Regional economies are confronting momentous changes. The globalisation of trade and economic activity is increasingly testing their ability to adapt and maintain their competitive edge. There is a tendency for income and performance gaps to widen between and within regions, and the cost of maintaining social cohesion is increasing. Rapid technological change and greater use of knowledge are offering new opportunities for local and regional development but demand further investment from enterprises, reorganisation of labour and production, more advanced skills and environmental improvements.

All four Småland-Blekinge counties recorded growth rates above the OECD average for TL3 regions from the mid-1990s until the crisis year of 2008. Moreover, GDP per capita in the four counties was already above the OECD average in 1995, meaning that the four counties are both relatively wealthy and dynamic by OECD standards. The area is known to be one of the most business-friendly parts of Sweden, with several well-known industrial clusters. The world’s largest furniture retailer, IKEA, originated in Småland, and one of the most active industrial districts in Scandinavia, the Gnosjö district, is located over four small municipalities in Jönköping County. Employment rates in the region have been fairly high by both Swedish and OECD standards. This, along with high wages and a comprehensive welfare state, has provided the foundation for high levels of welfare and quality of life in the region.

This chapter presents an overview of recent demographic, social and economic trends in the four counties of Småland-Blekinge, setting them in both Swedish and international contexts. It identifies a series of policy challenges for the region that are addressed in the chapters to follow. These include the need to facilitate a shift from the region’s historic specialisation in medium-low and low technology manufacturing towards more knowledge-intensive activities. This will require addressing the supply of human capital, improving connectivity and enhancing the attractiveness of the region. In addition, demographic trends raise increasing challenges for public service delivery, particularly in sparsely populated municipalities that are experiencing both population decline and accelerated population ageing. This reinforces the need to expand and deepen the range of instruments and institutions for inter-municipal co-operation.

The lack of technology-intensive industries and knowledge-based enterprises and the lack of skilled labour are two inter-related factors constraining the competitiveness and growth opportunities of Småland-Blekinge. The region’s traditional sectors need to evolve towards a knowledge-based economy to ensure the maintenance and growth of the region’s prosperity. Yet the adjustment of its industrial fabric will require a highly qualified and dynamic labour supply. The regional competitiveness of Småland-Blekinge relies greatly on its ability to attract and retain youth, migrants, women and their families, so that they can work, live and set up businesses in the area. This is directly related to the perceived attractiveness of the region in terms of quality of life and the availability of attractive jobs and business opportunities. This chapter first looks at how to ensure a highly qualified and dynamic labour supply by better integrating youth and women in the local economy and by attracting talent from outside. It then focuses on factors that can help make Småland-Blekinge an attractive place to live and work and to improve the framework for business competitiveness.

This chapter considers the multi-level governance arrangements that can support more efficient regional development policies in Småland-Blekinge. The promotion of economic development is currently characterised by excessive fragmentation, duplication and overlap. The lack of co-ordination among actors and programmes, the increasing mobility of people and businesses across administrative borders, and the relatively small size of the four counties may affect the capacity to articulate comprehensive development agendas. The regionalisation reform under discussion has potentially significant implications for Småland-Blekinge, but it needs to be considered within the broader framework of problems of multi-level governance. Whatever the future administrative structure of Småland-Blekinge, it will require the involvement and co-operation of different kinds of actors at different levels of government. The chapter first describes the governance structure of Småland-Blekinge and then analyses arguments to be considered when assessing the need for, and characteristics of, reform. Finally, it analyses a number of institutional and multi-level governance arrangements that besides the potential re-arrangement of the administrative borders in the region, could help to promote a coherent governance framework for regional development policies in the region.