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Presentation on theme: " THE FUTURE OF REGIONS IN THE PERSPECTIVE OF GLOBAL CHANGE How to use the Finnish inspiration to develop the RegioFutures Programme? Warsaw,"— Presentation transcript:

1 THE FUTURE OF REGIONS IN THE PERSPECTIVE OF GLOBAL CHANGE How to use the Finnish inspiration to develop the RegioFutures Programme? Warsaw, June 9, 2008 Valtteri Kaartemo Pan-European Institute Turku School of Economics Finland 2050

2 Presentation outline Aim of the presentation Global change Future challenges of Finland –Demographic change –Service sector Concluding remarks

3 AIM Dear Mr. Kaartemo, Welcome to the June conference. Please consider in your presentation the question - how to use the Finnish inspiration to develop the Regio Futures Programme. Please accept my best regards, Antoni Kuklinski

4 AIM elaborated The perspective of global change –Changes in the global division of labour –Demographic changes –Implications on the industry

5 China and India keep on growing (CIA´s Long Term Growth Model)

6 Projections of Finland and BSR The role of China in the global change

7 Global division of labour Flow of low-competence jobs to low-cost and close-to-the-market countries likely to continue Competition on knowledge-intensive sectors increasing Global companies create new models for education

8 Ennakointikulttuuri ja Suomi (World Economic Forum 1998-2005)

9 Global crises (Oxford Analytica) Rank Global Stress Point 1CHINA/TAIWAN: Armed hostilities (x) 2US/IRAN: US strike on Iran (x) 3INTERNATIONAL: Human avian flu pandemic (x) 4UNITED STATES: Deep recession (x) 5INTERNATIONAL: Oil price shock (x) 6PAKISTAN: State collapse (x) 7INTERNATIONAL: Return to protectionism (x) 8INTERNATIONAL: Terrorist dirty bomb (x) 9IRAQ: Collapse of state institutions (x) 10INTERNATIONAL: Chemical/biological attack (x) 11INDIA/PAKISTAN: Armed hostilities (x) 12INTERNATIONAL: Commodity price bust (x) 13RUSSIA: Return to regional ascendancy (x) 14 LATIN AMERICA: Disruption to hydrocarbons sector (x) 15LEBANON: Civil war (x) 16ARGENTINA: New sovereign default (x) 17NORTH KOREA: Military conflict (x) 18NIGERIA: Large-scale disorder in the Delta (x) 19HORN OF AFRICA: Regional conflagration (x) 20CENTRAL ASIA: Risk of major disorder (x) 21BALKANS: Return to serious disruption (x)

10 Finland has three major challenges ahead: Globalisation Competence competition Ageing Requires creativity, dynamic willingness and capability to reshaping (SITRA 2006) Finland’s challenges

11 Key publications on the future of Finland and BSR Finland: Labour 2025 FinnSight 2015 Services 2020 Baltic Sea Region (BSR): VASAB 2010 + 2030

12 Strategic basic options for Finland 1.Development through crisis 2.Decline without huge crisis 3.Controlled renewal process by exploiting future opportunities and by preventing future threats SITRA (2005)

13 Opportunities and threats can be found by analysing the changes in the operating environment 1. Trend analysis 2. Scenario analysis 3. Weak signals/wildcards

14 Three basic methods in foresight research: Trend analysis One or several dominating development process analysed Scenario analysis Several alternatives described and analysed Weak signal analysis Uncertain but potentially high impact

15 Globalistion Technology waves Social fragmentation And polarisation trends Demographic changes Challenges of sustainable development Multilayered decision-making in polictics and international politics Economy globalises Resource allocation changes and the importance of economies of scale increases Regional and social system: hierarchical, multi-centred or networked? Changes in interaction between cities and rural areas (inner-city rural areas, peripheries) Changes in the shape of cities Changes in welfare state Changes in social life Risk society or ecological modernisation? Megatrends and development processes

16 Weak signals and wild cards Weak signals may develop new opportunities which other operators have not yet noticed in “the noise” Affects companies directly or indirectly via business environment May provide opportunities and threats Often underestimated by people who are aware of the phenomenon Takes time before turns into “mainstream”

17 Global megatrends 1.Economic changes as a result of globalisation and economic integration (impact of network economics) 2. Technological changes (ICT, biotechnology, and nanotechnological revolution as a result of technological convergence) 3. Social and cultural changes (social polarisation, subcultures, mobility, multicultural societies, ”woman power” -movement) 4. Demographical changes such as ageing and migration 5. Environmental changes and challenges 6. Political changes (increasing importance of international decision- making and security policy)

18 Globalisation and economic change Hierarchical world cities Cross-border growth regions Development corridors (e.g. Northern Dimension Growth Triangle, E18, Tallinn-Helsinki) Importance of capital region in networking Global localisation Strategic importance of the growth of network economics EU’s region and development policies Global institutions and networks

19 4 basic scenarios for Finland A1: Globalising Finland: Rapid EU enlargement A2: Finland as an unlimited resource exploiter: Breakdown of semi-federalist EU B1: Finland of sustainable development: Slow EU enlargement B2: Finland of local governance: Neglection of EU enlargement

20 What if… Globalising Finland Unlimited resource exploiter Sustainable development Finland Local governance Finland Population Migration Labour force R&D expenditure Education expenditure

21 What if… Globalising Finland Unlimited resource exploiter Sustainable development Finland Local governance Finland Population concentration Mobility of people Equality Industrial concentration Entrepreneurship

22 What if… Globalising Finland Unlimited resource exploiter Sustainable development Finland Local governance Finland Unemployment Regional polarisation Company taxation Income taxation Public health expenditure

23 What if… Globalising Finland Unlimited resource exploiter Sustainable Development Finland Local governance Finland Social expenditure Security expenditure Public debt Usage of renewing energy sources Voting activity

24 What if… Globalising Finland Unlimited resource exploiter Sustainable development Finland Local governance Finland Share of women in labour Labour participation rate Networking of people Coal taxation

25 Finland in structural change Structural change is not over after 15 years of drastic changes In 2020 less than 25% of labour force in industry, while in 1990 the share over 30% The share of service sector as an employer will climb up to 73% in 2020, while in 1990 the share about 60% Employment grows in electronics, business services, hotels and restaurants, private services, and health care and social services Employment continues to decrease in agriculture, manufacturing industry (apart from electronics), wholesales, finance, and public administration

26 Important point Decrease in employment is caused also by structural changes in the modes of companies which affects statistics ”Number employed in industry has not decreased significantly when outsourcing to service sector is counted” ”This development is different from may other countries” Hannu Piekkola, ETLA

27 Wild cards Events and processes with low probability (often 10-20 %) of occurance but high impact (economic, social, political, ecological) on society and organisations The following ten wild cards on Finland’s future were presented by Research Director Jari Kaivo-oja in August 2007

28 DM 240922 04-2007 Copyright © Tekes 10 wild cards affecting Finland’s economic and political environment 1. Sub-prime crisis into global depression 2. Fast accumulating crises from climate change 3. Russia’s new foreign policy 4. Ecological breakdown of China 5. Chaotic crisis of Pakistan and the involvement of India

29 DM 240922 04-2007 Copyright © Tekes 10 wild cards affecting Finland’s economic and political environment 6. Pandemias 7. Acute shortage of labour in Europe and uncontrolled immigration to Europe 8. Global recession caused by speculative money 9. The end of Nokia’s success 10. Crisis of welfare services

30 NOTICE! There may also be positive wild cards!

31 Demographic change

32 Global and regional competition for talents

33 Decline in young population - loss of dynamic forces

34 Age pyramids in Finland in 2003 and 2030 2003 2030

35 Dependency ratio by 2050

36 Demographic change and its implications Where do aged population settle – cities or rural areas, Finland or migration Challenge of securing services for the aged – need for social and technology innovations Need for migrant workers in 2010s The future of welfare cluster Who takes care of the elder and the babies if shortage of labour in Finland? Competition for talents

37 Social, health and educational costs

38 Crisis coming before 2050? The Ministry of Finance’s 2006 Stability Programme: pensions- related expenditure rises from 11% of GDP in 2010 to 14% in 2030 and stays there until 2050 Public expenditure as a percentage of GDP will increase from 48% in 2010 to 58% in 2050 GDP growth rate that is expected to decline from 2.2% in 2010 to 1.4% by 2030 and stay there until 2050 public debt will rise from 35.8% of GDP in 2010 to an unsustainable 117.5% in 2050.

39 McKinsey’s recipe survival of the welfare system requires policies that will generate annual economic growth of “well over 2% – closer to 3%” It is essential to strengthen... Finnish companies’ global competitiveness by improving productivity. Action must be taken to create new jobs in growth sectors. Financing of the country’s welfare services must be secured by raising the rate of employment.

40 Growth in megacities Lähde: CIA 2003

41 Population centres in the Baltic Sea Region

42 European engine cities

43 Scenarios for regional structure in Finland Deeply polarised: Development in favour of large centres and the zones between them. Death of small and mid-sized centres and rural areas Multi-centred and balanced: More balanced than hierarchically strongly concentrated network of large and mid-sized cities. Successful regions in rural areas concentrate around these various centres Decentralised regional structure: Activities and people move into small centres and periphery Mustikkamäki and Viljamaa (2001)

44 Change of population 2003- 2030 by region in Finland

45 Labour 2025 “Full employment, high productivity and good jobs will provide the foundation for well being as the working age population diminishes” economic growth rate will slow down –but growth will continue, rise in the standard of living employment in service sector will continue to increase –further decrease in primary production and industry

46 Labour 2025 the most important objectives of economic and social policy are to maintain a high employment rate and a low unemployment rate balance of labour supply and demand in the 2010s the question will not be whether enough jobs can be created for a growing workforce, but whether new jobs can be created elsewhere in the economy as vacancies created by retirement remain unfilled in some businesses or other work communities.

47 Change in labour market until 2050

48 Strength of Europe? (World Bank 2007)

49 Where will the workers come?

50 Population development in Eurasia

51 FinnSight 2015 project examined the global and social change factors that have impact on Finnish business and society also aimed at identifying the future challenges of innovation and research activity

52 FinnSight 2015 The dynamics in the global division of labour are about to impact all the countries which have opened up to the global economy. In traditional industrialist states, the share of conventional industries on production and employment diminishes, and the role of service sector increases.

53 Finnsight 2015 the market for skilled workers is strongly globalising –possibilities to attract skillful workers to home country –but also raises the threat of braindrain to the countries with the best working and living environment. balance of power within science and technology is shifting towards the emerging economies –the growth in emerging economies is likely to outpace that of Europe and the United States. These issues have significant impact on Finland’s employment and international competitiveness. Already by 2015

54 Services 2020 “to anticipate the changes that will take place in the private service industry and the operational environment of the individual sectors, and to examine how these changes will be reflected in the competence requirements in the sectors being evaluated”

55 Changes in the consumption pattern in Finland in 1900-2002: Towards service economy

56 Trend towards service economy

57 Challenges of service sector in Finland… the share of services in GDP is lower than developed country average Productivity in services is lower than European average Less competition in service sector than European average Higher prices in service sector than European average Lower level of internationalisation than European average Lower impact on employment than European average -Productivity could be improved by developing services -Currently only 12% of R&D investments in services

58 Dilemmas of innovation policy in Finland (service perspective) Concentration on benchmarking ideas and one model in innovation processes Technology needed in service innovations before taken seriously No clear model on cross-border innovations Not enough market research analysis in the phase of commercialisation Too slow processes in support and administration Research and knowledge in immaterial rights poorly developed on int’l level Service design –knowledge is not on high level Lack of capability in combining knowledge in franchising and logistics

59 Special challenges (and opportunities) in franchising-business in Finland Development of high-level research and competence Combination of technological expertise in franchising High-level competence in brand strategies Specialisation in service innovations in franchising Government support for development of expertise in marketing and customer service Development of E-commerce models to support Finnish companies

60 DM 240922 04-2007 Copyright © Tekes Innovation challenges of service economy in Finland Need for regional service sector strategies Lack of innovative service firm clusters Lack of respect for service culture and service development Acceptance for the idea that technology not always needed for service innovation Problems in commercialisation of high tech and services Internationalisation of service companies must be improved Digitalisation and e-commerce should need more attention Also services should be able to brand and market Global market research should be more used in development of science and technology parks (tech push vs. market pull) Lack of understanding on service innovations in the eyes of financers (compared to Sweden and Denmark)

61 Total entrepreneurial activity in 2004

62 Co-operation in Nordic innovation policy

63 1.Consumer Kids 2.Millennials at Work 3.Heteropolitans 4.MABYs 5.Boomers – branding to 60-100 year-olds Lähde: Anterior Insight 2007 Trends in consumer market

64 Challenges from the emergence of new technologies

65 The development of Finland in the future Even more innovation-driven society: vision of large campus – considered the best justified vision Finland as a network of science and technology parks, which is linked to global centres of competence Technological and social innovations in focus Increasing transparency of state borders and the development of the EU towards a federal state Finland becoming more multicultural society Climate change makes the climate in Finland warmer, more humid and more extreme weather conditions occur – change needed in agriculture and forestry to match the needs, growth in climate and environment business

66 Level of education further increases A part of Finland focuses on recreational services – whereas some focuses on a competence in certain sector Russia and the Baltic Sea Region remain important for the economy of Finland The development of the EU is crucial for Finland If entrepreneurship is not improved nationally, Finland as ”remote desktop”- and ”subsidiary”-economy Connections to globalising world increasingly important Current welfare state-model changes dynamically towards emphasis on the public-private -partnership Competence on nanotechnology and space science are important on a long-term The development of Finland in the future

67 Finland is mostly unable to compete in low cost level Possibilities are in innovation and competence Finland remains as a home for most demanding goods and services Finland produces what others can not Competitiveness of business environment remains crucial to attract new investments The development of Finland in the future

68 Summary of key statements in foresight publications With the current trend, the question on global division of labour is likely to become even more crucial for Finland. Need for RFP from the perspective of global change

69 The importance of asking the right question What is the question we aim at finding the answer? Finland 2050: –Economy Labour Services –Technology –Healthcare –Environment + Slovenia 2050 + Italy 2050 + Poland 2050… Interrelated but vast!

70 Questions to be solved in the planning process Streamlined problematisation with a common vision What is the role of comparative studies internal to the study? What is the role of comparative studies external to the EuroFutures Programme?

71 Concluding remarks What comes beyond service sector? We should concentrate on the issues which are likely to matter in 2050 and present the ideas clearly Imagination needed from 2025 onwards –How can we deploy the best imagination in Europe?

72 Finnish inspiration for project outcomes regional centres for foresight research until 2025 regional foresight forums ( ( until 2050www.ennakointifoorumi.fi Inter-regional co-operation in resource allocation

73 Loop system Loop between regions Loop between methodologies

74 Suggestions for next steps Funding instruments Selection of partners Concrete research plan with measurable outcomes Realistic budget and schedule WE HAVE AN IMPORTANT PROGRAMME AND WE SHOULD START IT BEFORE WE LOSE OUR MOMENTUM

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