Who are the high performers?
Amongst top performers 54% were rural
(pre-crisis):
 33% rural close to cities
 21% rural remote
Declined to 41% (post crisis)
 31% rural close to cites
 9% rural remote

6. 6
The rural paradox?
The majority of rural regions close to cities and rural remote are not driven by the
paradox: 69% of rural close to cities and 58% of rural remote experienced
both employment and productivity growth

7. 7
What are the key drivers of rural productivity
growth?
 Tradable activities are key for rural close to cities and remote rural
 Proximity to cities - a minimum level of density is key for economies of scale/scope
and delivery of goods and services.

8. 8
Policy implications
1. Identifying drivers in rural areas
– Tradables (manufacturing), renewable energy, natural resources,
services, fisheries, forestry, agriculture, tourism, natural amenities
– Finding the niche (smart specialisation)
2. How to add value in these domains
– Policy focus on enabling factors: skills, accessibility, market intelligence,
institutions, innovation
3. Urban – rural linkages
– Infrastructure and connectivity
– Shared governance and policies
4. Demographic trends and forward looking policies
– Address long term cost enhancing efficiency in service provision
(planning, ICT)
– Mitigation and adaptation to climate change

9. 9
Part 2: NSPA findings and recommendations

10. • NSPA collaboration established in 2004 (14
regions across 3 countries)
• 2.6 million people over an area of 532 000
square kilometres, which is comparable to
the population of Rome inhabiting the entire
area of Spain.
• Share common territorial characteristics (low
density, resource-based, and harsh climate)
• Special status recognised in Accession treaty
for Sweden and Finland to join EU in 1995
• Increasing economic and geo-political
importance to EU and respective countries
10
Northern Sparsely Populated Areas

11. 11
Relatively strong performance in an OECD
context
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0 10000 20000 30000 40000 50000 60000 70000
GDPpercapitagrowth2000-2012
Initial GDP per capita in 2000 (constant PPP, USD 2010)
OECD TL3 regions NSPA TL3 regions OECD average
Benchmarking GDP per capita performance in NSPA regions, 2000-2012
Note: GDP per capita growth is measured as the average yearly growth rate between 2000 and 2012.
Source: OECD (2016), "Regional economy", OECD Regional Statistics (database)
Within the context of the OECD these regions are relatively wealthy and
generally growing above average.

12. Productivity Population Employment Activity rate
Västernorrland 0.5% -0.9% -0.5% -0.1%
Jämtland Härjedalen -0.1% -0.9% 0.1% 0.1%
Västerbotten 0.2% -0.5% 0.2% 0.1%
Norrbotten 0.6% -0.9% 1.1% -0.1%
Nordland -0.1% -0.9% 0.0% 0.0%
Troms -0.8% -0.5% 0.1% -0.1%
Finnmark -0.7% -0.9% 0.6% -0.1%
South Savo 0.7% -1.1% 0.4% -0.2%
Pohjois-Savo 0.1% -0.6% 0.4% 0.0%
Northern Karelia 0.5% -0.7% 0.1% 0.1%
Kainuu 0.0% -1.3% 0.4% -0.1%
Central Ostrobothnia 1.6% -0.4% 0.1% -0.1%
Northern Ostrobothnia -0.3% 0.3% 0.0% 0.0%
Lapland 0.8% -0.9% 0.2% 0.0%
12
Productivity and workforce activation important
to future growth
Decomposing GDP growth in NSPA regions (1999-2012)
Source: Own calculation based on OECD Regional Statistics (database)
SwedenNorwayFinland
Only one of the NSPA regions has been affected by the so-called ‘rural paradox’
whereby productivity growth is generated by shedding labour.

13. 13
Growth is concentrating in a smaller number of
places
-1%
0%
1%
2%
3%
4%
5%
-5000 0 5000 10000 15000 20000
Averagegrowth
2007-2013
Number of establishments in 2007
Finnish LLMs Norwegian LLMs Swedish LLMs Log. (Total NSPA LLMs)
Establishment growth in NSPA Local Labour Markets (LLMs)
Source: Own calculation. The size of the bubbles represent the estimated number of workers within the LLM.
Larger local labour markets are generating business and employment opportunities at
a faster rate.

14. 14
• National factors play a role e.g. sectoral specialisation at a national level,
exchange rate flexibility
• Tradeable sector – size and structure, sectoral specialisation linked to
natural resources and amenities (mining, fisheries and aquaculture, tourism,
forestry), and participation in global value chains (first stage processing,
value-adding services, research and development)
• Proportion of the public sector in the regional economy – symptom of a
weak private sector economy
• Enabling factors – human capital, and the quality of transport and digital
infrastructure
• Population size and density – necessary for economies of scale and scope
(concentrated v. dispersed settlement patterns)
14
Factors influencing the productivity performance
of NSPA regions

15. Policy themes Key challenge
Demographic change and
labour markets
Population ageing which will reduce the size of the future labour force, and there are
structural problems in local labour markets including higher levels of youth
unemployment and welfare dependence.
Service delivery innovation Demographic change and fiscal consolidation continuing to place pressures on public
infrastructure and services.
Infrastructure and
connectivity
Remoteness from markets and long distances between urban settlements, which is
compounded by an often challenging topography and harsh climate (e.g. maintenance
costs).
Increasing entrepreneurship The sustainable development of the NSPA is dependent upon facilitating new local
businesses in areas such as ICT related services, tourism, niche manufacturing, and
food production.
Smart specialisation and
low-density economies
Research and innovation resources are limited across the NSPA and high technology
sectors constitute a small part of these economies. Because home markets are small
growth will come from developing the tradeable sector.
Linking indigenous
communities with regional
development
The Sami have an important role in regional economies; however, the connections
with regional and rural development strategies are often inconsistent and weak.
15
Enhancing NSPA collaboration to address shared
challenges
Summary of policy challenges for NSPA regions

16. • Continue to ensure that the unique characteristics of the NSPA regions (a
harsh climate, long distances from markets, and a small number of isolated
settlements) are effectively incorporated into national and European level
policy settings for regional and rural development, and service delivery. This
includes:
o Recognising the importance of improving infrastructure for connectivity;
o The need to focus scarce economic development resources in areas of absolute advantage;
and,
o Accounting for the higher unit costs of delivering public services (due to remoteness, low
population densities, and the harsh climate).
16
National and EU support for low density
economies
Sweden allocates close to 20% of its ERDF
allocation to addressing transport bottlenecks
and broadband access which is mostly
allocated in the northern regions.
Lapland’s smart specialisation strategy is
focussed on exploiting and commercialising arctic
resources and conditions, and combines sectoral
and cross-cutting approaches.
Norway has a system of regionally
differentiated employer social contributions
with a 0% rate applying in Finnmark and
northern Troms (compared to 10.6% in the
southernmost zone).

17. 17
Part 3: Findings and recommendations for
Sweden

18. • 4 NSPA regions in Sweden account for 8.6% of the national economy,
9.1% of its population, and 54.6% of the national land area
• Wood and paper, chemicals, minerals and basic metals (mostly located
in the north) are all major exports for Sweden - also key inputs for the
manufacturing sector, and for professional and technical services
located in Stockholm
• Key role in national energy sector with over half of the country’s energy
production coming from hydroelectricity
• Costs of low-density are relatively low (e.g. estimated at 0.2% of GDP for
cost equalisation system)
18
Important contribution to national prosperity and
wellbeing

19. 19
Rural areas in the north were more resilient
during the crisis
Region Sector
Productivity growth
2000-2008
Prod. growth crisis
2007-2008
Prod. Growth crisis
2008-2009
Blekinge County
South
Manufacturing 1.58% 0.72% -6.84%
Kronoberg County
South
Manufacturing 1.82% -1.16% -6.76%
Kalmar County
South
Manufacturing,
electricity plants,
agriculture
2.07% 2.22% -9.63%
Gotland County
South (island)
Manufacturing,
agriculture, tourism
1.15% -2.12% -3.94%
Dalarna County
Centre
Manufacturing, tourism 1.75% -2.54% -6.49%
Västernorrland County
North
Natural resource
(forestry)
1.14% -0.50% 0.88%
Jämtland County
North
Natural resource,
tourism
2.10% 7.80% -2.52%
Västerbottens County
North
Natural resource
(mining)
2.05% -1.42% -3.24%
National average 1.83% -1.17% -3.39%
Productivity growth for Sweden's rural regions, 2000 - 2008
Source: OECD (2017) Monitoring Review of Sweden

20. 20
Variations in performance amongst the northern
regions
80
90
100
110
120
130
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sweden Västernorrland County Jämtland County Västerbottens County Norrbottens County
Real growth index of regional GDP 2001=100
Source: OECD Regional Database

21. Region Absolute advantages
Norrbotten Mineral endowments and forestry resource, attractive landscapes (mountains,
lakes and rivers, wilderness areas), industry-research networks embedded within
the Luleå University of Technology, and proximity to Norway and Finland.
Västerbotten Mineral endowments and forestry resource, a history and tradition of
manufacturing and services linked to these natural resource based industries, its
attractive landscapes and proximity to Norrbotten and Lapland, and the research
and innovation infrastructure based around Umeå University.
Jämtland-
Härjedalen
Attractive landscapes (mountains, lakes and rivers, wilderness areas), proximity
to Trondheim, a history and tradition of tourism related activity, and food
producers which are integrated with the tourism industry.
Västernorrland Proximity to Stockholm and relatively lower land costs, attractive landscapes
(e.g. high coast), a history and tradition of heavy industry and related activity,
and it’s urban and transport infrastructure.
21
Absolute advantages vary between regions

22. 22
Key growth factors
Benchmarking Sweden's NSPA regions against key growth
factors
Note: Note: High skilled: share of population 16-74 with education isced 4,5,6 (2015). Low skilled: share of
population 16-74 with education isced 1,2 (2015) (higher value means few low-skilled). Patent intensity: PCT patent
applications, per million inhabitants (2011). High speed internet: at least 100 Mbit/s (2015). Road density: road
surface (sq km) divided by total land surface (2010). Startup intensity: startups per 1,000 resident 16-64 (2014).
0
25
50
75
100
125
150
High skilled Low skilled Patent intensity High speed internet Road density Startup intensity
Västerbotten Västernorrland Jämtland-Härjedalen Norrbotten Sweden

23. Theme Summary
Productivity and
competitiveness
• Provide support to link smart specialisation strategies to areas of absolute
advantage and to facilitate access for SMEs to external markets
• Facilitate better coordination of local and regional tourism efforts
• Strengthen regional competency platforms and introduce flexibilities so
vocational education and employment services can be better adapted to
regional needs
Connectivity and
access to services
• Improve incentives and support to extend e-services initiatives
• Reduce regulatory/ administrative barriers to service delivery innovation
Governance of
regional
development
• Strengthen the strategic role of County Councils in relation to ESIF
• Improve alignment of administrative boundaries of state agencies at a
regional level
• Allocate competencies for regional spatial planning and transport
planning and coordination to the body responsible for regional development
in the region
• Ensure the body responsible for regional development has a lead role
alongside the County Administrative Board in the development of the National
Transport Plan
23
NSPA (2017): recommendations for the national
government

24. 30 recommendations across the 4 regions which focus on better mobilising
endogenous assets by:
• Working with local businesses and research and educational institutions to identify
areas of absolute advantage and strengthening platforms to facilitate innovation
and value-adding to them
• Strengthening their brokering role (between municipalities, local businesses, service
providers and educational and research institutions) to improve labour market
matching and facilitate service delivery innovation
• Strengthening mechanisms that facilitate the coordination and alignment of
planning, investment, and maintenance of infrastructure between the regional and
local levels
• Facilitating bespoke cross-border collaboration (e.g. shared transport corridors,
common tourism destinations)
24
Recommendations at a regional level – common
themes

25. Rural policy challenges Examples/lessons Recommendations
Developing a coherent
vision for rural Sweden
Broad/narrow approach
employed by Finland (National
Rural Policy Programme and
the Rural Development
Programme)
Develop a national rural policy with coherent vision,
clear priorities and measureable outcomes.
Broadening rural policy
beyond EU programmes
Applying lessons from Sweden’s
national regional growth policy
and Italy’s Inner Areas Strategy
Allocate responsibility for regional growth and rural
policies to political body at regional level and task them
to prepare an integrated regional and rural
development strategy (RRDS).
Lack of clarity in roles and
responsibilities (top
down/bottom up)
Bespoke solution applying the
Principles for Public Investment
and lessons from Finnish
approach
Task CABs to negotiate a binding agreement with the
regional political body on how national ministries will
align and coordinate to support implementation of the
RRDS.
Generating buy-in and
commitment from sectoral
ministries
White House Rural Council and
applying lessons from Sweden’s
national growth policy
• Establish a national rural advisory committee with
cross sectoral members and reporting to the Prime
Ministers Office
• Create a rural development fund that regions can
compete for to implement priorities identified in their
RRDS.
25
Monitoring Review (2017): Recommendations
towards a new rural policy

26. 26
Part 4: next steps

27. • OECD support to the NSPA collaboration in terms of advice, information, participation
in other reviews, events and seminars
• OECD ‘checking in’ on progress with the NSPA:
– Light touch knowledge-sharing event and assessment in 12 – 18 months
– Options for Monitoring Review in the medium term (3-5 years)
• Working with the OECD to share lessons, identify good practices, and contribute to a
better understand of low density economies:
– Mining and regional development
– Indigenous communities and regional development
• Dialogue with other Swedish regions undertaking work with us:
– Territorial Review of the Megaregion of Western Scandinavia (spring 2018)
– Monitoring Review of Småland-Blekinge (summer 2018)
27
Next steps from here – OECD support for NSPA
and national regional and rural policies

28. THANK YOU FOR YOUR
ATTENTION
28
chris.mcdonald@oecd.org