Speech at a Ministerial Meeting in conjunction with North Atlantic Forum.

9/25/00

Valgerdur Sverrisdottir,
Minister of Industry and Commerce

Dear colleges.
In this presentation I intend to touch on the following two subjects:

1. The challenges of Regional Development,
and the importance of:
2. Scientific Co-operation and Technology Diffusion Policy

The challenges of Regional Development

Outmigration from the Icelandic countryside and provincial towns to the capital area is becoming a serious problem in Iceland. In the present decade migration to the capital area has gradually been increasing and is currently the highest in the Nordic countries. Simultaneously, employment in the rural areas has reduced, especially in agriculture and the fishing industry.

The highest outmigration numbers are seen in the Vestfjords, accounting for about 20% of the district population in the ten-year period 1987-1997. Next in line is northwestern Iceland and the southeastern fjords with between 12 and 20% of the district population. The only areas that show increased population are the capital area and the areas south of it.

The young people account for most of the migrates. It is the age groups in their twenties, i.e. those most needed to carry on the economic activity, and this makes the situation even worse.

Reduction in economic activity has followed the same pattern

Beside the fact that the economy has been booming in the capital area the main cause for the migration is that employment in both agriculture and fishing has been reduced with improved farming techniques as well as improved fishing and fish processing techniques in the favor of fully processing the catch on board. This has resulted in that the need for the existing factories and labor force in the rural communities close to the fishing banks is much less than before.

Another cause, for the outmigration from the rural areas, is the increased share of knowledge in manufacturing. The fishing industry is a far cry from what it used to be. In the past years various jobs have been created in knowledge- based spin-off industries connected to manufacturing, technological development, education, marketing etc. It is now estimated that only 20% of the value added of a product lies in the manufacturing itself, while as much as 80% lies in knowledge industry connected to it. These knowledge-based jobs tend to move to the capital area.

The main political challenge that I am presently faced with is how to turn this development around. The conventional way of pouring more and more capital into these regions in order to support the local firms has no permanent value.

With continuously increased GDP it is clear that the traditional industries agriculture and fisheries will gradually contribute relatively less and less to the national economy. These industries will probably be able to increase their gross value in face with new technologies, but they will not be capable of creating new jobs in the provincial towns to any considerable extent.

For revival of the rural economy a new approach is required.

The new approach must be a fresh start from the bottom up with effective transfer of new knowledge to these regions. Improved education is the first priority and all have to accept that live-long-learning has become a fact of life. The regions have to become active participants in the new economy were knowledge and highly skilled workforce is a key factor in the economic development. We must however keep in mind that qualified labor is also more demanding regarding residential factors such as access to educational, opportunities for their children, cultural activities and other spare time activities.

Science and Technology Co-operation and Technology Diffusion Policy

The revival of the rural communities must be an integral part of the national Innovation Policy. Time does not allow me to discuss our Innovation Policy but I can not but mention one part of it, which is frequently referred to as the Technology Diffusion Policy.

The Technology Diffusion Policy is about efforts aimed at transforming scientific and technical knowledge into new competitive market products.

It is clear that scientific knowledge is of rather limited value for the economic development if there is no practical use for it.

The scientific performance of the Icelanders is very good in any international comparison. We, as many other economies, do however have need for more scientific and technological knowledge than we can provide ourselves - on our own. Scientific co-operation with others nations have over the years been of major value for us. This co-operation has primarily been on the Nordic level and since 1993 also within EU}s Framework program for Scientific Cooperation.

Based on our experience, especially from EU}s Framework Program, it is quite clear that a small economy as ours can contribute relatively more, and in the same manner gain relatively more, than many of the larger economies.

As my closing remarks I want to summarize by saying that the revival of the rural communities must be based on a new approach where transfer of new knowledge to the rural areas plays the key role. The knowledge will eventually be technology based in order to make the creation of new and better paying jobs possible. But as new scientific knowledge is not created by it self all of this has to be keyed to a cross border scientific and technological co-operation.