4.2 Regional impacts of structural economic change

There are large differences in sectoral composition of both gross product and employment between the BSR economies. On a national level the largest differences lie with Lithuania, Latvia, Poland and Belarus having high shares of employed in agriculture, whereas this share is substantially lower in the rest of the BSR countries. Despite high employment, the agricultural sector's contribution to the GDP in these countries is low.

In 1997 roughly a fifth of all employed in Lithuania, Latvia and Poland were in agriculture and nearly as much in Belarus (17%). The corresponding figure for Sweden, which is the lowest in the BSR, was less than 2%.

In Poland, agricultural employment is heavily influenced by a large number of small farms working on a subsistence basis (no market orientation). All farm units > 1 ha are considered as farms in Polish statistics. Only one-third of the 2.1 million farms produce for the market.

In contrast, Russian BSR regions have a small agricultural sector (5% of total employment). In Estonia the corresponding share is also low (9%) and further decreasing.

The service sector was largely underdeveloped in transition countries, but is now growing rapidly. In Poland, Lithuania and Latvia this sector employs only 48, 51 and 53% respectively of the work force, and in Belarus as little as 38%. In comparison, in the western BSR the service sector provides more than two thirds of all jobs.

The manufacturing sector is most significant in Belarus providing nearly half (45%) of all employment. In the Russian BSR regions, Estonia, and Poland the manufacturing sector accounts for nearly a third of all employment. In the western BSR these shares range from 23% (Norway) to 29% (German BSR).

At a regional level, these sectoral dif-ferences become more pronounced. In Lithuania, in Taurage and Marijam-pole regions, primary employment accounts for nearly half of all work. Also in Estonian Jõgevamaa, in Latvian Vidzeme and Lithuanian Utena the share of agricultural employment is around a third. In Belarus agricultural employment is highest in the western parts of the country in Grodno and Brest Oblasts (23%). Of the Russian BSR regions, Pskov and Novgorod have the highest rates (15%).

In Finland, Norway and Sweden the most fertile agricultural areas lie in the southern or western parts of the countries. Owing to the more urban settlement pattern in these areas, the relative importance of agricultural employment is greater in more northerly or easterly parts of these countries. Forestry plays also an important role in primary employment there. In coastal and northernmost Norway fishing, fish farming and to a smaller extent reindeer farming (e.g. in Finnmark) are important sources of livelihood. In Denmark and BSR Germany, primary production is a significant export industry.

Economic change has affected different types of regions differently.

• Regions, which have pertained or even strengthened their previous leading role.

  These are largely confined to capital regions. But in bigger countries, also other growth centres have stabilised their position, such as Hamburg in Germany, Poznan or Cracow in Poland. The latter benefit from central transport location and from an innovation tradition.

  In Latvia, Riga city has all capital city functions, it is the main and very influential economic development, political, innovation, educational, cultural centre. Here, approx. 65% of all national jobs, 55% of all registered enterprises are concentrated and the city attracts approximately 90% of all national investments. The discrepancy between Riga and more distant areas is growing.

  Also smaller urban regions have managed to strengthen their competitive position by successful development of new economy activities. Examples are Karlskrona in Sweden, Tampere in Finland, Aalborg in Denmark. Greifswald in Germany is at the very beginning of such development.

• Regions strengthened by the political changes

  These include particularly regions with good accessibility to and from western countries, where economic activities are more intensive. Poznan in Poland is an example. Also, Brest (Belarus) has benefited from its strategic location towards the west.

• Regions, having been highly industrialised, but where markets have been reduced due to inefficient production methods or products not in high demand.

  These regions still have not managed to adapt fully to the new economy activities. Some traditional port cities suffer from this impact, where shipbuilding is declining and port functions are -concentrated at few major harbours. A similar situation exists for cities with former military base.

  Examples for this group in coastal regions are Stralsund in Mecklenburg-Vorpommern, Szczecin and Gdańsk in Poland, Kaliningrad (Russia), Liepaja in Latvia and Ida-Viruuma in Estonia.

• Regions, which have been less developed in the past and have remained or even underpinned their disadvantaged status.

  These are mostly agricultural areas characterised by a heritage of former large state farms and markets oriented towards the East.

• Regions negatively affected by new borders through the appearance of new independent States

  Here, new development problems emerged, as traditional regional interaction has been interrupted to different degrees. Typical examples are Daugavpils in Latvia, Polotsk/ Novopolotsk in Belarus and Narva in Estonia.

The service sector, both public and private, has been most successful in generating new jobs. This is especially true for the transition countries, which are starting from a substantially lower level than the western BSR countries. Most rapid increase has been around St Petersburg, in south-eastern Lithuania (Vilnius, Alytus), and in Mogilev oblast in eastern Belarus.

Within the manufacturing sector new jobs have been created mostly in Finland and Norway. This is largely connected with regions where high-tech industries (telecom, electric engineering) are located. But also, some regions with smaller-scale manufacturing activities (for example Etela-Pohjanmaa) have developed well. Other growth centres in the manufacturing sector are in Estonia (especially Jõgevamaa, but also in Ida-Virumaa, Raplamaa, Viljandimaa and Järvamaa), Lithuania (Alytus) and Latvia (Cesis).

The most substantial decrease in primary sector employment has occurred in Estonia, where nearly half of all agricultural jobs have been lost. In Ida-Virumaa County, the number decreased from 19,000 employed in 1993 to a mere 3,000 in 1997. In nearly all Finnish regions but two, in Russian Murmansk, Karelia and Pskov, in Brest oblast in Belarus, in eastern and south-eastern Lithuania as well as in Schleswig-Holstein agricultural employment also decreased by more than a quarter during the same period.