Red tape still greatest challenge for business in Baltic Sea region

Nov 25, 2004

Bureaucracy is the greatest day-to-day problem and a major challenge for both efficient and comprehensive business cooperation in the Baltic Sea region, a survey conducted among participants at this year's Baltic Development Forum summit in Hamburg and released this week has shown.

The sixth annual Baltic Development Forum summit drew more than 400 regional and extra-regional decision makers representing the business community, political groups and public administration, as well as leaders from innovation agencies, research institutions and the media. During the summit they were asked to respond to the question on the three greatest problems in the Baltic Sea region problems.

The delegates mentioned bureaucracy (60 percent), cultural barriers (32 percent) and lack of complete implementation of EU legislation (24 percent) as the biggest obstacles to more extensive business cooperation in the region.

When asked about the three biggest challenges for the Baltic Sea countries in the next three years, participants mentioned the initiation of new clusters (38 percent), bureaucracy (38 percent), corruption (36 percent) and realization of the EU's single market (28 percent).

However, surprisingly few participants found taxes and duties to be an important barrier to cooperation, and no responses mentioned company tax among the region's greatest problems. Less than 6 percent saw tax as an important barrier to cooperation.

"The result certainly wasn't unpredictable. The new and successful businesses in the Baltics, as well as Russia and Poland, demand a political environment with a strong anti-corruption commitment and no bureaucracy - just like Scandinavian and German businesses,"Chairman of the Baltic Development Forum Uffe Ellemann-Jensen said.

Hubert Mandery, senior vice president of the BASF conglomerate who participated as speaker during the summit, mentioned the continuing problem with bureaucracy in his address during the summit in Hamburg. "Less bureaucracy and better regulations - not more regulations - are a must," he said.

Carl Cederschiold, high representative of the mayor of Stockholm, echoed the sentiment. Cederschiold, who during the summit in Hamburg announced Stockholm as the venue for the 2005 summit, pointed out that distorting subsidies, cumbersome bureaucracy and high taxes remained the main challenges for the region. "They curb incentives for innovation," he said.

Uffe Ellemann-Jensen, who is also a former foreign minister of Denmark, agreed. "Challenges remain, and if we fail to organize coordinated regional action, the challenges might just be too high for anyone to overcome," he said. "The companies currently located in the region would eventually downgrade their involvement in the region relative to their activities to gain a stronger foothold in other parts of the world."

The Baltic Development Forum is currently preparing a joint initiative called The Baltic Sea Initiative 2010. The initiative is to unlock the benefits of regional cooperation and sets specific goals for what the Baltic Sea region aims to achieve in the new era that the region has entered. The Baltic Sea Initiative 2010 will be the basis for discussions at next year's Baltic Development Forum summit in Stockholm on Oct. 16-18, which will be coorganized with the Swedish Agency for Innovation Systems, VINNOVA.

"The initiative will be linked closely to the European Union's Lisbon Strategy. I expect the initiative to reinforce the impact of the Lisbon reforms in the Baltic Sea countries and to widen the knowledge of the region globally," said Uffe Ellemann-Jensen.

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