Assessment and recommendations
As an island, Gotland has a unique development trajectory
While Sweden has numerous islands and long coastlines, the region of Gotland is by far its largest island (3 140 km²), is located the furthest from the mainland (90 km) and is the only territory that has both regional and municipal administrative capacities. Gotland represents 0.8% of Sweden’s land area and with a population of about 60 970, it is the smallest Swedish region in terms of inhabitants but the 29th largest municipality out of 290. The island is also of considerable security interest because of its central location in the Baltic Sea and its closeness to other countries in the Baltic region. Its strategic importance has grown following Russia’s large-scale aggression against Ukraine. Visby is the island’s main city, home to about 26 000 inhabitants. It is a United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage Site and also contains a large share of jobs, infrastructure, trade and services for the island. The majority of Gotlanders (60%) live outside Visby. According to the OECD typology (see Annex 4.B), Gotland is classified as a predominantly rural remote TL3 region.
Gotland’s economic geography is relatively diverse despite its small size. Apart from the public sector, which is largely situated in Visby, the island is specialised in primary sectors, including agriculture and material processing activities, particularly quarrying and cement production. The island is home to Sweden’s largest cement plant supplying international and mainland industries. Industrial production is situated in the north of the island around the industrial port of Slite, while the agricultural centre is located in the south and interior of the island. The island’s strong tourism sector spreads out across the coastlines and beaches. It largely depends on Swedish tourists, resulting in the population doubling over the summer months.
As a relatively small island economy, Gotland must address a range of bottlenecks to enhance well-being and attain sustainable regional development. These include a lack of critical mass and distance to larger markets, vulnerability to climate change (e.g. summer droughts and sea level rise), higher costs to deliver services and infrastructure, and high elderly dependency rates.
Gotland outperforms comparable benchmark regions from European Union (EU) islands and OECD remote rural regions
Compared with OECD peer regions, Gotland has good living standards. In terms of gross domestic product (GDP) per capita, Gotland ranks above the level of comparable islands (USD 32 925) and remote regions1 (USD 28 904). However, it has the lowest place amongst all Swedish regions, with USD 37 323 in 2018, which places it below the OECD (USD 45 217) and national (USD 50 473) averages. The gap in GDP per capita with respect to the national average has widened over the past 2 decades (+6 percentage points between 2000 and 2018). Yet compared to its peers, Gotland’s economy has performed well since 2009, with its GDP per capita growing by 1.2% annually, against a 0.23% of peer island regions (-0.67%) in remote regions. In the national context, Gotland has the lowest level of labour productivity (19.6% below the national average). Yet when compared to peer regions, productivity trends on Gotland have been competitive. Since 2009, Gotland’s annual productivity growth of 0.8% has outpaced that of peer EU island regions (-1.28%) and peer remote regions (0.33%). Raising productivity on Gotland will be critical to sustaining high living standards and growth over the medium and long terms. In this respect, Gotland has the potential to raise productivity by fostering innovation across the entire regional ecosystem, attracting skilled labour by further improving its attractiveness (e.g. in terms of quality of life and services, schooling, housing, etc.), addressing challenges of seasonality in its labour market and adding more value to existing areas of economic specialisation.
Internal migration has boosted population growth on Gotland (3.4% in the period 2001-19) but still remains below the Swedish average of 15.2%. However, Gotland’s population growth is similar to the remote region benchmark and significantly higher than the EU island benchmark. The positive migration of working-age adults with children has increased Gotland’s youth dependency ratios, which exceed both its island and remote region peers. At the same time, Gotland’s population is ageing fast. Between 2010 and 2020, the elderly dependency ratio increased 4.8 percentage points, whereas the Swedish average only increased by 2.2 percentage points. This is also well above the remote region benchmark, although similar to other island regions. These demographic trends present a number of challenges for the delivery of public services, the tax base and the sustainability of traditional sectors, given that farmers and other occupations need to find successors.
Quality infrastructure has enabled high well-being standards but will soon require upgrading and expanding
As an island, Gotland is highly dependent on infrastructure connections due to its isolation and remoteness from the mainland. Key infrastructure assets of Gotland include a recently expanded port to support larger cruise ships, fibre optic broadband throughout the island (88% of households have access to the fibre optic network), charging stations for electric airplanes and other renewable energy systems (renewable energy generation from biogas, solar and wind). However, some of Gotland’s infrastructure will soon be incapable of providing an appropriate level of service. In some cases, this is due to infrastructure reaching the end of its useful life and in other cases, the increasing impacts of climate change or population growth.
Key infrastructure challenges include:
Introducing a new, stable primary source of electricity to replace the current subsea cable from the mainland that is reaching the end of its expected life. For renewable energy to take on a larger role in the island’s electricity supply, it needs to overcome its intermittent nature and limited or contested locations for deployment. Replacing the existing cable will likely be vital for the local economy to supply significantly increased demand needed for industrial processes. The decision around the cable replacement is outside the region’s legislative power. The region can do more to strategically prepare for the consequences of alternative scenarios for energy cables.
Water shortages currently limiting economic development and result in strict regulations. Climate change and increasing demand for water put further pressure to undertake new water infrastructure investments that can increase the quantity and quality of water. Water availability is projected to decrease by 13.3% for Gotland between 2021-50 compared to 1961-90 and estimates suggest that demand will increase by more than 40% by 2045. A mix of different technical solutions will likely be required on different parts of the island, because use, existing infrastructure and geological conditions vary significantly.
Developing a sufficient supply of affordable permanent housing options. Seasonal homes dominate new housing (between 2010 and 2020, 58% of building permits were for second or holiday homes) since they are the most profitable form of new construction. The share of moderate-income housing, particularly rental housing, is not on par with population increase, causing prices to rise (the municipality of Gotland ranks 5th highest among all 290 Swedish municipalities in terms of price increases since 2020). This makes it hard for lower-income households or young people to find affordable places to live. The lack of accommodation is also putting pressure on regional attractiveness, seasonal industries and university students.
Gotland needs to further strengthen its business ecosystem and use innovation to add more value to existing areas of specialisation to sustain a resilient and sustainable future
Many of Gotland’s enterprises stay small: expanding support for enterprises to the growth stage, strategically using innovation and upskilling workers can help them scale or grow
Gotland is characterised by a vibrant start-up community, recording the second-highest rate of start-ups in the country (12.5 per 1 000 inhabitants just after the capital city of Stockholm with 14.8). Yet, entrepreneurs are older than in other regions and micro and small businesses make up the majority of businesses (91% of all privately owned workplaces have 0-4 employees and less than 3% have over 50 employees). While only some local firms have the capacity or willingness to grow, it is important to identify those who do and help them obtain the needed support.
The incubator programme and the notable potential for improved research and skills development through the university are at the heart of entrepreneurship support on Gotland. Support for business growth and scale-up, however, is still underdeveloped or only punctually covered. Overall, the system is not set up in a way that follows the business life cycle and currently does not provide sequential support for each step of the way. This holds the risk of firms being stuck at a pilot stage, with businesses having less opportunity for more job creation.
Small- and medium-sized enterprises (SMEs) on Gotland struggle to attract and retain skilled and high-qualified personnel. In addition Gotland records lower levels of education than the Swedish average. Only 43.5% of women and 28.9% of men aged 25-64 on Gotland have upper secondary education. This is lower than the Swedish average of 49.8% for women and 37.6% for men. Consequently, upskilling local employees and building a local workforce that fits the emerging needs of the local economy is of increased importance for Gotland. This will be even more so as, in the coming years, successors will be needed for many retirees. The lack of affordable, permanent rental housing makes recruitment and retention increasingly difficult.
Opportunities can enable further economic diversification and add more value to existing areas of economic specialisation
A large part of Gotland’s economy is seasonally defined, growing during the summer months and shrinking in the winter. Enhancing innovation in the region can add more value to established and niche markets, and help diversify the labour market around three areas of smart specialisation (hospitality, agro-food industry and renewable energy). Areas of opportunity include mobilising synergies in overall research and innovation activities, improving a distribution channel for small-scale food products, establishing close links between the agro-food and hospitality industries to attract tourists throughout the year, as well as drawing on the innovation potential of the creative and cultural industries, especially the game design university track.
Gotland is well positioned to advance its bioeconomy and circular economy in conjunction with its ongoing status as national pilot for a fully sustainable energy system by 2040. The geographical and social proximity within the island provides a suitable environment for circular economy development that relies on material flows and synergies between users. The island is also home to a range of sectors that belong to the bioeconomy, including crop and animal production, forestry, manufacturing of food products, beverages, tobacco products and aquaculture.
Region Gotland administers regional and municipal assignments as a single entity, with potentially greater efficiency
Effective regional development will depend on strengthening the capacities of regional government staff and ensuring equitable service provision throughout the territory, reflecting diverse local needs
The island of Gotland is both a single region and a single municipality in Sweden’s territorial administrative structure. Region Gotland, the island’s administrative body, fulfils the functions of both a regional and municipal government. This structure is unique in Sweden and permits the regional government to administer regional and municipal assignments as a single entity, with potentially greater efficiency. At the same time, consolidating all subnational government responsibilities into one body requires a higher-than-average ability to deliver on responsibilities and tasks. While in other parts of Sweden competencies are distributed between the regional and municipal levels, on Gotland they are not. This structure creates a heavy workload for a small administration, where many public officials play a dual role, and it can generate a shortage of skills, ranging from digital to analytical, required to fulfil tasks.
Human, financial and infrastructure resources are not always sufficient to provide quality services throughout the territory. This is illustrated by the fact that Region Gotland is facing some challenges in meeting its goals for citizen satisfaction with public services, as some citizens still do not feel that it is easy to get in touch with the regional government or access some public services throughout the island. Various local, not-for-profit development companies have emerged to fill this gap in service provision (i.e. providing housing, economic development and leisure services), particularly in the more remote or rural areas of Gotland. Providing future infrastructure and service needs in rural communities will depend on the long-term viability of local initiatives and their access to resources, as well as a more effective regional government that has a stronger presence throughout the island. This necessitates equipping administrative staff with the necessary skills, reinforcing the presence and increasing strategic co-operation with local initiatives.
Gotland must manage low own-source revenues and a higher cost of infrastructure and public service provision resulting from remoteness and high seasonality
Region Gotland enjoys greater budgetary autonomy and flexibility than other municipalities and has seen an increase in its overall revenues, benefitting from the new fiscal equalisation system. However, being a mainly agricultural and tourist island economy, it has an own-source revenue stream that currently faces limitations. Its revenues in almost all categories are less than what general subnational revenue represents as a percentage of the total government revenue system, and its regional and local tax revenues remain lower than the national average, with the discrepancy generally increasing since 2016. For instance, in 2020, Gotland’s regional tax revenue was 7% lower than that of other Swedish regions. At the same time, it faces higher costs of infrastructure and public service provision. For instance, according to 2020 figures, general structural costs on Gotland were 7% higher than the national average. New ways to strengthen the flow of fiscal revenue, including own-source revenue, must be found to ensure the availability of sufficient resources to further invest in regional development. Reinforcing Gotland’s regional attractiveness strategy, particularly the resident and business pillars could help increase own-source revenue as well as contribute to user charges and fees. In addition, focusing on Gotland’s smart specialisation strategy could, over time, boost the island’s competitiveness and productivity which would also contribute to revenue streams.
Addressing a lack of clarity in the distribution of responsibilities among levels of government and island-blind national strategies can improve the efficient implementation of strategies
Receiving regional development responsibilities has empowered Region Gotland but has also accentuated co-ordination challenges with other levels of government. Since 1998, Region Gotland can design and implement its own strategic priorities and measures for its growth and development based on its assessment and knowledge of regional strengths. At the same time, it has become challenging to effectively implement the policies emanating from the central level because national strategies sometimes are not “place-sensitive” or their implementation exceeds the capacities of the regional government. Current steering documents for regional development at the national level in Sweden do not sufficiently consider the significance of insularity and how it can limit the economic and social development of islands and the living conditions of their inhabitants in relation to the rest of the Swedish territory. The consolidation of regional and local level responsibilities into one government has also generated a lack of clarity in the distribution of responsibilities between the levels of government and produced accountability issues that need to be resolved in order to strengthen co-ordination among regional and national agencies and improve the government-citizen relationship.
Gotland needs to improve infrastructure investment, planning and delivery to stay ahead in a rapidly changing environment, increase its competitiveness and remain attractive
Adopt a more visionary and foresight-oriented approach to exploring the consequences of different scenarios for decisions that are outside the control of the regional authorities (fate of the local cement plant and the provision of a new cable to supply electricity). To do this, the island should anticipate the consequences of these various decisions on the island’s future economic development path and determine necessary regional responses.
Better align infrastructure planning and investment decisions to regional development priorities, including in Our Gotland 2040. Our Gotland 2040, released in 2021, can be used as a guide to developing priority areas for infrastructure investment that align with local needs. Priorities in the plan that have implications for infrastructure include improving accessibility, being at the forefront of the climate and energy transition and conserving water and the environment. Investments should be determined based on their expected economic, social and environmental returns.
Allow for and support infrastructure solutions specific to local needs across the island and, where appropriate, involve local initiatives and seek synergies with local service provision. As an island, Gotland can make use of not having to integrate into larger infrastructure elements, making local choices, for instance regarding water, sanitation and broadband infrastructure, more flexible. Especially, more remote communities lend themselves to innovative actions directly suited to local needs. The regional government can do more to support local development companies and make room in its strategic planning for a broad variety of alternative solutions as well as possibilities for peer learning between local development companies working on infrastructure provision.
Consider a variety of future investments, including:
Expand renewable energy capacity, the extent of which will be defined by the provision of the submarine cable. Continue the process to upgrade the electricity distribution grid to meet future increases in the use of electricity by households, businesses and transport.
Closely monitor and plan for climate-induced water stress related to decreased rainfall and possible saltwater intrusion in wells, and further support the local agricultural sector to encourage water retention practices.
Seek out new transport routes to the Baltic region to allow for more tourism and facilitate exports to new markets.
Continue exploring opportunities to support the increased adoption and use of sustainable transportation including biking.
Increase the supply of housing stock for permanent residential use on the island along with support schemes to address the chronic shortage of rental housing through a policy mix. This could include: zoning additional land for housing and loosening height restrictions, increasing the penalty developers have to pay if they do not follow building permits that require a certain number of units to be reserved for permanent and/or rental use; and acquiring additional municipal land and lease it to building developers, reserving a number of units for medium-income/rental use as well as developing additional student accommodation to meet student needs that can be used by summer workers when classes are not being held.
Facilitate upgrading wireless capacity to full 5G across the island and consider using this to become a rural testbed for connected technologies in agriculture. Further promote the island as a remote working hub, attracting people from the mainland to work remotely, as well as providing more flexible work opportunities for residents of Gotland.
To boost productivity and achieve sustained growth in the medium and long terms, the region should expand its entrepreneurial support system, strengthen innovation capacity and assure skills development
To this end, Region Gotland should:
Develop business support throughout all relevant stages of the business life cycle, addressing island-specific challenges and fostering interaction between existing stakeholders by:
Assuring the business support system covers all business life cycle stages and facilitates collaborative action. This includes advancing plans to set up an accelerator programme, strengthening collaboration between the university and businesses by facilitating continuous stakeholder engagement roundtables, increasing research and development (R&D) expenditure, strengthening the interaction among Gotland’s clusters and various pilot projects, and supporting the upgrading of emerging clusters, the Green and Blue Centres, into single access points for knowledge.
Supporting the establishment of strong “off-island” business partnerships and networks by: i) upgrading the local export office by focusing on export awareness campaigns, particularly providing information specific to Gotland’s industries and Baltic markets; and ii) setting up a Stockholm or mainland broker. This broker should support SMEs in promoting local products and directly liaising with possible buyers and developing synergies between existing export channels.
Improving municipal services for entrepreneurs by building the capacity of administrative staff through peer learning with other municipalities.
Increasing SMEs’ digital skills by rolling out targeted programmes that combine information and communication technology (ICT) solutions with management training, making use of young people’s digital skills (i.e. in apprenticeships) and setting up advisory services to develop individualised training paths as well as updating the region’s digital agenda.
Encouraging young people to become entrepreneurs. This can be done by promoting youth entrepreneurship in formal educational programmes and extracurricular activities (e.g. model firms, entrepreneurship clubs and business plan competitions). Also consider setting up a mentoring programme to match younger entrepreneurs with those that have more experience, especially retired business owners, as part of a voluntary programme and developing co-working spaces across the island to allow for social interaction and networking amongst young entrepreneurs.
Add value to sectors of specialisation and further develop niche markets that allow for strategic diversification of the local economy by:
Further developing a “farm-to-table” culture in the agro-food and hospitality industries and supporting farms in applying technological innovations to stay competitive by:
Continuing the development of a sustainable food development office that supports the development of local distribution pathways for small farm producers and contributes to educating the local hospitality industry on the benefits of buying local.
Further developing food tourism routes through branding and identity, including wayfinding strategies and signage, and marketing and communications.
Continuing to support innovation in farms to apply technology that already exists elsewhere. The Green Centre could leverage its university contacts and become a learning and mentoring hub for this.
Utilising the creative and cultural potential of the island, further developing the creative and cultural sectors (CCS), like gaming, and fostering cross-sectoral innovation programmes by:
Elaborating a CCS strategy defining concrete measures and roles for the development of the CCS involving relevant local stakeholders. Establishing closer co-operation between the university and Region Gotland to develop possibilities around a potential games cluster.
Setting up a specific incubator/accelerator (track) for CCS that, amongst other things, supports game design students to transition into becoming professional game developers. The existing cultural entrepreneurship centre or Science Park Gotland can be a platform for this.
Supporting cross-sectoral and interdisciplinary projects involving creative industries to bolster innovation in tourism, education, mining, energy and agriculture through creating platforms, organising events for matchmaking and linking with traditional sectors.
Strengthening the bioeconomy and circular economy as well as further pushing the renewable energy transition by:
Further combining technological perspectives and research with regulatory framework conditions to allow for experimentation and applied research, for instance through further development of the planned Industrial Symbiosis Park.
Establishing effective governance arrangements through harmonising regulatory requirements and assuring sufficient policy co-ordination across different circular and bioeconomy sub-sectors such as agriculture, food, forestry, marine, waste and energy and developing a circular economy strategy based on the regional development strategy.
Enhancing collaboration between the emerging agro-food and aquaculture clusters, the Green and Blue Centres, in support of innovation and entrepreneurship around the food industry and saving scarce water resources.
Developing coaching and support on circular economy and bioeconomy development, i.e. on waste efficiency in businesses and across value chains to minimise waste, saving water and other materials.
Address future labour market and skills needs by adjusting Gotland’s training and education system and attracting and retaining a skilled workforce needed for businesses to thrive by:
Reinforcing the anticipatory planning and strategic understanding of future skills needs in the region by:
Raising the level of education and allowing for more up- and reskilling through local SMEs by:
Providing regular opportunities for young people, from primary education onwards, to reflect on and discuss their prospective futures, allow students to consider the breadth of the labour market, facilitate contact with role models and provide application support.
Guiding SMEs to provide upskilling opportunities to their staff and assure reskilling programmes are compatible with the part-time and long-distance learning needs of the island.
Making the island more attractive for teachers by:
Setting up experience-sharing networks amongst teachers of different communities, supporting flexible work hours and rotation systems for itinerant teachers and/or accommodation support.
Further developing a national policy that condones study loans for educational professionals moving to rural municipalities, recognising that delineation according to different parts of the island might be needed to adjust for inter-regional differences.
The region should assure a successful implementation of Gotland’s regional development strategy Our Gotland 2040 and better serve the diverse local needs throughout the island
Region Gotland, in collaboration with other levels of government, should:
Continuously develop the regional government’s management capacities and digital skills as well as enable a way to better deliver public services throughout the island by:
Establishing the desired skillset for a future, more efficient civil service in the region by enabling an environment within the regional government that fosters continuous development among civil servants.
Reinforcing the presence of regional government administrative and other services throughout the island, ensuring equitable service provision across the entire island. This can be achieved by creating territorial delegations or establishing a network of access points to services – mobile or stable – in strategic places and should be monitored and assessed based on Gotland residents’ levels of satisfaction with regional public services in rural areas.
Strengthening collaboration with local development companies to enable them to more effectively fulfil certain responsibilities left unattended by the regional government. The presence of these companies has a positive impact on rural communities on Gotland. The regional government should support them and facilitate their work, putting in place a transparent and equal set of procedures for dialogue and interaction. Jointly developing and implementing a plan to strengthen this work can be done in alliance with the regional association of these companies, GUBIS.
Improve the region’s ability to finance its regional development priorities by:
Evaluating Gotland’s regional attractiveness and complement branding efforts with concrete actions. In order to overcome Gotland’s small tax base, it is important to attract new residents and businesses on a permanent basis. The region could conduct an assessment of Gotland’s current features and measure their attractiveness for specific target groups (families, students, businesses in key industries, etc.). Then, the region could look for ways to reinforce its current regional branding strategy in order to attract those targeted groups by offering them concrete benefits and carrying out concrete communication actions.
Enhancing capacities for the management of EU funds by reinforcing the skills of regional staff in the governance of these funds, attracting additional skilled professionals, reaching out to experts/consultants, strengthening advisory mechanisms for beneficiaries and establishing better dialogue and knowledge exchange mechanisms with regional stakeholders. To achieve this, Region Gotland must seek partners in the national government and in other regions where the capacities exist and experts on the subject can be contacted or consulted.
Strengthen vertical co-ordination to ensure island particularities are reflected in national-level strategies, clarify assignments among levels of government and enhance accountability by:
Strengthening vertical co-ordination to ensure place-based and island-proof policies to better align national and regional level development strategies and facilitate the implementation of investment projects and strategies. Region Gotland could urge the national government to seek collaborative ways to improve dialogue platforms and create regulatory instruments of national scope in order to ensure the consideration of the specific conditions and needs of the island and promote the creation of policies that are island-proof.
Clarifying assignments among levels of government by establishing a working group that brings together Region Gotland and the different national agencies with a presence on the island. This would help to identify critical unclear assignments and spaces for overlap and to communicate to the national government a roadmap to solve these issues. The success of such a measure will depend on collaboration between the regional government, the County Administrative Board and national agencies in the region, and should be assessed based on the comparison of the results of the same measurement instrument applied before and after the proposed roadmap was implemented.
Enhancing accountability by introducing new performance monitoring and evaluation mechanisms in order to improve transparency in the distribution of competencies and resources and strengthen the relationship between levels of government and between Region Gotland and the region’s residents. This could be done by establishing an interoperated reporting platform that allows all actors (public agencies, private businesses, non-profit organisations and citizens) to track who (level of government, agency) does what (responsibilities), how (mechanisms, policies, projects) and with what resources (funding and transfers). A baseline of the situation must be established beforehand and should be re-evaluated in a period of three to five years.
Note
← 1. To better compare the performance of Gotland against relevant regions, the analysis makes use of two benchmarks, one based on comparable islands and a second based on remote regions. The islands benchmark, is made up of seven islands of similar administrative level in the EU (TL3, see Annex 4.B). The remote regions benchmark, allows to compare Gotland based on its low level of accessibility. It consists of a benchmark of 40 regions, belonging to 8 countries. The complete list is in Annex 4.A. In order to select the regions, a three-step methodology was used: i) select regions with the same rural typology as Gotland: non metropolitan remote regions, or NMR-R, according to the revised OECD classification; ii) demographic criteria: select regions with 50% above and below the population of Gotland; iii) surface area criteria: select regions with 50% above and below the surface area of Gotland.