The role of regional policies in a globalized world

Speech held at Open Days Brussels 9. october 2007.

Dear Madam Commissioner, Ministers, ladies and gentlemen.

Thank you for the invitation to participate at this workshop and for the opportunity to share some of my reflections on regional development in Norway with you here today.

Let me start by saying something about the context of regional development in Norway.

Hundred years ago, Norway was one of the poorest countries in Europe. Now it is one of the richest. Why? First a reflection. Norway is a country of paradoxes – heterogeneous and homogenous at the same time. On one side: Norway is high up in the North, cold, with 2000 km from south to north,  a very fragmented topographic structure and only 4,7 mill inhabitant in a scattered settlement pattern.  On the other side:  Norway represents a combination of factors, such as: rich natural resources, a modern economy based on advanced use of these resources, well educated human capital, regional differential culture, but at same time  a long common  history and a strong tradition for social cohesion and thrust in the society. And of course as we see it, a very beautiful country, with great variation in nature and habitat.

Regional policy in Norway has evolved since the post-war period. After World War II a major effort was made to industrialize the country and make the nation able to compete abroad and earn much needed foreign exchange. We wanted to use our natural resources, particularly hydro electricity, to build big industrial plants, mainly  in peripheral areas where the resources were.

In the sixties a regional development fund was set up. Equal service provision in all parts of the country became also a permanent policy goal. During the seventies the oil industry was also established. In the same period a “green political wave” gave for first time an explicit goal about keeping up the settlement pattern. In the eighties manufacturing industries started to stagnate and the first consequences of more open trade and globalization was obvious. It was a time for strong reorientation in Norway on many aspects.

New measures started to be developed around 1990, with more focus on the service industries. There was also a growing understanding that research and competence were important elements of a modern regional policy. In the resent years the need to especially promote innovation has become a central element also in Norwegian regional policy.

The status today is that globalization has an important influence on all parts of Norway. But as the Norwegian manufacturing industry is now either a highly capitalized business, based on our rich natural resources, or highly specialized niche industries, the globalization influences have mainly been positive. The heavy negative effects were, as mention earlier, taken already in the eighties and nineties. But of course, Norway faces great challenges linked to being able to compete with the very high wage level in our country. On the other hand, the wages of high educated people are not so high. Our tradition for social cohesion has kept it relatively low compared to international standard, to the benefit to our blue collar workers.

Norway has still a smaller high tech industry compared to our neighboring countries. A country like Norway, with its structure of natural resource- based industries, focus more on day to day incremental process innovation. This also fits better to the very practical skills of a large part of the Norwegian work force, with very much tacit knowledge and a more geographically decentralized location structure. But also we have challenges in the future to change our structure in the direction of a more research-based industry, all though it should be done in our Norwegian way  and out of our strengths and geographical conditions.

The present Government in Norway has put regional development again at the top of the political agenda. The main goal is to facilitate economic growth in all parts of the country, thereby providing citizens with a real choice as to where they want to live, work and prosper.

There are in fact lesser differences in living standards between urban and rural regions in Norway than in most countries. Furthermore, we have been able to keep the main parts of our small communities. But they are under challenges. Of course, settlement patterns in Norway, as in Europe, have been characterized by urbanization and centralization, even though the changes have not been so rapid in Norway as in our neighboring countries. The development has been relatively balanced between the main parts of the country, except for a stronger growth in the capital region and a weaker growth up in the High North.

So how is Norway responding to these challenges from the globalization?

•he answer is a regional differential policy with three main strategies when considering regional policy:
1. Develop industrial activities based on regional comparative advantages and clusters, and a broad regional mobilization around common goals and strategies.  The national government should have an obligation to active support such regional growth strategies from beneath.
2. Improve the foundation for development in the different regions, by strengthening competence, supporting the business environment for innovation and entrepreneurship, reducing distance barriers, developing attractive local communities and, of course, enhancing sustainable use of natural resources.
3. Make an extra and even broader effort to meet the challenges in the most vulnerable regions and the measures for this purpose should be strengthened.

My ministry is responsible for a set of instruments targeting regional innovation, competitiveness and attractiveness. This, however, amounts to only 10 per cent of the money spent on the more specialized and what we call “narrow” region that  nearly half of the regional policy measures are to be found under other ministries than my ministry, the one only formally responsible for regional policy. 

Regional policy must therefore be an integrated part of policy areas like education, health, transport, culture and exploitation of natural recourses.  In Norway we refer to this as the “broad regional policy”.

An important task for my ministry is to coordinate the politics in different fields in order to arrive at a targeted policy for regional development. We therefore have established the Government’s sub-committee for rural and regional policy, where relevant ministries take very active part.

An other important element in the answer to the globalization, is more governance. In Norway, as in many other western unitary countries, there has been a shift to multi-level governance systems involving co-ordination of different levels of governments and participation of different stakeholders.

In a reform in 2002 large parts of the means and measures in regional policy are decentralized to our 19 county municipalities in a devolution reform in 2002. The intension was also more generally to give the county a stronger role as the regional development actor.

It is planned a new regional reform from 2010 which will give the new region even more power. Regarding regional policy there are three main elements: 1) The regions will get a common ownership with the state of the main financing institution of innovation in Norway, which is also called Innovation Norway, 2) they will be invited to establish to regional innovation companies together with the state owned Industrial development cooperation and 3) there will be established regional research funds. All together will this make a strong and committed alliances between the regional and national level both in regional policy and in innovation policy more generally.

That means that in the future in Norway, regional and local players will have a crucial role in the function as catalyst for endogenous bottom up growth. At the same time there will be still a clear need for a central government to guarantee funding, supporting more specialist competence, securing good international framework,  and not least the needed coordination between and especially helping regions that area lagging behind. It is important to the Government that national authorities still assume a key responsibility when communities have problems with declining populations and radically changing economic and business conditions.

Let me then turn to the international level. Much of Norways policy answers to the globalization lies in a close dialog with the EU and the member states. We are member of the European Economic Area and the great majority of our export and import are related to EU. We also share many common challenges, such as climate change, an aging population and a need to further strengthen the competitiveness of the business environment. International cooperation is a necessary and useful tool to address such common challenges through networking, exchange of experience and policy development.

During the informal ministerial meeting in Leipzig in May this year the Territorial Agenda was discussed. The Agenda makes it legitimate to discuss the territorial impact of sector policies and the need for deeper coordination of these policies. Furthermore, this agenda presents a differentiated and holistic approach towards territorial development. That is as you have understood, really in the core of our Norwegian agenda.

Based on our challenges in our peripheral areas, Norway would also like to make contributions to the process of a green paper on territorial cohesion, as we did during the process leading up to the green paper on maritime policy and the new blue paper on maritime policy to be presented tomorrow.

Let me conclude. Globalization has made regions throughout the western world face many of the same challenges, but regional characteristics do make a difference. It is therefore a need for a differentiated regional policy. This means development strategies which are systematically built on the strengths of each individual region. And further; these strategies should be combined with a committed cooperation or partnership, between the governmental levels. The vision should be a win-win-game between the regions as well as between the regions and the state government. That means that our Government has “a heart for all regions”. That was the name of their last white paper on regional policy from spring 2006. We want really to obtain  positive synergies between the capital region, the greater regional centers and the peripheral regions, and between the different governmental levels. We try to move in this direction, but, we are not that naïve, we knew that also in Norway there are barriers between sectors and regions, so we knew that it will be a long distance run!

Anyhow, we are optimistic and want to give you a last message from Norway: Small can be beautiful – and I add, even in times of globalization!

I kindly thank you for your attention.