FINLAND * 1. REGIONAL DISPARITIES AND PROBLEMS. Figure 1: Finland. Finland

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1 FINLAND * 1. REGIONAL DISPARITIES AND PROBLEMS The south-west core regions are areas of economic and population concentration; the rest of Finland consists of sparsely-settled rural areas. The key regional problems of northern and eastern Finland are rural unemployment and fragile settlement structures. The main policy challenge in these areas has been to improve employment opportunities by promoting the diversification of rural industries and to prevent depopulation, thereby maintaining settlement patterns. In the more densely-populated south, the problems have been principally related to industrial restructuring and unemployment, though urban migration remains an issue, with flows into the Helsinki-Tampere-Turku triangle, which is flourishing, as are IT clusters such as Oulo and Jyväskylä. Figure 1: Finland Source: 1

2 Table 1: Socio-economic indicators in Finland (NUTS II) Finland Regions Population (000) 2001 GDP Per Capita, PPS 2001 Employment by sector (% of total) 2002 Unemployment Rate (%) EU15=100 EU25=100 Agric. Ind. Services Manner-Suomi Itä-Suomi Etelä-Suomi Länsi-Suomi Pohjois-Suomi Åland Total Source: Eurostat (unemployment rates) and Third Report on Economic and Social Cohesion (European Commission, Brussels, 2004). 2. NATIONAL REGIONAL POLICY OBJECTIVES Over the last few years, there has been a renewed emphasis on regional policy in Finland. The aim of the 2003 Regional Development Act is to provide a framework for regional development, based on interplay between the central government and the Regional Councils (joint boards of municipalities within each region). The new Act reinforces an ongoing policy shift away from issues of territorial balance (though they are still mentioned as secondary policy objectives) and towards the stimulation of regional competitiveness across the country. The intention under the Act is to provide a framework for developing the varying potential of regions across the country rather than to focus support on narrowly-defined areas of need. 3. INSTITUTIONAL ARRANGEMENTS EU membership, and the consequent access to the Structural Funds, resulted in a reorganisation of Finnish regional policy. From 1994, regional development activities became co-ordinated within a framework of time-limited programmes closely based on EU structural policies. This programme-based approach expanded the scope of Finnish regional policy beyond its traditional focus on business support. The Ministry of the Interior has overall responsibility for regional development in cooperation with other ministries and the Regional Councils. The Ministry determines the content of policy and is responsible for: the preparation of regional policy legislation; the designation of the aid area map; the formulation of national regional policy targets; the promotion of regional policy across government; and the co-ordination of regional policy administration at the regional and local levels. Together with relevant stakeholders, the Regional Councils are responsible for drawing up Structural Fund programmes for their areas. They are also responsible for developing fouryear regional development programmes and the associated annual implementation plans. 2

3 In terms of regional policy implementation, responsibility is divided between the national and regional levels. The Ministry of the Interior is responsible for the implementation of the special national programmes. The Regional Councils are responsible (in cooperation with State authorities and municipalities in the region and other parties involved in financing the regional strategic programmes) for drafting the annual implementation plans. Regional Management Committees have an important co-ordinating function. They coordinate the implementation and financing of the regional strategic programme and the special national programmes. They have been established in all the Finnish regions (with the exception of Ahvenanmaa/Åland, which has special status as an autonomous region). They are tripartite bodies with equal representation from the Regional Council and its constituent municipalities, the representatives of State bodies in the region and the social partners. Within each region, the Regional Management Committee does not implement the strategic programme (that is the task of the Regional Council) but it does discuss it and tries to create a regional consensus around it. This mirrors the approach adopted under the Structural Funds; in effect, the EU programming structure is now being used for national regional policy purposes. Administratively, Finland is divided into 12 historical provinces (Laani), 19 regions and 455 municipalities. Under the NUTS classification scheme Finland has been divided up as shown in Table 2. Table 2: Territorial Units in Finland Unit Type Designation Number of Units NUTS I 2 NUTS II 5 NUTS III NATIONAL REGIONAL POLICY INSTRUMENTS 4.1 Instruments Historically, regional policy instruments in Finland mainly comprised business aid schemes operated by the Ministry of Trade and Industry through their regional offices. The main regional incentives were Regional Investment Aid (now subsumed within Investment Aid under the 1999 Aid to Business Act), a Transport Subsidy and Development Aid for SMEs, though only Regional Investment Aid and the Transport Subsidy were restricted to designated aid areas. In addition, several horizontal measures co-financed by the Structural Funds have a regional dimension, including aid available from other public bodies such as Tekes (R&D aid), Sitra (R&D support) and Finnvera (risk financing and guarantees). Alongside business aid, there are a number of special national programmes that aim to contribute to regional policy goals: the Regional Centre Development Programme to develop a growing network of regional centres covering all Finnish regions by strengthening the competitiveness of 3

4 regional centres and encouraging them to organise and intensify cooperation between municipalities and the public and private sectors within any given region; the Rural Policy Programme to revitalise and diversify economic activity and safeguard and develop services in rural areas by coordinating measures in various administrative sectors that have an impact on these areas. the Centre of Expertise Programme to improve the preconditions for the establishment and development of internationally competitive business and research groupings calling for a high level of expertise; the Island Development Programme to diversify and utilise island areas more effectively, especially rural island areas. In addition, each Regional Council draws up a four-year regional strategic programme, which aims to pull together the various potential funding sources, available within each region. It also produces an annual implementation plan developed in cooperation with the State authorities, municipalities and other parties involved in financing the regional strategic programmes. 4.2 Spatial Coverage of National Regional Policy The regional aid map holds 42.3 percent of the national population (up from 41.6 percent, ) and has three grades of problem region. The highest award ceilings are available in Development Area 1, the Objective 1 area in the eastern part of Finland (13.4 percent of the population). Development Area 2 consists of the former Objective 6 area in Lapland (6.9 percent of the population). The remaining aid areas form Development Area 3 (22 percent of Finnish population). They include all of Finland s Objective 2 areas. Separate award rates apply in the Åland islands. Figure 2: Finnish regional aid map Source: DG Competition website 4

5 5. EU PROGRAMMES For the period, almost EUR 2.39 billion have been allocated to Finland from European Structural Funds. Finland benefits from five regional development programmes, two under Objective 1 and three under Objective 2. Reduction of unemployment, industrial base diversification, strengthening of the fabric of SMEs and limitation of the exodus of population from rural areas are general objectives of European aid measures. Objective 1 programmes are specifically designed for the development of the areas in the north and east of Finland with a very low density of population. Objective 2 programmes include zones that are currently at the phasing-out stage. Figure 3 shows the geographical distribution of Structural Funds for the period Figure 3: Structural Funds for Finland, Objective 1 Objective 2 Objective 1 Objective 2 Objective 2 (partly) Phasing-out (till 31/12/2005) Source: The allocation of funds among the various programmes is presented in Table 3. 5

6 Table 3: Structural Funds to Finland, (millions of EUR) Obj. 1 Obj. 2 Obj. 3 INTERREG URBAN EQUAL LEADER+ Fisheries Total 1, , Source: DG Regio, The European Structural Funds ( ): Finland. The administrative authority for the Finnish Objective 1 and 2 programmes is the Ministry of the Interior. The responsibility for the strategic implementation of the programmes lies with Regional Management Committees formed by regional councils and their constituent member municipalities, financing authorities representing the central administration and other relevant organisations, as well as the social partners of the region in question. * This paper has been prepared by the (EPRC) for the Second International Conference being held in Latvia on April Inclusive of million allocated in March 2004 by the European Commission in the framework of the performance reserve for the most successful programmes. 6