EFFICIENCY OF TOURISM PROJECTS 
IN THE OBJECTIVE 6 AREA IN SWEDEN 
- AN INITIAL APPROACH

1. Problem

1.1 Negative development

During the 1990’s we have witnessed a rapidly growing exodus from the countryside in Sweden, especially from the already sparsely populated areas of the interior of central and northern parts of the country. It is a situation resembling what took place in the 50’s and 60’s, but with one important exception: During these decades Sweden experienced an economic boom with GNP-figures growing by 3-5% per year. The driving force behind the migratory forces were then an overheated labour market in both the private and public sectors in the major urban areas and a shrinking primary industry (agriculture as well as forestry) in the countryside. The pull effect was evident and the state was encouraging the migration to the larger cities by financing an expansion of public housing there (+ 1 000 000 units in a 10-year period). New suburbs grew up mainly around Stockholm, Göteborg and Malmö.

Today, economic growth is much more modest. It was even negative in the early 90’s. Migration now takes place because of a smaller and restructured labour market, not least due to cut-downs in the public sector all over the country. There is a push effect which is creating a very difficult situation for many regions, whose population base is falling rapidly. Since local income-taxes are the financial backbone of public services in the communities, selective out-migration of economically active people creates less tax-incomes which forces the local areas to cut services, public investment and employment. The negative spiral is in full force.

Like in many other parts of rural Europe the solution to this dilemma has been sought in support for SME’s, both existing ones and in incentives to start new small and medium-sized enterprises. 

Looking at recent regional development theory for marginal areas there seems to be a strong consensus about the need for a local area to mobilise it’s resources, to diversify industry, to reach economies of scope by flexible production and to try to operate as a territorial enterprise (see e.g. Cappelin 1992, Saraceno 1997). These advise are in contrast to earlier recipies which focused on economies of scale as growth-inducing instruments.
 

1.2 Tourism and marginal areas

The basic question in this project concerns whether tourism as a local, resource-based industry has the propensities to act as one of these flexible and uniting territorial industries, or if small-scale tourism industry has draw-backs which makes it unsuitable as a long-term basic industry for otherwise marginal production and population areas.

Apparently, the positive approach has been taken in many parts of Europe, as there are, literally, thousands of tourism projects looked upon as potential job-creators. All of the EU Structural Funds, including the Special Initiatives (LEADER, INTERREG etc) support tourism projects in the countryside. This is also the case for the EU Objective 6 area, which this project will look into more closely. 
 

2. The Objective 6 area

2.1 Basic facts

The Objective 6 area was introduced when Sweden, Finland and Norway became candidates to join the EU in the early 90’s. Large parts of these countries are extremely sparsely populated, with a topography and climate unsuitable for large-scale agricultural production and with a problematic accessibility due to considerable distances to the population centres. 

In other respects the general socio-economic problems in these areas are very similar to those in the EU Objective 1 areas - high unemployment levels, declining industries, ageing populations etc - but the economic situation, measured as GNP/capita, does not fit the Objective 1 criterium of being below 75% of the EU average. 

The criterium for delimitation for this special support area was based on a population density of less than 8 inhabitants/sq. km. Since Norway voted against EU membership in their referendum, only Finland and Sweden has access to Objective 6 support programmes. 

The Objective 6 area covers 50% of the area of Sweden (see map), but with only 5% (434 000) of the total population. There are 13 towns with more than 5 000 inhabitants, but only 2 (Östersund and Kiruna) with more than 20 000. Since the 60’s the area has lost 20% of its population and today this loss is accelerating rapidly. The average density is only 2.

In administrative terms the area consists of parts of 7 provinces (counties) and parts of 43 communes. Only one county is wholly included (Jämtland) while 37 of the communes have their whole area within this support zone. All of these communes are situated in the interior. The coastal area with the majority of the population of central and northern Sweden is outside. Also the coast suffers from unemployment and out-migration and the Swedish government has indicated that in the Agenda 2000 discussion on new regional support areas, the Objective 6 area should be extended to include also the coastal areas and as such included in the new Objective 1 area. 

16% of the area consists of mountains and 50% is forested. These landscape resources have been and are still very important for future productive use. The area has a lot of rivers and lakes and it is the major national producer of hydroelectric power. The environmental situation is good, although acid precipitation affects lakes and forests, mainly in the southern parts. Agriculture is dominated by small-scale holdings, often run on a part time basis, and a majority of the forested area is owned by some large companies with pulp and paper industries + saw mills outside the area.

Within the area forestry products are used to manufacture building material, wooden floors and furniture. There is competition for the forest resources between the smaller local firms and the larger export-oriented industries along the coast.

GNP/capita is 86% of the national figure, which, in turn, is slightly below (98%) the EU average. Public sector employment is 40% (70 000 employees, 3 out of 4 female) of the economically active population (34% nationally) and emplyment in agriculture is 3% (4%). All industries are dominated by small-scale enterprises. 94% of the firms have less than 10 employees. The mining industry has halved the number of employees since 1975 and the figure now is 4 500. Private services have 25 000 people employed and tourism industry has 52 000 beds in the area. (SPD Rev. 20/7/98).
 

2.2 Population situation

Small firms with mainly local markets are particularly sensitive to population decline. During most part of the 90’s public sector employment has been cut down, due to budget problems on all levels (state, province, commune) in the whole country, including the Objective 6 area. Service employment has suffered, both industry and private services, as public and private consumption has declined. This situation is today (1998) even more aggravated. During 1998 over 200 of the 289 Swedish communes experienced an absolute population decline and all communes in the Objective 6 area had negative population changes. Very low birth rates combined with net outmigration are pushing most communes towards critical thresholds for public and private services. The winners in this restructuring of the labour market are the densely populated areas in the south central and southern parts of Sweden, but there has also been some emigration to other countries. For the Objective 6 area Norway has been an attractive alternative, especially for people made redundant in the health care sector, where Swedish cuts have been met by a Norwegian labour market deficit. The Nordic countries have since the early 50’s a completely deregulated labour market between themselves, so there is very little bureaucracy involved in moving across the border, even to the non-EU country of Norway. 

Unemployment is for Sweden as a whole around 10% and for the Objective 6 area around 15%
 

3. Strategies for development

3.1 SWOT-aspects

The predominant problems identified for the Objective 6 area can be summarised as:

- peripherality
- negative population change leading to an unbalanced age and sex 
  distribution
- small local markets
- dependency on public sector employment
- dependency on state subsidies to the communities and to the 
  unemployed/underemployed

In the ususal SWOT-analysis for the SPD the main strengths considered are the rich natural resources and the unspoiled environment. Forests, hydroelectric power production and the ore deposits are used by a modern, flexible and competitive national manufacturing industry already, through the structural readjustment process so characteristic of the 90’s. The area will thus continue to be a major source for raw materials dependent on a positive development of the international competitiveness of Swedish industry outside the area itself.

Weaknesses include low physical accessibility (high transport costs) and the unfavourable population structure.

Opportunities are found in the quality of the natural resources and the environment, with tourism as a possible sector for expansion.

Three threats are emphasized: A continuing population decline, a shrinking public sector with further loss of (female) jobs and potential social problems (self-confidence) caused by a high long-term unemployment level.
 

3.2 Strategies and priorities

The main strategies adopted concern:

- a broader economic base with new entrepreneurs and better 
  competitiveness in existing enterprises
- long-term development and use of the natural resources
- to keep the local communities alive by ensuring that young people, not 
  least young women, can stay and earn their living

Across these strategies there are some horisontal themes including:

- better use of information technology in all activities
- equal opportunities for men and women
- preservation of the natural and cultural environment
- better use of competitive (comparative) advantages
- enhancement of practical skills and competence

There are 5 development priorities identified from these strategies and themes for the period 1995-99 (total costs per priority): 

1. Development of enterprises (319 MECU)
2. Development of competencies (110)
3. Agriculture, fisheries and natural resources (138)
4. Local development  (78)
5. Development of the Sami reindeer industry and culture - Global grant to 
   the Sami parliament (14)

After 1995 a 6th priority has been added:

6. Physical infrastructure (70)

The total costs calculated are thus 743 MECU (14 MECU in technical support added), with 300 from the EU structural funds, 280 from national public sources and 164 in private sector co-financing.

Overall objectives include:

- the creation of 900 new SME’s
- establishing and/or preserving 9 500 jobs
- lowering the unemployment level
- raising BNP/capita towards national level
- raising IT-use and IT-competence
 

4. Tourism in the SPD

4.1 Measures. 

Each of the priorities are subdivided into measures. Looking more closely at these mesures it is apparent that several of them either (A) include recommendations directly aimed at tourism development, or they  (B) incorporate tourism as one approach among others. Some measures do not have any tourism alternative (C). In Table 1 all the measures are classified according to these recommendations.
 

It is evident that tourism is looked upon as an important activity in many respects, to help creating enterprises, jobs, knowledge and as a complementary way of using existing (natural and cultural) resources. 

This is no surprise, after all the area has - in places - a long history of tourism industry, with a lot of experiences of the pros and cons of running tourism businesses far away from the larger markets. The major change is that tourism in the SPD is treated as a possible main employment source and a realistic base for SME’s, regardless of where and how this business should be carried out.
 

4.2 Measure 1.4 Development of tourism

In Measure 2.1 ‘Strengthening Research and development’ one of the efforts has been to create the European Tourism Research Institute (ETOUR) at Mid Sweden University and this project is closely connected to one of the reponsibilities of this institute, that is to monitor the results of the tourism incentives in the Objective 6 area. Will tourism investment be capable of long-term creation of new SME’s and of sustainable jobs in local areas?

It is apparent that these questions cannot be fully answered yet. The analysis must take its starting point in the character of the projects granted within the support scheme, in order to make an assessment of the possible and probable short and medium-term outcome of single as well as groups of projects according to the approach taken in the projects.

Measure 1.4 ‘Development of tourism’ is the one measure most prominently aimed at attracting tourism project applications.

The objectives stated for this measure in the SPD are:

- To elevate the area to an international tourist destination by raising the level and quality of marketing

- To raise tourism income and create better opportunities for new and sustainable jobs

- To support a better use of resources and extend the tourist season

However vague those objectives may be, in operational terms, they are certainly general enough to accomodate many different kinds of projects. A number of selection criteria have been formulated to help the decision-making bodies to choose the proper projects, many are also rejected. Those projects which can be expected to fulfill one or more of the criteria have a better chance of being selected. The criteria are:

- better use of existing tourist facilities
- potential for tourism growth
- potential of an extended season
- new jobs, new market and profitability opportunities created
- horisontal criteria applied: internationalisation, enhancement of the natural 
  environment, equal opportunities for men and women, use of information 
  technology 

The assessment indicators are strictly quantitative:

- number of new jobs
- number of preserved jobs
- number of new enterprises
- occupancy levels
- change in turn-over 
 

4.3 Criteria and projects

The Objective 6 area had a very slow start with few projects granted during 1995-96. As Sweden was a new EU-member both national and regional public authorities were unfamiliar with the neccessary procedures involved in handling EU support schemes. This situation became gradually less difficult and the distribution of project funds is today much more (administratively) efficient, although the learning period is far from over.

This project adresses the relevance of the criteria for granting support for tourism induced development and the efficiency of the projects in relation to these criteria. 

A tentative approach is to categorise criteria into Relevant and Not Relevant (for using tourism projects as an instrument for wider development objectives). Projects might be grouped into Efficient and Not Efficient (as instruments for these purposes). A table can then be set up where the four sectors can, likewise tentatively, be defined to show four different situations.

The interpretation at this yet not tested stage is rather straightforward:

I  A match between relevant criteria and successful and efficient  projects 

II Criteria which should not be very relevant have nevertheless  helped choosing efficient projects

III Projects which are not efficient although they have been judged  so by relevant criteria

IV Not efficient projects chosen from less relevant criteria

Projects in sectors I and IV will help identifying why a successful project is successful and why bad projects can be explained as bad, respectively.

Projects in sectors II and III will require more complex explanations. Successful projects might have other features, maybe context-dependent, which make the successful although the possibilities seem small (II). Similarely, unsuccessful projects (III) might have the right expectations, but fail due to circumstances which need to be found.
 

4.4 Project ideas

This is a very condensed version of the ideas behind the project, which has barely started by categorising hitherto granted tourism projects within measure 1.4. The categorising is being made according to stated  objectives in the applications in order to find a structure among the projects and to be able to attach selection criteria to each project.

There are a large number of unsolved questions, which will be dealt with in due course. The foremost objective is to reconstruct the theoretical foundations for the SPD and its development objectives and measures. In particular the work with categorising the projects will most probably mean that all tourism and tourism related projects will be included from all measures (see Table 1).

During late spring a selection of project owners will be approached and the individual projects looked into more closely. Different methods will be used, including focus group discussions to find out preferred modes of operation and the elusive context-dependent factors.

Experiences from other countries, mainly from tourism projects in some Objective 1 areas, will be sought in order to compare characteristics in successful or unsuccessful projects.

Finally, the empirical findings will be put into the theoretical framwork to answer the basic question on tourism’s varying ability to function as a development instrument in marginal areas.