Elina Priedulena, Hanse Parlament, “Future Trends in the Baltic Sea Region- Potential for SMEs“

1. Future trends in the Baltic Sea Region
Elina Priedulena, Hanse Parlament
Part-financed by the European Union (European Regional Development Fund and
European Neighbourhood and Partnership Instrument)

2. Contents
1. Economic development in Baltic Sea Region (BSR)
- general development trends
- SMEs
2. Trading across borders
3. Innovation
4. Demographic changes
5. Economic Outlook for Lithuania
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3. Is it worth to operate abroad?
• Large companies have been global for a
long time –
globalization/internationalization
• SMEs are usually acting on markets
close to home
→ Next step: expand further to
other markets, understanding the
vast opportunities but also the risks, in
large consumer markets like Poland,
Russia and Ukraine, because:
→ more opportunities, even though
more competitiveness; more profit for
own enterprises
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4. Economic development
of BSR
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5. BSR
Source: HWWI
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6. States of BSR – a vast potential of EU
• 147 million inhabitants = 29% of the population of the EU
• 67 millionen employees (2009) = 31 % of all employees in EU
• 30 % of the GDP of the EU Member States
• export 725 mrd./euro = 33% of exports within EU (2009)
• import 993 mrd./euro = 30% of EU imports (2009)
• more than 100 universities and research institutes
Furthermore
• favourable geographical location  regional cooperation in manifold
manner
• EU recognised the potential of BSR and developed the EU Strategy 2020
for the BSR – first specific regional strategy in EU to support and coordinate
collaboration of diverse players on various levels.
Source: HWWI
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7. Real GDP growth rate,
percentage change on previous year
Source: Eurostat
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8. Real GDP development and forecast
2009 2010 2011 2012f 2013f
Denmark -5.8 1.3 1.2 1.4 1.7
Germany -5.1 3.7 3.0 0.8 1.5
Estonia -14.3 2.3 8.0 3.2 4.0
Latvia -17.7 -0.3 4.5 2.5 4.0
Lithuania -14.8 1.4 5.9 2.3 3.8
Poland 1.6 3.9 4.0 2.5 2.8
Finland -8.2 3.6 2.8 0.4 1.8
Sweden -5.2 5.6 4.0 1.4 2.1
Norway -1.7 0.7 2.4 2.7 2.9
• percentage change on previous year
• f=forecast Source: Eurostat
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9. GDP per Capita in PPS (EU=100)
250
EU 27
Denmark
200
Germany
Estonia
150
Index value
Latvia
Lithuania
100
Poland
Finland
50
Sweden
Norway
0
2004 2005 2006 2007 2008 2009 2010
Source: Eurostat
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10. Small and medium-sized enterprises
(SMEs)
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11. SMEs – backbone of the European economy
• enterprises (EU, 2010)
– SME: 99.8% of all enterprises (20.8 Mio.)
• Typical SMEs (92% of all SMEs): micro enterprises
< 10 headcount
• Ø 4 employees/enterprise
– large enterprises: 0.2% of all enterprises (43,000)
• share of employment (EU, 2010)
 SMEs EU 27: 66.9% of all employees
 85% of net new jobs in the EU between 2002 and 2010 were
created by SMEs
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12. Trading across borders
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13. Trading within BSR
 The exchange of goods is essential for the cross-border
integration of EU states; Baltic Sea states important trading
partners
 international trade through spatial proximity between regions
more intense
→ neighbours within BSR have intense import and export
trading relationships with each other
 the traditional economic interconnections between former
Hanseatic cities
Source: HWWI
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14. Major export and import countries of
Lithuania 2011
Imports Exports
78159.9 LTL/milj. 69642.5 LTL/mlj.
EU 55.9% 61.4%
Russia 32.8% 16.6%
Germany 9.7% 10.2%
Poland 9.1% 9.3%
Latvia 6.6% 6.9%
Netherlands 4.9% 6.6%
Sweden 3.3% 6.1%
Italy 3.2% 5.2%
Beldium 3.21% 4.1%
Estonia 2.8% 4.1%
Belarus 2.5% 3.6%
Source: Statistics Lithuania
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15. Corner stones of export and import
mineral products
25%
chemical industry products
48%
machinery; mechanical
appliances; electrical
equipment
Export 9% vehicles; aircraft;
vessels&associated
transport equipment
10% other
8%
mineral products
34%
35% chemical industry
products
machinery; mechanical
appliances; electrical
Import equipment
vehicles; aircraft;
vessels&associated
transport equipment
other
8%
11%
12% 15

16. Innovation
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17. Indicators of Innovation
Innovation GDP share Share of R&D Patents per Labour force
European of R&D₂ employees at 100.000 share of
Scoreboard₁ expenditures labour forces inhabitants HRST₃
2009 2008 2007 2007 2009
Rating %
EU 27 - 1.9 1.5 11.7 42.1
Sweden 2 3.8 2.4 29.8 51.2
Finland 3 3.7 3.0 25.1 52.5
Germany 4 2.6 1.7 29.1 47.5
Denmark 6 2.7 2.4 19.4 53.0
Estonia 13 1.3 1.4 1.7 49.2
Poland 26 0.6 0.7 0.4 36.4
Lithuania 27 0.8 1.2 0.2 45.3
Latvia 30 0.6 0.9 0.8 43.3
Russia - 1.0 1.1 (2005) 0.2 -
1) 33 countries by comparison
2) R&D – Research and Development
3) HRST – Human Resources in Science and Technology
Sources: Eurostat (2010); HWWI
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18. Innovation and SMEs
• fundamental, especially in crisis times, for stimulating
the expansion of SMEs, either into existing or new
markets
• compared with large enterprises rather difficult:
finance, technology, shortage of qualified personnel,
limited resources
• Policy responses to those challenges:
 Reaching equal big share of GDP into R&D is one
of strategic goal of the EU Strategy 2020.
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19. Demographic changes
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20. Demography
• employment resources is the key factor of economic
development in BSR
• Demografic changes due to:
 continued increase of life expectancy
 natural population development – averaged EU wide
low rates of fertility
 Migration – increased migration from low earn
countries to EU 15
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21. Effects: aging of society, lack of employment, growing average age of
population, structural issues/changes regarding employment, problems in
social spheres – safeguarding of social pension system, etc.
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22. Economic Outlook
for Lithuania
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23. Source: Lietuvos Bankas
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24. Economic outlook
• The country’s economy is slowing amid the eurozone
debt crisis
• Nevertheless,
→ the global outlook brightens 2013
→ the economy in Lithuania will recovery
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25. Yes, it is worth to operate abroad!
• BSR builds a good action place:
“In spite of numerous economic, ecological and cultural
differences, the Baltic Sea States form a cohesive, “domestic
region”. This makes regional cooperation especially important
here, acting as a role model for other regions of Europe. But there
is still more potential to be exploited.”
Günther Oettinger - Commissioner for Energy
• and SMEs:
“…form the backbone of the European economy. They are key to
entrepreneurial spirit and innovation in the EU and thus crucial to
ensure EU competitiveness. “
Erkki Liikanen - Enterprise Commissioner
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26. Thank you for your attention!
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