A National Strategy for Regional Competitiveness, Entrepreneurship and Employment 2007-2013

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A national strategy for regional competitiveness, entrepreneurship and employment 2007-2013 Produced by The Ministry of Enterprise, Energy and Communications Photo Maria Nilsson Printing XBS Grafisk service Article No N7003

Contents

1 Introduction ...... 4 1.1 Regional development policy, labour market policy and the EU’s cohesion policy ...... 6 2 Strategic focuses, priorities and guidelines for regional competitiveness, entrepreneurship and employment...... 10 2.1 Innovation and renewal...... 11 2.2 Skills supply and improved labour supply...... 17 2.3 Accessibility...... 22 2.4 Strategic cross-border cooperation ...... 25 2.5 Sparsely populated regions in Northern Sweden and city conditions...... 27 3 Implementation of the strategy for regional competitiveness, entrepreneurship and employment 2007–2013 ...... 30 3.1 Regional development programmes – strategies for the development of the counties ...... 31 3.2 Regional growth programmes...... 32 3.3 Structural funds programmes for regional competitiveness and employment...... 33 3.3.1 National structural fund programme for regional competitiveness and employment (ESF)...... 34 3.3.2 Regional structural fund programmes for regional competitiveness and employment (ERDF)...... 34 3.3.3 Indicative distribution of structural funds funding 2007–2013...... 35 3.3.4 Organisational structure for the programme period 2007–2013 ...... 37 3.3.5 Implementation of Structural Funds programmes for regional competitiveness and employment.....39 3.3.6 Coordination with other plans and programmes at a national and European level...... 41 3.4 Programmes for territorial cooperation ...... 44 3.4.1 Implementation of cross-border and transnational programmes ...... 46 3.5 Partnerships for regional competitiveness, entrepreneurship and employment...... 47 3.5.1 National forum for regional competitiveness, entrepreneurship and employment...... 48 3.5.1 Thematic authority groupings for regional competitiveness, entrepreneurship and employment ...... 48 4 Follow-up and learning...... 49 5 Opportunities and threats for regional competitiveness, entrepreneurship and employment in Sweden...... 51 2

Appendix 1 Indicative distribution of funding between the structural funds programmes Appendix 2 Adoption of a national strategy for regional competitiveness, entrepreneurship and employment 2007– 2013 Appendix 3 The Council’s decision on the Community’s strategic guidelines on cohesion

1 Introduction

The Swedish economy is strong and is developing well. Sweden’s competitiveness and the Swedish business climate rank increasingly highly in international comparative studies, and in recent years Sweden’s growth has outperformed the EU average. Today, Sweden meets many of the objectives set out in the Lisbon Strategy, which aims to strengthen the competitiveness of the EU and generate sustainable growth and full employment.

Sweden’s overall national growth is dependent on the growth generated locally and regionally. Competitive regions and individuals are necessary in order for Sweden as a whole to be competitive. The more regions have a strong, growing economy, the better the conditions for the whole country. A greater number of economically strong regions also encourages growth in Sweden’s weaker regions. Despite the regional conditions for growth in Sweden varying considerably, the regional disparities in living standards are relatively small from a European point of view. However, trends in recent years show that the differences between the regions of Sweden are growing, and in this area Sweden’s challenge for the future is to create the right conditions for all regions to be able to realise their potential for growth based on their own unique circumstances.

Since the conditions for regional development vary nationally, a distinct regional and local influence must be exercised over this development work. Each region should be given sufficient responsibility and authority to allow it to grow based on its own unique circumstances. Individuals and businesses are better able to strive for success and take advantage of powers of development and dynamics where they live and work if growth policy is adapted to suit regional conditions.

Sustainable national growth depends on all the country’s regions showing strong development. Sustainable growth is economic growth which does not jeopardise the ecosystem on which we depend and which safeguards human resources. Another basic requirement for sustainable regional development and competitive regions is close cooperation between people, businesses, municipalities and authorities.

The European cohesion policy aims to contribute towards economic and social cohesion within the EU by evening out regional differences and human inequality. The aim during the coming period of 2007–2013 is to create competitiveness and employment by safeguarding existing conditions throughout the whole of the EU and by creating opportunities for all regions to contribute towards European competitiveness. 4

The national strategy for regional competitiveness, entrepreneurship and employment 2007–2013 should help to create competitive regions and individuals in Sweden. The government has identified the following national priorities for regional competitiveness, entrepreneurship and employment 2007–2013: Innovation and renewal, Skills supply and improved workforce supply, Accessibility and Strategic cross-border cooperation. In accordance with the European strategic guidelines for cohesion, the national strategy provides guidelines for structural fund programmes for regional competitiveness and employment 2007–2013. The strategy forms Sweden’s national strategic reference framework for cohesion policy, which is to be implemented in Sweden via eight regional structural fund programmes and a national structural fund programme with eight regional plans.

The national strategy involves further coordination of the regional development policy, the labour market policy and the European cohesion policy in Sweden. It should form a basis for implementing the EC’s structural funds in Sweden, and should provide guidance for regional growth programmes and for national authorities. It also aims to encourage dialogue and interaction between players at local, regional, national and EU levels. The basis for this dialogue is prioritisation within the national strategy and regional development strategies1.

The national strategy thus becomes a platform for gaining an overall view and sectoral coordination for regional competitiveness, entrepreneurship and employment. National and regional authorities play a significant role in successful regional development work. This requires successful collaboration between authorities and other players at a national, regional and local level. The prioritisation within the national strategy should provide guidance for the regional development work, and should form the basis of the authorities’ involvement in the work with regional development strategies, regional growth programmes and structural fund programmes for regional competitiveness and employment. Sustainable development should be a feature of all regional development work. The three dimensions of sustainable development – the economic, social and environmental dimensions – are of equal importance, and are dependent of one another.

The strategy is the result of, among other things, in-depth dialogue on future regional development issues. This dialogue involved representatives from local, regional and national levels, as well as representatives from interest groups, industry, authorities and unions. The work was carried out with the support of working parties within the Government Offices of Sweden, the most closely involved authorities and regional players. A specific working party assisted by providing analysis data for the strategy. This analysis data – “Swedish territorial conditions and development trends” – is available on the website of the Ministry of Industry, Employment and Communications.

1Regional development strategies are regional development programmes which are, in practice, county development strategies. 5

1.1 Regional development policy, labour market policy and the EU’s cohesion policy Regional development in Sweden Every part of the country should contribute towards Sweden’s growth and sustainable development. The regional development policy focuses on creating growth, sustainable development and a high level of service for women and men in all parts of the country. The primary role of the policy is to foresee and prevent structural problems and to create the right conditions for regional growth and competitiveness. Long-term growth and welfare needs to be strengthened, not least in terms of Sweden’s demographic development. Policy measures should have a strong, clear focus on long-term sustainable development, which should characterise all development work.

Growth is generated at local and regional level by people in companies. Regional development policy is based on the way in which local labour- market regions create structural conditions in sparsely populated and rural areas, small and medium-sized towns and cities. Built-up areas and sparsely populated and rural areas are viewed as interconnected areas. The sustainable growth of cities is promoted through initiatives in both regional development policy and national urban policy.

The most important role of the state is to create good conditions for sustainable regional development. This role needs to be made clearer, and cooperation between authorities and local and regional representatives must be improved.

The aim of regional development policy is effective, sustainable local labour-market regions which offer high levels of service throughout the country. Measures within virtually all policy areas are of significance in terms of regional development and in terms of achieving the regional development objective. This objective is to be achieved through:

• Well-developed management of state operations. • Clearer regional responsibility for development in certain policy areas, and a well-developed overall view. • A clear distribution of responsibility between the state and the municipalities. • Learning and programmes as development tools. • Regional comparisons as a driving force for change. • Cooperation with the EC’s structural and regional policy. • Targeted measures.

Labour-market policy in Sweden The overall aim of labour-market policy in Sweden is to contribute towards an effective labour market. By combating exclusion from the labour market, creating more jobs and more companies and by making 6 employment more profitable, welfare can be ensured. The employment principle should be clarified in unemployment insurance through changes to the way in which this insurance pays out and its terms and conditions. The way in which unemployment insurance is structured affects how the labour market works. Unemployment insurance should be a form of career readjustment insurance. Health insurance should aim to provide security for those affected by illness or injury whilst providing the motivation and the opportunity to return to work.

Employing people should be simpler and less costly. Initiatives are being introduced to make it easier for those who have been long-term unemployed to be able to return to work. The cost of employing young people should be reduced. Reducing employer contributions in certain service industries is also important. The Swedish business climate needs to be improved, and running a business should be more profitable.

The EU’s cohesion policy The EU’s cohesion policy aims to contribute toward economic and social cohesion within the EU. It aims to reduce regional difference and inequalities between people. Its main tool is the structural funds, which represent around a third of the EU’s budget.

Based on the aim of the cohesion policy, the revised priorities of the Lisbon Strategy and the need for a thematic and territorial focus, the European Council has decided on three objectives for the cohesion policy over the period 2007–2013: Convergence, Regional competitiveness and employment and European territorial cooperation. Funds will be allocated during the period to the Swedish regions for initiatives towards the second objective, Regional competitiveness and employment, and the third objective, European territorial cooperation.

• The objective of Regional competitiveness and employment (which replaces the current objective 2 and objective 3) aims to predict and promote economic change through a limited number of priorities under the headings of Innovation and the knowledge economy, Accessibility, Environment and risk prevention, and More, better jobs. The objective will be financed during the coming programme period by the two structural funds, the European Regional Development Fund and the European Social Fund.

• The objective of European territorial cooperation represents a further development of the Community Initiative INTERREG. The aim is to promote greater integration and cooperation between regions in order to contribute towards the development of the EU’s regions. Implementation will be through three types of programme: cross-border, transnational and interregional programmes.

In order to help improve the effectiveness of the cohesion policy, a clearer concentration of initiatives is required in order to achieve the objectives of the Lisbon Strategy.

The European cohesion policy should feature decentralised implementation, based on local, regional and national strategies. Effective implementation of the policy is reliant on close cooperation within a broad partnership of players in the planning and implementation of the programmes, and on additional interaction between the local, regional, national and European levels.

European strategic guidelines for cohesion One element of strengthening the strategic efforts within the future structural funds work is the introduction of European strategic guidelines for cohesion. The provisions of the structural funds comprise the regulations which form the basis of the content of the European strategic guidelines, and state which guidelines are possible in the member states. The guidelines should contribute towards initiatives within the EU regions being concentrated where the need is greatest and on clarifying ways which will help to achieve the objectives of the Lisbon Strategy. They should also improve the cohesion between the EU’s objectives and national, regional and local strategies.

The guidelines form a flexible framework which provides guidance for member states and regions when drawing up national and regional programmes. The guidelines cover all three objectives of the EU’s cohesion policy and identify three overall priorities for cohesion during the period 2007–2013. Sweden is only included in two of these objectives, and not all of the guidelines are relevant from a Swedish point of view. Appendix 3 details the European Council’s decision on the EC’s strategic guidelines for cohesion in its entirety.

European strategic guidelines for cohesion

• To make Europe and its regions more attractive places in which to invest and work o To expand and improve the transport infrastructure o To strengthen the synergies between environmental protection and growth o To address Europe’s intensive use of traditional energy sources

• To create growth through improved knowledge and innovation o To increase and improve investment in research and technical development o To facilitate innovation and promote entrepreneurship o To promote an information society for everyone o To improve access to financing

• More, betters jobs o To attract and retain more people in employment, and to modernise the social security system o To improve the adaptability and flexibility of employees and companies within the labour market o To boost investment in human capital through improved education and skills development o Administrative capacity o To help maintain a healthy workforce

One of the main strengths of the cohesion policy lies in its ability to adapt measures to suit specific geographic conditions. Territorial 8 cohesion complements economic and social cohesion, with the aim of achieving balanced development by reducing developmental differences and adding a geographic dimension to the sectoral policy. The areas prioritised under the guidelines are cities (for their contribution to growth and employment) and the diversification of economic activity in the countryside. It is also stated that the cohesion policy can play an important role in improving the situation in the outermost regions, arctic regions, sparsely populated regions and mountain regions.

Sweden’s action plan for growth and employment 2006–2008 The objectives for the future cohesion policy have been adapted in line with the objectives of the Lisbon Strategy and the integrated guidelines for growth and employment adopted by the heads of states and governments in connection with the revision of the Lisbon Strategy in March 2005. As a result of this revision, each member state will, as a first step, draw up an action plan for growth and employment for the period 2006–2008, showing how they will contribute towards meeting the objectives of the Lisbon Strategy.

On 28 November 2006, Sweden’s revised action plan for growth and employment 2006–2008 was submitted to the Swedish parliament and the European Commission. The action plan presents the government’s policy which will form the basis for long-term sustainable economic development, create scope for increased welfare and address coming challenges. The action plan details a large number of measures to make this policy a reality.

The national strategy for regional competitiveness, entrepreneurship and employment 2007–2013 complements the Swedish action plan by identifying priorities and guidelines for regional competitiveness, entrepreneurship and employment, which will also contribute towards meeting the objectives of the Lisbon Strategy.

Regional competitiveness, entrepreneurship and employment in terms of sustainability Sustainable development is an overall strategic objective both for the EU and for Sweden. Since 1999, sustainable development has been an overall objective of the EU Treaty, and in 2001 the EU’s first sustainable development strategy was adopted. A revised EU strategy for sustainable development was adopted at the meeting of the European Council in June 2006. The new strategy is ambitious, with concrete objectives and measures under seven key areas. This should lead to tangible progress within the EU’s sustainability work over the coming years.

The government intends to strengthen Swedish sustainable development work, and to appoint a sustainability commission. The sustainability commission will, among other things, oversee which efficiency and modernisation measures in terms of organisations, regulations and means 9 of control need to be made in order to facilitate the work towards a sustainable society and create environmentally-driven growth, and to avoid society obstructing positive initiatives put forward by individuals and companies.

Sustainable development is not a static situation with a single definition. It is a process of change, a form of development in a sustainable direction, whereby each region must find its own route based on its own circumstances. Controlling the way in which the regions choose to realise their vision for sustainable regional development is not a national task. It is the regional level which knows which initiatives and priorities are most suitable for changing unsustainable trends, changing unsustainable structures and facilitating sustainable development in each region. Promoting sustainable regional development involves prioritising solutions which give synergies between the economic, social and environmental dimensions whilst making balanced adjustments between opposing interests and conflicts between the three dimensions. With effective sectoral coordination, those overall solutions which are best for society can be identified.

2 Strategic focuses, priorities and guidelines for regional competitiveness, entrepreneurship and employment

Strategic guidelines and priorities Based on the opportunities and challenges facing Sweden and its regions, the government has identified the following national strategic priorities for regional competitiveness, entrepreneurship and employment: Innovation and renewal, Skills supply and improved labour supply, Accessibility and Strategic cross-border cooperation. In addition, attention must be paid to territorial circumstances in general. Particular attention should be paid to areas such as the sparsely-populated areas in Northern Sweden and the cities.

The priorities within the national strategy for regional competitiveness, entrepreneurship and employment should provide guidance for regional development work in Sweden. They cover all regions, but should be adapted to suit regional and local conditions. The priorities should form the basis for the authorities’ involvement in work on regional development strategies, regional growth programmes and structural fund programmes for regional competitiveness and employment.

The priorities of the strategy are cross-sectoral, and require greater coordination between sectors. The responsibility of the authorities involves working together on regional needs and priorities, based on the national objectives. Effective inter-sectoral cooperation leads to an increase in the added value of regional, national and European initiatives, whilst better enabling the authorities to meet their operational objectives. 10

This should contribute towards greater efficiency, improvements in meeting objectives and better use of resources, at both national and regional levels.

The national strategy will provide guidance for the ongoing work relating to regional growth programmes. The regional growth programmes are covered by the priorities of the national strategy. Those opportunities which exist for strengthening and coordinating efforts and implementing both regional growth programmes and structural fund programmes should be actively dealt with. Coordination should, among other things, take account of the fact that the structural fund programmes and the regional growth programmes are partly based on different geographic starting points.

Guidelines Within the prioritisation framework, a clear concentration of efforts and resources is necessary within the structural funds programmes. Within each individual priority, a number of guidelines have been identified for the programmes. Within the relevant areas, these are also in line with the guidelines of the Swedish action plan for growth and employment and the European strategic guidelines for cohesion2.

The guidelines form the framework for the implementation of the cohesion policy and present a menu, from which a choice is to be made in connection with the adoption of the eight regional structural fund programmes for regional competitiveness and employment. The national structural fund programme for regional competitiveness and employment will encompass all the guidelines within the framework for the Skills supply and improved labour supply priority.

2.1 Innovation and renewal Regional competitiveness shall be strengthened by increasing capacity for innovation and renewal. The government has highlighted Innovative environments and Entrepreneurship as particularly important initiative areas.

With the ever faster development of the world around us, a strong capacity for innovation and renewal is crucial for regional competitiveness and entrepreneurship. Good conditions are therefore encouraged in order for Sweden to be an innovative, industrious and competitive country. The entrepreneur and the business owner play decisive roles when it comes to new innovations and growth. The business owner depends on a local, regional and national environment which stimulates innovation, renewal and entrepreneurship.

2In terms of guidelines, the guidelines of the Swedish action plan for growth and employment (the National Reform Plan, NRP) and the European strategic guidelines (the Community Strategic Guidelines, CSG) to which these relate are stated. See the boxes beneath each priority. 11

A successful interaction between research, business, the public sector and political institutions is a key requirement for effective innovative environments. Sweden’s shared bank of expertise needs to be developed and converted into new products and job opportunities. This requires commitment from a wide range of players within Swedish society.

Innovative environments Corporate investment is becoming increasingly internationally flexible, and becomes focused on the regions and countries which offer the best conditions. In order for companies to be able to adapt to ever tougher international competition, they must develop new products, services and production methods. Various measures are being fostered in order to strengthen companies’ opportunities for renewal and growth. The development of strongly innovative environments is central in this context. Strongly innovative environments not only create the right circumstances to attract foreign investment and international skills, but are also fundamental in strengthening companies’ renewal and competitiveness.

A company’s capacity for innovation increases if there is an effective transfer of skills and interaction with other companies and organisations. Innovations are rarely isolated incidents, tending rather to come about in collaboration with a number of players. Innovative environments are increasingly viewed as a basic requirement for innovations, innovation systems and clusters to appear, spread and develop. The local and regional levels are highly important for the development of innovation systems and clusters. Sweden’s capacity for innovation is already extremely strong, and the main challenges are to reap the benefit fully and to develop it.

A region’s ability to develop innovations depends not only on how well the constituent institutions and players act, but especially on how well they interact with one another. Such interaction is of the utmost importance in developing regional innovative environments for developing innovation systems and clusters. The regions’ ability to interact with those around them – both nationally and internationally – should be promoted as a means of developing innovative environments. By promoting greater, more in-depth international cooperation, the regional innovative environments can gain access to a larger critical mass of players and skills, and thus boost their capacity for innovation.

A greater degree of specialisation is necessary in order to develop this capacity for innovation and thus the competitiveness of companies and regions. Such a focus involves being able to build upon the regions’ comparative advantage. The need for specialisation also applies to the city regions, although these regions are able to develop specialisations within more areas than small and medium-sized regions can. The need is more pronounced in the small and medium-sized regions. At the same time, increased specialisation affects regional vulnerability and thus 12 encourages interaction with other initiatives which create better conditions for dealing with rapid structural changes. Increased specialisation based on regional conditions and priorities should also be developed through greater interaction and dialogue on national priorities in order to make it easier to gather strength in terms of Sweden’s profile areas.

One prioritised task for increasing industry’s capacity for innovation is to create the right circumstances to boost companies’ ability to develop new and attractive products and services with greater added value, which they can bring to the market. Skills development initiatives which support product and service development tailored to suit the market, sustainable and effective production processes and improved business awareness in small and medium-sized businesses should be prioritised. Methods which improve the transfer of knowledge within industry and between industry and universities should be developed and strengthened. Advances in this area are particularly important in regions which lack the density of population required for a natural and effective transfer of knowledge within industry. The commercialisation of research results and ideas should also be increased. The Swedish innovation system still lacks the ability to turn high quality research results and patents into new, growing companies; research needs to lead to business and employment to a greater degree. Small and medium-sized businesses are particularly important in this respect. Not least, it is a matter of organising innovative environments so that they can, for example in the form of a cluster, be made visible and promoted to both national and international interested parties.

The previous government worked with representatives from industry, trades unions and authorities to draw up strategic development programmes within a number of key areas where Sweden’s competitiveness and leading position could be preserved and developed. The industries concerned are the automotive industry, forestry, metallurgy, IT/telecommunications, pharmaceuticals/biotechnology/medical technology and the aviation and aeronautic industry. The strategies include measures to promote research and development, initiatives to ensure good skills retention within industry and measures which stimulate business development in small and medium-sized businesses, including subcontractors.

If small Swedish businesses are to be able to compete with considerably larger businesses in the international market, they need to work together more closely in order to cope with high volume requirements, and in order to be able to offer a greater degree of flexibility than their larger competitors. Through the use and development of advanced IT applications, many businesses – particularly small businesses – can work together actively in areas such as research and development, manufacturing, marketing and sales. Such IT-based business networks can work together both locally and regionally across the whole country. Business networks with national coverage can be driving forces for 13 innovative environments, clusters and entrepreneurship at local and regional level.

Natural environments, culture and cultural heritage have become increasingly important to regions’ innovative development and competitiveness. It is also important to broaden the business base through, for example, preserving natural environments, culture and cultural heritage in the development of innovative environments. Attractive living environments create the right conditions for regional competitiveness and employment. The development of natural environments, culture and cultural heritage contributes to a region’s development and attractiveness. It also contributes towards the living environment which is necessary in order for the inhabitants of a region to be able to live, work and experience wellbeing in their local environment. By increasing the flow of skills between nature, culture and cultural heritage and the region’s industry, the ideal conditions are created for ensuring innovative and attractive environments which promote employment and growth in terms of experience-driven operations, creative industries and more traditional manufacturing and service industries. Here too, closer cooperation between the authorities involved and county representatives can be developed. The national strategy can also promote joint initiatives within this field. An attractive region with developed natural, cultural and cultural heritage resources helps to add value for industry and boosts regional competitiveness.

Entrepreneurship In many fields, Sweden can boast internationally competitive industry. It is important for the future that this competitive edge is retained and developed. In order to achieve this, Sweden needs more new businesses and more growing businesses.

Entrepreneurship and renewal are closely related. Sweden is, therefore, dependent for its growth and competitiveness on encouraging a better climate for entrepreneurship and enterprise. In order to retain Swedish businesses’ strong international position and boost the renewal of businesses and regions, the climate for entrepreneurship and enterprise needs to be improved. Sweden shall be one of the best countries in the world in which to start up and run a business, where starting a business is an attractive proposition regardless of age or ethnic background. Sweden’s competitive advantage in a globalised economy lies in producing highly skills-intensive goods and services. In order to promote this, an improved business climate is needed; running a business needs to be more profitable and less complex.

Sweden’s business climate is generally good for large and long- established businesses, but there is room for improvement when it comes to the climate for entrepreneurship. The fact that Sweden has few business owners and businesses which are growing demonstrates that the climate for entrepreneurship needs to be improved. The potential for 14 growth across the whole country must be fully exploited so that people can start businesses regardless of where in Sweden they are.

There is a clear relationship between peoples’ attitudes towards enterprise and new business start-ups. Regions where there is a more positive attitude towards enterprise feature higher start-up rates. Local and regional conditions for entrepreneurship and enterprise differ across the country. The structure of industry, traditions, attitudes and geographic flexibility are just a few examples of conditions which vary in different parts of the country. It is therefore not unexpected that there are significant regional differences when it comes to starting up new businesses in Sweden. New businesses are particularly important in regions which feature limited, unilateral industry. There are also still differences between the enterprise habits of men and women, and fewer women than men run businesses in Sweden. Women have a great potential for running businesses. If more women started and ran businesses, Sweden’s economic development would be boosted. It is therefore important that initiatives to promote enterprise among women be reinforced.

Sweden needs more entrepreneurs, both women and men. Innovation and creativity are needed within all sections of society, including within industry, the public sector, associations and education. The entrepreneurial perspective should also be given greater prominence within a number of areas of society and sectors in order for entrepreneurship in Sweden to be strengthened. This applies to areas such as the education sector, research, the public sector and political processes. The education sector plays an important role in working to promote entrepreneurship and improving knowledge of enterprise.

Access to capital is a fundamental requirement for setting up new businesses and for growth in existing businesses. There are shortcomings in the capital currently available on the market, and access varies from region to region. This may be due to reasons such as collateral securities which are difficult to value in certain regions as a result of e.g. low property retail value. There may also be differences in opportunities for women, young people and those with a foreign background when it comes to getting access to capital. There may also be differences in access to capital for financing at different stages. Regional development policy and economic policy include a number of different types of initiative to compensate for the market’s shortcomings in terms of available capital.

The government’s general approach is that it is important to reduce the use of direct business subsidies. Where there is a need for financing in addition to that which is available on the market, this should be primarily in a form which involves repayment of the capital used. However, the government believes that various capital procurement subsidies, with an emphasis on venture capital, guarantees and credits, should still be made within the framework of regional structural fund programmes for regional competitiveness and employment. 15

Small and medium-sized businesses’ demand for internationalisation measures has grown markedly. This demand should be satisfied, and attention must be paid to these businesses’ significant potential for internationalisation. Information and advice form a basis for satisfying this demand. The improved access to export advice which is now available in the form of advisors in all counties constitutes a natural starting point for such an ambition. This also creates the right conditions and a need for improved interaction between export advisors and other regional players such as ALMI Företagspartner AB, authorities, municipalities and industry bodies.

The potential of Sweden’s particular skills and strengths in terms of international competitiveness shall be exploited. Industry which enjoys a strong position in foreign markets places demands on e.g. a greater overall view, where supportive measures at various stages should work together to a greater degree. In order to attract foreign investment and create the best conditions for increased export, there is a need for further development and closer cooperation between players within regional development policy, economic policy and foreign trade, export and investment promotion policy.

Changing to sustainable consumption and production patterns creates opportunities for new businesses, employment and export. The market potential is deemed to be considerable for solutions which contribute towards meeting challenges within this field which are connected to both the social and environmental dimensions of sustainable development. Long-term sustainable use of resources and the further refinement of high-tech products and services are key aspects of nurturing a region’s potential in terms of e.g. natural resources.

Another attractive option is developing production and using renewable energy. Changing over to a more sustainable energy system can help to reinforce regional development and can also be used as a driving force for developing technology, products and services. Investment in these areas can contribute towards safe, environmentally-friendly energy consumption whilst providing scope for innovation, new businesses and employment, as well as creating additional export opportunities.

There is real potential in developing business operations for domestic production, service businesses, consumption and export based on a region’s natural environment, culture and cultural heritage. Where the natural environment, culture and cultural heritage are preserved, cared for and developed, this helps to create an attractive environment for residents, visitors and businesses alike.

The tourism industry has come to play an increasingly important role in sustainable growth in many regions. A successful tourism industry not only generates jobs within tourism businesses, but also leads to essential business developments, services and employment in other areas. Tourism 16 is particularly important to rural and sparsely populated areas of significant natural and cultural value.

Guidelines for regional structural fund programmes for regional competitiveness and employment

Innovative environments − Promote cooperation between research and development, industry and the public sector, develop initiatives for more effective interaction within innovation systems and clusters. − Encourage an international exchange of knowledge and cooperation between higher education and industry. − Promote development of regional profiles and specialisation. − Protect natural environments, culture and cultural heritage in the development of innovative environments. − Encourage the capacity for innovation in industry by promoting new knowledge particularly within small and medium-sized businesses. − Improving businesses’ ability to benefit from new knowledge from universities and research institutes. − Develop structures which encourage the transfer of knowledge between businesses. − Promote businesses’ ability to develop new products and services. − Promote the commercialisation of research results and ideas from higher education, industry and other players.

Entrepreneurship − Promote a favourable culture of entrepreneurship and enterprise. − Promote initiatives which facilitate starting new businesses. − Develop strategic forms of cooperation between businesses. − Support businesses’ capital procurement where the market provisions are not satisfactory. − Facilitate the development of industry with a greater international exchange of business, and stronger positions on the foreign markets. − Exploit the opportunities created by the sustainable use of natural resources, e.g. by promoting development and greater use of renewable energy sources. − Use changing to a more sustainable energy system as a driving force for developing technology, products and services. − Encourage ongoing development of business based on natural environments, culture and cultural heritage to promote socioeconomic development − Encourage continued development of natural and cultural tourism.

In line with the guidelines of CSG3 4.1.3, 4.2.1, 4.2.2 and 4.2.4, and NRP4 7, 8, 10, 11, 14 and 15.

2.2 Skills supply and improved labour supply The government wants to promote Skills supply and improved labour supply as a particularly important initiative area for the European Social Fund. The initiatives may be innovative and international in nature.

3 European Community Strategic Guidelines for Cohesion 2007–2013 4 Swedish action plan for growth and employment 17

Within the global knowledge economy, access to knowledge and skills in a broad sense is becoming an extremely strong competitive advantage for regions. Access to a workforce with the right skills is necessary if the development of industry and other operations is not to be hampered. The significance of life-long learning increases as the constant renewal of production, technology and skills requires employees to update their professional skills on an ongoing basis. In order for this to be possible, continuous vocational skills development is necessary. Well-balanced initiatives, harmonised with the need for skills and the demand which can be documented by industry, permit high levels of growth and also encourage new enterprise.

It is important that as many of the working population as possible are offered the opportunity to acquire the skills needed to obtain or retain a job. It is also important that Sweden should have a labour market which works for everyone, where everyone can feel that they have a part to play regardless of their ethnic background, where women and men participate on equal terms, where older people are given the option to remain in work until reaching retirement so that their professional experience is retained, and where young people are able to gain a foothold within the labour market.

The challenges faced by Sweden, along with many other EU member states, relate partly to the demographic changes whereby fewer and fewer people will have to care for more people, and partly to the increasing pressure for change resulting from globalisation. The European Council’s recommendations for Sweden included emphasising the importance of the country: − continuing to work to promote work-oriented solutions and to improve working conditions so that the number not working due to illness continues to decrease, − achieving better integration of “weak” labour-market groups such as immigrants and young people in order to benefit from the workforce potential which they represent, and − removing obstacles to any skills gap between workforce supply and demand.

The Swedish government concurs with these conclusions.

During the programme period of 2007–2013, the European Social Fund shall help to achieve the objectives of the Swedish government to increase the labour supply and the number of hours worked, and thus also contribute towards the EU’s target of becoming the world’s most dynamic, skills-intensive economy where everyone feels a sense of participation. In addition, it shall also contribute towards developing methods for increasing workforce participation among those groups who are further from the labour market. From a retraining point of view, preventative work is also necessary through creating sufficient skills development before individuals reach the stage of becoming sick or unemployed. 18

Skills supply The education system and access to skills development initiatives for both employees and the unemployed, as part of life-long learning, are essential to long-term economic growth, productivity and employment. Life-long learning requires ongoing collaboration between the education system, including higher education, and the rest of society, in order that the needs of the labour market can be matched to the demand of individuals. Higher education which is seen to be of a high quality from an international point of view is an objective not only for individual educational institutions but also for regions. Flexibility among researchers and students forms a part of the global economy. Swedish universities therefore remain active in attracting foreign students and researchers.

Short vocational courses and professional education remain in demand from both the sphere of work and individuals, and are of great importance to regional development. The range of different forms of education and specialisations available offers the individual the opportunity to choose the option which suits him or her best. The physical infrastructure for adult education is significant for growth. Access to various kinds of learning environment – such as the workplace, a learning centre or various forms of labour market training – is an important requirement for adult learning.

The government believes that it is important to even out the regional differences in progression between upper secondary schools and universities and the various educational levels. It also believes that it is important for the regions to contribute towards the government’s goal of Sweden becoming a leading nation in terms of knowledge. Trends indicate that women have broadened their educational and employment choices to a greater degree than men.

In many respects, Sweden already has a well-trained workforce, but rapid technological developments mean that those who are already employed need to undergo constant skills development in order for Swedish businesses not to lose ground. Such skills development is not primarily a public sector undertaking, but public financing may be justified in certain cases.

Experience from the Objective 3 Programme during the 2000–2006 programming period showed considerable interest in an analysis of which type of skills development is needed for the employees of an individual business. However, turning such analyses into skills development initiatives has in many cases not been as easy to achieve. It is of the utmost importance that the identified need for skills development should also be satisfied.

For the employee, this may be a case of acquiring new knowledge in order to be able to take on more demanding work or knowledge in order to be able to carry out an existing job more effectively. This could also 19 involve training key personnel within the business on how to minimise all types of discrimination due to ethnicity, gender, age, disability, etc. Increasing internal flexibility within businesses, authorities and organisations will be an important contribution and a target for such prioritisation. It is also important to increase flexibility and the skills flow between different sectors in order to promote innovation and competitiveness.

Improved labour supply Significant parts of the adult population of working age find themselves outside the labour market or work less than they would like to. In all, these make up more than a million people – both women and men. In order to combat this exclusion, it is important to cultivate the will to work in everyone who wants to and is able to work. Many currently find themselves outside the workforce. More people of working age therefore need to work, and work more on average. It is not only the openly unemployed who constitute potential workers: there are many people who are willing and able to work, but who for various reasons have not sought work in accordance with the criteria which define open unemployment.

There are also large groups among those on sick leave who say that they would like to work more if certain workplace conditions were met. Those receiving sickness and activity benefit (SA, “sjuk- och aktivitetsersättning”, formerly early retirement pension) can also be examined to see whether they constitute a possible workforce reserve. Exclusion from the labour market has increased particularly among young people.

The heart of the government’s economic policy – and hence also its labour market policy – is the creation of circumstances which allow more people to enter the labour market at an earlier stage, more people of working age to work and fewer people to leave the labour market early. The government will implement an active policy of renewal which allows all parts of the country to grow and develop on their own initiative. People shall have a better opportunity to take the initiative themselves and change their lives through their own efforts.

The employment principle must be re-established. It should be more profitable to work and easier to employ people. The labour market thresholds need to be lowered and harder work and/or greater responsibility should be rewarded. It needs to be easier to find the right job, and the unemployed should be offered support in order that they can quickly get back to work. A policy of more jobs must fundamentally be based on society being able to produce more goods and services. The business climate must be improved, not least for small and medium-sized businesses.

The labour market policy needs to be made more effective and the employment principle must be clarified so that additional resources can be secured for matching those seeking work to available jobs. It must be devised so that it works more clearly as a lubricant for the labour market. The labour market policy should help people to move as quickly as possible from one job to another, or from unemployment to work within the regular labour market.

The most important task for the Swedish employment service should be matching those seeking work with available jobs, instead of implementing labour market policy programmes. However, in order for this to be possible there should be a dynamic labour market to act as a foundation, with a growing number of jobs. The government’s broad jobs programme is a mainstay of its economic policy.

Changing over to a new labour market policy with a sharper focus on jobs and effective initiatives for those who find themselves furthest from the labour market involves radical changes to both the scope and the structure of the labour market policy programmes.

The labour market situation for those with foreign backgrounds is extremely worrying. The government intends to come back with measures to enable those with foreign backgrounds to enter the labour market more quickly, such as apprenticeships.

The national structural fund programme for regional competitiveness and employment shall contribute towards achieving current objectives and development areas in the national action plan for growth and employment.

The national structural fund programme shall focus on priorities for skills supply and improved labour supply, based on the following guidelines.

Guidelines for the national structural fund programme for regional competitiveness and employment The programme will include all the guidelines below.

− Promote such skills development as to ensure that those already employed do not risk unemployment due to not having the skills required. − Make it easier for those who find themselves far outside the labour market to enter and remain in the market through non-traditional initiatives. − Prevent and combat discrimination and exclusion from the labour market. − Prevent long-term sick leave and facilitate a return to work for those who are or who have been on long-term sick leave through innovative initiatives.

In line with the guidelines of CSG 4.3.1 and 4.3.2 , NRP 17, 18, 19, 21 and 23 and Regulation (EC) no. 1081/2006 of the European Parliament and of the Council article 3.

2.3 Accessibility In order to achieve regional competitiveness, entrepreneurship and employment, accessibility is something which should be strived for, both nationally and to and from other countries. The government promotes Regional enlargement and An advanced information society as particularly important priorities.

Global accessibility, and to a certain degree European accessibility, is naturally low for a peripheral country such as Sweden, despite an extensive transport system. However, for many of the country’s regions accessibility to workplaces, retail centres, services and social contacts is relatively good, despite long distances. Effective and sustainable transportation of goods and people, which improve accessibility for citizens and industry, are a prerequisite for strong competitiveness, both regionally and nationally. By expanding the national road and railway networks, good conditions are created for intraregional flexibility and for better connections with the European communications network. In the northern parts of the country, where greater accessibility is not achieved simply through improving the road and rail networks, flight connections are essential for effective interaction with surrounding regions, both nationally and internationally.

Accessibility is achieved not only through building roads or expanding public transport, but also by developing flexible forms of cooperation and by overcoming administrative obstacles. Improved accessibility therefore requires effective interaction between e.g. social planning, the labour market and services.

The development of the information society means that people can work, use public and private services and otherwise participate in society, regardless of where they live. This requires an advanced information society in all parts of the country, as well as a strong domestic market with skilled buyers and IT users. The use and development of products and content-based services requires an effective and secure IT infrastructure with high data transfer capacity to all parts of the country.

Regional enlargement In a sparsely populated country like Sweden, which has many small local labour market regions, regional enlargement means that these are linked together more closely. In larger regions, conditions are also improved for a more differentiated labour market and increased specialisation of industry, workforce and training. Regional enlargement can reduce regions’ vulnerability while allowing them to achieve a greater degree of specialisation. These are key requirements for competitiveness. There is a close relationship between economic growth and regional enlargement.

Regional enlargement involves not only an expansion of local labour market regions, but also for example service regions and training regions. 22

The quality of the interaction which exists within the local labour market regions, i.e. the actual use by people and businesses of the opportunities for flexibility and interaction which already exist, are just as important as geographic regional enlargement. Regional enlargement is largely a process which is driven forward by individuals and businesses and their ability to adapt. This is a process which requires holistic solutions and measures which embrace whole sectors. Long distances in inland areas of Norrland mean a need for different solutions to those required elsewhere in Sweden, such as measures aimed at regional strengthening or improved regional integration.

Regional enlargement should occur with the least possible environmental impact and on equal terms for both women and men. The fact that people live and work in a larger area leads to an increased flow of traffic, which in turn generates additional environmental impact e.g. through climate change, air pollution and noise. It is also important to take into account the different commuting patterns of women and men and the differences which may exist in lifestyle and travel patterns within different professional groups and between people with different educational backgrounds.

The requirements for regional enlargement, as well as for regional strengthening, are provided partly by the public sector through e.g. investment in infrastructure, housing planning, coordination between separate planning processes, the focus and location of the services offered, and partly through the design of the public transport system. In order for regional enlargement to be developed in a sustainable manner, it is important for the connection between travelling and infrastructure measures works well. Transport solutions which can satisfy society’s increasingly knowledge-based logistical requirements for goods transportation and requirements for advanced passenger transport should be promoted. One such solution is an advanced regional train system.

As regional development is placed within a wider context, the government has deemed that the coordination between separate planning processes, such as regional development, infrastructure planning and the provision of housing, has become increasingly important. Among other things, this should lead to different types of traffic complementing each other, and working effectively across municipal, county and national borders. Types of traffic cannot be viewed in isolation from each other, and transport requirements cannot only be satisfied through measures specific to each type of traffic. Interaction between rail traffic, road traffic, air traffic and shipping is therefore necessary, and means increasing the effect of the collective efforts made in terms of transport systems. Transport hubs such as ports, goods terminals and airports are important in this context.

Effective and appropriately priced transport chains are needed in order for the Swedish export industry to succeed against international competition. It is therefore important to strive constantly towards effective transport chains within the EU. European work to improve 23 infrastructure occurs within the framework of TEN-T, the Trans- European Networks for Transport, which includes roads, railways, airports, ports, inland waterways and sea motorways. The networks include 30 separate projects. Three of these affect Sweden: the Øresund Bridge (completed in 2000), the Nordic Triangle and the Baltic Sea Motorways.

Sweden’s implementation priorities for the Nordic Triangle are based on the priorities of the national long-term planning framework for roads and railways 2004–2015. The majority of the Swedish initiatives relate to improving accessibility in and between cities, for example through rail investments such as the Malmö City Tunnel, the Malmö-Gothenburg West Coast Rail Line and the construction of the E6 through Bohuslän.

The Baltic Sea Motorways aim to improve the efficiency of sea transport by developing infrastructure in the form of e.g. icebreaking, traffic information systems, port infrastructure and connections to ports from both the land and sea sides.

An advanced information society Information technology is a powerful force for change within national economy. New technology cuts distances both within Sweden and between countries. Since IT is of the utmost importance to Sweden’s future competitiveness, there should be access for everyone. In order to succeed with this, infrastructure and the opportunity to use this technology are key factors to consider.

An accessible information society with modern infrastructure and IT services which are of benefit to society can simplify everyday life and improve the quality of life of women and men, young and old in all parts of the country. An effective, secure IT infrastructure promotes regional development by, for example, creating the right circumstances for sustainable growth throughout the country. A successful IT infrastructure is essential for business and for living in sparsely populated and rural areas. For certain parts of the country, increased use of IT solutions can sometimes compensate for the remoteness from services or the market.

Increased use of IT benefits everyone. Communication between people improves, and the real technological benefits in terms of productivity and quality can only be reaped when the vast majority are part of the information society. Today, IT is one of the most important factors in achieving improvements in productivity and growth, in both the public sector and the private sector. This applies regardless of where in the country public organisations and businesses are located.

IT infrastructure expansion with high data transfer capacity is essential in order to achieve greater accessibility. Broadband networks within a town or municipality, which are often owned by the municipality or a municipal company, are often called town networks. These networks 24 have been expanded in recent years, giving users better access to electronic services. The fact that municipalities are increasingly starting to see IT and broadband issues as an integral feature of community planning and community development creates essential conditions for the ongoing development and expansion of the IT infrastructure and the use of IT operations.

Greater use of IT can contribute towards innovation and sustainable growth. Smaller businesses can reach larger, international markets, and many small businesses experience greater business benefits with IT use. For example, the opportunity to obtain faster, better information about forthcoming international business deals, including EU public procurement, can increase considerably for businesses which work together in sophisticated, active IT networks. IT can also contribute towards sustainable growth by offering for example smart, more energy efficient solutions and products and services which aim to improve accessibility for all groups within society. IT should therefore be seen as a natural part of – and an important tool for – operational and community development. In order to achieve this, businesses need better knowledge and an accessible infrastructure. It is therefore important to encourage and facilitate the use of IT among smaller businesses, both for their own development and in terms of the demand for the IT sector’s skills and services. Support should be provided for IT skills development in small and medium-sized businesses in order to increase these businesses’ use of e-commerce with a view to boosting competitiveness, innovation and growth. The initiatives which have already been implemented need to be reinforced and designed to a greater degree based on the specific needs of different small and medium-sized businesses.

Guidelines for regional structural fund programmes for regional competitiveness and employment

Regional enlargement − Strengthen the link between traffic and infrastructure measures. − Develop interaction between different types of transport. − Develop passenger transport which improves accessibility and which creates better conditions for regional enlargement.

An advanced information society − Encourage and facilitate the use of IT in small and medium-sized businesses. − Develop products and services, both private and public, which aim to improve accessibility to, and use of, IT for people and businesses. − Continue to develop broadband solutions in sparsely populated and rural areas.

In line with the guidelines of CSG 4.1.1 and 4.2.3, and NRP 9 and 16.

2.4 Strategic cross-border cooperation The ability to develop functional ways of working and structures across national borders is important in order to achieve regional competitiveness, entrepreneurship and employment. This should 25 therefore be reinforced. Strategic cross-border cooperation should both complement and contribute to fulfilling the national strategy’s priorities for regional competitiveness, entrepreneurship and employment.

An active attitude towards the rest of the world is necessary in order to ensure long-term regional competitiveness, and requires an ability to develop strategic cooperation within and across national borders. The cooperation may take many different forms and be based on a number of different aims. These dictate the character and geography of the cooperation. It may be based on geographic proximity, or on the regions sharing important challenges and opportunities which are more thematic in nature. Regional players may develop appropriate cross-border cooperation in order to achieve a critical mass and complementary skills within key development areas, such as the labour market, research, training, innovative environments, etc. Another important target of this cooperation is to develop robust collaborative structures which can cope with significant cross-border issues. Examples of areas where cooperation needs to be increased include transport solutions and environmental issues in the Baltic region.

Cross-border cooperation at regional level must be viewed in context. A single example of cross-border cooperation only makes up a fraction of the wider structure which exists for cooperation in any given geographic or thematic area. Regional and national initiatives can strengthen each other while contributing towards achieving more objectives. This requires effective dialogue between the local, regional and national levels of the cross-border cooperation. Functional ways of working, structures and programmes need to be developed in order for the regions to be able to work as effectively as possible on matters of a cross-border and transnational character. It is important for regional priorities to consider relevant national policy, and vice versa, so that there is a clear mutual benefit. The analyses and strategic considerations which form the basis for the regional development strategies should also steer cross-border work.

The more the residents of border regions move across the borders, the faster border region cooperation will develop. As well as the residents and business owners of the border region, all the other players – at national, regional and local level – have an important role in promoting this development. This can be achieved through, for example, legislation which is adapted to a greater degree, increased efforts at regional and local level and improved cross-border infrastructure. The long- established free movement of the Nordic workforce is a good example of this. The work to eliminate and provide information about differences in regulations which hamper cross-border collaboration needs to be intensified. The working methods used at GrenseTjänsten in Morokulien to eliminate border obstacles between Sweden and Norway should be developed and disseminated.

Guidelines for cross-border and transnational programmes

− Minimise border obstacles for cross-border commuters and businesses which carry out cross-border operations. − Promote cross-border network cooperation between businesses. − Develop cross-border cooperation solutions to increase access to key community functions. − Promote closer cooperation across national borders in order to strengthen innovative environments. − Contribute towards improving communications between the Nordic metropolitan regions. − Promote sea motorway initiatives across the Baltic in order to improve the effectiveness of transportation within the EU and to improve peripheral regions’ accessibility. − Promote cross-border cooperation for sustainable and innovative use and development of natural resources, culture and cultural heritage. − Promote closer cooperation on environmental issues in the Baltic and the North Sea.

2.5 Sparsely populated regions in Northern Sweden and city conditions Recent trends show that the differences between the regions of Sweden are growing. As a result, territorial situations need to be taken into account when devising initiatives.

Alongside the previously detailed priorities, the government wishes in particular to promote the unique conditions which characterise the sparsely populated regions in Northern Sweden, as well as city conditions and the relevance of cities to regional and national competitiveness. The specific conditions in rural areas for economic, social and environmental development are dealt with primarily in the strategy for the Rural Development Programme.

Sparsely populated regions in Northern Sweden The development conditions in the northern parts of Sweden are unique. The combination of extremely sparse population, long distances and cold climate affect opportunities for creating dynamic industry and competitiveness in these regions. One consequence of the long distances is in many cases geographically large local labour market regions with low population density, which entails for example additional costs in order to provide a good level of service and maintain accessibility through an effective transport network.

Investment in recent years targeted at exploiting the potential which exists in sparsely populated areas has helped to create better conditions for strong competitiveness in these areas. This has happened, for example, through developing pilot operations, solutions to span distances (such as better use of natural assets), further refinements within basic industry, and investment in tourism and the experience industry. Closer cooperation between public players, universities and local industry has 27 been essential for this development. The need for small business cooperation and networks is particularly pronounced in these areas. The successful initiatives which are based on exploiting the geographical location and the natural conditions shall be developed further.

Within the EU, the specific conditions in the northern parts of Sweden, Finland and Norway were noted in the Treaty of Accession for Sweden and Finland. This established that the conditions such as extremely sparse population, long distances and cold climate which prevail in the northern parts of the countries warrant an adaptation of the EU’s regulations, particularly within the EU cohesion policy and state aid regulations. This is why the four northernmost counties have been granted specific sparse population additional funding under the regional competitiveness and employment objective.

The European Commission’s new guidelines for regional support during the period 2007–2013 present certain opportunities for Sweden to make use of various forms of support. In areas with low population density (< 12.5 inhabitants per km2 at NUTS III level), transport subsidies may still be awarded. Additional types of support may also be provided in areas of extremely low population density (< 8 inhabitants per km2 at NUTS II level).

There is a need to increase knowledge, develop cooperation and share experiences in terms of the effects of the conditions which characterise these areas. This should take place working alongside regions in Northern Finland and Northern Norway, and in other parts of the EU.

Guidelines for the regional structural fund programmes for Övre Norrland and Mellersta Norrland In addition to the guidelines under “other priorities”, specific initiatives in sparsely populated areas should also include the following:

− Continue to develop opportunities relating to basic industry, including in terms of technology and service development. − Develop solutions to span distances. − Promote industry-oriented investment in tourism and tourist industry. − Promote thematic cooperation between these two regional structural fund programmes within areas such as research and development, skills supply and renewable energy.

City conditions Cities and metropolitan regions play an important part in growth, both in the surrounding regions and in the country as a whole. Cities, built-up areas and sparsely populated and rural areas should be seen as interconnected areas. If the right circumstances are created for sustainable growth in all parts of the country based on the conditions in each region, the sustainable growth of cities and metropolitan areas is also promoted, and vice versa.

The government believes that a key aspect of this is the creation of the right circumstances for sustainable growth in cities and metropolitan regions. City issues should be placed more clearly within a regional context and should become integrated features of the regional development work and the regional development strategies. This allows for a holistic view of the challenges and opportunities which the cities face. Exploiting the potential and the synergies which can arise through productive interaction between metropolitan regions, their surrounding areas and the rest of Sweden is important. In certain respects, the target for growth in the national metropolitan policy coincides with the regional development policy target.

The government believes that there must be a combination of sustainable growth promotion and social initiatives in order to support the development of cities and metropolitan areas. Various local and regional conditions also appear in metropolitan regions, where differences in size, industrial structure, knowledge resources and innovation conditions become apparent. It is important for Sweden’s metropolitan areas to use the opportunities which they have to compete with other metropolitan regions globally. Sweden has benefited considerably from international experience, and the government would like to encourage sharing experience and knowledge between metropolitan regions and regions in other countries. The cooperation in the Øresund region between Skåne and Greater Copenhagen is also important. Equally important is the cooperation between Western Sweden and Norway, and between the Stockholm-Mälardalen region and other countries around the Baltic.

Sweden’s national metropolitan policy has been devised in order, among other reasons, to create opportunities and avoid obstacles for those in urban areas which have traditionally been isolated, and to make these areas more attractive. The number of isolated areas in metropolitan regions needs to be reduced in order to promote long-term sustainable growth and social cohesion. Isolated areas create social and economic tensions which affect both conditions for individuals living in these areas and the development of the city as a whole.

Guidelines for initiatives in metropolitan regions in the regional structural fund programmes for Sydsverige, Stockholm and Västsverige In addition to the guidelines under “other priorities”, specific initiatives in metropolitan regions should also include the following:

− Reinforce internationally competitive innovation system clusters. − Promote local development initiatives in areas which experience isolation. − Promote increased integration. − Encourage cooperation and sharing experience with other cities in Sweden and internationally.

3 Implementation of the strategy for regional competitiveness, entrepreneurship and employment 2007–2013

The need for strategies and long-term initiatives is growing, in a surrounding world which increasingly requires ability to adapt and renew. When circumstances change rapidly, action is needed based on knowledge of the requirements imposed by the surrounding world and an ability to gather forces and concentrate resources. Strong political leadership is needed at national, regional and local level in order to create commitment and to win support from the parties affected.

The national strategy helps to develop the strategic focus for the regional development policy and the implementation of the European cohesion policy in Sweden. Experience from the regional development work of the last few years has demonstrated a need to coordinate efforts and implementation systems better. The national strategy will be a platform for an overall view and sectoral coordination for regional competitiveness, entrepreneurship and employment. At regional level, the regional development strategies have an equivalent function. These should also form the basis for regional growth programmes, as well as regional structural fund programmes and regional plans within the framework of the national structural fund programme. The starting points for this are the cooperation, support and commitment developed during the implementation of regional growth programmes, and attention should be paid to earlier structural fund programmes in the implementation of these programmes.

The image below shows the relationship between the national strategy, county regional development strategies (RUP), regional growth programmes and structural fund programmes for regional competitiveness and employment at national and regional level. In addition, there are a number of other European, national, regional and local initiatives and strategies which this system must take into consideration when implementing programmes and measures.

National strategy for regional National level competitiveness, entrepreneurship and employment 2007–2013

National structural fund programme (ESF) (1)

Multi-county level Regional structural fund Regional plans programmes (8) (ERDF) (8)

County level Regional development strategies (RDSs) (21)

Regional growth programmes (RGPs) (21)

3.1 Regional development programmes – strategies for the development of the counties According to the ordinance (2003:595) on regional development work, regional development programmes should be drawn up as a basis for regional development work. At present, fewer than half of the counties have drawn up a regional development programme. The regional development programmes should be strategies for sustainable regional development, which means that they are drawn up based on a holistic view of the county’s long-term development.

The regional development programmes should form the basis for a dialogue between the national and regional levels on the key regional development issues. The county sets its objectives and aims in order to contribute towards better sectoral coordination which includes local, regional and national initiatives within the county.

The regional development programme should detail how the objectives for the county are to be achieved, and should also include a strategy for how the county will help to achieve national objectives. The programme details the focus and priorities for the development of the region. It should state which areas are to be prioritised within the county. This should be based on an analysis of the county’s conditions and development potential. The programme should refer to the region’s cross-border and functional cooperation.

The regional development programme constitutes a basis for other programmes and measures within the county and at multi-county level. In this way, initiatives within a number of policy areas can be coordinated more easily, working towards common objectives. Through its long-term, overall objective, the programme provides a basis for other regional and local actions plans with activities within various different areas. The programme should take into consideration the local planning in the municipalities involved, and should use existing municipal analyses and programmes.

The regional development programme is drawn up by those parties responsible for coordinating the regional development work within the county (regional autonomous bodies, collaborative bodies or county administrative boards). A regional development programme is an ongoing process where commitment and winning political support are decisive. The process should be operated as a broad partnership of regional and local public players, industry, socioeconomic bodies and universities.

3.2 Regional growth programmes The regional growth programmes are instruments for process-oriented growth initiatives, with active participation from industry, at county level. The government believes that the regional growth programmes have the potential to develop into more focused, monitorable growth processes within the framework of the regional development strategies.

The regional growth programmes aim to coordinate initiatives within areas where sectoral cooperation contributes towards developing sustainable local labour market regions from a business point of view. Regional autonomous bodies, collaborative bodies or county administrative boards are responsible for coordinating and driving forward the regional growth programme process. The process-oriented attitude which should characterise the regional growth programmes enables priorities and initiatives currently being implemented to be reviewed. The regional growth programmes will, at county level, be able to interact with and complement structural fund programmes and, from a local and regional point of view, support and strengthen priorities and sectoral coordination within structural fund programmes.

The work on regional growth programmes has been underway since 2004. National monitoring of the implementation shows that almost half of the funding awarded comes from the state sector via the labour market, regional development, economic, cultural and transport policies. The government believes that the regional growth programmes have won firm regional support, with a clear focus on promoting sustainable growth conditions for industry. The regional growth programmes have thus far contributed towards a clearer overall view of issues which affect regional industry’s ability to compete. Cooperation between the parties 32 involved has grown, and there are still opportunities for development in the cooperation between the regional level and the national authorities.

The current time limit on the regional growth programmes ceases, and the process should become a key feature of the ongoing work on regional development strategies. The regional growth programmes are carried out with the support of a partnership. Its composition reflects various groups which work to create the right conditions for sustainable growth. The regional partnership features strong support for sustainable growth issues and a real desire to improve conditions for industry. Efforts should be made to ensure coordination with the structural fund partnerships at multi-county level.

The national strategy involves closer coordination between the regional development policy and the EU’s cohesion policy, e.g. through including regional growth programmes and structural fund programmes. This requires coordination in the planning and implementation of the programmes, bringing great opportunities for cooperation and strengthening the regional processes.

3.3 Structural funds programmes for regional competitiveness and employment In order to contribute towards strong regional competitiveness, entrepreneurship and employment in Sweden, a national structural fund programme has been set up for the European Social Fund and eight regional structural fund programmes for the European Regional Development Fund. The implementation of European Regional Development Fund and European Social Fund initiatives will be coordinated through close cooperation between the authorities responsible for managing the funds and making payments, as well as within the framework of the joint structural fund partnership for the two funds at regional level.

During the programme period 2007–2013, the whole of Sweden will come under the scope of the structural fund under the regional competitiveness and employment objective. As agreed by the European Council in December 2005, Sweden will be allocated approximately SEK 13 billion in relation to the regional competitiveness and employment objective and around SEK 2 billion in relation to the territorial cooperation objective. The funding allocated for regional competitiveness and employment will total around SEK 7.4 billion for the European Regional Development Fund and around SEK 5.5 billion for the European Social Fund.

3.3.1 National structural fund programme for regional competitiveness and employment (ESF) Labour market policy is a key, integrated feature of economic policy, and is devised based on national priorities. It is well in line with the EU’s employment strategy and the European Social Fund (ESF), and is based on a number of the same starting points. It is the reasoning behind also having a national structural fund programme during the programming period 2007–2013. The national structural fund programme for regional competitiveness and employment (ESF) will cover the whole of Sweden. A proposed national structural fund programme, which is being drawn up by the Government Offices of Sweden, will be adopted by the government and submitted to the European Commission.

Regional plans will be drawn up by the structural fund partnership in consultation with the managing authority, based on the national structural fund programme for regional competitiveness and employment, once this has been approved by the European Commission. These plans, for which support must be won from the Monitoring Committee, involve giving the national structural fund programme a sharper focus on regional conditions. Productive dialogue with labour market organisations in terms of both preparing programme proposals and the implementation of the programme is necessary if the national structural fund programme initiatives are to succeed.

3.3.2 Regional structural fund programmes for regional competitiveness and employment (ERDF) Eight regional structural fund programmes are being drawn up, and will be financed by the European Regional Development Fund (ERDF) and by national public funding. Private joint financing will also be encouraged in future, although this cannot replace public joint financing. The programmes are being drawn up by a wide circle of players at both regional and local levels, and are based on existing regional growth programme and structural fund programme partnerships. Based on county regional development strategies, the partnership is ensuring regional support for the programmes.

The regional structural fund programmes shall make prioritising easier and shall contribute towards sectoral coordination at multi-county level. It is important for authorities to be involved in drawing up the programmes at an early stage. The authorities and those coordinating the process of drawing up the programmes have a joint responsibility for ensuring that this happens.

The programme structure for the regional structural fund programmes aims to promote multi-county cooperation, based on the NUTS II classification, as below. The programme structure only affects the work to be completed under the structural fund programmes 2007–2013, and 34 does not anticipate the results of the work of the Committee on Public Sector Responsibilities5. The programme structure will be adaptable in line with changes which may occur within the regional community organisation during the programming period.

Table 1 Regional structural fund programmes for the period 2007–2013

Övre Norrland (Norrbotten and Västerbotten counties) Mellersta Norrland (Jämtland and Västernorrland counties) Norra Mellansverige (Gävleborg, Dalarna and Värmland counties) Stockholm (Stockholm County) Östra Mellansverige (Uppsala, Södermanland, Örebro, Västmanland and Östergötland counties) Västsverige (Västra Götaland and Halland counties) Småland och öarna (Kalmar, Kronoberg, Jönköping and Gotland counties) Sydsverige (Skåne and Blekinge counties)

Övre Norrland

Mellersta Norrland

Norra Mellansverige

Stockholm Östra Mellansverige Västsverige

Småland och öarna Sydsverige

3.3.3 Indicative distribution of structural funds funding 2007–2013 Approximately SEK 5.5 billion from the European Social Fund has been allocated for the national structural fund programme. The managing authority, in consultation with the Monitoring Committee, is responsible

5The Committee on Public Sector Responsibilities (dir. 2003:10) is a parliamentary committee tasked with overseeing structure and task distribution throughout the community organisation.

35 for allocating funding among the regions within the national structural fund programme.

An estimated SEK 7.4 billion from the ERDF will be allocated to the regional structural fund programmes, primarily in accordance with the criteria – population, unemployment, employment rate, educational level, population density and GDP – which form the basis of the European Commission’s allocation of funding to Sweden. This includes the additional allocation to the four northernmost counties due to their extremely low population density, which was agreed by the heads of state and government in the budget of December 2005. Within the budget arrangements, specific funding from the ERDF of approximately SEK 1.3 billion was allocated to Sweden. This funding is used to make up for those programme areas which otherwise would have suffered the greatest reduction in funding from the ERDF in relation to the current programming period. The table below, together with Appendix 1, shows the indicative distribution of funding from the ERDF under the regional competitiveness and employment objective for the programming period 2007–2013.

Investment in cities in the structural fund programmes Within the regional structural fund programmes which include the three major Swedish cities, a specific priority is to be created for investment in these cities. Investment within the framework of the programmes may, among other things, help to strengthen local development work in areas which are isolated. This should also contribute towards better cooperation and an exchange of knowledge between the cities of Sweden and those in other member states within the framework of the implementation of the programmes.

Specific sparse population funding in the four northernmost counties In accordance with the criteria low population density, long distances and cold climate in Sweden’s Treaty of Accession to the European Union, arrangements for the distribution of the structural funds for the period 2007–2013 mean that the four northernmost counties will be granted additional funding equivalent to EUR 35 per capita per year, or a total of around SEK 1.9 billion. This funding will be shared between the programmes for Övre Norrland and Mellersta Norrland alongside normal allocation throughout the country.

Table 2 Indicative distribution of funding from the European Regional Development Fund (ERDF, SEK millions)

Regional programme Total Övre Norrland (Norrbotten and Västerbotten counties) 1,922 Mellersta Norrland (Jämtland and Västernorrland counties) 1,399 Norra Mellansverige (Gävleborg, Dalarna and Värmland counties) 1,545 Stockholm (Stockholm County) 297 Östra Mellansverige (Uppsala, Södermanland, Örebro, Västmanland and 641 Östergötland counties) Västsverige (Västra Götaland and Halland counties) 503 36

Småland och öarna (Kalmar, Kronoberg, Jönköping and Gotland counties) 534 Sydsverige (Skåne and Blekinge counties) 559

3.3.4 Organisational structure for the programme period 2007–2013 The organisational structure for the implementation of the structural fund period 2007–2013 shall facilitate common national and regional prioritisation between regional development policy, labour market policy and the EU’s cohesion policy. The government believes that this, together with a clear distribution of responsibility, a more effective implementation organisation and more focused programmes, should create the right conditions for better achieving objectives. The organisational structure should contribute towards the requirements of the EU’s regulations and the need for steering being met. The organisational costs will be reduced.

The main components of the organisation are two managing authorities and certifying authorities, eight structural fund partnerships, plus monitoring committees.

Nutek will be the EU-authorised ERDF managing authority and certifying authority. Operations will be based at and managed from Östersund. The Swedish ESF Council will be the EU-authorised ESF managing authority and certifying authority. The Swedish National Financial Management Authority (ESV) will be the EU-authorised ERDF and ESF audit authority.

Nutek and the Swedish ESF Council will be represented and based at the same location for each of the structural fund programme areas. The geographic distribution of the structural fund programmes will be as detailed above. Where deemed appropriate by the managing and certifying authorities, these may also be based together in the relevant locations. The Swedish ESF Council also has a central unit. Officers from the ERDF managing authority and certifying authority will also be assigned to the six county councils tasked with coordinating the drawing up of the programmes and to the two regional autonomous bodies in Malmö and Gothenburg, which have been given identical tasks.

Within each regional structural fund programme area and corresponding area for the regional plan of the national programme, there shall be a joint structural fund partnership. The main task of the structural fund partnership will be to prioritise projects, and thus ensure that the regional structural fund programme and the regional plan for the ESF are implemented in accordance with the strategic focus of the programme and the plan. This also includes working with the managing authority to identify the need for coordination and delimitation with other development programmes being run at regional level, including specific regional growth programmes and the rural development programme.

The structural fund partnership can, if needed, link relevant specialist skills in various ways to its work.

The structural fund partnership shall comprise elected representatives from municipalities and county councils from the relevant counties, as well as representatives from labour market organisations, affected county administrative boards, county labour boards, interest groups and associations. The structural fund partnership for Övre Norrland and Mellersta Norrland will include representatives from the Sami Parliament.

Following a nomination process at regional level, the government will appoint a chairman for the structural fund partnership. Following a further nomination process, the chairman will appoint structural fund partnership members. The number of elected representatives shall be more than the number of other members. The structural fund partnership will also have a secretary, to be appointed by the chairman.

Before making decisions on allocating ERDF and ESF funding, the managing authorities shall consult with the programme’s structural fund partnership. Initiatives and projects will be prioritised by the structural fund partnership for the relevant programme. It is the government’s intention that the managing authorities should only grant funding in accordance with the project prioritisation carried out by the structural fund partnership.

The government will set up monitoring committees for all the structural funds programmes.

Responsibility for drawing up regional structural fund programmes at multi-county level The conditions for the programme work of the regional structural fund programmes is further clarified by the government decision of 29 June 2006 on offers and commissions to those responsible for coordinating the drawing up of programmes.

The programmes are being drawn up by a wide circle of players at both regional and local levels, and are based on existing regional growth programme and structural fund programme partnerships. Proposals for regional structural fund programme are submitted to the government, which then forwards programme proposals to the European Commission for approval. When the government makes an overall assessment on programmes involving Stockholm, Gothenburg and Malmö, the Commission on Metropolitan Areas in Sweden may help to coordinate issues affecting the bigger cities.

The county administrative boards of Norrbotten, Jämtland, Gävleborg, Stockholm, Jönköping and Örebro counties and Västra Götaland County Council (Västra Götaland region) and Skåne County Council (Region Skåne) have coordinated the process of drawing up proposals for the 38 regional structural fund programmes for regional competitiveness and employment.

3.3.5 Implementation of Structural Funds programmes for regional competitiveness and employment The Government has identified a number of important conditions for successful implementation of the regional Structural Funds programmes as well as the national Structural Funds programme and its eight regional plans. It is important to ensure that synergy can be created between initiatives of the European Regional Development Fund and the European Social Fund. The shared Structural Funds partnerships in the programme areas act as an important coordination instrument.

Experiences from earlier Structural Funds programming periods, as well as regional growth programmes, must be utilised. Methods and ways of working that have been judged to be successful within the Community Initiatives Urban, Equal and Innovative actions must also be taken into consideration and developed. Furthermore, it is important that a platform for analysis is compiled in preparation for implementation of the programmes. That is why all of the Structural Funds programmes must include a ‘SWOT’ analysis.

How the Structural Funds programmes will contribute to meeting the objectives in the Lisbon Strategy The Cohesion Policy should contribute to fulfilling the objectives of the Lisbon Strategy. One way of ensuring this is to earmark 60 to 75 percent of the Structural Funds resources in the EU 15, during the programme period, for initiatives relating to the goals of the Lisbon Strategy.

For programmes under the objective of Regional competitiveness and employment, 75 percent of resources are to be earmarked to contribute to the objectives of the Lisbon Strategy. The Swedish Structural Funds programmes during the current programming period fulfil this goal, and the programmes for the next programming period, 2007-2013, will have the same goal.

A Clear Business Sector Perspective It is central to the development, direction and implementation of the Structural Funds programmes to adopt a clear business sector perspective. This includes both local and regional perspectives in issues of trade and industry. It is also important to find forms that stimulate players in the business sector, including advocates for the social economy, to get involved in the implementation of the programmes. Favourable conditions for business sector participation in the Structural Funds programmes should therefore be created.

Sustainable development, including equality between women and men In all phases of the development and implementation of the Structural Funds programmes and related initiatives, all dimensions of sustainable 39 development should be taken into consideration. A comprehensive and long-term perspective in this work will contribute to sustainable development in the region. Special focus must be placed on equality between women and men, integration and diversity, and environmental issues. Equality between women and men must be promoted at all levels, from the preparatory stages to the implementation of Structural Funds programmes and projects, through representation and ensuring that these perspectives permeate all Structural Funds work. In terms of integration and diversity, consideration must also be given to the interests and influence of minority groups. The Structural Funds programme must make clear the significance of these issues in each different area, as well as how these issues will be taken into consideration in the implementation of the programme. Accessibility for people with disabilities must also be taken into consideration in the implementation. It is important that sufficient knowledge and skills in sustainable development are available, both at the planning stage of the Structural Funds programmes and at implementation. The Structural Funds programmes must also carry out an environmental assessment based on the provisions of the Swedish Environmental Code (chapter 6) and in accordance with the EU ordinance on environmental impact assessments of the effects of projects on the environment. In managing the applications for funding from the regional Structural Funds programmes, attention will be paid to each project’s influence on the Natura 2000 areas, and relevant Swedish legislation must be taken into consideration when making decisions on each project.

Functional cooperation The Structural Funds programmes must promote and prioritise cross- border cooperation with other regions in Sweden and in the rest of Europe. In this context, close collaboration with the managing authorities for territorial programmes should be sought and developed.

The Government wishes to put special emphasis on the significant need to build up and develop functional cooperation between counties and regions in Sweden. The geographical division of the Structural Funds programmes should not be a hindrance to this, although the directives which set out the limitations of the Structural Funds must be taken into consideration. For example, a project can only be funded by one Structural Fund and can only exist within one Structural Funds programme. Cross-border activities and contact between different programmes should be encouraged and stimulated both in the planning stages and in the implementation of Structural Funds programmes. This can be facilitated, for example, by ensuring that the regional Structural Funds programmes create joint thematic priorities and areas of activity in the programme documents. Possible thematic priorities should also be brought into line with national and European initiatives or programmes.

In the next programming period there will be new opportunities for cooperation between different Structural Funds programmes in different EU Member States, with the aim of stimulating an exchange of knowledge and experience in regional development issues. The 40

Government says that this type of cooperation should be initiated within the framework for all Swedish Structural Funds programmes. The national Structural Funds programme gives the same opportunities for transnational cooperation, inspired by the experiences gained from the ‘Equal’ Community Initiative during the 2000-2006 programming period.

3.3.6 Coordination with other plans and programmes at a national and European level Implementation of Structural Funds programmes should be done in coordination with other plans and programmes at a national and European level, in order to create synergies. This requires coordination at the development stage of plans and programmes. Below is a selection of plans and programmes which are of particular significance for regional competitiveness, entrepreneurship, employment and the implementation of the Cohesion Policy in Sweden.

County infrastructural plans Regional development work and infrastructure planning have important points in common. There should be an increased level of coordination in Sweden’s counties within the framework for responsibility for regional development strategies and county infrastructure planning. In this case, cooperation and coordination result in a situation where the prioritised goals of the different planning processes are in accordance with each other and show a global approach in the counties. This coordination can consist of a joint process to anchor infrastructural planning and regional development planning, locally and regionally.

National strategies and programme for rural development From 2007, a new rural programme will replace the environmental and rural development programme which has been in place up until 2006 and some of the measures within the two current Structural Funds programmes for objective 1, as well as the ‘Leader+’ Community Initiative. The goal of the Swedish rural policy is sustainable economic, environmental and social development in rural areas. The goal includes sustainable food production, employment in rural areas, taking account of regional conditions and sustainable growth.

The rural development programme will include significant initiatives for regional development, for example measures aimed at promoting competitiveness, entrepreneurship, growth and innovation in agricultural and forestry companies, the food industry and in small businesses in rural areas. These measures aim to reinforce companies’ competitiveness and promote diversification of rural industry, thereby contributing to local, income-yielding employment and a sustainable utilisation of the natural resources of rural areas. Valuable experiences of the method used for local anchorage and influence that was developed within the framework for the ‘Leader+’ Community Initiative should be taken advantage of and this method should be applicable to the entire country. 41

The rural development programme measures will primarily have as a starting point the resources of rural areas – including the natural resources that are used and managed by the agriculture, forests and fisheries sector – as well as the conditions for local development and micro-enterprise within this framework. Initiatives as part of the rural development programme have clearly defined target groups according to the EU framework.

Synergies between programmes will be found in issues relating to promotion of enterprises, growth and innovation in rural areas, with the intention of strengthening competitiveness, entrepreneurship and employment. This applies primarily to rural programme initiatives under axis 3, which has a broader target group definition, but also to initiatives in other axes. It is important that such initiatives from policy areas and programmes are well-coordinated, at the planning stage and the implementation stage. In order to ensure that initiatives within each programme contribute to creating added value, and as such do not replace more suitable forms of funding, there must be clear boundaries within and between programmes. Local initiatives for archipelagos and islands, development of Sami areas and the reindeer industry, as well as initiatives in the service industry where there is a clear connection to rural policy objectives and rural resources and industries, will primarily be implemented within the framework for the rural development programme. Delimitations are particularly necessary in relation to local conditions for tourism, Sami development, competence development, renewable energy and investment in broadband internet. Competence development measures exist in both policy areas. The process of setting delimitations will take place by directing rural programme measures towards the development needs of business owners and others with connections to agriculture, rural issues and local development, while measures in the national Structural Funds programme will be more general. These delimitations will be dealt with at the development and application phases of the rural development programme and the Structural Funds programmes.

Coordination of implementation will take place at local and regional level, taking national strategies and programmes as a starting point. The objective of the rural development programme is to see each county develop an action programme for application of programme measures, taking regional development programmes and different local development programmes (such as those for the commercial service sector) as a starting point. Within the framework for regional anchorage of the action programmes, the influence of local bodies, as well as the private sector and the non-profit sector shall be met. In order to ensure that Sami issues, including the reindeer industry, are taken into consideration, the Sami Parliament will take responsibility for the development of a strategy for implementation of rural programme measures, in the same way that county councils do. In the implementation of the rural development programme, regional self- government bodies, joint action bodies and county administrative boards 42 with responsibility for regional development work must have an active part to play in the decision-making process, primarily within axis 3. In the light of the county administrative boards' responsibility to implement the rural development programme in the county, they must ensure coordination with the partnership for the Structural Funds programmes and the regional growth programmes.

The European Fisheries Fund In the selected fishing areas, the European Fisheries Fund will provide resources to complement the other Community measures, in order to support sustainable development and improve quality of life, and in particular, to take into consideration the socioeconomic effects of the Common Fisheries Policy. These measures aim to maintain economic and social welfare in these areas, create added value for fishing and aquaculture products, maintain and develop job creation in fishing areas by supporting diversification or economic and social restructuring in areas where there are socioeconomic problems because of changes in the fisheries sector, promote good environmental standards in coastal areas, and promote national and transnational cooperation between fishing areas.

The selected fishing areas will be limited in size and sufficiently homogenous in terms of geography, economy and social conditions. Priority should be given to sparsely populated areas, areas where fishing is in decline, or small fishing communities. In other areas, the rural development programme is the primary source of economic contributions for this type of activity.

JEREMIE – Joint European Resources for Micro to Medium Enterprises In the next Structural Funds period, the European Commission and the European Investment Bank (EIB) have proposed a new instrument, JEREMIE. This means that EU Member States and regions will be able to earmark resources from the appropriate Structural Funds programme for initiatives relating to capital procurement, for example in the form of venture capital, guarantees and loans, aimed at small and medium-sized enterprises. The JEREMIE initiative should be tested in more depth in relation to the conditions and priorities of the Swedish context.

JESSICA – Joint European Support for Sustainable Investment in City Areas JESSICA is an initiative from the European Commission and the European Central Bank, as well as the Council of Europe Development Bank (CEB), which aims to encourage sustainable investment, growth and employment in the urban areas of Europe.

Government support for trade and industry Over the years from 2000 to 2006, 15.9 percent of Sweden’s population lived in national support areas. The support area is divided into support area A and support area B. In December 2005, the European Commission made a decision on new guidelines for regional support during the 2007- 2013 period. According to these guidelines, Sweden has a support area 43 that includes 15.3 percent of the population. This figure is based on the proportion of the population in areas with low population density (<12.5 inhabitants/km2) as well as certain areas with low gross regional product (GRP) and high unemployment. In its guidelines, the European Commission has laid down criteria for member states’ choice of regions to be included in the support area. The Government intends to give notification of a new support area map to the European Commission. Capital supply initiatives, with an emphasis on venture capital, guarantees and credits, must continue to be implemented within the framework for the regional Structural Funds programmes.

The Seventh Framework Programme for Research and Technological Development (7FP) and the Framework Competitiveness and Innovation Programme (CIP) The Seventh Framework for Research and Technological Development (7FP), as well as the Framework Competitiveness and Innovation Programme (CIP), can along with the Structural Funds form significant and powerful instruments in the EU strategy to reach the Lisbon objectives for improved competitiveness. The intention is that these Community instruments will be complementary and will reinforce each other. Coordinated national and regional initiatives within programmes are therefore of great significance in order to create leverage, especially in innovation and entrepreneurship, for example in regional clusters. It should be possible to create effective synergies since the two collaborating government authorities are the ones with the greatest involvement in these three instruments – Vinnova and Nutek.

3.4 Programmes for territorial cooperation The structures and programmes which exist for cross-border cooperation have been developed over a relatively long period. In this way, different roles and patterns for cooperation have developed. One example of this is the Interreg Programmes, which, since their introduction in 1995, have primarily been based on and strengthened existing cooperation structures. This applies to regional cross-border cooperation, where border regions in the Nordic countries have created programmes together, as well as to larger areas where the programmes build on cooperation around the Baltic Sea, the North Sea and the Northern Periphery.

In the next programming period the ‘Interreg’ Community Initiative will no longer be a Community Initiative. It will become one of three regular objective programmes. Funding will come from the European Regional Development Fund. The objective of territorial cooperation will be divided into three types of programme: cross-border, transnational and interregional programmes. A total of up to ten programmes affect Sweden, of which the interregional programme and the transnational Baltic Sea programme cover the whole of Sweden, while other cross- border programmes cover parts of the country. The content and form of the programmes will differ according to the programme type, but as a whole the programmes are to reflect the relevant challenges and 44 opportunities in the programme areas. The development of programmes for territorial cooperation is regulated by directives which have been drawn up jointly by the countries concerned.

The programmes for territorial cooperation, in accordance with the regulations, are to be implemented in a structure that includes the following government authorities: a monitoring committee, a managing authority, a certifying authority, an audit authority and a technical secretariat. The exact form the structure will take will vary depending on the circumstances of each individual programme.

Cross-border programmes In the next programming period, 17 out of a total of 21 Swedish counties will be eligible for support under the heading of ‘cross-border cooperation’. This means that a further seven counties are involved, compared with the current programming period. This is the result of the ‘150 kilometre rule’, which states that coastal regions where there is a maximum of 150 km to the nearest coast across a maritime border are also eligible for support. The increase in the number of counties entitled to support will partly place new demands on the programme structure, but primarily this change brings with it an opportunity to work strategically in larger contiguous programme areas.

The cross-border programmes in Sweden in the period from 2007 to 2013 are: Nord, Botnia-Atlantica, Sweden-Norway, Central Baltic, Öresund- Kattegatt-Skagerack and South Baltic.

Transnational programmes Transnational programmes aim to create strategic cooperation over larger geographical areas – areas which are contiguous or which have strong 45 similarities in their territorial conditions. As was the case during the 2000-2006 programming period, Sweden will be partly or entirely covered by three transnational programmes: the Baltic Sea programme, the North Sea programme and the Northern Periphery programme. Of these programmes, only the Baltic Sea programme covers the whole of Sweden. The North Sea programme is limited to Västra Götaland, Värmland, Halland, Kronoberg and Skåne, while the Northern Periphery programme affects only Norrbotten, Västerbotten, Västernorrland and Jämtland.

Indicative distribution of resources for the Territorial Cooperation objective 2.1 billion SEK is allocated to Sweden within the territorial cooperation objective. This allocation consists of 225 million SEK for transnational cooperation, plus 1.875 billion SEK for cross-border cooperation. The Regional Fund Regulation allows a certain degree of flexibility to transfer up to 10 percent of these resources between these two different forms of cooperation. In the light of Sweden’s relatively large allocation of resources for cross-border cooperation, the Government intends to take advantage of the option to transfer 10 percent of the resources for cross-border cooperation to the transnational programmes. Thereby, the cross-border programmes will be allocated 1.676 billion SEK and the transnational programmes will receive 414 million SEK, which will be distributed between the three transnational programmes as follows: Baltic Sea programme, 250 million SEK, North Sea programme, 101 million SEK, and Northern Periphery programme, 63 million SEK.

The allocation of resources between the cross-border programmes will be the result of negotiations between the countries involved, where one of the conditions is to achieve balanced investment in the different countries. Allocation of funds to the respective programmes will be indicated in the programme directive which will be sent to the authorities responsible for the programmes. This allocation will be finalised in the European Commission’s decision on programmes for the 2007-2013 period.

3.4.1 Implementation of cross-border and transnational programmes The fact that territorial cooperation is one of the three objectives of the EU Cohesion Policy in the next programming period means that there is a greater requirement for a more strategic programme implementation. All counties in Sweden are covered by at least two programmes for territorial cooperation, and several are included in no less than three to five programmes. Thereby there is an evident need for strategic coordination, where the differences between the programmes should be protected and utilised, in order to meet the aims and needs of the regions in the best way possible. A more strategic coordination of programmes is also important in order to avoid overlap between initiatives and to ensure that the programmes are as complementary as possible. The potential for 46 working simultaneously on priority initiatives for several programmes should be developed further. Furthermore, it is important to utilise the potential for flexibility within the regulations, for example, 20 percent of the programme resources may be used in counties which border on the programme area, and 10 percent of the total budget of the programme can be used outside the EU.

The priorities of the programmes should reflect national policies and planning. One important way of ensuring that this happens is for central government authorities and departments to be involved in the development and implementation of the programmes. Initiatives which contribute to improving communication between and within the programme areas, for example between the Nordic metropolitan regions, should be supported.

3.5 Partnerships for regional competitiveness, entrepreneurship and employment All players at national, regional and local level have a responsibility to create initiatives which are significant for regional development. Shared responsibility demands efficient collaboration processes and a continuing dialogue on regional development work, which may contribute to creating added value for the players involved. The collaborative process should contribute to providing links between regional and local strategies and national priorities, while also creating legitimacy, contributing to coordination and preventing fragmentation. Openness, participation and effectiveness must be ensured at the implementation stage. An important condition for efficient collaborative processes is that they involve players from all levels: European, national, regional and local.

The collaborative process depends upon increased sectoral coordination at national level, as well as broad coordination at regional level, between public sector bodies, the business sector, interest organisations and higher education institutions. At a local level, the collaborative process places demands on physical planning and general planning work. In the case where local authorities have accumulated business intelligence and developed local development strategies and programmes, these should be included in the regional development work as an important factual basis. The local authorities themselves should contribute by defining their own role in the county, with support from the county’s regional development objectives.

The point of departure for the collaborative process and for dialogue between the various levels is the existence of clear priorities which have been expressed in strategies at national, regional and local levels. The Government intends to create conditions for developing dialogue around regional development issues through measures such as establishing a national forum for regional competitiveness, entrepreneurship and employment, as well as thematic government authority groups for regional competitiveness, entrepreneurship and employment. 47

3.5.1 National forum for regional competitiveness, entrepreneurship and employment There is a clear and growing need for an advanced political dialogue on regional development issues, between the national and regional levels. It is the intention of the Government to develop the dialogue that has taken place during the creation of the national strategy for regional competitiveness, entrepreneurship and employment from 2007 to 2013. By establishing a national forum for regional competitiveness, entrepreneurship and employment, the Government wishes to create an arena for an ongoing political dialogue between national and regional representatives, taking the national strategy and the regional development strategies as a starting point. One of the results of the creation of a national forum for regional development will be that it creates the right conditions for Sweden to be united in its dialogue with the European Commission.

The national forum should meet regularly to discuss issues which are important in terms of regional development in Sweden. The result will help to determine which joint initiatives are required in order to be able to realise national and regional goals and priorities. The Government recognises the importance of an equivalent dialogue between regional and local levels, in order to ensure participation and representation of local interests in the strategic regional development work. In this context, municipality structural plans, or other types of local development strategies, can provide a good starting point.

Every third year – in 2009 and 2012 – there shall be a more in-depth progress check regarding the national strategy for regional competitiveness, entrepreneurship and employment from 2007 to 2013, and the regional development strategies. This is to take place through a broad dialogue with the regions and other players.

3.5.1 Thematic authority groupings for regional competitiveness, entrepreneurship and employment The participation of national and regional authorities in the regional development work is of central importance. The county administrative boards are to provide coordination between national initiatives and regional development work. The Government judges that the coordination of national government sectors may need to be improved in order to facilitate collaboration and make priorities clear in relation to the regional level. Authorities often play a part in processes which stretch over sectoral boundaries. The priorities stated in the national strategy are to form the basis for government authority action for regional development. The Government believes that the role of the authorities in promoting and participating in regional development processes needs to be emphasised. They are to contribute to the work of the regional development strategies and the regional growth programmes and Structural Funds programmes. 48

The Government wishes to stimulate the participation of national authorities in regional development work by establishing thematic groupings of authorities based around the national priorities for regional competitiveness, entrepreneurship and employment which have been identified. In the light of the experiences of the RUP commission (RUP- uppdraget6) it is extremely important to ensure continual contact and collaboration between regional representatives, national authorities and local authorities in the thematic group work. The thematic groupings create greater opportunities for knowledge acquisition, knowledge circulation and collaboration between authorities and players at regional level. These thematic government authority groups should also be seen as a resource for the national forum.

4 Follow-up and learning

An important element of this development work is continual reflection on the activities and initiatives carried out in order to learn from experiences – both positive and negative. The Government's intention is for a systematic follow-up and evaluation process to be part of the work carried out on the regional development policy and the European Cohesion Policy. The aim of this is to improve the programme work from start to finish – from planning to implementation. There is a constant need to increase our knowledge of the world around us and of how different measures can best be combined in order to be effective and reach our goals.

Taking as a starting point the analyses of development at national and regional level, as well as evaluations of the regional development work, in-depth progress checks will take place in 2009 and 2012 regarding the national strategy, the regional development strategies and the Structural Funds programmes. The national strategy or regional development strategies may be revised as a result, which could lead to changes being made to the Structural Funds programmes. This in-depth progress check will also form the basis for reporting to the European Commission. According to the EU framework, reporting must take place in 2009 and 2012 and must have as its starting point the relation between the national strategy for regional competitiveness, entrepreneurship and employment from 2007 to 2013 and the Structural Funds programmes for the same period. Reporting to the Swedish Parliament will also take place in connection to the budget proposal.

An analysis project will be initiated in 2007 which will then form a basis for the in-depth progress check. This will be a development of the analysis work which formed the basis for the strategy. The Government

6 In June 2004, the Government commissioned thirteen authorities to “present proposals for methods that contribute to strengthening the authorities’ work on the regional development programme”. The authorities were also required to highlight a number of key strategic areas and their contribution to sustainable regional development. 49 needs to be able to follow the territorial development throughout the country in a more systematic way, based on a number of thematic areas. The analysis should involve a number of national and regional authorities as well as experts from other organisations.

The process-oriented and result-oriented attitude which needs to permeate the regional growth programmes requires a continual learning process at local, regional and national level. In order to achieve this, the analysis capacity at county level must be capable of observing strengths and weaknesses within the regions while also keeping track of changes in the wider world and the implications of these for the region. This learning process includes continued use and development of the follow- up and evaluation system which has been built up around the regional growth programmes, based on the process evaluation of the Swedish Institute for Growth Policy Studies (ITPS), which was carried out in the spring of 2006, as well as Nutek's annual follow-up reports.

During the 2007 to 2013 programming period, the Structural Funds programmes will be evaluated at the development stage (ex-ante), throughout the duration of the programme, and afterwards, as was the case during the previous programming period. The nature of these evaluations will vary and they will serve different purposes during the programme cycle. The overall objective of this follow-up and evaluation work is to contribute to the quality of the programmes and the learning process. That is why it is important that further efforts are made to make better use of the evaluation process and results throughout this programming period, for example by using new methods. It is vital that it is the parties involved, owners and those responsible for programmes and strategies, who also process the results of follow-up and evaluation and contribute to improving the programmes and strategies in order to be more successful in reaching goals. Furthermore, it is important to learn not only from successes but also from failures.

The implementation of the Structural Funds work in Sweden must, from 2007, be reported on annually as a part of the follow-up of Sweden’s action plan for growth and employment, in conjunction with the spring summit of the European Council.

In the light of the varying experiences that Sweden’s regions have of programme and strategy work and EU programme work, the Government has judged that there may be a continued need for different forms of process support in preparation for the strategic and programme-related work to be carried out. There is also a need to find forms for a continual exchange of experiences, similar to that which Nutek has managed during the previous programming period, relating to the implementation of Structural Funds programmes.

The learning process in territorial cooperation Under the objective for territorial cooperation, there is a need to develop a continual learning process for Swedish participants in projects within the framework for different programmes. All or parts of Sweden's 50 territory will be included in up to ten programmes for cross-border, transnational or interregional cooperation. Since the programmes support cooperation between Swedish players and players from a host of other countries, in different combinations depending on the programme and initiative, it is difficult to keep track of lessons learned within one single programme. Nonetheless, it is extremely important to take advantage of experiences, methods and good examples from the huge range of projects carried out within the framework for current ‘Interreg’ programmes and future territorial cooperation programmes. More systematic follow-up work should therefore be established at national level, which meets the need for exchange of knowledge on administrative issues as well as circulating knowledge and experiences to create a continual learning process. This work is to be complementary to the initiatives taken by individual programmes in relation to evaluation and learning.

Nutek’s task during the current Structural Funds period – that of supporting exchange of experience, primarily in administrative issues for cross-border programmes – should therefore be widened. This work should include follow-up of results and circulation of experiences from initiatives within cross-border, transnational and interregional cooperation. The authorities responsible for coordinating this work are to be Nutek in collaboration with the Baltic Sea Unit of Sida and in close cooperation with the Swedish Association of Local Authorities and Regions.

5 Opportunities and threats for regional competitiveness, entrepreneurship and employment in Sweden

There are good prospects for strengthening competitiveness, promoting entrepreneurship and increasing employment in Sweden, but the challenges to be faced are also major. Globalisation, for good or evil, implies fast-growing economic competition. Demographic changes are bringing about growing challenges for Sweden’s welfare system, labour market and regions. Climate change and other environmental problems are in many respects threatening, and may prove to be costly for society.

The ability to meet the challenges of the future varies throughout the country, as a result of differing regional and local conditions. The work carried out at local level must be seen increasingly in the light of the regional, national and global context in order to achieve stronger competitiveness, more highly-developed entrepreneurship and increased employment.

Economic development and the structure of the business sector Over the last 25 years, the Swedish economy has gone through major changes. The conditions for the business sector have changed because of the increased pressure of globalisation, liberalisation of international 51 trade and capital flows, technological developments, and Sweden's entry into the EU in 1995.

One of several measures of a country's competitiveness is the trend in its gross domestic product (GDP). During 2005, Sweden’s GDP grew by 2.7 percent. Over the last four years, growth in Sweden in GDP per capita has been higher than for the EU-15, but somewhat lower in relation to the OECD. From a European perspective, economic development looks somewhat worrying for many Swedish regions. The Mälardalen region (outside Stockholm), Skåne, Western Sweden and Småland do not show the same capacity as comparable European regions, even though parts of these regions have shown strong development.

Table 3

Rank compared with GRP per capita NUTS II in the EU 25* Change in rank NUTS II7 2002 (EU25=100) 1995 2002 1995 compared to 2002 Stockholm 158 11 8 3 Västsverige 109 70 66 4 Sydsverige 106 84 78 6 Mellersta Norrland 104 51 91 –40 Småland och öarna 103 79 96 –17 Östra Mellansverige 100 100 111 –11 Övre Norrland 99 66 113 –47 Norra Mellansverige 98 76 119 –43 *There are a total of 253 NUTS II regions in the EU 25. Source: Eurostat

The regions of Northern Sweden, including Värmland and Dalarna, have, along with some German regions, shown the weakest economic development both in terms of GRP and employment, looking at the entire period since 1995. Growth in regional income per inhabitant is most rapid in the southern parts of the country. Of the five local labour markets that have the highest growth rate, two of these are in the county of Västra Götaland and three in Småland (Jönköping County, Kronoberg County and Kalmar County).

A factor that strengthens competitiveness and growth is increased industrial productivity. Sweden's current industrial productivity is at level with the OECD average, but compared with the EU 15 it is somewhat lower. There is a more varied geographical pattern for regional industrial productivity than is visible from regional income. Of the five local labour market regions with the most rapid growth in regional industrial productivity, two were located in Västerbotten county and the others in central and southern Sweden.

7 NUTS – Nomenclature des Unités Territoriales Statistiques – is the system for dividing the EU into regions for statistical purposes. 52

Figure 1 Average annual growth in regional income (left) and in regional industrial productivity (right) from 1994 to 2003 (in percentage).

Source: The Swedish Institute for Growth Policy Studies (ITPS), 2005

A further measure of competitiveness is the trend in fixed growth investments per capita, which also reflects the developments which have taken place in the Swedish economy over the last ten years. Almost all sectors have increased their share of gross investment of GDP between 1993 and 2003. The most significant growth has taken place in the wholesale, retail, hotel and restaurant industries, whose share of gross investment of GDP is around 1.2 percent. The equivalent value for the manufacturing industry is 3 percent and for financial and other corporate services it is 0.3 percent.

Production of services accounts for 53 percent of the value added in the Swedish business sector. The equivalent figure for goods production is 47 percent, most of which is covered by the manufacturing industry. In Sweden, the proportional size of the service sector is lower in comparison to, for example, the USA, Denmark and the UK. For a long time the Nordic countries have had a proportionally smaller corporate services sector, but this is beginning to change. New companies are now primarily being set up in the services sector, and within that, primarily in corporate services.

Table 4 Value added as a proportion of the total value added in the business sector, divided by sector. Average, 2000-2002.

GOODS Sector SE DK FI UK DE EU15 US Agriculture, forestry, fisheries, mining 3 % 6 % 5 % 5 % 2 % 3 % 3 % Manufacturing industry 36 % 21 % 37 % 24 % 32 % 29 % 31 % Electricity, gas and water 3 % 3 % 3 % 3 % 2 % 3 % 2 % Construction industry 5 % 6 % 5 % 6 % 6 % 7 % 5 % TOTAL goods production 47 % 37 % 50 % 37% 42 % 42 % 40 %

SERVICES Sector Wholesale and retail, hotel and restaurant industry 15 % 21 % 14 % 19 % 13 % 17 % 21 % Transport and communication 10 % 12 % 13 % 11 % 9 % 10 % 8 % Financial services and other corporate services 28 % 31 % 23 % 33 % 36 % 31 % 31 % TOTAL services production 53 % 63 % 50 % 63 % 58 % 58 % 60 %

Source: ITPS 2006

The structure of the business sector, as well as the degree of specialisation, differs between Sweden’s regions. As a result, the effects of changes in the structure of the business sector and changes in the economic situation affect different regions differently. Small and medium-sized regions, with a limited breadth in trade and industry, become increasingly dependent on a small number of large workplaces. This leads to increased vulnerability. Regional vulnerability is currently concentrated in the traditional industrial areas such as Bergslagen, parts of Småland, Dalsland and the southern coast of Norrland, as a result of tough global competition and structural changes. Even some of the regions which currently show strong economic growth are vulnerable due to the fact that they have a high degree of specialisation. The regions surrounding the major cities have the broadest sectoral representation.

An international comparison shows that Sweden has many micro enterprises with 1 to 9 employees. In the rest of Europe, only Italy and Spain have a higher proportion than Sweden. In terms of slightly larger small enterprises with 10 to 49 employees, Sweden has the lowest proportion after Spain and Italy. The stock of these enterprises amounts to 5.7 percent in Sweden, compared to 14 percent in Germany and 12.8 percent in the UK. The conclusion can be drawn that a lot of micro enterprises are set up in Sweden, in other words that the influx of new companies is relatively high, but that the conditions for growth are not particularly good compared with other countries.

In 2005, 44,585 new companies were started, employing 70,328 people, according to the ITPS.8 This meant that on average only 1.6 people were

8 Preliminary data. To be confirmed in summer 2007. 54 employed per company – a figure which has decreased successively. Only 40 percent of the business owners chose to work for their company full-time. Other business owners were either already employed, students or ran other companies. Despite strong growth, Swedish one-person enterprises avoid employing more staff. One reason for this may be that a relatively high number of one-person enterprise owners in Sweden do not have previous experience of employing staff. Business owners who have experience of being an employer, on the other hand, continue to employ staff. Only 2 percent of companies without employees in Sweden have had employees in the past, which is the lowest proportion in all EU countries, where the average is 28 percent. Furthermore, we can state that large private companies in Sweden have decreased their number of employees in recent years. The bulk of new jobs created have come from smaller, and in some cases newly established, companies. Even small companies have employed more staff, although this has not happened to a great enough extent to have brought unemployment levels down.

Few people in Sweden are involved in new entrepreneurship as it is measured in the Global Entrepreneurship Monitor (GEM). The ‘Total Entrepreneurial Activity Index’ states the proportion of the workforce (aged 18-64) who are either actively involved in starting a company or who own/run a company that is less than 42 months old. In the 2005 report, Sweden took 32nd place for entrepreneurial activity, in a list of 35 countries. If only the 21 richest countries in the OECD were counted, Sweden would be in 19th place. Sweden has been in the bottom third of this group of countries since it was included for the first time in 2000.

Figure 2 New entrepreneurship 2004.

Source: Nutek, 2006

Attitudes to entrepreneurship are judged to have an impact on the level of entrepreneurship. The average proportion of people who would prefer to be entrepreneurs varies between 24.3 and 30.6 percent in the NUTS II regions of Sweden. Stockholm has the highest proportion (30.6 percent) 55 and the other NUTS II regions are just below the national average. The proportion of people who are open to entrepreneurial activity is somewhat higher among men than women.

The globalisation process brings with it an intensification of Sweden’s already high level of international participation. The Swedish economy is becoming increasingly dependent on the outside world and the export market is judged to be the most important part of the economic growth. Swedish foreign trade is dominated by the manufacturing industry and the country’s primary resources still account for a significant proportion of exports. Services exports account for just over one fifth of total export demand. Sweden's high export level is not thought to lead to any major increase in employment, since employment in Sweden, as in many other OECD countries, increases primarily in sectors which have a regional or local market.

The fact that the Swedish economy is characterised by high international participation has an impact not only on the proportion of exports, but also on the capacity to develop new products and improve production methods.

In the context of the EU, Sweden and Finland are judged to be leaders in terms of innovative capacity. Sweden’s investment in research and development – in both public and private sectors – is well over the EU average. However, the degree of commercialisation of research results, in relation to the proportion of GDP which goes to research, is too low. A handful of high technology companies, such as ABB, Ericsson and Astra Zeneca, have helped Sweden as a country to come high on the list of R&D investment. Sweden has a very high level of R&D investment, concentrated within a handful of companies. At the NUTS II level in Sweden, there are regional variations in R&D expenditure in the business sector as a proportion of GRP. In 2003 the national average was 2.9 percent. At a regional level, Västsverige had the highest level of investment in research and development (5.4 percent) followed by Stockholm (3.1 percent) and Sydsverige (also 3.1 percent).

In order to improve the innovative capacity of a region, the proportion of highly educated people and the degree of knowledge intensity in manufacturing are judged to be important factors. The latter of these is closely related to the sectoral structure of the region. Small regions, where a high proportion of the workforce is employed in service production, have a relatively low level of knowledge intensity, while regional centres with universities and the metropolitan regions have high knowledge intensity. New, fast-growing companies have a higher level of innovation than established companies and sectors. Even investment returns in R&D are at times higher in fast-growing enterprises compared with established companies. This applies to the IT sector in particular, which is characterised by small, fast-growing enterprises which bring innovation.

56 es

Sweden is one of the leading knowledge-based economies in the EU. Every third Swede between the ages of 25-64 has some form of higher education. The proportion of highly educated people (at least three years’ education after upper secondary school) amounts to 19 percent, while 14 percent of the population (aged 25-64) have a shorter education after upper secondary school. Women have a higher level of education than men. This difference seems to be reinforced by the fact that more women (48 percent) than men (37 percent) continue to higher education within 3 years after completing upper secondary school. Levels of education vary widely between counties. 60 percent of the country’s highly educated people live in the three major cities. Since the metropolitan counties bring the national average up, the proportion of highly educated people is lower than the national average in 16 out of 21 counties.

An open society characterised by diversity and tolerance is a creative environment that attracts creative people who start and run new enterprises. This is judged to strengthen a region’s competitiveness. Innovative and attractive regions with good accommodation options, good means of communication, and access to services, nature, culture and heritage are factors which contribute to a good living environment and development of regional competitiveness. Housing and accommodation environments are increasingly seen as a tool for making an area, municipality or region more attractive, even from a business sector perspective, and in this way good housing promotes economic development. The increasing significance of housing for the wellbeing of the individual is judged to be increasingly important for companies’ choice of location, and for a continued development of economic activity in different locations.

Developments on the labour market Ever since the mid-1970s there has been a gradual restructuring of jobs from the industry to the service sector, and this is in part dependent on increasing competition from low-cost countries and on expansion in the capital-intensive and knowledge-intensive industries. Outsourcing of parts of or all of the production whilst simultaneously keeping research and development in Sweden has led to an increase in the service content and refinement value of production. As well as development within industry, there has been increased demand for both private and company- related services, of which company-related services have increased most in recent years. To cope with this restructuring, the labour market needs a high level of mobility and good matching processes.

After several years of good growth in the Swedish economy at the end of the 1990s, positive development stopped at the beginning of the twenty- first century, and as a result of this the development, the Swedish labour market became weaker than before. Despite the fact that the economy began to turn again during the latter part of 2003, Sweden's labour market did not develop as expected. Employment dropped in 2003 and 57

2004, above all amongst women, but since 2005 employment has displayed positive development, and during September 2006 the number of 16- to 64-year-old women in employment as a proportion of the population was 71.6%, while the corresponding figure for men was 77.2 per cent.

Figure 3 Number of 16- to 64-year-old men and women in employment, January 2000 to September 2006

(Säs o n g r e n s a d e v ä r d en, 3 månaders glidande medelvärde) Tu s e n t a l Tu s e n t a l 23 0 0 23 0 0

22 0 0 22 0 0

21 0 0 21 0 0

20 0 0 20 0 0

19 0 0 19 0 0 00 01 02 03 04 05 06 Kv i nn o r M än

Kä l l a : A K U , S C B

Open unemployment decreased with the improvement in the economy between 1997 and 2001, and then continued at a lower level in 2002. But open unemployment started to rise again in 2003 and continued to do so until the first six months of 2004, despite an improvement in the economy during the same period. Unemployment then settled on something of a plateau, with the exception of a big peak in the summer months of 2005 – an effect of SCB [Statistics Sweden]'s rearrangement of the AKU [Workforce Survey]9. For a number of months the development of open unemployment among women was not as good as that among men – largely because employment mainly improved in traditionally male sectors. But in September 2006 the unemployment percentages were 5.0% for men and 4.9% for women.

It is not just open unemployment that defines potential manpower. There are also many people who can and want to work but who are not given the opportunity. Large parts of the Swedish population who are capable of work are outside the regular labour market.

9 Arbetskraftsundersökning. 58

Just over a million people, i.e. just over 21% of the registered population aged 20-64, were provided with social benefits in 2005. In 2006 just over 12% of the population of working age received benefits related to ill health (sickness & rehabilitation allowances and activity & sickness benefit), nearly 8% received labour market-related benefits and about 1.5% financial assistance.

The Swedish labour market is characterised by an internationally high relative employment rate, largely because Sweden has high workforce participation amongst the elderly and women. In 2005, Sweden and Denmark had the EU's highest employment rate among women. The figure for Sweden was 70.2% – substantially higher than the EU's 60% employment target for women. Sweden's employment rate among the elderly (55- to 64-year olds) for the same year was 69.5%, and thus the highest in the EU for this group. The EU's employment target for the elderly is 50%. The high employment intensity in the elderly applies to both men and women (72.4% and 66.7%, respectively). The high participation of women and the elderly is positive for labour-market participation and thus for growth opportunities in the economy.

A prioritised group for Swedish labour-market policy is young people up to the age of 24, since youth unemployment in recent years has been at a high level compared with the end of the 1990s and the beginning of the twenty-first century. In 2005, unemployment among young people (15- to 24-year-olds) was 22.6% by the international definition. Poland, Slovakia, Greece and Italy were the only European countries with higher unemployment than in Sweden. During that year, youth unemployment for men and women in Sweden was 23.0% and 22.1%, respectively. (Eurostat, 2006).

In 2005, the proportion of young people (18- to 24-year-olds) finishing school with at the most nine year primary education was about 9% – about 8.5% for men and about 9.5% for women. In 2005 about 89% of 22-year-olds had at least primary education. The proportion for men of this age was about 88% and that for women about 89.5%. These results are relatively good from a European perspective (Eurostat).

A further measure of how well the labour market is developing is the number of hours worked in the economy. According to Swedish National Accounts this figure dropped in 2002 and 2003, largely as an effect of a flattening-off of the economy at the beginning of the decade. During 2004 the development in the number of hours worked was unstable, but since the second quarter of 2005 this figure has increased compared with the equivalent quarter of the previous year (see figure below).

Figure 4 Change in number of hours worked, by quarters 2000-2006 procent 2 1,5 1 0,5 0 -0,5 -1 -1,5 -2 -2,5 1234123412341234123412341234 2000 2001 2002 2003 2004 2005 2006

The unexpectedly weak labour-market development of recent years regarding employment, unemployment and hours worked, despite an improved economy, can be linked to various factors within the Swedish economy. One explanation is that productivity (refinement value per hour worked) in the Swedish economy has increased during this period, in that companies have been able to expand their production without needing to increase the number of employees or the number of hours worked. During the second quarter of 2006 capacity utilisation within the industry was at a record high throughout the country, at 91.1%. It is common, however, for productivity to increase during an upturn in the economy, when companies are using existing staff and capital more until the upturn is assured. But the development of productivity is expected to be weaker over the coming years, which in turn means that the number of hours worked can be expected to develop positively – likewise employment.

One explanation as to why unemployment has not dropped as expected is that more people (e.g. students) have entered the workforce during a period of improvement in the labour market, and another is that absence due to sickness has been dropping since 2003. Both of these factors are exerting upward pressure on open short-term unemployment, since more people are at the disposal of the labour market. But in the long term an increased offering is expected to lead to a greater demand for manpower.

The development of employment in the country's 21 counties has varied in recent years, as the benefit of recovery following the recession in the 1990s has varied from county to county. Stockholm is the only county in which the number of people in gainful employment was higher in 2000 than in 1990 (SCB, 2003). One explanation of the varying employment levels is that regional age structures have been formed as a result of a big influx of younger people into metropolitan and university regions, coupled with weak development in other parts of the country. According to forecasts from SCB (2003), the proportion of people of a professionally active age and the proportion of young people will continue to decrease in all counties until 2030, which in turn means that the provision quota (the number of young and elderly people per 20- to 60

64-year-old) is expected to rise further in all counties. But the pace of change will vary, and it is predicted that the regions that currently have an unfavourable age structure will fall further behind. The counties of Stockholm, Uppsala, Västerbotten and Skåne have high proportions of people with higher education, and SCB estimates that these counties will retain their leading position up to 2020.

Those born abroad constitute a group that is largely outside the Swedish labour market. There are differences in degree of employment and unemployment between those born abroad and those born in Sweden, and these differences have remained fairly unchanged in recent years. The positive employment trend from the mid-1990s onwards for those born abroad was interrupted when the state of the labour market deteriorated at the beginning of the twenty-first century, and the difference in employment between those born abroad and those born in Sweden has basically remained unchanged since then.

In 2005 employment intensity amongst men born abroad was 64.8%, compared with 77.8% for men born in Sweden. For women the equivalent figures were 58.7% for those born abroad and 74.2% for those born in Sweden (AKU, SCB). In the same year open unemployment for those born abroad was over twice as high as in those born in Sweden.

Those born abroad admittedly do not constitute a homogeneous group. A number of factors are of importance regarding opportunities on the labour market. Employment is linked to the time an individual has been in Sweden. The gap between those born in Sweden and those born abroad is considerably bigger for those who have only been in Sweden for a short time, though those born abroad who have been in Sweden for a long time do not enjoy the same degree of employment as those born in Sweden.

For people with disabilities, employment increased considerably (from 54.8% to 67%) between the mid-1990s and 2000, but the proportion of disabled people in employment decreased to 61.6% in 2004. Employment among disabled men was 64.4% in 2004, and for disabled women the figure was 59.0% for the same year. Then open unemployment for people with disabilities decreased until 2002, and partially as a result of this unemployment began to approach the levels in the rest of the population. Open unemployment subsequently increased again, and was 6.3% in 2004. In the same year open unemployment for men and women with disabilities was 6.1% and 6.5 respectively (SCB, 2005a).

Educational level is an important component of an individual's participation on the labour market, and people with disabilities have a lower educational level than the rest of the population, though the difference has decreased since the end of the 1990s (SCB, 2005a). The lower educational level of people with disabilities may, however, be a partial explanation as to why they have a weaker foothold on the labour market. 61

The chief factors mentioned by employed disabled persons as being important regarding their ability to carry out their work are adapted tasks, an adapted pace of work and adapted working hours. About the same proportion of men and women state that it is important to have adapted tasks, though women state that they are in greater need of adapted working hours or an adapted pace of work than men are (SCB, 2005a).

Sick leave has decreased since 2003, and the statistics also show that new granting of sickness and activity benefit has decreased over the past year. This is a positive long-term development, as it contributes to an increased labour supply in the economy – something that is important not least bearing in mind Sweden's future demographic development, entailing an increasingly elderly population. In the short term, however, it may mean a challenge for the labour market to absorb new manpower.

In 2005 men constituted 38% and women 62% of all those on sick leave. On a longer time perspective, men's absence due to sickness is not currently at a particularly high level. In certain professional areas the development of women's absence due to sickness is far worse than in others. Particularly high sickness figures are recorded in municipal areas of work, i.e. healthcare, schools and nursing. The combined picture shows that many of the reasons put forward as possible explanations of women's absence due to sickness can be attributed to shortcomings regarding equality between men and women – at both social and individual levels.

A SWOT analysis of the development of the Swedish labour market will be included in the national social fund programme.

Population and accessibility Sweden differs from most other European countries in that it is characterised by long distances and a sparse population structure. The population is unevenly distributed – a fact expressed in the structure of population centres. This structure is characterised by a large number of small and medium-sized towns a long way apart, and the predominance of Stockholm.

In Sweden, as in the rest of the EU, the proportion of elderly people in the population will increase considerably over the coming decades. There are at present big variations between Sweden's regions regarding the age structure of the population – variations that will probably be reinforced. The highest proportions of pensioners are expected in Norrland, Bergslagen and northeast Småland. The increase in the proportion of elderly people affects the provision quota, and there are already big variations in the burden of provision from region to region. The lack of manpower in many professional groups is deemed to be the result of regional changes in age structure.

Figure 5 Development of the population in labour-market regions (the 72 FA regions defined by Nutek ) during the period 1996-2005.

Befolkningsutveckling 1996-2005 (%) 2.3 till 8.9 (6) -4.2 till 2.3 (24) -10.7 till -4.2 (23) -17.2 till -10.7 (19)

Source: Nutek (Regional Analysis and Forecasting System [rAps])/SCB

The Swedish population is concentrated inside a triangle made up of the three biggest cities – Stockholm, Gothenburg and Malmö – and along part of the coast of Norrland. 80% of the population lives in 30% of the country's area. This is of great significance regarding accessibility conditions. The regional development of the population has long followed relatively stable patterns, with concentrations above all on metropolitan regions and regions with universities and higher education colleges. One clear development is urbanisation and a population decrease in large parts of the country. The population has decreased in most local labour-market regions, though the rural population has recently increased in areas close to population centres.

It is not just a town's or a region's own circumstances that determine its economic and social development. The situation in relation to other areas, especially big cities and metropolitan regions, and access to good communications are often of great importance. It is the opportunities for trade and service production that create the broad base for the development of industry. The situation in small and medium-sized towns differs greatly depending on their geographical location, i.e. whether they are part of a metropolitan region or a functional urban region, or constitute a more or less isolated regional centre. In many municipalities the population centres play an important role as regional or local centres for services and industrial activity for the surrounding countryside and small towns.

In the global economy, many factors speak for large and well-diversified regions gaining in importance regarding the national economy. Regional enlargement will facilitate reinforcement of the regions' competitiveness 63 and creation of conditions for more specialised businesses and thus a more differentiated labour market. Enlargement of the regions entails an increased supply and more demand for manpower, service, goods and cultural activities. The increased accessibility is contributing to increased dynamics in society and to decreased regional vulnerability.

The geographical distance between accommodation and workplace has constantly been increasing, but without any increase in journey time. In some parts of the country, e.g. the Stockholm/Mälaren valley region, this development is particularly clear. In the northern and sparsely populated parts of Sweden, with remote or isolated local labour markets, the distances are in most cases too big for physical regional enlargement to be possible.

Sweden's geographical conditions, with long distances both within the country and to strategically important markets, mean that access to efficient transportation and electronic communications is to a large extent affecting industry, the Swedish people and competitiveness. The challenge lies in dealing with increasing trade within the expanded EU and with the Union's neighbouring countries, and in creating good conditions for Swedish companies' increased presence on the global market. The characteristic conditions for Sweden are the long coasts, the winter climate, the low population density and the comparatively small volumes of goods. These conditions become particularly clear in the EU, where Sweden has longer distances to the major European markets and tougher conditions for reaching them than do the more central member states. This often means higher logistics costs than for other EU countries, which in turn means that retention of Swedish industry's competitive capacity greatly depends on efficient transportation.

Regional development – a territorial dimension Globalisation, internationalisation and European integration are setting new frameworks for development in countries and regions. The territorial dimension of regional development is being discussed within the EU. The starting point is that territorial cohesion must complement the targets of economic and social cohesion within the EU. The discussions have contributed to an increased focus on regions and on the significance of locality for the creation of competitiveness and growth.

The concept of regions is used to describe many types of geographical, administrative and functional areas. It is the context or function that determine how a region should be delineated. From a Swedish regional development perspective, a number of types of region with special needs and conditions can be identified.

More and more people are choosing to settle in the metropolitan areas of Stockholm, Gothenburg and Malmö. Economic development of the cities is crucial to the growth and competitiveness of both Sweden and Europe. Through their breadth and diversity they can also act as strong innovative 64 environments from an international perspective. The development towards bigger functional regions has shown the importance of the cities' relationship to their hinterlands. The Stockholm region, for example, is to a large extent integrated with the rest of the Mälaren valley, and the Gothenburg region with large parts of West Sweden. Stockholm/Mälaren valley is also a central region in the Baltic area, and is mentioned in several international contexts as one of Europe's most dynamic regions. The Malmö region is partially integrated with the Danish side of Öresund, which is of great importance to the region's development conditions.

University and higher-education towns are to be found in all the counties, and their activities and contacts are often spread over large areas. These towns thus have special advantages that should be taken care of, e.g. particularly good opportunities for intense collaboration between research, industry and public players.

Industry in small municipalities is often far too one-sided. They are particularly vulnerable if they are highly dependent on industries which may reduce their operations due to international competition.

The Swedish National Rural Development Agency defines rural areas close to population centres as areas 5 to 45 minutes by car from population centres with over 3,000 inhabitants. Nearly two million people live in such areas, and conditions there differ greatly from those in areas further from big population centres. Rural areas close to population centres often include attractive residential areas for large nearby population centres, and many areas have recently experienced positive development. The main factors that are particularly important for their regional development are good communications with the main town and access to local services. The areas are also often recreation areas for people in big population centres. Small enterprises that in various ways fall back on a big population centre form a natural component of trade and industry. There are also many examples showing that trade and industry in rural areas close to population centres is very internationally oriented regarding markets and networks.

Sparsely populated areas have long distances to big population centres and are mainly to be found in inland Norrland and in parts of western Svealand. Just under 500,000 people live in these areas. There are also other small areas with similar basic conditions, e.g. archipelagos with no fixed connection with the mainland, where about 30,000 people live.

Sweden's sparse population structure becomes particularly clear in the northern parts of the country, which are characterised by a unique combination of extremely sparse population, long distances and a cold climate. The population densities of Mellersta Norrland (the counties of Jämtland and Västernorrland) and Övre Norrland (the counties of Norrbotten and Västerbotten) are approximately 5.2/km2 and 3.3/km2 respectively. Such low population densities cannot be found anywhere else in Europe. The current age structure and development of the 65 population indicate a further population decrease over the coming decades in large parts of these areas, which in many places will make it harder to provide good services.

Cross-border collaboration There have always been international contacts at local and regional level in Sweden, but in recent decades the scope and concentration of cross-border collaboration have changed. Crucial changes such as the collapse of the Soviet Union, increased globalisation and Sweden's EU membership have created completely new conditions for international work. The traditional collaboration involving twin towns and twin counties is increasingly being replaced by development-oriented work. Cross-border collaboration is increasingly being seen as an essential part of regional development work rather than as a separate area of work. Collaboration with regions in other countries is one way of strengthening a region's ability to handle changes in the world.

The conditions for growth can be strengthened by regional cross-border collaboration, e.g. through a well-functioning cross-border labour market. Differences in the supply of and demand for manpower can be evened out better when economic development is stronger on one side of the border. For example, it is estimated that about 13,000 people resident in Sweden commute daily across the border to jobs in Norway. This means that individuals are offered a wide range of options regarding accommodation, studies, work, trade and culture. The same applies to developments concerning Haparanda in Sweden and Torneå on the Finnish side of the River Torne, which have basically developed into a merged centre. This area boasts advanced collaboration concerning joint use of facilities and educational resources. These developments are of great importance to the entire region around the Gulf of Bothnia and the Barents area. Öresund is another example of a border region with much cross-border collaboration. The 2000 opening of the bridge across Öresund changed the physical conditions for inhabitants of the region regarding cross-border activities. 9,000 people now commute daily across the Sound for work or studies in their neighbouring country.

Collaboration and establishment of networks between regions and companies are important conditions for strengthening regional competitiveness in a global economy. Collaboration does not always follow administrative borders, but is based on the functionality and the objectives sought by public and private players, e.g. increased production, development of new concepts, exchanges of experiences and an integrated labour market. Administrative boundaries of counties, regions and countries are of course important, and affect the conditions for the development of collaboration, but they should not govern collaboration or its content.

66 www.sweden.gov.se