Download OECD Territorial Reviews: Northern Sparsely Populated Areas

Northern Sparsely Populated Areas
This series offers analysis and policy guidance to national and subnational governments seeking to strengthen
territorial development policies and governance. These reviews are part of a larger body of OECD work
on regional development that addresses the territorial dimension of a range of policy challenges, including
governance, innovation, urban development and rural policy. This work includes both thematic reports
and reports on specific countries or regions.
The northern sparsely populated areas (NSPA) of Finland, Norway and Sweden are becoming increasingly
important to the geopolitical and economic interests of these countries and the European Union. These regions
have unique geographical characteristics – low population density and a harsh climate – and face specific
challenges due to an ageing population, long distances from markets, and high-cost land transport. However,
high productivity growth is possible in low-density regions. This report sets out policy recommendations
at cross-border, national and regional scales to enhance prosperity and well-being across the NSPA.
This includes closer co-operation with national governments to address shared challenges and opportunities
such as improving east-west transport connections and reducing occupational and skills barriers to labour
mobility, and addressing barriers to business growth such as access to finance.
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OECD Territorial Reviews
Northern Sparsely Populated
Areas
Pohjois-Savo, Finland
Northern Sparsely Populated Areas
Consult this publication on line at http://dx.doi.org/10.1787/9789264268234-en.
OECD Territorial Reviews
OECD Territorial Reviews
II. REGIONS IN NORTHERN SPARSELY POPULATED AREAS: 14 CASE STUDIES – 121
Pohjois-Savo, Finland (northern sparsely populated area)
The purpose of this case study is to provide recommendations for the Regional Council of
Pohjois-Savo to enhance productivity, growth and service delivery outcomes within the
context of the NSPA collaboration. The case study begins by outlining the assessment and
recommendations. An overview of the region is then provided, followed by an analysis of
regional economic performance. The case study concludes with an assessment of key
assets/opportunities and bottlenecks/risks facing the region.
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Assessment and recommendations
The Pohjois-Savo region is located in northern Finland in the central part of the country. It
shares a border with the regions of Central Finland, North Karelia, South Savo, Kainuu and
Northern Ostrobothnia. In the context of the NSPA regions in Finland, the economic
performance of the region has been relatively strong. GDP per capita in 2012 for Pohjois-Savo
was USD 31 420, which was 82% of the national average and 88% of the OECD average. The
gap between the regional and national GDP per capita level has decreased from 19% in 1995 to
18% in 2012. The economic crisis hit Pohjois-Savo in 2009, when GDP per capita decreased by
11% compared to the level of the previous year. Over the period 1995-2012, GDP grew by 2.0%
annually, driven by employment rate growth (1.5%) and to a lesser extent by productivity
growth (0.9%). In the period 1995-2012, the productivity gap between the region and the
country level narrowed. In 2012, GDP per worker was USD 73 247 in 2012, which was 90% of
the national average (USD 81 838) and 88% of the NSPA average (USD 82 978).
The absolute advantages of the region lie in its forest and mineral resources, agricultural
production, nature-based tourism attractions (winter sports and lakes), services and amenities
located in Kuopio, and technologies and skills embedded in local manufacturing and specialised
business and technical services. Overall the job market is performing comparatively well and has
a high level of skills. This indicates a fairly healthy growth dynamic which was disrupted during
the crisis as demand in external markets declined. Although the population of the region is
declining, it is growing strongly in Kuopio which is generating enough jobs and sufficient
lifestyle opportunities and services to attract people from other parts of Finland. In this sense, it
will be important to ensure people living in rural areas within Pohjois-Savo have access to
services and opportunities provided by Kuopio. Given the assets of the region, levels of
entrepreneurship and innovation are relatively low. Providing better support to small and
medium-sized enterprises (SMEs) and entrepreneurs and linking them with research and
innovation resources (both inside and outside of the region) is a potential area of focus for the
region.
The specific policy recommendations to help address these challenges and realise future
opportunities are outlined below.
1. Build resilience to external shocks by strengthening the region’s SME sector. The
region has been able to diversify beyond forestry and agriculture and develop a
comparatively sophisticated manufacturing and service based economy. However, the
performance of these businesses has been affected by changing market conditions,
particularly in forestry. These changes have exposed the vulnerability of the region to
external shocks. Many SMEs in the region have tended not to diversify and access new
markets because they lack the motivation, capabilities and knowledge to do so. The
region has the presence of a university with a research base in a small but growing,
liveable and attractive city. This higher education and research base will be an important
platform for promoting innovation in the regional economy. Within the framework of
the region’s smart specialisation strategy these changes can be achieved by:
a.
identifying clear areas of absolute advantage to diversify into higher value activities
and broaden the export base associated with the bioeconomy
b. strengthening intra- and interregional ties between innovation and research
institutions and SMEs, and develop measures to facilitate spin-offs and start-ups
(particularly with North Karelia where there are obvious synergies and
complementarities)
c.
working proactively with other regions in northeast Finland (South Savo, Northern
Kaerlia and Kainuu) with similar visitor attractions (lakes, cultural experiences, and
wilderness areas) to develop a common tourism brand, and share best practice in
tourism development.
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Assessment and recommendations (continued)
2. Lift workforce participation and improve service delivery outcomes in rural areas.
Industrial restructuring and an ageing population are affecting rural communities
throughout the region. The region will need to make the most of its potential workforce
to support its economic development priorities. This can be achieved by:
a.
ensuring that there is sufficient flexibility in the training systems and associated
services to support workers affected by job losses and structural change to find new
employment opportunities
b. developing measures to support and encourage people who are disengaged from the
workforce (e.g. long-term unemployment and people with health conditions) to take
up training and job opportunities, which will become increasingly important in the
context of a declining working age population
c.
designing and implementing an integrated service delivery strategy for the region
that identifies innovative ways to ensure access to health, education and transport
services, particularly for rural communities.
3. Improve accessibility for firms and communities in rural areas. Rural communities
have limited options for accessing employment and services, and in the context of an
ageing population this issue will need to be addressed. Small scale bottlenecks in the
transport network may also constrain future production possibilities related to the
bioeconomy and tourism within rural communities. The region can help address these
risks by:
a.
working with local municipalities and the national government on an integrated
approach to planning and prioritising transport infrastructure and maintenance with
a particular focus on local and secondary roads important for industry
b. providing support for communities and not-for-profits to develop community
transport solutions for people living in rural and remote areas, and better link them
with larger urban centres
c.
continuing to build the case for improvements to east-west connectivity to facilitate
improved linkages with North Karelia.
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Snapshot
Pohjois-Savo: Location within the NSPA
Note: Territorial level 3 (TL3) consists of micro regions within each OECD country. TL2 consists of macroregions within each OECD country. Each member country has identified the statistical or administrative
geography that provides the best fit for its territorial classification.
Source: Authors’ own elaboration.
The region of Pohjois-Savo was home to 248 129 people in 2016, which represents
4.52% of the Finnish population. Pohjois-Savo is in central Finland and shares a regional
border with South Savo, North Karelia, Central Finland, Northern Ostrobothnia and
Kainuu. The total land area of Pohjois-Savo is 16 768 square kilometres, which is 5.5%
of the national total. Pohjois-Savo has a population density of 14.82 inhabitants per
square kilometre compared to the national figure of 17.94.
The settlement structure of Pohjois-Savo is shaped by the main north-south transport
route connecting the region to southern and northern Finland, and the topography of the
region which is characterised by fresh water lakes and forest. The main city of Kuopio
has a population of 112 117, with two other small cities and another municipality with a
population of close to 20 000 (Varkaus, Lisalmi, and Siilinjärvi), with remaining
settlements distributed across the region. The population distribution of the region is
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changing as more people are moving into these cities, in particular Kuopio. Kuopio has
emerged as an important and fast growing city in Finland which provides higher
education, research, health and other services to the region. Industries in rural areas
include the wood and pulp industry, food and agriculture, and renewable energy.
In the period 2006-15, the population of the region declined at an average annual rate
of -0.08%, compared with the national population growth of 0.43% over the same period.
The population of the main administrative and service centre of the region, Kuopio,
constitutes 45% of region’s population. In the period 2006-15, the population of Kuopio
grew at a rate of 0.69% (above the national average), compared with the corresponding
figure for the balance of the region of -0.67%.
Kuopio and the nearest municipality to it both experienced population growth of close
to 0.7% a year between 2005 and 2015. All other municipalities in the region experienced
population declines over the same period. The small cities of Iisalmi and Varkaus had
population declines of less than 0.5% a year, while other municipalities in the region
declined by less than 1% a year. The decline in population is consistent with broader
demographic challenges. Nordregio has developed a composite demographic indicator
that has 10 measures of vulnerability to population decline that reflects: the age cohort
structure of the population, birth and death rates, migration rates and female to male
balance. A score of 7 or higher can be interpreted as evidence of a serious future problem.
Pohjois-Savo, Kuopio and 2 adjacent municipalities scored 4, while all other
municipalities had 8 or more vulnerabilities, with more than half scoring 10.
The region of Pohjois-Savo contains 19 municipalities and three local labour markets
that are made up of two or more municipalities that are connected by strong worker
flows. The first is centred on the regional capital Kuopio and consists of nine
municipalities. It is characterised as being a regional government centre with a local
university and is the ninth largest metropolitan region in Finland, and is one of two
functional urban areas in the Finnish portion of the NSPA. The local labour market
population for Kuopio is about 133 000 and as a result has fairly complex dynamics with
a broad range of skills and labour needs. This includes the core of scientific research and
education institutions, public administration, and business services. The second is centred
on Iisalmi that includes another four municipalities from Pohjois-Savo. This local labour
market specialises in food and agriculture, machinery manufacturing and wood
processing. The third is centred on Varkaus with two municipalities. Varkaus specialises
in energy boilers, plant technology and wood processing. Iisalmi and Varkaus are
characterised as being production based medium-sized towns, and have an aggregate
population of about 40 000. Four additional municipalities are not part of a local labour
market.
The economy of the region has historically been based on agriculture, forestry and
pulp production. Forestry continues to be important to the regional economy with the
export of wood products for construction. Agriculture includes milk and related products,
berry production and livestock. Over time, manufacturing has become more important to
the economic base of the region. This includes the manufacture of forest harvesters,
mining machines and energy related technologies (energy boilers and combustion based
energy plants). The performance of these export industries has been affected by stagnant
economic conditions in the national and European economy since the crisis.
There are 19 municipalities within Pohjois-Savo that collaborate through the Regional
Council of Pohjois-Savo. It has the responsibility for co-ordinating regional development
planning and initiatives. This includes working with the European Union (EU) in relation
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to structural funds delivered in the region. In 2013, the Regional Council of Pohjois-Savo
approved the Strategic Plan 2030, establishing the following four lines of action:
 Regional economic restructuring – improving the financing of companies’
development projects, encouraging research into companies’ service operations,
fostering technological innovation and international competitiveness.
 Labour-force supply – increasing the availability of a skilled workforce by
providing adequate training and education.
 Welfare services and general well-being – developing social and health services
and encouraging lifestyle changes in order to increase the availability of the future
workforce.
 Functional and accessible municipal structure – improving regional
infrastructure, such as telecommunication connections.
Pohjois-Savo has also developed a Smart Specialisation Strategy (2014-17) that
aligns with the first line of action. The strategy identifies three areas of innovation in
which the region is already highly performing, and two promising fields for future
innovation. The former includes machine and energy technology, wood and
bioprocessing, and the food industry; the latter refers to the health cluster as well as
activities related to water and air processes.
Economic analysis and benchmarking
GDP per capita grew at a slightly faster rate than the national average in the period
1995-2012, with particularly strong growth in the lead up to the crisis. GDP per capita in
2012 for Pohjois-Savo was USD 31 420, which was 82% of the national average and 88%
of the OECD average. The gap between the regional and national GDP per capita level
increased from 19% in 1995 to 25% in 2004, and then decreased to 18% in 2012. The
level of GDP per capita in Pohjois-Savo was below the average of the NSPA regions.
Between 1995 and 2012, GDP per capita grew by 2.3%, which was slightly faster than
the national average of 2.2% and considerably faster the OECD average of 1.5%. The
economic crisis hit Pohjois-Savo in 2009, when GDP per capita decreased by 11%
compared to the level of the previous year.
GDP per capita trend, 1995-2012
Pohjois-Savo
Finland
OECD
NSPA
45 000
40 000
35 000
30 000
25 000
20 000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Note: GDP per capita is expressed in constant PPP, USD 2010 (System of National Accounts 2008).
NSPA average not available before 1997.
Source: OECD (2016a), “Regional economy”, OECD Regional Statistics (database),
http://dx.doi.org/10.1787/6b288ab8-en (accessed 14 December 2016).
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The crisis hit the region hard, particularly in terms of productivity growth. Overall,
the main determinant of GDP growth has been the increase in employment rate. Over the
period 1995-2012, GDP grew by 2.0% annually, driven by employment rate growth
(1.5%) and to a lesser extent by productivity growth (0.9%). In the post-crisis period,
productivity growth dropped to -1%, and this resulted in negative GDP growth. Negative
population growth is also a factor that generally detracted from GDP growth.
GDP growth decomposition, 1995-2012
GDP growth
Productivity growth
ER growth
AR growth
Population growth
4%
3%
2%
1%
0%
-1%
-2%
1995-2012
1995-2008
2008-2012
Note: Growth rates refer to average yearly growth rates over the periods indicated. Productivity is measured
as GDP in constant PPP divided by employment at place of residence (15 years and older); Employment rate
(ER) is measured as employment at place of residence (15 years and older) divided by population aged 15-64;
Activity rate (AR) is measured as population aged 15-64 divided by total population.
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database),
http://dx.doi.org/10.1787/region-data-en (accessed 14 December 2016).
Comparing these trends to the national growth rates helps to identify specific regional
patterns. Low population growth is the factor that determined the below average GDP
growth over the 1995-2012 period. During this period, the population grew 0.63 percentage
points less than the national average. The difference in population growth was more
pronounced in the period 1995-2008 (-0.66) than in the aftermath of the crisis (-0.54),
indicating an improvement in demography trends with respect to the country average. The
rate of productivity growth has been consistently below the national level,
respectively -0.12 points in the period 1995-2008 and -0.37 points in the period 2008-2012.
GDP growth decomposition with respect to national averages
1995-2012 (%)
1995-2008 (%)
2008-2012 (%)
GDP growth
Productivity growth
Employment rate growth
Activity rate growth
-0.56
-0.18
0.25
0.00
-0.79
-0.12
0.00
-0.01
0.22
-0.37
1.09
0.05
Population growth
-0.63
-0.66
-0.54
Note: Growth rates refer to the difference between regional growth rates and national growth rates. For
further details see Annex.
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database),
http://dx.doi.org/10.1787/region-data-en (accessed 14 December 2016).
In the section below, we summarise the key factors of growth contributing to these
growth trends compared to national and OECD averages.
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The productivity gap between the region and the country level has narrowed.
GDP per worker was USD 73 247 in 2012, which was 90% of the national average
(USD 81 838) and 88% of the NSPA average (USD 82 978). The labour productivity gap
with Finland narrowed compared to the levels in 2000, from 13% to 10%. GDP per
worker grew rather steadily until 2009, when labour productivity dropped by 9%
compared to the previous year’s level. Pohjois-Savo had fully recovered from the
economic crisis in 2011 in terms of productivity, but experienced a subsequent decline in
2012. Trends in productivity in the market sector have followed the national level but are
at a lower level, in part, due to the industry mix of the region with less higher valueadding activities.
Labour productivity trend, 2000-12
Pohjois-Savo
Finland
NSPA
90 000
80 000
70 000
60 000
50 000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Note: Labour productivity is measured as GDP in constant PPP, USD 2010, divided by employment at place
of work (System of National Accounts 2008).
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database),
http://dx.doi.org/10.1787/region-data-en (accessed 14 December 2016).
Labour productivity, market vs non-market sector, 2000-12
Pohjois-Savo (non-market)
Finland (non-market)
Pohjois-Savo (market)
Finland (market)
95 000
85 000
75 000
65 000
55 000
45 000
35 000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Note: Labour productivity is measured as gross value added (GVA) in constant PPP, USD 2010, divided by
employment at place of work (System of National Accounts 2008). The non-market sector includes public
administration and defence, compulsory social security, health and education. The market sector includes all
other economic activities.
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database),
http://dx.doi.org/10.1787/region-data-en (accessed 14 December 2016).
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Pohjois-Savo is highly specialised in forestry, mining, and food and beverage
manufacturing, and has also developed a comparatively sophisticated services
sector. Although the region has a relatively low score for mining and quarrying,
electricity and water supply, this masks its high specialisation in the mining sub-sector.
The specialisation index for mining and quarrying is 3.46 in terms of gross value added
(GVA) (a level of specialisation over 3 times the national average). There is also a strong
presence of the public sector compared to the national average, but not stronger than the
average of the NSPA regions. The region has a high specialisation in manufacturing (1.33
in terms of GVA compared to the NSPA). The region has a particular strength in food and
beverage manufacturing. Financial and insurance activities, as well as professional,
scientific and technical activities are also areas of specialisation compared with the NSPA
average.
Specialisation index, by economic activity
Finland
NSPA
GVA
Employment
GVA
Employment
Agriculture, forestry and fishing (A)
2.07
2.10
1.06
1.56
Public administration and defence, compulsory social security,
education and human health (O,P,Q)
1.23
1.13
0.99
0.89
Construction (F)
1.09
1.00
1.07
0.95
Real estate (L)
1.04
0.85
1.32
0.77
Manufacturing (C)
1.02
0.98
1.33
1.20
Other services (R,S,T,U)
1.00
1.00
0.99
1.11
Mining and quarrying, electricity and water supply (B,D,E)
0.91
0.82
0.33
0.54
Whole sale and retail trade, transportation, accommodation and food
services (G, H, I)
0.79
0.87
0.97
0.96
Professional, scientific, technical and administrative activities (M, N)
0.78
0.76
1.07
1.03
Financial and insurance activities (K)
0.67
0.72
1.00
1.10
Information and communication (J)
0.47
0.42
0.75
0.72
Note: The specialisation index for each sector is the ratio between the sector weight in the regional gross value added
(GVA)/employment, and the weight of the same sector in the national (NSPA) GVA/employment. A value above 1 implies that
the region is more specialised in that sector than the rest of the economy. Calculations based on GVA for the year 2012,
expressed in constant PPP, USD 2010 (System of National Accounts 2008), and employment at place of work for the year 2012.
GVA specialisation indexes with respect to the NSPA are based on GVA for the year 2011, expressed in constant PPP,
USD 2005 (System of National Accounts 1993), due to lack of more updated data for Norwegian regions.
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en
(accessed 14 December 2016).
The key shifts in the regional economy have been the increasing importance of
manufacturing to regional growth and productivity, and the growth of employment
in professional and public services. About 34 000 persons were employed in this sector
in 2012, which was 32% of the total employment. The employment in the public sector
has increased in the period 2000-12, whilst its GVA has decreased, which implies a
decrease in labour productivity. The share of employment in the public sector (32%) is
higher than the national average (28%). Other sectors performed better in terms of
productivity, such as the manufacturing sector and forestry and agriculture. In particular,
GVA in manufacturing has considerably increased over the period 2000-12, from
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USD 920 million to USD 1 180 million, whilst employment has slightly decreased,
leading to higher productivity levels. Employment growth in professional, scientific and
technical activities has been strong, almost doubling between 2000 and 2012.
GVA by sector
Employment by sector
2012
2000
2012
2000
Public sector
Manufacturing ( C )
Whole sale and retail trade,
transport, accommodation and food
services (G, H, I)
Real estate (L)
Construction (F)
Professional, scientific, technical
and administrative activities (M, N)
Agriculture, forestry and fishing (A)
Mining and quarrying, electricity
and water supply (B,D,E)
Other services (R,S,T,U)
Information and communication (J)
Financial and insurance activities
(K)
0
500
1 000
1 500
2 000
0
10 000 20 000 30 000 40 000
Note: Gross value added (GVA) is expressed in constant PPP, USD 2010 (million) (System of National Accounts
2008). Employment at place of work is expressed as number of persons (System of National Accounts 2008). It is
important to note the limitations in relation to this sectoral analysis in small regional economies where changes may
reflect the decisions of single firms. We have sought to overcome this by using a longer time period encompassing
the period before and after the 2009 financial crisis.
Source: Calculations based on OECD (2016a), “Regional economy”, OECD Regional Statistics (database),
http://dx.doi.org/10.1787/6b288ab8-en (accessed 14 December 2016).
The tourism sector is overall performing less well than the national average but
employment in this sector is growing. Pohjois-Savo mainly serves the domestic tourism
market and includes a mix of winter sports and water based summer activities. The
number of guest nights per capita is slightly below average and it is growing at a rate
significantly less than average. On the other hand, the share of employment in this sector,
which is about 10% below the national level, grew more than the average between 2000
and 2013. The region also has a low share of foreign visitors, less than 50% of the
national average.
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Benchmarking Pohjois-Savo's tourism performance
Pohjois-Savo
Finland
200
150
100
50
0
Guest nights/population
Foreign visitors
Guest nights growth
Employment in accommodation
and food services
Growth in employment in
accommodation and food
services
Note: National values are set to 100. Regional values have been rescaled with respect to national values.
Guest night growth refers to the period 1995-2014; employment growth refers to the period 2000-13.
Source: Statistics Finland (2016a), Statistical databases, http://pxnet2.stat.fi (accessed 14 December 2016).
A key feature of the region is the expansion of high-technology manufacturing.
The share of employment in high-tech manufacturing has significantly increased between
2000 and 2013 which is a key feature and strength of the region. The trend was led by a
strong increase of employment in the manufacture of electrical and electronic products
and to a lesser extent by an increase of employment in the manufacture of machinery and
equipment. GVA in high-tech manufacturing was higher than the national average in
2014. The share of high-tech knowledge intensive services is below average, both in
terms of GVA and in terms of employment compared to the national level; however, its
share is high in the context of the NSPA.
Share of GVA in high-tech manufacturing and KIS,
2014
Pohjois-Savo
Share of employment in high-tech manufacturing
and KIS, 2000-13
Pohjois-Savo (high-tech KIS)
Finland (high-tech KIS)
Pohjois-Savo (high-tech manufacturing)
Finland (high-tech manufacturing)
Finland
60%
45%
40%
35%
30%
25%
30%
20%
15%
10%
5%
0%
0%
High-tech KIS
High-tech manufacturing
Note: High-tech manufacturing is calculated as the share of high-tech manufacturing over total manufacturing. Hightech KIS is calculated as the share of high-tech knowledge intensive services over total knowledge intensive services.
High-tech manufacturing includes the following 2-digit NACE sectors: 19-22, 26-30. Total manufacturing refers to the
NACE sector C. High-tech KIS includes the following 2-digit NACE sectors: 58-63. Total KIS refers to the following
2-digit NACE sectors: 58-66, 68-75, 84-88.
Source: Statistics Finland (2016a), Statistical databases, http://pxnet2.stat.fi (accessed 14 December 2016).
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Similar to other NSPA regions, the population of the region is declining and
ageing faster than the national average. The population in 2016 was 96% of the
level in 1990. Over the period 2006-16, population declined by -0.08% annually,
whilst Kuopio’s population grew by 0.69%, which is higher than the national average
of 0.43%. Pohjois-Savo is the most densely inhabited region in the Finnish NSPA,
even though population density decreased between 2000 and 2014. Population density
in 2014 was 14.82 people per square kilometre, compared to the national average of
17.94. Kuopio’s population is 112 117 persons, which is 45% of the regional
population. The elderly dependency ratio is 33.95, which is considerably higher than
the youth dependency ratio of 24.18. The male/female ratio of Kuopio is lower than
average (94.47 compared to 96.73), while the rest of region is higher than average
(100.84).
Population trend, 1990-2016
Pohjois-Savo
NSPA
Elderly and youth dependency ratios, 1990-2014
Finland
Helsinski
Pohjois-Savo EDR
Pohjois-Savo YDR
130
Finland EDR
Finland YDR
35
33
120
31
29
110
27
25
100
23
21
90
19
17
80
15
Note: 1990 value = 100.
Note: EDR = elderly dependency ration; YDR = youth
dependency ratio.
Source: Statistics Finland (2016a), Statistical databases,
http://pxnet2.stat.fi (accessed 14 December 2016).
Source: OECD (2016c), “Regional demography”,
OECD Regional Statistics (database),
http://dx.doi.org/10.1787/a8f15243-en
(accessed 14 December 2016).
Population changes are strongly influenced by domestic migration. The balance
of domestic migration was negative until 2013, when it became positive, unlike many
other NSPA regions. Negative natural population changes are also contributing to
population decline, with the number of deaths exceeding the number of births since 1998.
Similar to the other NSPA regions in Finland, the net domestic migration decreased in the
1990s and increased afterwards. The shares of external immigration and emigration over
the total population are less than half of the national average. While the majority of
immigrants has a European background (60% in 2014), the Asian share has particularly
increased over time, up to 30% in 2014.
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Decomposition of population trend, 1990-2014
Net migration, external
Net births
External migration as share of total population,
1990-2014
Regional immigration
National immigration
Net migration, domestic
Population change
1 500
0.7%
1 000
0.6%
500
0.5%
0
0.4%
- 500
0.3%
- 1 000
0.2%
- 1 500
0.1%
- 2 000
0.0%
Regional emigration
National emigration
Source: Statistics Finland (2016a), Statistical databases, http://pxnet2.stat.fi (accessed 14 December 2016).
The regional labour market has performed relatively strongly with key
indicators converging to the national average. The employment rate in Pohjois-Savo is
68.9%. The difference with the national average has narrowed from 5.4 percentage points
in 2004 to 1.1 in 2014. The unemployment rate in the region is 8.6%, which is similar to
the national average of 8.7%. The gap with the national average was particularly large
during the crisis. In 2009, the regional unemployment rate was 2.6 percentage points
higher than the national average. The youth unemployment rate was 29.7% in 2011,
6 percentage points higher than the national average. The difference between the
participation rate of men and women has decreased from 8 to about 1 percentage point in
the period 1990-2013. Since the crisis, the female employment and unemployment rates
outperform the male ones. In 2013, the unemployment rate for men was 5.5 percentage
points higher than for women, whilst the employment rate was 4.1 points lower.
Employment rate, 2004-14
Pohjois-Savo
Finland
Unemployment rate, 2004-14
OECD
Pohjois-Savo
73%
12%
71%
11%
69%
10%
67%
9%
65%
8%
63%
7%
61%
6%
59%
57%
5%
55%
4%
Source: OECD (2016d), “Regional labour markets”, OECD Regional Statistics (database),
http://dx.doi.org/10.1787/f7445d96-en (accessed 14 December 2016).
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OECD
134 – II. REGIONS IN NORTHERN SPARSELY POPULATED AREAS: 14 CASE STUDIES
Pohjois-Savo has a relatively skilled population for a rural and remote region.
As with many other rural regions, these outcomes differ between men and women. The
share of the labour force with higher education is 28% for men, which is 16 points lower
than for women and 4 points lower than the national average. On the other hand, PohjoisSavo performs better than average regarding basic educational attainments, particularly
among young people aged 20-24.
Share of labour force with lower education, 2000-14
Pohjois-Savo - M
Finland - M
Share of labour force with higher education, 2000-14
Pohjois-Savo - M
Finland - M
Pohjois-Savo - F
Finland - F
30%
50%
25%
45%
Pohjois-Savo - F
Finland - F
40%
20%
35%
15%
30%
10%
25%
5%
20%
0%
15%
Share of people 20-24 with lower education, 2000-14
Pohjois-Savo - M
Finland - M
Share of people 20-24 with higher education, 2000-14
Pohjois-Savo - F
Finland - F
Pohjois-Savo - M
Finland - M
25%
Pohjois-Savo - F
Finland - F
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Note: Lower education refers to the category “basic education/level of education unknown”. Higher education refers to
the categories “lowest level of tertiary education/lower-degree level of tertiary education” and “higher-degree level of
tertiary education/doctorate or equivalent level of education”. M = male, F = female.
Source: Statistics Finland (2016a), Statistical databases, http://pxnet2.stat.fi (accessed 14 December 2016).
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Pohjois-Savo is centrally located within Finland but east-west connections are
limited. The main transport route for the region is the north-south E63 which links
through to Tampere to the south and Kajanni in Kainuu. The journey to Helsinki takes
approximately 4 hours by car and 55 minutes by air. There are a maximum of seven
flights per day from Kuopio to Helsinki. Accessibility by train is relatively slow. It
takes 4 hours and 10 minutes from Kuopio to Helsinki, compared to 2 hours and
40 minutes from Seinäjoki, which is a similar distance from Helsinki. East-west
transport connections are limited and have not had significant upgrades in recent
years. It takes about 1 hour and 30 minutes to travel to Joensuu by car, and 3 hours
and 30 minutes through to Oulu. Compared to the national level, Pohjois-Savo does
well on key infrastructure measures with higher expenditure on transport due to the
sparsely populated nature of the region and lakes which makes accessibility difficult.
Benchmarking key infrastructure indicators
Pohjois-Savo
Finland
200
150
100
50
0
Road density to
population
Road density to area
National roads
Private roads
Net operative
expenditure for transport
Broadband 100 Mbps
Note: Regional values have been rescaled with respect to national values. National values are set to 100. All variables
refer to the year 2015. National and private roads are measured in square kilometres. Broadband 100 Mbps refers to a
connection that enables data transfer rate of at least 100 Mbps and that has been delivered to the user's home or building
over fixed ground or aerial cabling (fixed broadband).
Source: Administrative data provided by the Finnish Transport Agency and Finnish Communications Regulatory
Authority (2016), Supply of fast broadband in Finland,
www.viestintavirasto.fi/en/statisticsandreports/statistics/2013/availabilityofhighspeedbroadbandconnections.html
(accessed 1 February 2017).
Pohjois-Savo has low levels of entrepreneurship and innovation. The number of
new enterprises in 2013 was 13% lower than in 2005. Overall, the rate of growth in
enterprise formation has diverged from the national growth rate, with a period of
convergence during the crisis which was led by a large drop in the national average.
Agricultural entrepreneurs make up 34% of total entrepreneurs, compared to the national
average of 19%. In 2011, the patent intensity in Pohjois-Savo was 73.40, about half of the
NSPA average of 142.02.
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New enterprises, 2005-13
Pohjois-Savo
Patent applications per million inhabitants, 2011
350
Finland
125
300
120
250
115
200
110
105
150
100
100
95
90
50
85
0
Pohjois-Savo
Finland
NSPA
Source: OECD (2016e), “Regional innovation”,
OECD Regional Statistics (database),
http://dx.doi.org/10.1787/1c89e05a-en
(accessed 14 December 2016).
Note: 2005 value = 100.
Source: Statistics Finland (2016b), Enterprise openings
and closures, www.stat.fi/meta/til/aly_en.html
(accessed 30 January 2017).
In sum, as external conditions improve Pohjois-Savo is in a relatively strong
position to increase prosperity and employment outcomes for local people. The
region’s historical strengths have been in forestry, agriculture, and mining. Over time,
value-adding manufacturing and specialised services have also developed in the region.
Kuopio has evolved as an important centre for these manufacturing and services
industries, and as a medium-sized centre for education and research. The absolute
advantages of the region lie in its forest and mineral resources, agricultural production,
nature-based tourism attractions (winter sports and lakes), services and amenities located
in Kuopio, and technologies and skills embedded in local manufacturing and specialised
business and technical services. In the lead up to the crisis, the region’s tradeable sectors
were growing relatively strongly, productivity was increasing the primary sector and
associated manufacturing, whilst job creation was occurring in business services and
tourism. Overall, the job market is performing comparatively well and has a high level of
skills. This indicates a fairly healthy growth dynamic was disrupted by the crisis as
demand in external markets declined. However, the region’s high proportion of public
sector employment helped cushion the impacts of this shock, and the prosperity of the
region to a considerable extent reflects ongoing support from the Finnish national
government that provides a high level of social services across all the national territory.
Although the population of the region is declining, it is growing strongly in Kuopio which
is generating enough jobs and sufficient lifestyle opportunities and services to attract
people from other parts of Finland. In this sense, it will be important to ensure people
living in rural areas within Pohjois-Savo have access to services and opportunities
provided by Kuopio. Given the assets of the region, levels of entrepreneurship and
innovation are relatively low. Providing better support to SMEs and entrepreneurs and
linking them with research and innovation resources (both inside and outside of the
region) is a potential area of focus for the region.
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Benchmarking Pohjois-Savo in relation to key growth factors
Pohjois-Savo
Finland
200
150
100
50
0
High skilled
labour force
Low skilled
labour force
Road density to Road density to Broadband 100 Patent intensity Start-up intensity High-tech
population
area
Mbps
manufacturing
High-tech KIS
Note: A high value for low skilled means the region has a lower share of low-skilled labour force. All infrastructure
variables refer to the year 2015; patents, 2011; high and low skills, 2014; and employment in manufacturing and KIS
(knowledge intensive services), 2014.
Source: Statistics Finland (2016c), Population, www.stat.fi/til/vrm_en.html (accessed 1 February 2017) (educational
attainments, high-tech manufacturing, high-tech KIS); Statistics Finland (2016d), Enterprises, www.stat.fi/til/yri_en.html
(accessed 1 February 2017) (start-ups); admnistrative data on roads provided by the Finnish Transport Agency (2016);
Finnish Communications Regulatory Authority (2016), Supply of fast broadband in Finland,
www.viestintavirasto.fi/en/statisticsandreports/statistics/2013/availabilityofhighspeedbroadbandconnections.html
(accessed 1 February 2017) (broadband); OECD (2016b), OECD Regional Statistics (database),
http://dx.doi.org/10.1787/region-data-en (accessed 14 December 2016) (patents).
Assessment of opportunities and challenges
As identified in the previous section, Pohjois-Savo faces development challenges,
particularly in terms of providing future economic opportunities for the local population.
The economic analysis and benchmarking in the previous section identified the
importance of focusing on niche market strengths related to forestry, manufacturing and
tourism. The following part of the case study provides an overview of the assets/growth
opportunities and bottlenecks/risks identified during the OECD mission to Pohjois-Savo
conducted in June 2015. This section concludes with the policy recommendations for
responding to them.
Assets and growth opportunities
The city of Kuopio is a key economic asset for the region with a relatively
sophisticated business services and manufacturing sector. Kuopio is one of the
fastest growing cities in Finland and its functional labour market is one of the largest
50 labour markets for all the Nordic countries. This larger size allows some big firms
to find enough workers to operate efficiently. Kuopio itself has a diverse economy
that includes health care, the cultural sector and manufacturing as key strengths.
There is a cluster of specialised professional and business services located in the city
which is relatively diverse compared to many other NSPA regions. The university
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also plays a major role as an employer, and providing teaching and research services
which are aligned to local economic strengths. The city is recognised for its strong
tradition of urban planning, including a dense urban structure well serviced by public
cycling and provision for walking and cycling. The city also benefits from its lakeside
location and proximity to natural amenities. This, combined with health care, is
making it attractive as a retirement destination.
Forestry continues to play a strong role in the regional economy and there is
potential for future growth associated with the bioeconomy. Pohjois-Savo has had a
forest-based economy for its entire history and to a considerable extent its future
prosperity will continue to hinge upon the successful exploitation of forests . The
future strength of the sector in the regional economy largely hinges on the possibility
of Finnpulp fully implementing its plan to build the largest softwood pulp mill in the
world in Kuopio. This plant will have integrated by-products and represent a major
investment that will support large scale forest harvesting for decades. While the
biorefinery is seen as offering new potential for the forest sector in Finland, the likely
impact of the bioeconomy may be smaller in NSPA regions than is anticipated . Even
with a new pulp mill, the bioeconomy has to compete with the conventional
petroleum economy that has low cost feed stocks. Pohjois-Savo does have an
advantage because it has the capability with large pulp mills to produce a range of
associated by-products from forestry production. It also has a range of different
manufacturing and research expertise embedded within the region, which means it is
more likely for local innovations to occur. The Applied Science University of Savonia
also plays an important role by educating professionals and developing projects in
collaboration with enterprises. The key for Pohjois-Savo will be building stronger
linkages with research and innovation actors within and outside of the region to
identify higher value-adding opportunities.
Pohjois-Savo has a strong platform for innovation, with further effort
required in terms of engagement with the SME sector. Pohjois-Savo has a strong
higher education and research presence along with a Science Park in Kuopio which
has approximately 100 companies with 3 500 employees. The region has developed a
Smart Specialisation Strategy which includes a focus on wood and bioprocessing,
machine and energy technology, food production, health clusters and water and air.
These priorities were selected based on a survey of business and research
communities in the region and shape public investment in innovation which is mainly
targeted towards supporting larger companies which export internationally. Further
effort is required to better align research with industry, strengthen mechanisms to
translate research into commercial outcomes (including stronger collaboration with
North Karelia which has a more significant research base and R&D capability), and
engage the SME sector. SMEs associated with traditional industries in Pohjois-Savo
tend to form dependency relationships with a larger firm, which leaves them
vulnerable to changing market conditions. Smaller businesses which are family
owned also exhibit a reluctance to take risks that are necessary to grow, diversify and
access new markets. These firms will not be positioned to survive and grow as local
supply chains become more exposed to national and international competition. More
effort is required to strengthen leadership, skills and capabilities of business owners
and employees within the SME sector.
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Savilahti project – urban redevelopment: Kuopio, Pohjois-Savo
The Regional Council of Pohjois-Savo is currently working with public and private sector
actors on a re-development project in the middle of the city of Kuopio. The site is located on a
lake, with the university, university hospital and technology centre located close by. The
Regional Council has developed a vision for the site based on mixed-use residential, education
and commercial development, which leverages the existing education and research institutions
located in the city. Public and private sector actors are estimated to invest about EUR 1 billion in
the construction projects targeted in the area in the coming years. The project is also aiming to
utilise green technologies to ensure it is liveable and has lower environmental impacts. This
project is a good example of a regional council linking its land-use planning and regional
development competencies, and working in partnership with the private sector, to create new
economic opportunities. This development strategy will also strengthen the position of Kuopio
as a key centre for higher education and innovation in north and eastern Finland.
A key area for future business and employment is the tourism sector, which has
potential for further growth. Tourism is already present in Pohjois-Savo but has the
potential for further growth. The region is in the heart of the Finnish lake district and is an
integral part of the canal system that can facilitate water based tourism. Kuopio has better
air connections than is the case for central cities in other NSPA regions and it can be a
source of complementary urban tourism activities that support the conventional naturebased tourism that is the main feature of Pohjois-Savo. Most importantly, Pohjois-Savo
does not offer a distinct tourism experience that differs from other lake oriented regions
in eastern and central Finland. This suggests that there may be benefits in joint marketing
that tries to sell the larger region to international tourists.
Bottlenecks and risks
A growth strategy focused on Kuopio will also need to enhance urban-rural
linkages. The regional government has adopted a development strategy that
emphasises growth in the vicinity of Kuopio as the dynamic force that will help the
entire region prosper. The development strategy focuses on some of the key existing
firms in manufacturing and forestry and on enhancing the role of health care. Creating
a mix of new local entrepreneurs and larger existing firms is seen as important. While
the concept seems appropriate given the situation in Pohjois-Savo, it will be
important to expand rural-urban linkages between Kuopio and other municipalities in
order to ensure that benefits of growth are spread more widely across the entire
region.
Long-term risk associated with population ageing and a declining regional
workforce. Despite current concerns with low levels of employment, there is a longterm concern that the current labour force will not be replaced due to low rates of
fertility, high rates of youth outmigration, especially by young females, and limited
immigration. Nordregio has developed demographic projections at the municpality
level for all the Nordic countries. They use two measures to assess the ability of the
current labour force to be maintained. The first constructs the ratio of the current
cohort of 15 to 25 year olds to the current cohort of 54 to 64 year olds to see if there
are enough new workers about to enter the labour force to potentially replace those
about to exit. A ratio of less than one indicates too few new workers. Second, they
calculate the gender balance to see if there will be enough females in the municipality
to allow sufficient new births to, in principle, allow natural replacement to occur.
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This is done by taking a simple ratio of the number of females that are in the 15 to 24
age cohort and dividing by the number of males in the parallel cohort. A number less
than one again implies a problem. In Pohjois-Savo, in all municipalities but three,
Nordregio projects a labour-force replacement rate of less than 0.8, and a female to
male balance of below 80%. Both these indicators suggest a fairly rapid decline in the
future labour force, especially since the measures ignore the role of youth
outmigration, and in particular female biased outmigration. Two more rural
municipalities are projected as having a replacement ratio between 0.8 and 1, with a
gender balance of between 80 and 100. The Kuopio municipality, by contrast, is
projected as having a replacement rate of above 1 and a balance ratio above 100%.
Restructuring of the forestry industry and disengagement from the
workforce. In most municipalities of Pohjois-Savo, the supply of labour remains
affected by historical patterns of employment in a forestry sector that largely no
longer exists. In the past, workers in the forest had strong artisanal skills that were
specific to timber harvesting, but not readily applicable in many other occupations.
Moreover, these workers had weak levels of formal education, because formal
education was not required for employment. While these jobs have largely
disappeared, their legacy remains both in the form of a significant share of the current
labour force having only weak formal education, and in a too high share of young
males failing to grasp that current employment prospects hinge on having formal
skills. Both ends of the labour force in the region offer employment challenges. Older
workers are harder to retrain and can be less attractive to potential employers,
especially if they do not have direct experience in that industry. Discouraged workers
may withdraw from the labour force or seek work-related disability benefits. In
Pohjois-Savo, 10 municipalities had more than 12.5% of their population aged
between 15 and 64 receiving work-related benefits, and 5 had between 10 to 12.5%.
These are all municipalities that are fairly far from Kuopio but include the
municipalities in the two smaller local labour markets. These communi ties get caught
in a negative cycle of job and population loss which further erodes the capacity to
provide essential health, education and transport services to people living there.
Improving vocational training and skills will be important for delivering
better employment outcomes for young people, particularly in rural areas. High
rates of unemployment and low rates of participation in the labour force are
indications of serious mismatching problems in local labour markets, particularly in
rural areas. In Pohjois-Savo, these problems largely reflect a weakness in the job
creation process that is exacerbated by limited flexibility on the supply side in terms
of skill adjustments, outmigration or downward movement in prevailing wages. In the
long run, the larger problem is enhancing youth skills because the skill problems of
older workers will be slowly resolved by their leaving the work force. Once again,
these are problems that are far less significant in the vicinity of Kuopio, where the
relatively large local labour market works more efficiently. Moving youth and
younger individuals who are already in the labour force into training and retraining
programmes will be essential to better match workers with the most likely new jobs
of the 21st century. The region is taking steps to improve the delivery of training
services. Training providers in the region organise as a consortium along with local
firms, and this consortium decides the number training places that will be made
available across different courses up to 15 months in advance. This partnership
approach is important; however, the region also needs to ensure flexibility in the
provision of training as economic circumstances change.
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Consortium for education
The Consortium for Education located in Varkaus in Pohjois-Savo, Finland, is a joint effort
by the Savo Vocational College and the Varkaus Upper Secondary School to better connect the
formal education mission of the two institutions to the skills needs of local employers. The
schools provide academic and vocational education to almost 6 000 students using connections
with local firms to identify skill requirements and specific technical training methods that can
better connect education to future employment opportunities. Students receive both formal
education and develop practical experience through apprenticeships or other structured
placements with local employers. Programmes focus on local sectoral strengths including:
forestry, tourism and manufacturing. In addition, emerging public sector opportunities in health
and retirement care, and social services are available. The success of the programme has resulted
in it being extended beyond its local base to cover the entire Pohjois-Savo region through
collaborations with vocational education schools in other municipalities.
The Consortium is an innovative way to address the importance of linking academic and
practical work in vocational education. By connecting with key firms in the municipality that are
the main employers of graduates and better understanding their skill needs, the schools can
structure their programmes in ways that meets core education requirements and provide better
training. This benefits firms by providing more competent workers, benefits students by
improving the likelihood of employment in their chosen field upon graduation, and benefits the
schools by ensuring an ongoing demand for their programmes. Most importantly, this type of
programme addresses a crucial need for better mechanisms to match worker skills to employer
needs, and can help to resolve the common problems of high youth unemployment and limited
interest of young males in pursing further education.
There is a lack of access to broadband across some areas of the region. Because
of low population densities, private companies are not willing to provide broadband
access to many rural areas across the region. Municipalities in the north of the region
have broadband access due to co-investment from the national government. However,
areas in the southern part of the region do not have the same level of access. Elderly
people will also require support to use services delivered via digital platforms. Broadband
access is likely to become more important for the provision of services, particularly as the
population ages and all levels of government seek to achieve cost savings.
Problems with internal connectivity are impacting on regional competitiveness
and access to services and jobs. The agriculture, forestry and mining industries all rely
on good road connections to move goods to market. The deterioration of secondary and
minor roads is impacting upon the productivity and growth of these sectors. These
projects usually fall under the threshold for national transport funding and are also
sometimes too large for the region to address. Given the low population density and broad
distribution of settlements, large scale public transit has limited value relative to smaller,
and perhaps private, on-demand transit services. Improvements in local roads are
important for reducing transit times and for the more efficient movement of wood from
forest to processing sites. The large number of lakes complicates transport planning but
improving access to lakes is essential for tourism growth.
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II. REGIONS IN NORTHERN SPARSELY POPULATED AREAS: 14 CASE STUDIES – 143
Annex: Statistical summary
GDP pc
Period
Pohjois-Savo
Finland
OECD
1995
21 481
26 522
27 905
National
gap
81%
82%
88%
OECD gap
77%
2012
31 420
38 359
35 812
GDP
2012
7 798
207 673
19 363
GDP share
2011
3.8%
n.a.
n.a.
Productivity
2000
65 941
75 513
59 692
87%
110%
2012
73 944
90%
99%
73 247
81 838
km2)
16 768
303 891
Area share of national
5.5%
n.a.
Area (in
n.a.
Population
2014
248 430
5 451 270
Population share
2014
4.6%
n.a.
n.a.
Population density
2014
14.82
17.94
343.39
Elderly dependency ratio
2014
33.95
31.31
27.68
Youth dependency ratio
2014
24.18
25.75
25.68
Road density (p)
2015
-
Road density (a)
2015
-
Primary attainment % of LF
2014
11.2%
14.0%
-
Tertiary attainment % of LF
2014
36.0%
38.5%
-
Unemployment rate
2014
8.6
8.7
8.7
-0.1
-0.1
Employment rate
2014
58.1
59.7
53.6
-1.6
4.5
Youth unemployment rate
2011
29.7
20.1
23.7
9.6
6.0
Patent applications
2011
18.20
80.88
105.72
Patents per million
2011
73.40
285.89
60.28
GDP pc growth
1995-2012
2.26%
2.19%
GDP growth
1995-2012
1.98%
2.54%
Productivity growth
2000-2012
0.88%
0.67%
Population growth
1990-2014
-0.16%
0.37%
Elderly dependency (pp change)
1990-2014
13.3
11.4
Youth dependency (pp change)
1990-2014
-5.4
-2.9
Primary education (pp change)
1987-2014
-26.6
-25.4
Tertiary education (pp change)
1987-2014
16.1
16.2
Unemployment rate (pp change)
1990-2014
0.6
3.0
Employment rate (pp change)
1990-2014
1.1
-2.6
Changes
Notes: All national average values are weighted, apart from patent applications. All OECD average values are unweighted
meaning each regional value is treated as one observation (besides GDP pc). LF = labour force; pc = per capita; pp = percentage
point; p = population; a = area.
Source: Calculations based on OECD (2016b), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en
(accessed 14 December 2016).
OECD TERRITORIAL REVIEWS: NORTHERN SPARSELY POPULATED AREAS © OECD 2017
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