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Reviewing Stockholm’s Strategy for Sustainable Regional Development in the Arctic

By | Article
July 2, 2019
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A woman signing a statement watched by another woman

Swedish Foreign Minister Margot Wallström signing the Rovaniemi Joint Ministerial Statement at the 11th Arctic Council Ministerial Meeting in Rovaniemi. Photo: Jouni Porsanger

With global warming on the one side and fast-expanding business opportunities on the other, devising and implementing a sustainable (economic) development strategy is simply a must – indeed a matter of national security – for each of the Arctic 8. Failure to do so could have negative repercussions well beyond national boundaries thereby jeopardising both national and regional growth prospects. In this second article on Sweden’s Arctic strategy, therefore, we provide a detailed and critical account of Stockholm’s approach to and priorities for sustainable regional development in its Northernmost regions. The series will continue with two more articles covering Sweden’s approach towards a Common EU Arctic policy, and a Stockholm’s perspective on hard security in the North.

The Arctic Institute Sweden Series 2019-2020

According to the Swedish government’s National Strategy for Sustainable Regional Growth and Attractiveness 2015–2020, “a modern and active regional growth policy for the entire country is focused on giving the regions the opportunity to grow and develop based on their own specific regional conditions, in both urban and rural areas. This requires efforts and collaboration in a variety of sectors and at all levels of society. This way conditions for sustainable regional growth and attractiveness and a Sweden that keeps together are being created”.1)

The aim of this brief is to provide an overview and a critical evaluation of the Swedish government’s main priorities for encouraging sustainable economic growth in the Arctic region of the country. It will do so by discussing plans and initiatives for further expansion of large scale extractive industries, establishment of a truly bioeconomic model, promotion of tourism, cross-border and/or regional cooperation, and innovative and entrepreneurial culture. In doing so, it will also illustrate how certain factors, such as a lack of adequate rail, air, and maritime infrastructure, skilled labour, emigration, deteriorating public health, and limited educational opportunities could hinder the government’s efforts in attaining its goals.

This brief concludes by singling out what is missing in Stockholm’s Arctic development blueprint – an unfortunate lack of urgency due to its deep-rooted culture of strategic complacency – and proposes a number of policy recommendations, which are deemed critical to the successful realisation of the state’s long-term objectives for the Swedish Arctic.

Mining Industry

Given that Sweden’s Arctic is home to some of the largest iron ore mines in the world, the mining industry has historically played an important role in the socioeconomic development of the region. Currently, almost 90% of the European production of iron ore comes from Kiruna and Malmberget both of which are operated by the state-owned mining giant LKAB.2) Thanks to uninterrupted urbanisation in Asia and the resulting growth in global demand for minerals, technological advancements in autonomous driving, and climate change, more investment is being poured into the region’s extractive sector. Therefore, it is only reasonable for the government to be keen on further expanding the reach of the sector as a key driver for regional economic growth.

Nevertheless, caution must be exercised because mining in general, but especially in the Arctic, presents a double-edged sword.

On the one hand, it can attract investment in these remote regions and thus spur economic and social growth. Moreover, indirectly acquired expertise can be marketed as a service and hence be sold to interested parties around the globe. Of particular relevance here is the LKAB experience in moving the city of Kiruna 3 kilometres east to avoid mining-related erosion,3) which could prove a valuable ‘commodity’ with great potential for other mining cities that are grappling with a similar set of problems. In other words, LKAB could commercialise its experience in Kiruna as an added-value engineering product and offer it to the major mining cities of Latin America or even China.

It could also contribute to increased employment in support sectors such as hospitality, construction, and retail, which thrive on either servicing or supplying/supporting the large-scale activities of the mining companies in and around their regions of operation. Given the dire lack of adequate housing and skilled workforce, however, the local population has not been the main beneficiary of these emerging opportunities. Contracts tend to go to Stockholm-based companies while companies have no option but to opt for commuter or fly-in/fly-out modes of employment. This, in turn, could prove detrimental to the long-term growth prospects of the region as it constitutes a legal form of capital flight, since these workers pay their taxes elsewhere.

Due to its near-total dependency on demand trends and price fluctuations within the global market, on the other hand, economic volatility could not only bring industrial projects to an immediate stop and cause bankruptcies, but may also make investments in secondary sectors like infrastructure, housing, and education obsolete. The fate of Northland Resources in Pajala, Sweden, is a clear case in point.4) More importantly, mining could harm the environment and reshape the social dynamics of local communities by creating new wealth, thereby causing social tension. This latter point is especially relevant in Sweden since mining companies are not legally required to submit Social Impact Assessment (SIA) reports to obtain operational licenses5) and hence local grievances could (and usually do) go unnoticed.

Judging from the government’s latest strategic blueprint for the Arctic6) and the mining sector,7) as well as the mining industry association’s own report,8) no heed, unfortunately, is paid to a detailed deliberation on the societal component of sustainable mining, which revolves in and around the issues of community relations, social acceptance, and effective and fair distribution of impacts and benefits.9) Although the compulsory integration of the EU Strategic Environmental Assessment (SEA) into the national regulatory framework is a cause for optimism, it is not unreasonable to assume that the politically well-endowed mining industry, in which some of the major actors are state-owned entities, has played a key role in discouraging ruling coalitions from addressing this issue. This is evident in the fact that Sami communities’ discontent and anger over mining activities and land use in and around their towns have traditionally fallen on deaf ears in Stockholm.

Overall, there appears to be a clear and unequivocal academic consensus over the inadequacy of the legal framework for SIA in Sweden. Scant attention is paid to the consideration of the so-called “zero option” and cumulative impacts of projects. Furthermore, there are rarely, if ever, true and substantive discussions on a mining project’s alternatives.10) According to the latest report by SveMin, moreover, “Sweden will have to increase its labour supply, improve its infrastructure, develop a more competitive energy supply market and ensure an effective permitting process in order to further develop its mining sector”.11) Put together, it is only fair to suggest that the mining industry still has a long way to go before it can play both a long-lasting and responsible role in the sustainable development of the country’s Arctic region. Keeping in mind the importance of the northern region to the industry’s longevity and profitability, it must play a proactive role in addressing these issues out of self-interest, if not communal or national interest.

Bioeconomy

Given the importance of traditional industries, like forestry, to the bioeconomy and Sweden’s leading position in energy conversion technologies, establishing a bioeconomy does not only have environmental benefits, but also makes strategic sense. This is clearly reflected in the government’s latest strategic dossier for a bio-based economy:

“Sweden, in comparison to many other countries, has good preconditions given by natural geographic conditions, traditional industry and infrastructure for being able to convert to a bio-based economy. Converting from the use of fossil fuels to renewable resources can also confer an inherent increase in competition for raw materials. This also provides new opportunities to complement traditional products with new products and services to maintain and improve Sweden’s competitiveness”12)

Put simply, there is a much greater need for the development of alternative fuels like biofuel in the Arctic due to its unique and fragile ecosystem. As a result, the government has been consistent in its investment in developing the bioenergy sector in the region, with the primary objective of ensuring uninterrupted technological innovation and a high degree of energy self-sufficiency for the Arctic . In this way, there is hope that more foreign investment can be attracted to the region since locally produced energy could reduce local business costs.13) To this end, and in an effort to encourage widespread adoption, Sweden’s government has introduced the use of biomass in the public transport sector via a number of initiatives of which the Green Highway, a fossil fuel-free transport corridor, is the most prominent one.

In addition, and as an extension of its drive towards increased innovation, Sweden has established a biofuel region, which is effectively a network of actors from academia and the private sector both seeking to increase biogas production for use in the transport sector of Norrbotten, Västerbotten, Jämtland, and Västernorrland counties. As part of the wider strategic research programme, policymakers have further funded standalone research platforms for developing sustainable biorefinery processes. The Bio4Energy platform at the University of Umeå14) is a case in point. This strategy seems to be fruitful. Not only is Sweden home to SunPine, the world’s first company extracting biodiesel from pulp mill waste product,15) its Örnsköldsvik region is also a global pioneer in establishing bio-refinery clusters.

Nonetheless, aside from how the development of a bioeconomy could negatively affect social resilience, a more immediate obstacle to bioeconomy development in the broader Nordic Arctic region is the dire lack of a highly skilled labour force combined with accelerating emmigration rates amongst the local youth.16) As important as favourable policy frameworks are, successful implementation of a bioeconomy strategy requires a mix of traditional skills, like farming, and new skills for a range of biorefinery and bioprocessing technologies. The problem faced by the government is dual in nature. On the one hand, it is failing to convince the younger generation to find employment in traditional sectors while, on the other hand, youth who have acquired the right skill sets tend to prefer living in urban areas.

What is needed is a way to encourage the younger population to take up traditional work and see a future for themselves in rural areas. The good news is that the government is fully aware of this challenge. The bad news is that it appears to be confused about how to address it. One proposed solution is to offer more distant learning opportunities so the youth have less reason to leave their towns to pursue an education in the first place.17) Although this is a reasonable solution, it fails to address the emerging shortage of traditional workers. Another proposed solution, which is favoured by regional authorities in Norrbotten,18) is to call for and facilitate immigration into the region. In the current political climate in Sweden and Europe, however, this may not be a politically convenient option. This is not to mention the housing shortage and the desperate state of public education and the healthcare system, which could deter would-be immigrants.19)

Tourism

The government’s reliance on the tourism sector as a pillar of its sustainable economic development plan for Sweden’s Arctic is both a matter of necessity and opportunity: a necessity because it is one of the few sectors which have the potential to reduce reliance on the extractive sector without requiring large capital investment; an opportunity because it is attractive to foreign investors in areas such as nature-based or ecotourism, as well as Arctic tourism, both of which are becoming trends.20)

The steadfastness and determination to strike the right balance between environmental, socio-cultural, and economic impacts of tourism development in the government’s ecotourism strategy for the Arctic is remarkable.21) In other words, the Swedish government appears to be pursuing a smart tourism strategy with four objectives:

  1. Minimising the negative impact of increased tourism on the region’s unique environment.
  2. Building environmental and cultural awareness amongst the locals and visitors in their marketing campaigns, thereby using tourism to complement the wider national soft power strategy of raising awareness about climate change.
  3. Providing a source of income for the local communities while simultaneously enabling them to promote and prolong their cultural identity.
  4. Setting a precedent for the protection of human and labour rights within the industry.

The Swedish Lapland Visitors Board, for instance, has run a marketing campaign called Test of Swedish Lapland, which essentially provides visitors with a list of recommendations of what to eat and where. The campaign itself is used to both educate visitors about the local cuisine in what is trending as “experiencing local culture via food”22) and, perhaps more importantly, raise awareness about the uncertain future of food security in the region due to the changing climate and its unknown impact on the region’s ecology.

Meanwhile, cultural tourism is being utilised to enable the Sami communities in Kiruna and Abisko to promote and preserve their culture by making a living out of it. To this end, the world famous Ice Hotel in Kiruna and the national park in Abisko, as well as the famous Northern Lights, feature frequently on marketing material as an additional incentive to visit the Sami-populated areas.

All in all, the government, in cooperation with local authorities, tends to view the tourism potential of the region as a strategic asset. To this end, it is pursuing the dual objective of turning local tourism actors into professional businesses and ensuring, and indeed consolidating, the emergence of a culture of social and environmental sustainability within the sector via initiatives like Nature’s Best. Compared to its Nordic neighbours, however, Sweden is clearly lagging behind in promoting its Arctic region as a tourist destination. While it is normal to see ads of Norwegian and Finnish Arctic regions in travel agencies in affluent cities like Singapore, Hong Kong, Dubai, or Doha, it is a rarity to come across a Swedish one.

Most critically, the government is best advised not to rely too heavily on the sector as an engine of economic growth because the unknown effects of climate change could have negative repercussions for the entire industry and vice versa.23) For example, travelling long distances in and around the region could in fact contribute to further deterioration of the environment and hence be less socially acceptable or welcomed by the local population. Given the subzero temperatures, traveling long distances using traditional modes of transport or battery powered vehicles may not be an option. The quality of winter conditions may also deteriorate, leading to a shorter and less reliable seasons. How all these factors would spill over into the investment circles, which in general have a preference for short-term gains, should also not be lost on policymakers.

Cross-border and Regional Cooperation

Nationally, the government assigns importance to regional and international cooperation and hence facilitating regional cooperation constitutes one of the key pillars of the government’s development strategy for the Arctic region of Sweden.24) The key emphasis is on cross-border collaboration between the Arctic regions of Finland, Norway, and Sweden in a variety of fields ranging from commerce to public diplomacy, research, and art. Norrbotten occupies center stage thanks to its unique geographical location as the only county in Sweden that borders both Finland and Norway. According to the regional strategy document, “the focus lies on measures that strengthen the position of Norrbotten and the entire Barents Region as a key deliverer of raw materials within the EU. Focus is also placed on the potential for further development of the processing industry alongside research and education within areas such as the mining industry. Furthermore, Norrbotten wishes to contribute to making the region more attractive for young people, by securing wider participation of young people within all Barents Region activities”.25)

Another focus area concerns collaboration for the development of a more cost-effective transport infrastructure across the Nordic Arctic. Air and sea transport systems are both underdeveloped while the rail networks must be be upgraded and expanded. The government’s priority, however, lies in the rail network as it aims to connect the national network to that of the “EU Commission prioritised rail corridors, the Bothnian Corridor and Northern Axis, within the Trans-European Transport Network (TEN-T) whilst at the same time developing ‘greener’ transportation options”.26) Such an undertaking would have the added benefit of securing investment for the development of the Luleå harbour, which is one of the five selected strategic harbours in TEN-T. The overarching vision is that improvements in the transportation system will lead to the emergence of much needed inter-connected labour markets, which could go a long way towards temporarily compensating for the existing talent gap and introduce a degree of flexibility, thereby increasing the competitiveness of the Arctic region as a whole.27)

Finally, past experiences indicate that cross-border cooperation could prove valuable for the cost-effective development of new models and systems such as bioeconomy and digital governance by increasing “greater cost-effectiveness in public investment, strengthening economic complementarities and providing more direct and effective solutions to environmental problems.”28) The successful experience of Norway-based HRS Miljo selling waste to Kiruna-based Tekniska Verken for district heating production over the past twenty years validates such claims. Looking into the future, it would be interesting to see how the recently announced eID initiative will play out across the Nordic Arctic and whether or not it will meet its intended outcome of making movements of goods, individuals, and services faster and cheaper.

Startups, Entrepreneurship and Innovation

Research, development, and innovation have traditionally been the main tenets of economic growth strategy in Sweden, which is evident in its strong export sector and leading position in ICT technologies. For the Arctic, the government prefers a cluster strategy wherein the public sector, private sector, academia, and startup community work hand in hand; both complementing and compensating for each others’ needs, strengths, and weaknesses. What is more, special efforts are being made to make the labour market more gender-balanced, ensuring that women, who tend to be more educated compared to their male counterparts in the Arctic, can pursue careers outside the public sector, which has historically been a major source of female employment in the region.29)

To these ends, regional authorities in Norrbotten and Västerbotten, in collaboration with the EU’s European Regional Development Fund (ERDF) and with the tacit backing of the Swedish government, have put in place a well-thought out regional innovation and development strategy with the objective of creating smart specialisations centred around life science, healthcare, manufacturing, and the service industry. Labelled Innovation Loop, it “consists of a cyclical well-structured co-creation process whose mission is to allow the co-generation of innovative ideas and prototyping these into innovative solutions (products, services, processes) towards regional innovation ecosystems”.30) So far 37 new products and services have been born out of the programme, which is set to run until the end of 2020. The main focus of the plan is to increase the “synergy between the EU, national, regional, and local development strategies” and nurture local startups via the provision of finance and business or organisational management mentorship, both of which fit in well with Stockholm’s own grand strategy of Make in Sweden 2030.31) and building a smart society.32)

A main actor in the regional startup scene is the government-owned Almi Företagspartner AB, which offers its clients – regional startups and SMEs – advisory services as well as funding opportunities. Another influential player is the Luleå University-based Arctic Business Incubator (ABI). It accepts 40 and 10 ideas per annum into its accelerator and incubator programmes respectively and provides direct financing through its in-house venture capital firm – Arctic Venture – which is itself financed by 23 “business angels” whose investments have been matched on a one-to-one basis by the state-owned company Saminvest AB.33)

Partner Invest is yet another institutional player with a keen interest in the regional startup scene, although its investment size is capped at 5 million SEK.(Oxford Research. (2018). “Business Finance in the Arctic: Analysis of access to finance for SMEs and start-ups in the Arctic region”. Downloaded from https://arcticeconomiccouncil.com/wp-content/uploads/2019/03/Business-Finance-in-the-Arctic-final-report.pdf. Accessed on 9 May 2019)) The other dominant regional investors are Norrlandsfonden, founded by the state-owned mining company LKAB, Sparbanken Nord, and the European Investment Fund, which has been running the Fund of Funds initiative since 2016.34)

In short, entrepreneurship is, above all, a culture and therefore its strength and vibrancy are, to a considerable extent, determined by the sociocultural traits and peculiarities of the environment within which it takes place.35) Due to their historical isolation from population centres, Arctic communities are on average relatively closed and conservative, while the economic dominance of large traditional industries like forestry, which are very resistant to change and prone to corrupt practices,36) have collectively led to the emergence of an underdeveloped culture of entrepreneurship. This has stifled efforts at promoting innovation and entrepreneurial spirit in the region. However, things are beginning to take a turn for the better as more startup incubators pop up.37) Still, if the government is serious in its drive for more regional innovation, now is the time to take an honest and critical stock of its own reliance on and lax attitude towards the mining and forestry industries and begin to draw up realistic plans for their reform.

Conclusion: What is Missing from the Current Strategy on Regional Development

In conclusion, what appears to be missing from Stockholm’s strategy for sustainable development in the Arctic, and indeed its broader Arctic strategy, is neither resources nor ideas. Rather, it is the sense of urgency that is bizarrely absent from government discourses. As interesting that may be as a topic of inquiry, investigating why this is the case is out of the scope of this paper. However, it is sufficient to say that Sweden’s strategic culture is marred with a high degree of complacency which leads policy circles to be excessively focused on, and comfortable in, conventional thinking. This appears to be manifested in the seemingly widespread refusal or indifference of many academics and practitioners to broaden the strategic identity of Sweden so that it can be both a Baltic state and an Arctic state. The country’s historical failures in conquering the far north might play a role in this. Still, past experiences cannot fully account for this level of ignorance towards a geopolitically important region.

For Stockholm to be able to pursue an effective development policy in the region, it urgently needs to broaden its strategic scope and begin to consider itself as a state with a dual strategic identity: as both a Baltic state and an Arctic state. It must do so by, among other things, running campaigns in order to raise public awareness about the region and its potential encouraging the public to actually travel to and develop emotional bonds with the region as an indispensable part of the country and not just a frozen landmass.

It also needs to rethink the nature of its relations with the Sami communities by striving for more inclusive growth in consultation with them. There is a clear economic logic at work here. Their unique culture creates the talent and the potential for the emergence of a strong creative industry around Sami music and art, provided that investment and business management mentorship are forthcoming. Creative and cultural industries, in turn, are a potential source of economic growth and thus a key contributor to the emergence of a service sector capable of providing meaningful and fulfilling employment.

What is more, growing consumer demand for sustainably produced food can turn the reindeer industry into a profitable and prospective business. According to a 2019 OECD study, the estimated value of the entire industry in Sweden and Finland is a whopping EUR 1.3 billion with an employment potential of 15,000 jobs.38) To realise its full potential, Stockholm must be prepared to take a more hardline stance on the mining industry as its activities and the accompanying infrastructural projects negatively impact access to grazing lands. As a first step, the submission of rigid and detailed SIA must become compulsory.

Thirdly, given its ageing demography as well as the poor state of the public health in the north, population decline is beginning to present a serious security and economic threat. With no quick fixes in sight, the government must actively start looking for ways to both stop the ongoing emigration amongst the local youth and, simultaneously, attract immigrants and/or foreign-born citizens into the region. Diversity of culture and thoughts are generally deemed beneficial to socio-economic growth and hence immigration could prove valuable to the long-term developmental goals of region. For that to happen, the government must have concrete plans for the construction and provision of adequate housing and living environments, transport, and ICT infrastructure with a specific focus on distance and adult learning.

Above all, the government needs to concentrate its immediate efforts on finding and investing in a niche sector that could address one of the key developmental challenges of not only its own Arctic region but the entire Arctic. In other words, mining and forestry businesses, as valuable as they are to the growth potential of the region, are not capable of addressing some of the fundamental impediments to faster and smoother movements of people and goods in and across the Northern part of the country. In contrast, fast and secure communication can.

Due to the region’s high latitude and the ensuing frequency of geomagnetic interferences with communication lines, limited coverage capacity, and reliability are characteristics of cellular networks in the Arctic region. As such, there is a ‘communication gap’ that urgently needs to be narrowed if not fully closed. This is where Sweden, thanks to its position as a leader in the development of communication technologies, should divert a good bulk of its efforts, encouraging prominent national companies like Ericsson to design customised communication tools and systems suitable for the Arctic.

As the world enters a new era of great power rivalry, the effects of a warming climate become more apparent and threatening, and the ability to innovate plays a more central role in determining both national power and societal cohesion, Stockholm urgently needs to make adjustments to its policy approach for, and national attitude towards, its northernmost regions. It would stand a better chance to catch up with its neighbours in developing a more cogent Arctic strategy and, perhaps more importantly, play a more meaningful role in charting out a global strategy for an Arctic free of zero-sum calculations.

References[+]

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