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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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Just as serious a strategic challenge to the shipping industry is the problem of the recruitment of personnel. With the ongoing dissolution of the maritime cluster identity (Lindström et al., 2009) the attractiveness of the industry is declining among young people in the region. An expansion of the industry, as one would expect to find in the light of the growing transportation market of the Baltic, is thus hindered. The educational system is constantly under fire from the industry and conflicts between the educational system and the shipping companies, not observable in the past, are separating the two former cluster partners. The industry, thus, prefers personnel with hands-on knowledge and emphasizes educational programs that are skill-based with more practical ‘learning-by-doing’ while the educational system stresses international standards and more theoretical knowledge.

147A. Karlsson

A third problem to the Åland economy is the moving out of parts of the ferry fleet from Finland to Sweden. This strategic move, motivated by cost efficiency reasons, negatively affects the economies of the 16 municipalities of Åland. The government and the parliament of Åland can do little to prevent this development since they do not have the necessary competencies or political instruments (Karlsson, 2007c). Lobbying with Helsinki – for the sake of the Åland shipping industry – has, so far, proved unsuccessful.

Jurisdictional powers and economic capacity – problematic interrelations and an imperfect match The strategic challenges presently confronting the Åland economy clearly reveal the deficiencies of the “jurisdictional tool box”. The question is: can Åland rely solely upon its existing relations with Finland in order to protect the core of its economy - the shipping industry? Or has the time come to revise The Autonomy Act, with a view to expand the political room of manoeuvre, and so reducing the threats to the economy? The political culture of Åland is loath to struggle for a strengthening of the regional jurisdictional powers. Home Rule authorities have, historically, been reluctant to interfere with the business sector: maybe because they have not had the relevant institutional instruments in their hands. One might even say that in the past there has not been any particular need for an economic policy: the shipping cluster has carried the economy of Åland. The situation today is different and challenges the local political culture. Is the Åland political system ready to assume “a senior partner role” in the development of the Åland economy? That would certainly require some kind of development, of a kind that the jurisdictional system of the past has not produced. Being static, rather than dynamic, the Home Rule Act has not fostered that political entrepreneurship that is now seriously required.

The Case of the Faroe Islands: Strong Jurisdictional Powers and Strong Economic Capacity Jurisdictional powers The Home Rule Act of the Faroe Islands is of a younger date than Åland’s Act. In 1948, and in the aftermath of the Second World War, the time had come to formally manifest the long discussed autonomy of the Faroese people. The war years were, as many analysts have noted, among the most successful in the history of the islands. Isolated from Denmark (which was occupied by Germany during the Second World War), the islands (then occupied by Britain) had to take care of their own administration and handle their own affairs. A new political and business entrepreneurship emerged. When the war came to an end the Faroese people could rightfully claim “we can do it” (Hoydal, 2000; Debes, 2001).

This national self-confidence has since been maintained, and even strengthened, by both the upheavals and the recessions of the economy.

The Home Rule Act of the Faroe Islands has, from its very beginning, possessed an in-built dynamism. This means that the local legislative assembly (Logting) has been able to take over the responsibility of some agreed upon (and listed) legislative areas from the state of Denmark on a continual basis. The very idea behind the development of the Faroese

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

autonomy is that “those who decide should pay”, meaning “you decide when you can afford it” (Debes, 2001). This means that the Faroe Islands already controlled their own revenues in 1948: municipal as well as national taxes. It also means that those administrative areas that are financially burdensome are those that have been left in the hands of the Danish Realm: for example, the health care system (the responsibility for which was not taken over until 1977) and the educational system (which, with a few exceptions, remained ‘Danish’ until 2002) (Karlsson, 2007b).

The legislative and administrative areas that were to be “automatically” transferable (by a sole decision by the Faroese parliament) were, in 1948, listed on the so-called A-list, an appendix to the Home Rule Act while those that would require negotiations between the parliament of Denmark and that of the Faroe Islands were listed on the B-list. Legislative and administrative areas that would remain, exclusively, in the hands of the state of Denmark were: foreign policy, monetary policy, civil and penal laws and national security and defence (Lyck, 1997).

Over the years, new areas have been added to the A-list in revised versions of the Home Rule Act. As late as 2005, 25 new areas were listed. When all these are finally transferred to the administration of the Faroese authorities, the Faroe Islands might be said to stand on the threshold of sovereignty (Ackrén, 2006). The de jure jurisdictional powers are, no doubt, strong and they have been gradually strengthened.

The overall responsibility of certain policy areas of the administration of the Faroe Islands is shared by Torshavn and Copenhagen. In praxis, however, the state of Denmark exerts a minimum of influence over administrative areas that even legally belong to Copenhagen.

Annually, a generous monetary lump sum is transferred from Denmark to the Faroe Islands to cover the Danish part of those expenditures over which there is a mutual responsibility (Statistics Faroe Islands, 2006). The way this system operates strengthens the de facto jurisdictional powers of the Faroese (Karlsson, 2007b).

The pragmatism (Baldacchino & Milne, 2008a) that, in general, permeates Denmark´s relationship with the Faroe Islands is seen particularly in foreign policy. Although foreign policy is, formally, an exclusive Danish responsibility, in practice, the Faroe Islands run a foreign office of their own. They are represented in a number of North Atlantic Fishery Associations and have been given the right to sign their own bi-lateral fishery agreements.

When it comes to multi-lateral agreements, Denmark is the signing authority but a Faroese representative is present at the occasion of signing (Statistics Faroe Islands, 2006).

Furthermore, the Faroe Islands have their own “embassies” in Brussels and in Reykjavik and an attaché in London. The Faroese flag flies outside these “embassy” buildings.

Although the relationship between Denmark and the Faroese Islands has been challenged on several occasions over their (long) mutual history (Harhoff, 1993; Debes, 2001), the partnership has overall been beneficial to the Faroe Islands – and not only financially. The logic underlying the gradual transfer of legislative and administrative competencies is one that also fosters political entrepreneurship and administrative knowledge. Gradually, the political élite of the islands has come to accumulate a stock of critical knowledge which

149A. Karlsson

has also strengthened their self-confidence (Karlsson, 2007b). This knowledge, and the accompanying self-confidence, has been essential to the political entrepreneurship that, during the last 10 years, has come to play a significant role in the economic development of the Faroe Islands. A combination of de jure and de facto jurisdictional powers has had a positive effect upon the economic performance of the islands (ibid.).

Economic capacity

Like that of Åland, the economy of the Faroe Islands is strongly based around the sea. The Faroese are not, however, primarily seafarers but fishers (even though their seafarer competencies should not be ignored). The fishery cluster started to develop in the middle of the 19th century when a long lasting Danish trade monopoly was abolished and the Faroese were liberated from a quasi-feudal system binding them to farming (Olafsson, 2000). From then on, an economic capacity – remarkable for a seemingly isolated part of the Northern Atlantic – has continued to develop; today, the Faroe Islands are on the top of the economic Nordic autonomy list (Nordic Statistical Yearbook, 2006). The Faroe Islands have, in fact, never – despite their geographical position – been isolated. A cosmopolitan attitude continues to permeate Faroese society and many a good idea has come from abroad; the Shetlands, historically, being a particular inspirer (West, 1972; Debes, 2001).

The economic capacity of the Faroe Islands began to take shape in the 1860s (Olafsson, 2000). A core competency was developed which made the Faroe Islands, just in a few years time, an important exporter of fish products (mainly dried and salted cod) to European markets. The early fishery industry was mainly coastal and based on various banks outside the archipelago (West, 1972; Debes, 2001). The boats and the techniques at hand hindered the development of a more lucrative deep-sea fishery. But in 1871, a Faroese fishery company bought its first (second hand) sloop from the Shetlands and after that a fishery industry started to develop. With these bigger ships the attractive waters of Iceland and Greenland became accessible and a growing number of Faroese joined the annual expeditions to these waters. New and more efficient techniques were developed, resulting in a fishery competency developing into a core competency. A professional identity (the identity of being a fisher) became a national identity - the Faroe Islands became a nation of fishers (Hoydal, 2000) which furthered the diffusion of knowledge in the Faroese community. The recruitment of personnel was an easy task and it was a natural choice for young Faroese to join the fishery fleet (West, 1972).

Over the last 150 years, the fishery industry has become more differentiated and has come to include the whole value chain (Morkore, 1993; Olafsson, 2000). The processing of fish products is, of course, a more lucrative business than just selling raw fish and the fillet factories soon came to play a major role in adding value to the fish products. The finance and service providing sectors developed as well and gradually – in the middle of the 20th century – a cluster was formed (Karlsson, 2007b).

The economy of the Faroe Islands is highly dependent upon its exports. Well over 90% of what is produced on the islands is sold on international markets (Statistics Faroe Islands, 2006). This dependency, of course, makes the economy vulnerable in more than one sense.

–  –  –

International competition is fierce and prices are regularly changing. The flexibility of the production system is crucial to the profitability of the fishery industry as well as to its cluster partners. Building that flexibility has not been an easy task. Investments in trawlers and factories represent a heavy financial burden and running them smoothly and efficiently is critical to profitability. For a political system that traditionally has played a “senior partner” role – such as that of the Faroe Islands – it is natural to intervene when things do not run smoothly. This was the case in the 1990s when the bank crisis of the Faroe Islands became front page news all over the world. That crisis, however, proved to be an important period of learning for both the political and industrial élites of the islands.

The crisis started with the nationalization of the seas in the 1970s (Hoydal, 2000; Debes, 2001). An important consequence of the nationalization policy was that the free fishery on the world seas was prohibited. Free fishery quotas were only allowed inside a 200 nautical mile zone – quotas that were up to the nations to decide. For the deep-sea fishery fleet of the Faroe Islands, this meant returning home to coastal waters where a fierce competition arose. Conflicts between the small, regionally based fishery companies and the big, internationally oriented corporations became regular and the authorities tried to solve some of them by a generous subsidy policy. The Home Rule authorities became the guarantors for an increasing number of private loans that were taken at home and abroad. The fishery fleet became more and more efficient (and internationally competitive) but then, practically overnight, the cod disappeared from Faroese waters. By far the most important export product, the disappearance of the cod proved to be a disaster. The fishery fleet had a huge over-capacity and the loans that had built that fleet could not be re-paid. The fisheries and the fillet factories started to go bankrupt. At that time the Faroese authorities totally lost control over the subsidy system. The crisis turned into a bank crisis and then into a national disaster. Denmark, concerned with its international reputation, lent the Faroese Home Rule authorities huge sums of money resulting in a Faroese debt of 7,300 million DKK (US$1.4bn) (or 167,000 DKK - US$32,000 per Faroese) to Denmark (Hoydal, 2000). In 1992, the Home Rule authorities were put under the administration of the government of Denmark; for the first time, Denmark used its legal rights to recall the autonomy given to the Faroe Islands in 1948.

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