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«Sub-National Island Jurisdictions as Configurations of Jurisdictional Powers and Economic Capacity: Nordic Experiences from Åland, Faroes and ...»

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The identification of a core competency requires both historical and longitudinal perspectives. A core competency is not developed overnight. Significant to its identification is a (more or less visible) existence of divergent (but still related) economic branches (industries and firms) that thrive from an association with the core competency.

The more solid and robust these branches, the stronger the core competency; the greater the number of identifiable branches, the stronger the innovative capacity of the core competency (Karlsson, 2007a). Innovative capacity refers to a pro-active and creative exploitation of various resources; the key resource being the core competency itself (ibid.).

Innovative capacity is an essential element of gaining and maintaining competitive advantage. Small economies are, in this gaining and maintaining endeavour, critically dependent upon their differentiation skills (economies of scope). However, they rarely have the resources necessary to develop sophisticated research and development (R&D) systems. Instead, innovation by imitation is a much more preferred, and successful, strategy (ibid.). Being inspired by new ideas abroad, bringing them safely home and adapting them to the conditions of the local context is what the innovative behaviour of a

small island society is often about. The local entrepreneur is often a cosmopolitan:

scrutinizing, converting and translating ideas from abroad into local products and services which can be offered to various markets, among them those markets from which the ideas were originally borrowed.

Also central to the economic capacity of a SNIJ is the human capital factor (Kitson et al., 2004). A core competency cannot be maintained without unique skills and without a dynamic learning capacity. The existence of a core competency is equivalent to many people sharing a certain (competitive) knowledge (Karlsson, 2007a; 2007b). The diffusion of critical knowledge is therefore crucial if a core competency is to survive over time. This is not just a question of the formal educational system but also one of everyday knowledge and cultural transmission (Asheim, 2004). Still, the formal educational system may have much to contribute. Educating young people at home is likely to reduce the risk of losing them. It also means that the identity element of a core competency can be maintained and strengthened (Karlsson, 2007a; 2007b).

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The Three Nordic SNIJs – Jurisdictional Powers and Economic Capacity at Work The three Nordic SNIJs, the subjects of this study, exhibit both similar and dissimilar features. The following table offers some general data (Table 1).

Table 1 - Åland Islands, Faroe Islands and Greenland: General Data.

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Source: Karlsson et al. (2009:118-121).

The Case of Åland: Delimited Jurisdictional Powers and Strong Economic Capacity Jurisdictional powers Åland has, since 1921, enjoyed Home Rule within the Republic of Finland. Åland was, and still is, Swedish: in language, culture and identity. Formerly, Åland and Finland constituted the Eastern part of the Swedish Realm from the 10th century and up until 1809. The Eastern part of the realm was then lost to Russia and became a Grand Duchy within the Russian Empire. The Russian revolution in 1917 and Finland´s subsequent declaration of independence mobilized the Ålanders who, at that time, were experiencing a real threat to their Swedish identity. An unofficial referendum, held in 1919, clearly revealed the wish of the population of Åland: a reunion with Sweden. Contrary to this, the League of Nations – assigned to solve the so-called “Åland question” – decided that Åland should remain part of Finland but with a certain degree of autonomy (Barros, 1968).

The Autonomy Act of Åland guarantees the preservation of the Swedish language and the Swedish culture but gives the Ålanders a very restricted influence over economic issues (Lindstrom, 1997; 2001; Karlsson, 2007a). The Act has been revised twice, in 1953 and 1979, but Åland has still not, except on the municipal level, a taxation competency of its own. The Ålanders pay their state tax to Finland. Annually, 0.45 % of the total revenues of the state of Finland (except loans) are paid back to Åland as a lump sum. The revenues of the community of Åland are, consequently, not controlled by the Home Rule authorities.

144 Åland, Faroes and Greenland as Sub-National Island Jurisdictions

The de jure jurisdictional powers are delimited especially if one is to compare with other autonomies around the world (Lindstrom, 2000; Watts, 2008). Compared to the constitutional status of the Faroe Islands and Greenland, that of Åland has been rather static. The two revisions that have been made have not contributed significantly either to a political or to an economic dynamism. They have not meaningfully strengthened the de jure jurisdictional powers of Åland. Politics is basically the same and the politicians have had few opportunities to learn a more sophisticated type of policy.

The Parliament of Åland (Lagtinget) has legislative competences within areas such as education, culture and the preservation of old monuments, health and medical services, environment protection, promotion of industry, internal communications, municipal administration, police services, the postal services and radio/TV broadcasting. The laws of the state of Finland regulate foreign affairs, civil and penal law, courts of justice and, as mentioned, customs and taxation. Åland has the right to elect its own member to the Parliament of Finland, but is not represented on the EU Parliament. Furthermore, Åland is a neutral and de-militarized zone which means that no armed forces or fortifications are allowed on the islands. A special feature of the Home Rule of Åland is the right of domicile - a right which is necessary to possess if one is to acquire land or property, run a business or even vote in general elections. The right of domicile is naturally possessed by Ålanders born in the islands. Foreigners living in the islands may apply for this right, but only after five years of permanent residence. Consequently, the ownership of land and water is altogether an issue of the Åland government (Landskapsregeringen).

The very idea of a partnership (Baldacchino & Milne, 2008a) which prevails in today´s debate on multi-level governance (Bache & Flinders, 2004) is not much discussed in either Helsinki or Mariehamn. The Ålandic relationship with Finnish authorities has, from time to time, been rather strained: a number of disputes concerning territorial, economic and cultural issues have occurred. An ongoing dispute concerns the Ålanders´ very right to communicate with Finnish authorities in their own language: Swedish. “Guarding and protecting the autonomy” has become the predominant attitude taken by the political system of Åland (Karlsson, 2007a).

An ongoing dispute concerns the representation of Åland in the Parliament of the European Union. As was mentioned earlier, Åland does not have an EU representative of its own but is represented by Finland. Two recent decisions of the EU Parliament in particular, most unpopular among Ålanders, concern the abolition of the (for many decades almost sacred) spring aquatic bird shooting, and the consumption of snuff (economically, a very important tax free sales product of the ferry industry of Åland). These decisions have mobilized the Ålanders in a struggle for a parliamentary seat of their own. Finland has – by referring to the size of the nation of Finland, the limited number of seats that Finland holds in the EU Parliament, and the small population of Åland – refused to seriously consider this matter.

However, when the ratification of the Treaty of Lisbon came to the fore, the Parliament of Åland – in its negotiations with Finland - threatened not to ratify it. Whether such a refusal by the Åland Parliament actually could affect the overall process of ratification became an issue, even in some European newspapers. It appeared that the status of the Parliament of Åland, relative to the status of the Parliament of Finland, was not absolutely clear; and

145A. Karlsson

Finland, frustrated by the obstinacy of the Ålanders, even suggested that it might somehow exclude Åland from the EU. This dispute, however, came to an end late in 2009 when the Self-Government Policy Committee (Självstyrelsepolitiska Nämnden) of the Parliament of Åland voted in favour of ratifying the Lisbon Treaty. In the process, the Ålanders were granted the right to speak in matters concerning Åland in the EU Court. Still, the issue of an EU parliamentary seat has a high priority among the Ålanders and will, probably, be activated anew should another unpopular EU parliamentary decision be taken.

If one considers demanding processes like these in the context of the relationship between Åland and Finland, the de facto jurisdictional powers cannot be regarded as a significant resource to the benefit of Åland’s economy (Lindström, 2001; Karlsson, 2007a).

Economic capacity

The economy of Åland has, historically, been strong and stable compared with other regions of similar status (Ackrén, 2005; Baldacchino, 2006). At the core of its strong economic capacity is a core competency based upon nautical, technical, logistical and shipping management skills which has been nurtured for over 700 years. The shipping industry has, at its height, represented more than 50 % of the Åland GDP and has, through continual spinoffs, created the largest maritime cluster of the Northern Baltic (Lindström, 2002).

The shipping industry has demonstrated excellent adaptation skills and innovative capacity over time and has come to operate, successfully, in various segments of the international transport market. Many a successful business concept has been imported from abroad (Kåhre & Kåhre, 1988; Tudéer, 1993; Harberg, 1995). The diversity of the industry has had a profound impact on its steady progress during the last 150 years. Smaller, maritime shipping companies operating over shorter distances have come to operate alongside bigger tanker and ferry companies. This diversity has balanced contradictory business cycles and contributed to the ability of the shipping industry to maintain its leading role within the economic life of Åland (Lindström, 2002; Karlsson, 2007a).

Of course, the maritime cluster of Åland has not been able to avoid the recessions that periodically challenge the international shipping industry. Over 1975-1985, the shipping industry of Åland went through a dramatic structural change that left the fleet much reduced in number (Harberg, 1995). Simultaneously, prominent ship owners moved their fleets to such countries as Bahamas, Bermuda and Cyprus. The drastic down-turn of the merchant fleet was, however, balanced by the up-turn of the ferry traffic – now the cornerstone of the shipping industry of Åland. The business concept that developed the ferry industry was borrowed from abroad (more precisely, from the Channel) and adapted to the conditions of the Baltic (Svensson, 1986). Innovation by imitation has been a preferred strategy and the cosmopolitan attitude that lies behind it has come naturally to the entrepreneurs of this shipping milieu (Kåhre & Kåhre, 1988).

Åland society has, for a long time, been a truly maritime community. The maritime core competency has even been the carrier of a seafarer identity that, for more than a 100 years,

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was practically taken for granted (Kåhre & Kåhre, 1988). The Ålanders were, after all, seafarers. From the 1860s and up until the First World War, ownership of the shipping companies was widely dispersed. Almost every family had at least some shares in the many companies that had not only Mariehamn but also some minor municipalities as their headquarters (Papp, 1971). This fostered a widespread and diffuse knowledge of shipping and shipping management. There was also never a shortage of financial capital and the financial risks were secure. The first Ålandic bank was established in 1919 and the first marine insurance company was set up in 1938. With these two service providers, the maritime cluster began to grow (Lindström, 2002).

The (marine) insurance and finance companies are even today, together with a growing number of IT-companies, those that contribute most to the growth of the economy of Åland (ÅSUB, 2009). They are servicing both the Ålandic and some Nordic/European markets and have an extended internationalization as a prime strategic goal. Other service providers such as consultancy firms focusing upon security and transport efficiency (logistics) have been established. Tourism and trade have benefitted from the efficient transportation facilities that the ferry companies provide, and those wholesale companies that offer tax-free products that are essential in upholding the ferry traffic between Sweden and Finland have flourished (ibid.). The educational system has developed close to the core of the maritime cluster and produced seafarers in great demand by the international shipping industry for almost 100 years (Harberg, 1995).

This success story of the Ålandic shipping industry – and consequently of the economy of Åland – has in recent years, however, become more problematic. A fiercer competition coming from shipping companies operating in more favourable institutional settings – in The Netherlands, Belgium and Germany – has challenged the Ålandic merchant fleet’s market share. Contrary to the recommendations of the EU Commission (2003, 2004), Finland – with the taxation instrument in its hands – has not prioritized shipping among its industrial policies (Karlsson, 2007c). The tonnage tax, today a natural policy measure in many EU countries with maritime interests, is still only (reluctantly) discussed by the policy-makers of Finland. This laggard attitude has had a negative impact upon the renewal of the Åland merchant fleet, as well as upon the entrepreneurial climate within its shipping cluster: its youngest shipping company is now more than 30 years old.

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