The Baltic Region

2018 Vol. 10 № 1

Regional Economy

An Assessment of the Economic Performance of the EU Baltic Region States

Abstract

The paper explores how the common economic space, a product of the EU, influenced the economies of the Baltic Sea Region states in 1995—2015. The authors investigate changes in the economic performance of the developed (Germany, Denmark, Finland, and Sweden) and Eastern European countries (Poland, Latvia, Lithuania, Estonia) during the integration of the latter states into the EU. Performance dynamics is analyzed for eight EU Baltic Sea Region countries. Three Russian Baltic regions constitute a control group. The authors conduct a production-function-based comparative analysis of development dynamics in individual countries to identify distinctive features for each group. Despite a rapid growth of Eastern European economies, the difference between the region’s eastern and western countries remains substantial. Economic convergence between eastern and western EU countries in terms of investment does not lead to convergence in labour efficiency. The capital-labour ratio and the growth rate of labour efficiency in the Russian Baltic are close to the Eastern European average.

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The External Economic Factor in the Development of Northwestern Regions: Institutional Support and an Impact Assessment

Abstract

This research is warranted, since the Northwestern Federal District accounts for a significant proportion of Russia’s exports. The study aims to reveal the connection between the federal district’s external and internal economic development and to identify the extent to which institutional support for international economic cooperation facilitates brisk international trade. The authors consider international trade from the perspective of its procedural and institutional components. The study stresses dependence between the total international trade and internal economic performance of Russia’s North-West. Another focus is an analysis of institutional support for the development factors and the levels and areas of international economic cooperation. The analysis shows that the Northwestern regions’ external and internal economic development is interdependent and there is considerable support for international cooperation at different levels and in different areas. To a degree, this is explained by the federal district’s geographical position and transport connections, the ‘Nordic’ character of the economy shared by the Russian and neighbouring territories, and the multi-tier nature of the institutional framework for international economic cooperation in the international region.

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The Role of Public Companies in Creating a Platform for Economic Growth in Saint Petersburg

Abstract

Saint Petersburg has a special mission in delivering national development priorities, ensuring sustainable economic growth, and commercializing R&D. This necessitates research on the situation in the corporate sector, including investment potential and propensity to invest. The authors estimate the readiness of Saint Petersburg public companies to employ investment tools in delivering development strategies, which determine to a large extent the competitiveness of the city’s economy. This article presents a study into the response of twenty local public companies to changes in the economy and their ability to stay efficient and preserve investment potential in volatile economic conditions. The measures taken by the companies are considered as inert and inefficient. The authors surveyed managers from 70 Russian non-public companies, who confirmed the hypothesis that businesses are interested in investing in the earning assets (securities) of other companies to receive interest (dividends). The respondents tend to associate the risk of such investments with the issuer’s corporate control and corporate governance, which often fall short of best practices. The authors conclude that there is a need to improve knowledge of corporate relations, which affect competitiveness and the raising of funds necessary for sustainable economic growth in Saint Petersburg.

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Regional Security

NATO Policies in the Baltics: Objectives and Priorities

Abstract

The authors employ geopolitical analysis to identify the core characteristics of NATO’s current policy towards the Baltic Sea region. After the demise of the Soviet Union, the region was considered as one of the safest in terms of military security. However, in the aftermath of the Ukraine crisis, the region has witnessed a growing tension in relations between NATO and the Russian Federation. A comparative analysis of NATO’s official documents on the Baltics shows that the chief pretext for increased military presence in the region is the alleged need to defend the Baltic states from the Russian threat. Special attention is paid to the attempts of Western military strategists to encourage the neutral Nordic states — Sweden and Finland — to accede to NATO. This would lead to the organisation’s northern enlargement. The current situation suggests that to ease tension in the Baltic Sea region Russia has not only to respond adequately to emerging military threats but also to launch an awareness campaign to explain its position and dispel the myth about Russia preparing to start a hybrid war against the Baltic States.

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East Baltics: Economic Dilemmas of Security

Abstract

This article considers military security in the Eastern Baltic. The research focuses on the economic sustainability of Estonia, Latvia, and Lithuania in the context of military spending. The authors maintain that an increase in military spending can either strengthen or weaken national economic and technological potential. In Germany or Sweden, military spending accounts for a smaller proportion of the GDP or budget revenues, but it is integrated into the general model of innovative and technological development. In the case of the Baltics, it is advisable to estimate military spending as a proportion of budget revenues rather than that of GDP — this recommendation applies to all smaller states. The authors stress that the central component of any national military and economic development is a focus on general national objectives rather than solely military ones. Economically advanced countries integrate defence spending into their investment and innovation strategies and industrial policies. Smaller countries — and the Baltics are no exception — do not apply this principle. Their military spending does not contribute to the technological and economic agenda. The article shows that the military spending of Lithuania, Latvia and Estonia undermines their investment potential and serves as a critical factor in their national and governmental development. The authors suggest estimating military spending as a proportion of budget revenues rather than that of GDP.

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Regional Development: Geography and Economy

The Kaliningrad Region: Challenges of the Exclave Position and Ways to Offset Them

Abstract

The recent geopolitical shifts and Russia’s response to them have had a significant impact on the Kaliningrad region. This has created new challenges and warranted a revision of the old ones. The article investigates the reaction of the region’s economy to the challenges of its exclave position and considers possible measures to offset related problems in the current geopolitical situation. The article employs statistics, regional strategies, cross-border cooperation programmes, and expert interviews conducted by the authors in Kaliningrad in 2012—2014. The vast body of empirical data is instrumental in analysing the views of different stakeholders and estimating the problems and prospects of the region’s development as either Russia’s military outpost in Europe or as a ‘cooperation laboratory.’ The analysis takes into account collaborations with the neighbouring states. In striving to identify the preferable regional development conception, the authors reveal low susceptibility of local cross-border cooperation actors to the belligerent rhetoric of national authorities on either side of the border. The study of the state of affairs in tourism, a promising area of regional specialization, demonstrates a dual effect of the exclave position, which can be considered both as a challenge and an opportunity.

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The Effect of Migration on Latvia’s Sex and Age Composition

Abstract

The theory of Demographic Transition stipulates that the number of countries with the replacement and sub-replacement level of the total fertility rate is growing. In these conditions, population dynamics and the sex and age composition are increasingly affected by migration. The above holds true for Eastern European countries. Population decline has haunted Latvia for two and a half decades. Since 1990, the net migration rate has been negative, which contributes to depopulation. This study aims to reveal the effect of migration on the sex and age composition across Latvia and its largest cities. The authors consider hypothetical transformations in the country’s age structure in 2000—2015 in the case of zero net migration. The study uses the cohort component methods and considers the actual agespecific mortality and birth rates. The analysis of the results obtained for the population of Latvia and its individual cities makes it possible to identify temporal and age/space features of migration. A comparison of the official data with net migration rates calculated for different age groups ensures a more accurate estimate of the actual volume and direction of migration flows for certain Latvian cities. The method for calculating net migration for the selected age groups, described in the article, may narrow the gaps in the current migration statistics and reveal the territorial inhomogeneity of demographic processes.

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Estimating the Development of the Latvian - Estonian - Russian Transboundary Tourism and Recreation Region

Abstract

In 2004, the Pskov — Livonia Euroregion was established across the borders of Estonia, Latvia and Russia (the Pskov region). Tourism became a cooperation priority in the Euroregion. This necessitated research on the local tourism and recreation areas. This study aims to estimate the development prospects of transboundary microregions which have been identified by the authors within the Latvian-Estonian-Russian tourism and recreation mesoregion. The authors employ ten additional criteria proposed in the general conception of transboundary tourism and recreation regions. The article identifies five microregions: Pskov-Pechory- Tartu and Pskov-Izborsk-Cesis (first level), Pytalovo-Rezekne (second level), and Izborsk- Pechory district- Setomaa and Lake Chudskoe area (third level). The authors classify the microregions according to their level of development. The development of the Izborsk-Pechory district-Setomaa microregion is defined as ‘above average’, that of Pskov-Pechory-Tartu as ‘average’, and that of Pskov-Izborsk-Cesis as ‘below average’, and finally, the development of Pytalovo-Rezekne microregion is described as ‘poor’. The Lake Chudskoe area microregion is classified as an ‘emerging’ one. The overall level of development of transboundary tourism and recreation microregions is assessed as ‘below average’. The results of the study can be used in preparing recommendations for the development of transboundary microregions within the Latvian-Estonian-Russian tourism and recreation mesoregion.

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