Improving competitiveness

The level of prosperity that the Nordic–Baltic countries can sustain for their citizens depends essentially on the competitiveness of the region. The term “competitiveness” has many definitions, ranging from short-term indicators reflecting unit labour costs to broader sets of indicators describing the long-term development of the economic and social structures that support the creation of economic value in an economy.

To ensure that NIB fulfils its mission to improve competitiveness, each project the Bank finances is evaluated and rated on a five-grade scale measuring the impact the project is expected to have on the competitiveness of the Bank’s member countries. The ratings are based on a conceptual framework that considers both the aforementioned short-term and long-term indicators. The indicators are both qualitative and quantitative, measuring direct effects at company level and those impacting the region on a broader scale through potential wider and indirect effects on e.g. business clusters, sectors and the rest of the economy.

In 2015, NIB financed a number of projects across sectors contributing to improvements in the competitiveness of the member area through positive impacts on labour productivity and the business environment. The largest share of NIB’s lending was allocated to projects that support technical progress among NIB’s clients in business sectors and academia.

An example is the loan signed by NIB and Chr. Hansen Holding A/S to finance research and development activities into identifying and developing natural ingredient solutions for the global food and health industries. The project directly supports the company by adding value to its product offerings in advanced bioprocess engineering and microbial physiology. As Denmark has a strong local bioscience cluster, these investments in R&D are likely to support broader development of skills in the cluster through knowledge migration to other companies.

Investments in infrastructure boost the long-term growth of labour productivity and increase the attractiveness of the Nordic–Baltic countries as places to do business. NIB contributed to improvements in the quality of infrastructure in its member countries by lending to projects that upgrade and build new core infrastructure.

In Finland, NIB provided a loan to the City of Vantaa for the construction of the Ring Rail Line connecting two commuter corridors between central Helsinki and Helsinki Airport. The railway increases the capacity of the Helsinki Metropolitan Area public transport system and is an integral part of ongoing residential housing projects that are expected to add homes for 10,000 residents in Vantaa. The railway will therefore support urbanisation and reduce housing-related friction in the labour market in the Greater Helsinki area.

NIB also extended a loan to AB Lietuvos geležinkeliai, which continues its investment programme in the Rail Baltica railway line from the Lithuanian–Polish border via the city of Kaunas to the Lithuanian–Latvian border. The investments will improve the quality of the country’s main freight corridors by reducing travel times and increasing operational efficiency. These improvements are particularly important in the Baltic countries, where the share of rail transportation of total inland freight traffic is significantly higher than in other European countries.

NIB also reached out to financial intermediaries in order to facilitate lending to smaller businesses. In November, NIB signed a loan with Westra Wermlands Sparbank, which will use the loan facility to offer financing to small and medium-sized enterprises (SME) in the region. The majority of Westra Wermlands Sparbank’s SME clients are active in the forestry, manufacturing, telecommunications and IT sectors.

This and similar loan programmes will continue to be an important way for NIB to support the growth of smaller companies, which account for most of the jobs and value added in NIB’s member countries.

Loans disbursed in 2015