Regional economic policy review: paper 3 - international perspective

3. Regional Policy Objectives

3.1 Main policy objectives and frameworks

3.2 The formal objectives of regional policies in the five countries focus on the development and growth throughout the country ( DK , IE), or ensuring development of all regions while simultaneously reducing regional disparities by focusing on specific disadvantaged or problem regions (FI, NO, SE, CA, NZ).

Development of all regions and focus on problem regions

Finland

Development of the entire country, but with a place-based approach that promotes regionally distinctive strategies and interventions. In addition, a specific focus on the sparsely-populated areas.

Norway

Regional development policy comprises district (rural) policy focused on northern and other remote / sparsely-populated areas, and regional policy, focused on economic development in all regions. The goal is ‘regional balance through growth, equal living conditions and sustainable regions throughout the country’.

Sweden

Development of all parts of the country, but a territorial dimension recognises different conditions for sustainable regional development in different regions (different types of urban, rural and sparsely-populated areas). The underlying principle is ‘the more parts of the country that are strong and sustainable, the better it is for Sweden’.

Iceland

All regions apart from three main metropolitan areas are eligible for Provincial Growth Fund funding (the government’s key regional economic development policy). Regions identified as needing the most assistance are prioritised.

New Zealand

The national regional development strategy places a special emphasis on economically disadvantaged regions, whereas the operations of the Regional Development Institute are aimed at strengthening settlements predominantly in rural areas. At the same time, a place-based approach targets all types of regions, including the more developed ones. For instance the governmental policy statement for the economy and community proposes special regional planning for the capital area and the southwest region (which includes Reykjavik).

Development of all regions

Denmark

To boost productivity and growth throughout the country through targeted efforts in relation to innovation, sustainability, education and entrepreneurship.

Ireland

No formal regional policy objectives, but a government priority to promoted more balanced development reflected in progressive development of interventions promoting a more long-term, cohesive and structured approach to promoting regional growth.

Canada

Promotion of inclusive growth in all regions with policies that are nationally consistent but at the same time regionally tailored and build on specific regional and local economic assets and strengths.

3.3 At strategic level, these objectives are reflected in the core documents for regional policy at both national and regional levels. The key national strategic frameworks are as follows.

Denmark

Strategy for Business Development in Denmark 2020-2023

Objective

Unlocking the specific growth potentials of individual regions.

Focus

Addressing potentials and challenges in all parts of the country, including in cities, rural and peripheral areas.

Priority areas

• Qualified labour and social inclusion;
• Entrepreneurship;
• Green and circular transition;
• Innovation and positions of strength;
• Digitalisation and automatisation;
• Internationalisation;
• Tourism.

Main instruments

• Rural Development Allocation: to promote living conditions through grants and loans to projects on the small islands and in rural areas; and
• Direct grant support to individual firms in all small and some medium-sized bridgeless islands as part of the ERDF programme.

Finland

Regional Development Decision (‘Sustainable and Vibrant Regions’)

Objective

Reducing the differences between regions and within the municipalities

Focus

Supporting all regions and cities, taking into account the strengths and special characteristics of the regions (place-based approach linked to smart specialisation).

Priority areas

• Mitigation of climate change and safeguarding biodiversity;
• Sustainable community development and well-functioning connections;
• Economic renewal and acceleration of RDI;
• Knowledge and education as resources of regional development;
• Increasing inclusion and well-being; preventing social inequalities.

Main instruments

• Business Development Grant: aid to firms, especially SMEs.
• Regional Transport Grant: assistance to SMEs in selected sparsely populated areas, to safeguard and improve the conditions for SMEs by reducing the costs associated with long transport distances.

Norway

2019 White Paper ‘Vibrant Communities for the Future – the district report’

Objective

Regional balance, equal living conditions and sustainable regions across the country; growth and employment in the districts, sustainable utilisation of natural resources with a positive impact on local communities, and equal service provision throughout the country.

Focus

Regional balance and sustainable development; reinforced focus on the districts (rural areas).

Priority areas

• Growing businesses in regions and districts;
• Cross-border cooperation and the High North;
• Capacity-building and basic services in the districts.

2021 Strategy for Small Towns

Focus

Role of small towns as motors of development for surrounding areas and as ‘specialised’ centres for service provision.

2021 Strategy for mountain and inland areas

Focus

Developing the comparative advantages associated with natural resources (e.g. energy, industry, bioeconomy, food production, tourism) and more specific activities (e.g. data centres).

2021 Strategy for coastal areas

Focus

Supporting the development of established industries and promoting new and emerging activities (e.g. offshore wind, biological resources for food and medicine, CO2 storage, hydrogen and seabed minerals).

Main Instruments

• [‘Narrow’ RP] Regional Risk Loans and Regional Aid Grants; bespoke packages to address restructuring in targeted areas; schemes to support local capacity-building in remote and sparsely-populated areas.
• [‘Broad’ RP] Regionally-Differentiated Social Security Concession; measures for the Action Zone of northern Troms og Finnmark; exemption from VAT for energy consumption from renewables; specific grants to disadvantaged municipalities.

Sweden

Strategy for Sustainable Regional Development (2021-2030)

Objective

Strengthening the local and regional competitiveness for sustainable development in all parts of the country, recognising different conditions for sustainable regional development in different territories.

Focus

Sustainability (covering economic, social and environmental sustainability, and link to Agenda 2030) and shift from growth to development (a more holistic and longer-term view of development).

Priority areas

• Equal opportunities for housing, work and well-being;
• Skills supply and development;
• Innovation, renewal, entrepreneurship and businesses;
• Accessibility through digital communication and transport system.

Main instruments

• Regional Investment Support: to supply capital to businesses.
• Transport Grant: to compensate for the extra costs incurred due to long distances from markets in the four northernmost regions and to stimulate further processing.
• Social Security Concessions: to stimulate small business growth and ensure a good level of services in areas characterised by long distances, limited markets, poor access to services, low population density and unfavourable climatic conditions.

Ireland

National Planning Framework (NPF): Ireland 2040

Objective

More balanced territorial development.

Focus

Targeting a level of growth in the Northern and Western and Southern Regions combined; improving regional accessibility; recognising the role of ‘regional centres’.

Priority areas

• Compact growth to ensure sustainable growth of more compact urban and rural settlements;
• Smart and sustainable growth;
• Low carbon actions;
• Sustainable transport measures;
• ‘Livability’ of the region committed to sustainable, green and inclusive growth;
• Provision and maintenance of economic infrastructure; improving and protecting cultural heritage.

Main instruments

• Regional (State) Aid Scheme: investment grants for business investment.
• Enterprise development and employment support for the Gaelic-speaking areas.

Iceland

• Regional Policy of Iceland: National Regional Development Plan 2018-24
• Objective
• Address depopulation in individual regions; address the lack of economic and industrial diversity; support technological changes and the development and adaptation of individual industries; counter the impacts of climate change; ensure smooth communications and access to services; respond to increasing international competition for people and companies.
• Focus
• Supporting regional development across regions, with special emphasis on economically disadvantaged territories.
• Iceland 2020 – governmental policy statement for the economy and community
• Objective
• A dynamic society capable of protecting its welfare in a manner that is sustainable and serves all members of the community.
• Focus
• Social objectives: welfare, knowledge, sustainability; economic and development objectives: prosperity and quality of living.
• Main instruments
• Regional Development Institute supports regions through financial assistance and loans, regional strategy development to implement government goals, and a network of industrial regional development agencies whose aim is to promote innovation.

Canada

Innovation and Skills Plan, and associated regional programmes

Objective

Supporting innovation-led and inclusive growth in all regions with policies that are nationally consistent but regionally tailored.

Focus

Regionally-tailored programmes support business growth, productivity and innovation; help SMEs effectively compete in the global marketplace; provide adjustment assistance in response to economic downturns and crises; and support communities.

Main instruments

• Financial assistance for economic and community development;
• Knowledge mobilisation to support regional policy planning;
• Community networks supporting the local activities of the community futures organisations;
• Infrastructure programming.

New Zealand

No specific national regional development plan, but Investment Statement for the Provincial Growth Fund outlines sectors, infrastructure and regions prioritised for investment.

Objective

Create more and better-paying jobs, increase social inclusion and participation, support Māori development, encourage environmental sustainability, improve infrastructure and economic resilience.

Other

Other relevant strategies and pieces of legislation include: Resource Management Act; National Policy Statement on Urban Development Capacity; Local Government Act; Land Transport Management Act.

Main instruments

Provincial Growth Fund: to improve the productivity potential of regions. Aims to: create more and better-paying jobs, increase social inclusion and participation, support Māori development, encourage environmental sustainability, and improve infrastructure and economic resilience.

3.4 Policy trends

3.5 Strong focus on the place-based approach in regional policy

3.6 There is a strong and increasing emphasis on recognising the different potentials and challenges in different (types of) territories across the country and the objective of unlocking the specific growth potentials of individual regions and developing their comparative advantages. For example:

• Finland: different needs and opportunities (e.g. in terms of population, economic structure, environment and culture) and the importance of place-based development approach are emphasised in key regional policy strategies.
• Sweden: a recent analysis of regional growth policy highlighted an increased need for a place-based approach in the light of the complexity of the societal challenges and the need to understand the unique circumstances of different places, their capacities and ability to cooperate.^[11]
• Canada: Regional Development Agencies help to address key economic challenges by providing regionally-tailored programmes, services, knowledge and expertise that build on regional and local economic assets and strengths and leverage regional advantages to deliver long-term prosperity. Delegation of authority to community-based actors allows to adapt national programming to regional specificities and promote territorial sensitivity.^[12]

3.7 Emphasis on addressing territorial inequality, strengthening the focus on disadvantaged areas, and dispersing growth across the national territory

3.8 Most policy frameworks incorporate a strong focus on addressing the existing regional disparities, including though a greater emphasis on more remote and vulnerable areas, including rural and peripheral regions or territories facing specific development challenges (e.g. mountainous or coastal areas). For example:

• Finland: most funding is steered towards the sparsely-populated areas in the East and North.
• Norway: the recent (2017 and 2019) White Papers place more emphasis on the remote / rural areas compared to the previous ones (e.g. 2013). The 2019 White Paper ‘Vibrant Communities for the Future – the district report’, as well as the new strategies for mountain and inland areas and for coastal areas reflect a shift in emphasis towards more remote, vulnerable regions, reflecting concerns at demographic challenges, quality of public services and the challenges of business development in these territories.

3.9 A focus on addressing territorial inequality and ensuring more balanced development is also reflected in an increased consideration of and support to small and medium-sized towns, e.g.:

• Norway: the 2021 Strategy for Small Towns focuses on the role of small towns as motors of development for surrounding areas and as ‘specialised’ centres for service provision.
• Finland: the ‘regional city’ (seutukaunki) programme 2020-22 addresses smaller cities with regional importance with the aim of strengthening their role as part of wider urban policy and regional development.

3.10 This is also seen in the efforts to decentralise economic and institutional functions or activities away from dominant territorial centres, by dispersing them more evenly across the national territory. For example in Denmark, the priority is to boost productivity and growth throughout the country, and initiatives such as dispersal of government institutions or HEI beyond the big cities contributes to this objective.

Widening the scope of regional policy to address ‘grand challenges’

3.11 Regional policy efforts also increasingly seek to consider and address the spatial implications of global ‘megatrends’, including digitalisation and technological change, demographic transition and climate change, as well as wider sustainability considerations.

• For example in Canada, Policy Horizons Canada conducts scanning and foresight to anticipate emerging policy challenges and opportunities, to support medium-term policy development. It monitors and explores social, economic, environmental and technological changes in Canada and across the world, and analyses how they changes may come together in the future. Some of the work has considered how trends might have different impacts across regions.^[13]

3.12 Sustainable development is considered in its different dimensions (social, economic, ecological, cultural) and in line with the UN Agenda for Sustainable Development (e.g. FI, NO, SE).

• Finland: sustainable development is a key cross-cutting theme in the Regional Development Decision, and is underlined as the foundation for regional development. The New Regional Development Law focuses on the interrelation between sustainable development, growth and competitiveness, and the way these link to the regional economy, human capital and the diversity/specialisation/innovativeness/accessibility of the economic and research and innovation activities.
• Norway: strategies adopted in 2021 for the areas of small towns; business development in the mountains and inland areas; and business development in coastal areas are all firmly cast in the context of the UN Sustainable Development Goals, reflecting the recent tabling of a White Paper on Norway’s plan to achieve these by 2030.^[14]
• Sweden: the new Strategy for Sustainable Regional Development marks a shift to a more holistic and longer-term view of development which includes a specific focus on sustainability, covering economic, social and environmental dimensions, and link to Agenda 2030. The sustainable dimension was added to the policy objective by the Parliament following the recommendations of the ‘Agenda 2030 and Sweden report’.^[15] Agenda 2030 and the region’s own sustainability work are at the centre of the Regional development strategies, which set out the objectives and long-term priorities for the implementation of regional development activities in one or several regions.

3.13 Green and digital transition are also at the heart of the post-COVID longer-term recovery plans, some of which have a relevant territorial dimension. For example the Irish Recovery Plan is structured around the objectives of ‘Advancing the Green Transition’ and ‘Accelerating and Expanding Digital Reforms and Transformation’ in pursuit of a regionally balanced and inclusive recovery. Similarly in Finland, the measures in the regional recovery plans aim to promote digitalisation and carbon neutrality.

Addressing the implications of climate change

3.14 Regions are recognised to play a key role in climate change mitigation and transition to a carbon neutral economy, and climate challenges are increasingly considered in regional development strategies and plans.

• Sweden: environment and climate, including different impacts on different parts of the country depending on the economic structure and geographical conditions, are among the key long-term societal challenges affecting regional development under the new Strategy for Sustainable Regional Development (2021-30).
• Finland: the new Regional Development Decision Regions recognises that regions and urban areas play a key role in the mitigation of climate change, transfer to carbon neutral circular economy, and safeguarding of biodiversity, and climate change is considered both in the national and regional strategic decision-making and planning of activities, which require analysis of risks and forecasting of impacts.
• Ireland: the content and focus of regional development plans and initiatives is strongly determined by the need to address the longstanding challenge of climate change. For example, a National Economic Plan for 2021 (followed by a new National Development Plan for the period up to 2030) is focussed on recovery and regeneration in particular targeting employment creation and greening and decarbonising the economy.

Promoting the digital transition

3.15 A strategic focus on digital investment under regional policy is apparent across countries, covering a range of priorities. This is emphasising the role of digitalisation in fostering territorial cohesion and inclusion (e.g. through the roll-out of broadband in remote and rural regions and improving access to e-government, e-health, and digital skills) and also in supporting digitalisation of businesses and the take up of advanced technologies.

• Sweden: the growing importance of digitalisation in regional policy is reflected in its prominence in the new national strategic framework, as a specific priority.
• In the new Regional Development Decision in Finland, digitalisation is a theme that cuts across all the priorities (climate change mitigation, sustainable community development, economic renewal, knowledge and education and increasing inclusion and well-being). The Decision notes the importance of digital equality, which aims to ensure that no population group is excluded from the opportunities it provides.
• Iceland: the National Regional Development Plan 2018-24, which provides a framework for regional support and sets strategic priorities and actions for each sector, includes actions on changing technologies, including digital technologies in rural areas.

3.16 The increasing prominence of digitalisation in regional policy agendas is reflected in governance initiatives and institutional reorganisation that are seeking to strengthen coordination and coherence of measures (e.g. NO).

• Norway: the linking of regional policy with the digital agenda, through the appointment of a minister for ‘districts and digitalisation’ within the Department for Regional Development in the Ministry of Local Government and Modernisation (KMD), marks an important shift. KMD has been devising a strategy on the links between regional development and digitalisation, developing three strands: urban and rural issues; mountains; and coastal areas. This supports policy initiatives aiming to use digitalisation to boost regional development and maintain population settlement, and sits within a wider agenda to improve efficiency and address major societal challenges, reflected in a White Paper from KMD on innovation in the public sector.^[16]

Demographic challenges

3.17 Regional policy also seeks to address demographic challenges e.g. related to population ageing and outmigration in rural and peripheral areas.

• Finland: there is an interest in adopting a new ‘Smart Shrinking’ approach, which considers challenges of ageing and decreasing population and the impacts this has on economic development in regions and on other issues such as the delivery of services. Furthermore, the ‘regional city’ programme, which, among others, includes cities facing specific demographic challenges, is focussed on the supply of skilled labour force.
• Norway: a dedicated Commission on Demographics in the Districts examined the consequences of demographic challenges for the municipal, State and private sectors. A ‘youth panel’ provided an input into the process, as attracting and retaining young people is regarded crucial to the future of the districts. The 2019 White Paper considers how improving efficiency and innovation in the public sector can contribute to addressing major societal challenges, including demographic changes.
• Sweden: a government study in 2020 highlighted a clear pattern of skill divergence across the regions, reinforced by the mobility of highly educated people and coinciding with a decline in income convergence across the regions. Rural areas are facing challenges with skills supply in areas such as health care, schools and technical professions. Demography (including urbanisation, ageing, and regional skills supply) is one of the five long-term societal challenges at the core of the new Strategy for Sustainable Regional Development (2021-30).

3.18 In addition, there is an increased focus specifically on the dimensions of well-being, quality of living environment and social inclusion as objectives of regional policy (e.g. FI, SE, IE).

• For instance in Finland, the Regional Development Decision 2020-23 focuses on increasing inclusion and well-being and preventing social inequalities among its five priorities. Similarly, well-being, which is concerned with the living conditions, ability to function/work and inclusion in the society, is among the three core dimensions in the new Regional Development Law.