Report on the development of port related transport corridors and sustainable regionale development.

Transcription

1 Baltic Sea Spatial Development INTERREG IIC BALTIC Transport Communication and Regional Development Deliverable 3.1 Report on the development of port related transport corridors and sustainable regionale development. Version 1.0 (03,2000) EUROPEAN Regional DEVELOPMENT FUND Community Initiative concerning Transnational Cooperation Spatial Planning

2 Document Information Document: BALTIC Transport Communication and Regional Development Deliverable 3.1 Date: 28. Februar 2000 Editor: Authors: Status: Version 1.0 Report on the development of port related transport corridors and sustainable regional development. University of Hamburg, Institute for Geography, Prof. Dr. Jürgen Oßenbrügge Marcus Cordts, Eckart Maudrich This report is a deliverable within the project. The conclusions and opinions expressed are the authors own Document Releases: Version Date Distribution Consortium Version 1.0, Date 2

3 Contents A Restructuring in the Baltic Sea Region Situatedness of Balticom and WP3 within VASAB and Interreg IIC 5 Workplan of Deliverable Development of framework conditions and regional restructuring towards regional cohesion in the BSR 7 2 The trade-face of the strings - BSR-integration process 11 From plan to market - restructuring of Baltic Sea Region in a broader context 19 3 Strings as sustainable links: Spatial cohesion by means of environment friendly transport with particular focus on port-relatedness State of the art of physical transport network in the BSR Planned action till Development of transport networks 32 B Country reports Restructuring in Shipping and the role of ITs 41 4 Structure of country reports, methods and validity of data Germany Danmark Norway Sweden Finland Russia Estonia Latvia Lithuania Poland 78 5 Literature 82 Annex 84 Maps 87 Version 1.0, Date 3

4 A Restructuring in the Baltic Sea Region Situatedness of Balticom and WP3 within VASAB and Interreg IIC The Interreg IIC Baltic Sea Region (BSR) Operational Programme is a community initiative concerning transnational co-operation on spatial planning. It integrates the spatial strategies from Vision and Strategies around the Baltic Sea 2010 (VASAB 2010) with the European Commission s European Spatial Development Perspective (ESDP) and regional development needs in the area as outlined by the Nordic Council of Ministers (BSR-OP, p. 9). Consequently it ows a number of characterstics to its constituents. The main starting point lies with the ESDPs rationale: "The idea is to give a new dimension to the conduct of sectoral policies by integrating them into their spatial context and looking at how they interact" (ESDP-s, p. 2). Upon this basis a future-oriented spatial structure - i.e. one that deals with, or solves current weaknesses and anticipates future needs (BSR-OP 46) - shall be derived so that the living conditions of the people and enterprises improve (BSR-OP, p. 9). With respect to enterprises, a spatial structure contributes to this goal if it provides for a better balance between competition and cooperation so that overall competitiveness increases (ESDP-l, p. 4). Applied to the Baltic Sea Region this means that it shall be able to compete globally and become a recognized and integrated partner of the European and global society (BSR-OP, 51). The VASAB-process has begun to imply (VASAB started earlier than the first draft version of the ESDP was presented) the first step of the ESDPs idea in assessing current spatial structures, their inherent problems and sectoral and spatial policies in place to address these problems 1. Based on this it has created a vision and some 1 It should be noted that Interreg s defintion of BSR is based on ERDFs criteria for funding. Despite PHARE and TACIS programmes there is a clear financial bias towards EU-countries (BSR-OP, p. 10). VASABs delimitation of BSR differs form that. Despite the problem of financing development it includes all countries that have physical contact with the Baltic Sea, i.e. the transition countries, too. Moreover it includes Belarus. Russia and Germany denote only the following administrative units: Murmansk oblast, Karelia, St. Petersburg, Leningrad oblast, Novgorod oblast, Pskov oblast, Kaliningrad oblast, Schleswig- Holstein, Hamburg, Mecklenburg-Vorpommern, Berlin and Brandenburg. Roughly it can be stated that ERDF allocates money according to certain development indicators whereas VASAB provides for an Version 1.0, Date 4

5 strategies on how to improve the situation on a cross-national level (VASAB, p. 16). The legal status of these visions and strategies is not formally binding and it therefore can not appear as a neglection of the principle of subsidiarity but it is apt to provide some guidance to investors and financing institutions (VASAB, p. 16). Summing up this means that an increase in national and private cooperation across the BSR shall lead to an increased competitiveness of enterprises in a global context which in turn shall improve living conditions of the people. Within Balticom national and private cooperation in the transport sector shall be improved aiming at the modernization of transport operations which is sub-measure one of Interreg s measure : Improving communications and promoting energy solutions as part of sustainable development (BSR-OP, p.56-59). This in turn will affect the competitive status of the actors within transport and transport-related informationtechnology-business (IT) and show effect on global competitiveness of BSR-tradenetworks in certain commodities. Now, living standards differ to a great degree based upon the availability and kind of goods supplied. The spatially differentiated supply of goods - which is a central topic of spatial planning - relates to spatial structures which is constituted by three basic elements:"the system of cities and urban settlements ( pearls ), the interlinking infrastructure networks ( strings ), and selected types of land uses ( patches ) in non-urban (rural) areas" (VASAB, p. 5). Thus levels of supply differ widely across the BSR as national framework conditions vary and are subject to more detailed spatial differentiation within the national frameworks. Modernization of transport relations - as tested in Balticom - shall contribute to the improvement of living standards (social cohesion) by improving regional cohesion. Workplan of Deliverable 3.1 The spatial focus of workpackage 3.1. is the Baltic Sea Region as a planning region of VASAB Therefore its analysis will concentrate on the cross-national level. Since overall regional scetch of how these indicators could be improved over time. Both delimitations can not Version 1.0, Date 5

6 it is the aim of VASAB and Interreg to enhance cooperation in the BSR so that improved competitiveness leads to the BSR beeing a recognized and integrated partner of global society it becomes quite obvious that regional restructuring needs to focus on international linkages within the region and of the region with the global arena to describe the development of restructuring with respect to this goal. Major efforts concerning this arena stem from the involved national governments and enterprises with an international focus of activities. Part A will present some theoretical background to assess these broad strategic activities manifesting an important part of social and regional cohesion. Tentatively this will relate to the overall trade in the BSR and to more specific trade flows between its countries. This will then ultimately materialize in traffic volume. Part B looks at these issues from the perspective of individual countries. As a matter of this change in scale indicators are more specific than in Part A. 1 Development of framework conditions and regional restructuring towards regional cohesion in the BSR. The aim of this chapter is to describe the progress the BSR has done in becoming a recognized and integrated partner of global society. As stated above this takes an influence on trade and traffic development. The progress shall be described with respect to development in governance and business. To justify why certain data is presented as evidence, we will start with some theoretical background. Starting with the international activities of businesses. According to Meyer 1987 (p. 11,12) foreign market strategies of international enterprises can be distinguished by activity in - (Export-) Credit (Financial Engineering) - Licence and patent deals transfers - Export deals and - Foreign direct investment mean that challenges to sustainable development necessarily need to originate in the respective areas. Version 1.0, Date 6

7 All strategies are regarded as complementary tools of entry into foreign markets. Yet some groupings of these activities are possible. As part of internationalization enterprises could start with export, shift to licence and finish with a foreign direct investment. In-sourcing strategies would start with export and shift to foreign direct investment directly after that. Financial engineering is an important marketing tool with former state economies and developing countries. Sweden and Finland used this marketing tool in their trade relations with Estonia 2. With respect to risks - transfer-, dispositional and expropriational risks - it becomes obvious, that foreign direct investments are subject to all of the risks - including dispositional risks like political and social instability as a matter of say significant gaps in wealth and living standards - whereas the other three relate to transfer-risks, i.e. exchange rate, insolvency and trade barriers, only (Meyer 1987, p.17). Based on this split between transfers and foreign direct investment we will now look at theories describing the reasons for these actions. According to Hekscher-Ohlin-Theorem an abundancy of supply of a certain factor in one region will cause the factor itself to be cheaper than in a region who lacks that factor. As a result goods which which use this factor intensifely will turn out to be cheaper than elsewhere. Therefore this good should have a comparative advantage in export. Success in export should lead to a specialization according to these comparative advantages. (Schätzel, p. 126 / 127). If one assumes regions to be the European Union and the Central and Eastern European states then time and again the question arises which factors could be interesting for western enterprises strategies - who face pressures from global competition - and therefore which type of division of labor would result from the different scenarios. The latter relating to the question whether that type of intercourse leads to an increase in welfare and living standards in the eastern states and thus to an intensified social cohesion. 2 Nachrichten für den Außenhandel (NfA): Estland braucht westliche Importfinanzierung Version 1.0, Date 7

8 Discussion about major groups of strategies divides between the east as a production site or as a market of its own (Kurz/Wittke 1998). Implications differ significantly. The production site strategy assumes that due to an abundance of low-cost work-force and industrial production capacities in the east production will basically be directed towards the already existing western markets, resulting in an export-led growth as private local consumption is believed to be subject to little change. The market site strategy is contrary with respect to catch up in socio-economic standards and therefore speculates on rapid change and strong build up of consumption. Adding different factors and varying their bias could produce many intermediate solutions between these two poles. Yet we will not construct an ivory-tower set of potential combinations. Rather we will stick to these basics with little alteration and focus on its spatial implications with respect to transport and settlement. Obviously the westward orientation of the production site approach leads to an intensive import-export traffic between east and west. If the production site is a result of low-cost wages and all else remains constant, i.e. supply chains towards the production site and distribution towards western markets - then cross-border traffic is likely to boost and it is of paramount importance to set incentives for use of environment friendly modes of transport. Yet if some of the supply-chains shift into transition countries - as part of a complete reshuffle due to western cost-cutting-, then evolving traffic patterns would show an increase in cross-border traffic, too but regional distribution and concentration of traffic would produce a different picture: National traffic in transition countries would increase and owing to a new share in the supply-chain some value would be transferred as well. Production site jobs would be complemeted by a stabilisation of suppliers jobs and an extra demand for transport services. Deconcentration of traffic and stabilizing inputs into the transitional economy are main improvements. Competitive pressures face goods with similar factor-input structure in EU- (or even broadar OECD-) territory and might lead to further merging and deployment there. Version 1.0, Date 8

9 Further a production site with these qualities could also be used to differentiate already existing product diversity towards no-(brand-) name low-cost products which then could facilitate market entry in transition economies or low-cost high tech products which would facilitate transfer of knowledge (see licence and patents above). Production site strategy would be complemented by market site strategy. Considering the production site to be a foreign direct investment closes the circuit between monetary flows and commodity flows. The physical face of the investment - so the local spatial impacts - differ with respect to that sites initial conditions. If restructuring of existing stock seems economically sensible then the city will see some modernization in this area. Otherwise a greenfield-investment next to existing sites (since that is where the work-force is) creates dead spots, industrial ruins within city life. Depending on the spatial concentration of these factors city- or regional life might be affected negatively and therefore be a major challenge for city-planners. The second image of the production site strategies resembles - in traffic volume and distribution - the basic market-site modell (supply-chains originate in the west, consumption in the east) assuming vast similiarity of distributional and supply-chain traffic. Distribution of goods is to this modell what supply-chain is to the other. Gains of transition economies could lie in the transport sector and retailing as well as retailing related service sectors such as advertising and its impact on media and culture 3. 3 NfA, Werbemarkt in Estland meldet Umsatzplus, Thes Estonian case reveals that advertising has become more and more important. Yet since many of the products stem from abroad international PRagents seem to be an important partner to have to succeed as a local advertiser. Version 1.0, Date 9

10 2 The trade-face of the strings - BSR-integration process The European Bank of Reconstruction and Development has prepared a detailed study which shows the long-term revealed comparative advantage of transition countries factor endowments 4. Revealed comparative advantage is a normalised measure of net exports 5. Since advantage is a relation, focussing on transition economies standing will produce an overall picture of advanced economies situation as well. Relative weaknesses of one side therefore need to result in relative strengths of the other. - Commodity groups operationalising factor endowments are based on SITC- 2 digit classification (rev. 3) 6. Factor endowments are: labour, skills, capital, agriculture and natural resources. So the classical factors are distinguished in ressources and agriculture and labour is split up in skills and labour. The summary table below shows a country based classification of its revealed comparative advantage in a certain factor endowment and its trend in the time-span from based on the change in gross and net exports to OECD-countries. A single plus or minus denotes an existing revealed comparative advantage or disadvantage whereas a double plus or minus shows strong revealed comparative advantage or disadvantage. Trends vary from -2 (strongly negative) to +2 (strongly positive). Adding to this the main export commodity groups are shown. 4 EBRD. Transition Report p. 179 f. 5 Revealed comparative advantage in a commidity group i: RCAi = ((ESi-ISi)/(ESi-ISi). ES and IS are exand import share for commodity group i respectively. 6 Commodity assignments are as follows: Agriculture: 0,1,4,22,29 Skill intensive: 54,72,75,76,87,88 Labour intensive: 26,60,61,65,77,80-85,89 (textile, clothes, footwear, other) Natural resources: 21,24,26,27,28,32-35,63,66,68 (wood, oil, gas, electricity, coal, stone, non-ferrous metals, skins and furs, textile fibres) Capital-intensive: 23,25,51-53,55-59,64,67,69-71,73,74,78,79 (paper, chemicals, rubber, plastic, ferrous metals, transport and industrial machinery) Version 1.0, Date 10

11 Revealed comparative advantage (RCA) and exports. Country Agriculture Ressources Capital Labour Skills Main export commodity groups RCA Trend RCA Trend RCA Trend RCA Trend RCA Trend Estonia Oil (23%), wood (14%) Latvia Oil (41%), wood (23%) Lithuania Clothing (23%), oil (10%) Poland Clothing (11%), vehicles (8%) Russia Oil (32%), nonferrous metals (20%) Source: EBRD, Transition Report 1999, reduced by some countries and different notation for trend. Comparative advantage in all countries is biased towards resource- and labour-intensive industries, while there is a strong disadvantage in high-tech-sectors (skills). Slight disadvantages appear in agriculture and heavy-industry, the two sectors that were ideologically - as materialistic grounding - at the very heart of 45 or 70 (Russia) years of socialism. Vice versa imports from OECD-countries coped for deficits in the other factor endowments. So OECD countries had an advantage in two out of five factors. More specifically addressed Russia and Poland form the anti-podes of the spectrum of revealed comparative advantages. Whereas Russias comparative advantages lie in the resources sector - with more than 50% of its main export commodity groups stemming from that sector - Poland has comparative advantages in three of five factors: agriculture, ressources and labour. As a matter of fact main export commodities reveal this difference in quality and quantity: There is no such domination of a single group of commodities and a labour and a capital intensive commodity group form the main export categories. Anyhow trends in agriculture and ressources sector are negative, showing some problems in restructuring 7. Of the Baltic States Lithuania is similar to Poland with respect to the number and type of factor endowments with a revealed comparative advantage: Capital and labour - so 7 Osteuropa-Institut München, p. 34, % of all people employed in agriculture produce 7% of GDP. Maschines are old and properties average at 7ha. - Coal mining needs to reduce capacities and will set people free. Steel industry will have to deploy people due to modernization. Adding to this industrial problems show a clear regional bias towards Kattowitz region. Version 1.0, Date 11

12 two out of five factors - show comparative advantages with respect to OECD-countries. Therefore consequently labour intensive clothing industries form the main important export group. Yet trend in labour is strongly negative; directly opposite to trend in capital. Due to Russian oil transit, all the Baltics show oil among their two most important export commodities with Latvia heavily being dependent on it 8. Trends reveal very strong build up of advantages for Estonias high-tech sector and strong ones for Latvias capital sector. Development of trade over time shows that these differences in factor endowments have contributed to significant problems with transition economies trade balance. Balance of trade in goods & services (in Mill. $) Country Estonia - -83, , ,8 280,80 284,20 498, , ,00 Latvia 95,3 338,9 68, ,3-422, Lithuania - 201, ,6-866,4-1209, Poland Russia Source: World Bank. Global Development Finance. Analysis and Tables. Washington 1999; EBRD. If these problems should be due to OECD-countries than trade will have had to be geographically redirected. The next table shows the different dynamics of overall change of geographical integration of trade with respect to countries revealed advantages in exports. In 1990 more than 90 per cent of the exports of the Baltic States were directed towards countries of the Council of Mutual Economic Assistance (CMEA). Russias and Polands bias to CMEA was less at over 60 and 50 per cent respectively. 9 In 1994 this structure had changed completely for all countries except for Russia whose global integration has 8 Important oil pipelines end at the ports of Ventspils and Liepaja. See map in annex? Version 1.0, Date 12

13 not changed much. Trade had shifted to EU as the dominant partner with very large redistributions of trade flows in the Baltics and very considerable ones in Poland. Till 1997 not much changed for Estonia and Latvia. Yet Lithuania and Poland showed very considerable and some redirection of integration respectively with other transition economies. Direction of export trade 1994 and 1997 Country Trade with EU Trade with TE Tade with RoW Trade with EU Trade with TE Trade with RoW Estonia 0,62 0,29 0,09 0,64 0,28 0,08 Latvia 0,68 0,23 0,08 0,66 0,25 0,09 Lithuania 0,58 0,38 0,04 0,47 0,50 0,03 Poland 0,76 0,15 0,09 0,71 0,22 0,07 Russia 0,42 0,34 0,25 0,38 0,38 0,23 TE= Transition Economies; RoW= Rest of World. Source: EBRD, Transition Report Referring to VASAB framework the question arises how much of EU- and transition economies share of trade do VASAB-countries absorb. The table below shows intensity of regional embeddedness of BSR-countries overall trade Source: De Melo et al. 1997, cited after EBRD: Transition Report Intensity of BS-regional embeddedness = SQRT((ExpBSR/ExpTotal)*(ImpBSR/ImpTotal)); SQRT = square root, ExpBSR, ImpBSR= Export into or import form BSR countries (except for Belarus). Version 1.0, Date 13

14 BS-regional embeddedness (% share of trade with BSR in relation to total trade). Country * Germany 9,79 10,01 10,11 10,50 10,58 Denmark 42,34 43,88 44,12 42,44 44,22 Estonia 75,77 71,80 70,21 72,51 68,95 Finland 41,33 40,93 43,07 41,96 42,09 Latvia 53,98 56,46 64,25 58,57 Lithuania 44,94 50,17 46,94 49,52 59,73 Poland 47,41 45,48 48,23 47,39 60,26 Norway 35,54 36,72 37,03 36,03 34,61 Russia 31,67 21,41 21,04 20,34 24,23 Sweden 36,92 38,21 38,12 36,74 32,33 * First and second quarter, only, IMF ( c): Direction of Trade Statistics Quarterly. Washington D.C., own calculations. Baltic states are most intensly embedded in the BSR. More than half of their total trade is carried out in this area. Yet the dynamics of the three states is diverse. Whereas the BSR becomes more and more important to Lithuania and Latvia it is loosing attractivity for Estonia. Poland seems to be on a path to a very heartily connection to the BSR with an incredible increase in 1997 joining the Baltics top 50% club. The German engine is not as turbulent as the other ones but the BSR gradually gains importance though on the whole the BSR amount to just 10% of total German tradevolume. Nordic countries behave diversely. Denmarks links to the BSR seem to get even more intense - inspite of the cut back in summing up to almost half of the Danish trade volume. Norway and Sweden have had their strongest connection to the BSR in 94 and 95. After this a considerable shift in orientation away from the BSR Sweden in particular - has taken place. Swedish and Norwegian trade connect with the BSR with slightly more (Norway) and slightly less (Sweden) than one third of their respective trade-volumes. Finland does not yet know which direction to go. On the whole Finland has close links to the BSR with slightly more than 40% of its trade relating to it. Russias trade with the BSR decreased to slightly more than one fifth of its total trade from slightly less than one third in 94. It has not come back to these figures though the first quarters of 97 seem to indicate that it attempts to come back. Having considered each countries Version 1.0, Date 14

15 position with respect to global/regional integration, next table gives evidence regarding importance in total BSR trade, distinguishing between im- and exports. %-Share Total BSR-Imports %-Share Total BSR-Exports Memory items: GNP (Mill. US$) GNP/ Capita Pop. (Mill.) D D S S Dk Dk N Rus Rus FIN PL N FIN PL EST EST , LIT LIT , LV LV , * Data refer to IMF ( c): Direction of Trade Statistics Quarterly. Washington D.C., Weltentwicklungsbericht 1999, own calculations. Based on the value of trade there is a clear east-west divide: Five western states absorb 80% and five eastern states account for 20% of total value. Little differences exit between ex- and imports with respect to the first three positions. Alternations in ranking concern Norway, Russia, Poland and Finland who change relative positions, yet whose overall importance is in the range of 7 to 11%. As has already been stated in the paragraph about revealed comparative advantage, these largely are a result of different endowments with production factors which in turn reflect dissimilarities in production structure. - Moreover the size of the economy (GNP) and the overall geographical orientation of trade play an important role in attracting trade i.e. explain a great deal of variation in importance across BSR-countries. BSR trade in early- and mid-ninetees clearly is dynamic. Whereas world trade grew by 6.8% 11 on average BSR trade grew by 9,28%. Compared to this average two western (Sweden and Denmark) and two eatern (Russia and Lithuania) could not keep pace and therefore lost importance. Most extraordinary growth rates experienced Latvia and 11 IMF: Global Development Finance 1999, p. 17. Version 1.0, Date 15

16 Norway. More specific explanations about this will be given below in the country section. The following table integrates the previous tables on embeddedness and importance to BSR trade. BS-regional integration more Denmark, Poland(4) Estonia, Latvia, Lithuania, Germany, Finland (3) less Russia, Sweden (1) Norway (2) less more Importance in trade The odds are case 2 and 4: Despite more direct focus on BSR trade is loosing value (4) and inspite of geographical reorientation trade is gaining importance (2). So far trade has been looked upon with an investors eyes. Yet equally important and relevant to trade and its development are institutions and their regulative body. The following table gives an overview about institutional integration of transition economies. Version 1.0, Date 16

17 Institutional integration into european and global economy. Date of empowerment Important international treaties Estonia Latvia Lithuania Poland Russia Independence Independence Independence from Soviet from Soviet from Soviet Union (1991) Union (1991) Union (1990) Republic of Poland through constitutional change from Peoples Republic of Poland (1989) EU-Association agreement (1992) CEFTAmembership (1993) Sovereignty proclaimed (1990) WTOmembership (1999) EFTAmembership (1996)WTOmembership (1999) EFTAmembership (1995) EFTAmembership (1993) WTOmembership (1995) OECDmembership (1996) The emergence of new states (the Baltics in particular) brought about new barriers. As a matter of fact the insitutional complexity rises - which applies to trade in particular and therefore forms new obstacles. To adress these obstacles a counter-current reduction in institutional reduction is necessary to prevent harmful effects to economy. Reduction of complexity had begun with several bilateral agreements which then dissolved into a broader regional context (i.e. EFTA). This then formed the basis for the next step (WTO). Poland has achieved greatest and quickest success in integrating. Together with Estonia it applies for EU-membership now. On the opposite Lithuania has not yet succeeded in WTO-membership talks. Whereas most of theses treaties have a clear bias towards trade EU-accession talks play in a broader framework.. Next paragraphs are intended to link current focus to this extended view. Version 1.0, Date 17

18 From plan to market - restructuring of Baltic Sea Region in a broader context. Challenges in restructuring stem from the organisational structure in centrally planned economies. A universal subject - the state - was responsible for providing the means to sustain living conditions as ideologically proclaimed. To succeed in doing so products and services as well as utilities and their finance had to be allocated by an overall plan. So disposition, ownership, responsibilty and governance of collective acting were centralised. Based on this broad picture it becomes evident that a market orientation forces break up of universal subject into many subjects, therefore decentralisation of ownership, responsibility and disposition. The following table gives an idea of this process by showing development of private sectors share in total gross domestic product. Private sector share in GDP (%)* Country Estonia 10,0 10,0 25,0 40,0 55,0 65,0 70,0 70,0 70,0 Latvia 10,0 10,0 25,0 30,0 40,0 55,0 60,0 60,0 65,0 Lithuania 10,0 10,0 20,0 35,0 60,0 65,0 70,0 70,0 70,0 Poland 30,0 40,0 45,0 50,0 55,0 60,0 60,0 65,0 65,0 Russia 5,0 5,0 25,0 40,0 50,0 55,0 60,0 70,0 70,0 * IMF-staff estimates till 1993, EBRD staff estimates from Rough estimates based available statistics from both official and unofficial sources. The underlying concept of private sector value added includes income generated by the activity of private registered companies, as well as by private entities engaged in informal activity in those cases where reliable information on informal activity is available. In 1990 private sectors share in GDP reflects intensity of state economy; Russias 5% share is superseded by Baltics 10% and differs considerably from Polands 30% share after one year of constitutional change. In 1996 share-levels of all countries had at least caught up on Poland, with Estonia and Lithuania overtaking it already. In 1998 all countries have reached almost or slightly more than two thirds level of GDP. Version 1.0, Date 18

19 Nonetheless these figures do not mean that influence of state has become marginally. Based on turnover two thirds of all big companies in Poland still belong to the state 12 With many subjects acting in the same arena states role turns to regulating, framing individual actors actions in order to prevent overall harmful effects and to provide for the efficient supply of goods and service by private actors. With respect to the latter aspect external opening of economies helped raise efficiency level but provided for more competition resulting in painful adjustments inside. Next table shows how internal and external deconstruction affected real growth in gross domestic product. GDP (percentage change in real terms) Country Estonia -13,6-14,2-9,0-2,0 4,3 3,9 10,6 4,0 0,0 Latvia -10,4-34,9-14,9 0,6-0,8 3,3 8,6 3,6 1,5 Lithuania -6,2-4,3-16,0-9,5 3,5 4,9 7,4 5,2 0,0 Poland -7,0 2,6 3,8 5,2 7,0 6,1 6,9 4,8 3,5 Russia -5,0-14,5-8,7-12,7-4,1-3,5 0,8-4,6 0,0 Source: EBRD. Output of all countries suffered significantly was particularly bad for all countries except for Poland who had begun growth then already. Latvia was struck hardest with a decline of 34,9%. But double digit negative growth rates in Estonia and Russia demonstrate significant problems, too. Since 1993 (Latvia) and 1994 (Estonia) growth rates have begun positive trends showed best results in growth for all countries (slightly less in Poland) and 1998 have seen decreasing positive growth rates in the Baltics and Poland. On the whole a trend for Russia is hard to detect. Growth rates fluctuate vastly. More specifically next table shows development of efficiency in industrial sector. Next table operationalises efficiency in industrial sector by relating share of total workforce employed in industrial sector to share in gross domestic product. 12 Mittel - und Osteuropa, p. 33. Version 1.0, Date 19

20 Share of industry and construction in total employment (in per cent)share of industry in GDP (in per cent) Country Estonia 36,8 na 36,4 27,5 35,5 22,0 33,0 21,1 32,0 20,7 34,0 19,8 33,5 19,0 33,6 18,1 33,2 na Latvia 40,6 38,2 38,9 29,9 34,63 0,7 31,02 5,4 28,8 28,1 28,0 26,4 26,7 27,4 26,8 24,3 na 23,0 Lithuania 41,2 45,3 39,53 8,8 38,03 6,0 32,82 7,0 29,22 6,1 28,22 5,8 27,12 5,2 na23, 6 nana Poland 36,3 40,2 35,33 4,0 34,03 2,9 32,73 2,2 31,92 9,2 32,02 7,1 31,7 28,1 31,9 28,1 na na Russia 42,3 41,84 40,54 39,44 37,04 35,24 33,74 31,84 nana 6,0 3,9 3,6 1,5 1,8 2,5 2,7 Source: EBRD In 1997 Estonias industrial sectors employment of 33,6% of total workforce accounted for 18,1% of GDP, only; at the same time employment did not change much. So efficiency has decreased significantly. This does not apply for Latvia. Latvia has cut down employment from 40,6% (1990) to 26,8% in Yet its slightly unbalanced ratio employed to output stayed fairly constant across the years. A similar process occured in Lithuania, except for that Lithuania started with a positive balance and now has a slightly negative one. With respect to latter Polands development very much resembles Lithuanias. In difference to Lithuania Polands industrial sectors contribution fell slightly whereas employment has decreased drastically. So efficiency has increased. Russias path differs from the above. A pronounced decline in employment did not affect output significantly. 31,8% of total workforce account for 42,7% (1997) of GDP. According to these figures Russias industry is most efficient. Yet this development might not be due to positive developments in industry but it could show extremely negative progress in other sectors, too. Version 1.0, Date 20

21 Whereas the previous aspect focused on the efects of competition in industrial sector next table exhibits the importance of the sector enabling this competition, i.e. the trade sector. Share of trade in GDP (%)* Country Estonia na na 46,9 54,1 61,6 57,2 53,3 61,6 62,5 Latvia na na 54,6 48,4 32,1 37,3 36,7 40,1 40,3 Lithuania na na na 78,8 50,2 50,7 48,9 49,7 44,2 Poland 15,7 16,3 16,3 17,2 18,8 20,0 21,2 24,2 24,7 Russia na na 57,4 30,9 21,3 20,4 18,3 18,0 24,2 * Average of exports and imports as a share of GDP, EBRD. Generally trade is more important in small Baltic states than in Poland and Russia (1998). From 1993 on it has been the predominant sector in Estonia which provides us with some evidence that Estonias above average growth rates in GDP heavily depends on trade. With respect to trend this applies to Poland as well. Its trade share of GDP has increased from 15,7 (!990) to 24,7% in Lithuanias development has been directly opposite to Estonia and Poland. Trade was a major determinant of growth in 1993 (78,8% of GDP); by 1998 its share had decreased continuously to 44,2%. Similar to this trend Russias share of trade in GDP was more than cut in half by decreasing from 57,4 % (1992) to 24,2% (1998). This decline has to do with rapid decline in prices on the world market. Moreover due to high inflation russian economy has considerably shifted to barter trade 13.Yet in 1998 Russias trade picked up in importance again. In the above section on international activities relations between trade and foreing direct investment have been plotted. Based on that one should expect foreign direct investment to pick up over time, too. In trade we have seen that a considerable redirection of trade has taken place. Follwoing table shows if this redirection was accompanied by a pick up of foreign direct investment, too. 13 Alexaschenko, p. 156; compare Commander / Mummsen. Version 1.0, Date 21

22 The following table describes overall development of foreign direct investment dynamics. Foreign direct investment (net inflows recorded in the balance of payment in US$ millions) Country Cumulative FDI- Inflows Cumulative FDI- Inflows per capita Estonia Latvi Lithuania Poland Russia Source: EBRD, Transition Report In absolute terms Poland has attracted by far the most foreign direct investments, with an acceleration of the dynamics in the last two years. In per capita figures the Baltics have most successfully absorbed FDIs with Estonia beeing most attractive. Foreign direct investment shows that Russia has not gained much confidence in foreign investors eyes, yet. Geographical origin of FDIs show interesting results as becomes apparent from following tables: Version 1.0, Date 22

23 Origin of FDIs in the Baltics (cumulated till end of 1997) Estonia Latvia Lithuania % share in FDI % share in FDI % share in FDI Finland 28,8 Denmark 20 USA 25,9 Sweden 20,7 Russia 10,4 Sweden 12,3 USA 5,8 USA 9,1 Germany 11,5 Russia 5,7 Singapore 9 Great Britain 7,8 Denmark 4,7 Germany 7,3 Denmark 6,1 Norway 4,7 Great Britain 5,1 Singapore 4,2 Ireland 4,7 Great Britain 3,5 Sweden 4,7 Germany 3 Switzerland 3,4 other countries 18,9 Estonia 2,8 Source: Estonian National Bank, Latvian Statistics, Lithuanian Development Agency cited after: Mittelund Osteuropa Perspektiven, Bd. 1 Estonia has predominantly been charming to Finland and Sweden who account for almost 50% of FDIs. Including other VASAB-states (62.9%), FDIs mirror trade flows and show high overall integration within BSR.- In tendency this is true for Latvia, too with 45.2% of all foreign direct investments stemming from VASAB-states. Denmark is biggest investor and Russias investments relate to importance of oil sector in Latvia.- Unfortunately not much data has been available for Lithuania. Anyhow one third of listed origins stem from VASAB countries. As with trade situation looks different for Poland and Russia: Version 1.0, Date 23

24 Origin of FDIs in Poland (end 1997) and Russia ( ) Poland Russia % of share in FDI % share in FDI-stocks USA 11,89 USA 41.2 Germany 9,34 Germany 8.0 MNE and 9,2 Great Britain 7,7 Institutions Italy 9,13 Cyprus 5.0 France 6,86 Austria 4,3 Netherlands 6,09 Switzerland 3,5 South Korea 6,09 Liechtenstein 3.0 Great Britain 5,66 Frankreich 3.0 Sweden 3,2 Sweden 2,5 Denmark 1,73 Belgium 2.0 Norway 1,35 Finland 0,78 Source: PAIZ, Goskomstat; BfAI cited after: Mittel- und Osteuropa Perspektiven FDIs in Poland show a clear integration into the west. Yet BSR-countries representation (16,4%) does not reflect trade patterns. Little affinity to BSR in trade terms corresponds with little integration in FDIs, too. With respect to market and production site approach we asked if countries would profit from respective actions. Based on very rough measures of growth rates of nominal GDP and inflation gaps between east and west have widened despite higher integration into BSR. Version 1.0, Date 24

25 Nominal growth of GDP Germany 5,2 3,4 2,3 2,9 3,8 2,6 Denmark 7,3 5 5,2 5,3 4,9 4 Finland 5,8 7,7 4,7 7,3 7,2 4,8 Norway 5,5 3,8 5,5 3,4 Sweden 5,9 7,8 2,3 3 3,9 3,4 West 5,94 5,54 4 4,38 4,95 3,7 Estonia -1,80 4,30 4,00 11,40 5,50 5,00 Latvia 2 0 2,8 6,5 6 4,5 Lithuania 1 3 4,7 5,7 5 3 Poland 5,2 7 6,1 6,9 6,3 5,7 Russia -12,6-4 -2,8 0,8-3,8-5,4 East -1,24 2,06 2,96 6,26 3,8 2,56 Inflation Germany 2,4 2,2 1 0,6 0,9 0,9 Denmark 1,4 1,7 2 1,9 2,1 2,3 Finland 5,8 7,7 4,7 7,3 7,2 4,8 Norway 5,5 3,8 5,5 3,4 Sweden 5,9 7,8 2,3 3 3,9 3,4 West 4,2 4,64 3,1 3,24 3,525 2,85 Estonia 48,00 29,00 23,00 11,20 11,20 9,30 Latvia ,5 6 6 Lithuania 72,1 39,5 24,7 8,8 7 6,7 Poland 29,5 21,6 18,7 14, Russia ,6 14, East 98,52 62,62 26,4 11,6 21,44 26,4 Version 1.0, Date 25

26 3 Strings as sustainable links: Spatial cohesion by means of environment friendly transport with particular focus on portrelatedness. So far we have focused on abstract categories of value with respect to competitiveness and cooperation (sharing of respective advantages in factor endowments). Next we shall extend and shift this idea to the transport sector. Adding to this VASAB sets this in a context of sustainability, i.e. transport needs to be environmentally friendly (p. 58). So first of all integration and accessibility of services shall be linked into planned urban network and secondly this shall be done by promoting sea transport and railways. Yet major focus of this statement is on long-distance traffic. Therefore short-distance flexibility of road transport shall be combined with the other modes of transport to shift and keep long-distance traffic on vessel- and rail-services. To effectively mobilise the potentials of environment friendly transport modes competitiveness needs to be raised by reforming institutional set up of transport sector (VASAB, p. 58).This shall be complemented by usage of competitive potentials which lie in innovative communication systems (OP, p. 56). Lastly - to increase overall efficiency - inter-modal transport centers shall improve combined transports (VASAB, p. 58). Next subsections will give an overview of existing and planned infrastructure, state of reform in transport and development of cross-border (long-distance) transport. 3.1 State of the art of physical transport network in the BSR. The state of the art in physical transport network summarizes map 1 in the appendix. According to VASAB deficiencies in the transport network are as follows: Ports: - Nordic and Western ports need to adapt their hinterland transportation to increasing volumes of ferryboat traffic. This applies for ports in transition countries even more so. Version 1.0, Date 26

27 - Railway links to hinterland particularly need to be improved in: the ports of Klaipeda, Liepaja and Tallinn (towards Russia); Rostock, Saßnitz/Mukran, Szczecin, Gdansk and Karlskrona (VASAB, p. 33). Railways: - Transport time and quality need to be improved along Helsinki-Tallinn-Riga- Kaunas-Warsaw, Gdansk / Gdynia-Kaliningrad-Riga-St.Petersburg, Berlin-Warsaw- Vilnius-Daugavpils-St.Petersburg, Berlin-Warsaw-Brest-Minsk-Moscow. - Gdansk, Kaliningrad, Riga and Tallinn are inadequately linked with crosscontinental railway lines. - Cross-border links between Finland and Russian Karelia are insufficient. - With respect to quality regional links between Vilnius / Kaunas, Gdansk, Kaliningrad, Riga, Tallinn and Minsk do not offer reasonable alternative to road transport. - Lengthy border-crossing procedures increase travel time and therefore hamper benefits from physical improvement measures. - Railway systems are not technically harmonised between west and east. (VASAB, p. 34). Roads: - insufficient port hinterland connections (same ports as mentioned for railways) - deficient cross-continental links to Western, Central and Eastern Europe, with the need for an improved integration of major coastal cities. - lack of cross-border links Finland-Karelia, and generally inadequate border crossing procedures, deficient national road systems to link main national and regional cities with each other. (VASAB, p. 36) Transport Centers: - The creation of such centers is only incipient in western and nordic countries, and they are widely missing in Central and Eastern Europe. Such center is under study now for Sestokai (Lithuania) along the Warsaw-Vilnius / Kaunas corridor (VASAB, p. 36). Version 1.0, Date 27

28 3.2 Planned action till Derived from the previous section map2 in the appendix displays BSRs visions with respect to transport and settlement. According to VASAB planned action incorporates following goals: General: - easy border crossing with little delay. Sea Transport: - Ferryboat links across the Baltic Sea will be particularly strengthened in the southeastern part, including the ports of Saßnitz, Rostock, Szczecin / Swinoujscie, Gdansk / Gdynia, Kaliningrad, Klaipeda, Riga, Tallinn and St. Petersburg, with a growing number of links across the Baltic Sea towards the Nordic Countries and Germany. - New railway ferryboat links, will link Sweden (Ystad-Kalmar range) to Gdansk and Klaipeda. - Universal port functions will concentrate at the ports of Lübeck-Travemünde, Kiel, Copenhagen, Arhus, Esbjerg, Malmö, Gothenburg, Oslo, Stockholm, Helsinki, Rostock, Szczecin-Swinoujscie, Gdansk, Kaliningrad, Klaipeda, Riga, Tallinn and St.Petersburg. These ports will develop into partners among themselves and for existing universal ports such as Hamburg ( as the intercontinental main port). - Short-sea shipping shall complement universal ports. Railways. - Improved railway transportation systems shall provide connections for long distances among European and Baltic cities. - Main high-speed international railway lines 2010 and beyond shall be: 1. Hamburg- Rodby-Copenhagen-Malmö- Stockholm - Sundsvall; with a branch Malmö-Gothenburg (Oslo) 2. Hamburg- Arhus- Frederikshavn - (Oslo) 3. Turku-Helsinki-St. Petersburg- Moscow. 4. Tallinn-Riga-Kaunas-Warsaw-Berlin-Hamburg Version 1.0, Date 28

29 5. St. Petersburg-Pskov-Daugavpils-Vilnius-Warsaw (to meet corridor no.4) 6. Moscow-Minsk-Brest-Warsaw (to meet corridor no. 4) 7. Klaipeda-Siauliai-Vilnius-Minsk-Gomel- (Kiev) 8. Kaliningrad-Kaunas-Vilnius (to meet corridor no. 7) 9. Gdansk-Warsaw-Prague 10. Szczecin / Swinoujscie-Poznan-Wroclaw-Prague 11. Dresden-Wroclaw-Katowice-Krakow-Rzeszow-Kiev. (VASAB, p. 59) - Main port hinterland railway connections 2010 and beyond shall be: 1. Copenhagen- Odense-Esbjerg-Frederikshavn 2. Frederikshavn-Jutland 3. Esbjerg-Jutland 4. Gotheburg- Oslo, Stockholm, Karlskrona, Karlstad. 5. Oslo- Stavanger, Bergen, Trondheim 6. Stockholm- Karlstad, Östersund, Gothenburg 7. Narvik-Kiruna 8. Helsinki-Tampere, St. Petersburg 9. Kotka / Hamina- Kuopio, Joensuu; St. Petersburg 10. Turku / Naantali- Tampere, Lahti, Russia 11. Hanko-Lahti-Russia 12. Pori / Rauma - Tampere, Lahti, Russia 13. Kokkola- Kajaani, western Russia 14.Oulu-Kajaani, north-western Russia 15. Kemi-Rovaniemi, north-western Russia 16. St. Petersburg-Petrozavodsk, Moscow,Vitebsk 17. Tallinn-Narva, St. Petersburg, Moscow; Tartu-Pskov-Moscow 18. Riga-Daugvapils-Vitebsk-Moscow; Rezekne-Moscow 19. Liepaja-Riga and further (see Riga) 20. Klaipeda-Siauliai-Vilnius-Minsk 21. Kaliningrad-Kaunas-Minsk-Moscow 22. Gdansk-Warsaw, Katowice-Vienna-Budapest 23. Szczecin-Berlin and Poznan-Wroclaw-Prague 24.Saßnitz-Berlin, Rostock-Lübeck Version 1.0, Date 29

30 25. Rostock-Berlin, Lübeck-Hamburg Hamburg via Berlin, Leipzig, Dresden towards east and southeast; via Bremen or Hannover towards south and southwest; via Puttgarden and Flensburg towards the Nordic countries. - fixed link across the Öresund (motorway and railway) - assessment of economical and ecological feasibility of fixed link across the Fehmarn Belt. - Links between Finland and Russian Karelia / Murmansk - Railway bridge across the lower Elbe river. Roads: The long-distance road network shall include, among other, the following alignments: 1. Via Baltica: Helsinki-Tallinn-Riga-Kaunas-Warsaw-Berlin) 2. Via Hanseatica: St. Petersburg-Tartu-Riga-Siauliai-Kaliningrad-Gdansk-Szczecin- Lübeck. 3. TEM: Oslo-Gothenburg-Karlskrona-Gdansk-Szczecin-Lübeck. 4. Szczecin-Wroclaw-Prague 5. Turku-Helsinki-St. Petersburg 6. Berlin-Warsaw-Minsk-Moscow. 7. Hamburg-Copenhagen-Malmö- (with a fixed link across the Öresund with extensions towards Oslo resp. Stockholm) 8. Hamburg-Flensburg-Frederikshavn. Version 1.0, Date 30

31 3.3 Development of transport networks. a. Institutional development. Challenges in restructuring stem from the organisational structure in centrally planned economies. A universal subject - the state - was responsible for providing the means to sustain living conditions as ideologically proclaimed. To succeed in doing so products and services as well as utilities and their finance had to be allocated by an overall plan. So disposition, ownership, responsibilty and governance of collective acting were centralised. Based on this broad picture it becomes evident that a market orientation forces break up of universal subject into many subjects, therefore decentralisation of ownership, responsibility and disposition. With many subjects acting in the same arena states role turns to regulating, framing individual actors actions in order to prevent overall harmful effects and to provide for the efficient supply of goods and service by private actors. Moreover stable supply of finance to decentralised subjects as well as efficiency-driven restrictions on states budgets in maintaining and providing infrastructural settings become important aspects. An investigation of the European Bank for Reconstruction and Development deals with the specific restructuring processes that take place in the transition economies 14. Based on three broad fields of investigation: tariff reform, commercialisation, regulatory and institutional development progress in restructuring with respect to railways and roads sector are operationalised. The following table gives in-depth description of the different types of framework conditions, plus and minus showing relative position within broad category. Moreover it assigns transition countries to categories and therefore reveals individual countries standing in restructuring process. 14 European Bank for Reconstruction and Development, p. 50 f. Version 1.0, Date 31

32 Railways 1. Monolithic organisational structures still exist. State railways are still effectively operated as government departments. Few commercial freedoms exist to determine prices or investments. There is no private sector involvement. Cross-subsidisation of passenger service obligations with freight service revenues is undertaken. 2. New laws distance rail operations from the state, but there are weak commercial objectives. There is no budgetary funding of public service obligations in place. Organisational structures are still overly based on geographic or functional areas. Ancillary businesses have been separated but there is little divestment. There has been minimal encouragement of private sector involvement. Initial business planning has been undertaken, but the targets are general and tentative. Russia (2+), Lithuania (2+) Roads 1. There is a minimal degree of decentralisation, and no commercialisation has taken place. All regulatory, road management and ressource allocation functions are centralised at ministerial level. New investments and road maintenance financing are dependent on central budget allocations. Road user charges are based on criteria other than relative costs imposed on the network and road use. Road construction and maintenance are undertaken by public consultation or accoutability take place in the preparation of road projects. 2. There is a moderate degree of decentralisation, and initial steps have been taken in commercialisation. A road / highways agency has been created. Initial steps have been undertaken in ressource allocation and public procurement methods. Road user charges are based on vehicle and fuel taxes but are only indirectly related to road use. A road fund has been established but it is dependent on central budget allocations. Road construction and maintenance is undertaken by corporatised public entities, with some private sector participation. There is minimal public consultation / participation and accountability in the preparation of road projects. Latvia (2+), Lithuania (2+), Russia (2+) 3. New laws have been passed that restructure the railways and introduce commercial orientation. Freight and passenger services have been separated, and marketing groups have been grafted onto traditional structures. Some divestment of ancillary businesses has taken place. Some budgetary compensation is available for passenger services. Business plans have been designed with clear investment and rehabilitation targets, but funding is unsecured. There is some private sector involvement in rehabilitation and / or maintenance. Latvia (3+), Poland (3+) 3. There is a fairly large degree of decentralisation. Regulation, resource allocation, and administrative functions have been clearly separated from maintenance and operations of the public road network. Road user charges are based on vehicle and fuel taxes and fairly directly related to road use. A law has been passed allowing for the provision and operation of public roads by private companies under negotiated commercial contracts. There is private sector participation either in road maintenance works allocated via competitive tendering or through a concession to finance, operate and maintain at least a section of the highway network. There is limited public consultation and / or participation and accountability in the preparation of road projects. Poland (3+) 4. New laws have been passed to fully commercialise the railways. Separate internal profit centers have been created for passenger and freight (actual or imminent). Extensive market freedoms exist to set tariffs and investments. Medium-term business plans are under implementation. Ancillary industries have been divested. Policy has been developed to promote private rail transport operations. Estonia (4) 4. There is a large degree of decentralisation of road administration, decision-making, resource allocation and management according to government responsibility and functional road classification. A tansparent methodology is used to allocate road expenditures. A track record has been established in implementing competitive procurement rules for road design, construction, maintenance and operations. There is large-scale private sector participation in construction, operations and maintenance directly and through public-private partnership arrangements. There is substantial public consultation and / or participation and accountability in the preparation of road projects. Version 1.0, Date 32

33 4+. Railway law has been passed allowing for separation of infrastructure form operations, and / or freight from passenger operations, and / or private train operations. There is private sector participation in ancillary services and track maintenance. A rail regulator has been established. Access pricing has been implemented. Plans have been drawn up for a full divestment and transfer of asset ownership, including infrastructure and rolling stock. Source: EBRD, 1999, p A fully decentralised road administration has been established, with decision-making, resource allocation and management across road networks and different levels of government. Commercialised road maintenance operations are undertaken through open and competitive tendering by private construction companies. Legislation has been passed allowing for road user charges to fully reflect costs of road use and associated factors, such as congestion, accidents and pollution. There is widespread private sector participation in all aspects of road provision directly and through public-private partnership arrangements. Full public consultation is undertaken in the approval process for new road projects. Overall institutional reform process is slowest in Russia and Lithuania and fastest in Estonia and Poland (the countries with first round EU-accession talks) with Latvia hanging in between. As a reflex of this condition railway labour productivity shows significant differences. Railway labour productivity being operationalsed by the number of traffic units (passenger kms plus freight tonne-kms) divided by total number of railway employess. Estonia (98,6 % in 1998) and Poland (87,4% in 1997) have almost come back to pertransformation level whereas Russia (60,9% in 1998) and Lithuania (36% in 1998) particularly have a long way to go, still. As in overall reform-process Latvia is in between (72,0% in 1998). Railway labour productivity (1989=100)* Country Estonia 96,1 92,2 53,1 55,0 47,7 50,8 55,0 74,2 98,6 Latvia 93 82,5 58,5 54,0 48,8 50,2 65,6 75,4 72,0 Lithuania 90,3 75,2 51,2 50,7 35,4 32,2 35,6 37,9 36,0 Poland 83,0 71,1 68,5 76,2 78,4 83,0 84,4 87,4 na Russia 99,5 105,6 89,8 75,4 57,7 56,8 54,6 58,6 60,9 * Number of traffic units (passenger kms plus freight tonne-kms) / total number of railway employees, EBRD Version 1.0, Date 33

34 b. Development of cross-border transport flows. Cross-border statistics by all modes of transport and country are not available on a regular basis. Some countries provide this information for some modes of transport, yet cover different years. To sum up: A long lasting time-series is not available. Nevertheless some evidence can be taken from OECD-data 15 covering commodity flows between BSR-countries by mode of transport from 1992 to As a matter of the short time-series trends can not be derived at this stage. Nevertheless these figures will allow to get an idea of trade relations physical manifestations, i.e. transport corridors by mode of transport. Following tables show how cross-border traffic in BSR distributes across modes of transport: Modal split in BSR-trade (tsd. t) Modal split in BSR-trade (%) Vessels Vessels 73,63 70,19 68,26 Road Road 8,08 9,85 11,91 Rail Rail 16,10 18,21 17,88 IWW IWW 2,18 1,75 1,94 Source: OECD, own calculations Cross-border traffic in BSR is mainly vessel traffic. Yet its share is decreasing as road traffics share in total cross-border traffic rises. With respect to individual countries im- and exports following tables enable a more distinct pircture of this overall view. 15 European Conference of Ministers of Transport: Statistical Trends in Transport Paris Version 1.0, Date 34

35 Modal share in countries imports (t) from BSR Vessels Road Rail IWW D Dk EST FIN LT LV N PL S BSR Source: OECD, own calculations. Among the overall domination of imports by vessels clearly the Baltics, Sweden and Finland most heavily rely on them. In difference to this overall structure, Norways imports are dominated by rail traffic. This is due to the iron ore transport between Kiruna and Narvik 16. Rail transport is significant to Poland and to a lesser extend Germany, too. Road transport show some importance in Estonia, Denmark, Germany and Poland. During this very limited time span road transport has considerably seized ground in Germany. 16 Precisely this should not be classified as import but rather as transit as national norwegian statistics do. Version 1.0, Date 35

36 Modal share in countries exports (t) in BSR Vessels Road Rail IWW D Dk EST FIN LT LV N PL S BSR Source: OECD, own calculations. On the export side vessels are even more dominant. This applies particularly to the Baltics and most notably to Norway. Yet other countries structure and - as far as this can be taken from this little time span - dynamics reveal some interesting details. There is a significant shift from vessels to road in Denmark. According to these statistics road transport of Finland and Estonia shows some most remarkable increases. Though - as regards Finland - doubts might be raised as to the reliability of this figure; in the country section it shows that most of this increase is due to traffic with Germany. Yet national statistics show very little correspondence to this quantity. So this number looks like a statistical bug. Later revisions of these statistics will show real values size. - Lastly Poland and Sweden transport considerable amounts via road as well. As with imports, Polands railway transportation is comparable in size to vessel transport. Rail transport shows considerable amounts in Germany and Sweden, too. Connecting what has been stated above on individual countries importance in BSRtrade (in US$), next tables show importance with respect to tonnage distinguished by mode of transport. Version 1.0, Date 36

37 Share of total BSR imports by mode of transport Vessels Road Rail IWW D Dk EST FIN LT LV N PL S Source: OECD, own calculations. East-west division is even more dramatic. Across all modes of transport more than 90% of the tonnage is due to western imports with Germany beeing by far the most dominant importer. Latter applies to relevance of inland waterways in particular. Due to iron ore transport Norwegian imports by rail show high volumes. Imports by road concentrate in Denmark and Germany. Difference between share in value and share in tonnage of BSR-imports by vessels (1993) per cent FIN D S Dk EST LT LV N PL Source: DOTs, OECD, own calculations Version 1.0, Date 37

38 With respect to vessels next diagram reveals that share of western countries imports in tonnage do by far exceed its share in value. As stated above low-value, high-volume resource sector is transition economies main comparative advantage in exports. On the other hand transition economies share in imports is higher than could be expected from its share in value which mainly is due to its deficits in higher-value, less-volume commodities. Share of total BSR exports by mode of transport Vessels Road Rail IWW D Dk EST FIN LT LV N PL S Source: OECD, own calculations. Scenery varys as exports are regarded. Of all inland waterway exports more than 80% are due to Poland. With respect to rail Poland shows high overall importance, too (1994: 54%). Road traffic concentrates in Germany and Denmark with significant shares in Sweden, Poland and Finland, too. Lastly vessel traffic reveals that share of raw materials in scandinavian countries (wood, oil, ore) is quite important, too. As the other side of the imports this becomes clearly visible for the Baltics anyhow. This divide reflects in the density of traffic also. The number of ships arrivals in VASAB-main-ports in the next table show evidence on this subject. Summing up it shows that port related transport is of utmost importance in the BSR. Value as well as tonnage are concentrating in the west. With respect to shipments this Version 1.0, Date 38

39 gets refelcted by a high overall density in the western Baltic Sea. As regards sustainability rising road traffic between Germany and Denmark raise concern. Therefore efficiency of rail connections should be of major concern in that area. Moreover high amounts of rail-traffic in cross-border traffic between Poland and Germany should be preserved. Number of ship s arrivals 1997 Name of port Name of port Growth Helsingborg Riga Malmö ,5 Tallinn 350 Copenhagen Rostock 333 Stockholm Szczecin- 159 Swinoujscie Hamburg Helsinki 125 Gothenburg Gdynia 123 Helsinki Gothenburg 122 Szczecin Turku 117 Swinoujscie Oslo Oslo 115 Lübeck Lübeck 112 Kiel Helsingborg 104 Turku Stockholm 100 Rostock Copenhagen 99 Gdansk Malmö 93 Gdynia Hamburg 92 Tallinn Kiel 92 Riga Gdansk 77 Source: ISL: Shipping Statistics Yearbook 1998 Version 1.0, Date 39

40 B Country Reports Restructuring in shipping and the role of ITs Ship-based world trade rose continuously since the 80's was to be the first of the last 16 years, where - with respect to the previous year - a cut back of 0.7% occured; in 1997 it rose by 5.1%. In 1998 world-wide transport volume by ship amounted to a total of 5.1 billion tons. Despite smaller transportation need carrying capacity of the world trade fleet rose by another one per cent in 1998 totalling at million tons. Even if this increase dropped off in 1999, larger ship capacities in connection with lower volume of world-wide transport leads to sinking freight charges. " The freight charges are not sufficient to cover operating costs, interest and repayment." (Torsten Wagner, executive committee member of the Schiffshypothekenbank zu Lübeck AG in: DIE WELT, 17,06,99). These developments lead to the necessity that all participants of the world sea trade chain have to advance rationalization measures, strengthening their position against the direct competitor and other transport modes. Information Technologies (ITs) have become a key function, because their implementation accelerates and simplifies processes. Use of ITs is frequently accompanied by a loss of jobs, changes in qualifications of employees and lower operating costs. Furthermore ITs can enhance use of optimization potentials (e.g. utilization of resources) which ultimately can lead to cost reduction. Globalization of world economy and growing international competition amongst enterprises within the range of port economies, lead to the fact that competitional pressures force enterprises to exploit new rationalization potentials and therefore advance the use of ITs. WP3 assesses IT-related potentials for port areas in order to maintain regionally competitive. ITs have become an outstanding means of development in world economy. Different authors see this technology as base innovation of the fifth Kondratief-cycle beginning at Version 1.0, Date 40

41 present. Port-related ITs represent a part of this innovation, so that it is to be assumed that the implementation of ITs in port areas will become gain importance and will pose a significant influence for economic and regional development of port areas. Up to now IT implementation in port- and ship-based transport chains ran rather sluggishly. The development of port related information- and communication technologies started in Almost from this very begining EDI (Electronic Data Interchange) has been used as a communication tool between different actors in the sea transport chain. In 1998 about 20% of all ports in Europe used EDI with the number of EDI messages rising rapidly. The Port of Antwerp exemplyfies this with a yearly growth of about 40%. The total number of handled EDI messages by the port information system of Antwerp has risen from 217,000 in 1991 to 2,750,000 in Port ITs can be classified into Information Networks and Communication Technologies and location related technologies. The first ones connect different actors whereas the latter ones are Terminal Operating Systems, container positioning systems or gate technologies. A systematic description of Information Technologies and their impact on regional development is subject of Deliverable 3.2, which will be submited in September. Version 1.0, Date 41

42 4 Structure of country reports, methods and validity of data. Country reports begin with trade entwinements of BSR-countries on the state level. The difference between regional demarcation of Interreg II C program region and statistical availability has been dealt with in part A already. So comparable statistical data from IMF sources will be used on the state-level. Analysis BSR trade entwinements is based of foreign trade data, which is available for all states in a time series from 1992 to Data stems from Direction of Trade Statistics (DOTS) of the International Monetary Fund (IMF), which contains ex- and imported goods (without goods in transit trade) of each country (origin and destination per quarter on dollar basis), whereby data gets supplied by national customs authorities. Import values include insurance and freight costs (c.i.f - cost, insurance and freight) export values exclude them (f.o.b. - free on board). On average this difference amounts to 10% of the commodity value. A comparable analysis was done by WAHLEN (1995) for the period 1985 to 1994, so that the changes of the trade entwinements of the BSR states can be interpreted from the beginning of the 80's to the end of the 90's. Moreover country reports show absolute figures for im- and export of goods as well as im- and export ratios, which indicate the share of BSR with respect to total foreign trade of respective countries. Another ratio shows commercial entwinement. Whereas ex- and impors for themselves illustrate direction of trade relation, entwinement represents a bilateral relationship. Trade entwinement of two States (A, B) describe geometrical means of export quota from A to B and from B to A (see WAHLEN 1995). The entwinement index can take values between 0 and 1, whereby 0 expresses, that the concerned states do not have a mutual foreign trade. 1 stands for the fact, that all exports from A go to B and all exports from B likewise to A. The entwinement index shows interesting results with respect to the different sizes of incurred economies. Version 1.0, Date 42

43 Linking up with part A type of commodities reflect individual countries bases of trade. As a matter of reduction of complexity judgements will be based on entire foreign trade of respective country. Statements refer to UN Standard International Trade Classification(SITC). Next section of country reports deal with modal split of cross-border transports and - as a tentative answer to hinterland traffic - modal split on national networks. Data stem from OECD and ISL (s.a. part A). Version 1.0, Date 43

44 4.1 Germany The BSR as a market for German exports is far less important than the German market for the eports of the other BSR countries. In the 90's only 10% of the German exports went into the BSR. However the other national economies exported 30% of their exports to Germany. In absolute values Germanies foreign trade with these countries is in balance. Related to Germanies foreign trade relations with individual states it should be noted that in the last years a slight surplus was obtained with Denmark, a stronger one with Poland and Sweden and deficit with Norway, which is particularly due to the German raw material imports from Norway. The ten most important customers for German Exports do not lie in the BSR. Besides EU members France, Great Britain, the Netherlands, Italy, Belgium-Luxembourg, Austria and Spain these are USA, Switzerland and Japan. Germany - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Export quota Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 44

45 Germany - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations The entwinement of Germany with the BSR shows a high stability, whereby data points towards an easy reduction towards the end of the nineties. Entwinement in the 80 s was stable around the value 0.1. In connex with German unification in 1990 it rose to between 0.12 and Yet during the course of the 90 s index fell to 0.1 again. With respect to individual states entwinement differs significantly. While entwinement with EU members, as well as with Norway and Russia stagnates or decreases, entwinement with Poland rises clearly. This development in the trade relations between Poland and Germany began in 1990; the entwinement index, which stagnated during the 80's approximately at 0.02, rose in the 90's continuously and quadrupled itself nearly to 1997 up to 0.1. Version 1.0, Date 45

46 Germany - Entwinement Index 0,14 0,12 0,1 0,08 0,06 0,04 0, BSR EW DK LT N PL RUS S FIN LV Source: UN, Direction of Trade Statistics , own calculations Industrial pre-products, machines and transportation equipment, are Germanies main import goods. They make up for approx 50% of overall commodity value. Nearly 50% of all exports belong to class 7 (Machines, transport equipment). As a matter of the short period of time covered, trend in the table is a big word. So this should be interpreted as a direction of how the value of ex- and imported goods developed in the middle of the 90's. It becomes clear that during such a short term no substantial shifts can be detected. Yet one thing becoumes obvious: Im- and export of class 7 commodites increase. Related to the means of transport, with whom the products are transported in Germany, a dramatic change takes place since the 70's. While 1970 still 33% of the ton kilometers transported in Germany were completed by train, this share almost halved itself until 1997 to 18.5%. In the same period the share of the road transport rose from 37% up to 62%. The share of the inland navigation sank from 23% to barely 16%. To stop this non-sustainable development social-democratic government increased mineral fuel tax Version 1.0, Date 46

47 (ECO-tax) from 2000 on to shift transport from road to more environmentally friendly transport modes ship and railway. The support of intermodal transport is a keypoint in this policy. Road transport fees (per km) shall be enforced until The `Bundesverkehrswegeplan, the long-term planning document for transport infrastructure, will be re-worked to shift road transport to short sea shipping and inland navigation. The German inland waterway fleet shall be supported. Public-private partnerships are envisaged for the infrastructure projects of the TEN. The improvement of the hinterland links to the seaports have high priority also. (CARDEBRING/FIEDLER in: Swedish Maritime Administration (SMA) 1999) Germany, Exports and Imports 1996 in % Exports F.O.B. Imports C.I.F. SITC Commodity 1996 Trend Trend All Commodities 100,0 100,0 0 Food and Live Animals 4,1 8,1 1 Beverages and Tobacco 0,7 1,0 2 Crude Materials, excl. Fuels 1,6 3,9 3 Mineral Fuels etc. 1,4 7,9 4 Animal, Vegetable Oil, Fat 0,0 0,3 5 Chemicals, Related Prod Nes 12,7 8,6 6 Basic Manufactures 15,6 15,2 7 Machines, Transport Equip 49,6 34,3 8 Misc Manufactured Goods 10,2 14,9 9 Goods not Classified 3,9 5, about 400 million ton kilometers were transported in Germany; This is - approximately 20% of the total national transports in the BSR. Leaving out Russia (1,100 million ton kilometers, over 60% of BSR) the other 8 states transported 300 million ton kilometers together. Most transports stem from Germany and Russia. 17 Trend in this context means: average change 1992 to Version 1.0, Date 47

48 With respect to cross-border traffic OECD-data (see part A) reveal the quantity of goods (in tons) loaded on the different modes of transport for the year There are some significant differences in the modal split of German exports between BSR and other countries. The share of trucks in BSR exports is comparatively low at 13% and trains amount to as much as 12%. With more than 70% of Germanies BSR-exports vessels are the dominant means of transport. Yet this overall picture is subject to considerable variation if looking at traffic relations on a national level. With more than 50% of transport volume trains clearly dominate exports to Poland, whereas vessels and trucks amount to about 20% only. Denmark looks very different from that with 50% of exports made up by trucks whereas vessels and rail amount for 30 and 15% respectively. Vessel-based exports relate to Norway, Sweden and Finland as well as to the three Baltic states. Modal Split, German Exports to the BSR 1994 in % Vessel Road Rail IWW Total Denmark 33,2 50,1 14,8 1,8 100 Sweden 84,5 0,2 12,6 2,6 100 Poland 22,7 20,3 50,7 6,3 100 Total 71,8 13,1 12,4 2,7 100 Source: OECD 1998 The most important german ports for exports to the BSR are Lübeck-Travemünde and Rostock, followed by Hamburg, Sassnitz-Mukran, Kiel and Bremerhaven. Lübeck- Travemünde and the ports in Mecklenburg-Vorpommern focus their trade primarily on Sweden, Kiel on Norway and Bremerhaven on Finland. In Hamburg there is no obvious "specialization" of trade with a certain BSR country. It is furthermore remarkable that port of Flensburgs major trade partner are the three Baltic states though - with respect to volume - far less important than the other ports. Version 1.0, Date 48

49 German ports, number of ship s arrivals Hamburg Kiel Lübeck Rostock Source: ISL: Shipping Statistics Yearbook Version 1.0, Date 49

50 Apart from German foreign trade German ports play an important role in European transit trade, both for Scandinavian states and for the national economies in central and eastern Europe. German ports, cargo traffic Total cargo traffic, foreign and transit traffic (in 1000t) Nature of traffic in % share of total Gener. cargo Dry & liq. bulk Oil / prod. Hamburg ,6 47,4 17,9 Kiel ,4 22,6 Lübeck ,1 6,9 0,2 Rostock ,7 56,3 22,4 Source: ISL: Shipping Statistics Yearbook German ports, container traffic Hamburg Kiel Lübeck Rostock Source: ISL: Shipping Statistics Yearbook Version 1.0, Date 50

51 4.2 Denmark Denmark most heavily depends on exports. During the 90's approx. 35% of the danisch GDP was due to exports. According to classical foreign trade theory this value is not surprising for a country of that size. Mass productions economies of scale need a big market resulting in a high share of exports in smaller countries. Both of Denmarks most important trading partners - Germany and Sweden - lie within the BSR. The BSR plays a mjor role in Denish foreign trade. Over 40% of exports and more than 45% of imported goods go into or come from this area. Considering exports in a longer period, it becomes clear that the BSR has gained importance since the 80 s. Besides Germany (18%) and Sweden (11%) Norway (5%) is a major importer of Danish export goods. Denmark - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 51

52 Denmark - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations About 2.5% of all BSR exports (excl. Denmark) go to Denmark. Germany amounts to 16.5%. In absolute figures this means that in 1997 Denmark imported goods for approximately 20 billion US$ from other Baltic Sea states. Germany however imported goods for 40 billion US$: twice as much. Denmarks entwinement (more than 0.1) with the BSR is - inspite of the very much higher ex- and import ratios - not stronger than the German entwinement with the BSR. In comparison to Germany this is due to its smaller size as an export market for the other BSR countries. Highest entwinement is with Sweden with Germany and the other Scandinavian countries having above average entwinements as well. The development of Danish commercial entwinement with the BSR shows no change in sum. Since the middle of the 80 s it stayed around 0.1. The entwinement with Sweden has goton looser at the beginning of the 90's and was exceeded occasionally by Version 1.0, Date 52

53 Danish-Norwegian entwinement; However since 1995 it has almost come back to 1985 level. Denmark - Entwinement Index 0,12 0,1 0,08 0,06 0,04 0, BSR Estland Deutschland Litauen Norwegen Polen Rußland Schweden Finnland Lettland Source: UN, Direction of Trade Statistics , own calculations Main export goods of Denmark are the SITC class 0 (negative trend) and 7 (positive trend). Development of imported goods show same trend as exports. The share of train transports in total volume (tkm) is even smaller than in Germany. As with Germany trend is negative: In % of all goods were transported by train, 1996 this had decreased to 12%. Road transports decreased slightly, too because of newly established pipelines. Yet in the last 25 years road transport rose considerably by 2 billion ton kilometers. Version 1.0, Date 53

54 Denmark, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 21,4 10,2 1 Beverages and Tobacco 1,0 1,3 2 Crude Materials, excl. Fuels 3,6 3,4 3 Mineral Fuels etc. 4,3 3,9 4 Animal, Vegetable Oil, Fat 0,5 0,5 5 Chemicals, Related Prod Nes 9,3 10,0 6 Basic Manufactures 10,5 16,6 7 Machines, Transport Equip 25,5 32,4 8 Misc Manufactured Goods 14,4 13,3 9 Goods not Classified 9,4 8,3 The maritime transport sector plays an importatant role in the Danish economy. 5% of the GNP are obtained in the shipping sector (SONNE in: SMA 1999). Nearly the entire foreign trade with Norway, Finland and the three baltic states is managed by vessels. Road transport plays a role in trade with Germany (1994: 40%) and Sweden (1994: 10%) only. Train and inland waterways are unimportant. With respect to trend in the last years, shipping sectors importance has decreased whereas road transports have gained momentum. Some important notes are that the fixed links across the Great Belt opened in 1998, have removed around 50,000 domestic port calls. The fixed links across the sound, wich will open in 2000, is expected to cut at least 20,000 further port calls and probably also a large share of the 50,000 annual port calls in Elsinore from Helsingborg. This will of course affect Danish shipping significantly. A fixed link across Fehmarn Belt is under consideration and will probably eliminate most of the ferry-traffic to Germany. The remaining routes will all be of limited importancein terms of transport volume. (SONNE in: SMA 1999) Version 1.0, Date 54

55 4.3 Norway Norway is still more heavily dependent on exports than Denmark. 45% of its GDP stem from exports. Much of this is due to Norways strong crude oil extraction. Over 50% of Norwegian exports fall into SITC class 3 - mineral fuels, petroleum products, natural gas etc. - which constitutes nevertheless also 10% of the exports, whereby the portion of the class 3 still rises in the last years over favor of other industrial goods. The most important customers for Norwegian products are Great Britain, Germany and the Netherlands. Furthermore important trade partners are Sweden, Denmark and Finland as wel as USA, France, Canada and Italy. The importance of the Baltic area for Norwegian exports is declining. Whereas in the first half of the 80's over 35% of all exports went into the BSR, this value went back to 27% in 1997; Yet the curve is subject to strong fluctuations. Norway - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 55

56 Norway - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations Norway - Entwinement Index 0,1 0,09 0,08 0,07 0,06 0,05 0,04 0,03 0,02 0, BSR Estland Dänemark Lettland Litauen Polen Rußland Schweden Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 56

57 Norwegian entwinement with BSR is declining. From 0.1 in 1985 it dropped to 0.07 in Much of this decrease is due to the decreasing entwinement with Sweden: Their entwinement sank from 0.11 to The commercial entwinements with the other important trade partners remain almost constant during the investigation period (Denmark 0.05; Germany 0.03; Finland 0.025). It becomes clear that high entwinements concentrate in the western part of the BSR for which Norway is an important crude oil supplier. The eastern BSRs crude oil supply stems from Russia. The portion of annually transported ton kilometers by train (national network) sank dramatically from approx. 30% in 1970 to approx. 10% in Yet road transport did not profit from this development. Due to the type of goods in Norwegian exports (above all crude oil and fuels) transport by pipelines has risen in the last years. Whereas in 1980 no pipelines existed at all, they already made up almost 30% of all transported ton kilometers in Norway, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 7,6 5,7 1 Beverages and Tobacco 0,0 0,6 2 Crude Materials, excl. Fuels 1,9 7,2 3 Mineral Fuels etc. 54,7 4,5 4 Animal, Vegetable Oil, Fat 0,0 0,3 5 Chemicals, Related Prod Nes 2,8 8,7 6 Basic Manufactures 12,6 17,2 7 Machines, Transport Equip 11,1 39,2 8 Misc Manufactured Goods 2,8 15,2 9 Goods not Classified 6,4 1,3 Version 1.0, Date 57

58 4.4 Sweden The importance of the BSR for Swedish foreign trade is just as big, as the importance of Sweden as an importer of goods from other BSR neighbors. This shows in the high entwinement index Sweden has with the BSR; Nevertheless over the last 15 years its entwinement decreased slightly from 0.12 to Exports amount to approximately 30% of Swedish GDP. Four of the ten most important trade partners (Germany, Norway, Finland and Denmark) lie within the BSR. Other important trade partners are Great Britain, USA, the Netherlands and Belgium-Luxembourg. Sweden - Exports in Mill. US$ in % Quarter 20 D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 58

59 Sweden - Imports in Mill. US$ in % Quarter 30 D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations High entwinement with the BSR mainly results from high entwinements with its Scandinavian neighbours. Much the same as the entwinement with the whole BSR, these entwinements show a negative tendency since the middle of the 80's. For example the entwinement index with Denmark dropped from 0.1 in 1985 to 0.07 at the beginning of the 90's. In the last decade however value came back from 0.08 to 0.09 again. Likewise the curves for Norway and Finland show the same tendency. However on a lower level the entwinement of Sweden with Germany remains constant. Above all Estonia and Poland gain in importance since the changes in Eastern Europe. Main Swedish import goods are goods of the SITC classes 6 and 7 which constitute the biggest fraction of exports,too. With respect to trend share of class 7 increases, while share of class 6 stagnates or goes back. Version 1.0, Date 59

60 Sweden - Entwinement Index 0,12 0,1 0,08 0,06 0,04 0, BSR Estland Dänemark Lettland Litauen Norwegen Polen Rußland Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations Sweden, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 2,1 6,0 1 Beverages and Tobacco 0,3 0,9 2 Crude Materials, excl. Fuels 6,3 3,1 3 Mineral Fuels etc. 2,1 7,5 4 Animal, Vegetable Oil, Fat 0,0 0,0 5 Chemicals, Related Prod Nes 6,6 10,0 6 Basic Manufactures 22,7 15,4 7 Machines, Transport Equip 44,3 41,8 8 Misc Manufactured Goods 8,0 13,2 9 Goods not Classified 7,5 2,0 As in the other states track bound traffic is loosing attractivity, yet not as dramatic as in Germany. Nevertheless trains amounted to 36% of total traffic volume in 1997 (1970 approx. 50%); a value by far higher than in all other western BSR countries. Swedish foreign trade s most dominant means of transport is vessels. Version 1.0, Date 60

61 4.5 Finland Although Finland (5 Mill. inhabitants) is smaller than Sweden or Denmark, the portion of exports in GDP (approximately 20%) is lower than in these countries. The most important trade partners of Finland are the same as those for Sweden, with one exception: Russia. Both with ex- and imported goods Russia plays a much more important role, than for the other Western European national economies, even if its importance has decreased strongly since 1990/ This special role has historical roots. Much of the former Soviet Unions foreign trade was carried out via Finland. And lastly Russia simply is a direct neighbour of Finland. All states show that a direct border supports the importance of two states as foreign trade partners. The importance of the BSR for Finnish foreign trade is very high. Nearly 40% of all Finnish exports go into other BSR countries. But as the share of Russian exports sanks so did the Finnish and therefore its share in total BSR exports. In 1985 the share of the BSR still nearly amounted to 55% of all Finnish exports. Likewise Finnish entwinement with the entire BSR sank in the 80's; the same applies to entwinement with Sweden and Russia. The minimum was reached in 1993 with an entwinement index of less than 0.08 (entire BSR); up from then values have recovered slightly. Much of this latter development is due to Estonia and Poland. Yet until now Eastern European markets did not get back to pre-1990 levels. Finnish ex- and import structure shows many parllels to Sweden. Finnish foreign trade is dominated by SITC classes 6 and 7, too. The composition develops similar to Swedish developments. 18 This is related to the fact, that since 1991 the trade with the follow-up states of the Soviet Union, such as the Ukraine is not included in the Russian value. Version 1.0, Date 61

62 Finland - Exports in Mill. US$ in % Quarter D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Finland - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 62

63 Finland - Entwinement Index 0,09 0,08 0,07 0,06 0,05 0,04 0,03 0,02 0, BSR Dänemark Deutschland Litauen Norwegen Polen Rußland Schweden Estland Lettland Source: UN, Direction of Trade Statistics , own calculations Transport on national networks show an interesting development. Trains share decreased between 1970 and the early 90 s, yet recovered (1997: 26.8%) to values slightly higher than This development did not go debited to the road traffic which increased about 10% from 1970 (approx. 54%) to 1997 (approx. 64%). The portion of the inland navigation halved itself from 20% in 1970 to under 10% in Finland, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 2,3 5,6 1 Beverages and Tobacco 0,4 0,7 2 Crude Materials, excl. Fuels 7,6 6,7 3 Mineral Fuels etc. 3,1 10,6 4 Animal, Vegetable Oil, Fat 0,0 0,0 5 Chemicals, Related Prod Nes 6,0 11,0 6 Basic Manufactures 35,7 13,4 7 Machines, Transport Equip 38,3 39,1 8 Misc Manufactured Goods 5,8 10,6 9 Goods not Classified 0,7 2,1 Version 1.0, Date 63

64 4.6 Russia The BSR constitutes only a minor fraction of total Russian trade (see Germany). In difference to Scandinavia or e.g. the three Baltic states principal Russian trade partners do not lie in the BSR. Only Germany belongs to the ten most important importers of Russian goods. Besides Ukraine, Switzerland, Beloussia, the Netherlands and Italy USA, as well as Japan and China belong to the most important customers for goods made in Russia Russia - Exports in Mill. US$ in % Quarter 10 D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Political change in 1990/91 brought about a dramatic cut in exports which due to a sell off in resources (to raise foreign currency for debt payments) recovered during the 90's. Likewise BSRs share sank from almost 30% to under 20% and stagnates since 1994 on this lower level. It should be noted that Germany imported 2/3 of the goods exported into the BSR, whereas the predominant means of transport is by road (Moscow/Warsaw/Berlin). Still more dramatically the share of imported goods from Version 1.0, Date 64

65 BSR neighbors of all imported goods sinks. Whereas in 1993 still nearly 40% of all Russian imports came from one of the other 9 states of the BSR, this share sank to 20% in Russia - Imports in Mill. US$ R 2 = 0, Quarter in % D.O.T.S.World BSR Importquote Linear (Importquote) Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 65

66 Russia - Entwinement Index 0,1 0,09 0,08 0,07 0,06 0,05 0,04 0,03 0,02 0, BSR Estland Dänemark Lettland Litauen Norwegen Polen Schweden Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations The entwinement index with the BSR sank from 0.1 in 1985 to 0.06 at the beginning of the nineties but shows a positive tendency in 1997, again. Above all the entwinement with Latvia and Poland rose. The entwinements with Lithuania and Estonia clearly decreased towards the end of the 90's. Germanies share increased after German unification yet sank as quick as it had rosen to meet 1985th level in An allocation of the Russian imports in SITC classes of the UN are not present for Russia. Still Russia however predominantly exports raw materials and semifinished goods and imports high-quality consumer and capital goods, as well as food. This becomes clear also with a view on modal split. Unfortunately these data do not exist a time series as for the other countries, but values for the year 1990 are available. In % of all ton kilometers in Russia were transported by train. The second most important carrier are pipelines, with a share of 30% of all transported ton kilometers. These numbers make clear that above all bulk goods were transported and the mineral fuels such as oil and natural gas play a special role. Only 7% of the ton kilometers were transported by trucks. This small value has to do with the enormous distances and the Version 1.0, Date 66

67 condition of Russian road infrastructure; Road transport become economically unprofitable. Inland navigation (with 5%) does not play an important role. A possible explanation could be that Russias big rivers have a north-south orientation whereas transport routes have an east-west orientation. The most important and only fully operational Russian BSR ports are St. Petersburg and Kaliningrad whereas St. Petersburg is not ice-free over the wintertime. It is absolutely necessary to modernize these two ports in the next years to meet international maritime standards (see FIEDLER/CARDEBRING in: SMA 1999): Implementation of modern freight forwarding systems and modernisation of port handling facilities Development of environmental protection systems (see WP 10) Implementation of information- and communication technologies Integration of sea and land transportation (intermodal systems) Version 1.0, Date 67

68 4.7 Estonia Foreign trade is very important for the three baltic states with export quotas from 40% to 60%. In Estonia the proportion of the BSR in ex- and imported goods amounts to between 60% and 70%. The most important customers of Estonian goods are - besides the direct neighbours Russia, Latvia and Finland - different BSR neighbors, e.g. Sweden, Germany, Latvia and Denmark. The share of the BSR in the Estonian exports sank since the statistical entry in 1992 from 80% to 63% in Estonia - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations The limited time span does not allow to make a judgement about the temporal quality of this development. Estonain imports show a clear seasonal bias: Import ratio is highest in the first quarter, drops slightly in second and third quarter and collapses in the fourth Quarter. This cycle repeats itself in all years. This is amazing because absolute values of ex- and imported goods do not achieve their maxima and minima in comparable cycles. Altogether the proportion of the BSR in Estonian imports remains constant with slightly over 70% annualy and does not develop like the export quota, i.e. negatively over the years. Version 1.0, Date 68

69 Estonia - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations The entwinement index doubled itself since 1992 from to 0.05 in Since the BSR loses its importance as a customer for Estonian goods, the development shows Estonia as an increasing sales market for goods from other states. Actually the importance of Estonia for Finnish exports doubled itself. While % of the Finnish exports went to Estonia this increased to 2.9% in Also for Russia and Poland the Estonian market gains momentum. Estonian foreign trade started to be assigned to SITC groups since 1995, so that no statements about development of composition of ex- and imported goods can be made. Numbers for 1996 show that the composition of the imported goods indicates a similar structure as those of exports. Estonia ex- and imports above all goods of the SITC classes 0, 6, 7 and 8. Version 1.0, Date 69

70 Estonia - Entwinement Index 0,08 0,07 0,06 0,05 0,04 0,03 0,02 0, BSR Deutschland Dänemark Litauen Norwegen Polen Rußland Schweden Finnland Lettland Source: UN, Direction of Trade Statistics , own calculations Estonia, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 14,0 12,5 1 Beverages and Tobacco 1,1 2,2 2 Crude Materials, excl. Fuels 10,1 3,5 3 Mineral Fuels etc. 6,4 9,4 4 Animal, Vegetable Oil, Fat 0,0 0,5 5 Chemicals, Related Prod Nes 9,5 10,3 6 Basic Manufactures 21,8 20,3 7 Machines, Transport Equip 19,8 29,5 8 Misc Manufactured Goods 17,1 0,0 9 Goods not Classified 0,0 11,8 In 1997 the railway s share in transport volume amounts to approx. 65% of total volume and thereby achieves the same level as The remaining 35% are subject to road transportation. Inland navigation and pipelines do not play a major role. Version 1.0, Date 70

71 4.8 Latvia In the 90 s more than 60% of Latvias GDP stems from exports. 40% to 50% of all exports are directed to the BSR. Today, Germany takes the place of the former principal trade partner Russia, which still imported 22% of Latvian exports in 1994 (1997: 10% were replaced). Other important trade partners are the direct neighbours Estonia and Latvia, as well as Sweden. In addition, other countries, that do not belong to the BSR, are important trade partners e.g. Great Britain, the Ukraine, Belorussia, Switzerland and Austria. With respect to Estonia Latvian exports look quite different despite similar values for BSRs share in overall exports. As with Estonia exports vary significantly across the quarters. Yet in difference to Estonia there is no clear cycle which governs ups and downs. Even more so this applies to the import quota. Inconsistencies in the data however to not permit clear statements. The data for the last three quarters were deleted, since they obviously were incorrect. Latvia - Exports in Mill. US$ in % Quarter 30 D.O.T.S.World BSR Exportquote Linear (Exportquote) Version 1.0, Date 71

72 Latvia - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations Due to that error in the data entwinement values for Russia and Latvia are not presented. Thus neither are those for the BSR over the entire investigation period. Just as the "Direction of Trade Statistics" UN data concerning ex- and imported goods according to SITC contains errors, which could not be clarified in the context of this analysis, so that an interpretation of the represented values does not take place here. With respect to ton kilometers the train is the main traffic carrier in Latvia. Yet its proportion decreased since 1970 from 85% to 60% in The share of road carriage stagnated in the same period by 15%. As in Russia, since the middle of the 90's about 15% of all ton kilometers were transported by pipeline. Pipeline transports refer to oil, which is extracted in Belorussia and Russia and than turned over at Riga. Version 1.0, Date 72

73 Latvia - Entwinement Index 0,06 0,05 0,04 0,03 0,02 0, BSR Estland Dänemark Litauen Norwegen Polen Rußland Schweden Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations Latvia, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 14,2 9,8 1 Beverages and Tobacco 1,1 2,2 2 Crude Materials, excl. Fuels 20,1 2,6 3 Mineral Fuels etc. 2,0 21,6 4 Animal, Vegetable Oil, Fat 0,0 0,8 5 Chemicals, Related Prod Nes 6,7 11,9 6 Basic Manufactures 25,8 18,0 7 Machines, Transport Equip 13,0 22,5 8 Misc Manufactured Goods 15,6 10,5 9 Goods not Classified 1,5 0,1 Version 1.0, Date 73

74 4.9 Lithuania Lithuanian foreign trade relations are very similar to Estonian. This refers to export quota, the importance of the BSR and the principal trade partners. Lithuania - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations The BSR-share in Lithuanian exports varies between 35% and 65% whereby altogether the importance of the BSR neighbors seem to decrease (not significantly though). Moreover the proportion of imported goods from the BSR varies considerably between 30% and 80%. The entwinement with the BSR is varies between 0.04 and Relatively high entwinements still exist with traditional trade partners Estonia, Latvia and Russia. Version 1.0, Date 74

75 Lithuania - Imports in Mill. US$ Quarter in % D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations Lithuania - Entwinement Index 0,08 0,07 0,06 0,05 0,04 0,03 0,02 0, BSR Estland Dänemark Lettland Norwegen Polen Rußland Schweden Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 75

76 The share of raw materials (in $) in all imported goods decreases continuously, whereas chemical products and industrial goods increase. However exports of class 6 and 7 goods are declining. So dynamics refer to exports of chemical products, only. Yet the quality and availability of the data do not permit precise statements. In Lithuania the share of rail-bound traffic (in tkm) decreased from 80% in 1970 to 50% in In the same period the share of road transport increased from 20% to over 30%. In Lithuania pipelines play a considerable role in transport % of goods were handled by this mode of transport. Lithuania, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 16,7 10,7 1 Beverages and Tobacco 0,6 1,7 2 Crude Materials, excl. Fuels 12,6 7,0 3 Mineral Fuels etc. 11,4 19,4 4 Animal, Vegetable Oil, Fat 0,5 0,5 5 Chemicals, Related Prod Nes 14,2 12,1 6 Basic Manufactures 15,9 17,7 7 Machines, Transport Equip 15,7 21,7 8 Misc Manufactured Goods 12,4 7,4 9 Goods not Classified 0,0 1,8 Version 1.0, Date 76

77 4.10 Poland In contrast to many other states in the BSR, Poland is not a typical export nation. 15% of GDP are due to exports. This is the lowest value in the BSR. Principal trade partners are Germany and Russia with together more than 50% of total Polish exports. Germanies share rose dramatically in the last years from 30% in 1993 to 46,5 % in Summing up CIS-countries share in 1997 it shows that their share of trade with Poland has decreased significantly. Russias share alone fell sharply to 6.2 in 1997 (Soviet Union: 25% in 1985). Polish trade clearly shifted towards EU. Only a small fraction of trade with Germany and Russia gets transported by vessels. Most of it is based on trucks and rail (Moscow - Minsk - Warsaw - Berlin). A look on the modal split reveals further information on development. The proportion of road transport (tkm) rose from 13% in 1970 to 43% in The proportion of rail transport decreased in the same period from 80% to 46%. Inland navigation does not play any role. However the share of pipelines has doubled from 5% to 10%. Clearly a lot of work needs to be done to make this relation more environmentally sound. Except for Germany and Russia no other BSR country belongs to the ten biggest importers of Polish goods. These countries are Great Britain, Italy, the Netherlands and France, as well as USA, Ukraine and Belorussia. Version 1.0, Date 77

78 Poland - Exports in Mill. US$ Quarter in % D.O.T.S.World BSR Exportquote Source: UN, Direction of Trade Statistics , own calculations Poland - Imports in Mill. US$ in % Quarter D.O.T.S.World BSR Importquote Source: UN, Direction of Trade Statistics , own calculations Version 1.0, Date 78

79 With respect to Germany and Rusia imports very much look like exports. Almost 60% of imports origninate in BSR-countries. Imports from Eastern European economies (above all Russia) have not declined as dramaticlly as Polish exports to them. The Polish market becomes increasingly more important for other national economies. While in % of the exports of the other BSR neighbours went to Poland, this value rises to 2.2% in Poland - Entwinement Index 0,14 0,12 0,1 0,08 0,06 0,04 0, BSR Estland Dänemark Lettland Litauen Norwegen Rußland Schweden Deutschland Finnland Source: UN, Direction of Trade Statistics , own calculations Entwinement index rises from 0.08 in 1993 to 0.12 in During the 80's and in the first years after political reshuffle the index stagnated at around 0.08; decreases as from trade with the Soviet Union and the other CIS were balanced by increases in trade with Germany. During the 90's trade with former Eastern European allies stabilized on a lower level, increase with Germany flattened and (in to a smaller amount) also with other Western European BSR neighbours. Thus the BSR becomes clearly more important to Poland. Version 1.0, Date 79

80 Lithuania, Exports and Imports 1996 in % Exports F.O.B. (%) Imports C.I.F. (%) SITC Commodity 1996 Trend 1996 Trend All Commodities 100,0 100,0 0 Food and Live Animals 10,1 8,5 1 Beverages and Tobacco 0,5 0,7 2 Crude Materials, excl. Fuels 3,4 4,6 3 Mineral Fuels etc. 6,9 9,2 4 Animal, Vegetable Oil, Fat 0,0 0,6 5 Chemicals, Related Prod Nes 7,6 13,2 6 Basic Manufactures 26,4 20,4 7 Machines, Transport Equip 23,4 33,0 8 Misc Manufactured Goods 21,5 9,6 9 Goods not Classified 0,1 0,1 As well as the adjustment of foreign trade, the structure of goods changed. While the importance of agricultural products, raw materials and semi-finished goods decreased in im- and exports, finished goods rose considerably. Above all increase in imports of semi-manufactured products for industrial manufacturing in connection with increase of exports of high-quality industrial goods underlines the development of Poland from a national economy shaped by agriculture and comparably old industries, to a modern industrial economy. Version 1.0, Date 80

81 5 Literature Alexaschenko, Serguei: Rußland: Krisen, Alternativen, Perspektiven. in: Die Allgemeine Kredit (ed.): Handbuch Länderprofile und Marktanalysen. Perspektiven und Risiken im internationalen Geschäftsverkehr. Stuttgart BMFT: Szenarienuntersuchung Maritime Verkehrssysteme im Ostseeraum. Bremen Vol. 1: Analyse des Ist-Zustandes. Vol. 2: Third Conference of Ministers for Spatial Planning and Development: Vision and Strategies around the Baltic Sea Towards a Framework for Spatial Development in the Baltic Sea Region. Tallinn First Official Draft of the European Spatial Development Perspective. Summary. Noordwijk BMfWT (ed.): Wirtschaftslage und Reformprozesse in Mittel- ud Osteuropa. - Sammelband Berlin Carbajo, José / Fries, Steven: Restructuring infrastructure in transition economies. (= EBRD Working Paper No. 24). EBRD Commander, Simon / Mumssen, Christian: Understanding Barter in Russia. EBRD EUREK: Erster Offizieller Entwurf. Noordwijk, Europäische Kommission - Generaldirektion Wirtschaft und Finanzen: Europäische Wirtschaft. Nr. 68. Belgien European Commission: Interreg II C. Community Initiative concerning Transnational Co-operation on Spatial Planning. Baltic Sea Region Operational Programme FAZ GmbH Informationsdienste; manager magazin Verlagsgesellschaft mbh; Dr. Rödel & Partner GmbH (ed.): Mittel- und Osteuropa Perspektiven. Jahrbuch 1998/99. Vol. 1: Politischer Hintergrund und Wirtschaftsentwicklung. Vol. 2: Geschäftspraxis, Investitions- und Außenhandelsbedingungen. Frankfurt a.m Gérard Wild: Die Krise in Rußland - eine Gefahr für Mittel- und Osteuropa? in: Die Allgemeine Kredit (ed.): Handbuch Länderprofile und Marktanalysen. Perspektiven und Risiken im internationalen Geschäftsverkehr. Stuttgart IMF: Direction of Trade Statistics Yearbook Washington D.C IMF: World Economic Outlook. Washington D.C Institute of Shipping Economics and Logistics: Shipping Statistics Yearbook Bremen Version 1.0, Date 81

82 Jenny Clei: Märkte mit Vorrangstellung in Mittel- und Osteuropa. in: : Die Allgemeine Kredit (ed.): Handbuch Länderprofile und Marktanalysen. Perspektiven und Risiken im internationalen Geschäftsverkehr. Stuttgart Kurz, Constanze / Wittke, Volker: Using industrial capacities as a way of integrating Central-East European economies in: John Zysman (ed.), Will there be a Unified European Economy? International Production Networks, Foreign Direct Investment, and Trade in EasternEurope (University of California's International and Area Studies Publications 1998). Meyer, Margit: Die Beurteilung von Länderrisiken der internationalen Unternehmung. Berlin Schätzl, Ludwig: Wirtschaftsgeographie 1. Theorie. 5. Aufl.. Paderborn, München, Wien, Zürich Statistischers Bundesamt: Statistical Yearbook for Foreign Countries. Stuttgart UNCTAD: Review of Maritime Transport 1998, New York, Geneva Swedish Maritime Administration: Baltic Maritime Outlook. Gothenburg1999. The World Bank: Global Development Finance. Analysis and Summary Tables. Washington United Nations: International Trade Statistics Yearbook New York Wahlen, Kai: Die Handelsverflechtungen im Ostseeraum seit den politischen Umbrüchen Universität Hamburg 1995, Diplomarbeit im Institut für Geographie (unveröffentlicht). Version 1.0, Date 82

83 Annex 1 Empirical evidence concerning development of ports with universal function in the BSR Name of Total cargo traffic foreign and transit traffic (in Nature of traffic in % share of total Port 1000t) Copenhagen Tallinn ,9 64,1 47,8 Helsinki ,6 26,4 9,1 Turku ,8 11,2 Hamburg Kiel Lübeck Rostock ,6 47,4 17, ,4 22, ,1 6,9, ,7 56,3 22,4 Riga ,6 39,4 Oslo ,8 46,2 Gdansk Gdynia General cargo Dry & liq. bulk Oil / oilpprod ,9 55,1 Szczecin- Swinoujscie St Petersburg ,9 90,1 29, ,1 48, ,4 82, ,7 46,3 23,3 Gothenburg ,5 Helsingborg ,6 19,4 Version 1.0, Date 83

84 Malmö Stockholm , ,5 44,5 20,5 Name of port Total container traffic (total containers handled) Copenhagen Tallinn Helsinki Turku Hamburg Kiel Lübeck Rostock Riga Oslo Gdansk Gdynia Szczecin Swinoujscie St. Petersburg Gothenburg Helsingborg Malmö Stockholm Version 1.0, Date 84

85 Annex 2 Maps Version 1.0, Date 85

86 Version 1.0, Date 86