Resolution

of

The Riga Forum 2006: Investment in the Baltic metropolitan regions

Towards a collaborative approach

Preamble

Much has been made of the ideas of cities (or countries) as competitors – competing for export markets, competing for skilled labour, competing for visitors, competing for investment. The approach of the Riga Forum 2006  is to question the universal validity of  the ‘competitive’ model and is instead based on the premise that competition is not the entire story, that perhaps cities are not exact analogues of private firms competing for profit and that benefits can derive from collaboration and alliances.

This position is based on policy documents, research, and factual evidence.

1. The evidence on the growing interdependence of the Baltic States and their capitals is documented in the report on Towards a Coordinated Investment Strategy for Riga, Tallinn and Vilnius prepared for the BaltMet Invest project. Manifestations of integration include:

• Rapid growth of mutual trade –  so that in 2005 Lithuania and Estonia were for the first time Latvia’s top export partners overtaking Germany and Great Britain who were previously the top partners
• The other Baltic States are the top FDI destinations for outward investment from each of the three Baltic States.

2. At the European policy level the Commission in its working paper on cohesion policy and cities emphasises ‘coordination or strategic alliances’ as a ‘tool for balanced development’.
3. At the European political level the European Parliament’s Baltic Strategy Working Group’s   recently published report on Europe's Strategy for the Baltic Sea Region calls for greater economic integration in the region, including Kaliningrad.

Conference resolutions

1. Taking into account the evidence and discussion on “Investment and Collaboration in the Baltic sea region states” presented at the conference, the importance of a collaborative approach to investment, as outlined in the BaltMet Invest report Towards a Coordinated Investment Strategy for Riga, Tallinn and Vilnius, is affirmed.
2. The pivotal role of the Baltic metropolises in regional development is underlined.
3. The collaborative approach of the Coordinated Investment Strategy should be extended to include other countries. A clear first case for extension is Kaliningrad.
4. The collaborative approach should also be extended to other important spheres. For example, Riga has taken the regional lead in the EU project “Innovation Arena” which aims to promote the importance of innovation. As well, Riga takes an active part in the implementation of the flagman project of the BaltMet network – BaltMet Inno (Baltic Metropolises Innovation Strategy). As a result Riga will host one of four European innovation weeks in September 2007, combining the strengths of both aforementioned projects and organizing a major event with the conference on innovation and a publication event of the results gained in BaltMet Inno project.
5. Also, since the November 2005 Riga has taken over the presidency of the BaltMet network, developing the work of the Baltic Metropolises Network (BaltMet). BaltMet brings together 11 capitals and large cities around the Baltic Sea to promote the competitiveness of the Baltic Sea Region and operates by initiating and co-coordinating cooperation projects between the member cities.
6. It is important to take concrete actions to develop collaborative practices in investment and other spheres initially by creating administrative instruments such as joint working groups to implement specific policy actions in specific areas.

Actions and recommendations

It is recommended that specific collaborative policy should be sought in the following spheres:

1.      Development of the Baltic Region as a common area for attracting foreign direct investment that reflects the growing integration of the region.

2.      Development of efficient and customer-oriented city administrations.

3.      Development of easy access and good infrastructure.

4.      Development and attraction of high quality human resources.

5.      Attraction and activation of nascent or underexploited industries.

These tasks are to be accomplished through development of synergies and sharing of best practices in different areas of city administrations on the basis of established administrative structures and existing working groups, e.g. in the framework of the Baltic Metropoles Network.

Towards A Coordinated Investment Strategy

for Tallinn, Riga And Vilnius

An Implementation Procedure

Introduction

Five strategic directions have been identified in the BaltMet Invest report as priorities for developing a coordinated investment attraction framework. Action by the respective city governments requires concrete decisions at the political level. For this we recommend the creation of one or more inter-city working groups, consisting of municipality representatives plus perhaps outside experts, to examine  concrete possibilities to coordinate activities or to engage in joint activities and to prioritize the alternatives. Resources in the form of financing, people and time allocated are essential for success in any of the proposed areas. The activities set out hereafter are suggestions following from the analysis contained in the BaltMet Invest final report, as well as from cooperation practices elsewhere. The working groups would not be bound by the report and may identify other concrete directions and other activities. It is also the task of the working group or groups to set priorities for actions based on financial and political situation and the most urgent needs.

This procedure is entirely in line with the Methodology for Developing an Investment Strategy as outlined in Annex 2 of the report and corresponds to Step 4. The proposed working groups are in effect the first stage of an implementation plan that takes into accounts the interests of the municipalities in this process and in which they are essential participants because they know best the needs and desires.

Subsequently the working groups could also act as consulting and coordinating bodies for cooperation and development of the coordinated actions and could have a role in the monitoring of implementation and in the development of revisions.

Strategic directions and suggested activities

1.      The Baltic Region as a common area for attracting foreign direct investment.

Whether we like it or not outsiders often perceive the Baltic countries as one entity.  Rather than treating this perception as unfortunate ignorance on the part of foreigners, it can be seized as an opportunity for marketing co-operation between Vilnius, Riga and Tallinn to promote the metropolises as part of a united region. That could be realised most efficiently by creating an integrated (common) platform of services, legislation and information.

Activities in this direction can be developed through a common working group represented by all municipalities and also the main national institutions working with foreign investors. The working group would initially set priorities on where and how much to promote, and demarcate the areas of common and individual actions.

Suggested activities

1.1.Pool common marketing resources from Scandinavia, Northern Europe and the CIS to promote a single Baltic region as an investment target. This activity will involve intensive cooperation with national bodies, such as development agencies, foreign ministries and embassies.

1.2.Prepare investment attraction system and procedures, as well as identify responsible units within the city council for management of this process, in order to ensure effectiveness and transparency. The common working group would work out the most efficient system at the technical level in support of the strategy.

1.3.Coordinate investment procedures in all the capitals, indicating that Baltic countries are a common investment target region. This action will ensure that the basic platform for investors in Baltic capitals is similar, i.e., similar and comprehensive legislation and procedures, even as far as simplified treatment for investors coming from the other two municipalities (package type services)

1.4.Form a common Baltic capitals investment agency that would be accessible and free-of-charge for all investors. It can operate in a virtual fashion. Potential investors could easily study investment possibilities in all capitals via a common internet portal. These web pages are then linked to those of local municipalities, allowing the investor to make direct contact with whoever is actually offering the investment support service.

1.5.Ensure exchange of information between municipalities and supply information to investors not only about the particular city and procedures, but also about the other two cities. This will establish the fact that the region is indeed integrated and prevent unknown and unnecessary competition. Councils would be informed about processes going on elsewhere.

2.      Efficient and customer-oriented city administration.

The Baltic capitals have already had great success in receiving investments from abroad. However, currently the cities may be losing some of their cost advantage, thus placing much more focus on how well the cities function. Investors who have to make time consuming efforts to contact civil servants for permits and certificates may move their focus from the Baltic capitals to other rising economies in the region.

A promising initiative could be a ‘Mutual Learning Programme”. Here a working group could develop proposals for various forms of mutual learning and cooperation with the goal of developing more efficient and customer (investor) oriented administrations. Such a programme could have a wider participation than just the three Baltic city councils. Other cities in the region that demonstrate good practice and expertise in particular could also participate as peer municipalities, such as (but not limited to) Copenhagen, Helsinki, Stockholm, Warsaw, St. Petersburg; cities like Kaliningrad, Minsk, Kiev may also be involved in the mutual learning network since they possess some of the same problems.

Suggested activities:

2.1.All forms of mutual learning. Regular seminars with participation of all three cities on live issues of municipal work.

2.2.Common workshops to share experience and facilitate the cooperation via personal contacts of municipality employees.

2.3.Workshops to exchange expertise, inviting other peer cities to learn from it or organizing a common study trip to that city.

2.4.Organizing a competition for the best innovation in municipal administration, e.g. management of building permits

2.5.Joint work on technical issues requiring specialized knowledge.

3.      Easy access and good infrastructure

Easy internal and external access to the region is a precondition to preclude economic isolation. Air transport as well as road and rail infrastructures are means to boost business activity and attract foreign investment.

Again a working group for coordination of transport infrastructure in the region could be created. Although this is to large extent a national and wider region level question, the municipalities should be active in lobbying city interests (individual and common) nationally.

Suggested activities:

3.1.Improve external accessibility to the region by air transport, including intercontinental flights

3.2.Improve accessibility by sea transport, particularly for cargo purposes

3.3.Ensure cooperation for infrastructure development - cooperation projects in public transport, road construction, airport accessibility

3.4.Ensure easy availability of road and transport information, including maps, information centres and road signs

3.5.Improve infrastructure and transport that is used for leisure and tourism purposes, particularly cruise ferries, camping facilities

4.      High quality human resources

Availability of high quality labour is one of the most important preconditions for investment placement decisions. Cities face similar challenges of ageing and diminishing labour force.

Human resources are also a national issue, but should not be treated as fully external to the cities. A working group under this domain would look at how to avoid extensive competition for workforce. It could promote on a Baltic level a regular analysis of labour force demands and forecasts, and initiate education and training in demanded specialities. It could contribute to the discussion on immigration and promote coordinated municipal interests.

Suggested areas of activity:

4.1.Attraction of highly qualified workforce internationally via easier work permits and lodging facilities.

4.2.Higher labour productivity via higher quality education and training.

4.3.Survey of investors (current and potential) of available human resources (scarcity, quality, needs).

5.      Attraction and activation of nonexistent or underexploited industries

Cities can take an initiative to support the private sector in identifying potential niches in global markets. A cross-city working group could act as catalyst to facilitate entrance or creation of industries and ensure coordination among municipalities.

Suggested areas of activity:

5.1.Exploit the capacity of universities for innovation and knowledge-based industries.

5.2.Attraction of foot-loose industries such as international conferences and fairs.

5.3.Cooperation in the tourism industry, offering Baltic-wide packages and cultural diversity.

Some target areas for each city:

Here we suggest some investment target areas for each separate city that follow from the analysis of their economic profile, historical specialization and city development plans and visions. There is much overlap in these areas and we see it as quite normal that cities as similar as the three Baltic capitals should indeed be active and operating in similar areas.

Tallinn

o       Transit gateway in the direction Northern Europe and Northern part of Russia – rest of Europe

o       IT sector

o       Finance and banking sector

o       Exhibition and conference services

Riga

o       Gateway in the direction Russia and Belarus – Western and Central Europe

o       Fashion and arts sector

o       Exhibition and conference services

o       IT sector

Vilnius

o       Gateway in the direction Belarus and Ukraine – rest of Europe

o       Film industry

o       Tourism

o       Conferences sector

Co-operation is rooted in realizing the power of the region vs. each separate country. The benefits from cooperation increase greatly with growing economic integration of the region. The political goal must be to increase the belief that cooperation is a positive sum game. As already mentioned in the introduction, regional cooperation is very much how the EU sees the way forward in terms of EU urban development.

A set of possible tools for developing a cooperative approach has been suggested in this document. It must be stressed that the choice of particular activities and their priority is up to the municipalities to decide. However, we suggest starting with:

• Initiatives to create a common area for investment attraction
• A mutual learning programme 

These two areas represent cooperation options with the most obvious positive externalities and are relatively inexpensive to implement.