copy the linklink copied!Chapter 2. Towards a sustainable development in Outokumpu and North Karelia

The purpose of this chapter is to provide recommendations about the type of policies to unlock Outokumpu’s mining potential and new growth opportunities in the municipality and the region. First, the chapter presents an overview of the current economic and institutional environment of the mining sector in Finland and the region. Then, it examines the policy strategies needed for sustainable development in Outokumpu and North Karelia, involving their mining potential.

    
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Box 2.1. Assessment and Recommendation

Assessment

  • Finland can play a key role in the raw materials agenda of the EU. The country stands out by its attractive regulatory environment and mining production. However, mining policy in Finland is a space-blind policy, which lacks integration with regional characteristics and local development plans. The mining potential in the country can further expand through joint work with regions and municipalities.

  • Outokumpu has the potential to raise the role of the mining sector in the regional development and support the national mining strategy. However, there exists a lack of clarity on the role of the mining sector in the regional economy and on the marketing strategies to promote the mining potential. Furthermore, the regional mining strategy does not acknowledge the local mining clusters and the potential of Outokumpu’s mining-related companies.

  • Outokumpu has scope to mobilise its assets, including its geographic location and the industrial fabric, and further diversify its economy to unlock growth opportunities and boost well-being. This process requires overcoming the fragmented visions of development within the region and the lack of co-ordination in the economic strategies among municipalities.

Recommendations

Better integrate mining in local economic development planning and link Outokumpu with the Joensuu local labour market (LLM):

  • Revise the municipal economic development plan to better define the economic objectives based on the existing assets in the territory (particularly integration within the Joensuu LLM, maximising mineral and metal extraction, and the mining value chain) (Outokumpu Municipality).

  • Create a unified vision and priorities amongst municipalities within the Joensuu LLM (Outokumpu Municipality, Business Joensuu, the regional council and national agencies). Actions for this are:

    • Develop the local workforce to meet future industry needs (e.g. skills profile, demand for skills from business, and barriers to mobility).

    • Attract and retain workers that address critical skills shortages/gaps (current and forecast).

    • Improve infrastructure connectivity and transport services to reduce commuting times.

Strengthen the local mining cluster of Outokumpu and improve the operational environment for mining-related activities:

  • Strengthen the vision of mining development in the region (Regional Council of North Karelia and Business Joensuu). Actions for this are:

    • Identify priorities to maximise the potential of the mining value chain in the region (land use, skills, innovation and internationalisation) and ensure they are reflected in North Karelia’s regional planning and smart specialisation strategy.

    • Develop a portfolio of projects linked to these priorities and link them to funding opportunities for national funding and the European Structural and Investment Funds (ESIF).

  • Develop a clear mining brand for the region and a strategy to promote it internationally. The marketing activities should aim to make the Outokumpu mining camp an internationally renowned source of knowledge-based services in mining and ensure this strategy is included within the national marketing activities (Regional Council of North Karelia and Business Joensuu).

  • Enhance interregional (Finland and European Union) co-operation on smart specialisation and green mining technologies by promoting joint projects on research and innovation with other regions and supporting the internationalisation of local businesses (Business Joensuu).

  • Conduct a flagship project for mining activities (e.g. testing of tailings for mines in cold temperatures) to align and spur commercial partnerships among established industries. This should involve an active role from the Geological Survey of Finland (GTK), local firms and the University of Applied Sciences in Joensuu (Outokumpu Municipality and Business Joensuu).

  • Lead Outokumpu’s mining camp and GTK to take an active role in supporting the regional mining strategy by building a network of experts to support innovation and higher-value-added activities in the sector (Outokumpu Municipality and Business Joensuu).

Diversify sources of economic growth to boost employment and reduce labour market mismatches:

  • Provide targeted support to increase the share of the service sector in the economy by promoting new businesses focused on services embedded in the industrial process of established companies and enhancing linkages with universities and other markets (Business Joensuu).

  • Strengthen programmes to boost small- and medium-sized enterprises (SMEs) and entrepreneurial culture (Business Joensuu). Actions for this are:

    • Improve the link of entrepreneurs and SMEs in small rural municipalities to regional business development programmes. This involves enhancing local and international networks for SMEs to transition toward related higher-value economic activities connected with the green economy (Business Joensuu).

    • Develop a strategy to strengthen an entrepreneurial culture by enhancing education programmes, improving information and mentoring and reducing the negative social consequences of business failure (Business Joensuu).

  • Strengthen tourism strategy through a co-ordinated approach and development of partnerships (regional council and Outokumpu Municipality). Actions for this are:

    • Strengthen the regional strategy on tourism to embrace a model where tourism is developed around a collection of experiences that leverages on the special characteristics of each municipality (regional council).

    • Enhance partnerships with stakeholders involved in mining tourism and expand the offer of thematic events leveraging on the mining museum (Outokumpu Municipality with Business Joensuu).

  • Improve programmes and regional co-ordination to enhance vocational, language and information technology (IT) training to increase workforce suitability with the current and future needs of the private sector (Business Joensuu, Outokumpu Municipality and regional council).

  • Embrace a comprehensive strategy to attract and integrate high-skilled migrants in order to fill gaps in the labour force demand and boost local business in Outokumpu (regional council and Outokumpu Municipality).

  • Develop a strategy to involve the older working-age population in the economic development of the municipality. Such a strategy should be aligned with the regional priorities and the work of institutions in Joensuu that aim to create new economic opportunities for the older population (Outokumpu Municipality).

copy the linklink copied!Introduction

As depicted in Chapter 1, the municipality of Outokumpu faces acute challenges for sustained economic development and the future of the local businesses. These challenges include out-migration, an ageing population, a lack of skilled workers and a low share of entrepreneurs. Yet Outokumpu has unexploited assets that can be further mobilised to revitalise the local economy and boost well-being in the community. It includes a good geographic location and a strong industrial fabric. Furthermore, the European and international demand for raw materials gives the municipality an opportunity to leverage on its mining expertise to become a key player for the national and international mining sectors.

The purpose of this chapter is to provide recommendations on the type of policies that can unlock Outokumpu’s mining potential and new opportunities for growth in the municipality and the region. In order to harness the benefits for and address the challenges in regional development, in in collaboration with North Karelia, Outokumpu needs to put sound policies in motion to mobilise its local assets, including its geographic location, industrial sector and mining expertise. Diversifying its economy by transitioning towards high-value-added activities, upskilling and attracting labour force and promoting entrepreneurship, will also be required.

This chapter begins with an overview of the current economic and institutional environment affecting the mining sector in Finland and North Karelia. It then outlines the current municipal and regional development strategies and examines the policy needed to address Outokumpu’s challenges in sustainable development.

copy the linklink copied!The institutional environment in Finland and North Karelia

Finland as a key player to fulfil the European Union demand for minerals

Global demand for raw materials has grown strongly over the past two decades. Raw materials are essential for the production of goods and services and for the development of new technologies. Since 2000, rapid economic growth in developing countries, mainly China and India, has boosted the consumption of minerals and metals. This global demand for materials is expected to remain high due to the ongoing urbanisation in Africa and the development of new green technologies.

The global transition towards a low carbon economy is opening up market opportunities to materials that did not previously attract sufficient commercial demand. These new materials include lithium, nickel, cobalt and graphite, necessary for electric batteries, wind turbines and electric cars. For example, demand for lithium is expected to triple from 2017 and 2025, and demand for cobalt could increase by 60% during the same period (McKinsey & Company, 2018[1]).

The abovementioned market trends coupled with the shortage of easy-to-access extraction mineral deposits add pressure to the global demand for materials.1 Thus, a major challenge for national and regional economies with limited mineral production, such as the European Union (EU), is to ensure access to a stable supply of raw materials.

The EU has set the aim to improve the reliability of supply for raw materials in the years to come high on the agenda. This strategy was initially outlined in the 2008 European Raw Materials Initiative, which has the sustainable supply of raw materials from EU sources as a key pillar (European Commission, 2008[2]). To achieve this objective, the European Commission has supported programmes to reduce waste and conserve resources, while promoting a sustainable utilisation and recycling of raw materials. It has also enhanced research and the knowledge base on raw materials as well as the regulatory framework conditions across the European countries.2

As part of this strategy, the European Commission has identified a number of critical non-energy and non-agricultural raw materials that are highly important to industry and society in the EU (Box 2.2). In 2017, the commission established 43 types of critical raw materials (CRMs) of high importance to the EU economy and with high risk associated with their supply (Table 2.1).

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Table 2.1. Critical raw materials (CRMs) for the European Union, 2017

Antimony

Fluorspar

LREEs

Phosphorus

Baryte

Gallium

Magnesium

Scandium

Beryllium

Germanium

Natural graphite

Silicon metal

Bismuth

Hafnium

Natural rubber

Tantalum

Borate

Helium

Niobium

Tungsten

Cobalt

HREEs

PGMs

Vanadium

Coking coal

Indium

Phosphate rock

Note: HREEs: Heavy rare earth elements, including dysprosium, erbium, europium, gadolinium, holmium, lutetium, terbium, thulium, ytterbium, yttrium.

LREEs: Light rare earth elements, including cerium, lanthanum, neodymium, praseodymium, samarium. PGMs: Platinum-group metals, including iridium, platinum, palladium, rhodium, ruthenium.

Source: European Commission (2017[3]), Study on the Review of the List of Critical Raw Material, https://ec.europa.eu/growth/sectors/raw-materials/specific-interest/critical_en (accessed on 6 February 2019).

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Box 2.2. Critical raw materials for the European Union

Raw materials are crucial to Europe’s economy. They form a strong industrial base, producing a broad range of goods and applications used in everyday life and modern technologies. Reliable and unhindered access to certain raw materials is a growing concern within the EU and across the globe. To address this challenge, the European Commission has created a list of critical raw materials (CRMs) for the EU, which is subject to a regular review and update.

Critical raw materials are important to:

  • Industry production: non-energy raw materials are linked to all industries across all supply chain stages.

  • Modern technology: technological progress and quality of life rely on access to a growing number of raw materials. For example, a smartphone might contain up to 50 different kinds of metals.

  • The environment: raw materials are closely linked to clean technologies. They are irreplaceable in solar panels, wind turbines and electric vehicles, among others.

The list of CRMs can help to:

  • Strengthen the competitiveness of European industry.

  • Simulate the production of CRMs by enhancing new mining and recycling activities in the EU.

  • Foster efficient use and recycling of critical raw materials, a priority area in the EU circular economy action plan.

  • Increase awareness of potential raw material supply risks and related opportunities among EU countries, companies and investors.

The methodology to identify CRMs:

The 2017 criticality assessment was carried out for 61 candidate materials (58 individual materials and 3 material groups: heavy rare earth elements, light rare earth elements, platinum-group metals, amounting to 78 materials in total). In 2014, 54 materials were assessed.

The main parameters used to determine the criticality of the material for the EU are:

  • Economic importance – provides insight into the importance of a material for the EU economy in terms of end-use applications and the value-added (VA) of corresponding EU manufacturing sectors. The economic importance is corrected by the substitution index (SIEI) related to technical and cost performance of the substitutes for individual applications.

  • Supply risk – reflects the risk of a disruption in the EU supply of the material. It is based on the concentration of primary supply from raw materials producing countries, considering their governance performance and trade aspects. Substitution and recycling are considered risk-reducing measures.

Source: European Commission (2017[3]), Study on the Review of the List of Critical Raw Material, https://ec.europa.eu/growth/sectors/raw-materials/specific-interest/critical_en (accessed on 6 February 2019).

Most of the suppliers of CMRs to the EU are non-European countries. Supplying 60% of all CMRs to Europe, China is the largest supplier to the union, followed by Russia and the United States (Figure 2.1). This high external dependency on critical metals creates potential geopolitical and market risks for the EU.

As one of the richest countries in mineral deposits in Europe, Finland can play a key role in the raw materials agenda of the European Union. Finland is the third-largest European country supplying raw materials to the EU (3% of all the raw materials supplied), after France and Norway (Figure 2.1). Finland’s mining production represents most of the EU production of platinum-group elements and other minor metals, including chromite, which is fully integrated with the stainless-steel production (Table 2.2). In particular, Finland is the EU’s largest supplier of cobalt (mined as a by-product of nickel and copper, 66% of total supply) and has become one of the EU’s largest producers of phosphate and gold (World Finance, 2019[4]). Finland is today one of the larger suppliers in the world of the cobalt chemicals used in the global battery production (European Commission, 2017[3]; World Finance, 2019[4]).

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Figure 2.1. Main suppliers of critical raw materials for EU, average from 2010-14
Figure 2.1. Main suppliers of critical raw materials for EU, average from 2010-14

Note: The figure should be interpreted in terms of the ranking of main suppliers rather than looking at the exact numbers.

Source: European Commission (2017[3]), Study on the Review of the List of Critical Raw Material, https://ec.europa.eu/growth/sectors/raw-materials/specific-interest/critical_en (accessed on 6 February 2019).

Finland stands out in the world by its attractive regulatory and business environment for mining. The country ranks first as the best judicial environment for mining activity according to Fraser Institute’s Mining Survey. It represents an improvement in comparison with 2016 and 2015 where ranked in (Stedman and Green, 2018[5]). The survey’s results represent the opinion of executives and exploration managers in the sector and include data from more than 100 jurisdictions. Finland’s high ranking is related to its mining potential, political stability, transparency, high quality of available geological data and current infrastructure. In particular, the geological data collection is considered one of the best in the world (Stedman and Green, 2018[5]). This database, developed by Geological Survey of Finland (GTK), covers the whole country and includes geological, geophysical and geochemical information, which is available to exploration and mining companies.

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Table 2.2. Finland mining production as a share for the EU, selected minerals and metals, 2012

Metal by country

Unit

Mine production

Share of EU production (member states only) (%)

Share of world production (%)

Chromite

kt

452

99.8

1.88

Copper

kt

20.7

2.5

0.12

Gold

t

9

41.8

0.32

Nickel

kt

21

45.3

1.20

Palladium

t

1

100.0

0.51

Platinum

t

0.43

100.0

0.24

Silver

t

20

1.1

0.08

Zinc

kt

51.5

6.8

0.38

T: tones.

Kt: kiloton.

Note: Cobalt in Finland is mined as a by-product of nickel and copper mining.

Source: Lulea University of Technology (2014[6]), “Mapping the Nordic mining and metal industry”.

The good international standing of Finland has led to an increased inflow of exploration projects. The country has emerged as the most interesting exploration country in Europe and attracts significant interest from international mining companies (Lulea University of Technology, 2014[6]). In 2017, Finland recorded the third-highest investment in mining exploration since 2012, with 46 companies conducting 44 exploration projects (7 of which are being conducted in North Karelia) (Tukes, 2017[7]). Most of the exploration projects focus on gold, copper, platinum, nickel, zinc and cobalt in areas located in the eastern and northern parts of the country (Figure 2.2). These projects provide a good base to strengthen the role of the country’s mineral production in the EU mining policy.

Embracing a mining policy with a territorial approach can help sustain Finland’s international attractiveness and ensure a major role in the production of critical minerals for the EU. Subnational governments play an instrumental role in the sustained development of the mining sector in a country and in the implementation of the national mining policy (OECD, 2017[8]). Regions ensure that the enabling factors for mining development are in place, including infrastructure, skills, community engagement and land-use governance. They also contribute to co-ordinating stakeholders and local clusters in order to support mining projects and promote policy complementarities at the local level (Chapter 3). Thanks to its close contact with the community, local governments are key to supporting community engagement in the projects and strengthening social license to operate (SLO).

Regions such as North Karelia and, in particular, Outokumpu can become an important partner in the implementation of the mining national strategy. Many Finnish regions are conducting individual strategies to promote mining development and harness the economic benefits from the global needs of materials. Both Lapland and North Karelia have established metals as one of their smart specialisation strategies. Small municipalities are also developing mining initiatives such as the mining camp of Outokumpu or the construction of the chemical plant for processing cobalt and nickel sulphates in Sotkamo. Outokumpu, in particular, can contribute to the national mining sector thanks to its enabling socio-political environment for mining activities and an internationally connected industrial base with expertise in mining. These local initiatives and assets require co-ordination with the national strategy to ensure a good operational environment for mining activities and positive social and economic outcomes for the communities.

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Figure 2.2. Mining exploration projects in Finland, 2018
Figure 2.2. Mining exploration projects in Finland, 2018

Source: Mining Finland (2019[9])Current Exploration Projectshttp://www.miningfinland.com/opportunities#current-exploration-projects (accessed on 6 February 2019).

The mining policy in Finland lacks a territorial approach

The responsible use of natural resources and the capacity to innovate in the production of natural products is a cornerstone strategy to boost regional competitiveness in Finland. For this, one of the goals set by the national government is to make Finland a global leader in the sustainable extractive industry (Finnish Trade Organization, 2016[10]). This strategy can leverage on the relevant position of Finland as a key supplier of raw materials for the European Union.

The 2010 Mineral Strategy is the guiding document that outlines the route for the future of mining in the country and sets the vision for 2050. In this vision, the government has set the target to make of Finland a global pioneer in the sustainable utilisation of minerals, with the mineral sector as one of the foundations of its national economy. To achieve this, the Mineral Strategy has set three strategic objectives: promote domestic growth and prosperity, find solutions for global mineral chain challenges and mitigate the environmental impact. The objectives are complemented by 4 action themes with 12 actions proposals (Figure 2.3).

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Figure 2.3. Mineral Strategy of Finland
Figure 2.3. Mineral Strategy of Finland

Source: Geological Survey of Finland (2010[11]), Finland’s Minerals Strategy.

The Finnish Mining Strategy results in a comprehensive policy strategy that aims to enhance knowledge, skills and innovation as a means to achieve sustained and sustainable growth in the sector. The goal of attaining sustainable or green mining translates in efforts to implement technologies, best practices and mining processes as a means to reduce the environmental impacts associated with the extraction and processing of metals and minerals. Furthermore, the policy strategy acknowledges that the minerals sector has significant potential to become a key foundation of the national economy, particularly from the perspective of sustaining regional development. To make this happen, it stresses the need for proactive support and commitment from both the Finnish government and other relevant public authorities.

The country has a strong mining cluster consisting of mines, major global technology companies, SMEs and organisations providing education, and research and development (R&D) and innovation services. Government-owned companies support the mining strategy in Finland by supporting financing (Finerva) and promoting the development of value chains such as the battery cluster (Finnish Minerals Group).

The policy has also a strong focus on international promotion. As a part of the whole strategy to boost the mining sector, the government elaborated the Mining Finland programme. Funded by Business Finland, this programme is a platform that condenses all the information related to the mining activity in the country in a single site. It includes information on current active mines, exploration mining projects and prospective resources. The platform also shows the current composition of the Finnish mining cluster, promoting the mining and services companies established in the country (Box 2.3).

Nevertheless, the mining policy in Finland is a space-blind policy that does not fully take into account the special characteristics of the regions and their development strategies. Neither the national policy nor the mining national cluster acknowledges the local mining clusters and particular regional strategies. For example, Mining Finland does not mention the characteristics of the regions with mining activities. Involving regional and local governments in the national mining policy can help Finland strengthen the social licence to operate, the mining infrastructure and the land-use governance, among other conditions, to enhance the operation climate for the sector. The Canada Minerals and Metals Plan is a good example of a national plan that involves both national and regional governments by implementing strategic actions. Some of these actions include: the review of Canada’s tax position, policy and fiscal measures; working with Indigenous peoples, local communities and industry to identify enabling infrastructure needs and opportunities for economic benefit; and settling land claims with Indigenous peoples as a principle for reconciliation (Natural Resources Canada, 2019[12]).

A unified and co-ordinated vision for mining development in the country is also key to supporting regions in their local economic strategies. A co-ordination with other strategies (transport, education) can realise policy complementarities and thus help attain regional development goals. For example, actions to strengthen R&D operations and expertise in mining could be better integrated with other regional development programmes that support innovation including the activities of the regional smart strategies. This synergy can foster an innovative ecosystem and spur SMEs and researchers working in the sector.

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Box 2.3. The Mining Finland programme

The Mining Finland programme is one of the Finnish government’s growth programmes funded by Business Finland. The main goals of the programme include:

  • Export promotion and internationalisation of Finnish mining technology and service companies.

  • Promotion of direct foreign investment in early-stage Finnish mining and exploration companies and in technology growth companies in the sector.

  • Increased visibility of the Finnish mining industry in the global mining industry market.

  • Support for companies to develop their international marketing and sales capabilities.

  • Strengthening of the Finnish mining cluster and promotion of networking between actors in the sector.

Stakeholders that want to be members of the programme must pay a membership registration fee of EUR 2 000. After May 2019, fees and terms of memberships concerning current and temporary members will be reassessed. The membership gives companies and organisation access to all the services offered by the programme, including:

  • Company visibility on programme websites, brochures and publications.

  • Direct contacts with international mining industry actors, Finnish embassies and Business Finland export centres.

  • Free participation in the programme’s international trade shows, congresses and roadshows, excluding own travel and accommodation costs.

  • Free participation in programme’s networking and match-making events, excluding own travel and accommodation costs.

  • Generic training events.

  • Access to GTK’s and Business Finland’s expert services and network.

Note: The initial end date of the programme is April 2019. Discussions with Business Finland and the Ministry of the Economic Affairs and Employment about the possible continuation of the programme and future financing model are going on.

Source: GTK (n.d.[13]), Mining Finland, http://new.gtk.fi/miningfinland/index.html (accessed on 6 February 2019).

copy the linklink copied!Policy strategies to attain sustainable economic development in Outokumpu

Outokumpu has been able to transition from an economy dependent on mining to one with a strong industrial base. The municipality has a number of assets that can unleash new opportunities for growth, including its geographic location, mining sector potential and strong industrial fabric with globally connected companies. Yet, the municipality faces a number of challenges in sustaining economic growth and increasing employment rates. They include out-migration, a low-skilled labour force and relatively low entrepreneurial activity (Chapter 1). This section will examine the policies to mobilise such assets while addressing the current challenges.

The development policy strategy in North Karelia and Outokumpu

The experience across several OECD countries and regions has shown that strategic planning is an important tool for development. Regions can benefit from planning, especially on the provision of basic public services and the elaboration of the right framework for economic diversification and innovation. Effective strategic planning can help reduce asymmetries of information, contribute to the better functioning of markets and create new markets where there are none (OECD, 2016[14]).

Regions and municipalities in Finland develop their development programmes based on the EU and national-level strategies. Finland’s regional development policy has a strong focus on the competitiveness of business and innovation (Box 2.4). The 2016-19 strategy, “Competitive regions and smooth everyday life”¸ aims to improve the competitiveness of business through better transport and communications infrastructure and support to innovation. The economic objectives also include a commitment to ensuring environmentally and sustainable economic growth through the bioeconomy sector. In this strategy, social objectives are given less emphasis and framed in terms of providing access to services (OECD, 2017[8]).

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Box 2.4. Finland’s regional policy framework

Regional development in Finland is governed by an overarching Regional Development Act. The Regional Development Act first came into force in 1994 as a response to the impacts of the recession of the early 1990s and to help enable accession to the EU. The commitments to equity and competitiveness are embedded within the objectives of the Regional Development Act and include:

  • Promoting the balanced development and national and international competitiveness of the regions.

  • Sustainably supporting and diversifying the business structure of the regions and promoting economic balance.

  • Promoting sustainable employment as well as competency, equal opportunities and social inclusion of the population.

  • Narrowing development gaps between and within regions and encouraging the full use of the available resources in a sustainable manner.

  • Enhancing regional strengths and specialisation and promoting regional culture.

  • Enhancing the quality of the living environment and a sustainable regional policy.

The government’s regional policy acknowledges the disruptive effects of external changes – such as climate change, stagnant global growth and immigration – on the economic conditions of Finland’s regions. These changes have forced downsizing and restructuring of existing firms, which has led to reductions in employment. In turn, this has generated other problems such as structural unemployment, skills mismatches and increasing inequalities between regions. The main opportunity for growth is identified as coming from the capacity to take advantage of the bioeconomy sector to generate new products, services and export markets.

The table below depicts the main priorities of Finland’s regional policy.

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Table 2.3. Finland's regional policy: Priorities and actions

Priority

Vision

Action areas (examples)

Growth through renewal

Regions will have created growth based on high-quality competency and sustainable development.

  • Ensuring regional Councils prepare for the impacts of structural change.

  • Developing skills and capabilities of entrepreneurs.

  • Collaboration between higher education institutions and businesses.

  • Supporting the development of bioeconomy.

  • Improved skills requirements for newly arrived migrants.

Vitality through well-networked regions

Finland, relying on a network of regions, makes effective and sustainable use of its resources.

  • Ensuring the EU’s long-term transport strategy considers linkages to non-EU markets.

  • Ensuring regional employment and innovation needs are reflected in the EU Arctic Policy.

Well-being through partnerships

The public, private and third sector successfully promote the development of regions and services as a joint effort.

  • Promoting the use of digital services.

  • Inclusion of private and third-sector actors in local and regional development.

  • Promoting housing construction in growing urban regions.

Sources: Government of Finland (2016[15]), Competitive Regions and Smooth Everyday Life: National Priorities of Regional Development 2016-2019; OECD (2017[16]), OECD Territorial Reviews: Northern Sparsely Populated Areas, http://dx.doi.org/10.1787/9789264268234-en; OECD (2005).

North Karelia’s development strategy

The Regional Strategic Programme 2018-21 of North Karelia (POKAT2021) defines the region’s development objectives based on the region’s potential and special characteristics. It describes and consolidates EU-, national- and regional-level strategies as well as the municipal and local level strategies with specific focus areas. The programme aims to attain three main goals:

  • Oil-free region. The region seeks to be at the forefront of sustainable and resource-smart production and use of renewable energies.

  • Life-long participation. The region wants to see the ageing population as an opportunity rather than a challenge, by involving people of different age groups.

  • Smart specialisation. The smart specialising strategy identifies two core areas with potential to boost regional economy: new solutions for the forest bioeconomy and technologies and materials as enablers for growth (Table 2.4).

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Table 2.4. North Karelia’s key areas of economic potential

Core areas

The region’s areas of expertise

New solutions for the forest bioeconomy

- Forest technology and logging logistics: Forestry machinery manufacturing and utilisation of logging methods and technologies

- Distributed biorefining: Raw material chains for distributed biorefining and the refinement technologies

- New biobased products: Biobased materials and production technology

- Forest information solutions: Service activities that are based on electronic forest information

- Multipurpose use of forests: The refinement of the material and immaterial value of forests

- Renewable energy production and wood construction: Distributed energy production and hybrid solutions that are based on renewable energy sources

Materials as enablers for growth

- Photonics: Scientific research and commercialised solutions

- Machinery and engineering workshop solutions: Machinery and engineering design expertise

- Information and communication technology (ICT) applications: Digital solutions in products, services and processes

- Chemistry-related materials expertise: Scientific research on functional materials and biomaterial analytics

- Precision technique: Precision work expertise in the manufacture of optical, mechanical and biomedical components

- Extractive industry processing expertise: Analytics and processing expertise that serve the stone and extractive sectors

Source: North Karelia Council (2018[17]), POKAT 2021 North Karelia’s Regional Strategic Programme for 2018-2021http://www.pohjois-karjala.fi/documents/33565/34607/POKAT+2021+Summary.pdf/80583d66-9e7b-d4f6-8e90-3dc0a4552dac?version=1.0 (accessed on 24 January 2019).

To achieve the long-term goals, the programme has set three areas of action: i) vitality from regional networking; ii) growth from renewal; and iii) well-being from partnerships (Table 2.5). These strategic actions aim to mobilise the natural and economic assets of the region including tourism, forest bioeconomy and mining activities, and link them together with the local market. To do so, the programme seeks to leverage a variety of internal and external networks, including Russia and EU countries. The programme acknowledges that attaining a more dynamic economic growth and a sound business environment requires boosting well-being in local communities. It involves improving educational standards and ensuring quality access to public services.

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Table 2.5. Areas of actions in the North Karelia Regional Strategic Programme 2018-21

Areas of action

Specific actions

Vitality from regional networking

- Create good accessibility and operating environment to enhance transport infrastructure in the region and harness the benefits from international and interregional networks

Growth from renewal

- Forest bioeconomy: Foster the sector and size its potential for business opportunities in the substitution of renewables for fossil fuels

- Technology industries: Prepare the region and businesses for the effects of automation by strengthening businesses’ adaptability and digital solutions

- Stone processing: and mining: Produce a long-term regional mining policy aligned with national and EU-level policies

- Tourism: Support the sector with joint efforts and effective co-marketing activities – enhancing niche markets like nature-based and sustainable and responsible tourism

- Food industry: Establish itself as an organic producer in the semi-cultivation of forest-origin health foods, such as mushrooms, herbs and berries

Well-being from partnerships

- Comfortable living based on the development of the operational environment and economic growth

Source: North Karelia Council (2018[17]), POKAT 2021 North Karelia’s Regional Strategic Programme for 2018-2021http://www.pohjois-karjala.fi/documents/33565/34607/POKAT+2021+Summary.pdf/80583d66-9e7b-d4f6-8e90-3dc0a4552dac?version=1.0 (accessed on 24 January 2019).

Outokumpu’s development strategy

The Outokumpu’s development programme aims to improve the attractiveness and well-being in the municipality as well as to attain a sustainable municipal budget to ensure a better provision of public services. The municipality has identified four policy priorities to be attained through the strategic plan:

  1. 1. Municipal image: Improve the municipality’s image and attractiveness.

  2. 2. Corporate finance: Achieve balanced municipal finances.

  3. 3. Vitality: Develop local vitality.

  4. 4. Well-being: Promote urban welfare.

To achieve this, the plan has a set of six transversal actions that contain specific strategies that support one or more policy priorities (Table 2.6). To improve the municipal image, for example, the municipality aims to embrace digitalisation, enhance road safety, undertake active marketing and update urban planning.

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Table 2.6. Actions and strategies in the Outokumpu Development Strategy

Actions

Selected strategies (policy priority targeted)

Corporate finance

- A higher tax growth than cost growth (corporate finance and urban image)

- A unified, integrated urban group. e.g. integrated practices with joint marketing among municipal companies (vitality, urban image).

Business development

- Business impact assessment as part of decision-making (well-being and vitality)

- Genuine co-operation between actors (vitality)

- Development of tourism and service industries (vitality & city image)

General administration

- Customer focus and customer service quality (welfare, city image)

- Active municipal marketing (city image)

- Co-operation and partnerships- events and institution meetings (vitality, well-being)

Welfare services

- A secondary education that is versatile and linked with the market (city image, vitality, welfare)

- Development of cultural activities (welfare, city image)

- Child-friendly city (welfare, city image)

Urban construction services

- Upgrading urban planning (vitality)

- Real estate portfolio management and planning (vitality, city image)

- Budget management for maintenance and reparation (corporate finance and urban image)

- Improving the overall look (city image)

Municipal companies

- Improving road safety (vitality, welfare)

- Renovation of streets (city image)

- Plot marketing – increasing plot sales (vitality)

Source: Outokumpu Municipality (2018[18]), “Corporate Strategy 2018-2021”, http://www.outokummunkaupunki.fi/documents/291232/298182/Outokummun+kaupungin+konsernistrategia+Kumpukartta+2018-2021%2C+kvalt+27.11.2017%2C+voimaan+1.1.2018.pdf/5a953d57-1739-4207-dc2e-9e9e0b9601b8 (accessed on 6 February 2019).

The economic plan recognises the need for attracting new business and people to the municipality and create a sustainable living environment for residents. Marketing activities together with policies to improve public services delivery are welcomed strategies to revitalise the municipality. Ensuring quality education and the right amenities for families, as well as a friendly environment for business to settle in are strategies that can provide sustainable growth for the area.

One of the key areas of the plan is the development of a cluster to support mining activities in the region. The Outokumpu mining camp aims to create a stronger network between the existing industrial companies, workers’ expertise and research centres to provide a solution for mining activities (Figure 2.4). Yet, the way in which this interaction will work and the type of solutions to be developed are not clearly detailed in the plan.

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Figure 2.4. Outokumpu’s mining cluster
Figure 2.4. Outokumpu’s mining cluster

Source: Outokumpu Municipality (2018), “Corporate Strategy 2018-2021”

The regional and municipal development plan are forward-looking and aims to create a dynamic business environment. However, these plans could better exploit synergies among them and align main priorities. Key policy priorities in the regional plan including creating new economic opportunities for the elderly population or unlocking the potential of bioeconomy seem to be missing in the municipality’s development plan. Likewise, the regional plan lacks clarity about the role of the mining sector for the development of the whole region and does not acknowledge the local mining cluster and strategies for the sector.

Mobilising regional assets to become a mining hotspot

Outokumpu municipality has scope to unlock existing assets in the territory in order to attain its economic objectives and boost well-being. The geographic location, the natural resource endowment and the important industrial component in the economy can be better aligned to support a unified vision of development and mobilise the potential of the local mining value chain.

Unlocking the potential of Outokumpu geographic location

Outokumpu benefits from a good geographic location, with close proximity to the two largest urban centres in Eastern Finland and to the Russian border. The municipality is 50 kilometres away from Joensuu (average travel time of 40 minutes), the capital of North Karelia, and 90 kilometres from Kuopio (average travel time of 75 minutes), the capital of Northern Savonia region and the second most densely populated city in the country. Outokumpu is less than 120 kilometres from the Russian border and has direct access to the region’s 2 airports in less than 100 kilometres (Joensuu and Kuopio).

Outokumpu’s proximity to Joensuu provides an advantage over more remote municipalities in the region. Outokumpu, along with five other municipalities, is located in the labour market of Joensuu (Chapter 1). This is the largest labour market in the region due to the size of the population and range of jobs offer (OECD, 2017[8]). In fact, Joensuu represents the main hub of population and economic growth in the region, which offers surrounding an opportunity to benefit from that dynamic. Generally, subnational areas closer to cities are more prosperous and experience higher economic growth than the more remote ones. Empirical evidence for the OECD concludes that the gross domestic product (GDP) per capita growth of subnational areas within 45 minutes by car to a city is, on average, half a percentage point higher than the growth of those areas within 45 to 90 minutes from a city of the same size (Ahrend and Schumann, 2014[19]). The proximity to the fastest-growing municipality in the region can benefit Outokumpu through a greater flow of workers, business and ideas.

Nevertheless, there is competition among municipalities for workers and investment. Municipal plans are competing to attract skilled workers without a clear co-ordinated strategy for the whole local labour market (Chapter 3). An individual strategy for investment can eventually translate into a “race to the bottom”, leading to revenue losses and weaker labour and environmental standards. From a regional standpoint, if existing economic activity is simply transferred from one location to another within the same region, net benefits are at best zero, and usually negative (OECD, 2018[20]). Therefore, a well-functioning governance framework must be in place to ensure that the potential benefits from proximity to a city are seized and the notion of “catching up” promoted. OECD analysis finds that, for a given population size, a higher fragmentation of a single local labour market among municipalities is associated with lower productivity (OECD, 2015[21]).

Furthermore, Outokumpu is not fully benefitting from the flow of workers into the local labour market. Outokumpu is the third municipality in the local labour market with the largest share of residents working in their place of residence (80% of employed residents work in Outokumpu). The municipality also receives a relatively large share of workers commuting every day from other municipalities (31% of Outokumpu’s workforce in 2015), far above the share in Joensuu (27% of non-resident workers) (Chapter 1). Despite such a flow of workers, Outokumpu has a higher unemployment rate than the LLM average (Chapter 1). Part of the persistent unemployment rate in the municipality is explained by labour market mismatches (see next section). The fact that workers from other municipalities, not all of them high-skilled, can find a job in Outokumpu (Chapter 1) underlines the existence of information and mobility barriers within Outokumpu’s workforce. Improving the information on job opportunities and the availability of skills across the local labour market can help match Outokumpu’s unemployed population with labour opportunities in other municipalities.

The whole labour market can further unlock opportunities from agglomeration economies. Productivity tends to increase with the size of the area’s labour market, which enables a broader range of firms to compete and specialise, thereby raising overall efficiency (Ahrend et al., 2014). Yet, the size of the labour market is not the only determining factor of productivity; it also depends on the relative accessibility of firms to each other and the labour force, sector-specific effects (e.g. cities with a higher proportion of financial services tend to have higher productivity) and the level of skills (Ahrend et al., 2014). Co-operation among municipalities to create a well-functioning labour market that links worker skills, business and educational institutions correctly is a tool to promote productivity. For operational factor mobility, infrastructure and land-use strategies are instrumental to increase accessibility to employment and provide high-amenity environments that are attractive to highly skilled labour.

Infrastructure in the local labour market has scope for improvement. The OECD (2017[8]) has stressed the need to improve infrastructure in North Karelia, especially the provision of transport services to small rural communities. The main transport corridor for the region is Highway 6, which links Kajaani, the capital of Kainuu in the north (approximately a 3-hour journey from Joensuu), to the south, towards the national capital Helsinki (5 hours by car) (OECD, 2017[8]). Currently, a private car is the main way to commute from Outokumpu to Joensuu, since public transport has a low frequency and there are no train connections. The highway connecting both areas has many sections with only two lanes and is prone to freezing during wintertime. These factors tend to increase the overall commuting time. Furthermore, the road network conditions to Kuopio and other municipalities in the west can be enhanced to improve municipal links. As OECD (2017[8]) mentioned, improving east-west connectivity has the potential to create new growth opportunities for northern sparsely populated areas (NSPA).

In summary, to make the most of the geographic proximity of Joensuu and Outokumpu, the North Karelia and Outokumpu Council should:

  • Better assess the socioeconomic and environmental interconnection between Outokumpu and the LLM. A starting point for this assessment is to produce and disseminate clear data at the appropriate scale (e.g. workforce skills and job opportunities in different municipalities) to identify mobility barriers and challenges in the territorial interaction among the municipalities.

  • Set up a framework to help local stakeholders co-operate outside the constraints imposed by administrative boundaries. To do this, the regional council should encourage municipalities to identify development strategies or projects around functional geographies (e.g. Joensuu LLM) and co-operate on labour mobility and investment attraction. Common planning and foresight strategies to embrace potential interactions in the labour market should be a priority on the territorial agenda.

  • Develop a common and co-ordinated regional approach to attract and retain workers.

  • Improve infrastructure connectivity with Joensuu and other municipalities.

Becoming a key player for the mining sector

For Outokumpu, mining explains most of its development history. Today, the municipality has a number of assets to become a key player for the mining sector: i) ongoing exploration projects in the municipality; ii) a potential for undiscovered deposits; iii) proximity to active mines and known deposits; iv) companies with mining expertise; and v) social licence and political willingness.

While there are no active mines in the municipality, some mining exploration projects could revitalise the mining activity in the area. The municipality is located in the so-called Outokumpu geological area (named after the company), containing copper, zinc and nickel deposits. Currently, the two most relevant exploration projects are:

  • Outokumpu copper mine operated by Finnaust Mining. Six drill targets have been identified to date, with a good potential for hosting high-grade copper. The mine is immediately adjacent to the former Outokumpu copper mine.

  • Hautalampi nickel, copper and cobalt mine operated by Finncobalt. Preliminary studies in Hautalampi (the historic mining area of Outokumpu) have determined a deposit of 2.2 million tonnes with a production plan of the 7-year underground mining operation.

The geological area where Outokumpu is located still appears to have undiscovered resources. GTK analysis underlines the Outokumpu copper-cobalt deposit as one of the eight most representative deposits in the country. It has found that about 71% of the copper and 68% of the zinc endowment of Outokumpu-type deposits are located in poorly explored and undiscovered areas (GTK, 2014[22]).

Outokumpu is also in close proximity to municipalities with active mines and mineral deposits with permits. Finland’s most significant mines are located in Eastern Finland and Lapland (Chapter 1). There are two active metal ore mines in North Karelia: Kylylahti multi-metal mine in Polvijärvi and Endomines gold mine in Ilomantsi. Outokumpu is 22 minutes by car from the Kylylahti copper, gold and zinc mine operated by Boliden and slightly more than 1 hour from the gold mine in Ilomantsi. In terms of exploration projects, North Karelia hosted 7 out of the 44 exploration projects of Finland during 2017. Overall, there are at least ten known deposits with active permits at less than one-hour’s distance from Outokumpu (Figure 2.5). Most of the deposits are of copper, zinc (e.g. the Vuonos deposit), nickel and talc (e.g. Perttilahti deposit).

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Figure 2.5. Mineral deposits around Outokumpu
Figure 2.5. Mineral deposits around Outokumpu

Note: Each figure represents the main mineral of the deposit.

Source: GTK (2019[23]), Mineral Deposits and Exploration (database), http://gtkdata.gtk.fi/mdae/index.html (accessed on 6 February 2019).

The municipality benefits from a pool of companies with important mining know-how to support green sustainable mining. The municipality has 47 companies in the industrial manufacturing sector; some of them with direct experience in mining-related machinery. The most representative of these companies is Outotec; a company that was initially established as a technological unit of the Outokumpu mining company, is currently an independent global leader in minerals and metals processing technology with an important focus on sustainable mining. This company has a factory unit in Outokumpu that manufactures mining machinery and structures and exports to a variety of countries.

Another key player for mining activities in Outokumpu’s industrial fabric is the Geological Survey of Finland (GTK). GTK, the national geological research centre, operating under the Ministry of Employment and Economy, based its competitive advantage on a high-skilled research service that leverages on a pool experts and laboratories to provide customer-oriented solutions and support business operations in different areas of the extractive sector. The company have four strategic themes: i) digital solutions to drive GTK’s success; ii) producing new cleantech solutions; iii) supporting the sustainable building of communities with geology; and iv) creating sustainable growth with mineral economics. GTK’s Mineral Processing Laboratory (GTK Mintec) in Outokumpu focuses on mineral processing and material research and works with global costumers. It has the potential to be an important platform for developing research and innovation projects as well as bench-scale tests to continuous pilot campaigns in the mining sector.

Overall, Outokumpu’s industrial companies can provide particular know-how for mining operations in cold climates and support the niche market of green mining and circular economy in that sector by developing sustainable mining technologies. If well-managed and linked to global value chains, this industrial fabric can become a key player to support the national strategy to make Finland the global leader in the sustainable extractive industry.

While Outokumpu is not the closest municipality to Russia, it can further benefit from its proximity by integrating the local industry with the mining development in that country. North Karelia is a north-eastern region in Europe. Its border with Russia is a competitive advantage that has afforded the region a particular expertise on Russia and contributed to the regional economy, especially in the tourism sector. The regional development plan has recognised the importance to enhance the network with the Russian market. Outokumpu can consider strengthening its market activity with the neighbouring country by improving, for instance, the flow of tourists and the integration of its industrial sector with the mining development in that country.

Finally, the enabling social-political environment for mining activities is an outstanding asset in the municipality to support mining development in the region. The conversion of exploration properties into actual mines depends on several factors, including the development of world metal prices and mining technology, as well as the socio-political aspects of natural resource extraction (Tiainen, Sairinen and Sidorengo, 2015[24]). In Outokumpu, the community has a positive perception of the mining activity, with a number of families that still remember the economy’s mining past and experienced workers in mining planning. Furthermore, the municipality has put the elaboration of the mining cluster high on the development agenda. Mining and stone processing is one of the five pillars for economic development in the North Karelia regional plan. The region acknowledges the good international image of the country in the mining sector and the potential of mining to create jobs in other sectors of the economy.

Towards an integrated strategy to unlock the mining potential

Outokumpu has a set of assets that can contribute to raising the role of the mining sector in the regional development of North Karelia. To mobilise this mining potential, the region needs to conduct a number of strategies.

First, clarify the role of the mining sector in the regional development plan and future opportunities for growth. While the region includes mining development as a part of the smart specialisation strategy on materials as enablers for growth, most of the growth opportunities in the region and the flagship programmes are focused on forestry and the bioeconomy. The “materials as enablers for growth” smart specialisation strategy allocates a high relevance to technology development and mobilisation of the related expertise in photonics, while the mining sector seems less of a priority. It implies a rather unclear regional strategy to promote the innovation ecosystem in the mining value chain. For example, the strategy to enhance the photonics industry, promoted as a key regional innovation programme, aims to scale up the value-added of the industry by linking competencies between different sectors. This type of support and strategic thinking – connecting ICT, technology and universities to strengthen the industry – is needed in the mining sector.

Second, enhance the international promotion of regional and Outokumpu’s mining assets. Outokumpu and North Karelia are absent from international fairs and events on mining. While Finland is a brand for sustainable mining and a favourable jurisdiction for mining, there is not recognition of Outokumpu within this brand. Furthermore, the promotion activities of North Karelia do not mention the local clusters and their potential in mining. The poor regional marketing of mining is related to a lack of a common vision of the mining role in regional planning and co-ordination challenges with the national strategy.

Finally, acknowledge the local mining clusters and involve the companies in the regional mining strategy. The extractive industry processing expertise strategy of North Karelia does not recognise the potential of a mining camp strategy and the mining-related industries in Outokumpu (GTK, Outotec). For example, GTK does not appear as an active player in the smart specialisation strategy of materials, unlike Lapland where the smart specialisation strategy has actively involved GTK along with other private companies and educational institutions (Box 2.5). For this, Business Joensuu can play an instrumental role in mapping mining assets and involving the private sector and local strategies with regional plans and strategic programmes on mining.

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Box 2.5. Involving stakeholders in smart specialisation strategies

Lapland’s Arctic Smartness cluster

The Lapland’s Arctic Smartness cluster collaboration is headed by the Regional Council of Lapland. This cluster has increased awareness of the expertise and specialists in Lapland and created new opportunities for introducing developed products and services to the market.

The collaboration between companies, educational and research institutions, the public sector and financers is a key element in the cluster’s work. The clusters of Lapland have seen significant development in the past few years. New goals have been set in Lapland that strongly emphasise the emerging industries in the area and the needs of business life. This steadily advancing locomotive is being steered by new and innovative industries. In addition, growth has been seen in the traditional mining and tourism industries.

The Arctic Smartness collaboration guides the clusters and implements smart specialisation in Lapland. The Geological Survey of Finland (GTK) and the Natural Resources Institute Finland (LUKE) have obtained a stronger role in the region. Together, Arctic Smartness stakeholders have increased the international visibility of Lapland.

The actors working the business interface, namely Digipolis, Rovaniemi, Development and ProAgria Lapland, create services concepts. The University of Lapland and Lapland University of Applied Sciences provide innovation platforms and learning environments as meeting points for business, education and research.

Source: Arctic Smartness (n.d.[25]), Homepage, https://arcticsmartness.eu/ (accessed on 23 March 2019).

The mining potential of Outokumpu can be boosted by leveraging on EU cross-border co-operation programmes. As a part of the EU current programming period (2014-20), North Karelia, through Business Joensuu, participates in two EU programmes to develop the mining sector. The two programmes have an important component on network development and provide a platform for deep policy learning, peer review and identifying ways to use EU policy instruments (European Structural and Investment Funds). The programmes are the following:

  • The Mining and Metallurgy Regions of EU (MIREU) project aims to establish a network of mining and metallurgy regions across Europe to develop guidelines and recommendations to ensure the sustained and sustainable supply of mineral raw materials to the EU. The network will help the regions to share knowledge and experiences in establishing and maintaining an extractive industry. MIREU brings together 30 partners from 17 regions, representing 15 EU countries. It is funded by the EU Research and Innovation programme (Horizon 2020). The main objectives of the programme are:

    • Map synergies between mining and metallurgy regions.

    • Identify favourable conditions for raw material development.

    • Engage with stakeholders and raise public awareness about the need for minerals and the importance of a sustained supply within Europe.

    • Develop EU-level Social License to Operate (SLO) Guidelines and an accompanying Toolkit.

  • The Smart and Green Mining Regions of EU (REMIX) project aims to link EU mineral-rich resource regions to support innovations of large- and small-scale companies in their regional mining value chains. The REMIX project brings together nine partners and one advisory partner from nine different countries to outline good practices with regards to how regional SMEs and municipalities can benefit from the mining industry and how the regional development authorities can strengthen the sustainable operational environment (Interreg Europe, 2019[26]). It is funded by the European Regional Development Fund. The main objectives of the programme are to:

    • Develop a dialogue between regional and industrial policymaking in the EU.

    • Involve research, development and innovation (RDI) in regional development processes.

    • Raise awareness of the sustainability of the EU mining sector.

    • Increase the regional innovation capacity in mining and metallurgy.

There is a scope to take these mining programmes a step further in terms of joint projects on research and innovation, and internationalising SMEs with other municipalities and regions. For this, North Karelia needs to agree on their areas of expertise to support the EU mining networks. Business Joensuu’s role here should be to co-ordinate a unified vision of mining in the region and involve the private sector (e.g. GTK) and educational institutions in EU networks. The regional competitive advantages that North Karelia can put forward within the EU programmes should include its geographic location, industrial expertise on sustainable mining and social license to operate. An active role from the region on leading a project in the networks, the EU-level Social License to Operate Guidelines for example, can afford the region higher international recognition in the mining sector.

Business Joensuu can also ensure both EU programmes contribute jointly to building scale for the mining strategy in Outokumpu and promote policy complementarities at the local level. A co-ordinated support between both programmes can lead to a stronger local mining camp in Outokumpu and ensure its recognition as a key player to promote the mining network in the country. Enhancing the co-ordination of specific internal activities of each of the EU programmes (e.g. marketing activities and SME support) with the national and regional strategies can result in a coherent policy to ensure enabling factors for mining development are in place (e.g. infrastructure, skills).

In summary, to make Outokumpu a key player for the national and European mining sector, the region needs to develop an integrated mining strategy that aligns different stakeholders to a single vision and promotes its competitive advantages globally. Specific actions for this are to:

  • Develop a unified vision for mining development within the region. This involves clarifying and enhancing the role of the mining sector in the regional development strategy. For this, the region needs to assess the potential of local assets and strategies (Outokumpu mining camp) to define its integration within the smart specialisation strategy. The revision of the regional strategy in 2021 is a great opportunity to reassess priorities.

  • Strengthen the regional support for the implementation of local mining strategies. Business Joensuu should help ensure sufficient support for mining development and balance among the implementing programmes for both regional smart strategies (bioeconomy and metals). This involves promoting co-ordination among municipalities to leverage on their special characteristic on mining and link municipal assets with other mining regions (Lapland) to generate synergies in order to attract investors (Chapter 3).

  • Define a clear mining brand for the region and a strategy to promote it internationally. The marketing activities should aim to make the mining camp an internationally renowned source of knowledge-based services in mining. For this, the region should enhance its participation in mining events and ensure this strategy is included within the national marketing activities and the national platform Mining Finland (Chapter 3).

  • Enhance interregional (Finland and EU) co-operation on smart specialisation and green mining technologies. This involves strengthening the use of the EU cross-border co-operation programmes for the mining sector. For this, Business Joensuu should leverage these platforms to promote joint projects on research and innovation with other regions and support the internationalisation of local businesses.

  • Conduct a flagship project for mining activities (e.g. testing of tailings for mines in cold temperatures) to align and spur commercial partnerships among established industries. For this, GTK’s lab with other established companies and universities of applied sciences could co-ordinate efforts to expand their offer to the mining industry and attract international firms investing in Nordic countries. For example, GTK could become a platform to test new exploration and operation methods and offer tailored market solutions for operations in cold temperatures. This project could, in fact, become a cornerstone of the mining camp in Outokumpu.

Diversifying the economy for sustained and inclusive regional growth

The economic structure and level of diversification are important factors in influencing regional economic performance. OECD regions that are undergoing a catching-up process in their stages of economic development are characterised by a high level of diversification and a greater concentration in tradable activities (OECD, 2016[27]). Countries, regions and cities with a diversified economic structure have a higher employment and economic growth rate than their peers with a high degree of specialisation (Glaeser et al., 1992[28]; Hausmann and Hidalgo, 2010[29]; OECD, 2018[20]). Although specialised regions may have high levels of GDP per capita, a high degree of specialisation tends to hinder GDP growth. The OECD (2018[20]) found that the lower per capita GDP and productivity growth of highly specialised regions are due in part to lower levels of innovation-related activities (lower patent activity) in comparison with more diversified regions.

Diversification strategies need to be consequent with the economic structure and abilities of the region (Boschma and Iammarino, 2009[30]). Regions should focus on diversifying the economic activities that require related skills and knowledge to those activities already present in their economies. This involves upskilling labour force, attracting new skilled people and establishing an operational environment for new business that can support new paths of growth based on cemented economic advantages.

Expanding the existing industrial fabric beyond manufacturing

Outokumpu can further diversify its economy by promoting a transition of the established companies towards high value-added activities and boosting new sectors such as tourism to leverage on the municipality’s natural endowments and special characteristics.

Outokumpu is the most industrialised municipality in North Karelia (Chapter 1). The manufacturing sector employs 33% of the working-age population in Outokumpu, far above the share of the local labour market (16%) and the country average (13%). The main companies established in the municipality supply to a number of sectors: machinery and electric components for extractive industries (e.g. Outotec); industrial components for agriculture and forestry (e.g. Outokummun Metalli Oy and Pippo Oy); technological components for construction and housing (FinelComp) (see Table 3.1 in Chapter 3). Most of these companies either compete in international markets or are connected with global firms (e.g. Outokummun Metalli is a supplier to the multinational John Deer).

Yet though this manufacturing industry has brought economic dynamism to the economy and income to the municipality, there is a persistently high unemployment rate in comparison to the region (Chapter 1). As the former session depicted, a share of Outokumpu’s workforce did not fit with the labour demand of the industry-manufacturing sector, which explains the role of the municipality as net receiver of workers from surrounding areas. In an increasingly globalised world, the main source of value-added is often found in upstream or downstream steps in the production process (e.g. R&D, design of products or marketing). Transitioning towards the service sector can thus help the municipality to diversify the economy into high value-added activities. Regions catching up across OECD member countries are moving faster towards tradable services and increasing their share in the total economy while, in “low-income regions”, industrial production accounts for one-third of total output and is the fastest-growing sector (OECD, 2018[20]). Part of the industrial transition towards services is leveraging on the services linked to the production process (OECD, 2018[20]).

Outokumpu has tried to enhance service activities in the economy but the growth opportunities in economic strategy remain mostly linked to industrial production. Primary-sector logistics or services activities have less relevance in the municipal economic strategy. The main strategy to support diversification within Outokumpu’s development plan is the strategic action of developing tourism and service industries (see Table 2.6). To do this, the municipality is promoting a joint digital project to develop a modern business environment and support marketing expertise. While Outokumpu’s economic strategy has defined the goal to increase the share of the services sector in the economy, the strategy falls short on clarifying the type of service activities it wants to promote.

The municipality has scope to support economic diversification by unlocking the synergies with the services embedded in the manufacturing process. The strategic diversification in related sectors can build on local manufacturing strengths. Many companies in Outokumpu require a range of services associated with the industrial processes, including design, sales, maintenance and financial management. Although in some cases, companies get to develop these services in-house, some services (e.g. maintaining, disposal of material, security) can be provided close to the production site. Identifying the potential services to be outsourced requires common planning activities and networking events with firms, entrepreneurs/SMEs and government. To support this effort, Business Joensuu and Outokumpu Municipality should dedicate a particular programme to foster interfirm links (inside and outside Outokumpu) and entrepreneurship in these type of service activities.

Greater development of the mining sector in the region can also lead to a growth of service activities. The OECD finds that services is the sector with the strongest backward(or upstream) linkages to mining. This sector accounts, on average, for 23% of the value-added of exports from the mining sector (based on a sample of 65 countries included in the 2018 version of the OECD Trade in Value-Added [TiVA] dataset). In almost all the regions studied, the large majority of services embedded in mining exports are produced domestically (18%), while a small proportion is imported (5%) (OECD, forthcoming[31]). The relevance of domestic services in mining underlines the capacity of the mining sector to support economic growth in the local economy (Box 2.6).

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Box 2.6. Backward and forward linkages in the mining sector

The OECD conducted an analysis based on detailed and harmonised data on the mining global value chain in the 2018 version of the TiVA data that comprised 65 countries. The Trade in Value-Added (TiVA) dataset traces value addition into and out of the mining sector throughout the entire value chain. Upstream linkages to sectors that feed into the mining sector as inputs are referred to as backward linkages. Downstream sectors that integrate exports from the mining sector into their production processes are referred to as forward linkages.

As with other natural resource sectors, much of the value-added of mining exports come from the sector itself (59% in 2015). This is due to the inherent value of the minerals extracted, plus the value addition of labour and capital expenditures in the sector. The sector to which mining displays the strongest backward linkages is services, representing 23% of the value-added of exports from the mining sector on average (Figure 2.6). In European and Central Asian countries, services account for 26% of the value-added of minerals exports. In almost all regions, a large majority of services to the mining sector are produced domestically, accounting for 18% of the value-added of mining exports.

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Figure 2.6. Backward linkages, the mining sector
Inputs by sector into mining, 2015
Figure 2.6. Backward linkages, the mining sector

Source: OECD (forthcoming[31]), The Mining Global Value Chain and the Impact of Embodied Services, OECD Publishing, Paris.

The mining industry uses a variety of services throughout the lifecycle of mines. The mining lifecycle is composed of four main stages: prospection and exploration, feasibility, exploitation, and closure and remediation. Due to the specific legal, technical and economic needs of the mining process, each stage requires specialised mining services. These include geological services like surveying and sample analysis; engineering services that contribute to feasibility studies, mining design and oversight of mining operations; construction services for roads, mine sites and mining camps; drilling services at both exploratory and construction phases, among others. Furthermore, mining is increasingly done remotely; digital mining includes services related to data collection and management; specialised software; technologies such as sensing, information gathering through drones and machine learning; and innovative business processes.

Source: OECD (forthcoming[31]), The Mining Global Value Chain and the Impact of Embodied Services, OECD Publishing, Paris.

Outokumpu can also move towards high-value-added activities by better linking its assets with the smart specialisation strategies of the region. Outokumpu can be a key partner for North Karelia to attain the “materials as enablers for growth” smart specialisation strategy. This strategy aims to leverage the economic growth on the technologies and materials in the region by harnessing the existing activity on research, R&D from the technology industry companies (53% of R&D in the region stems from companies in the field). To harness the mining and metal potential, North Karelia regional council has identified two main bottlenecks:

  • Improve the critical mass of experts with presence in the region.

  • Enhance the relevance of high-technological businesses in production volume. So far, mainly traditional engineering and metal companies are involved in this type of production.

In Outokumpu, GTK’s national network of experts can support the regional strategy on metals and mining. The company employs 420 full-time staff and are engaged in tasks at the local, national and international levels. It has seven research laboratories around the country with experts in areas such as isotope geology and applied mineralogy. Outokumpu can mobilise GTK through, for example, the mining camp, to take an active role in supporting the materials strategy and address the need for experts in the sector.

Using tourism as an anchor of economic growth

The tourism sector in North Karelia is small when compared with an average of Finnish regions (Chapter 1). North Karelia is among the 6 regions with the lowest number of overstay nights spent by tourists (456 323 in 2017), which represent 2% of the national total. It is far below the number of nights spent in regions such as Uusimaa (33% of the national total), Lapland (12%) or the neighbouring region Pohjois-Savo (5%) (Official Statistics of Finland, 2018[32]). Furthermore, the sector relies on a narrower range of tourists, mainly domestic and Russian (North Karelia Council, 2018[17]).

This sector, however, has the potential to represent an important source of income for North Karelia and Outokumpu. The regional council has set tourism as one of the five sources of growth for the region (see Table 2.5). The regional tourism policy focuses on supporting nature-based tourism and sustainable and responsible tourism as well as stressing the safety and security characteristics of the region. The region has also developed the website visitKarelia which promotes municipal destinations, mainly natural and cultural attractions. The tourism strategy in the 2018-21 regional development programme has set four objectives:

  • Strengthen tourism centres, international competitiveness and the product offer.

  • Enhance tourism marketing and sales.

  • Develop event tourism.

  • Develop ecological and cultural tourism.

In Outokumpu, the municipal council has conducted activities to promote tourism based on its mining heritage. Since 2008, the municipality has been following a comprehensive plan to attract tourists to the old mine, converted into a tourism destination. This mine serves as a museum for mining in the country. Tourists can take a tour of the mine and learn about ancient and modern mining processes. The site also offers the possibility of holding conferences and events underground.

The municipality offers other types of attractions beyond the old mine: a golf area in the old mining site of Kereti, an important offer of water-related attractions (24% of Outokumpu’s land is covered by water) and a natural park just 5 kilometres from the centre, with nature trails of 3, 4 and 7 kilometres. Outokumpu receives around 15 000 visitors per year, most of them Finnish nationals attracted first and foremost by the mine site.

Outokumpu can improve its tourism strategy by diversifying its offer and linking its main destination, mining, with other sectors such as agriculture or forestry. Tourists visit the municipality attracted by the mine but their stay is generally short and does not explore other attractions in the area. For example, further exploiting ecotourism could help Outokumpu attract some of the tourists visiting Finland on an annual basis and looking for outdoor activities. Health and wellness tourism could also create a new offer for the country’s increasing elderly population. The municipality can further promote the other exciting activities in the area – golf, trekking, fishing – by developing new activities around them (e.g. hosting golf camps, fishing tournaments). As seen in other examples of OECD regions, an integrated tourism strategy at the local level requires close co-ordination with the community and other levels of government, regional and national (Box 2.7).

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Box 2.7. Experiences of mine repurposing – Atikokan, Ontario

Atikokan, a transitioning municipality in north-western Ontario, engaged in mine site repurposing to avoid winding down activities following closure of its in-situ mines.

Mine dependency prevailed from 1944 until 1980, covering the period of commercial iron ore production. During this extended phase, mining was the dominant source of employment for Atikokan’s residents. Upon closure, the property was transferred to the township and all buildings, equipment, stockpiles and useable aggregate materials removed.

The post-mine-dependent period emerged in 1981, following the closure of the neighbouring mines of Steep Rock mine in 1979 and the Caland mine the following year.

The first, unofficial stage of repurposing spanned the 1981 to 2004 period, when the abandoned “legacy mine land” was used informally by local residents for a variety of outdoor activities (e.g. horseback riding, fishing, hiking, picnicking, snowshoeing and skiing). The second period was driven and implemented by a local volunteer group but enabled by local and external stakeholders. This neo-endogenous strategy was initiated in 2005 with the establishment of the Charleson Recreation Association.

The association and its volunteers implemented the repurposing mechanism, with advice provided by the Ontario Ministry of Natural Resources. The township’s dominant tourism identity reflects the area’s natural, place-based assets, including Quetico Provincial Park, with its abundant trails and waterway.

This experience suggests that repurposing may potentially create paths that are simultaneously emergent and dependent (i.e. if the repurposed landscape is the first tourist attraction in the municipality) or enhance a pre-existing emergent trajectory, whose development hinges on a previously tapped, place-based asset (e.g. wilderness space).

Sources: Mitchell, C. and K. O’Neill (2016[33]), “Tracing economic transition in mine towns of northern Ontario: An application of the “resource dependency model””, The Canadian Geographer, Vol. 60/1, pp. 91-106.; Worrall et al. (2009).

Outokumpu should also upgrade the experience of mining tourism. This can be done by conducting international partnerships with other museums and diversifying the activities around the mine site to increase the number and variety of tourists. Specific actions could involve:

  • Partnerships with museums and other stakeholders targeting the same tourism niche. A co-ordinated approach among different levels of government and private sector is instrumental to boost tourism in niche products, such as mining museums. The Louvre-Lens case in France could be a good example of a partnership development involving different actors (e.g. SMEs, national museum) to support the rehabilitation of a closed mining site (Box 2.8).

  • Enhancing the offer of thematic events around the mining museum. Distinctive products and thematic visitor experiences may also be created from particular types of landscape and associated cultural heritage (OECD, 2018[34]). Thus, a strategy to offer a set of products linked to the mining site can become an instrumental tool to sustain the flow of visitors. Many OECD regions have recognised events as catalysts, animators and image-makers for both business and leisure travel. Improving the promotion of wedding or business events within the mine as well as creating thematic events require sound co-ordination with the North Karelia tourism strategy. The case of Coal Creek Community Park and Museum in Korumburra can guide the municipality to widen the tourism offer based on the museum and thematic events.

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Box 2.8. Tourism development for mining rehabilitation

Partnerships and integrated investment for mining tourism: The case of Lens, France

Lens, a mining municipality of about 31 000 inhabitants in the north of France, closed its last coal mine in 1986. Since then the town has sought to revitalise the economy. In co-operation with regional and local authorities, in 2012, the world-famous Louvre Museum opened a satellite branch in the mining area of the municipality. The aim was to revitalise the region and promote economic development through tourism, transforming the area into a new cultural destination.

The establishment of the museum has been a concerted effort made by public authorities across different government levels. The French state approved the use of the Louvre brand, the regional council financed 60% of the construction cost (EUR 150 million) and the local authorities played an important role in financing and promoting the project.

The development was supported by a global approach to investment at a destination level and included the creation of a strong value proposition with a long-term view. The strategy engaged local SMEs in the process, building capacity in knowledge and skills. Private investment has been directed mostly into accommodation but significant investment has also been made in leisure parks, museums and convention centres.

Since 2015, the Mission Louvre-Lens Tourisme, consolidated with the establishment of a “destination contract”, rallies public and private partners to undertake a consistent, highly visible tourism offering, in line with the expectations of foreign markets. This type of contract has been an important step to overcome traditional barriers to tourism investment, including the fragmentation of local stakeholders and the lack of tourism capacity, by creating a committee of investors and experts.

Enlarging tourism based on mining heritage

Coal Creek is a small recreation area in the town of Korumburra (3 639 inhabitants) in the state of Victoria, Australia. The prosperity of the town was closely linked to coal mining. The mine of Coal Creek operated until 1958. In 1974, the town developed an open-air museum of 15 hectares on the site of the closed mine.

Today, it is called Coal Creek Community Park and Museum, whose museum was accredited in 2014. It is home to local groups and organisations and has a large educational programme. Several events are held during the year, which have proved extremely popular with local people and the surrounding communities.

Tourists can upgrade the visit with a multimedia interpretative self-guided tour, ride the bush tramway, enjoy the Community Gallery and take a scary Ghost Tour. Weddings and family events often take place in the park.

Sources: OECD (2018[35]), “Effective policy approaches for quality investment in tourism”, https://doi.org/10.1787/88ea780c-en; Coal Creek (Coal Creek, n.d.[36]) (n.d.[36]), Coal Creek Community Park and Museum, https://coalcreekcommunityparkandmuseum.com/.

For a successful outcome of Outokumpu’s tourism strategy, North Karelia needs to conduct a whole-of-government approach for tourism that involves all the municipalities and the different economic sectors (e.g. environment, transport). The current regional tourism strategy lacks integration of the municipal characteristics into a single brand. For example, the mining museum seems somehow lost among the outdoors, ecological activities promoted in the regional strategy. The regional marketing strategy should go beyond displaying the attraction in each municipality separately to form a co-ordinated experience for visitors. To do so, the region can move from a tourism destination approach towards a model where tourism is developed around a collection of experiences which are often thematically connected and can be explored at the visitor’s own pace within somewhat wider geography (OECD, 2017[37]). Examples like the European Cultural Routes, the Sierra Mágica Routes Programme in the state of Puebla, Mexico or the wine trail in Valle de Guadalupe in Baja California can serve as a guide for North Karelia (OECD, 2017[37]).

To develop a comprehensive tourism strategy on tourism, the region needs to improve its data on tourism. Clear and detailed data are the basis for regions to better plan and define tourist products and attract new tourists (OECD, 2017[37]). North Karelia Council should enhance its tourism data by conducting a visitor survey to gather the characteristics of tourists, their travel and consumption patterns, expectations and degree of satisfaction with different aspects of their travels. This should be done jointly with municipalities to adapt their local strategies and improve their offer.

Unlocking new growth opportunities by upskilling the workforce and attracting new workers

Population ageing is a widespread phenomenon across the OECD. Elderly dependency ratios in the OECD, the ratio between the resident population that is 65 years or older and those of working age (15-64), grew by more than 25% between 2001 and 2015 (OECD, 2018[20]). In many low-density areas, the population ageing is coupled with out-migration, particularly among youth, and low fertility rates (OECD, 2016[27]).

North Karelia and Outokumpu are not an exception to this trend and face one of the most accelerated demographic shifts in the country. In North Karelia, the share of the elderly population is growing faster than in the rest of the country (Chapter 1). The situation for Outokumpu is more dramatic as the municipality experiences a higher out-migration and ageing population rate than the region. Furthermore, Outokumpu’s labour force has lower skills than the average of the municipalities in the local labour market (Chapter 1). Implementing policies to upskill the local labour force, attract new residents and offer new economic opportunities for the elderly population are mechanisms to maintain a vibrant community and promote diversification in the economy.

Upskilling labour force

Human capital is a critical factor influencing regional growth and development throughout all types of OECD regions (OECD, 2017[38]). A skilled human capital is at the essence of regional development and competitiveness. It leads to building a learning society that is able to absorb and create knowledge, drive innovation and facilitate local adaptability within a changing technological environment. A high level of skills is required to access higher-wage jobs and higher education and advanced vocational abilities are also a requirement in many parts of the non-traded sector.

Outokumpu’s workforce has low levels of educational attainment. The transition from mining to manufacturing activities during the 1980s left a share of workers with skills that do not match contemporary economic needs. The share of the workforce with higher education (28%) is far below the share in the local labour market (35%) and the average of the region. Alongside this, most of the people who out-migrated from Outokumpu in the past years have a medium or high educational level, while the average of people having moved into the municipality hold secondary educational levels (Chapter 1). OECD regions tend to compensate the trends of a shrinking workforce with policies to increase productivity (OECD, 2018[20]); yet, in the case of Outokumpu, the low skills of its labour force represent a challenge to transition towards high-value-added activities.

Outokumpu municipality has set high in its development agenda the improvement of the quality of secondary education and their link with the market. The “secondary education that is versatile and linked with the market” strategy focused on active marketing for high school and developing high school co-operation with local vocational schools and network leaders. North Karelia has a programme to better match labour demand with job seekers. The Skilled Workers and Entrepreneurship programme, conducted by Business Joensuu in co-operation with the Employment Office, supports the future employee with training related to the professional skills required for the job and the company’s tacit knowledge. Correspondingly, workers in companies have been trained as masters/instructors for the newcomers. Business Joensuu is also looking to further leverage on the European Social Fund to improve labour market matching with companies by linking together different actors and establishing personalised support for unemployed people.

However, more efforts should be undertaken to adapt higher education to market needs. Outokumpu has a vocational college that teaches a variety of degrees and has a good scientific component. Yet, its best-known vocational degree is dance, which attracts annually a relatively large number of students from other municipalities. This degree does not fit the demand for labour in the area and most of these students leave the municipality once their studies finished. Furthermore, at the regional and local levels, there is a lack of granular data on the characteristics of the workers and unemployed population as well as the needs from the labour demand side (see the previous section).

The municipality’s development plan can give greater emphasis to the provision of intermediate skills within the labour force. The current municipal plan has a strong focus on improving the quality of secondary education; however, strategies to address skills of the mid-career population and those active workers coming from the economic transition period can be strengthened. Enhancing programmes to support higher knowledge-intensive pedagogy and retrain the workforce can be instrumental to transition to high-value-added activities. For this, stronger co-ordination with regional programmes is required for the municipality and local companies to improve vocational, language and IT training in order to increase workforce suitability with the current and future needs of the regions’ private sector (Box 2.9).

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Box 2.9. Vocational education and training (VET) for local labour markets

Vocational education and training (VET) delivery should be aligned with the local sectoral and occupational labour market profile. Turning specifically to mechanisms for local decision-making in VET, the ability of local actors to align VET delivery with the sectoral and occupational profile of the local labour market is critical.

Governments are using a number of mechanisms to allow local actors to tailor the sectors and occupations covered by VET programmes in their local areas. These include: i) developing a menu of choices, from which local stakeholders are able to choose; ii) allowing for local choice as long as nationally set parameters are met; and iii) market-based mechanisms, including steering through subsidies.

The market approach case often drives apprenticeship programmes as they require interest from both a trainee and a workplace sponsor. In the short term, the system ensures a reasonable degree of alignment between apprenticeship offerings and labour market demands.

Source: OECD (2016[39])Job Creation and Local Economic Development 2016http://dx.doi.org/10.1787/9789264261976-en.

A policy to upskill the labour force should also aim to prepare workers to face the changes brought by technological change. Automation would bring disruptive effects on local economies. On the upside, automation offers a path to revive productivity growth. On the downside, it can lead to large-scale job losses. The OECD (2018[40]) finds that jobs in rural regions with a lower share of service activities and low productivity face higher risks due to automation. In particular, economies with a high degree of specialisation in manufacturing, such as Outokumpu, could face important risks of job displacement, as this sector contains high proportion of repetitive tasks (Box 2.10). This scenario reinforces the need for Outokumpu municipality to make labour force upskilling a central policy in its economic plan. Furthermore, given that jobs in the service sector are less prone to suffer from automation, diversifying the economy towards high-value-added activities will help the municipality to reduce the effects of automation in the labour market. A well-prepared labour force can thus harness the benefits of automation by offering high productive services in the manufacturing and mining sectors.

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Box 2.10. Manufacturing and mining are among the top sectors at risk of automation

According to the OECD (2018[40]), mining jobs are among the top five occupations in terms of jobs at risk of automation (Table 2.7). Automation is likely to reduce the number of operational jobs in mining such as drilling, blasting, and train and truck driving. These areas typically constitute over 70% of employment in mines (Cosbey, A. et al., 2016[41]).

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Table 2.7. Top 5 occupations in terms of jobs at risk of automation

Occupation (ISCO name)

Share of jobs at high risk of automation,

average across TL2 regions (%)

Food preparation assistants

0.6

Drivers and mobile plant operators

3.5

Labourers in mining, construction, manufacturing and transport

2.2

Stationary plant and machine operators

2.6

Refuse workers and other elementary workers

0.8

Note: The table shows the five occupations that have the highest risk of automation (in descending order) as well as their share of total employment, average across TL2 regions in the sample.

Sources: OECD (2018[40]), Job Creation and Local Economic Development 2018: Preparing for the Future of Work, https://doi.org/10.1787/9789264305342-en; Cosbey, A. et al. (2016), Mining a Mirage? Reassessing the shared-value paradigm in light of the technological advances in the mining sector, http://www.iisd.org (accessed on 24 September 2018).

Strengthening strategies to attract new residents

To address the effects of the elderly population and a shrinking workforce, the municipality can attract workers to fulfil the demand for labour from established companies and create new business.

North Karelia Council has already conducted strategies to bring new residents to the region. One of the key regional policies to repopulate the territory is to use high-quality education as a tool to pull in young people and families (North Karelia Council, 2018[17]). The region’s educational offer is competitive in national comparison, in terms of quality and diversity. The region counts with the University of Eastern Finland (UEF), the Karelia University of Applied Sciences and the Riveria organisation of vocational education and a conservatory of music education. The UEF is one of the top five universities in the country and has performed well in many international university rankings (North Karelia Council, 2018[17]). It counts more than 15 000 students in its 2 main campuses of Joensuu and Kuopio. The educational institutions in the region are also connected through a network, Edupark, which offers educational packages and tailored educational programmes for students.

Both the region and the municipality can benefit from developing a trademark in quality education, specialised in some of the regional attributes. Courses on photonics and bioeconomy are gaining importance in North Karelia’s educational institutions. The region is also creating a competitive cluster in digital education and learning (Export Cluster project), which will package services to meet the needs of international students. Outokumpu should co-ordinate the municipal work on education with the former regional strategies, leading the municipality to promote vocational programmes that can complement those of large universities in Joensuu.

A comprehensive strategy to receive migrants can fill gaps in the labour force demand and boost local business in Outokumpu. The supply of workers emerging from Outokumpu’s vocational college is not is enough to meet the demand for labour in the municipality. While the vocational college in Outokumpu is conducting strategies for drawing in people from overseas (e.g. Bulgaria, Estonia, India) to fill this gap, more has to be done to increase the number of skilled workers and ensure their long-term integration with the local economy and society. OECD evidence shows that the presence of migrant communities could have a positive impact at the local level by revitalising demand for local business, balancing out local demographic losses and diversifying the cultural activities for all residents (OECD, 2018[42]). Migrants can improve the supply side of the labour market by providing skills that are scarce on the market (see the case of Solingen in Box 2.11).

A policy of migrant’s attraction can also contribute to create new companies and boost entrepreneurial levels in the hosting area. Figures from Gothenburg and Roma stresses that migrants are greater risk-takers than are native-born. In Sweden, the percentage of Swedish men who are self-employed is 4.8% but rises to 7.7% of Iranian-born and 11.4% of Syrian-born men (OECD, 2018[42]). With the right public support and training, migrants can build and grow local firms and thus leapfrog the possibility of low quality-type of entrepreneurship. For example, in a sector like tourism, migrants can leverage on their foreign language skills to play a critical role in filling labour shortages.

North Karelia and Outokumpu should evaluate the possibility to embrace further migration to boost economic and population growth. Given their knowledge of the territorial reality, local authorities are the best placed to work in partnership with different stakeholders (e.g. non-governmental organisations, businesses, citizens and migrant associations) to successfully receive and integrate the new inhabitants. Based on other regions’ experiences gathered by the OECD (2018[42]), certain actions can be further developed in North Karelia and Outokumpu to harness the economic benefits of migration and enhance the local labour market:

  • Improve the match between local labour needs and newcomers’ skills by building a locally accessible database of newcomers’ competency.

  • Fight discrimination on the labour market. Enforcement of anti-discrimination legislation in hiring and at the workplace could be made through education and support programmes for local employers or the introduction of anonymous CVs.

  • Develop strong networks with the private sector to foster migrant integration. Municipalities can support informal networking opportunities for migrants and directly provide fiscal incentives to companies that commit to hiring non-nationals.

  • Develop systems for the validation of professional qualifications by helping migrants understand which authorities they need to address to obtain the validation.

  • Encourage employment orientation services to target (skilled) migrants (Box 2.11).

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Box 2.11. Matching skilled migrants

Migrants and children of immigrants tend to have a structural disadvantage as they are less familiar with how the labour market works, including the unwritten rules about applications and social codes surrounding job interviews. In addition, online or traditional recruitment strategies might not reach newcomers due to language barriers and lack of social networks. In some cities, job orientation is one of the services available in one-stop-shops for migrant orientation. When it comes to qualified migrants, cities often put in place-targeted services to attract international skilled workers or to incentivise international students to stay after their studies. Some practical cases are:

  • Amsterdam: The city has deployed significant efforts to attract skilled migrants and has made contacts with local enterprises to this end. The city established the Expat Centre (now called IN Amsterdam – International Newcomers Amsterdam), which is a one-stop-shop for the integration of highly skilled migrants. Migrants find assistance to register and settle in the city. In collaboration with the national Ministry of Security and Justice (Immigrate and Naturalisation service [IND]), the Expat Centre helps with residence and work permits, registration with the municipality, tax questions and many other official matters.

  • Helsinki: The International House Helsinki and the At Work in Finland project focus, among others, on international skilled migrants in Helsinki, by developing services to retain international students and international skilled workers (one-stop-shop), relocation services and matching them with private companies (on demand). The city has also established the Skills Centre of Helsinki, where the city provides adult migrants with employment services and co-operation with enterprises, vocational, educational, occupational and specific language training. Since June 2016, the Skills Centre has reached over 1 000 people.

  • Solingen: The city has developed a strategy to respond to labour shortages for (elderly) healthcare. The project, “The Future of Care is Colourful” (Die Zukunft der Pflege ist bunt) aims to attract young migrants with an interest in working in this area. The municipality established an office for the counselling and the hiring of migrants as interns in this sector.

Source: OECD (2018[42])Working Together for Local Integration of Migrants and Refugeeshttp://dx.doi.org/10.1787/9789264085350-en.

Considering ageing as an opportunity

North Karelia has made of the ageing population an opportunity for development in the region. The region estimates that age can be a resource for society in a variety of ways in the future. The regional plan thus aims to create new economic opportunities for the elderly population in order to mobilise their assets. Ageing is also a strategic focus area of Karelia University of Applied Sciences, developed not only in the curriculum but also in co-operation practices with external partners (Jamsen and Kukkonen, 2015[43]).3

However, Outokumpu does not clearly embrace this long-term strategy in its municipal plan. While Outokumpu is one of the municipalities with the highest share of elderly population, the economic plan does not outline clear strategies to involve the elderly in the labour market and business development.

Supporting ageing employees to stay at work requires a combination of management training and work well-being measures. Older workers can be a means to transfer skills to younger cohorts and, with the adequate mentoring, joint work between older and younger workers can lead to the creation of new expertise and methods (Jamsen and Kukkonen, 2015[43]). In that sense, the management of the skills of employees of diverse ages is key to the extent of the usefulness of older employees.

Differentiated measures to offer a quality of life to older cohorts are also key in this strategy. For example, companies like Abloy in Finland – leading manufacturers of locks, locking systems and architectural hardware – have developed the Age Master’s programme to keep employees healthier and longer in working life. It starts when employees are 55 years of age and offers them collective education and recreation as well as ageing seminars, concerning healthy lifestyles for example, and free use of special fitness clubs. After 59 years of age, workers start to receive additional days off as long as they have carried out their personal fitness tests. The outputs following the programme’s first review showed an increase in the company’s retirement age from 59 to 62 years old (Jamsen and Kukkonen, 2015[43]).

The elderly population at retirement can also be of benefit to society. They have experience, knowledge and, often, time. They can take care of grandchildren, freeing extra time for working-age parents, engage in voluntary work or travel around the region. Including this population in overall cultural activities can also vitalise the municipalities. In Joensuu, for example, the festival Ilosaarirock started offering free tickets to people older than 60 years old; since then, the affluence of older people has increased and the festival has now increased the age threshold for free tickets to 65 years old (Laitinen et al., 2012[44]).

North Karelia experiences a number of challenges in making the most of its workforce. It includes fragmented information about skills and labour needs, a range of actors involved in regional workforce planning without effective co-ordination (Chapter 3) and a lack of an integrated vision of some long-term strategies (e.g. including the elderly population in the economy) in the municipal strategies.

To address these challenges, North Karelia needs a whole-of-government approach to link different stakeholders and levels of governments in order to implement a co-ordinated strategy that develops skills, attracts new residents and mobilises the elderly population. In fact, a key role for OECD regional governments to improve the labour market and skills is overcoming fragmentation and integrating the national and local levels through better co-ordination of service providers, municipalities and civil society actors (OECD, 2018[45]). For this, North Karelia’s regional council should establish partnerships to connect education and training providers with employers in the region. This can be done through a platform, connecting the different actors and increasing co-operation among municipalities. Business Joensuu should be the bridging actor to understand business needs and translate into policy strategies.

Promoting entrepreneurship and SMEs to unlock high-valued-added activities

New and small businesses are often a driving force of innovation and knowledge diffusion, they respond to new demands and social needs, and contribute to empowerment and inclusion in society. In the OECD area, SMEs account for 60% of total employment and generate 50% to 60% of value-added on average (OECD, 2017[46]). When the labour market does not offer enough economic opportunities for local residents, the entrepreneurial route is often an alternative way that can help to channel the benefits of this human capital into the local economy.

The promotion of SMEs is a key aspect of the development strategy for Finland. Business Finland promotes the internationalisation of SMEs through different programmes, which focus mainly on the most productive and outstanding SMEs. For example, the Green Mining programme had a goal of increasing the number of SMEs targeting the export market in the mineral cluster. It supported around 25 SMEs with their own projects on R&D (Tekes, 2015[47]).

In North Karelia, SME and entrepreneurship support is a cornerstone strategy. The region undertakes a series of programmes to boost existing SMEs and promote entrepreneurship, in particular in the smart specialisation strategic sectors: bioeconomy and metal technologies (Table 2.8). Most of the projects are funded (partially or entirely) through the EU Structural Funds. Business Joensuu is the entity in charge of implementing and co-ordinating most of the projects supporting SMEs and entrepreneurs from North Karelia Region and Outokumpu.

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Table 2.8. Selected programmes to support SMEs and entrepreneurs in North Karelia

Programme

Objective

Fund source

Export Growth – Export to Growth

Promote the growth and competitiveness of production-oriented SMEs in North Karelia by intensifying exports to Germany, Russia and Sweden.

European Union and public funding

xpertise in 2020

Gather information on training needs to improve the productivity of companies. Provide tailor-made training to enable a quality system for the company (micro and SMEs) and improve leadership.

European Union and public funding

Digital Time Training for Business Developers

Develop the digital readiness and expertise of persons and development organisations involved in business counselling. In addition, participants will be provided with tools to identify the potential for digitalisation.

European Union and public funding

Investments in Eastern Finland – Coaching programme

Support the creation of growth-oriented and internationally competitive SMEs by developing the positioning and investment conditions of foreign companies in Eastern Finland.

European Union and public funding (shared among different regions)

RARE

Increase the volume of stone business in all areas from extraction to refining, from raw materials to products through an exploration of new reserves, deployment of resources and best practices for production start-ups.

European Union and public funding

New Generation Recruitment Skills for SMEs (SMErec)

Strengthen the competitiveness of SMEs by developing companies’ recruitment expertise and thereby ensuring the success of SME recruitment. Implemented in Joensuu and Turku.

European Union and public funding

Source: Business Joensuu (n.d.[48]), Projektit, https://www.businessjoensuu.fi/tietoa-meista/projektit/.

The programmes supporting North Karelia’s SMEs are large and diverse in scope. Their focus ranges from promotion of exports through networking and the organisation of fairs (e.g. ExportGrowth – Export to Growth, RARE) to coaching and management training, business development and recruitment (e.g. Expertise 2020, SMErec).

The region is also setting up an “entrepreneur community”, through the joint work of Business Joensuu, the University of Eastern Finland and vocational education providers. For this, each educational institution involved has developed a number of programmes to develop entrepreneur skills. The initiative involves linking young people to opportunities linked to developing skills, networks and mentors, and then introducing them to business coaches (Incubator, Go Global, etc.). The region is also commencing a local small start-up fund where two-thirds of the funding will come from the national government and the rest from local investors. This initiative goes in the right direction by addressing the gaps in the local market, particularly in skills, networks and mentoring. However, this initiative risks being too focused on Joensuu and needs to build additional mechanisms that link it to small communities in the region (e.g. Outokumpu).

Overall, most of the programmes supporting SMEs and entrepreneurship in North Karelia lack incentives to engage the actors from small municipalities and end up paying greater attention to businesses established in Joensuu. Furthermore, many national programmes co-ordinated by Business Finland tend to focus on the large and more advanced companies. Business Finland’s contact with municipal companies is subordinated to the business promotion agency in the region, in this case, Business Joensuu. While, on paper, this division of tasks brings efficiency, many companies that need to be more visible and support internationally are less integrated into national programmes. Business Joensuu should thus play a proactive role in terms of linking small municipalities to regional programmes in order to support skills.

Linking SMEs entrepreneurs with local firms and international networks

Efforts to support closer interaction among small companies and large industries can lead to new business opportunities in Outokumpu. There is scope to make established companies in the municipality work closely with local businesses. Manufacturing firms in Outokumpu acquire many supplies from businesses in other municipalities or internationally. For example, Outotec only obtains 25% of its inputs from the Outokumpu area; products such as dunks and chains are sourced from other municipalities or imported. These local companies competing globally (Outotec, GTK) could further integrate local SMEs in their value chains to support internationalisation and promote a better business environment in the region. For example, as a platform for innovation (as proposed in the previous section), GTK could also support a start-up ecosystem that facilitates upgrading and related diversification of SMEs.

Furthermore, the diffusion of knowledge from the most innovative firms to other firms is an instrument to spur innovation. Linking SMEs to new markets and knowledge can lead to new businesses ideas among local companies and finding diversified sources of growth (Mitchell and O’Neill, 2016[33]). With the support of Business Joensuu, Outokumpu should enhance local and international networks for SMEs to transition toward related economic activities. Programmes to foster these links need to be complemented with a means to create interfirm ventures and linkages with foreign firms.

The example of the Windcluster in Verdal Municipality in Norway can guide the strategic plan (Box 2.12).

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Box 2.12. The relevance of local and external networks for economic transition

Verdal Windcluster Mid-Norway project

Since the 1960s, Verdal, a small industrial town in Central Norway, specialised in oil and gas (O&G) after a major Norwegian industry corporation started developing a yard for the fabrication of steel structures for the offshore O&G industry. For almost three decades, Verdal fared well and the yard grew to become a cornerstone in the region and a large industrial site in Norway. However, in 1999 and 2009, the O&G industry experienced important shocks that hit the Verdal economy.

Following the first external shock, the Aker Verdal company underwent a restructuring process that resulted in significant loss of employment. In 2000, subsidiary companies started forming in Verdal, many of them focusing on mechanical engineering and formed by previous Aker employees.

Verdal Municipality, in close co-operation with Aker, supported the transition by applying for a restructuring programme (RP) from central government to reduce the negative effects of plant downsizing and help revitalise the local economy. The programme conducted three adaptive strategies to address the issues in the Aker company and set a new industrial development path in Verdal Municipality:

  1. 1. A comprehensive training programme aimed at laid-off workers, workers at the Aker plant, and individuals who had left to work in spin-offs or other new firms.

  2. 2. Provision of entrepreneurial support and programmes to attract new (external) firms into the Verdal Industrial Park in order to diversify the local economy.

  3. 3. Development of the infrastructure at Verdal to facilitate new ventures.

In 2009, Verdal faced a second economic shock as a result of the global financial crisis. The response to this event was even more proactive than the first shock, as it was decided to support the creation of the Windcluster Mid-Norway.

The local government decided to include the development of infrastructure to promote new ventures and to facilitate sectoral agglomeration of existing firms. However, the most important feature of the second response is its focus on developing interfirm networks and extra-local linkages to new markets and knowledge sources, specifically the Windcluster Mid-Norway project. The project aimed at developing a wind-energy cluster, with an initial focus on the emerging offshore wind market.

In 2009, the local strategy was to apply for an “Arena” programme, which is financed typically for three years and aims to increase value creation in regional business environments. This external state funding was crucial for the cluster project to be launched, and it is thus evident that the top-down strategy of cluster creation in this case fitted with the bottom-up aspirations in Verdal.

Source: OECD (2018[42])Working Together for Local Integration of Migrants and Refugeeshttp://dx.doi.org/10.1787/9789264085350-en.

The expansion of the mining sector in the country could also open up new opportunities for local SMEs. New requirements for mining activities (e.g. management of waste and side streams, environmental reports, multifaceted research) and the increasing use of technology in the sector (e.g. automation and measurement and monitoring technologies) creates possibilities for SMEs (Vasara, 2018[49]). Many mining companies outsource those services to specialised firms, especially when it comes to activities that require local knowledge. For example, occupational safety and the management of safety risks are highly valued at mines and these tasks are often supported by companies with local know-how. An overall strategy for SME support is then needed to connect the demand of future business, SMEs and entrepreneurs.

Boosting entrepreneurial culture in Outokumpu

To drive entrepreneurship and SMEs’ involvement in high-value activities in the municipality, Outokumpu needs to boost the entrepreneurial culture in the community.

The relevance of industrial manufacturing in Outokumpu has hindered the formation of an entrepreneurial culture. Culture, defined as shared practices and values, has an influence on risk-taking and tolerance of failure (related to attitudes) and affects the individual’s conjectures about the desirability of the entrepreneurial action (related to opportunities) (OECD, 2017[46]). Manufacturing industries provide a large share of jobs in the municipality as well as training for employment. Many people in the area see the work in the manufacturing industry as a path to secure a sustained income in the long term. In turn, the trend of new businesses in Outokumpu is decreasing and most skilled people are going to work in other municipalities (Chapter 1). The rapid trend of an ageing population also hampers entrepreneurship as young people tend to be less risk-averse to start a new business.

Enhancing education programmes, improving information and mentoring activities as well as reducing the negative social consequences of business failure are common policies in OECD countries to boost an entrepreneurial culture (Box 2.13). Outokumpu, in joint work with the regional council, should develop an integrated policy approach to foster entrepreneurship in the area. This can include information campaigns to raise awareness about entrepreneurship (e.g. France) or providing financial support to entrepreneurs that are active or have already failed (e.g. Portugal). A cornerstone policy to promote a change towards a more entrepreneurial attitude is including entrepreneurial courses into the curriculum of educational institutions and training for employees, supporting entrepreneurship education across all disciplines, including entrepreneurship culture development (Box 2.14).

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Box 2.13. Supporting entrepreneurial culture

The entrepreneurial function is a vital component in the process of economic growth. The business environment context regulates opportunities, feasibility and desirability considerations for entrepreneurial action, as well as its outcomes. OECD countries have conducted a number of strategies to boost entrepreneurial culture. Many of those actions include improving education, promoting training and mentoring, and providing second chances.

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Table 2.9. Promoting an entrepreneurial culture: Policy developments

Policy approaches

Examples

Entrepreneurship education

Denmark

Danish Foundation for Entrepreneurship: created in 2011, following a partnership between different ministries, it aims to create a coherent national commitment to education and training in entrepreneurship and become a national knowledge centre for entrepreneurship education and training.

The Netherlands

Education and Entrepreneurship Action Programme: launched in 2007, to promote entrepreneurship in education and to bring the education sector and the business community closer together.

Education Networks Enterprise: set up in 2009 as a subsidy scheme to help educational institutions integrate entrepreneurship education into their policies, organisation and curricula.

Portugal

Strategic Programme for Entrepreneurship and Innovation 2011-15: it has introduced entrepreneurship as a transversal competency in school teaching programmes, including non-formal training. This includes the INOVA! Ideas contest, which provides young people with the opportunity to develop ideas that can contribute to the resolution of issues in their local communities.

Information, advice, coaching and mentoring

Canada

Expert Panel on Championing and Mentorship for Women Entrepreneurs: set up in the framework of the Economic Action Plan 2014, it aims to consult with business leaders and entrepreneurs and advise the Minister of Status of Women on best practices for mentorship and championing to support women entrepreneurs.

France

Entreprendre au Féminin: national plan to develop women entrepreneurship, launched in 2013, it includes initiatives that sustain entrepreneurship education and raise awareness among female students about the opportunities from the entrepreneurial career.

Second chance

European Union

Second chance for honest entrepreneurs: in order to address the stigma and consequences of business failures, the Small Business Act for Europe promotes a second chance policy by supporting actions and facilitating exchanges of best practice between member states. It includes promoting a positive attitude in society towards giving entrepreneurs a fresh start, enabling the completion of all legal procedures to wind up a business, in the case of non-fraudulent bankruptcy, within a year.

Portugal

Revitalise Programme (Programa Revitalizar): this makes it easier to save businesses, which are economically sound but facing insolvency, through financial instruments, development of an out-of-court credit restructuring system and improvements in the legal framework. The Insolvency and Corporate Recovery Code introduces an early warning mechanism that aims to facilitate timely signalling of financial difficulties.

New “pre-executive extrajudicial procedure”: gives creditors prior knowledge about the attachable assets of debtors, thus enabling better decisions on further action to be taken.

Source: OECD (2017[46]), Small, Medium, Strong. Trends in SME Performance and Business Conditions, https://dx.doi.org/10.1787/9789264275683-en.

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Box 2.14. Changing norms on society for entrepreneurship

In the past two decades, Sweden’s population has undergone a fundamental change in attitude. Entrepreneurs and small companies were often the objects of suspicion in the past. Today, many citizens dream of becoming an entrepreneur and running their own company.

An important part of this change in attitudes has been driven by the educational sector itself. As a deliberate strategy, Nutek, the national board responsible for entrepreneurship, innovation and regional development, started a programme in 1998 for entrepreneurship in school. Its goal was to increase focus on creativity in education and to change the perception that the aim of education is simply to get a job. Instead, the emphasis was placed on giving an education so that each student could shape his or her own future and even run their own business.

In the Västra Götaland region, entrepreneurship has been at the centre of development policy for 15 years. Support for organisations like Young Entrepreneurship and other organisations running programmes at every educational level has been strong and consistent. The region has also started its own programme for entrepreneurship in society, focusing on how civil servants in municipalities and other public organisations perceive entrepreneurship. One element of the programme has allowed public officials in cities to be “entrepreneurs for a day”. This experience is often an eye-opener for the participants. The programme has now been adopted by the national association for regions and municipalities and is being implemented in 160 of Sweden’s 290 municipalities.

This focus on entrepreneurship has clearly paid off. Västra Götaland today has the highest proportion of young people in Sweden who say that they can envisage becoming entrepreneurs or starting a company. This is a remarkable change in a region known as Sweden’s manufacturing “district”. Three out of 4 inhabitants between the ages of 18 and 30 in Västra Götaland report that they could see themselves running a company. The Swedish average is two out of three.

Source: Adapted from OECD (2016[50])OECD Territorial Reviews: Bergamo, Italyhttps://dx.doi.org/10.1787/9789264251984-en.

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Notes

← 1. Natural metal concentrates found in the bedrock are called mineral deposits. If the deposit can be utilised in an economically viable manner it is referred to as ore.

← 2. The European Raw Materials Strategy defined 14 critical raw materials based on the risks of supply shortage and their impacts on the economy. Though Finland is not a main producer of any of those, it has potential in cobalt.

← 3. The focus on ageing is prominent in the university’s research and innovation strategies, which is developing a service and learning environment, called Viomala, with the aim to provide a common development structure for students, older people and external partners.

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Chapter 2. Towards a sustainable development in Outokumpu and North Karelia