Industrial restructuring in transitional Baltic Sea Region countries (Baltic States, Kaliningrad oblast)

Abstract

This paper analyses recent trends in industrial development in the Baltic Sea transition countries. The heavy industry collapsed during the first half of 1990s in most former socialist countries. However, since the second half of 1990s the industrial output, export, productivity and even employment (in some branches) has been increased remarkably. And instead of a de-industrialisation, which has been general trend in Western Europe since 1970s, we may speak about a re-industrialisation. Foreign investors have played major role in the restructuring and efficiency growth of manufacturing in transitional economies. The rising importance of foreign investors and the growing export and re-export to other BSR countries are showing, that the industries in transitional countries are becoming more and more integrated to developed BSR countries. Still, especially textiles and electronics that are concentrated on relatively low-skilled subcontracting are characterised by a sharp rise in re-exports. Hypothetically, when considering the price convergence in the case BSR transition countries joining the European Union, those low value added booming industries can run into crisis soon and relocate the production to further cheaper regions in Russia or South-East Asia. The empirical part analyses recent industrial development trends (employment structure, exports, investments) in three Baltic countries and Kaliningrad oblast. Finally, I try to compare the industrial restructuring within particular clusters in Estonia and Kaliningrad oblast using statistics and interviews. Key words: regional integration, transitional economies, industrial development