Working Paper Series Serie 6 Spaces, Territories and Regions Paper No. 6.03.03.02 Kirde-Eesti, Estonia: Patterns of Socio- Economic Development - Case Study Report Dimitri Zimin* * Karelian Institute – University of Eastern Finland (UEF) 2014 www.grincoh.eu This paper was funded under the FP7 project “Growth– Innovation – Competitiveness: Fostering Cohesion in Central and Eastern Europe (GRINCOH)” under the Programme SS H.2011.2.2-1: Addressing cohesion challenges in Central and Eastern Europe; Area 8.2.2 Regional, territorial and social cohesion. Project Nr. 29 0657 Dimitri Zimin, [email protected] Karelian Institute – University of Eastern Finland (UEF) www.uef.fi Please cite as: Zimin D.,(2014), ‘Kirde-Eesti, Estonia: Patterns of Socio-Economic Development - Case Study Report’, GRINCOH Working Paper Series, Paper No. 6.03.03.02 Kirde-Eesti, Estonia: Patterns of Socio-Economic Development - Case Study Report Content 1. Introduction ............................................................................................................................ 2 2. Trajectories of economic development and structural change, social cohesion ................ 15 3. Development factors ............................................................................................................ 33 3a. External context of development: trade and FDI ............................................................... 37 3b. Endogenous growth factors: innovation and entrepreneurship ....................................... 42 4. Governance and local/regional development policies ........................................................ 44 5. External interventions: national policies and EU cohesion policy ....................................... 46 6. Future prospects .................................................................................................................. 48 7. Conclusions ........................................................................................................................... 52 Bibliography .............................................................................................................................. 54 Annexes .................................................................................................................................... 55 1 1. Introduction 1.1. History and location Kirde-Eesti is an Estonian NUTS3 region occupying the northeast of this country. Territorially, it coincides with the administrative district (maakond, uezd or county) known by its historical name as Ida-Virumaa. On the east this region borders on Russia. The borderline goes along river Narova and the Narva Reservoir. In the south it is limited by the northern shore of Lake Peipsi (Chudskoe). In the west and southwest, Kirde-Eesti borders on two other Estonian counties: Lääne-Virumaa and Jõgevamaa. And in the north the region is washed by waters of the Gulf of Finland. Narva is the largest town in this region, with a population of 57,7 thousand.1 It was founded in the 12th century. In the Middle Ages Narva was an important centre of Hanseatic trade between Western Europe and Russian cities, especially Novgorod-the-Great and Pskov. Over centuries this land saw several rulers: the Danes, the Livonian Order, and Sweden. In 1704 this area was captured by Russian Tsar Peter the Great and until the revolution of 1917 it remained part of the Russian Empire. In 1918 Estonia became independent. But already in 1940 the country was turned into one of Republics of the Soviet Union. After the collapse of the USSR in 1991, Estonia has regained her independence, and the state border has been established along river Narova. In 2004 Estonia joined NATO and the European Union. In late 2007 the country became part of the Schengen Area, and at the beginning of 2011 it joined the Euro Zone. Spatial structure of the north of Kirde-Eesti is dominated by the St. Petersburg – Tallinn motorway, which goes along the southern shore of the Gulf of Finland. The main towns – Narva, Kohtla-Järve and Sillamäe – are situated on this motorway, which serves as the main transport connection to this region. In addition, there is the St. Petersburg – Tallinn railway, a growing seaport in Sillamäe, and a small inactive airfield near Narva. The southern part of this region is rural where small villages and farmsteads dominate in the local landscape. One can also find two natural reserves here: Muraka and Puhatu. Administratively, the region is divided into 20 municipalities (see Map 1). Until recently there were 22 of them, but in summer 2013 three municipalities (Lüganuse, Maidla and Püssi) merged.2 The administrative centre of Kirde-Eesti is the town of Jõhvi, where the seat of County Government is situated. Jõhvi is conveniently located in the northern part of the region, near the Tallinn – Narva motorway. It should be noted that Kirde-Eesti is a polycentric region: although Narva is its largest city, it does not play a dominant role neither in a political sense nor in terms of labour commuting and economic significance. Kohtla-Järve, Sillamäe and Jõhvi have been quite independent centres of socio-economic gravitation. 1.2. Basic socio-economic characteristics During the last two decades this region experienced a notable demographic decline, which was much more pronounced here than in Estonia as a whole (see Table 1). In 1989-2012 Kirde-Eesti lost 33,8 1 This figure is based on results of the last population census, which was carried out in 2011 (Statistics Estonia, 2013). However, Estonia’s Population Register gives a much larger figure – 62,1 thousand inhabitants as of 1 December 2013 (“Registr narodonaselenya. Nemnogo statistiki,” 21 December 2013, Narvskaya Gazeta, http://www.gazeta.ee/?p=35349). All internet links mentioned in this Report were last accessed on 10 January 2014. 2 “Rastopivshie lednikovyi period,” 2 January 2014, Põhjarannik, http://sp.pohjarannik.ee/archives/18137. 2 percent of its inhabitants because of negative natural growth of the population and massive outmigration to other regions of Estonia and abroad. The fall in the number of inhabitants has been particularly deep in the industrial municipalities of Kiviõli, Püssi and Kohtla-Järve. In addition, Kirde- Eesti experienced the problem of ageing (see Table 2), exacerbated by strong outmigration of young people. On the whole, in 1989-2012 Kirde-Eesti lost 25,6 thousand inhabitants because of negative natural growth of the population and additional 49,3 thousand (of which 30,1 thousand were lost in 1989-1999) because of the region’s negative migration balance.3 Kirde-Eesti’s population density has been somewhat higher than the Estonian average (43,5 inhabitants per square kilometre versus 29,6 as of 1 January 2013, Statistics Estonia, 2013b). This can be explained by this region’s higher-than-average rate of urbanization, which was stimulated by intensive industrialization of Kirde-Eesti during the Soviet period. Figure 1. Administrative division of Kirde-Eesti, as of 1 January 2013 Source: Wikimedia.org, http://upload.wikimedia.org/wikipedia/commons/4/4e/Ida-Viru_municipalities.png 3 Author’s calculations on the basis of Statistics Estonia, 2013b 3 Table 1. Population dynamics in Estonia and in Kirde-Eesti in 1989-2013 Population, total, as of 1 January Population change, % 1989 2000 2013 1989- 2000- 1989- 1999 2012 2012 Estonia as a whole 1565662 1372438 1286479 -12,3 -6,3 -17,8 Kirde-Eesti 221111 180233 146283 -18,5 -18,8 -33,8 including: - Jõhvi 17623 13921 12550 -21,0 -9,8 -28,8 - Kiviõli 10390 7435 5485 -28,4 -26,2 -47,2 - Kohtla-Järve 62059 47838 36377 -22,9 -24,0 -41,4 - Narva 81221 68843 57650 -15,2 -16,3 -29,0 - Narva-Jõesuu 3754 3003 2569 -20,0 -14,5 -31,6 - Püssi 2532 1876 1007 -25,9 -46,3 -60,2 - Sillamäe 20561 17237 13942 -16,2 -19,1 -32,2 Source: Statistics Estonia, 2013b Table 2. Age structure of the population, as of 1 January Age, years Age structure, % 0-19 20-64 64+ 0-19 20-64 64+ Estonia as a whole - 1990 459853 929141 181605 29,3 59,2 11,6 - 2000 353885 812556 205189 25,8 59,2 15,0 - 2013 264135 789803 232541 20,5 61,4 18,1 Kirde-Eesti - 1990 62646 137945 21216 28,2 62,2 9,6 - 2000 43288 108487 28322 24,0 60,2 15,7 - 2013 26343 90590 29350 18,0 61,9 20,1 Source: Statistics Estonia, 2013b It should be noted that Kirde-Eesti differs significantly in terms of its ethnic structure from the rest of Estonia (see Tables 3 and 4). Ethnic Estonians make up just 20 percent of the total population, while the share of ethnic Russians is almost 73 percent. The dominance of Russians is particularly strong in the largest cities of this region (Narva, Sillamäe and Kohtla-Järve), where non-Estonians make up 85- 95 percent of all inhabitants. Ethnic Estonians dominate only in small rural municipalities, where their share is approximately 70 percent on the average (Statistics Estonia, 2013b). This ethnic peculiarity has become a source of serious tensions between Russian-speaking residents of Kirde-Eesti and the Estonian state, which has pursued a strategy of Estonianization. For instance, according to the Citizenship Laws of 1992 and 1995 an overwhelming majority of Russian speakers, who came to live in Estonia after WWII and their descendants, could not receive Estonian citizenship without passing a language test. Since most of them did not know Estonian, they became stateless. Likewise, the Language Law of 1995 has prescribed that only Estonian can be used in public administration, and fluent Estonian has become a compulsory requirement for employees