Heading EUROISLANDS some outsider observations Jouko Kinnunen Statistics

Heading EUROISLANDS – some outsider observations Jouko Kinnunen Statistics and Research Åland 7 October 2011

First impressions • Extensive work, voluminous reports • A lot of effort put into data gathering and processing • Relies on earlier policy studies and evaluations – as required in terms of reference • Put a lot of (too much? ) efforts in creating new ways of aggregating and presenting EU-wide archipelago data

Description of the islands • General picture (a view shared by the EU bodies? ): remote, peripheral, small, vulnerable, not attractive to new firms or inhabitants • Cannot compete with continental Metropolitan European Growth Areas (MEGAs) – lack of agglomeration economies, variety of supply etc. • On average low educational content of human capital (Nordic islands exception) • Accessibility and transport costs a common problem

But… • A lot of variation in the conditions of the islands: some island regions have higher GDP per capita than EU 27 average (including Åland) • The diversity of the success of islands begs for explanations: – – Åland: tax free Shetland: oil production Islas Baleares, Cyprus: tourism and other services Channel Islands: international tax competion, banking • In sum: success explained by special policy environment or by use of natural resources POLICIES ARE IMPORTANT

About the methodology • Construction of several indices 1. 2. 3. Scaling of variables in relation to EU 27 =100 Construction of ordinal-scale classes from the index values Taking average of ordinal-scale information of several indicators That gives us State Index, Change Index, Direct, Indirect and Asset Attractiveness Indices Attractiveness is a key concept of the study: but can causes and effects of success (or failure) be clearly defined with this concept? The role of EU, state and local level policies? These indices produce nice maps and convey a general picture, but should be used only for descriptive purposes (not monitoring nor evaluation)

The problem with indices • Unresolved question of weighting • Lots of information is lost in the process of creating the indices of the study (data from interval to ordinal scale) – not possible to discern any effect of EU programs • The variables comprising indices may be more informative when presented separately (GDP, unemployment, population growth) • State Index correlates with GDP per capita • Construction of new indices – the original sin of geographers?

Methodology, cont. • The central yard stick is EU 27 average • Alternative idea #1: comparison with other, peripheral, small, insular (island-like) regions • Alternative idea #2: Importance of transport costs within island context, what happens to islands that get a fixed link to mainland? What is the pure insularity effect?

Analysis of EU policies • Island Impact Analysis (IIA): A literature review of previous studies coupled with an interpretation of results within island context? Why introduce a new concept? • EU policies have mixed impacts on territorial cohesion of islands, rather negative general outcome • Programs with (potentially) positive effects: LEADER, R&D subsidies, structural funds • Good point: Report raises the importance of being aware of the impacts of sectoral and EU-wide policies on islands

Place-based policies on the rise • The policies of the national and regional decisionmaking bodies is being given a greater role in the new cohesion policy (even OECD promotes this, Finland’s KOKO-initiative) • EU: Barca report and European Parliament’s post 2013 study • Finland’s KOKO initiative • OECDs LEED programme • A more in-depth analysis of current policies of islands would have been an important contribution • Local decision-making is constrained by many factors: what kind of industrial policy is possible within EU?

Recommendations of the study ü Transport infrastructure improvements within the EU: asks for increased awareness of island impacts ü Enhanced local-level administrative strength to participate in EU programs ü Improved coordination between EU programs ü Positive discrimination of small islands with less than 5. 000 inhabitants today - > even for bigger islands, but how big? ü Support to entrepreneurship and networking ü Compensation of ”insularity costs”; OK in case of public sector, for private sector competition rules & effects need to be taken into account

Concluding reflections • Role of EU programs is limited compared to national and local policies • The island impacts of Finnish (industrial) statelevel policies? Finnish island studies? • We need to learn more on the local policies: interplay with competition regulations and industrial policy (Itiden example) • Less compensatory and redistributing and more enabling programme measures in the future? • Relation between subsidiarity principle and cohesion policies? Who should be doing what? • Åland is doing rather well. Future actions?

Åland issues • Tax-free based ferry traffic: continued loss of importance? Need for new jobs • Firms: barriers to entry? • People: barriers to entry (and exit), social requirement of linguistic & cultural conformity? • Åland’s own policies have uneven regional effects: more room for regional (archipelago) solutions e. g. for land ownership?

Thank you for your attention!