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					STBR publications 15/2005




Road Transport Corridors Study:


Future Trends




  Project part-financed by the European Union
STBR – Sustainable Transport in the Barents Region


                 Road Corridors,
        Future trends of the Barents region




        Project part-financed by the European Union   14/10/2005
                                                                  2




Table of Contents:

1. Introduction .................................................................................................................... 5
PART I: GEOGRAPHICAL PERSPECTIVE................................................................ 7
2. Focal areas of the business sector in the Barents Region............................................ 8
   2.1 Northern Norway – Finnmark, Troms and Nordland................................................. 8
     2.1.1 Business sector trends in northern Norway ......................................................... 8
     2.1.2      The impact of trends in the business sector in northern Norway on transport
     in the Barents Region ................................................................................................. 10
   2.2 Northern Sweden - Norrbotten and Västerbotten..................................................... 10
     2.2.1 Business sector trends in northern Sweden ....................................................... 10
     2.2.2      The impact of business trends in northern Sweden on transportation in the
     Barents region............................................................................................................. 13
   2.3 North-western Russia – Murmansk, Arkhangelsk and Karelia ................................ 13
     2.3.1 Business trends in north-western Russia ........................................................... 13
     2.3.2      The impact of business trends in north-western Russia on transportation in
     the Barents Region ..................................................................................................... 15
   2.4 Northern Finland – Lapland, Northern Ostrobothnia and Kainuu ........................... 16
     2.4.1 Business trends in northern Finland .................................................................. 16
     2.4.2      The impact of business trends in northern Finland on transportation in the
     Barents Region ........................................................................................................... 19
3. Regional transport subsidies in Finland, Sweden and Norway as a factor
   influencing traffic streams in the region .................................................................... 19
   3.1 General ..................................................................................................................... 19
   3.2 Current situation ....................................................................................................... 20
     3.2.1 Finland............................................................................................................... 20
     3.2.2 Sweden .............................................................................................................. 20
     3.2.3 Norway .............................................................................................................. 21
   3.3 Future prospects and possibilities............................................................................. 22
     3.3.1 Finland............................................................................................................... 22
     3.3.2 Sweden .............................................................................................................. 22
     3.3.3 Norway .............................................................................................................. 23
   3.4     The impact of possible changes in transportation subsidies on traffic streams
   within the entire Barents Region .................................................................................... 23
4. The current situation and future of goods transport fees in Finland, Sweden and
   Norway - the impact on traffic streams in the Barents Region? ............................. 24
   4.1 General ..................................................................................................................... 24
   4.2 Current situation ....................................................................................................... 24
     4.2.1 Road transport ................................................................................................... 24
     4.2.2 Rail transport ..................................................................................................... 25
     4.2.3 Transport by water............................................................................................. 26
   4.3 Future prospects........................................................................................................ 26
     4.3.1 EU’s general transportation policy lines ........................................................... 26
     4.3.2 Road transport ................................................................................................... 27
     4.3.3 Rail transport ..................................................................................................... 28
     4.3.4 Transport by water............................................................................................. 28
     4.3.5 The impact of infrastructure fees on goods traffic ............................................ 29
                                                                  3



   4.4      The impact of possible changes in goods traffic fees on traffic streams within
   the entire Barents Region ............................................................................................... 29
5. Population structure and development prospects ..................................................... 30
   5.1. Population structure in the future ............................................................................ 30
   5.2. Population growth calls for jobs.............................................................................. 31
   5.3. Business prospects................................................................................................... 32
PART II: THE CLUSTER PERSPECTIVE ................................................................. 33
6. Development of the Barents Region from the Cluster Perspective.......................... 34
   6.1 Oil and gas industry.................................................................................................. 34
     6.1.1 The oil and gas cluster within the regional perspective .................................... 34
     6.1.2 Current situation and prospects in the Barents Region ..................................... 34
     6.1.3 Potential............................................................................................................. 35
     6.1.4 Impacts on traffic in the Barents Region........................................................... 36
   6.2 Fish industry ............................................................................................................. 37
     6.2.1 Global trends ..................................................................................................... 37
     6.2.2 Current situation and prospects in the Barents Region ..................................... 37
     6.2.3 Potential............................................................................................................. 37
     6.2.4 Impacts on traffic in the Barents Region........................................................... 38
   6.3 Testing – a growing branch of industry in the Barents Region................................ 39
     6.3.1 Global trends ..................................................................................................... 39
     6.3.2 Current situation in the Barents Region ............................................................ 39
     6.3.3 Future prospects................................................................................................. 40
     6.3.4 Potential............................................................................................................. 41
     6.3.5 Impacts on traffic in the Barents Region........................................................... 41
   6.4 Major sports events .................................................................................................. 42
     6.4.1 Global trends ..................................................................................................... 42
     6.4.2 Current situation ................................................................................................ 42
     6.4.3 Future prospects................................................................................................. 43
     6.4.4 Possibilities........................................................................................................ 43
     6.4.5 Impacts on traffic............................................................................................... 43
     Case 1 Arctic Ocean Race 2008................................................................................. 44
   6.5 Competence centres – strengthening and maintaining regional structure ................ 44
     6.5.1 Global trends ..................................................................................................... 44
     6.5.2 Current situation in the Barents Region ............................................................ 45
     6.5.3 Future prospects................................................................................................. 45
     6.5.4 Potential............................................................................................................. 46
     6.5.5 Impacts on traffic in the Barents Region........................................................... 46
   6.6 Large retail units....................................................................................................... 47
     6.6.1 Global trends ..................................................................................................... 47
     6.6.2 Current situation in the Barents region ............................................................ 48
     6.6.3 Future prospects................................................................................................ 48
     6.6.4 Impacts on traffic in the Barents Region........................................................... 49
   6.7 Tourism .................................................................................................................... 49
     6.7.1 Global trends ..................................................................................................... 49
     6.7.2 Current situation in the Barents region.............................................................. 50
     6.7.3 Potential............................................................................................................. 50
     6.7.3 Impacts on traffic in the Barents Region........................................................... 51
     Case 1 Touring bus travel system (Adventure bus travel).......................................... 51
   6.8 Mining industry ........................................................................................................ 51
                                                                  4



      6.8.1 General trends.................................................................................................... 51
      6.8.2 Current situation in the Barents region.............................................................. 52
      6.8.3 Prospects............................................................................................................ 53
      6.8.4 Potential............................................................................................................. 53
      6.8.5 The effect on the traffic of Barents region ........................................................ 53
      Case 1 Talvivaara´s nickel mine in Sotkamo (Kaleva 2005-08-19)........................... 54
   6.9 Forest and wood industry ......................................................................................... 55
      6.9.1 Global trends ..................................................................................................... 55
      6.9.2 Current situation and future prospects in Barents region .................................. 55
      6.9.3 Potential............................................................................................................. 56
      6.9.3 Impacts on traffic in the Barents Region........................................................... 57
   6.10 Summary of impacts on transport sector ................................................................ 58
7. Research and development projects in the Barents Region ..................................... 60
   7.1. Organisations taking part......................................................................................... 60
      7.1.1 EU programme work ......................................................................................... 60
      7.1.2 Organisations taking part in project coordination ............................................. 62
   7.2. Completed and ongoing surveys and projects related to road traffic development 63
      7.2.1 General .............................................................................................................. 63
      7.2.2 Corridor and leg surveys ................................................................................... 64
      7.2.3 Surveys aimed at supporting tourism development .......................................... 66
      7.2.4 Traffic safety projects........................................................................................ 67
      7.2.5 Logistics surveys ............................................................................................... 68
      7.2.6 Administrative and road technology cooperation.............................................. 69
8. New project ideas.......................................................................................................... 71
References ......................................................................................................................... 74
                                             5



1. Introduction

The Barents Region consists of twelve regions located in four different countries. Each
country and region has its own plans and visions for the future. However, the regions are
in close interaction with each other, and changes taking place in one region may have an
impact of development trends in all neighbouring areas.

In this report, the future of the Barents Region is approached from two different perspec-
tives:

   1. The geographical perspective
   2. The cluster perspective

The geographical perspective emphasises country- and region-specific plans and trends.
The cluster perspective, on the other hand, views operation within the entire Barents Re-
gion from the viewpoint of a specific branch of industry. Of these two, the geographical
perspective is probably the more realistic one, while the cluster perspective takes better
into account the Barents Region as a single area to be developed. It is hoped that the use
of different perspectives will give rise to different ideas on development targets in the re-
gion.

Developments and trends in a variety of areas have an impact on the development of the
Barents Region. It is in the best interest of all countries in the Barents Region to keep the
northern areas inhabited. Political decisions play a major role in the development of busi-
ness and viability in these remote areas. Political decisions may again be affected by geo-
political events and the economic state of the countries, global economic trends, prevailing
attitudes and values etc. It is of course possible for business in the Barents Region to go
ahead at full speed even without a positive political climate, but that calls for more eco-
nomic investments and risk-taking on the part of the private sector.

The geographical perspective focuses on trends in the following areas, their impact on the
transport sector and development in other areas:

   1. The business sector
   2. Legislation and regional subsidies
   3. Regional structure and planning

Within the cluster perspective, the following entities and their development prospects are
studied:

   1.   Oil and gas industry
   2.   Fish industry
   3.   Tourism
   4.   Forest and wood industry
   5.   Mining industry
   6.   Service sector/large retail units
   7.   Testing
   8.   Sports events
   9.   Culture
                                             6




The report is based on existing literature and combination of data from available sources.
               7




PART I: GEOGRAPHICAL PERSPECTIVE
                                              8




2. Focal areas of the business sector in the Barents Re-
gion

2.1 Northern Norway – Finnmark, Troms and Nordland

Natural resources make up the foundation of the business sector in northern Norway.
However, major changes within the regional, national and international framework pose a
great challenge for traditional industries based on natural resources, such as fishing, in
terms of job security and growth. A global economy, increased competition etc. are the
force behind these changes.

2.1.1 Business sector trends in northern Norway
Fishing is, and will continue to be a major industry in northern Norway, despite the fact
that its significance has steadily declined. Three quarters of the total value of fishing pro-
duction in Norway comes from the north. Only 10 per cent of Norway’s inhabitants live in
the north, but half of the country’s registered fishermen are based there. Between 1990
and 2002, the number of fishermen in the north declined from 13,500 to about 9,000.
(Utenriksdepartementet, 2003). Most of the fish caught in Norway is exported to the EU,
and the globalisation of trade has increased competition in these areas significantly. In
addition, the high exchange rate of the Norwegian krone and high wage costs compared to
other countries have created obstacles for Norwegian fish in the international market.
Norwegian fish products are also subject to trade restrictions, particularly in EU member
states.

At the moment, the fastest growing market for Norwegian fish products is Russia; meas-
ured in tons, the volume of exports increased by nearly 60% between 1999 and 2003.
However, as a whole, statistics from 2000-2003 show a declining trend; the value of total
exports shrank by nearly one tenth during the period in question. (SSB, 2004) Fish farm-
ing was expected to provide a boost for employment and production in coastal regions in
the north, but so far the expectations have only been fulfilled to a certain point. The rea-
sons for this include overproduction, diseases and accusations of price dumping. Fish
farming is however an area that is heavily invested in.

Reindeer husbandry is of great importance for the Sámi population of Norway economi-
cally, in terms of employment, culturally and socially. Problems in this field include
changes due to construction of roads, gas pipelines, power lines etc. as well as the increase
in the number of predators. In addition, as a result of the EEC agreement e.g. the transpor-
tation costs of animals to be slaughtered have increased, because the regulations make it
harder for small abattoirs to carry on their operation. Particularly the coastal areas of
Finnmark, where significant industrial and tourism plans etc. are currently being made, are
of great importance for reindeer husbandry. (Arctic Council, 2002) This conflict may pose
a problem in the future.

Tourism is an important branch of industry in northern Norway as well, in terms of em-
ployment and production value alike. There was considerable growth in this field in the
                                                9



1980s and ‘90s, but in the past few years growth has more or less stagnated. Reasons for
this include long distance from intended markets and Norway’s high price level. In addi-
tion, there has been a lack of strong, long-term social planning in Norway aimed at im-
proving the industry, such as investing in strategic infrastructure and developing various
activities and interesting experiences for tourists. (Utenriksdepartementet, 2003) In the
province of Troms, the development of the Senja tourism road has been brought forward,
with the infrastructure improvements it necessitates. Other fairly extensive individual tour-
ism projects are already under way, such as sea tourism centre that is being planned in
Storfjord1, which is seen as having an equally important role as Lofoten and North Cape in
the future. Another example are the tourism, hotel and cinema centre plans for Kauto-
keino.2

The Lofoten-Barents Sea areas were opened for oil and gas exploration in the early 1980s,
and major finds, mostly gas, have been made. (Olje- og energidepartementet, 2003) Large
finds are also expected to be made in the disputed sea border area between Norway and
Russia. Test drilling in ongoing in the eastern Barents Sea, but the general opinion is that
Lofoten will remain out of bounds for the energy industry in the future and continue to be
reserved for fishing. 3

The Snøhvit gas field north of Finnmark is the only find so far where production is sched-
uled to begin. The production plant will be opened in autumn 2006.4 The project has al-
ready created hundreds of new jobs, and oil and gas industry is expected to provide a
strong boost for economy and the business sector in northern Norway. The construction of
large industrial production plants would lead e.g. to improved infrastructure and logistic
connections in sparsely populated areas, which would in itself create a more favourable
setting for development in other fields.




Image. Oil and gas finds in the Barents Sea (Statoil www.statoil.com)
1
  www.framtidinord.no 2005-06-06
2
  www.altaposten.no 2005-06-17
3
  E.g. www.framtidinord.no 2005-06-15
4
  www.statoil.com
                                             10




Development in other fields of refining and mining production has stagnated in recent
years. However, cooperation with Russia is expected to provide a new boost to the sector,
particularly mining. In addition, it is hoped that the positive development in the oil and gas
sector will act as a catalyst for more extensive cooperation between the countries. (Uten-
riksdepartementet, 2003) The belief in the potential of the mining industry is the strongest
in Nordland. The province is one of the most important producers of ore and minerals in
Norway. The current trend seems to be that of a switch from metal production to produc-
tion of industrial minerals, because the current view is that the known ore deposits in the
area only have capacity for less than ten years. There is however a vast potential for min-
eral deposits in the area, and several new quarries are likely to be opened within the next
few years. (Nordland fylkeskommune, 2001; 2005)


2.1.2 The impact of trends in the business sector in northern Norway
      on transport in the Barents Region


     -   The growing oil and gas industry provides a boost to other branches; business
         cooperation with Russia growth of internal traffic in northern Norway, and
         the Norwegian-Russian axle in particular; train link between Kirkenes and
         Murmansk?
     -   Fresh fish transports to Russia increase further the condition of the road
         network in northern Norway and north-western Russia is likely to become a
         major issue
     -   Need for new transport corridors towards the south as well: the Nellim-Pasvik
         road connection and the Arctic Ocean coast? The volume of road transports
         from northern Norway and the Kola Peninsula to the south via Lapland and
         north-western Russia is estimated at as much as 3 million tons per year on both
         routes (European Commission 2005)
     -   The volume of dangerous substance transports on roads is increased by Snöh-
         vit and other gas/oil production plants?
     -   The development prospects of industry and infrastructure may give rise to con-
         flicts with reindeer husbandry and indigenous population possible delays in
         project implementation
     -   Development of the tourism sector sites on the coast and inland areas of
         Finnmark




2.2 Northern Sweden - Norrbotten and Västerbotten

2.2.1 Business sector trends in northern Sweden

The mining sector in Norrbotten accounts for about 40% of total production in the sector
in Sweden. Large production plants include the Aitik open-face quarry and the mines in
Malmberget and Kiruna. Mining will continue to play a major role in the future as well.
(Länsstyrelsen i Norrbottens län, 2003; Regeringskansliet, 2004) There are several ore
                                             11



exploration studies and expansion projects being currently implemented. For example, the
expansion of the Aivik open-face quarry is being worked on5; with today’s capacity, op-
eration could continue for about 10 years, but with the expansion mining could be carried
out for several decades. Surveying is also currently carried out beneath the City of Gälli-
vare, aimed at expanding the capacity of Malmberget.6 Wholly new avenues for mining
are being explored e.g. in Jokkmokk and Arjeplog, where uranium exploration is under
way.7 Quite recently, a decision was made to invest in scientific research in the field: a so-
called Nordic Rock Tech Centre, aimed at coordinating research and development projects
(within the entire northern dimension as well), thus promoting development in the field
has been set up in Gällivare as a joint project by firms working in the sector and Luleå
University of Technology.8

There are two large ore deposits in Västerbotten, the so-called Skelleftefältet and the new,
promising find known as Guldlinjen. So far, only the resources in Skelleftefältet have been
utilised, so expansion of mining plays a crucial role in terms of the province’s future pros-
pects. Exploration projects are continuously being carried out in the ore fields; only re-
cently, a large new ore vein was identified in the northern part of Skelleftefältet, for ex-
ample.9 In addition, a new gold mine was opened recently in Svartliden, between Storu-
man and Lycksele. It employs about 70 persons and produces a significant amount – 2
tons – of gold per year.10 The expanding mining sector poses particularly high demands on
smooth transportation, and many companies consider that the province’s poor road and
railway infrastructure constitutes a hindrance to growth. (Regeringskansliet, 2004) It is
hoped that the development of the mining sector jointly with the university and high-tech
firms will create new high-tech companies and job opportunities in the region. (Länssty-
relsen i Västerbottens län, 2005)




5
  www.nsd.se 2005-06-03
6
  www.nsd.se 2005-04-28
7
  www.nsd.se 2005-04-26, 2005-04-23
8
  www.nsd.se 2005-04-02
9
  www.privataaffarer.se 2005-05-26
10
   www.norran.se 2005-06-17
                                             12



Image. Mines operating in northern Sweden in 2003 (Source: Sveriges geologisk undersökning
       www.sgu.se)

The utilisation of forests and timber has long been an important industry in Norrbotten and
Västerbotten, thanks to extensive forests and high-class research. In Västerbotten, the for-
est industry has also given rise to several leading forest technology enterprises, and me-
chanical wood working industry is in particular seen as a field with great future potential.
In terms of practical measures, a decision was recently made to set up a research centre in
Skellefteå to aid research in the field.11 Forests as a source of energy is also seen as an
important future field, particularly with regard to inland forests. It is hoped that this will
even out regional differences in the degree of forest utilisation. The construction of the
Norrbotniabanan railway link from Umeå to Haparanda is seen in the north as a vital
measure to meet the growing transportation needs of mining and forest industry. (Länssty-
relsen i Norrbottens län, 2003; Länsstyrelsen i Västerbottens län, 2005)

In the past 30 years, car and component testing in Arjeplog, Arvidsjaur, Jokkmokk, Kiruna
and Älvsbyn has evolved into a significant branch of business in northern Sweden. Turn-
over in the field has grown in ten years by 700%, and the annual growth rate is estimated
at 20-25%. An extensive new testing area was completed in Arjeplog at the end of 2004,
and the airport in Arvidsjaur has been improved as requested by industry operators, e.g. by
lengthening the runway. The expansion of the airport also serves the needs of tourism and
transport. The future visions of vehicle testing have e.g. featured the idea of a new type of
adventure driving schools, where car enthusiasts would pay for a combination of improv-
ing their driving skills and adventure tourism in northern Sweden. Train and airplane test-
ing already under way in Kiruna and Gällivare is also seen as a target for future develop-
ment. (Näringsdepartementet, 2003)

Adventure tourism is a very trendy field in northern Sweden as well, and there is firm be-
lief in its growth potential. In both northern provinces, fishing tourism in particular has
gained in importance, and it is also seen as having growth potential. In Pajala, for exam-
ple, an annual fishing competition and festival will be launched, aimed at attracting tour-
ists from Sweden, Finland, Norway and Denmark. The target for the first year is 1,000
overnight stays and 800 competition participants. The long-term plan includes extensive
fishing tourism in the area.12 Investment in traditional ”tourist traps” will continue; an ex-
ample of this is the skiing centre in Riksgränsen, which is currently undergoing expan-
sion.13 In recent years, however, the government’s plans of a uniform value-added tax
have given rise to concern. It would entail a significant rise of the price of hotel stays and
transportation of people. (Finansdepartementet, 2005) According to tourism entrepreneurs
in northern Sweden, this would lead to a situation where Norrbotten is no longer able to
compete with northern Norway and Finnish Lapland.14

Individual construction projects which are likely to give a major boost to tourism and
other industries include the IKEA furniture store to be built in Haparanda and the Luleå
Culture Centre. IKEA is expected to bring a tremendous economic boost to the entire
North Calotte, attracting shoppers all the way from Norway and Russia as well. There is

11
   www.norran.se 2005-05-18
12
   www.nsd.se 2005-02-28
13
   www.nsd.se 2005-06-02
14
   www.nsd.se 2005-04-26
                                                13



already a lot of activity in the areas adjacent to Haparanda and Tornio, eager to reap the
benefits of a growing influx of visitors.15


2.2.2 The impact of business trends in northern Sweden on transpor-
      tation in the Barents region
         -   The potential of Haparanda-Tornio increasing traffic volume on the
             main road running along the Bothnian Arc; improvement of the E4 leg in
             Sweden is likely to increase the volume of traffic coming from Finland as
             well; growing traffic volume on the road between Rovaniemi-Tornio
         -   Expansion of mining and forest industry; raising the capacity of the Malm-
             banan railway link, a system regulating rail width at the border between
             Sweden and Finland the NEW corridor; a new regional transport corri-
             dor between Finland and Sweden
         -   Norrbotniabanan increasing transportation volumes along the north-
             south axle; a large-scale move from road to rail transports? A train link be-
             tween Finland and Sweden for people traffic..?
         -   With an increase in “tourism VAT”, tourists could move eastwards; this is
             however unlikely considering the importance of the tourism sector
         -   Developing forest and mining industry in Västerbotten infrastructure
             improvements; preconditions for increased people traffic as well, crosswise
             traffic between Sweden and Norway (making use of Norwegian ports? See
             Chapter 3)
         -   Car and component testing develops into a new type of basic industry
             increased air traffic in Norrbotten; inland sites are more easily accessible,
             good preconditions for strong growth terms of number of visitors

     …




2.3 North-western Russia – Murmansk, Arkhangelsk and Karelia

2.3.1 Business trends in north-western Russia
Mining accounts for about half of industrial production in the Murmansk area. There are
large reserves of chrome, titanium diamonds and rock used in building supply manufactur-
ing in the Kola Peninsula. Investing in mining and sustainable development are seen by
the regional administration as the most important target.16 Metal industry in the region has
also shown particularly brisk growth in recent years. (Lapin yliopisto, 2005)

During the past ten years, fishing and fish processing, which are both significant industries
for Murmansk and Arkhangelsk, have undergone major structural changes. The switch
from planning economy to market economy that took place in the early 1990s as well as
the continuous shortcomings in national legislation concerning the fishing industry have

15
     Esim. www.nsd.se 2005-06-13
16
     2004.murman.ru/economy/mining/
                                              14



had a great impact on the field. Fishing is down to half from its previous level, and fish
processing has diminished to one fifth. There is cooperation with Norwegian partners on
regional level. It is hoped that Norwegians will e.g. be able to provide economic assistance
in development as well as in fishing, fish processing and organisation of marketing. Coop-
eration may have other impacts as well; for instance, overproduction and high wage costs
in Norway may lead to permanent transfer of jobs to Russia. Fish farming is considered a
potential field of the future in north-western Russia. (Lapin yliopisto, 2005; Utenriksde-
partementet, 2003)




Image. Ore reserves and mining operators in the Murmansk region (Murmansk region
       2004.murman.ru)

In Russia, oil and gas production on land has been heavily invested in. New finds have
been sought for in the Barents Sea since the early 1980s. Offshore drilling is about to be
launched in Prirazlomnoye in the eastern Barents Sea. So far, one of the factors curbing
development has been the negative attitude on the part of officials, and particularly the
military, towards western investments in strategically important areas. (Utenriksdeparte-
mentet, 2003) The situation is likely to undergo a radical change in the next ten years.
Taking the enormous Shtokman gas field in the Russian part of the Barents Sea into use is
one of the largest projects in sight, and many Norwegian firms are eager to get in on the
action. However, the project has been delayed several times, and according to Russian
sources operation will commence in 2015 at the earliest.17 The gas reserves in the field
total about 320 billion cubic metres, which equals all known gas reserves in Norway. 18
Another important project is the construction of a new earth gas pipeline to Murmansk
through Siberia. Officials and representatives of the business sector have been planning to
set up special economic areas in the Murmansk area to attract investments. 19

The most important branches of industry in the Arkhangelsk region and the Karelian re-
public are forestry, wood refining as well as pulp and paper industry. The forest reserves
in the area are about four times greater compared to Finland, while logging is only 60% of
the Finnish level, and most of the timber is exported. It is therefore likely that the future of
the forest industry will be influenced by the planned increases in raw timber export duties.

17
   www.bellona.no 2005-02-04
18
   www.planora.fi 2005-08-09
19
   www.planora.fi 2005-08-09
                                             15



(Layton, 1999; Zimin, 2004) This is expected to attract companies specialising in refined
wood products to the area. Today, the majority of forest industry production from the area
is exported unrefined.

Despite its potential (the so-called Kostamuksha phenomenon, as opposed to the China
Phenomenon; i.e. prerequisites for ”globalisation in adjacent areas”), Karelia has not been
seen as a particularly attractive alternative for foreign entrepreneurs. (Joensuun yliopisto,
2005) Besides investments in electronics industry in Kostamuksha, there are only few ex-
amples of new industrial investment projects, such as the StoraEnso sawmill, IKEA’s fur-
niture factory in Kostamuksha (to be completed in 2005) and the gravel plant that Lohja
Rudus is planning to set up near Sordavala. The towns of Segezha and Kondopoga are
also seen as promising examples. Paper mills have made sizable investments there aimed
at developing social infrastructure and the living environment and to attract capital. The
influx of foreign investments may be speeded up by the planned forest legislation reform,
which will allow renting of forests for 49 years instead of five years at a time, as is pres-
ently the case. However, there is widespread corruption within the wood refining and for-
est industry in Karelia, and it is largely controlled by organised crime. This is seen as be-
ing one of the biggest obstacles to further development in this sector. (Zimin, 2004)

In accordance with a global trend, there are small-scale attempts to invest in tourism in
north-western Russia as well. A full-scale skiing centre can already be found in Kirovsk in
the Kola Peninsula. An annual ski race is arranged in Pechenga, by the Norwegian and
Finnish border, with 5,000 participants from three countries. There is also potential for
growth in fishing tourism in the Kola Peninsula.20


2.3.2 The impact of business trends in north-western Russia on
      transportation in the Barents Region




20
     2004.murman.ru/economy/tourism/
                                                16



         -   Recovery of the fishing and fish-processing industry, possible moving away of
             production from Norway fish transports will increase both within Russia
             and from Russia to Finland and Sweden
         -   Development of the forest sector and forest policy how will significantly
             increasing Russian exports make use of Finnish and Swedish infrastructure and
             ports in transports?
         -   In the long term: growing mining and metal industry in the Murmansk area,
             the Shtokman gas field crosswise goods streams will increase, potential
             links to ports by the Gulf of Bothnia and the west coast of Norway Calls for
             realisation of the Salla-Kandalaksha railway line and a crosswise road network
             suitable for international traffic in northern Lapland
         -   Positive development in the Republic of Karelia is likely to lead to increased
             land traffic volumes on an east-west axle
         -   In the long term, development of the tourism sector (infrastructure, services,
             security) is likely to increase the volume of people traffic in the Kola Penin-
             sula many times over; new ski centres etc.       will this mean a permanent
             eastward shift in the destination of international tourists in the future?
     …
     …




2.4 Northern Finland – Lapland, Northern Ostrobothnia and
Kainuu

2.4.1 Business trends in northern Finland
Forest and metal industry accounts for most of industrial production in northern Finland.
Industry is more dependent on export than elsewhere in Finland. (Lapin liitto, 2005a) Ma-
jor industrial centres are the Kemi-Tornio area in Lapland, Oulu and Raahe in Northern
Ostrobothnia and the Kajaani area in Kainuu. The raw material used at the ferrochrome
plant in Tornio comes from the chrome mine in Keminmaa, which has the deepest known
chrome ore deposit in the world. There are plans to make a switch from open-face to un-
derground mining in the near future, which would double the mining mass capacity.21

Development of mining is seen as having great potential in northern Finland’s future
strategies as well. (Lapin liitto, 2005a) A nickel mine is scheduled to open in Kevitsa, So-
dankylä in 2005.22 The multimetal deposit in Kevitsa is one of the biggest in Finland.
Europe’s biggest gold mine is likely to commence operation in the near future in Suuri-
kuusikko, Kittilä. According to the latest geological surveys, the gold reserves of the find
total over 116 tons. 23 Opening of a nickel mine, anticipated to become one of the four
biggest nickel mines in the world, is also being planned in Sotkamo. It would create jobs


21
   www.outokumpu.com
22
   www.kaleva.fi 2005-06-17
23
   www.kaleva.fi 2005-08-20; www.euroinvestor.se 2005-07-19
                                            17



for 450 persons.24 Small, private satellite mines founded close to big mines are common
elsewhere in the world, and they make popular investment targets. There are plans to start
this type of investment in Finland as well. Eastern parts of northern Finland have in recent
years begun to interest foreign mining companies due to promising diamond finds.25

The Oulu region is a significant centre of information technology, even on an international
scale, and its impact on development in all of northern Finland is considerable. However,
ETLA, the Research Institute of the Finnish Economy, no longer believes in exceptionally
brisk growth in the IT sector of the kind that was seen in the 1990s, when the number of
jobs increased by nearly 100%.26

In Kainuu, which is suffering from economic stagnation, cross-border cooperation with
Russia is seen as a resource that should be fully made use of. (Kainuun liitto, 2005) In the
province’s future strategies, the possibilities created by growth of the Russian economy
are emphasised in making Kainuu an attractive investment target for international sub-
contracting. There is also increased interest on the part of SMEs in Kainuu towards opera-
tion on the Russian side, and joint surveys have been launched with metal and timber
companies in the area concerning the initiation of production in adjacent areas and more
versatile raw material production in Russia.27




24
   www.tekniikkatalous.fi 2005-05-26
25
   www.kaleva.fi 2005-06-12
26
   eennakointi.fi/talouskatsaus/
27
   www.planora.fi 2005-07-08
                                               18




Image. Regional structure plan for Lapland 2022 (Lapin liitto)

Tourism continues to play a major role in Lapland. In the region of eastern Lapland, for
instance, the structural change that has been ongoing since the 1990s (the impact of glob-
alisation on industrial production, the loss of jobs provided by the state and state-owned
companies) has contributed towards increased investments in tourism. (Valtioneuvoston
kanslia, 2004) There are plans to build a ski-flying hill in Suomu, Kemijärvi. It is seen as a
potential booster for tourism in the area. With the construction of the hill, a ski centre cov-
ering all World Champion and Olympic winter events could be developed in the
Kuusamo/Ruka, Rovaniemi/Ounasvaara and Kemijärvi/Suomutunturi area, which could
serve as an international training centre for skiers.28 Other examples of tourism projects
include expansion of Santa’s Village on the Arctic Circle in Rovaniemi (the area attracts
about 400,000 visitors each year, most of whom come from abroad)29, and the planned
expansion projects in Rukatunturi, which will triple the amount of floor space constructed
in the area.30




28
   www.kemijarvi.fi
29
   www.kaleva.fi 2005-06-04
30
   www.kaleva.fi 2005-06-20
                                                    19



2.4.2 The impact of business trends in northern Finland on transpor-
      tation in the Barents Region




         -   Potential within the mining industry increases the need for railway link mainte-
             nance/development; the Arctic Ocean coast railway line with branches?
         -   On the other hand, possible closing down of railway lines with little traffic in ar-
             eas of impact of promising finds may weaken prospects of growth in the field
         -   Doubling of production volume of the Kemi chrome mine           increased steel in-
             dustry transport volumes; raising the capacity of sea fairways in ports by the
             Gulf of Bothnia
         -   If implemented according to plans, cross-border cooperation between Kainuu
             and Russia will increase the volume of cross-border traffic; with the exception of
             the Sotkamo nickel mine, no single significant transport factor is likely to be in
             sight in Kainuu; however, realisation of the NEW corridor would increase the
             volume of transit traffic via Kainuu (the Barents link)
         -   Development of the hospitality sector in Lapland and possible investments in
             winter sports will increase the volume of air and road traffic and put added pres-
             sure on infrastructure development, particularly as far as the deficient east-west
             axle is concerned
     …


3. Regional transport subsidies in Finland, Sweden and
   Norway as a factor influencing traffic streams in the
   region
3.1 General
The aim of regional transportation subsidies is to even out the higher transportation costs
caused by long distances in sparsely populated northern provinces in order to improve the
competitiveness of enterprises operating in the area. Transport subsidies are a form of re-
gional policy subsidy approved by the EU. In each country, a certain percentage of trans-
portation costs is subsidised, depending on the distance travelled. Enterprises operating in
certain fields only are eligible for subsidies (the product must be highly refined; e.g. trans-
portations of iron ore or raw timber are not eligible).31




31
     www.te-keskus.fi; www.transportstotte.no; www.nutek.se
                                             20



3.2 Current situation
3.2.1 Finland
The current legislation on regional transport subsidies is in force until 2007. Subsidies are
only paid to SMEs located in the provinces of Lapland, northern Ostrobothnia, Kainuu,
North Karelia, Etelä-Savo and Pohjois-Savo.

Transport subsidies are paid for transportation by rail and lorry, when the distance is at
least 266 km. If the transportation involves port operations, subsidies can be paid when
transportation by land is at least 101 km. The subsidy is 7-29% of transportation cost, de-
pending on the distance. Transportations starting in the North Calotte area (northern Swe-
den, northern Norway, Lapland, the Murmansk area) can be subsidised even if the dis-
tance covered in Finland is less than 266 km, if the total distance covered is at least 266
and the transportation is destined for another country’s North Calotte area, or is being
taken further from there; however, the subsidy only covers the part of the journey com-
pleted in Finland. Ports by the Gulf of Bothnia also receive port operation subsidy,
which is not affected by distance, and it is always paid to the dispatcher of goods.
The subsidy totals € 1.04/tn for ports located between Merikarvia and Kalajoki, and €
2.05/tn for ports north of Kalajoki.

At the moment, about € 3.7 million/year (2004) is paid in transportation subsidies to a
total of about 250 SMEs. On this scale, the direct impact of the subsidy on traffic streams
is negligible, because the subsidy is too small to stimulate an increase of production vol-
ume. (State Audit Office report 57/2003) An interesting detail comes out in the survey
conducted by Logisforum concerning logistical needs of firms operating in northern
Finland now and in the future: The current system of transport subsidies directs part of the
goods streams to ports in southern Finland, because it is cheaper for the exporter to use
them instead of the nearest port. (Logisforum, 2002) In its current for, the law thus puts
added pressure on the road network in southern Finland, instead of making use of sea
transport, e.g. through the Port of Oulu.

3.2.2 Sweden
In Sweden, transport subsidies are not restricted by the size of the company. Transport
subsidies are paid to enterprises located in remote northern areas (Jämtland, Norrbotten,
Västerbotten and Västernorrland).

Transport subsidies are paid for railway and lorry transportation, when the distance cov-
ered is at least 401 km. The distance travelled by road is however irrelevant, if the destina-
tion is a port situated in the region covered by the subsidy (cf. the situation in Finland),
and if the transportation continues by sea for any considerable distance. Subsidies are paid
for transportations abroad, if the total distance travelled is at least 401 km. The subsidy is
paid for the part of the transportation covered in Sweden. The subsidy totals 15-45% of
transportation cost, depending on the distance and the area.

In Sweden, the amount of regional transport subsidies is ten-fold compared to that paid in
Finland (SEK 350 million, [about € 37 million] in 2002). The amount (as well as the fact
that large companies are also eligible for support) naturally has a considerable impact on
                                                     21



companies’ production volumes, and thereby on regional traffic and transportation bal-
ance. (Lähteenmäki-Smith, 2002)

3.2.3 Norway
In Norway, a system of regional staggering has been used since 1975 in determining em-
ployers’ social security costs. The payments by employers have varied between 14.1 per-
cent in cities in southern Norway and zero in northernmost Norway. The objective has
been to improve the competitiveness of sparsely populated areas. According to a decision
made by the EFTA surveillance authority at the beginning of 2004, the Norwegian system
partly distorts competition, and changes were thus made. A corresponding system, albeit
on a smaller scale, was abolished for the same reason in Sweden in 2000. In Finland, a
three-year experiment was launched in 2003 in northern Lapland and the archipelago by
which social security payments by the employer were abolished altogether. The impact of
this measure has been very limited in Finland, and there are no plans to continue with this
form of support. (Sosiaali- ja terveysministeriö, 2005; Valtioneuvoston kanslia, 2000)

In Norway, the zero level of employer’s social security payments will remain in force in
Finnmark and the area of Nord-Troms, but elsewhere the level will gradually be raised to
14.1% by the year 2007. For this reason, a new national transport subsidy has been intro-
duced in Norway as a regional subsidy form replacing the old system.

It should be remembered in this connection that the government is currently engaged in a
dispute with the European Commission concerning the reinstatement of staggered pay-
ments by employers in the entire area of northern Norway, because EU regulations on
regional subsidies are unclear. 32

The national transport subsidy is only given to firms affected by the raise of social security
payments. Transports by rail, lorry, sea and air are eligible for the transport subsidy. The
condition for receiving the subsidy is that the transportation distance is at least 350 km.
For transports destined for Finland or Sweden, subsidy is paid for the part of the journey
covered in Norway, if the total distance travelled is at least 350 km. Transportations to
other countries are eligible, if the distance travelled in Norway is at least 350 km. In the
provinces of Nordland and Troms, the subsidy comes to 30-40% of the transportation cost,
depending on the distance; however, the subsidy must not exceed the amount of raised
social security costs on annual level. In the 2005 budget, about NOK 200 million (about €
25 million) has been reserved for the national transport subsidy.

In addition to the national transport subsidy, subsidies given by provinces to firms operat-
ing in their area have been in use in northern regions. There are differences between the
provinces as to grounds for granting support, but as a whole, the significance of this type
of subsidy is relatively minor. For example, in the 2005 budget in the province of Troms,
about NOK 7.8 million (about € 1 million) has been set aside for regional transport sub-
sidy, while there are no budget funds reserved for this purpose in Finnmark.33




32
     Esim. odin.dep.no/fin/norsk/norsk_okonomi/arbeidsgiveravgift/bn.html
33
     www.troms-f.kommune.no; www.finnmark-f.kommune.no
                                              22



3.3 Future prospects and possibilities

3.3.1 Finland

A working group set up under the auspices of Lapland’s TE (Employment and Economic
Development) Centre (representing the TE Centres and regional councils of Kainuu, Cen-
tral Ostrobothnia, Lapland and Northern Ostrobothnia) has proposed the expansion of the
current transport subsidy into logistics support for SMEs (as part of the proposal concern-
ing the so-called Arctic subsidy supported by the European Commission), which would
e.g. cover transportation of people in addition to goods (The Strategy of Northern Finland
– interim report 22 November 2001).

There have been calls for a significant increase of the level of transportation subsidy on
the part of industry and hauliers. In addition, the fact that the legislation on transportation
support is in force for a fixed term and its future is uncertain diminishes companies’ ea-
gerness to make large investments that might lead to increased transportation volumes. For
the time being, no factors can be discerned as having a direct impact on traffic streams in
one way or another.

3.3.2 Sweden

The current status, impact and possible development measures of transport subsidies are
analysed in the report Transportbidraget – En analys av motiv, effekter och alternativ
(2004) drawn up by Nutek, an organisation responsible for transport subsidy administra-
tion. An interesting proposal from the viewpoint of traffic streams in the region is that of
giving subsidies to transportations
destined for ports in Norway as
well. At present, the subsidies di-
rect goods streams to ports in
southern Sweden, because the dis-
tance to ports in Norway falls short
of the 401 km required. If this re-
form were implemented, it would
have a considerable effect on the
transportation system, because the
amount of lengthwise traffic in
Sweden would decrease, whereas
crosswise traffic to Norway would
increase. This would mean new
requirements concerning e.g. the
E12 road from Umeå to Mo i Rana.
As is mentioned in the report, the
impact of a plan of this kind calls
for thorough charting and addi-
tional studies.

                                     Image. The alternative direction of goods streams from
                                            Sweden (Source: Infraplan)
                                             23



The transport subsidy allocation will remain unchanged in the future, although there has
been some pressure to cut it. (Info bulletin issued by Näringsdepartementet, 18 August
2005)


3.3.3 Norway

In the 2006 state budget, a raise of about 50% to NOK 300 million (about € 38 million,
Kommunal- og regionaldepartementet) has been planned. This would reflect the gradual
raise of employers’ social security payments, and will therefore not increase the relative
level of transport subsidy, which would increase traffic streams.

The European Commission has however also proposed that other types of use subsidies
besides direct transportation subsidy be allowed in very sparsely populated areas (the so-
called Arctic subsidy, cf. Finland). Due to these unclarities in regional subsidy policy the
earlier decision on the discontinuation of staggered payments by employers may thus be
revoked.


3.4 The impact of possible changes in transportation subsidies
    on traffic streams within the entire Barents Region
In accordance with the guidelines of transport cooperation in the Barents Region, the en-
tire Barents Region should be seen as a single transport area. Decision-makers should also
be encouraged towards joint planning and development of the region’s transport infra-
structure and services. The road networks of southern parts of Finland, Sweden and Nor-
way are already heavily congested. The constantly growing volume of heavy traffic in-
creases the risk of serious accidents, as has been seen in the past couple of years e.g. in
Finland, in addition to exacerbating the problem of air pollution. Guiding transports from
northern areas to an east-west direction instead of a north-south route would be in line
with the EU’s TEN transport network policy, which emphasises the prevention of conges-
tion and increasing cross-border operation and regional cohesion. (Sikow-Magny, 2005)

In practice, transport subsidy systems in Finland, Sweden and Norway only cover areas
that make up the Barents Euro-Arctic transport area. Thus, when considering transport
subsidy reforms in individual countries, the Barents Regions should be looked at as a
whole. The alternative transport corridor via Norwegian ports proposed by Nutek that was
mentioned above is an excellent example of this. In Finland, it is vitally important to en-
sure at least that the transport subsidy system guides goods streams via the shortest possi-
ble route to ports by the Bay of Bothnia in the case of firms whose logistics could benefit
from this, instead of increasing the “lorry rally” to southern Finland even further. In addi-
tion, increasing the amount of subsidies in Finland as well and reviewing the restriction
based on the size of the company might open up more extensive possibilities for more
comprehensive utilisation of the entire east-west axle.
                                              24



4. The current situation and future of goods transport
fees in Finland, Sweden and Norway - the impact on traf-
fic streams in the Barents Region?
4.1 General
According to current European transport policy, the aim of fees on transportation is to
diminish congestion, environmental damage, accidents as well as infrastructure wear and
tear. In practice, this means influencing total transportation demand, the impact on timing
of demand and the distribution between modes of transportation. (VTT, 2004) For in-
stance, the introduction of a kilometre-based infrastructure fee for heavy road traffic may
result in a significant shift from road to railway transports etc. Changes in traffic pricing in
one country affect other countries as well.

The taxes used in road traffic are taxes based on vehicle purchase and length of time regis-
tered and the taxation of fuel and kilometres driven. Fees on infrastructure use include fees
levied for the use of a particular stretch of road, tunnel or bridge, as well as rail fees in
railway transportation.

Transport subsidies (e.g. exemption from fuel tax for vessels and exemption from electric-
ity tax for railways) has no direct effect on the distribution between modes of transporta-
tion. The popularity of sea transport as compared to transport by land is not increased by
subsidies given to sea transport, because the price level of sea freights is defined by inter-
national markets, and subsidies go to shipping companies and their costs. In a similar vein,
rail transport subsidies would go towards meeting the increasing costs of operators, if state
funds were used in an attempt to attract customers to choose transport by rail. (LVM,
2005a)

4.2 Current situation
4.2.1 Road transport
Finland
   • annual fixed tax, taxation of fuel
   • no road tolls/fees
   • no annual user fees for heavy traffic

Sweden
   • annual fixed tax, taxation of fuel
   • no significant road tolls/fees
   • annual user fee for heavy traffic (Eurovignette)
             for Swedish vehicles, for the entire road network (“tax”); for foreign vehi-
             cles, for expressways and certain stretches of basic road network (“fee”)
             differentiated according to the vehicle’s environmental impact
Norway
   • annual fixed tax, taxation of fuel
   • road tolls widely in use on expressways, bridges and tunnels
   • no annual user fees for heavy traffic
                                           25




           Heavy Traffic Net Charges,
           Domestic Haul (40 tn / 400 km)

      70
      60
                                                Fuel taxation
      50
 EUR 40                                         Eurovignette
      30
                                                Annual vehicle tax
      20
      10
       0
            Finland Sweden Norway


Image. Taxes for heavy traffic in Finland, Sweden and Norway (Source: ECMT 2004
       (http://www.cemt.org/topics/taxes/AnnexB3e.xls)

4.2.2 Rail transport

Finland
   • gross ton kilometre-based rail fee
             basic fee
             rail tax

Sweden
   • gross ton kilometre-based rail fee
   • accident fee
   • diesel fee (halved for newer equipment (1990 ))
   • in addition, the so-called Öresundsbroavgift (a fee for trains crossing the Öresund
      bridge) and rail yard fee.

Norway
   • gross ton kilometre-based rail fee
   • CO2 fee (diesel)
   • electricity fee (kWh-based)
   • multimodal transportations exempted from fees
             the aim of this measure is to reduce the amount of transportations solely by
             lorry
                                                   26



Table.       Rail fees in Finland, Sweden and Norway. Sources: LVM 2005, SIKA 2002, Samferd-
             selsdepartementet 2004, Euro exchange rate on 16 June 2005

Finland                      Sweden                          Norway
Rail fee:                   Rail fee:                        Rail fee:
€0,001227/gtnkm      (basic €0,00030/gtnkm                   €0,00150/gtnkm
fee)                        (SEK0,0028/gtnkm)                (NOK0,0118/gtnkm)

Rail tax                     Accident fee:
€0,001/gtnkm (diesel)        €0,0592/km
€0,0005/gtnkm (electricity) (SEK0,55/km)
Railway fees based on the number of kilometres transported

4.2.3 Transport by water

Finland
   • merchant vessels must pay a so-called fairway fee for the use of state fairways
             size of the fee depends on vessel type, size and its ice-strengthening
             the fee is the same in the entire country (no fairway-specific fees)
             Merenkulkulaitos (the Finnish Maritime Association) has the right to grant
             discounts to so-called transit traffic
   • piloting fee
   • in addition, ports levy port fees

Sweden
   • a two-part fairway fee
             partly based on gross capacity (differentiated according to environmental
             impact)
             partly based on amount of tons transported
             Sjöfartsverk has the right to grant so-called commercial discounts to stimu-
             late shipping.
   • piloting fee
   • ports levy port fees

Norway
   • in most municipal ports, fairway fee based on gross ton capacity, so-called safety
      fee and piloting fee
   • ports levy port fees and ice-breaking fees

4.3 Future prospects

4.3.1 EU’s general transportation policy lines
Transport policy strategy 2010 (White book 2001)
   • strong competitiveness
   • less environmental damage
   • shift from roads to transport by rail/water
   • better usability for all groups
   • improved traffic safety
                                              27



Preparation of transport mode-specific directive
   • Proposal for amendment of the Eurovignette directive (2003)
              expands member states’ right to levy user fees from heavy goods traffic for
              the use of the road network
              fees are not mandatory, but if they are levied, the directive must be fol-
              lowed
              the primary objective is to guide companies’ logistic choices, so that exter-
              nal and internal infrastructure costs caused by transportation are taken into
              account better than before
              Germany intends to impose kilometre fees from the beginning of 2005. In
              Austria, fees have been in use from the beginning of 2004, and Holland and
              Sweden (see below) are also studying the possibility of turning the Eurovi-
              gnette fee into a kilometre fee
   • Fuel directive proposal (2002)
              fuel taxation would gradually fall within a common fluctuation margin
              the proposal was rejected by the European Parliament
   • Amendment of the Railway traffic capacity and rail fee directive (2001) is under
      way
              the principles of the fee system have been extensively harmonised
              the aim is to make calculation grounds more uniform
   • Transport by water (2001)
              differentiation of fairway fees according to actual costs caused by emission
              and noise

Supporting different modes of transportation
   • the Marco Polo II programme
               aimed at supporting intermodal transportation
               long-term objective is to move transportations from roads to waterways

4.3.2 Road transport

Finland
   • heavy-traffic fees are seen in many ways as posing a problem (the costs of trans-
       portations, abroad, there is little transit traffic in Finland, technical implementation
       is costly); Finland thus aims to concentrate on following European development on
       this issue (LVM, 2003).

Sweden
   • the government’s road traffic tax report proposes a significant increase of diesel
      tax and the introduction of a kilometre tax for heavy traffic (Finansdepartementet,
      2004)
             the opinion in northern Sweden is that these measures might even mean the
             death of forestry and sawmills, due to the long distances. According to a
             report drawn up by forest industry research centre Skogforsk, transporta-
             tion costs in the forest sector would increase by 30% if the proposal were
             put into effect.
             it has also been estimated that the reform would mean an extra cost of SEK
             1.1 billion to the food industry (Lantbrukarnas Riksförbund)
                                            28



               at present, foreign lorries only pay an Eurovignette user fee for using the
               so-called Eurovignette road network; if the kilometre fee were introduced,
               the fee would be used on the entire road network

Norway
   • the possibility of introducing municipal low-emission zones (lavutslipssoner) and
      the extra costs/restrictions this would impose on heavy traffic are being studied
      (Samferdselsdepartementet, 2005)
              the greatest impact would be felt in big southern cities, where emissions are
              the greatest problem

4.3.3 Rail transport

Finland
   • internal Finnish traffic will be opened for competition in the year 2007
             new operators are most likely to be interested in current high-volume routes
             and whole-train transportations for big customers        competition and the
             threat of competition will lower railway freight prices in the case of strong
             goods streams
             correspondingly, the freight prices of irregular and minor goods streams
             may go up        small railway consignments are likely to be transported by
             lorry in the future (LVM, 2005b)

Sweden
   • In 2002, SIKA proposed a reform of rail fees. The most important were raising the
      diesel fee many times from its present level, the introduction of a carbon dioxide
      fee, and a kWh-based electricity fee. (SIKA, 2002) In practical terms, this would
      mean that fees for electrical trains would be doubled, and those of diesel trains
      would increase by 300%. No reforms are scheduled in the near future.


4.3.4 Transport by water

Finland
   • fairway fee reform is currently under way
            A Ministry of Transportation and Communications working group has
            made two new proposals for new fairway fee legislation, which are cur-
            rently being circulated for comment (LVM info bulletin, 30 June 2005)
            both proposals suggest that an annual fee in internal traffic and the discount
            it brings be abolished; fairway fees for cargo vessels from Finland and
            other EU member states would go up on average 11%, while fees for others
            would go down 10%
            the other proposal would impose the so-called ice passage index, calculated
            based on the vessel’s width and engine power, meaning that ice classes
            based on actual ice strengthening would no longer be used
            there are fears that a fee based on ice passage index will diminish the use of
            ports in northern Finland during the winter months, leading to a switch to
            other modes of transportation from the north
                                             29



               possibility of traffic streams moving to ports in northern Sweden? Ice pas-
               sage capacity is not used as a basis for pricing in Sweden

Sweden
   • the future reform of fairway fees has been charted; plans to adopt a system based
      on distance covered and motor power, aimed at better reflecting the environmental
      costs caused by water traffic (Regeringskansliet, 2003)

4.3.5 The impact of infrastructure fees on goods traffic

SIKA has analysed the possible effects of the infrastructure fees presented above on goods
traffic performance in Sweden with the aid of a certain modelling system (Samgodsmodel-
len). (SIKA, 2005)

Just by itself, the introduction of a kilometre tax for heavy traffic would mean a decrease
of about 5% of road transport performance. The effect of the rail fee reforms proposed by
SIKA would decrease goods transports by train by as much as 15%. Furthermore, the in-
troduction of marginal cost-based fairway fees would diminish sea traffic by about one
percent.

According to the analysis, simultaneous introduction of the fees in all modes of transporta-
tion would lead to an increase of sea transportation performance, to the detriment of rail
and road transport.


4.4 The impact of possible changes in goods traffic fees on traf-
    fic streams within the entire Barents Region
The common European trend is to aim at supporting more environmentally friendly modes
of transport. This is an area where Sweden has been particularly active. However, the
planned kilometre tax and the raising of the diesel tax do not take into account impacts
caused by regional differences, such as the limited infrastructure and long distances in
northern areas; for example, there is no parallel railway network available as an alternative
to roads for the majority of firms. The fixed structure and close regulation of traffic of the
railway network restricts its use for transports.

In reality, society’s possibilities of affecting the choice of transport mode are relatively
small, because the decision concerning the mode of transport is ultimately made by the
firm that needs transports, based on its own needs. (Ratahallintokeskus, 2005) The only
practical consequence of marginal cost-based fees – used without compensatory reduc-
tions in other taxes and fees levied on traffic and transports – in a setting like the Barents
Region could very well be a decline of the business sector due to a radical rise in transport
costs that are already high.

When new cross-border transport corridors are being planned, an attempt should be made
to harmonise fees and taxes in individual countries. Major changes in pricing in just one
country – such as the possible kilometre tax in Sweden – are hardly likely to attract inter-
national transit traffic to make use of alternative transportation routes that could otherwise
                                                    30



be recommended. Considerable differences in railway tariffs also make it more difficult to
develop wholly new routes and to make better use of existing infrastructure.

It could be rewarding from the viewpoint of the potential east-western Barents transport
corridor to develop a modelling system supporting the analysis of international transports
within the entire Barents Euro-Arctic traffic area in the future. Current freight modelling
systems (e.g. Samgods, NEMO/PINGO, FRISBEE) are relatively inaccurate when it
comes to depicting actual international goods streams due to their differing modelling
premises, emphasises, criteria etc. (STBR, 2005)

The transport-policy significance of northern Norway and north-western Russia will in-
crease considerably in the future thanks to their nearly endless natural resources. This is
why different future transport route alternatives should be analysed. The joint impact of
various potential transport corridor alternatives as well as transport subsidy and goods
traffic pricing scenarios on the distribution of transportation modes, and on the choice of
routes in particular, could be modelled more accurately within Barents cooperation. This
would help guide authorities towards making social decisions that are in line with the sus-
tainable transport policy of the EU and the Barents Region.


5. Population structure and development prospects
5.1. Population structure in the future
All in all, about 4.9 million people live in the Barents Region being studied here (exclud-
ing the regions of Nenets and Komi)34. This is about 3% of the combined population of
Norway, Sweden, Finland and Russia. The proportion of population living in the Barents
Region varies between the countries, from 2.3% in Russia to 12.5% in Finland. The Bar-
ents Region thus has a different relative impact in the regional policy of different coun-
tries. The majority of people living in the Barents Region (67%) are Russian.

Region                      Population in % of country’s Population in Population
                            2000           total popula- 2010            change
                                           tion
Norway, Barents                    464,328          10.4         471,995          7,667
Nordland                           239,109           5.3         241,938          2,829
Troms                              151,160           3.4         155,343          4,183
Finnmark                            740,59           1.7          74,714            655
Sweden, Barents                    511,878           5.8         525,178         13,300
Västerbotten                       255,640           2.9      **262,589           6,949
Norrbotten                         256,238           2.9      **262,589           6,351
Finland, Barents                   647,336          12.5          643752         -3,584
Oulu                               455,135           8.8         465,740         10,605
Lapland                            191,768           3.7         178,012        -13,756
Russia, Barents*                 3,285,000           2.3      2,961,000        -324,000
Arkhangelsk                      1,492,000           1.0       1,352,000       -140,000
Murmansk                         1,017,000           0.7         883,000       -134,000

34
     www.stat.fi, www.ssb.no, www.scb.se, www.barentsinfo.fi/beata
                                                    31



Karelia                             776,000                    0.5     726,000         -50,000
Total*                            4,908,542                           4601925         -306,617

*Excluding the regions of Nenets and Komi
**Estimated from country’s total forecast based on population share

The Barents Region population is estimated to diminish by about 6%, or some 300,000
persons, by the year 2010. This reduction is mainly caused by a diminishing of the popula-
tion in the areas of Arkhangelsk, Murmansk and Karelia. In Sweden and Norway, the
population living in the Barents Region is likely to increase at the same rate as total popu-
lation growth in the countries, i.e. by a total of 21,000 persons. In Finland, however, the
population of Lapland province is estimated to diminish by about 14,000 persons, while
that in Oulu province is expected to increase by about 11,000. Population forecasts that
differ as much as this are most likely based on different ideas concerning not only natural
population growth and migration, but also the attraction power and business structure of
the regions.

In the past ten years, population in the Barents Region has only grown in the provinces of
Troms and Oulu. It is therefore interesting that in Norway, population growth is also ex-
pected to take place in the provinces of Nordland and Finnmark. This calls for a change in
the direction of current population trends.

The number of persons under 15 years of age is expected to fall by the year 2010 in Nor-
way, Sweden and Finland. According to estimates, the trend is similar in the northern
provinces of Norway and Finland as well. This means that the population will age, which
will contribute further towards a lower birth rate. The expected increase in population
would thus involve people of working age and pensioners, which is likely to mean that
migration to the region increases as the birth rate goes down.

In Finland, on the other hand, it is believed that the positive population trend in Oulu
province will be strengthened further by both natural population growth and regional at-
traction power. In contrast, there is little belief in the attraction power of the province of
Lapland in the population forecasts. It should however be considered whether the same
kind of population growth as in Norway can be expected in the northern regions of Swe-
den and Finland. What should be done in order to attract new residents to these regions, in
addition to the current inhabitants?

5.2. Population growth calls for jobs
A well-functioning and vital municipality or city needs residents, and they need jobs so
that they can earn a living. Even the most pleasant location cannot hold on to its people for
long if commuting distances become unreasonably long, or if there are simply no jobs
available. As possibilities of finding employment weaken, people are faced with two al-
ternatives: becoming self-employed or moving elsewhere to find a job. Over time, various
solutions to regional problems of unemployment have been proposed. In recent years, the
notion has increasingly gained ground that employment trends in a given area are in some
way dependent on the ability of its regional centre to succeed in the market. This is partly
due to the growing emphasis of the global economy on information-intensive products,
services and sectors. This emphasises the importance of innovative environments and con-
tributes towards centralisation of regional structure. (Tulevaisuusvaliokunta, 2002) We
                                             32



may therefore have to accept the fact that jobs will increasingly be concentrated in innova-
tive centres, where waves of information and interaction give rise to new, productive ac-
tivity. The possibilities of development in areas with poor employment prospects are thus
largely dependent on whether innovative centres can be established in them, securing job
growth in the area.

In recent years, a trend has been seen where people who have had careers elsewhere return
to their former areas of residence after retirement. This sounds very positive, but it should
be remembered that returning migrants will not move to remote, inaccessible areas – they
need services. Even though today’s old-age pensioners are relatively healthy and mobile,
it is to be expected that their circle of life will diminish after an active initial period of
retirement, and accessibility of various social and health care services will become in-
creasingly important.

These views of the future call for ensuring traffic connections within regions at the very
least. If the demand of services is assumed to focus increasingly on larger regional centres
as opposed to sparsely populated areas and small rural centres, it is important to make sure
that the regional centres are accessible by private and public transport alike.


5.3. Business prospects
Various cluster and Polis plans have been drawn up in recent years based on the concept
of regional centres (Tulevaisuusvaliokunta, 2002). In these plans, a conscious effort has
been made to support the information, technical and economic development of the busi-
ness sector by defining a profile for each cluster centre or Polis on the basis of its
strengths. For example, a determined effort aimed at reforming the business structure of
regional centres has been launched within the Multipolis network set up in northern
Finland, and similar Polis projects are under way in northern Sweden as well. The corner-
stones on which the Polis concept in northern Finland relies include technology, natural
environment, measuring technology and winter. It is possible to set up competence clus-
ters around the areas of strength mentioned in Chapter 2, such as mining, mechanical
wood industry, fishing and tourism.

In an increasingly global world, it is no longer sufficient in terms of supporting Polis net-
works for each centre to have strong interaction with its own region and national-level
regional centres. In a society where economic and production success is increasingly
based on free flow of information, regional centres must be secured access to international
forums as well. Mere flow of information does not suffice; people and goods must be able
to move as well. It has been shown that personal interaction makes utilisation of existing
information and the birth of innovations more effective. This may also be one of the rea-
sons for the failure of distance work to catch on as was hoped. Even though persons work-
ing at distance might prioritise their living environment, work performance is often ham-
pered by the lack of social interaction found in the workplace. Working at distance there-
fore calls for smooth connections with the rest of the world, on an international level as
well.
               33




PART II: THE CLUSTER PERSPECTIVE
                                              34




6. Development of the Barents Region from the Cluster
   Perspective
6.1 Oil and gas industry

6.1.1 The oil and gas cluster within the regional perspective

The oil and gas industry constitutes a significant source of revenue for the national econ-
omy. The limited amount of oil and gas resources puts demands on governments and busi-
ness policy as to utilisation of finds. The benefits must be focused on securing sustainable
development of human, social and physical capital in the regions.

When correctly implemented, the potential benefits of projects are the following: (a) im-
proved employment locally; (b) transfer of technical and commercial competence and im-
provement of local capacity; (c) increased fiscal revenue on regional level; (d) improved
accessibility of services, particularly in the areas of health, education, transport and energy
production due to increasing public funding and investments; and (e) positive cumulative
effects in interest areas. (World Bank)

6.1.2 Current situation and prospects in the Barents Region

Oil and gas exploration has been conducted in the Barents Region for decades, and the
area is one of the richest in the world in terms of raw materials. In the Norwegian part of
the Barents Sea, 25 finds have been made (Statoil 2004), and gas production will com-
mence in the Snöhvit field north of Hammerfest in 2006. Most of the liquefied natural gas
(LNG) produced will be transported by sea to the European market.

In north-western Russia, oil production is ongoing in the north-western areas of Komi and
Nenets. That is where the Timan-Pechora oil and gas province is situated, being one of the
largest in the world (40 fields in production). There is a significant amount of oil produc-
tion in southern parts of Komi as well. The oil-rich Prirazlomnoye field, where production
is set to begin in the near future, is also located in the northern sea area. There is also a
considerable amount of earth gas production in the regions of Komi and Nenets. The most
important gas project in the near future is exploitation of the Shtokmanovskoye field lo-
cated in the middle of the Barents Sea. Russian operators are currently making decisions
concerning the choice of foreign business partners, and production is scheduled to begin in
2015. The annual production volume of gas is estimated at 50 billion cubic metres. Most
of the gas will probably be exported to the US market via the northern sea route. (Business
Support Bureau ”Runa”, 2003)
                                           35




6.1.3 Potential

According to estimates, only 0.32% of the oil reserves in north-western Russia had been
exploited by the year 2000. Oil and gas reserves in the region are believed to last for at
least 140 years. (Business Support Bureau ”Runa”, 2003) Norwegians are expecting to
make a large find east of North Cape. (Innovasjon Norge, 2005)
                                           36




6.1.4 Impacts on traffic in the Barents Region

-     massive cumulative effects
-     sub-contracting industry
-     an economic boost to the regions     creates a favourable environment for other in-
      vestments as well
-     hundreds of new jobs increase the need for services, housing production etc.  indi-
      rect job growth (thousands)

    bound to have an effect on road-traffic volumes as well
              - commuting?
              - development of areas increases the volume of people traffic

Case 1 Snøhvit

Snøhvit-project has increased the attractivity of northern Finnmark among local youth,
returnees and new inhabitants. Immediately after the decision of construction was been
made the population growth turned positive in Alta, Hammerfest and Vadsö.
Business and employment in the area has increased dramatically. Sectors of transportation,
construction hotel and restaurant business and other service sector have increased the
most. Local and regional companies have received many more subcontracts than was es-
timated in accounts made previously.
In road transport the load in Alta-Hammerfest road has risen more than expected and hea-
vy traffic to Melköy has increased the transit trafiic in Hammerfest downtown. It is ex-
pected that daily work traffic From Alta to Hammerfest will increase. Until now it has
                                            37



been noted however that Snøhvit has not increased the governments investment in extra
infrastructure projects although new traffic needs have risen up already.


Business Support Bureau ”Runa” 2003. Industrial Development in the Russian Barents
region.

Innovasjon Norge. 2005. Forstudie. Petroleumsrettet näringsutvikling i Nord-Norge.


6.2 Fish industry

6.2.1 Global trends

Aquaculture will continue as the fastest-growing animal-based food production sector in
the world. The share of aquaculture in the production of fish, crustaceans and molluscs is
increasing continuously. As a whole, production volumes within the cluster have however
remained more or less unchanged in recent years due to stagnation in catch fishing and
catch quotas. Fresh fish continues to be the most widely accepted product in the market.
(FAO, 2004)

6.2.2 Current situation and prospects in the Barents Region

The northern coast of the Barents Region is a significant production area for fish and fish
products. The largest production areas are the regions of Murmansk and Arkhangelsk, the
municipalities of Bodö and Tromsö with adjacent areas as well as Hammerfest, Nordkapp
and Båtsfjord. The majority of production is exported. (TØI, 2002;
www.russianamericanchamber.org) The volume of fish production in northern Finland
and Sweden does not reach very significant numbers; in addition, fish from the Baltic can-
not be exported to the EU due to high dioxin content. (European Commission, 2002)

Both northern Norway and north-western Russia are suffering as a result of stagnation of
the sector. Russia is a growing market for Norwegian fish products. Calculated in tons,
exports to Russia increased by about 50% between 1998 and 2003. (SSB, 2004; Economic
Monitoring of North-West Russia, 2005)

Recently, sizable investments have been made in the Murmansk area aimed at supporting
Russian plants engaged in fish processing. Demands have been issued by Moscow that all
catches must be offloaded in Russian ports so as to ensure sufficient supply of raw mate-
rial for the plants. (www.barentsobserver.com 2005-05-26)

6.2.3 Potential

Aquaculture has great potential to become a major industry, particularly in the Murmansk
area; at present, it is only a fraction of the corresponding level in northern Norway. In
2004, over 200,000 tons of farmed fish was produced in the northern provinces of Nor-
way, while the annual production volume in the Murmansk region has only been 500-600
tons. (www.bisnis.doc.gov; SSB, 2004; Ivanova, 2005)
                                             38



6.2.4 Impacts on traffic in the Barents Region

Classification of fish products according to transport requirements: (TØI, 2002)
              1) Fresh fish, crustaceans and molluscs – tight requirements regarding
                  transportation time and quality
              2) Frozen fish, crustaceans and molluscs, including processed frozen prod-
                  ucts – tight requirements concerning unbroken cold chain, but not con-
                  cerning transportation time
              3) Processed fish, crustaceans and molluscs – no requirements

Fresh fish is mostly transported by lorry (61% of transportations) due to requirements
concerning transportation time and quality. In the Barents Region, significant amounts of
fresh fish products are transported between Norway and Russia; from Norway to Sweden
and Finland; and from northern Norway to the south of the country. As Russia continues
to grow in importance as a market for fish exported from Norway (fresh fish makes up
about 40% of all fish exports from Norway to Russia), this is likely to increase the volume
of road transports in the Barents Region. The question is how large a proportion of these
transports will go via Finland and Sweden. The road infrastructure of these countries
might be the most attractive alternative for transporting goods to Russia as fast as possible.
Accordingly, the aquaculture potential of the Murmansk area (1,000-fold production vol-
umes in aquaculture (cf. Norway) are likely to increase the amount of export transports)
gives rise to the same question: the “most high-quality” and fastest route to Denmark and
Germany runs through Finland and Sweden. However, no fresh fish is transported via the
cross-border stations between Finland and Russia at the moment. (STBR, 2005) Border
crossings that are as smooth and fast as possible pose their own requirements on these
transport corridors.

CASE Innovative aquaculture in the Murmansk area

There is a fish farming plant operating in the Murmansk area by the shore of Lake Iman-
dra that makes use of the cooling water originating from the Kola nuclear plant that runs
into the lake. The daily stream of warm water totalling 1,000 cubic metres creates ideal
conditions for trout farming. According to plant representatives, the growth rate of trout is
2-to-3-fold compared to other fish farms in the area. The lake water in the plant area re-
mains unfrozen even when it gets as cold as -30°C. The vicinity of the nuclear plant has
given rise to concern about contamination, but according to plant representatives, the ra-
diation level of the water does not exceed norms, and each fish batch is tested by three
independent laboratories. The fish plant produces 50 tons of trout per year. At the mo-
ment, testing is under way to see whether sturgeon farming can be launched.
(www.murman.ru/news/ 2005-01-24)


Food and Agriculture Organization of the United Nations. 2004. The State of World Fish-
eries and Aquaculture 2004.

Ivanova, M. 2005. The Northern fisheries of the Russian Federation: Institutions in transi-
tion.
                                            39



Transportøkonomisk institutt. 2002. Godstransporter innen, til og fra Nordland og Nord-
Norge.


6.3 Testing – a growing branch of industry in the Barents Region

6.3.1 Global trends

Vehicle testing is one of the biggest and most important branches of industry in the world,
making up about 9% of the combined European GNP. In 2004, some 15.3 million new
cars were bought in Europe. Total car production volume in the world is about 60 million
cars. The European Union is currently the world’s largest car producer and market area.
Competition between different car makes is hard, and as customers’ level of demand rises,
product development and thereby vehicle testing has increased considerably in impor-
tance. Cars must also be able to function in extreme conditions (cold, snow, slippery con-
ditions). That is why new car models have been tested for decades in Barents Region
countries, particularly Finland and Sweden. In addition to the car industry, tyre manufac-
turers are another important actor involved in testing in the Barents Region. In addition to
traditional testing, new markets (e.g. trains, airplanes and army equipment testing) are
emerging.


6.3.2 Current situation in the Barents Region

Winter testing of cars and tyres has been conducted particularly in northern Sweden and
Finland since the 1960s and ‘70s. During the past 30 years, testing has become a very im-
portant branch of business in many municipalities. For example, in northern Sweden the
automotive and component testing industry has a yearly turnover of about 500 million
SEK and an annual growth rate of between 20 and 25%.35 Car and tyre testing is a major
branch of industry in Finnish Lapland as well. Its indirect impact can be seen as cumula-
tive effects e.g. in the hospitality and service sector. For example, the large privately
owned car testing unit situated in Särkilompolo, Muonio, provides jobs for 200-300 per-
sons in the winter, and around 15-20% of the labour force in the municipality is linked to
the industry.




35
     Västerbotten Kuriren 17.11.2004
                                                              40




In Sweden, testing is conducted in nine municipalities, all of which are members of
SWTR (Swedish Winter Test Region), a vehicle-testing organisation (Arjeplog, Arvids-
jaur, Jokkmokk, Älvsbyn, Malå, Sorsele, Gällivare, Kiruna, Storuman).36 In Finland there
are four companies offering car and tyre testing services. One is in the provincial capital
Rovaniemi, and a pioneer in the business operates from Muonio. This place serves a dozen
or so car manufacturers. The other two businesses are both in the municipality of Inari.37

In northern Sweden and Finland, testing has traditionally involved cars and tyres, but there
is now a determined effort to broaden the scope of winter testing. Winter testing of air-
planes and trains has already been launched in Sweden38, while snowmobiles have been
tested in Rovaniemi.

6.3.3 Future prospects
There is strong belief in good future prospects in winter testing. Prerequisites for winter
testing in the Barents Region are good. The northern parts of Finland and Sweden have the
advantage of permanent snow, a long winter, sparse population (secrecy), good traffic and
data connections as well as a stable social system. In Norway, development of testing is
made difficult by variations in altitude, a more insecure snow situation (due to the sea and
the Golf Stream) and the country’s high price level. The natural conditions in Russia are
well suited for the purpose, but insecurity and poor traffic and data connections prevent
more extensive development in this field.


In Finland and Sweden, investments have been made in testing development. The winter-
testing organisation SWTR promotes the industry’s interests and supports testing activi-
ties. Train and army equipment testing areas are currently being planned in Gällivare and
Sorsele in northern Sweden.39 Space technology (Phoenix space shuttle) has also been
tested in the vast unpopulated regions of northern Sweden.40 Development of testing in

36
   http://www.welcometovasterbotten.se/default.asp?ML=21331
37
   Helsingin Sanomat 18.12.2001
38
   Västerbotten Kuriren 13.12.2004
39
   Lapin kansa 29.9.2004
40
   Ruotsin radio 6.5.2004
                                              41



Finland is being supported through various programmes, such as the Arctic Power project
(snowmobile testing in Rovaniemi) and the project aimed at developing a competence
cluster in cold technology (including e.g. the Polartest and ColdClimateDataCentre pro-
jects). There are also preliminary plans to build a year-round winter-condition test tunnel
for cars in Snowpolis in Vuokatti, a sort of “ski tunnel” for cars 41, whereas initiation of
Unmanned Aerial Vehicle (UAV) testing has been planned for Kemijärvi42.

Switzerland and Austria are currently the main European competitors for the Barents Re-
gions in the field of winter testing. The advantages that the Barents Region has to offer
compared to these two include a longer and more predictable winter and vast uninhabited
areas that guarantee privacy.


6.3.4 Potential

There are lots of extensive, empty areas featuring extreme conditions in the Barents area
that could be utilised in testing. It is however likely that thanks to their competence cen-
tres, Sweden and Finland will continue to attract the majority of winter testing customers
in the future as well. There is significant potential for expansion in the field, but testing
calls for special competence (education) and capital (connections to manufacturers, public
funding). In addition, prerequisites for the development of testing areas also include good
traffic connections (freight + people traffic) and existing auxiliary services that support
testing (hospitality sector). In the following, some ideas on the development of testing in
other areas besides the two market leaders, Finland and Sweden are presented:

 -   A testing area for cars using alternative sources of energy (e.g. electric cars) in north-
     ern Norway (Finnmark)
 -   There is potential for testing of army equipment in other countries besides Sweden, as
     extensive military exercises/testing have been conducted in the area and military
     structures are already in place The development may be prevented or slowed down by
     the political situation and history (Nato/Warshaw pact)
 -   Strong growth of China’s auto industry -> a possibility for development of testing in
     Russian parts of the Barents Region? Railway connection already exists.


6.3.5 Impacts on traffic in the Barents Region

Testing poses its own demands and has its own impacts on traffic in the regions. Because
the products being tested are often new prototypes, manufacturers usually want to keep
their products well hidden. The majority of products are transported to the test sites in
containers. Testing is often carried out at night for secrecy reasons. Increase in testing
volume means more container traffic in the areas, but it is hardly likely to become signifi-
cant, since the freight volumes are relatively small and limited to a certain time of the
year. However, fast and direct connections (air freight + people traffic) are of great impor-
tance for the development of the field. Customers use large sums of money for testing and
they are prepared to pay for good service.

41
  Kaleva 5.9.2005
42
 Kaleva 9.9.2005
                                             42



6.4 Major sports events

6.4.1 Global trends

In today’s world, sport is big business. Sponsors are interested in sports events due to their
high visibility. In addition, sports events attract large crowds to come and see the events
and enjoy the atmosphere on location. Many sports events have great significance for
business in the area. In the best-case scenario, even a seemingly wacky event may turn
into a real booster for local tourism, as shown by the success of the Swamp Soccer World
Championship in Hyrynsalmi.

6.4.2 Current situation

Looked at from the more central parts of Europe, the Barents Region is remote and
sparsely populated. That is why big sports events are rarely arranged there. The area’s
strength in terms of sports events is a long winter with abundant snow, which is good from
the viewpoint of arranging winter sports events. That is why the season’s first and last
international cross-country ski events are arranged there. Two large world cup events are
arranged in the Barents Region annually: the cross-country skiing, ski-jumping and Nordic
combined world cup event in Kuusamo at the end of November, and the alpine world cup
ski race in Levi, both of them major international events. According to the FIS event cal-
endar, about 15 major international cross-country and 18 alpine ski events are organised
each year in the Barents area, in addition to some other big winter sports events (such as
the Arctic Challenge - Tromsö Snow Board Competition).

Adventure sport is a relatively new sports form that has fast increased in popularity. Com-
petitions are arranged in different parts of the world, in places with demanding natural
conditions. About 25-30 large, highly esteemed international events are arranged each
year. In 2005, two of these events took place in the Barents Region: one of the competi-
tions of the Salomon X-adventure World Tour (Riskgränsen) and ExploreSweden (AR
World Series competition). In addition, several smaller adventure sports events are ar-
ranged in the region every year, such as the Lapin Kulta challenge, Syöte challenge, Arctic
KIMM (Hemavan), The North Pole Marathon (North Pole, Russia), FEM (Kebnekaise),
Kieppi Adventure challenge (Oulu region), Björkliden Arctic Marathon (Kiruna). Addi-
tionally, other adventure sports events are arranged depending on the year, because many
of the races are held on different locations each year (e.g. the North Face Endurance
Quest). Well-organised adventure sports events are the best possible advertisement for the
local tourism industry!

Other interesting sports events that have given rise to international interest and attracted
participants from other countries include the Arctic canoe race (Kilpisjärvi-Tornio, now
terminated), the Border-to-Border cross-country ski event (Kuusamo-Tornio), the Swamp
Soccer World Championship (Hyrynsalmi), numerous Snowcross snowmobile races ar-
ranged around the Barents Region, reindeer races (e.g. Inari, Jokkmokk, Kautokeino),
Winter Swimming World Championship (Muonio) and mountain bike races (WC in Åre
in 1999!). In addition, countless smaller national-level sports events are arranged annually.
Among these, soccer, ice hockey and bandy are the ones attracting most interest on na-
tional level.
                                             43



6.4.3 Future prospects

What major international events could realistically be arranged in the country is something
that is being evaluated in each of the Barents Region countries. For example, there are
plans to build a ski-flying hill in Kemijärvi in Finland. It would make it possible to ar-
range World Cup competitions in ski-flying. In Tromsö, plans to apply hosting the 2018
Winter Olympics are being considered.

It is unlikely that the Barents Region is chosen as the venue for very many large-scale
sports events. The region is far from the main European markets and the population base
does not guarantee large numbers of spectators on location, which is why not all sponsors
are interested. The potential there is mainly lies in new branches of sports, extreme condi-
tions and events making use of the exotic surroundings. However, there are positive ex-
ceptions that bear witness to determined work: the Freestyle Word Ski Championships in
Ruka and the 2005 and 2006 Alpine Skiing World Cup competitions in Levi.

6.4.4 Possibilities

The Barents Region could find a new profile as an Arctic sports area in Europe. Canada
could be used as an example in this respect; they already have an extensive selection of
Arctic sports events. Greenland has also managed to gain some degree of recognition as a
location for Arctic adventure sports. The following is a list of events that could be consid-
ered and organised jointly in the Barents Region:

              -   the Barents Region’s own adventure sports event (cf. e.g. the Arctic
                  Team Challenge in Greenland www.atc.gl): Barents Ultimate X-
                  Challenge: e.g. hiking + mountain climbing in Norway (1 day), canoeing
                  in Sweden (1 day), sailing across the Gulf of Bothnia (1 day), cycling in
                  Finland (1 day), mountain biking + canoeing + hiking in Russia (1 day).
              -   Arctic winter bicycle race; Arctic Tour of Barents. Bicycle race in ex-
                  treme conditions (ultracycling). Possibility for equipment and product
                  manufacturers to test their products (bikes + clothing). As far as is
                  known, no similar event exists elsewhere.
              -   Arctic boat race around the Barents Region; The Arctic Ocean Race.
                  Start and goal in Tornio-Haparanda. Channels in Russia used as transport
                  stages.
              -   Winter Windsurfing Race across the Gulf of Bothnia (wing surfing)

There is a joint organisation for cooperation and event organisation established in the
1950s, the Barents Sports Cooperation, formerly the North Calotte Cooperation.


6.4.5 Impacts on traffic

Sports events and their arrangement have very little impact on traffic. One might actually
say that the opposite is true: traffic connections have a significant impact on the success of
sport events and on whether the area is chosen as a venue. Particularly the existence of
airports in the vicinity of the venue is an absolute prerequisite of many events, guarantee-
ing sufficient connections for freight and people alike.
                                             44




Case 1 Arctic Ocean Race 2008

Sailing is an integral part of the Barents Region’s past and present. Nearly every sailing
club and association in the Barents Region arranges numerous sailing competitions each
year; however, these are all relatively minor events. Larger regattas and open-sea races
take place elsewhere in the world. The Tall Ship Race is the only boat race attracting in-
ternational attention arranged in the waters of the Barents Region. The next Tall Ship Race
in the Baltic will take place in 2008. In principle, preconditions do exist for a new, large-
scale boat race.

Arranging such an event calls for a lot of work and charting of the suitability of harbours
and fairways in Russian parts of the Barents Region. The event could be partly funded
within the framework of the STBR II project, under its theme ”improving the conditions
of leisure boating in the Barents Region”


6.5 Competence centres – strengthening and maintaining re-
gional structure

6.5.1 Global trends

The competitiveness and employment situation of companies, regions and national
economies is increasingly dependent on their ability to create and utilise new information
and technology. This is partly due to the growing emphasis of the global economy on in-
formation-intensive products, services and sectors. Successful application of new informa-
tion and technology requires active involvement in its creation. This calls for innovative
operating environments with an abundant exchange of information and interaction be-
tween organisations. (Tulevaisuusvaliokunta, 2002)

Innovations include the idea of networking. Networks generate social capital, which has
been shown to enhance learning and to promote results in the companies within the net-
work. Building social capital calls for continuous personal interaction and maintenance of
connections. Large cities have traditionally acted as centres of communication of this
kind. Even though today’s information technology allows remote regions to make use of
the knowledge capital located in urban centres, the sparse interaction network of remote
areas cannot compete with the denser interaction network found in cities. According to the
current view, innovations and successful operation are thus the trump cards of urban cen-
tres. (Tulevaisuusvaliokunta, 2002)

As the operating environment of companies becomes increasingly international, innova-
tive operation does not by itself suffice to guarantee a company’s position in the global
division of labour. Innovation must focus on a narrow sector, so that it leads to a suffi-
ciently high level of competence in one or a few areas. This also enables the participation
of smaller regional centres in innovation work and the focused development of their spe-
cial competence. Instead of the former regional centres one might talk about centres of
competence specialising in development work of a certain kind.
                                             45



The idea behind the concept of competence centres is that they create jobs and bring
wealth to surrounding areas as well. We can make a conscious effort to set up innovative
centres of competence oriented towards a certain type of activity by investing in coopera-
tion and internationalisation in research and business. When successful, competence cen-
tres attract more actors in the field in question to the area and create better operating con-
ditions for other branches of business and services.

6.5.2 Current situation in the Barents Region

Development of the Multipolis network has been ongoing in northern Finland and north-
ern Sweden since 1998 with the aid of the EU. The Multipolis Network has 6 competence
centres in Sweden and 14 in Finland. In 2003, 4 competence centres in northern Norway
joined in as well. The competence centres cover a multitude of fields, ranging from “soft”
human fields to “hard” technology. Cooperation between the centres is a key element of
the Multipolis concept.




Image 1. Multipolis centres in the Barents Region.
(Source: http://www.lapinliitto.fi/bestpractice/presentations/files/Esitys_7_Multipolis.pdf)

6.5.3 Future prospects

Today’s Multipolis centres are located along the main road network, which ensures their
accessibility by road. Competence centres also need fast international connections, which
underlines the importance of international flight connections. Not all Multipolis centres
are directly accessible by flight, but nearly all of them are located less than 100 km from
                                              46



the nearest international airport. It may thus be expected that the links between the Multi-
polis centres and the rest of the world will continue to function, provided that the current
air traffic network remains unchanged and road connections between the centres and from
centres to airports are kept in good condition. Traffic connections supporting regional
structure are also of great importance. It must therefore be ensured that traffic connections
between each centre and its area of impact are in order.

6.5.4 Potential

If the centre of competence is seen as a regional centre bringing jobs and economic stabil-
ity to surrounding areas as well, the concept should also be introduced in areas where traf-
fic connections (road and flight connections) are good, but where the Multipolis network
has not yet spread. Such centres include Vadsö and Sör-Varanger in Norway, Inari and
Kittilä in Finland as well as Arvidsjaur, Storuman, Skellefteå, Umeå and Lycksele in
Sweden.

If the existing industries in the regional centres and their accessibility are taken into ac-
count, new centres of competence could be set up e.g. in the following locations:
    - Sör-Varanger, Norway,
    - Inari, Finland and
    - Arvidsjaur, Sweden.


6.5.5 Impacts on traffic in the Barents Region

Competence centres are primarily situated in centres with good traffic connections. This
means that the centres have good connections with surrounding areas, other centres as
well as international forums. This usually means that the competence centres are regional
centres located in the immediate vicinity of the main road network, preferably very close
to an international airport. As far as existing Multipolis centres are concerned, these traffic
connection requirements are in most cases fulfilled. There are many Multipolis centres
along the Bothnian Arc that are not in the immediate vicinity of an airport, but relatively
close to one, however. The Multipolis centres that are furthest from international airports
are those in Sodankylä (Astropolis) and Pajala (Assemblypolis). Development of the com-
petence centre network primarily involves securing existing traffic connections and con-
struction of new connections as need arises.

If more competence centre/Multipolis centres are to be built in the Barents Region, loca-
tions with good existing traffic connections should be chosen. This is the case in Sör-
Varanger, Inari and Arvidsjaur, for example.

Case 1

Sör-Varanger is a municipality with nearly 10,000 inhabitants close to the border be-
tween Norway and Russia. Sör-Varanger is home to the busy harbour of Kirkenes, which
is used a lot by Russians as well. Because fishing is such an important livelihood in north-
ern Norway and especially in the Murmansk region in Russia, Sör-Varanger could focus
on fish industry and environmental development projects. The competence centre could
also make use of existing cooperation with Russians. Because there are no Multipolis cen-
                                              47



tres in the vicinity, a competence centre located in Sör-Varanger could also provide a
boost for development in surrounding areas.

Case 2

Arvidsjaur is one of the nine municipalities in Sweden where winter testing is carried out.
The municipality therefore already has the competence required, and investments have
been made in the field. Even though SWTR, the organisation developing winter testing is
based in Gällivare, Arvidsjaur could also sharpen its image as a winter testing location.
Arvidsjaur has good road connections to many directions, and it is situated in the immedi-
ate vicinity of an airport. The success of Arvidsjaur could also promote business in areas
adjacent to it.

Case 3

One of the strengths of Inari in Finland is its participation in the car and tyre testing clus-
ter in northern Lapland. There is a lot of this type of activity in Sweden, but less so in
Finland. By cooperating with SWTR of Sweden, Inari also has the possibility to gain more
ground as a testing competence centre. Even though Inari is far removed from rapidly de-
veloping centres on a Finnish scale, it has the potential to act as an innovative centre
thanks to modern communications technology and good flight connections. A competence
centre in Inari could also strengthen regional structure in the entire area of Finnish north-
ern Lapland.


6.6 Large retail units

6.6.1 Global trends

In the Western world ruled by trends shopping has become a more and more popular
hobby. Shopping no longer means only to acquire necessary items on a reasonable price. It
has an increasing element of getting experiences and fulfilling ones dreams. In order to
live the experience of shopping people are willing to sacrifice more time and money than
before. There is a so called shopping culture where consuming is a means of fulfilment.

Shopping trips are also longer than before. Partly this is caused by centralization of jobs
and services which means that in order to get all the necessary services one must travel
more than before. Partly it is also a question of change in thinking. The freedom of choice
is being emphasized considerably. Products of right brand, quality or price are being pur-
chased from centres once considered to be too far. The distance and the time needed to
travel are becoming less important compared to shopping itself.

If a retail store wants to draw customers from farther away than the boundaries of usual
weekly shopping, the store must have elements of attraction. A monopoly status (e.g. al-
cohol retailing), brand and quality of the product, selection or price can be such elements.
The more elements of attraction a store has, the greater the estimated appeal of the store is.
Appeal also tends to pile up. Greater amount of appealing stores in an area results in a
greater selection and sphere of influence for a shopping centre. Competition also has its
                                              48



say in the extent of sphere of influence. The further away is the corresponding rival centre,
the greater the sphere of influence is for the shopping centre in question.

When you put together the culture of shopping and the increasing movement of people it
is understandable that people increasingly find their way into shopping centres where
many kinds of services are available or into large retail units of great selection. Therefore
setting up a new shopping centre or large retail unit may cause changes in streams of cus-
tomers. If a new large retail unit or shopping centre is being set up it may also boost up the
demand of other services nearby. This can best be done by known chain stores already
successful elsewhere. For example IKEA and Bauhaus have a wide variety of products
and their prices are competitive to corresponding chain stores.


6.6.2 Current situation in the Barents region

According to statistics of tourism the most appealing shopping centres of Barents are the
cities of Troms in Norway, Luleå, Piteå and Umeå in Sweden and Oulu in Finland. Piteå
excluded these cities are not only centres of shopping but also centres of population and
administration. This makes them popular targets for tourism. Being capitols of counties /
provinces Troms, Luleå, Umeå and Oulu probably have a wide sphere of influence in re-
tail also. If the sphere of influence is estimated to be 200 kilometres for each of the centres
mentioned, the joint sphere of influence will cover city centres of Norrbotten, Västerbot-
ten, province of Oulu and the province of Troms in Norway. Outside of this sphere of in-
fluence there are however main parts of provinces of Nordland and Finnmark and the east-
ern and northern parts of province of Finnish Lapland. From these areas shopping trips
will mainly be directed into smaller centres such as Bodö, Mo-i-Rana, Vadsö and Ro-
vaniemi.

Nowadays shopping trips in Barents area are directed mainly into five city centres, Troms,
Luleå, Umeå, Piteå and Oulu. The shoppers come to each city mainly from its own prov-
ince, but it is quite possible that shopping trips are made also from further away. Passen-
ger traffic from counties to these centres is lively. On the other hand lots of goods are be-
ing transported to these centres mainly from outside of Barents area. Goods can be trans-
ported to centres mentioned by sea and Troms excluded by rail, but most of the goods will
probably be transported by road. This results in a large amount of heavy traffic especially
on the main roads from south to north but also between Troms and Sweden for example.

6.6.3 Future prospects

A furnishing and interior design retail store called IKEA is going to open a new outlet in
Tornio, in the borderland of Finland and Sweden. The location of the new store is planned
to draw customers from the provinces of Norrbotten, Oulu and Lapland. This kind of
change in flows of customers is very likely to happen. Therefore the main roads leading to
Tornio increase their significance. Also a new retail outlet of Bauhaus planned to Oulu
will increase shopping trips to Oulu. In addition the usual shoppers from province of Oulu
new shoppers will come from other parts of Finland and Northern Sweden.
                                             49



6.6.4 Impacts on traffic in the Barents Region

There are altogether 1.5 million inhabitants located in Norwegian, Swedish and Finnish
areas of Barents. Although this amount of people has a lot of purchasing power, the poten-
tial is spread to a fairly wide area. Therefore it is not likely that any of the shopping cen-
tres of Barents area can compete with larger shopping centres of their countries in volume.
On the other hand the distribution of population gives lots of chances for smaller, provin-
cial shopping centres to flourish. The standing of smaller shopping centres can be broken
down easier than the dominance of greater shopping centre cities. This means that found-
ing new shopping centres or changes in selection and price in smaller centres can have a
huge impact on the direction of shopping trips. Shopping trips directed to one store or
shopping centre supports also other business activity in the area. On the other hand a mas-
sive direction of shopping trips to shopping centres diminishes supply and demand in the
centre hinterlands.

As the shopping trips are increasingly directed into shopping centres it is of primary im-
portance that passenger traffic from hinterlands has good and flexible connections to cen-
tres. This goes mainly for shopping trips from provinces to provincial centres but in the
Barents area also the increasing volume of traffic from north to south and between centres.
The goods transport for its part will also in the future be directed from south to north ei-
ther by road, rail or sea. On the other hand the the dominance of few shopping centres in
the Barents area will decrease the need for goods transport north from polar circle.

Case 1

The new IKEA in Tornio will undoubtedly increase the need for goods transport espe-
cially from southern parts of Sweden to Tornio. Most of this load is expected to travel
through highways. The passenger traffic to Tornio will also increase which requires well
functioning road connections both from Finland and Sweden. Supposed IKEA can bring
along retail outlets from other product groups the shopping trips from Northern Finland
and Northern Sweden to Oulu and Luleå can decrease significantly.

Case 2

Bauhaus is planning to establish a new outlet in Oulu. Bauhaus also has enough elements
of attraction to re-direct shopping trips. As Oulu already is strong shopping centre, Bau-
haus is only likely to have a small effect on shopping trips. Bauhaus's role will mainly be
to increase Oulu's selection and appeal in a way that will make a shopper to visit Oulu
more often or to come to Oulu instead of Luleå. In order to operate Bauhaus will require
functioning road connections for goods transport from Southern Finland and passenger
traffic from the provinces of Oulu and Lapland.


6.7 Tourism


6.7.1 Global trends
                                             50



International tourism receipts represented in 2003 approximately 6 per cent of worldwide
exports of goods and services. The substantial growth of the tourism activity clearly marks
tourism as one of the most remarkable economic and social phenomena of the past cen-
tury. The number of international arrivals shows an evolution from a mere 25 million in-
ternational arrivals in 1950 to an estimated 763 million in 2004, corresponding to an aver-
age annual growth rate of 6.5 per cent.




During this period, development was particularly strong in Asia and the Pacific (13 per
cent on average a year) and in the Middle East (10%) while the Americas (5%) and
Europe (6%), grew at a slower pace and slightly below the world's average growth. New
destinations are steadily increasing their market share while more mature regions such as
Europe and the Americas tend to have less dynamic growth /www.world-tourism.org/.

6.7.2 Current situation in the Barents region

In several regions tourism is regarded as a one of the most important current and future
line of business. All the Barents regions have common tendency for attracting more tour-
ists and promoting tourism of their own region. The Barents region posses good possibili-
ties for strong tourism development through good marketing, co-operation and capitalizing
Russian possibilities. The unique and diverse untouched nature combined with experi-
ences is the number one tourist attraction of the Barents region. Difficult reachibility, sea-
sonality and high prices due long distances are the main problems in Barents region tour-
ism development. In Russia the problems are related to the insufficient tourism and trans-
port infrastructures. Furthermore, lack of co-operation between municipalities, regions and
countries create obstacles for Barents region wide tourism development as well as regula-
tory and andministrative issues.

6.7.3 Potential

The greatest potential of the Barents Region exists in nature related tourism development.
Problems might occur if resources are wasted to develop same kind of tourist attractions
all over the region. For example four Santa Claus villages in different locations decreases
                                             51



the credibility of all villages and of the whole region as a tourism destination. The Barents
region tourism development should focus in creating new, unique experiences and form
functional packages out of them. Promoting international tourism roads in the Barents
Region is one potential way of doing this. An other possibility that should be tested, is
testing functionality of a touring bus service (so called adventure bus travel system) in
Barents Region circumtances.

6.7.3 Impacts on traffic in the Barents Region

Tourism development has a direct impact to all Barents Region transport modes. The avia-
tion business will be propably mostly affected. The prices of flight tickets have been de-
creasing since new aviation companies has emerged. New connections are being estab-
lished all the time. This prospect creates also new possibilities for new tourist flows to the
Barents Region. Therefore also the signifigance of the transport connections from the air-
ports increases.

Case 1 Touring bus travel system (Adventure bus travel)

In a nut shell, adventure bus travel is like interrail on wheels. The system allows travellers
to jump on and off anywhere and anytime along the route with the same ticket. The adven-
ture buses travel “off the beaten track” to autenthic destinations away from the main roads.
Therefore, the adventure bus system can fortify existing public transport network. The bus
driver is a travel guide, cook, organiser and everything from between being an essential
part of the adventure travel. This concept has become very popular in sparsely habited
countries, where the level of public transport services aren’t very extensive. Adventure
bus travel concept could work well in Barents Region as the vertical public transport con-
nections are insufficient. The concept is also a very effective way to start co-operation
between tourism service providers in different locations.

The adventure bus travel concept has been targeted firstly to backpackers, but it could
work for other target groups, such as pensioners, also. The adaptiblity of this concept to
the finnish Lapland is being studied in a pre-study.


WTO web pages: www.world-tourism.org
STBR study of international tourism roads in the Barents region
(www.barentsinfo.org/stbr)
Lapland road district / Plaana Ltd: “Adventure bus travel network in Lapland” – report
draft 10.10.2005


6.8 Mining industry


6.8.1 General trends

Mining products are necessary in our every day life; as construction material for infra-
structure and buildings and for industrial purposes such as manufacturing of steel, cars,
electronics, drugs, elintarvike and fertilizers. The demand for mining products is largely
                                             52



shaped by the market situation of industries like steel and construction industry that use it
as raw material. In this respect the mining industry is different from other industrial sec-
tors. (Euromines 2004)

Mining industry has potential to stimulate the economic life of rural areas because it can’t
be affected by globalization trend since the deposits are impossible to outsource to coun-
tries of cheap labour from the area where they are found. Instead the demand for example
in China is growing rapidly and the economy needs massive quantities of mining products
which secures the demand of mining products also in the future.


6.8.2 Current situation in the Barents region

The Barents region is one of the richest areas in the world in terms of its mineral reserves.
In northern Sweden and northwest Russia the mining industry has been for long time the
single most significant sector contributing to the national economy. Peculiar to the Mur-
mansk area is soviet originated mono-industrial city phenomenon which means that there
are several cities that depend on single mine. Typical to these industrial plants is ineffec-
tive logistical system with high transportation costs. The republic of Kom is another im-
portant centre for mining industry in northwest Russia and five major companies operate
in that area. (Runa 2003)

The mines in northern Sweden account for more than 90 % of all iron ore production in
the EU15-countries. The portion of mining industry in the Norrbotten BAT in 2000 was
10,8 % in comparison to national portion of 0,3 %. 85 % of Swedish mining industry’s
labour is from Norrbotten and Västerbotten. (Roos, P., 2003)




Linked to this it has been discussed in Finland how could it be that the area between these
two areas wouldn’t have similar industrial potential. At the moment there are only few
mines in northern Finland of which the most important one is the chromium mine of Kom
that sells its production to steel factory in Tornio.

The mining industry of northern Norway is concentrated mainly on the the Nordland prov-
ince where the focus of the production is on industrial minerals. In unquestionably rich
                                             53



province of Finnmark in terms of raw materials the mining industry has been practically
run down due to the closing of some major production plants. (Nordland fylkeskommune,
2005; Finnmark fylkeskommune, 2003)

6.8.3 Prospects

The developing mining industry can be counted as one of the strongest sectors of eco-
nomic life in the whole Barents region excluding northern Norway. The most important
new projects of the near future include in Finland the Sotkamo`s nickel mine of
Talvivaara, Kittilä`s gold mine and the opening of Sodankylä`s mine of Kevitsa;
Ladozhskoe-5” –gneiss-granite mine in the republic of Karjala and opening of Lo-
monosov`s diamond deposit in the are of Arkangel to full production around the year
2009; (Novosti Rossii 2005-06-28) in northern Sweden and in peninsula of Kuola one
concentrates already on the expansion of the existing big units. Several single mining cit-
ies might be completely faded away in the peninsula of Kuola as the production concen-
trates on bigger centres. In the republic of Kom the so called aluminium project gathers
attention                       and                       it’s                       bauxite?
mine that belongs to the first phase is already running. It is estimated that the project will
employ in it’s full capacity by the year 2008 even 10 000 persons. (Runa, 2003;
www.kommersant.com 2005-04-26)

6.8.4 Potential

The potential of the mining industry in the Barents region is enormous. In Sweden as well
as in Finland and in Russia there are tens of ore finding projects running and there has
been a good number of promising findings. The deposit on its own is not however enough
to start a business but also the following factors contribute to the starting of a business:
(Roos, P., 2003)
    • Infrastructure such as the availability and the price of water and electricity
    • The availability and the price of transportation corridors
    • Opportunities for cluster concentration
    • Historical attitude to mining industry

Especially for Lapland’s economic life well developing mining industry might have a
radical effect. If the importance of the sector would reach even a fraction of the corre-
sponding in northern Sweden and northwest Russia, it would be a significant factor in
Finland’s economy. In regional perspective the employment effect of the mining projects
has been studied among others places in the University of Umeå where the employment
effect of two future Västerbotten mines was analysed. The permanent effect of the projects
was estimated to be 68 indirect jobs for every 100 mining jobs and during heavier invest-
ments the indirect employment would be temporarily considerably more than the direct
employment. (Sörensson, R., 2003)

6.8.5 The effect on the traffic of Barents region

The transportation volumes of mining industry are traditionally high and the normal trans-
portation chain is mine – ore refinery – metallurgical production. Railway transportation is
basically the most practical option for the mining industry. Often a railway connection can
                                             54



be built from a mine (in other words from a fixed production plant) to the railway network
where the product is transported either directly to metallurgical production or to the near-
est harbour that meets the logistical requirements of further transportation. Practically the
developing mining industry in the Barents region will put the future of the northern area’s
railway network in a spotlight especially in Finland and in Russia. Currently for example a
big part of the mining production from the peninsula of Kuola is transported via the ex-
pensive and slow northern sea corridor but in the future for example so called Arctic sea
track? and Salla-Kantalahti connection could serve also the northwest Russian’s and
north Finland’s mining industry.

However, it is not sure that the future’s possible mine transportations will use railways.
For example Outokumpu kilpailutti? rikastekuljetukset from Elijärvi chromium mine to
Tornio steel factory and the company will most likely move to road transportation in 2006.
(RHK 2005) The increase in the number of road transportation is also affected signifi-
cantly by the number of smaller output plants (so called satellite mines) that will be
founded in the future. For this kind of plants it is probably most efficient and most flexible
to transport products on wheels to the nearest big terminal.


Case 1 Talvivaara´s nickel mine in Sotkamo (Kaleva 2005-08-19)

The all time biggest mining investment in Finland can be decided in Sotkamo already in
the near future. The CEO Pekka Perä from Talvivaara Projekti Oy thinks it is very likely
that the construction work worth at least 300 million could be started already in the begin-
ning of 2007.

The scale of Europe’s biggest unutilized sulphide nickel deposit is grand: the ore zone is
10 kilometres long, 100-400 meters wide and even 400 meters deep. From easily utilized
open pits in the central area, at least 340 million ton of quality ore can be dug. It is esti-
mated that there will be work for at least thousand persons for 25 years. With multiplier
effects Talvivaara could offer an income for thousand.

The metal content of the Talvivaara´s rikaste going for refining would be about 50 per
cent. In addition to nickel also some amount of copper, zinc and cobalt would be col-
lected.

A railway connection is already planned for the mine. The distance to the track between
Kajaani and Iisalmi from Murtomäki is 24 kilometres. The amount of masses to be trans-
ported is huge and goods need to be transported also to Talvivaara.

Roos, P. 2003. Sustainable Development in Mining communities. An Overview of Eco-
nomic effects of Mining in Norrbotten and Kiruna.

Sörensson, R. 2003. Effektstudie av gruvetableringar i Lycksele och Storumans arbets-
marknadsregioner.
                                              55



6.9 Forest and wood industry


6.9.1 Global trends

Internal and external factors such as public pressure and economic realities are continuing
to influence change in the forest sector and to shape the way forestry is defined and prac-
tised. Policies in other natural resource sectors are having a direct impact on sustainable
forest management, increasing the urgency to improve synergies and strengthen partner-
ships. The recent expansion of the EU will also bring about new challenges and opportuni-
ties, also influencing markets for forest products. (FAO, 2005)

Global trends in forestry include e.g. continuously growing amount of protected forests,
decreasing price level of industrial products and the concentration of business (50 largest
companies own 41 % of worlds industrial wood raw material). In the markets reliability
and ecologically sustainable solutions are being valued more and more. The increasing
significance of certified production as a global phenomenon is an example of this. As an
institutional trend, world is stepping from accurately regulated complex planned politics
into market determined solutions and more transparent monitoring. Society is playing a
more important role also in rooting out corruption and determination of occupational
rights. (Forest Trends, 2005)


6.9.2 Current situation and future prospects in Barents region

The Barents area is rich for its forests also and therefore traditional and strong wood in-
dustry sector characterises the areas industries. Northern Norway and Murmansk excluded
wood industry is either the most important or one of the most important lines of business
depending on the area.

More than 90 % of all Russian forest resources are located in the Asian side of the country
but only small amount of these resources can be used as natural conditions are difficult,
infrastructure is insufficient and transport distances are long. This means that North-West
Russia is the second most important Russian area of wood industry and approximately 70
% of all trades industry is located there. The deficiencies of road network cause however
problems in North-West Russia also. This results in e.g. logging companies of Arkangel to
use less than half of their capacity. Companies have to transport timber trough natural wa-
terways in inland (which are frozen half of the year) or by rail from Komi and Vologda. In
Arkangel area the authorities are investing in extending of forest road networks, although
in this respect it is probably wise to talk about decades in carrying out of the project. The
accessibility of raw material is even greater problem in the Republic of Komi. The Repub-
lic of Karelia has benefited of its location near EU, their situation is better because of for-
eign investments and use of more advanced technology. (Runa, 2003)

Russian wood industry export is being effected by the unclear future of export tolls. The
latest turn is a proposition of prohibiting the export of timer totally, the dume will consider
this. The proposition is being made as an attempt to promote the development of national
wood processing. On the other hand this would mean hard times to logging companies as
                                            56



over 40 % of their production is exported. Besides at the moment there is no capacity in
Russian refineries to use all the raw material. (Runa, 2005)

The output of wood industry and the use of wood as raw material in Finland will in years
to come most likely remain nearly unchanged. The course of change is being determined
by the development of wood industry’s competitive position. In the long term the indus-
try’s growth potential will be based on the use of exported raw material. (RHK, 2005) In
this respect Russian export policy will likely have an important role. Lately in Lapland
there has been a lot of talk about Metsähallitus’s wide protection programme and the dis-
pute over logging areas between sámi people and wood industry.

In Sweden the situation is much like that in Finland. The production of pulp and sawn
timber has remained at the same level whereas the production of paper has increased in the
country. (Skogsindustrierna, 2005). In the long run the importance of exported raw mate-
rial will increase in order to maintain the opportunities of industry’s development.

6.9.3 Potential

The wood sectors greatest potential lies in North-West Russia. Most of the logging com-
panies in Arkangel and Komi regions are export orientated so full scale utilization of raw
material might have a significant effect on timber transportation. It remains to be seen, in
which extent the Russian wood refinement industry will grow in the long term.
                                             57



Source: Barentswatch 1998


6.9.3 Impacts on traffic in the Barents Region

The largest group of transportation in wood industry is timber. (LVM, 2005b) In timber
transportation rail and log floating is usually being used in longer journeys and shorter
journeys are mainly done by trucks. The growth in production and use of raw material has
increased the total amount of transportations. Pulp and paper mills and sawmills largely
operate continuously and in order to reduce stocks the need for transportation is continu-
ous.

When Barents area is being looked upon as a whole, the growing need of raw material
transport in wood industry will most likely be satisfied by road transports due to sparse
rail networks. Exporting Russian timber and transit traffic from east to harbours of Finnish
Gulf of Bothnia are dependent upon Russia’s unsettled export policy. These transports
mainly have an effect of one way or another into rail transports.

Case 1. Rail connection Isokylä-Kelloselkä

Finnish organisation of administrating rail (Ratahallintokeskus) has drawn up an account
of future. They suggest that the rail connection Isokylä - Kelloselkä should be closed
down. Nowadays the rail in question is used by wood industry which transports 33,000
tons per year on this rail. (RHK, 2005). If the rail connection would be closed down wood
transports would be directed into road traffic. The volume of road transportations would
sum up into 3,500 full trailer combinations. The vast increase in use of road would natu-
rally result into costs of road maintenance. These increasing costs would many times
overcome the savings gained from closing down the rail.


On the other hand maintaining and improving the rail which could eventually be linked
into Russian rail network would open up a connection from Murmansk region to Northern
Sweden (where the future Norrbotniabanan will improve preconditions of international
rail transport) and in that way add to so called Barents corridor. In the provincial vision of
Lapland the rail connection is seen to have future significance also in passenger traffic due
to expected growth in the Murmansk region.

This case reflects in a certain way the nonchalant attitude central governments have to-
wards infrastructure plans in northern areas. Instead of investing into future only exertion
of roads and raise of costs will be obtained.


Business Support Bureau ”Runa”. 2005. Timber Industry Development in Russia. Prob-
lems and Forecasts.

Food and Agriculture Organization of the United Nations. 2005. The State of World’s
Forests 2005.

Forest Trends. 2005. Global Forests in Transition.
                                             58




Skogsindustrierna. 2005. Skogsindustrin. En faktasamling 2004.

6.10 Summary of impacts on transport sector

The table below is composed according to the previous study and includes rough estimates
about the effects of the development of different sectors to Barents´ region traffic in terms
of countries and mode of transportation. According to this study the cargo transportation
and especially the cargo transportation? on roads pose the greatest difficulties. Mining,
oil and gas sector are estimated to be the most important reasons for the growth of traffic
volumes. The growth in personal transportation? caused by new jobs means among
other effects an increase in the commuting between areas. In addition to this, other factors
causing the growth in personal transportation? are the big shopping centres that cause
increase in road traffic and tourism that leads to growth in air traffic.

Important in the growth of traffic and traffic networks in the Barents region is to move
heavy industrial raw materials and products away from road network to water and railway
transportation.

Table. The estimated effects of different sectors to the volume of traffic in the Barents
region.
59
                                           60




7. Research and development projects in the Barents
   Region

7.1. Organisations taking part

7.1.1 EU programme work

The aim of the EU’s regional and structure policy is to promote economic and social unity
among the member states and to diminish regional differences in development. The finan-
cial support granted by the EU towards various projects is channelled through target pro-
grammes that have been prepared in the member states and approved by the Commission.
A number of organisations are responsible for coming up with ideas for development pro-
jects, their coordination and financial preparation together with interest organisations,
which are more or less directly integrated in the administrative groups of EU programmes.
Interreg Community initiatives and neighbouring areas cooperation programmes for the
EU’s outer borders are multi-country target programmes.

1995-1999 Programme Period

During the 1995-1999 programme period, the Interreg IIA community initiative comprised
cross-border cooperation. Four programmes were implemented during the 1995-1999 pe-
riod. Each programme had its own regional administrative committee, which made deci-
sions on granting EU funding to projects.

The Barents Programme. Focused on projects aimed at developing cooperation with the
Murmansk region. The programme area comprised nearly the entire Barents Euro-arctic
area, i.e. the provinces of Lapland and Norrbotten, Finnmark, Troms, Nordland as well as
Murmansk and parts of the Arkhangelsk region.

The North Calotte Programme. Programme background: North Calotte cooperation
funded by the Nordic Council of Ministers. This was closely integrated with the Interreg
programme in terms of both content and administration. The general aim of the pro-
gramme was to support development in the North Calotte area that was economically, so-
cially and environmentally well-balanced.

The Karelia programme. The aim was, jointly with the Tacis programme targeting north-
western Russia, to diminish the negative effects of the border, to even out economic dif-
ferences between areas close to the border and to make use of development potential
through regional cooperation. The programme’s cross-border cooperation mainly targeted
the Republic of Karelia.

The Kvarken and MittSkandia programme. Programme background: Kvarken cooperation
(Finland-Sweden) funded by the Nordic Council of Ministers and the more loosely organ-
ised MittSkandia cooperation (Sweden-Norway). Forms of cooperation were highly inte-
grated into the Interreg programme in terms of content and administration. A key element
                                             61



in the implementation of the strategy was the development of ferry connections across the
Kvarken.

2000-2006 Programme Period

The Interreg III Community initiative implemented during 2000-2006 is divided into three
programme sectors (A, B and C). The IIIA programmes promote cross-border coopera-
tion, the IIIB programmes promote cooperation between states and the IIIC programmes
aim at promoting cooperation between regions. So-called neighbouring area cooperation
programmes for the EU’s outer borders have been drawn up for the final years of the cur-
rent structural fund period (2004-2006). Neighbouring area programmes are based on ex-
isting Interreg programmes on the EU’s outer borders. At the same time, preparation of a
new, proper neighbouring area instrument has been launched. The intention is to have it
ready for use after the year 2006. The goal is to come up with one instrument that can be
used to finance operation on both sides of the EU’s outer border.

Interreg IIIA Kvarken-MittSkandia. The programme aims to build a lasting infrastructure,
to develop east-west cooperation with emphasis on transport connections, strengthening
competence and developing the business sector and boosting regional identity. The pro-
gramme participants are Helgeland in Norway, Örnsköldsvik and Västerbotten in Sweden
and the regions of Ostrobothnia, Central Ostrobothnia and South Ostrobothnia in Finland.
The Västerbotten county government has administrative and financial authority over the
project.

Interreg IIIA North. The programme is divided into three sub-programmes: North Calotte,
Kolarctic and Sápmi. Of these three, the Kolarctic programme was turned into a
neighbouring area programme in 2003-2004. The aim of the North Calotte sub-
programme is to increase the vitality of the region by developing its business sector, infra-
structure and special competence. The aim of the Sápmi sub-programme is to achieve a
multi-faceted, active and highly evolved Sámi social life by developing cross-border co-
operation. Joint projects with Sámi living in Russia are implemented through the Kolarctic
neighbouring area programme. The Regional Council of Lapland has administrative and
financial authority over the IIIA North project. Each programme has its own secretariat (in
addition to separate Norwegian secretariats) that prepares project applications and moni-
tors the implementation of the sub-programmes.

Interreg IIIB Baltic. The programme area comprises 11 countries: from the EU, Finland,
Sweden, Denmark, Estonia, Latvia, Lithuania and Poland and the northern parts of Ger-
many. In addition, the area includes Norway and parts of Russia and Byelorussia. The
main goals of the programme include east-west integration within the Baltic area and in-
clusion of the Barents Region in more extensive development of the Baltic and the entire
Northern Dimension. The administrative authority and secretariat are based in Germany,
in addition to which each country has its own national advisory group.

Interreg IIIB Northern Periphery A cooperation programme comprising Finland, Sweden,
Norway and the northern parts of Scotland as well as Iceland, the Faeroe islands and
Greenland. The aim of the programme is to improve the competitiveness of the regions
e.g. by diminishing the disadvantages caused by remote location and sparse population, to
make use of their natural strengths and resources and to maintain a sustainable social de-
                                             62



velopment trend. The Västerbotten county government has administrative and financial
authority for the project. The programme has a joint secretariat and a regional contact per-
son in each country, who assists the secretariat e.g. in project counselling and dissemina-
tion of information.

The Euregio Karelia neighbouring area programme. Based on the Interreg IIIA Karelia
programme implemented in 2001-2004, which was turned into a neighbouring area pro-
gramme in the autumn of 2004. The programme area comprises the provinces of North
Ostrobothnia, Kainuu and North Karelia and the Republic of Karelia. The aim of the pro-
gramme is to develop cooperation between firms, to promote culture and to make border
crossing safer and more flexible. The Regional Council of Oulu has administrative and
financial responsibility for the project, and the programme secretariat is based in Oulu.

The Kolarctic Neighbouring Area Programme. The programme area covers the northern
parts of Finland, Sweden, Norway and Russia. The aim is to boost the region’s ability to
accept large international investments by making use of special competence in the region,
and to strengthen the cooperation structures that are already in place. Administratively, the
programme continues to be part of the Interreg IIIA North Programme. Auxiliary staff is
based in the Norrbotten county government, the Finnmark provincial government and the
regional administration in Murmansk.

2007-2013 Programme Period

The preparation of the 2007-2013 programme period is currently under way. Regional
differences in the degree of development will increase significantly due to the EU’s ex-
pansion to the east. In the future member states, average GNP is less than half of that in
the current member states. The average GNP in the EU as a whole will thus shrink by
12.5%. This means that the emphasis of regional development problems will shift to east-
ern Europe, resulting in gradual diminishing of the funding given to old member states.
Targeting funds as efficiently as possible will thus become increasingly important.
(Sisäasiainministeriö, 2004)


7.1.2 Organisations taking part in project coordination

Barents Euro-Arctic Council (BEAC). A foreign-ministry level forum for cooperation in
the Barents Region. BEAC has seven members: Finland, Sweden, Norway, Denmark,
Russia, Iceland and the European Commission. The aim of the regional council (BEARC)
consisting of leaders of counties and provinces as well as representatives of indigenous
peoples in the Barents Region is to engage in development work on regional level. Work-
ing groups formed by the councils are responsible for strengthening cooperation and im-
plementing projects. Cooperation is constantly being developed so as to include more sec-
tors, such as economic cooperation, health and social affairs, energy and the environment,
rescue cooperation, forests and timber, traffic and transport, customs cooperation, youth,
education and research. Regional working groups focus on issues related to energy, health,
infrastructure, IT, communications, culture, environment, youth, indigenous population
and education.
                                            63



Norway’s Barents Secretariat and Institute. A secretariat under the administration of the
counties of Finnmark, Troms and Nordland. Its task is to provide consult services in con-
nection with Interreg projects and other projects, to coordinate them and to give assistance
to the Barents Regional Council and Norwegian authorities. The secretariat is responsible
for the practical implementation of each Barents programme as defined by the regional
council. There are plans to turn the Barents Institute, which is working in close coopera-
tion with the secretariat, into a major research centre of future Barents cooperation.

Sweden’s Barents Secretariat. The Secretariat, administered by the counties of Norrbotten
and Västerbotten and the Foreign Ministry, was founded in 2004 with the intention of
making Swedes participate more actively in Barents cooperation.

The North Calotte Council. The Nordic Council of Ministers funds the operation of the
North Calotte Council. Its operation involves cross-border cooperation with authorities
responsible for regional policy and representatives of the business sector. The Council’s
work is implemented in the form of projects involving e.g. culture and the environment.
The Council also grants match funding to Interreg projects.

The University of Lapland’s Arctic Centre. The Arctic Centre conducts multidisciplinary
research, carries out projects services etc. Research focuses on three areas: global change
(global economy, natural resources, climate change), sustainable development as well as
environmental and minority law.

Finnbarents. An organisation administered by the University of Lapland and Rovaniemi
Polytechnic, which provides consultation and project planning services primarily for the
needs of cooperation between Lapland and Murmansk. The organisation has e.g. partici-
pated in several Kolarctic and Interreg IIIA North programmes.

The Kvarken Council and the MittSkandia Association. The Kvarken Council is a Finnish-
Swedish cooperation organisation under the administration of the region’s provinces and
counties, which acts as a project coordinator in university, transport and communication,
culture, food, environment and tourism projects. MittSkandia aims at promoting coopera-
tion between Västerbotten and Helgeland in Norway with the aid of similar projects. The
organisations are also active participants in the Interreg Kvarken-MittSkandia programme.

Arctic Council. A forum of cooperation of governments of northern countries (Canada,
Denmark, Finland, Iceland, Sweden, Norway, Russia and the United States) and represen-
tation of indigenous peoples. The organisation implements projects aimed at promoting
economic, social and, above all, environmental protection development in the Arctic re-
gions.


7.2. Completed and ongoing surveys and projects related to road
     traffic development

7.2.1 General

In the following review, surveys and major projects limited to the Barents Region, looking
at it from the viewpoint of road traffic, have been divided into five categories:
                                            64



   1.   corridor and leg surveys,
   2.   surveys aimed at supporting tourism development,
   3.   traffic safety projects,
   4.   logistics surveys and
   5.   administrative and road technology cooperation.

The review includes surveys commissioned by the county governments of Norrbotten and
Västerbotten: an analysis of the deficiencies of the E12 road due to the reformed guide-
lines for TEN networks that emphasise the importance of an east-west transport network
and the topical nature of new TEN projects, and road network surveys aimed at serving
the needs of tourism development.


7.2.2 Corridor and leg surveys

Ministry of Transport and Communications of Finland. The Oulu-Karelia-
Arkhangelsk-Komi Corridor – Pre-study (1995)
The corridor development programme has been divided into three priority groups. The
first of these was to be implemented in 1995-1997, the second in 1998-2000 and the third
from 2001 onwards. In the case of road transports, the plan was as follows:

Phase 1 1995-1997
   i.  City of Arkhangelsk traffic planning
  ii.  Maintenance and improvement surveys for the Kuusamo-Loukhi and Juntusranta-
       Kemi legs.
 iii.  Maintenance and improvement survey for the Vartius-Kochkoma leg
 iv.   Survey of the management of maintenance in the Archangelsk region
  v. Road service survey in the Republic of Karelia (fuel distribution, accommodation,
       road signage, weather forecasts)

Phase 2 1998-2000
   i.  Survey on the Oulu-Karelia-Arkhangelsk-Komi legs
  ii.  Improvement of the Paltamo-Vartius road
 iii.  The Kotlas bridge over the Malaya Severnaja Dvina river, survey; a survey of the
       Kotlas-Velsk bypass road
 iv.   Survey of the Kargopol-Pudozh-Wytegra legs

Phase 3 2001
   i.  Construction of the Oulu-Karelia-Arkhangelsk-Komi road connection in accor-
       dance with the survey
  ii.  Construction of the Kotlas bridge in accordance with the survey
 iii.  Construction of the Kargopol-Pudozh-Wytegra road connection in accordance with
       the survey

Regional Council of Lapland et al. The Barents Corridor – Transportation Develop-
ment Needs; Prerequisites for Economic Cooperation (1995)
As far as road transports are concerned, development of the border-crossing point in Salla
for the needs of international transport as well as improvement of the border roads in Salla
and Rajajooseppi/Lotta was suggested in the plan. After the survey was published, im-
                                           65



provement work has been carried out on the Lotta-Murmansk road, but the road from the
Finnish border to Alakurtti is still in need of paving. Work on the Salla border crossing
point has been completed on both sides of the border.

Finnmark fylkeskommune et al. Kommunikasjoner Nord-Norge – Nordvest
Russland; Utredning med handlingsplan (2000)
In the survey, road connections were deemed to be of adequate quality in view of current
transport volumes, but customs operations and border crossings were seen as posing a
problem. A proposal was made to raise the standard of the E6 road for long-distance
transports, so that road transports to the Murmansk area could use the shortest route via
Norway instead of going via Finland/Sweden.

Utvecklingsprogram för fjällregionen inom MittSkandia (1999-)
A joint Swedish-Norwegian project aimed at developing the fjell areas of Västerbotten
and Nordland in order to curb the negative population trend. Within the framework of the
project, a development need survey was conducted in 2000, in which the following devel-
opment areas in the road sector were presented:
  • E12: the Umskaret tunnel, various improvements, making it part of the TEN network
  • Road nr 1088, “Sagavägen”, Kittelfjäll-Hattfjelldal: reconstruction of about 60 km
  • Roads nr 73 and 1116, Kruttfjellsvägen, reconstruction 12+23 km
  • In addition, improvement of standard on the following roads: E6, Rv 45, 363 and
     987.

For more information, see
http://www.ac.lst.se/planeringochboende/aktuellaprojekt/fjallregionen/


Perämerenkaari-yhdistys. Perämerenkaaren liikennejärjestelmä 2001(2001)
A plan aimed at the development of the main road (E75, E4, E8 Piteå-Kalajoki) running
along the Bothnian Arc. The starting premises for drawing up a joint target standard for
the road were the following:
  • meeting and overtaking is safe (stretches of road with four lanes; overtaking lanes)
  • pedestrian and bicycle traffic separated from car traffic
  • a uniform geometric minimum standard
  • a uniform speed limit level
  • uniform level of signage, road-side services and telematics

Länsstyrelsen i Västerbotten et al. På Tvärsen (2004)
A preliminary survey of the improvement needs of the Swedish leg of the E12 road be-
tween Mo i Rana and Umeå. An analysis of the deficiencies on this leg has been con-
ducted, and improvements have been suggested (overtaking lanes, improving safety at
intersections, improving visibility by removing vegetation etc.) The survey acknowledges
the crucial importance of the road as a corridor from Norway via Sweden to Finland and
Russia, and its significance to the business sector in northern Sweden. Furthermore, the
importance of making the road part of the TEN network is emphasised. As an example of
concrete measures, the Umskaret tunnel, to be completed in 2006, will contribute towards
preventing breaks in connections on this leg that are common, especially during the win-
ter.
http://www.ac.lst.se/kommunikationer/dokumentatthamta/rapporter
                                             66




Charting the effects of the new Ivalo-Kirkkoniemi road connection (2004-2005)
The municipalities of Inari and Sör-Varanger will commission a survey of the effects of
the connection between Nellim in Inari and the Pasvik valley in Norway. The report is
scheduled to be completed in the summer of 2005. Finland and Norway have set up a joint
guidance group for the project. If completed, the road connection is believed to serve the
needs of fishing and mining industry and to promote tourism by the Arctic Ocean. The
survey focusing on the Finnish part of the road that was completed in March 2005 states
that “opening of the new road connection would have a positive impact on the develop-
ment of northern Lapland, the North Calotte and the Barents Region”. (Lapin liitto,
2005b)

Mittskandia Tvärkommunikationer (2004-2007)
The crosswise traffic effects of the Umskaret tunnel to be completed on the E12 road are
being charted. The project will produce a basic survey of future transport possibilities for
the use of traffic authorities and tourism entrepreneurs.


7.2.3 Surveys aimed at supporting tourism development

Itä-Suomen Matkailun kehitys Oy / Matkailun koulutus- ja tutkimuskeskus. Luoteis-
Venäjän matkailun puiteohjelma (1999)
Within the framework programme, the following tourism development measures in north-
western Russia were defined:
   i.  Increasing the amount of information about marketable tourism possibilities
  ii.  Raising the profile of spearhead sites and services, their productification for west-
       ern tourists
 iii.  Strengthening competence and cooperation within the tourism industry
 iv.   Improving the basic tourism infrastructure

On a general level, the report proposed e.g. the development of a tourist guide to north-
western Russia and an Internet portal for tourism. Among various tourism products, e.g.
the definition of tourism roads and routes in the area was suggested. Deficiencies in road
signage were seen as a bottleneck for land traffic, especially in view of the needs of for-
eign tourists travelling by car, in addition to problems related to border crossing and cus-
toms formalities.

Länsstyrelsen i Västerbotten. En studie av transportsystemets funktion för rese- och
turistnäringen i Västerbottens län (2001)
The results of the report were used as background information of the STBR’s tourism road
project. In the report, the transport network in Västerbotten was analysed from the view-
point of the needs of the tourism industry. As far as the road network is concerned, the
following legs were identified as being important starting points for development:
  • E4 Central Europe-Stockholm-Umeå-Skellefteå-Haparanda: an important link for
      long-distance tourism
  • E12 Vaasa-Umeå-Lycksele-Mo i Rana: an important link for tourism
  • The Rv 45 road Göteborg-Östersund-Dorotea-Vilhelmina-Storuman-Sorsele-
      northern Norway: an important link for long-distance tourists to the fjell region, par-
      ticularly in the summer
                                             67



 •   The Rv 95 road Skellefteå-Boliden-Arvidsjaur-Arjeplog-Bodö: an important link for
     long-distance tourists to the north of the country, particularly in the summer
 •   Road nr 363 Umeå-Vindeln-Ammarnäs: a scenic road well suited for tourism
 •   Road nr 1088 etc. Sagavägen, Örnsköldsvik-Hattfjelldal: small-scale services and
     sights for tourists
 •   Road nr 1116 Kruttfjellsvägen, Tärnaby-Hattfjelldal: link to the E6 road on the
     Norwegian side, enables making a tour on both sides of the border

http://www.ac.lst.se/kommunikationer/dokumentatthamta/rapporter

Länsstyrelsen i Norrbottens län.
A survey of the road network in Norrbotten county corresponding to the survey in Väster-
botten presented above. The following legs were seen as being the most important in terms
of improvement measures:
  • The Lv 374 road N Storfors-Ottostorp: bus and car traffic to the Storforsen hotel and
     camping area
  • The Rv 95 road about 15 km east of Arjeplog: bus and car traffic to Arjeplog
  • The Rv 45 road north and south from Jokkmokk: bus and car traffic
  • The E10 road about 15 km east from the Norwegian border: passengers arriving by
     air and train continue their journey by bus/car to the ski centres of Riksgrän-
     sen/Björkliden/Abisko.
  • The Rv 99 road south from Kuivakangas: bus and car traffic to the river valleys

All in all, about 20 stretches of road are mentioned in the report that are in need of im-
provement measures. The report was used as background information of the STBR’s tour-
ism road project.
http://www.bd.lst.se/publishedObjects/10000915/turistvagar.pdf


7.2.4 Traffic safety projects

Barents Region traffic safety cooperation (1996-)
In 2003, the working group on traffic safety published a basic report of the traffic safety
situation in the region. In the report, the basis of traffic safety work is presented, traffic
safety visions, organisations and expectations in the countries are compared, and sugges-
tions are made as to future areas of emphasis, organisation and separate funding. It was
found that there are differences between the countries in traffic safety behaviour and or-
ganisation of traffic safety work. In the basic report, the following were proposed as areas
of priority in terms of future measures:
    • children and traffic
    • monitoring of heavy traffic
    • alcohol and drugs in traffic
    • winter maintenance
    • driver education
    • analysis of traffic accidents

In 2004, the Barents Region Traffic Safety Plan for 2004-2007 was completed. In the plan,
the areas of priority are looked at in more detail. The following were suggested as concrete
                                             68



measures: charting the driver education curricula in different countries and harmonising
their level; harmonisation of winter maintenance practices (setting up a website aimed at
improving the exchange of information, learning from best practices in neighbouring
countries), gathering information on alcohol and drug use in different countries, special
traffic monitoring operations during weekends; harmonisation of load and weight regula-
tions for heavy traffic, a joint education project aimed at heavy traffic operators; gathering
and analysing accident statistics in the Barents Region on an annual basis.

Development of Traffic Management Sector in Murmansk Region in CBC / Multi-
professional traffic safety work (2003-)
The joint project between the Lapland Road District, county government and regional au-
thorities from the Murmansk area aims at promoting traffic safety cooperation between the
two countries through concrete measures. During the project, the following measures have
been implemented, among others: training has been arranged for key persons responsible
for traffic safety in the Murmansk region, info boards aimed at assisting professional driv-
ers have been set up at the border-crossing posts of Salla and Lotta, a preliminary plan
concerning the placing of signs, information boards and services aimed at road users has
been drawn up, a campaign promoting the use of reflectors and seatbelts has been carried
out, and a website maintained by the Murmansk area traffic police has been set up
(http://www.gaimo.ru).

In the future, cooperation will focus on the organisation and development of small-scale
traffic education measures and campaigns.

For more information, see
http://www.laaninhallitus.fi/lh/lappi/kvasiat/home.nsf/pages/7C43F08541D4DBAFC2256
EFD0047775E

7.2.5 Logistics surveys

Länsstyrelsen i Norrbottens län et al. Masterplan för logistik och infrastruktur på
Nordkalotten (2000)
On a general level, the plan proposes that the general standard of the road network be
raised in the North Calotte area; raw material transports suffer due to the poor standard of
the roads and poor maintenance (some stretches of road are closed off during the winter)
etc. In Norway, construction of a continuous north-south road connection serving transport
needs and a road to Lofoten in the west are proposed.

Logistik och transport Rana-Umeå (2001-2005)
Charting and analysing logistics and transports on the E12 road between Mo i Rana and
Umeå. The aim of the project is to generate information for regional authorities as well as
transport companies and others on e.g. new, competitive logistics solutions, to enable lar-
ger transport volumes and to look for concrete solutions to the problems of cross-border
transports.

Logsa – Logistisen verkoston ja kuljetusten kilpailukyvyn kehittäminen Sallan käy-
tävällä (2002-2006)
The aim of the project is to generate information about the route from the ports of Kemi
and Tornio to Murmansk and Arkhangelsk, to chart the development needs of the route
                                            69



and to initiate investments needed for opening the route. The project follows up on an ear-
lier project, in which the plan Development of Logistic Network And Transport in the Salla
Corridor – Study Plan (Meri-Lappi Instituutti, 2001) was drafted to chart research infor-
mation.

For more information, see http://www.ulapland.fi/?deptid=15942

County Administrative Board of Norrbotten et al. The Logistics System in the Bar-
ents Region – Pre-study (2005)
The report provides an overview of the logistics situation in the Barents Region as well as
suggestions concerning further study. For road transports, the report proposes the compila-
tion of topology of the transport network and terminals in the Barents Region. The system
would include a compilation of data on companies, providers of logistics services, mail
delivery points on municipality level and up-to-date information on the road network. The
database would enable optimal definition of resource needs, prediction of transport times
and development of fixed routes. The work was carried on within the framework of the
STBR’s Terminal Study in 2004-2005.
http://www.barentsinfo.fi/stbr/down.asp?id=250&file=STBR_Logistics_PreStudy_Report.
pdf


7.2.6 Administrative and road technology cooperation

Vägverket Region Norr. Behovet av Trafikinformation och en gemensam webbplats,
Bartic Web, för gränsöverskridande transporter i Barentsregionen – Kvalitativ
marknadsundersökning (2002).

Cooperation between the traffic information centres in Luleå, Mosjöen, Rovaniemi and
Oulu was launched in 1998. Its aim was to develop dissemination of information serving
cross-border traffic in order to improve traffic safety and increase the efficacy of trans-
ports. In the surveys conducted, the interest and need expressed by transport companies
towards setting up an Internet portal was studied. The website would provide up-to-date
information on road and weather conditions, congestion etc. Based on the surveys, it was
found that there is a need for future development of the projects.
http://www.barentsinfo.fi/stbr/down.asp?id=167&file=Rapport-Bartic%20Web.pdf

Nordisk gruppe for vintertjeneste. Nordiskt vintersamarbete – Statusrapport
2003(2003)

The report provides a review of studies and surveys (mainly on road technology) related to
winter road maintenance in the Nordic countries. Examples of ongoing projects include
the development of weather forecasts, development of an automatic warning system of
slippery road conditions, planning of tools aimed at defining the most cost-efficient road
maintenance standard and the impact of road salt on the environment, vehicle brake sys-
tems, alternative means of combating slippery roads etc. In addition, training is ongoing in
different countries aimed at personnel responsible for winter road maintenance.
http://www.vv.se/filer/publikationer/statusrapport2003.pdf

Northwest Russian Road Management (2001-2004)
                                             70



A project supporting the development of road management and the road network in the
Arkhangelsk region, coordinated by Finnroad and authorities in Arkhangelsk province.
The project consisted of the following elements: development and implementation of
computer-aided systems for road management, road geometry measurements, a pilot pro-
ject aimed at development of weather data services, administrative and operative issues,
financing of road management as well as staff training and seminars.

Technical reports produced during the project: http://www.ador.ru:8101/about/report/

The Roadex Project (1998-2005)
A joint project of the road districts in the northern periphery regions, focusing on the ex-
change of experiences on road technology and development of uniform operating prac-
tices. The most important theme of the project is maintenance of the northern road net-
work and roads with little traffic. The first phase of the project was completed in 2001,
and the following reports were published as a result: Road Condition Management of Low
Traffic Volume Roads in the Northern Periphery (2000), Road Condition Management in
the Northern Periphery (2001), and Winter Maintenance Practice in the Northern Periph-
ery (2001). During the first phase of the project, the carrying capacity of the roads, weight
restriction problems typical of northern regions as well as new winter maintenance meth-
ods were studied.

The second phase of the project comprised the following three stages:
   i.   Identifying problems, field study
  ii.   Analysing problems; identifying their causes
 iii.   New innovations,
and it produced the following reports:
     • Socio-economic impacts of road conditions on low volume roads
     • Dealing with bearing capacity problems on low volume roads constructed on peat
     • Permanent deformation related to freeze-thaw cycles
     • New material treatment techniques
     • Managing spring thaw weakening on low volume roads
     • Drainage on low traffic volume roads
     • Environmental guidelines
     • Environmental guidelines, pocket book
     • User Perspective to Roadex II Test Areas’ Road Network Service Level, Results of
        a Questionnaire Study on Road Network Condition and the Use of Roads

For more information, see http://www.roadex.org
                                                     71




8. New project ideas
Within the STBR project, studies on Barents Region traffic infrastructure, traffic and re-
lated operations have mainly been conducted. There are plans to launch an STBR 2 pro-
ject, which would include more concrete measures than its predecessor. That is why this
part of the report focuses on identifying practical projects within the Barents Region
transport sector based on earlier reports presented here. Practical projects could include
the following: arranging seminars, drawing up plans (e.g. road plan), launching pilot pro-
jects, assisting the opening of crosswise traffic connections, assisting joint projects and
improving or constructing connecting legs/providing support to projects. The word “con-
crete” can thus be understood on many different levels. What is concrete to an EU official
is seen as something quite different by the road master in a small municipality!

However, in terms of project ideas, besides concrete projects also potential targets of
charting and study are proposed, which could attract more extensive interest outside the
Barents region, e.g. on EU level. The aim has been to come up with new project ideas that
have not been made or proposed in connection with earlier Barents Region projects.


 STBR 1st phase           Other cross-border projects Future aspects and trends



          +    Stated development needs
                    from the projects                +    Geographical view
                                                          - Industry
                                                          - Spatial development   +   Cluster view
                    -    Already realised projects
                          and suggested projects
                                                          - Demographic changes       - Different industries




                                          New project topics/ideas
                                               for STBR II

Image. The birth process of project ideas.

Through the STBR I, it was observed that there is a need for at least the following con-
crete projects:

        Education and informing aimed at drivers in heavy traffic
        Harmonisation of heavy traffic weight limit measurements and restrictions (coop-
        eration)
        Integrating traffic safety into companies’ quality systems (development + pilot) +
        rewarding companies (a common practice in the region?)
        Drawing up a plan on alternative routes for main roads in case of accidents involv-
        ing dangerous substances
        Making a risk analysis concerning transports of dangerous substances on the main
        roads in the Barents Region
                                            72



       Mobile tourism road (the Blue Road, Barents Road, Northern Lights Road) in co-
       operation with device manufactures in the Barents Region. Cooperation with geo-
       graphical information projects in the Barents Region is of key importance.
       Developing international tourism road packages (airplane, car, airplane) and prod-
       uct content definition. A pilot project for the Blue Road, Barents Road or the
       Northern Lights Road. A joint project with the organisation responsible for tourism
       roads. International marketing via incoming travel bureaus, Internet portal and
       booking, car rental, definition of operational content, possible scenarios for coop-
       eration etc.
       Development/launching of adventure bus tourism in the Barents Region; prelimi-
       nary report on development of adventure bus tourism in Finnish Lapland will be
       completed in October 2005.
       Launching of cooperation aimed at defining the tourism road network in the Bar-
       ents Region, drawing up common rules of play, setting up a working group and ar-
       ranging a meeting together with parties who make decisions on national tourism
       roads.
       Arranging a seminar aimed at developing methods used in gathering statistical data
       for tourism purposes. The meeting should be followed up by development of
       common methods used for gathering statistical information.
       Tourism destination study in the Barents Region. In cooperation with national
       tourism development organisations and studies conducted by them (e.g. interviews
       at borders).

Needs/ideas on possible new Barents Region transport projects that have come up in the
course of work or by studying trends:

       Projects aimed at joining road registers. Possibilities of joining road register data
       describing the condition of the roads. The effects of road quality on business trans-
       ports (gross capacity classes in Sweden, weight restrictions in Finland and Nor-
       way, in addition to periods of frost damage + wintertime restrictions).
       The effect of road type (width, type) on driving behaviour in the Barents Region.
       Heavy traffic is a particular target in this respect; transports go through several
       countries and types of road. Comparison and analysis of road types, psychological
       interview studies and accident statistics. Recommendations on measures aimed at
       improving heavy transport safety. The study may provide background material for
       guiding transport streams in the Barents Region.
       Providing guidance to tourists arriving in the Barents Region by car (identified by
       car register plate) on local traffic culture. Pilot experiment could involve providing
       information on the behaviour of reindeer on the road with the aid of mobile de-
       vices (e.g. GSM, Bluetooth tag, WLAN) to drivers of foreign vehicles arriving in
       the reindeer-husbandry area. Behind this idea is the susceptibility of drivers com-
       ing from outside the area to get into accidents with animals.
       Preconditions for international pleasure boating in the Barents Region. Project
       aimed at developing small harbours in the Russian Barents Region. Eliminating
       practical obstacles and drawing up development plans, all the way to the level of
       harbour plans. Organising the Arctic Ocean Race around the Barents Region.
       Road pricing in the Barents Region. New forms of financing for implementing
       traffic projects in the Barents Region. Taking into consideration the financing
                                       73



 means and prospects developed in the EU. Part of the traffic infrastructure policy
 programme of the Barents Region (presented below)
 Measures by society aimed to impact transport streams (the entire Barents Region
 seen as one traffic area)
     1) Analysis of the consequences of and alternatives to different means; vari-
         ous scenarios
           •    Taxes, fees, tariffs
           •    Transport subsidies
           •    Other types of subvention
     2) Strategy plan and proposals for measures
     3) A high-level lobbying group to promote the implementation of possible
         measures – to ensure that something really does happen
 ”Substance to the Barents Euroarctic Transport Area Cooperation regarding Infra-
 structure Development Plans”
           •    A report for the traffic infrastructure strategy (image)


        Barents transport infrastructure policy programme




              New winds?
                Visions!
               Scenarios!
             • More comprehensive infrastructure policy
           •New forms of financing; e.g. ”regional earmarking
             from regional fuel tax revenue??? Road funds???
                            •Joint projects

                                                                   Insufficient budget funds
                                                                         for the north


EU                     Central administra-
                               tion


                                                                Business-sector potential
BEATA                     Regional administra-                        • Oil and gas
                                  tion                                  • Mining
                                                                  • Tourism etc. etc. …
                                            74



References
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                                            75



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                                             76




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More information on STBR – Sustainable Transport in the Barents Region:

STBR Homepage
http://www.barentsinfo.org/stbr/


STBR Management Group:

Bo-Erik Ekblom
Länsstyrelsen i Norrbottens län, Luleå
Tel:+46 920 961 51 Fax:+46 920 23 10 92
bo-erik.ekblom@bd.lst.se

Tuomo Palokangas
Pohjois-Pohjanmaan liitto, Oulu
Tel:+358 8 3214 023 Fax:+358 8 3214 055
tuomo.palokangas@pohjois-pohjanmaa.fi

Per Munkerud
Nordlands fylkeskommune, Bodø
Tel: +47 755 31351 Fax: +47 75 65 00 01
per.munkerud@nfk.no


STBR Secretariat
c/o Petri Mononen
Liidea Ltd. Kirkkokatu 2, 90100 Oulu, Finland
Tel:+358 8 8810 308 Fax:+358 8 8810 340
petri.mononen@liidea.fi

				
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