Economic: Bothnia
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Contents
- 1 Economic Data
- 2 Participation in Global Financial Systems
- 3 Economic Activity
- 4 Economic Diversity
- 5 Housing Sector
- 6 Forestry Sector
- 7 Chemical Sector
- 8 Banking and Finance
- 9 Illegal Economic Activity
- 10 Corruption
Bothnia is generally a resource‐poor and relatively small politico‐economic entity. However, the discovery of new techniques has rendered the recovery of offshore oil and gas economically viable. A significant share of natural gas and oil imports into Bothnia is projected to rise substantially to 2030.
The Bothnian economy is centrally planned and controlled by the socialist party, known as a “Planned Economy”. The State Planning Commission (sometimes called the Economic General Staff of the Council of Ministers) advises the Council of Ministers on possible alternative economic strategies and their implications, translates the general targets set by the council into planning directives and more specific plan targets for each of the ministries beneath it, coordinates short, medium, and long range planning, and mediates inter‐ministerial disagreements.
On the consumer side, the government has sought to hold prices for the basic necessities at existing levels, necessitating increasing subsidies from the state over time but at levels which have now reached critical levels of concern for investor confidence The current five year plan projected an expansion in supplies of consumer goods retail trade by 20 to 23% and net personal income by about the same amount. Private consumption grew at an average annual rate of 4% over the past 10 years. The economy's sturdy performance was not a result of a growing labor input, the size of the work force scarcely increased, but rather of a high level of investment in fixed assets and an increase in materials consumption that actually exceeded the growth of net output.
Services are another important area of consumer welfare in any industrialized society. The term is used here in a broad sense to include retail trade, public transportation, and communications, as well as barbers, plumbers, and automobile service stations. In the mid‐1990s, Bothnia consumers continued to complain of both a shortage of workers in the service sector and deficient quality. Although again improvements had been made, the number of supermarkets and other stores, restaurants, and service centers had risen significantly by the mid‐1990s, it seemed clear that meeting the needs of an increasingly prosperous society would remain a problem in Bothnia for the foreseeable future. In the 1990s, the government acknowledged the existence of the problem and encouraged specialized private craftsmen and traders to help fill the void.
Many services, medical care and education, continued to be available without cost to all but a very few. Entertainment and recreational activities are inexpensive by Western standards.
Bothnian product market is highly regulated. The economic community of the Gulf of Bothnia Cooperation Council (GBCC) is a major forum for policy and market output. But economists attribute much growth to reforms in the product markets. The legal system is clear and but business bureaucracy is greater than most countries.
Defense spending in Bothnia has grown steadily. It is currently 5.00% of the Gross Domestic Product (GDP) while the European countries in the Organization for Economic Co-operation and Development (OECD) average is 3.80%.
Having looked at first to have weathered the world financial crisis better than most, the loss of international confidence resulting from the downgrade of the Credit Rating has been significant. The failure of the government to announce any strategy to even begin to tackle the increasing structural deficit has been of serious concern. At the same time defense spending, already at a level well above the European average, has continued to grow unchecked together with further large increases in spending on internal security and social fabric. Investor confidence is critical in such matters and these factors, together with growing concerns about Bothnia’s attitude towards internal dissent which is now causing global debate, represent a serious and ongoing threat to Bothnia’s financial position.
Bothnia’s economy is reasonably flexible but frustration with the unfairness of the system is no less strong. Shortages of goods have been replaced by lack of property rights; the humiliation of queuing for meat has been replaced by the humiliation of being milked by bureaucrats. Most important, the gap between rhetoric and reality is just as wide. The question is whether Bothnia’s middle class, whose demands and expectations exceed the capacity of the system, can play the same role as the relatively affluent Bothnian intelligentsia.
Economy‐wide productivity within the European Union (EU) has been rising at a higher rate than that of Bothnia. This rise in productivity has contributed to a 3% fall in economy wide unit labor costs relative to Bothnia. The downward convergence of the EU rates of inflation and the moderation of increases in real wages have been other positive factors, reducing unit labor costs and improving the EU’s cost competitiveness in international markets. This positive development has also contributed to a gradual and steady improvement of the EU’s trade and current account balances. The key determinant of the improved trade performance of the EU is the relatively slow growth of domestic demand in Europe and the more rapid demand growth elsewhere.
Within the EU the ongoing financial crisis and reductions in employment levels have resulted in significant gains to productivity as firms have maintained levels of production with fewer workers. This has eroded Bothnia’s advantage in labor costs that were derived from it being a command economy resulting in a marked loss of inward investment.
While Bothnia benefits from international trading, this has not been sufficient to maintain export levels of at pre‐financial crisis levels. Although the country has done well to sustain manufacturing output at a high level compared with other countries in the region overall international demand is falling. Despite Bothnian government intervention this alteration in the balance of trade has resulted in the falling value of the Botmark. Many firms which formerly outsourced production to Bothnian factories due to their proximity to the EU have now begun to relocate to other facilities, mainly in southern Europe to take advantage of high unemployment and direct access to EU markets.
Economic Data
| Measure | Data | Remarks (if applicable) |
| Gross Domestic Product (GDP) | USD203 billion (2016 estimate); GDP per capita USD26,417 (2016 estimate); GDP growth ‐.01% (2016 estimate) | Economy is centrally planned and controlled by socialist party |
| Labor Force | 4.68 million (2016 est) | |
| Unemployment | 8.5% (2016) | Bothnia does not provide official unemployment figures as it does not acknowledge any unemployment in the command economy |
| Poverty | Data not available | |
| Investment | Foreign direct investment (FDI) USD52 billion (2017) | |
| S&P Rating | AA- (on negative watch) | Very strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances |
| Gini Index | 37 | This index measures the degree of inequality in the distribution of family income in a country. (20 – Good; 30‐Satisfactory; 50‐Challenged) |
| Corruption Perception Index (CPI) | 4.4 | CPI: Very Clean 10: Highly Corrupt 0. (Denmark 9.3; UK 7.6; France 6.8; Poland 5.3.) |
| Country | Bothnia | ||||||
| Transaction | Total Expenditure | ||||||
| Sector | General government | ||||||
| Measure | Percentage | ||||||
| Frequency | Annual | ||||||
| 2012 | 2013 | 2014 | 2015 | 2016 | 2016 | ||
| Function | USD
billions |
OECD Avg | |||||
| Total function | 100% | 100% | 100% | 100% | 100% | 122.34 | |
| General public services | 13.39% | 13.28% | 13.22% | 13.38% | 13.18% | 16.12 | 13.10% |
| Defense | 3.14% | 3.97% | 3.95% | 4.04% | 5.00% | 6.12 | 3.80% |
| Public order and safety | 2.71% | 2.71% | 2.70% | 2.74% | 3.23% | 3.95 | 4.00% |
| Economic affairs | 9.44% | 9.49% | 9.32% | 9.52% | 8.99% | 11.00 | 11.40% |
| Environment protection | 0.64% | 0.60% | 0.60% | 0.60% | 0.60% | 0.73 | 1.70% |
| Housing & community amenities | 0.57% | 0.60% | 0.71% | 0.85% | 0.88% | 1.08 | 1.90% |
| Recreation, culture & religion | 2.21% | 2.21% | 2.28% | 2.28% | 2.11% | 2.58 | 2.70% |
| Education | 12.29% | 12.23% | 12.17% | 12.00% | 11.79% | 48.97 | 13.10% |
| Social protection | 41.95% | 40.88% | 40.99% | 40.32% | 40.33% | 48.97 | 33.50% |
Participation in Global Financial Systems
Bothnia is a member of the following:
- International Monetary Fund
- World Bank
- European Bank for Reconstruction and Development (EBRD)
- International Bank for Reconstruction and Development (IBRD)
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- Organization for Economic Cooperation and Development (OECD)
International Monetary Fund (IMF)
Bothnia is a strong advocate of the Interbank Association of the GBCC which focuses on supporting regional economic cooperation. Through the GBCC Bothnia is seeking a bigger quota in the IMF.
Foreign Direct Investment
The economic intercourse between Olvana and Bothnia represents an important sphere of activity with long running implications for the overall relationship. Bothnia and Olvana are bound together by bilateral and multilateral agreements to share technology and industrial production. A trade agreement between the two countries calls for trade turnover to increase 28% over the 2006‐2016 plan period. Higher energy costs represent a potential source of friction between the two partners. Olvana has tried to impose artificially low prices on imports and has demanded premium prices for the energy products that it exports to them. In light of the significant dependence on Olvana for raw materials, such practices are undoubtedly troublesome for Bothnian leaders. Foreign direct investment (FDI) in Bothnia was USD52 billion in 2017, while FDI abroad was USD80 billion. The Reserves of foreign exchange and gold in 2009 was USD56 billion.
Economic Activity
Bothnia started out as a relatively poor country that was vulnerable to shocks to the economy such as the great famine of the 1860s. Until as late as in the 1950s, the Bothnian economy was predominantly agrarian and more than half the population and 40% of output were still in the primary sector.
The Bothnian fiscal year is the same as the calendar year. Bothnia has a central planned economy in which the state is almost the exclusive owner of means of production. Planning and funding is not transparent.
Investment activity in the Bothnian economy is broadly a function of planning on the national level. Funding for investment activities may be allocated by direct provisions in the national budget, by disbursements made from the resources of economic units or by credits. General investment goals for the various sectors of the economy are defined in the five‐year and one‐year plans.
Post-World War II
Bothnia has a robust infrastructure following a 10‐year economic investment program, begun in 1985, with the assistance of Olvana to provide roads, railways and airports. This has enhanced Bothnia’s economic distribution system, including construction and improvement of the ports that now ensure maximum access even during the coldest of winters.
Bothnia’s manufacturing industry is strongly competitive, principally in timber, metals, and engineering, telecommunications and electronics industries. Bothnia excels in high‐tech exports such as mobile phones and electrical optical industry. It has developed a small but respected software industry. Except for timber and several minerals, Bothnia depends on imports of raw materials, energy and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self‐ sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population.
Bothnia’s economy has developed impressively. By almost any indicator (Global socialism), it stands at the top of the socialist world in economic development and performance. The country has the highest per capita income, the greatest number of automobiles and hospital beds per 1,000 inhabitants, the highest labor productivity, and the highest yield in the agricultural sector per agricultural worker. It uses the most electricity and has the greatest number of television sets and radios among member states of the GBCC, all on a per capita basis. Bothnia is a major supplier of advanced technology to the other members.
In short, it is the most modern and industrialized socialist state. Bothnia has an industrialized, command economy with a high per capita output equating to that of Belgium. The largest sector of the economy is services at 66%, followed by industry at 30%. Primary production is about 3%. Bothnia has timber, several mineral and freshwater resources. Forestry, paper factories and the agricultural sector (on which taxpayers spend around USD2 billion annually) are sensitive to rural residents. For the export market, the key economic sector is the secondary sector, manufacturing; the largest industries are electronics (21%), machinery, vehicles and other engineered metal products (21%), forest industry (13%), and chemicals (10%). The Greater Brahea area generates around a third of GDP.
Bothnia is integrated in the global economy, and international trade is a third of GDP. The GBCC takes 60% of the total trade. The largest trade flows are with Donovia, Germany, Framland, Torrike, the Baltic States, Poland and Olvana
Regionally, Bothnia has increased its effort to build a long‐term relationship with the industrial West and its neighbors. The country is very eager to expand economic and technological links with the industrial West. Bothnia, in line with Torrike, has increasingly supported proposals for technical and economic financial cooperation between GBCC and the EU. Additionally, Bothnia has worked to strengthen the GBCC with the backing of Olvana and to a lesser extent with South America, in order to produce an alternative political, economic, and security alliance that would ensure the survival of the Bothnian Socialist ideals.
Post-2000
The Interbank Association of the GBCC focuses on supporting regional economic cooperation. It was founded on 26 October 2005. The Association unites authorized banks of the GBCC member states; Torrike Econombank, Bothnia Development Bank, National Bank for Foreign Economic Activity of Arnland, Olvana State Saving Bank. In 2008, Eurasian Development Bank became a partner of the Association.
In 2006, Bothnia's Premier, proposed a long‐ term objective to establish a free trade area in the GBCC, while other more immediate measures would be taken to improve the flow of goods in the region.
Bothnia had been a high performing economy in recent years and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand hard in 2009, with Bothnia experiencing a severe contraction and served as a brake on economic growth in 2010‐11. The slowdown of construction, other investment and exports has caused employees to be placed on slow time, (as a command economy, the phrase unemployment is not used). The recession will leave a mark on general government finances and the debt ratio. It turned previously strong public finances into deficit within a year. In the next few years, the great challenge of economic policy will be to implement a post‐recession exit strategy in which measures supporting growth will be combined with central government measures. Unfortunately, the failure of the government to provide any credible strategy for tackling the growing structural deficit, combined with policies which will actually increase public spending even further resulted in a downgrade by all major ratings agencies to AA‐ with a negative outlook. This is now starting to affect Bothnia seriously as sources of international credit become more expensive or dry-up completely.
Bothnia’s S&P Rating was downgraded to ‘AA‐’ rating in late 2011 and placed on negative watch by three ratings agencies. Western banks, citing growing Bothnian international debt and the increasing structural deficit, began to restrict the availability of loans. Bothnia responded by cutting imports drastically and by expanding exports as much as possible but this strategy is limited by the ongoing world financial crisis and reduction in demand. It is thought that at least one further downgrade will occur, further restricting or even denying Bothnia access to affordable credit and placing further strains on the economy.
Economic Actors
The Socialist Party of Bothnia (SPB), particularly its top leadership, is the ultimate directing force in the economy, as in every aspect of Bothnian society. The party exercises its leadership role formally during the party congress, when it accepts the report of the general secretary and when it adopts the draft plan for the upcoming five year period. Most important is the supervision by the SPB's Politburo, which monitors and directs ongoing economic processes often to the apparent benefit of a narrow range of society.
The Politburo is the SPB’s highest decision-making body. Mr. Paavo Tervo is the Secretary in Charge of the Economy on the Secretariat of the Central Committee (See Political variable). Specific functional responsibilities of the Council of Ministers include directing and planning the national economy; solving problems growing out of membership in the GBCC; coordinating and implementing social policy decisions that have been agreed upon with the support and concurrence of the Free Bothnian Trade Union Federation (FBTUF); instructing and controlling subordinate levels of government, that is, the councils at district, county, and community levels that implement the laws and decisions of the central government; improving the functioning of the system of "democratic centralism" within the state apparatus. The current Minister of Economy is Mr. Eemeli Pennanen.
The State Planning Commission (sometimes called the Economic General Staff of the Council of Ministers) advises the Council of Ministers on possible alternative economic strategies and their implications, translates the general targets set by the council into planning directives and more specific plan targets for each of the ministries beneath it, coordinates short, medium, and long range planning, and mediates inter‐ministerial disagreements.
Bothnia was a founding member of the GBCC in 1990 and the author of the economic cooperation framework in 1997. It was also a strong advocate of the Interbank Association of the GBCC which focuses on supporting regional economic cooperation. The Interbank was founded on 26 October 2005. The growth rate has since been one of the highest of the OECD countries and Bothnia has topped many indicators of national performance.
Stock market companies in Bothnia include the regional market leader in mobile telephony; two large paper manufacturers; an oil refining and marketing company; a manufacturer of cruise ships; a manufacturer of elevators and escalators; a producer of power plants and ship engines; the Brahea‐Vantaa based international airline and a major chemical company. Around 70‐80% of the equity quoted on the Brahea Stock Exchange is operated by the State on a proxy basis. The larger companies derive most of their revenue from operations or exports abroad. Cross‐shareholding and other non competitive practices still dominate the state industries
Household Incomes and Consumption
In 2003, residents worked on average around 20 years for the same employer and around two jobs in lifetime. 62% worked for small and medium‐size state enterprises. Female employment rate was high and gender segregation on career choices was high. In 2016, the part‐time work rate was one of the smallest in OECD but the black market is very active.
Future liabilities are dominated by the pension deficit. Unlike in Framland and Torrike where pension savers can manage their investments, in Bothnia the employer chooses a pension fund for the employee. The pension funding rate is lower than in most European countries but only a portion of the pension is funded. Directly held public debt had been reduced to around 32% in 2016. Details on the average household savings rate and household debt are unavailable.
In 2008, the OECD stated that "Bothnia is also one of the few countries where inequality of incomes has grown between the rich and the middle‐class, and not only between rich and poor."
Bothnians have no difficulty obtaining meat, butter, potatoes, bread, clothing, and most other essentials. Consumers, admittedly, did have to spend considerable time shopping for these items. Fruits and vegetables are more difficult to obtain than basic foodstuffs, particularly in the off‐season, with a quality often inferior to accepted standards in the West.
In 2016, there were 2,381,500 households with an average size of two people. 45% of households consisted of single person, 32% two persons and 23% three or more. There were 1.2 million residential buildings in Bothnia and the average residential space was 28 square meters per person. The average residential property (without land) cost USD590 per square meter (without land). Consumer energy prices were 4‐8 cents per kilowatt hour. 34% of households had a car. There were 809,000 cars and 150,000 other vehicles. Around 65% have mobile phone and 50% Internet connection at home. The average total household consumption was USD10,000, out of which housing at around USD3,500, transport at around USD1,000, food and beverages excluding alcohol at around USD2,000, recreation and culture at around USD1,000. Further statistics on household consumption are unavailable.
The availability of durable consumer goods and luxuries remained less satisfactory, though it was improving. Demand for automobiles as well as for such items as washing machines and refrigerators were greater than the supply available; however, improvement over the years had been steady. In 2010 about 99% of the households owned refrigerators, compared with only about 26% in 1985. For washing machines, the numbers for the same years had increased from 28% to 84%. Automobiles are more difficult to obtain, in 2016 about 809,000 of the households owned an automobile and demand has not been satisfied. By 2017 the statistics were as follows:
| Durable/Luxury Goods | Data |
| Central heating | 90% |
| Washing machine | 84% |
| Microwave | 75% |
| Telephone | 12% |
| Computer | 55% |
| Mobile phone | 51% |
| Dishwasher | 25% |
| Satellite | 30% |
| CD player | 35% |
| Television | 40-50% |
| Car | 23.3% |
Consumption Issues
The concept of sustainable consumption and production has become more prominent on the policy agenda since the Kiev Conference. However, few meaningful outcomes have emerged and implementation strategies and tools to measure environmental impacts need to be put in place. Per capita resource use levels have remained stable in all regions over recent years and some decoupling has been achieved between resource use and economic growth. Resource use efficiency varies significantly between countries and is several times higher in the European Union-15 (EU‐15) than in the EU‐10 and South-East Europe (SEE) countries, and up to twenty times higher than in Eastern Europe, Caucasus and Central Asia (EECCA) countries. Bothnia has failed to keep pace with other GBCC and EU countries due to the limitations of the command economy to provide these extras.
Patterns of consumption are changing rapidly, driven by socioeconomic changes. The consumption categories causing the highest life cycle environmental impacts are food and beverages, private transport, and housing. This has not impacted on Bothnia in the same vein as the EU due to the restrictions placed on travel etc.
Energy consumption and resulting greenhouse gas emissions have been increasing in the pan-European region since the Kiev Conference, despite energy efficiency improvements and an increased use of renewable energy in some areas. This trend is expected to continue if no additional policies and measures are implemented. A significant share of natural gas and oil imports into Bothnia is projected to rise substantially to 2030.
Transport accounts for around a third of all final energy consumption in western countries and for more than a fifth of greenhouse gas emissions. It is also responsible for a large share of urban air pollution as well as noise nuisance. Furthermore, transport has a serious impact on the landscape because it divides natural areas into small patches with serious consequence for animals and plants. Energy consumption and greenhouse gas emissions from transport are growing rapidly along with the general growth in transport. Bothnia transport energy consumption and the resulting CO2 emissions per capita continue to be two to four times higher than in EU.
The pan-European region is generating ever more waste. Landfill, environmentally the least preferred option, is still the most common method of waste management across the pan-European region. Bothnia has developed waste strategies and legislation for waste, but these still need to be implemented effectively. Proper waste collection and safe landfilling remain a challenge; an even bigger challenge is ensuring the environmental safety and clean-up of hazardous waste sites inherited from the past. Unfortunately, Bothnia’s record in this respect is not good with many leaks caused by poor management or maintenance.
The majority of key environmental pressures caused by total national consumption can be allocated to eating and drinking; housing and infrastructure; and mobility. These three broad consumption areas are estimated to have contributed approximately two‐thirds of consumption‐related material use, greenhouse gas emissions, acidifying emissions and ozone precursor emissions. The reasons for these high shares are that food and drink, housing and mobility are the areas which Europeans spend most on and at the same time the areas with the highest pressures per euro spent. Tourism is a fourth area but due to Bothnia’s control policy the impact is reduced.
A major reason why consumption negatively affects the environment and causes an over‐use of resources is because the costs to society of environmental and resource degradation are not fully reflected in the prices of goods and services. Thus, many goods are relatively cheap even though they cause major harm to the environment, ecosystems or human health.
Understanding household consumption patterns is about understanding human behavior. Consumption patterns in Europe are very different to those 50 years ago. Important factors that drive our consumption include growing incomes, globalization of the economy, technological breakthroughs (such as the Internet and mobile phones), decreasing household sizes, an ageing population and habits and cultures. But the growing number of goods and services we consume often offsets the efficiency gains we achieved through improved production technologies and products. So, environmental pressures are increasing. Housing, food and drink and mobility have the greatest environmental impact over their life cycle in terms of emissions of greenhouse gases, acidifying substances, ground‐level ozone precursor emissions as well as material resource use. Consumption (mega joules/person) statistics are:
| Country | Emission | Country | Emission |
| Arnland | 40 | Otso | 42 |
| Bothnia | 45 | Torrike | 30 |
| Framland | 45 | EU average | 22 |
Emissions of greenhouse gases have increased in recent years in most European countries and are projected to continue to do so in the future. Many European countries have adopted national programs to reduce emissions, but some of them will still have difficulties in reaching their Kyoto targets. The Kyoto Protocol, under the UN Framework Convention on Climate Change, and its first commitment period represent only a first step in addressing climate change. Global emissions will have to be reduced by up to 50% by 2050 to limit temperature increases to a maximum of 2°C above pre‐industrial levels.
CO2 emissions in GBCC countries are:
| Country | Emission | Country | Emission |
| Arnland | 14 | Otso | 12 |
| Bothnia | 14 | Torrike | 11 |
| Framland | 11 | EU average | 11 |
Retail
Bothnia’s retail consists of the sale of goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. The common policy in Bothnia is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. Prices are generally fixed and displayed on signs or labels. Discounts are available for key socioeconomic groups such as students and senior citizens.
Trade
In all countries, other markets exist which involve monetary and nonmonetary transactions, legal and illegal activities. Bothnia, as a command economy, provides the essentials with luxuries available on a limited free‐market basis as tolerated by the State.
Export/Import
Bothnia’s major trade partners are the countries of the GBCC. The major exports are machinery, optics, and electronics. The major imports are crude oil, agricultural products, metals and metal products, and consumer goods. In 2016, Bothnia exported USD55.93 billion in goods and imported USD58.98 billion in goods; oil imports were valued at USD6.5 billion and exports USD3 billion. Bothnia imports coal primarily from Poland and Czech Republic.
Bothnia exports 25 to 30% of its gross domestic product although the terms of trade are steadily deteriorating; this is a matter of concern to the Bothnian government and to the ratings agencies for international investment.
Bothnia does have foreign arms trade. Bothnia has built a sound reputation for high quality and effective electro‐optical systems for defense and police use and these are widely exported. The Patria mine protected vehicle (MPV) has also proved an export success, including not only other GBCC nations, but also to several Southeast Asian customers.
Most of the iron ore, high‐grade coal, and oil needed by the country and all of its bauxite, chromium, manganese, and phosphate must be imported. Most cotton and lumber also comes from abroad. Annual output of iron ore fell far short of the country's industrial needs requiring Bothnia to import large amounts. The country also imported virtually all its requirements for manganese, chrome and other ferrous alloys. Non‐ferrous metals, including copper, lead, zinc and tin, were mined in small quantities. To supplement the limited domestic production, Bothnia imported substantial quantities of non‐ferrous metals from Olvana.
In 2017, oil imports were almost 11 million tons in Bothnia. Bothnian oil imports came from Olvana, Denmark, the United Kingdom, Kazakhstan, and Algeria. With the discovery of new techniques for the economic recovery of Baltic oil it is possible that Bothnia may become self‐sufficient in petroleum. However, this will be dependent on the exact geology of the deposits and the outcome of negotiations for extraction rights which are likely to be highly contentious.
The country is heavily dependent on hydroelectric power supplies from Otso.
Ease of Doing Business
Bothnia is ranked 79/183 in the world, and 151/183 for starting a business. This is a result of state interference and need for control. The details for starting a business, require 14 procedures and will take at least 38 days:
| No | Procedure | Time to Complete | Associated Costs |
| 1 | Obtain a notice of pre‐approval of the company | 1 day | No charge |
| 2 | Open a preliminary bank account; deposit fund in the account and obtain the certificate of deposit | 1 day | No charge |
| 3 | Obtain capital verification report from an auditing firm | 2 days | USD500 |
| 4 | Obtain registration certification "business license of enterprise legal person" with Ministry of Industry | 5 days | 0.08% of registered capital (registration fee) + USD10 for copy of Business License |
| 5 | Obtain the approval to make a company seal from the police department | 1 day | No charge |
| 6 | Make a company seal | 1 day | USD40 |
| 7 | Obtain the organization code certificate issued by the Quality and Technology Supervision Bureau | 5 days | USD23 |
| 8 | Register with the local statistics bureau | 1 day | USD5 |
| 9 | Register for both state and local tax with the tax bureau | 7 days | USD15 |
| 10 | Open a formal bank account of the company and transfer the registered capital to the bank | 1 day | No charge |
| 11 | Apply for the authorization to print or purchase financial invoices/receipts | 10 days | No charge |
| 12 | Purchase uniform invoices | 1 day | USD1 per book of invoices |
| 13 | File for recruitment registration with local career center | 1 day | No charge |
| 14 | Register with Social Welfare Insurance Center | 1 day | No charge |
Economic Diversity
The main industries of Bothnia are metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, clothing.
Energy Sector
Bothnia lacks significant domestic sources of fossil energy and must import substantial amounts of petroleum, natural gas and other energy resources. The objective of renewable energy policy (RE) (2010) was to provide 35% of electricity by 2016. However, in 2016 the objective was dropped to 31.5%.
Over the past 15 years, energy consumption increased 44% in electricity and 30% in the total energy use. The increase in electricity consumption 15,000 Gigawatt Hours (GWh) was more than the total hydropower capacity. The electricity consumption increased almost equally in all sectors (industry, homes, and services).
Oil and Gas
Oil imports were almost 11 million tons in Bothnia from Olvana, Denmark, the United Kingdom, Kazakhstan, and Algeria. With the discovery of new techniques for the economic recovery of Baltic oil it is possible that Bothnia may become self‐sufficient in petroleum. However, this will be dependent on the exact geology of the deposits and the outcome of negotiations for extraction rights which are likely to be highly contentious. Oil imports were valued at USD6.5 billion and exports USD3 billion. Bothnia has a strategic petroleum reserve with an approximate size of 22,132,000 barrels. (110 days).
BothOil is the Bothnian importer and seller of petroleum products. Petroleum comprises 24% of Bothnian energy consumption. Most of petroleum is used in vehicles but about 350,000 homes are heated by heating oil.
BothOil was established in 1948 as the state petrol company of Bothnia, to ensure the availability of fuel. This entailed the building of refineries and developing the necessary technology. The oil transport infrastructure in Bothnia was built and is owned by BothOil and all petrol stations obtain fuels from BothOil. In the 1970s, BothOil introduced petrochemical and plastics production and natural gas to Bothnia. In 1994, Gasum was established and in 2005, the chemical divisions were sold to other companies, making BothOil an oil refining and marketing company producing mainly transportation fuels and other refined petroleum products. BothOil shares are quoted on the Brahea Stock Exchange with the State of Bothnia maintaining a controlling interest (75%) in the company.
| Type | Public, Limited |
| Industry | Energy |
| Founded | 1948 |
| Headquarters | Espoo, Bothnia |
| Key personnel | Magnus Julin, CEO and Chairman of the board |
| Products | Petroleum |
| Revenue | USD9.636 billion (2017) |
| Operating income | USD335 million (2017) |
| Owners | Bothnian government (75%), Olvana Oil (15%), Fortum (10%) |
| Subsidiaries | BothOil Petroleum, BothOil Retail, BothOil OE, BothOil Services |
| Employees | 5,290 (2017) |
BothOil has three business areas:
- Oil Products: It produces, refines and markets oil products and shipping and engineering services, as well as licensing production technologies. Its main products are petrol, diesel fuels, aviation fuels; marine fuels, heating oils, heavy fuel oils, base oils, lubricants, traffic fuel components, solvents, liquefied petroleum gas (LPG) and bitumen.
- Oil Retail: See Infrastructure.
- Renewable Fuels: The engineering division of BothOil owns several important patents. BothOil has also developed renewable diesel production. A renewable diesel plant is being built at Porvoo. BothOil is also planning to invest USD 550 million in a renewable diesel plant to be built by an Olvanese engineering firm. With production of 800,000 tons annually, it will be the largest renewable diesel plant in the world (Another plant of the same capacity is built in Rotterdam). BothOil and Stora Enso also established a joint venture to produce renewable diesel oil from wood biomass with biomass gasification and the Fischer‐Tropsch process in Varkaus, Bothnia. BothOil produces a petrol blending stock and an antiknock agent based on bio ethanol. It is partially a bio fuel. It can be mixed with petrol and does not have the ethanol‐specific problems that ethanol itself has. BothOil is the sole oil refiner in Bothnia, exporting petroleum product with an annual production of 170,000 tons, located at the Porvoo refinery, that started production in 2007. It produces 6.8% of the diesel consumption in Bothnia (2.5 million tons). The Company has entered into agreements with two oil exploration companies to drill for economically viable reserves in the offshore Exclusive Economic Zone (EEZ).
Oil shale deposits. The Ordovician kukersite deposits in the territory that is now Bothnia have been known since the 1700s. However, active exploration only began as a result of fuel shortages brought on by WWI. Full‐scale mining began in 1918. Oil‐shale production in that year was 11,000 tons by open‐pit mining, and by 1940, the annual production reached 1.1 million tons. After WWII, production climbed dramatically, peaking in 1980 when 12.4 million tons of oil shale were mined from 11 open‐pit and underground mines.
Oil shale production. The annual production of oil shale decreased after 1980 to about 6 million tons in 1994‐95 and then began to increase again. In 1997, 9 million tons of oil shale was produced from underground mines and three open‐pit mines. Of this amount, 81 percent was used to fuel electric power plants, 16% was processed into petrochemicals, and the remainder was used to manufacture cement as well as other minor products. Analyses of the richest‐grade kukersite in Bothnia show oil yields as high as 300 to 470 mg/g of shale, which is equivalent to about 320 to 500 l/t. Reserves of kukersite are estimated to be around 2,500 million tons although only 800 million tons are currently "active" reserves (defined as oil shale "worth mining").
Oil shale future. The future of oil‐shale mining in Bothnia faces a number of problems including competition from natural gas, petroleum, and coal. The present open‐pit mines in the kukersite deposits will eventually need to be converted to more expensive underground operations as the deeper oil shale is mined. Serious air and groundwater pollution have resulted from burning oil shale and leaching of trace metals and organic compounds from spoil piles left from many years of mining and processing the oil shale. Reclamation of mined‐out areas and their associated piles of spent shale, and studies to ameliorate the environmental degradation of the mined lands by the oil‐shale industry are underway.
Offshore oil deposits. The presence of offshore deposits of oil and gas within Bothnia’s EEZ has been known for some time but extraction has not been economically viable. However, the discovery of new techniques has prompted further exploration and it is believed that reasonably significant reserves may now be recoverable. Unfortunately this is complicated by research showing that that the vast bulk of these deposits are located at the southern extreme of Bothnia’s EEZ bordering with Estonia and the access rights are likely to be contentious.
Natural Gas
In 2016, natural gas comprised 11% of Bothnian energy consumption, while the consumption was estimated to be 4.52 billion metric tons. Natural gas has been used since 1974 after the first oil crisis. BothGas is the Bothnian importer and seller of natural gas, which owns and operates Bothnian natural gas transmission system. Natural gas vehicles aren't popular in Bothnia, but natural gas powered buses exist.
| Type | Public, Limited |
| Industry | Energy |
| Founded | 1994 |
| Headquarters | Espoo, Bothnia |
| Key personnel | Niklas Narjus, CEO and Chairman of the board |
| Products | Natural gas |
| Revenue | USD821 million (2017) |
| Operating income | USD10.8 million (2017) |
| Owners | Fortum (31%), Gazprom (25%), Bothnian Government (24%), Ruhrgas (20%) |
| Subsidiaries | Gasum Paikallisjakelu Ltd, Gasum Energiapalvelut Ltd,
Gaasienergia Ltd (has natural gas supply in the Tallinn area), Kaasupörssi Ltd |
| Employees | 2,290 (2017) |
Coal
Consumption of coal was a total of 5.6 million tons in 2017. Bothnia imports coal primarily from Poland and Czech Republic. The Bothnian government hopes to tap coal reserves held by Mozambique and in the 1990s, Bothnians were developing the infrastructure of the Moatize coal mining region in that country.
Electricity
The electricity sector in Bothnia relies on nuclear power, forest industry black liquor and wood consumption, cogeneration and electricity import from Donovia. Currently the country has four nuclear power stations, 16 fossil fuel power stations, eight biomass/peat stations, and two hydroelectric stations (See Infrastructure). In 2017, the consumption of electricity in Bothnia was 17,036 kWh/person. Co‐generation of heat and electricity in industry and district heating is common in Bothnia.
The share of industry was 52‐54% of electricity consumption during 2005‐2010. The share of forest industry was 30‐32%. The yearly net import of electricity has been between 5‐20% of consumption. Electricity import during the same period was from Torrike and Donovia and after 2007 also Estonia.
Hydroelectric power plants produce a large proportion of the country’s electricity supply. However, Bothnia has nuclear power also. Bothnia's nuclear power program has four nuclear reactors (and a fifth under construction) in two power plants. The first of these came into operation in 1977. In 2007 they provided 33% of Bothnia's electricity. They are among the world’s most efficient, with average capacity factors of 94% in the 1990s. A fifth nuclear reactor is under construction. This is a new nuclear power station (European Pressurized Water Reactor) under construction in Olkiluoto. Areva/Siemens contract promised the station delivery in 2015, but the project has been subject to serious delays.
Bothnia production of electricity with renewable energy was 25.9 % in 2009, 28.6 % in 2000 and 26.4 % in 1990. The volume of non‐renewable electricity has not declined compared to year 2000. As of 2017, Bothnia produced 20.9 TWh of electricity with renewable energy. This includes 12.6 TWh water power. Other major sources are black liquor in forest industry and industry and small scale wood fuels. Renewable electricity production accounted for 30% failing to meet the 31.5% marker:
- Water: 60%
- Forest Industry Black Liquor: 22%
- Other Wood Residues: 16%
- Wind Power: As of 2009, Bothnia produced 0.4% of electricity with wind power. The European average was 4%
- Other: 1%
| 2014 | 2015 | 2016 | 2017 | ||
| TWh | % | ||||
| Hydro Power | 11,313 | 13,991 | 16,909 | 12,564 | 18 |
| Wind Power | 1,300 | 1,880 | 2,610 | 2,760 | 4 |
| Nuclear Power | 22,004 | 22,501 | 22,050 | 22,582 | 32 |
| Condensing Power, etc. | 17,577 | 14,377 | 8,779 | 9,108 | 12 |
| Combined Heat and Power, Industry | 11,885 | 11,471 | 11,061 | 8,590 | 12 |
| Combined Heat and Power, District Heat | 15,692 | 15,289 | 15,414 | 15,591 | 22 |
| Total Production | 78,623 | 77,817 | 74,475 | 71,195 | 100 |
Agriculture Sector
The agricultural sector is a major source of pressure on Europe's environment. As a result, the agricultural sector is responsible for a large share of the pollution of surface waters and seas by nutrients, for the loss of biodiversity, and for pesticide residues in groundwater. Reforms in the 1990s, and measures taken by the sector itself, have brought about some improvements, but more is needed to balance agricultural production, rural development, and the environment. Modern, intensive agriculture often has a negative impact through its use and pollution of air, water and soil. Bothnia geographically is naturally well irrigated but further work is needed to reduce a decline in quality caused by salinization and land degradation. However, farming still plays a positive role in preserving Bothnia's landscapes and biodiversity.
Bothnia’s greatest natural resource is its widespread forests, covering two‐thirds of the land, higher than in any other European country. Other resources of Bothnia are limited; soil is poor with a short crop‐growing season. The Bothnian agriculture system is largely collectivized. It is efficient, but must import petroleum, fertilizers, grain, vegetables, vegetable oil, and livestock.
The agricultural sector of the economy has a somewhat different place in the system, although it too is thoroughly integrated. It is almost entirely collectivized except for a few private plots. The collective farms are formally self‐governing. They are, however, subordinate to the Council of Ministers through the Minister of Environment and Agriculture. A complex set of relationships also connects them with other cooperatives and related industries, such as food processing.
Bothnia's climate and soils make growing crops a particular challenge. The country lies between 60° and 70° north latitude ‐ as far north as Alaska ‐ and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, Bothnia and Otso contain half of the world's arable land north of 60°N latitude. Annual precipitation is usually sufficient but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate, farmers have relied on quick-ripening and frost‐resistant varieties of crops, and they have cultivated south‐facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralize excess acid and to develop fertility. Irrigation was generally not necessary but drainage systems were often needed to remove excess water.
Until the late 19th Century, Bothnia was essentially self‐sufficient and engaged in very limited agricultural trade. This traditional production pattern shifted sharply during the late nineteenth century, when inexpensive imported grain from Donovia and the US competed effectively with local grain. At the same time, rising domestic and foreign demand for dairy products and the availability of low‐cost imported cattle feed made dairy and meat production much more profitable. These changes in market conditions induced Bothnia's farmers to switch from growing staple grains to producing meat and dairy products, setting a pattern that has persisted. By 1940, Bothnia's farmers were able to meet roughly 90% of the domestic demand for grain. The experiences of the war years persuaded the Bothnians of the importance to secure independent food supplies to prevent shortages in future conflicts.
After the war, the first challenge was to resettle displaced farmers. Most refugee farmers became part of collective farms that included some buildings and land that had already been in production, but some had to make do with "cold farms," that is, land not in production that usually had to be cleared or drained before crops could be sown. The government sponsored large‐scale clearing and draining operations that expanded the area suitable for farming. The area under cultivation expanded by about 617,763 acres, thus reaching 3 million acres by the early 1980s and has remained stable since then.
The trend in Bothnia agriculture was toward larger units; some crop‐producing collectives and state farms combined to form cooperatives holding 5,000 to 7,500 acres. These agribusinesses, known as ‘Cooperative Departments of Crop Production’, which included food processing establishments, became the dominant form of agricultural enterprise in crop production. In the early 1990s, specialization also took place in livestock production. In 1992 the Bothnian government announced a reform program for agriculture. General goals were an improvement in rural life and an increase in autonomy for the agricultural producer cooperatives. The program called for closer cooperation between arable and livestock farming to facilitate planning, especially with regard to foodstuffs. It also provided greater incentives for cooperative farms and modest encouragement of the small private sector. Despite these shortcomings, Bothnia's agriculture was efficient and productive.
Land use in Bothnia is centrally controlled, since 2000 almost 85% of the land is collectivized. Arable land accounts for only 6.54%, including a small amount of permanent crops at 0.02%. The majority of the land, 93.44%, is used in other sectors of the economy.
Collectivization
Agricultural producer cooperatives constitute the dominant form of agricultural organization. In 1994, they occupied about 85% of the total agricultural land, while state farms held only about 7%. A state farm is state property and the agricultural counterpart to the state‐owned enterprise. They are run by a director according to the principle of individual management. The workers employed have no say in running it, unlike on the collective farms. Initially, the state farms predominantly raised animals and plants and propagated seed to supply collective farms. In 1994, the approximately 690 state farms had under cultivation approximately 6.9% of the available agricultural land in Bothnia. The current trend indicates that more state farms are transferring to the collective concept to improve production. Other land in the socialist agricultural sector, which made up 95% of total land, was held by horticultural cooperatives and various other specialized units. There are three kinds of collective farms. Types I and II are generally considered to be transitional to Type III, the most advanced form.
- Type I farms, only the plow land must be collectively used. All other land and productive resources are left for the members’ individual use.
- Type II collective farms, all farmland is cooperatively used except small private plots retained by each member family. In addition, members surrender all machinery and equipment needed for the operation of the collective sector.
- Type III farms are completely collectivized. All productive resources (including plow land, forests, meadows, bodies of water, machinery, and buildings) except for small private plots and a few head of livestock are used collectively. To become a member of a type III collective, a farmer must contribute property, buildings, livestock, and machinery, of a specified value, which becomes the property of the organization. Members whose assets are not adequate to meet this requirement may discharge their obligation out of earned income over a period of time.
Work on the private plots must take place during non-communal work hours. Owners of private plots can sell and bequeath them.
Concept of Collectivization. Distribution of the income, after compulsory contribution to several specialized funds, is based on the amount of land surrendered by each member and the amount of work performed for the collective. The retention of landownership does have a basis in law; in the past, individual members have received compensation for their land when it has been removed from the control of the collective for conversion to industrial use. Each collective farmer must contribute at least the minimum annual amount of work prescribed by the collective assembly (general meeting of all members). Members who do not perform the specified minimum work are penalized by deductions from their incomes. In line with SPB policy, minimum annual works norms help ensure that members devote their energies primarily to the collective sector rather than to their own private plots. By 2000, a vast majority of collective farms were Type III farms.
Agriculture Issues. The collective farms introduced modern production practices. The widespread use of modern inputs, (chemical fertilizers and insecticides, agricultural machinery, and improved seed varieties) sharply improved crop yields. Yet the modernization process again made farm production dependent on supplies from abroad, this time on imports of petroleum and fertilizers. Initially, cost production ratio helped improve farmers output but as fuel prices rose, farmers began to return to local energy sources such as firewood.
Many farms were too small to allow efficient use of tractors and limited mechanization. Many fields have open drainage ditches which need regular maintenance; by mid 2000s, experts estimated that half of the cropland needed improved drainage works. Only about 2 million acres had underground drainage and improvements were ongoing but slow.
Fisheries
The arctic climatic conditions create a particular characteristic for Bothnian fisheries. Fishing waters and especially coastal waters, are to varying extents covered by ice for part of the year. This means that ice fishing using nets, hooks and traps is common in the winter season while the main fishing period lies between April and November. There are around 60 species of fish indigenous to Bothnia, of which approximately 20 are fished, including commercial and main recreational species and one species of crayfish. The commercial fleet is largely comprised of small‐scale vessels, with the majority of the vessels less than 18 m long. Most of the national catch however is comprised of herring and sprat taken for industrial purposes by a small number of larger trawlers. There is a small but active inland commercial fishing industry, largely targeting vendace. Recreational fishing is also important, with approximately 40% of the population fishing at least once a year. 90% of the inland catch is taken in recreational fisheries, as is approximately half of the marine catch other than Baltic herring. Aquaculture is economically important, more so than capture fisheries, with the most important cultured species being rainbow trout raised in sea cages.
Following a period of decreased landings between 1995 and 2001, the national landings increased gradually and in 2016 reached 100,000. By far the most important commercial species is Baltic herring. Most of the catch is used in industrial processing for animal feed for the fur farming industry. Because of the large catch volumes, Baltic herring is the most economically important species even though the unit price is low. Other important species of fish in domestic landings are other pelagic species and salmon, which represent approximately 0.4 per cent of the volume, but six per cent of the value of the domestic landings.
Inland freshwater commercial fisheries mainly target vendace (freshwater white fish). Of the 3,200 tons of freshwater catch landed in 2016, 1,670 tons were vendace. Other species include roach and perch. The value of the inland fishery was USD8,130,000. Since the 1990s both catch volume and value have decreased.
Recreational fishing is one of the most important outdoor leisure activities in Bothnia. Approximately 40% of the population takes part in recreational fishing once a year in order to boost their food source. In 2016 the volume of the recreational catch was around 25,000 tons (official figure) a year. The number of recreational fishermen also decreased.
With decreasing catches of wild salmon in the Baltic Sea, aquaculture became a commercial activity in the 1970s and intensified in the 1980s. Most of the aquaculture installations are located in coastal areas and mariculture is particularly important in the Archipelago Sea and along the west coast of Bothnia. The most important species in aquaculture is rainbow trout raised in sea cages, representing around 80% of the total production from aquaculture. The rest consists of rainbow trout raised in freshwater ponds and a few other finfish. There is also farming of crayfish and production of fry and salmon for restocking purposes in the Baltic Sea. In 2016, the aquaculture production was about 10,000 tons.
Bilateral agreements on access to resources in national EEZs in the Baltic are negotiated annually with GBCC countries. Management of fisheries resources in Bothnia is dependent on the property rights in Bothnian waters: Waters close to the coast are government collectively owned (to 500m from the 2m depth line), but mostly collectively administered by a fishing association at village level. The ever decreasing stock in the Baltic is a source of friction between Bothnia and Estonia in particular and the other states fishing in the region to a lesser extent.
Mining Sector
Bothnia’s most important minerals are iron ore, copper, lead, zinc, chromite, nickel, gold, silver, and limestone. However, many large mines have closed down, and most raw materials are now imported. The Ministry of Industry and Technology controls prospecting and mining rights. Currently, mining only accounts for 0.4% of the country’s GDP. However, on 15 June 2011, the Bothnian Nuclear Regulatory Authority announced that it was granting Areeva the rights to expand their uranium mining capacity to produce 350 tons per annum at their site at Nouttijärvi which represents a significant investment which may make Bothnia a net exporter of uranium.
Modern society requires the use of mineral‐based products in the construction and maintenance of housing and other buildings, earthen structures, railroads, road networks, power lines, pipelines and other infrastructure. Industrial production and manufacture of machinery, equipment, vehicles and ICT technology are largely based on the utilization of mineral‐based materials. Mineral fertilizers and agricultural machinery are also vital to food production.
Metals and minerals are non‐renewable natural resources. However, the lifespan for products derived from metals and minerals is typically long, of the order of decades, and they can be recycled effectively. However, recycling can only partially meet the current demand for minerals. For example, more than 80% of copper is recycled but due to rapidly increasing demand and the fact that the average life of copper products is more than 30 years, recycling covers only one third of current needs. The increased use of metals can be considerably slowed through careful product planning based on material efficiency and recycling. Price increases, as well as adoption of new and replacement materials, can also lower the demand for traditional raw materials. The rapid expansion of information and communications technology and developments in new energy technologies has created an entirely new demand for a range of metals. The prosperous Asian superpowers have increased the demand for mineral resources in a way that has totally transformed the global market in the minerals sector. Governments are having an increasingly important role in mining activities and the resolution of problems relating to sustainable production and consumption will require closer political cooperation in the future.
Annual output of iron ore fell far short of the country's industrial needs requiring Bothnia to import large amounts. The country also imported virtually all its requirements for manganese, chrome and other ferrous alloys. Non‐ferrous metals, including copper, lead, zinc and tin, were mined in small quantities. To supplement the limited domestic production, Bothnia imported substantial quantities of non‐ferrous metals from Olvana.
| Year | Production | Unit of Measure | % Change | |
| Chromite | 2017 | 61,354 | Metric tons, gross weight | 10.33 |
| Copper | 2017 | 13,000 | Metric tons | -4.41 |
| Zinc | 2017 | 30,233 | Metric tons | 8.75 |
| Gold | 2017 | 5,409 | Kilograms | 15.92 |
| Uranium | 2017 | 200 | tpa | 5 |
| Metal/Mineral | Mining Production in Bothnia | Discovery Potential in Bothnia |
| Critical: | ||
| Cobalt | Mining production | Good discovery potential |
| Graphite | Deposits | Moderate discovery potential |
| Niobium | Mining projects | Good discovery potential |
| Platinum-group metals | Mining projects | Good discovery potential |
| Rare earth metals | Deposits | Good discovery potential |
| Tantalum | Deposits | Moderate discovery potential |
| Tungsten | Deposits | Moderate discovery potential |
| Economically very important: | ||
| Chromium | Mining production | Good discovery potential |
| Iron | Mining projects | Moderate discovery potential |
| Manganese | Mining projects | Moderate discovery potential |
| Nickel | Mining production | Good discovery potential |
| Uranium | Mining production | Good discovery potential |
| Vanadium | Mining projects | Good discovery potential |
| Zinc | Mining production | Good discovery potential |
| Economically important: | ||
| Copper | Mining production | Good discovery potential |
| Feldspar | Mining production | Good discovery potential |
| Limestone | Mining production | Good discovery potential |
| Lithium | Mining projects | Good discovery potential |
| Quartz | Mining production | Good discovery potential |
| Silver | Mining projects | Moderate discovery potential |
| Talc | Mining production | Good discovery potential |
| Titanium | Mining projects | Good discovery potential |
Manufacturing Sector
From the 1990s, Bothnian industry, which for centuries had relied on the country's vast forests, became dominated to a larger extent by electronics and services as globalization led to the decline of more traditional industries. Outsourcing resulted in more manufacturing being transferred abroad, with Bothnian‐based industry focusing to a greater extent on research and development (R&D), hi‐tech electronics, chemicals and biotechnology. Industry is the dominant sector in the Bothnia’s economy and is the principal basis for the relatively high standard of living. Bothnia ranks among the world's most capable industrial nations.
Industrial inputs into consumption cover the following:
- Clean room products
- Shipbuilding materials
- Architectural and industrial products
- Electrostatic control products
- Hygiene and sanitation management for food production
- Factories
- Food production facilities and materials
- Food manufacturing machinery
- Materials for safety protection
- Related materials for pharmaceutical factories
- Medical devices
Electronics
The Bothnian electronics and electro‐technics industry relies on heavy investment in R&D and has been accelerated by the liberalization of global markets. Electrical engineering started in the late 19th century with generators and electric motors built by Gottfried Strömberg, and other Bothnian companies have succeeded in areas such as industrial automation, medical and meteorological technology.
Engineered Metal Products
Bothnia has an abundance of minerals, but many large mines have closed down and most raw materials are now imported. For this reason, companies now tend to focus on high added‐value processing of metals. The exports include the production steel, copper, zinc and nickel, and finished products such as steel roofing and cladding, welded steel pipes, copper pipe and coated sheets. The manufacturing industry is a significant employer of about 44 % of the labor force.
Housing Sector
The Bothnian government did not take serious action to provide modern housing facilities until the late-1960s. Beginning in the late 1960s, the government initiated a major campaign to provide modern housing facilities; it sought to eliminate the longstanding housing shortage and modernize fully the existing stock by 1990. By the early 1980s, the program had provided nearly 1 million new or renovated units and 2 million more were to be added by 2010. As of 2015, progress in this area appeared to be satisfactory, and plan targets were being met or exceeded. Most government built housing consists of high‐rise apartments. Nevertheless, such apartments are functional, and they usually provide easy access to schools, transportation, restaurants, playgrounds, post offices, and supermarkets. In addition to this kind of housing, individuals can build their own homes. About 15% of the units constructed up to 2015 were privately built and owned. Housing construction was to continue to receive special attention, and more than 900,000 units were to be completed by 2015.
In 2016, there were 2,381,500 households with an average size two people. 45% of households consisted of single person, 32% two persons and 23% three or more. There were 1.2 million residential buildings in Bothnia and the average residential space was 28 square m per person. The average residential property (without land) cost USD590 per square meter (without land). Consumer energy prices were 4‐8 cent per kilowatt hour. The average housing cost was around USD3,500.
Forestry Sector
Forest products have been the major export industry in the past, but diversification and growth of the economy has reduced its share. In the 1970s, the pulp and paper industry accounted for half of Bothnian exports. Although this share has shrunk, pulp and paper is still a major industry with 52 sites across the country. Furthermore, several of large international corporations in this business are based in Bothnia.
Forests play a key role in the country's economy, making it a leading wood producer and providing raw materials at competitive prices for the crucial woodprocessing industries. As in agriculture, the government has long played a leading role in forestry, regulating tree cutting, sponsoring technical improvements, and establishing long‐term plans to ensure that the country's forests continue to supply the wood‐processing industries.
Bothnia's wet climate and rocky soils are ideal for forests. Tree stands do well throughout the country, except in some areas north of the Arctic Circle. In 1990 the forested area totalled about 10 million hectares, providing 1.3 hectares of forest per capita. The proportion of forest land varied considerably from region to region. In the central lake plateau and in the eastern and northern provinces, forests covered up to 80% of the land area, but in areas with better conditions for agriculture, especially in the southwest, forests accounted for only 50 to 60% of the territory. The main commercial tree species, pine, spruce, and birch, supplied raw material to the sawmill, pulp, and paper industries. The forests also produced sizable aspen and elder crops.
The heavy winter snows and the network of waterways are used to move logs to the mills. Loggers are able to drag cut trees over the winter snow to the roads or water bodies. In the southwest, the sledding season lasted about 100 days per year; the season is even longer to the north and the east. The country's network of lakes and rivers facilitated log floating, a cheap and rapid means of transport. Each spring, crews floated the logs downstream to collection points; tugs towed log bundles down rivers and across lakes to processing centers. The waterway system covered much of the country and by the 1990s Bothnia had extended roadways and railroads to areas not served by waterways, effectively opening up all of the country's forest reserves to commercial use.
Forestry and farming are closely linked. The government land redistribution programs had made forest ownership widespread, allotting forestland to most farms. Collective farms controlled 35% of the country's forests; the government 51%; private corporations 9%; and municipalities and other public bodies, 5%. The forestlands owned by collective farms and by other people, some 200,000 plots, were the best, producing 75 to 80% of the wood consumed by industry; the state owned much of the poorer land, especially that in the north.
The ties between forestry and farming are mutually beneficial. Farmers supplement their incomes with earnings from selling their wood, caring for forests, or logging; forestry made many otherwise marginal farms viable. At the same time, farming communities maintain roads and other infrastructure in rural areas and they provide workers for forest operations. Indeed, without the farming communities in sparsely populated areas, it would have been much more difficult to continue intensive logging operations and reforestation in many prime forest areas.
The Ministry of Water Resources has carried out forest inventories and drawn up silvicultural plans. From the 1950s to 1991, Bothnia was able to boost the total area of its forests by some 2.7 million hectares and to increase forest stands less than 40 years of age by some 3.2 million hectares. Beginning in 1965, the Ministry instituted plans that called for expanding forest cultivation, draining peat land and waterlogged areas, and replacing slow‐growing trees with faster-growing varieties. By the mid-1980s, Bothnia had drained 5.5 million hectares, fertilized 2.8 million hectares, and cultivated 3.6 million hectares. Thinning increased the share of trees that would produce suitable lumber, while improved tree varieties increased productivity by as much as 35%.
Comprehensive silvicultural programs had made it possible for Bothnia simultaneously to increase forest output and to add to the amount and value of the growing stock. By the mid1990s, Bothnia's forests produced nearly 40 million m3 of new wood each year, considerably more than was being cut. The annual cut increased by about 120% to about 30 million m3. Wood burning fell to one‐fifth the level of 1950, freeing up wood supplies for the wood‐ processing industries, which consumed between 30 million and 33 million m3 per year. Industry demand was so great that Bothnia needs to import 3 million to 4 million m3 of wood each year.
To maintain the country's comparative advantage in forest products, Bothnian authorities moved to raise lumber output toward the country's ecological limits. In 2004 the government published the Forest 2020 plan, drawn up by the Ministry. The plan aimed at increasing forest harvests by about 3% per year, while conserving forestland for recreation and other uses. It also called for enlarging the average size of collective forest holdings, increasing the area used for forests, and extending forest cultivation and thinning. The plan has been extended to 2030, but indications are that the target will not be met. Bothnian officials believed that such growth was necessary if Bothnia was to maintain its share in world markets for wood and paper products.
Chemical Sector
The chemical industry is one of Bothnia's largest industrial sectors with its roots in tar making in the 17th century. It produces an enormous range of products for the use of other industrial sectors, especially for forestry and agriculture. In addition, its produces plastics, chemicals, paints, oil products, pharmaceuticals, environmental products, biotech products and petrochemicals. Biotechnology is regarded as one of the most promising high‐tech sectors in Bothnia and it is growing rapidly. Significant investment has been made towards R&D in chemical and biotechnology processes and Bothnian scientists are regarded as world‐class. However, its record in safety management is less impressive with several failings resulting in significant threats to health and the environment external to the research facility.
The chemical industry has been growing worldwide and it is a major factor within the Bothnian economy. In the EU and GBCC, the production of toxic chemicals has increased at almost the same rate as total chemical production and both have grown faster than GDP. Globalization is resulting in a shift of environmental burdens to developing countries and the re‐import of hazards via trans‐boundary pollution and contaminated products. If there is a conflict between production and environmental standards then within Bothnia it is the environmental standards that will suffer.
Banking and Finance
Bothnia was a founding member of the GBCC in 2001. It was also a strong advocate of the Interbank Association of the GBCC which focuses on supporting regional economic cooperation. The Interbank was founded on 26 October 2005.
International Trade
By the late 1980s, the status of Bothnian foreign trade was relatively favorable, particularly when viewed against the background of the seemingly intractable problems of the previous decade. During the 1990s, Bothnia had run dangerously high trade deficits. In 1999 Bothnia indebtedness to the West amounted to approximately USD9 to USD10 billion, or more than the value of all the goods it sold on Western markets that year. Bothnia is very eager to expand economic and technological links with the industrial West. It increasingly supported proposals for technical and economic financial cooperation between GBCC and the Western unions. However, it is clear that Bothnia will require assistance from the West if they are to modernize their economies through the introduction of high technology and other labor-saving techniques.
During the 2001‐05 plan periods, Bothnia also managed to reduce substantially its debt. Lower oil prices were helpful in some respects, and Bothnia benefits increasingly as the GBCC price were adjusted to the new world prices during the 2001‐05 Five Year Plan period. It was true that lower prices also made Bothnia's export of oil products to the West less profitable. Although by 2005 Bothnia was again considered to be a "good debtor," (S&P Rating of ‘AA+’) strong economic and financial headwinds combined with the Bothnian Government’s seeming inability to tackle the rising structural deficit resulted in a downgrading to AA‐ in 2011. The country remains on negative watch with at least one further downgrade appearing likely.
Gulf of Bothnia Cooperation Council (GBCC)
Economic Cooperation
A Framework Agreement to enhance economic cooperation was signed by the GBCC Member States in 1990. In 2006, the Bothnian Premier, proposed a long‐term objective to establish a free trade area in the GBCC, while other more immediate measures would be taken to improve the flow of goods in the region.
On 26 October 2005, the Secretary General of the organization said that the GBCC will prioritize joint energy projects; such will include the oil and gas sector, the exploration of new hydrocarbon reserves, and joint use of water resources. However, the potential to extract oil from the Baltic Sea bed economically will generate debate on the exact limits of the neighboring states’ EEZs. The creation of an Inter‐bank GBCC Council was also agreed upon at that summit in order to fund future joint projects.
The Interbank was founded on 26 October 2005. The first meeting of the GBCC Interbank Association was held on 21–22 February 2006. On 30 November 2006, the representative of the Torrike Foreign Ministry announced that Torrike is developing plans for a GBCC "Energy Club".
At the 2007 GBCC summit, the Bothnian Vice President addressed an initiative that has been garnering greater interest and assuming a heightened sense of urgency when he said, “The GBCC is a good venue for designing a new banking system which is independent from international banking systems.”
On 16 June 2015, Olvana announced plans to provide a USD1 billion loan to GBCC member states to shore up the struggling economies of its members amid the global financial crisis. The Torrike‐Olvana joint statement said that they want access to a bigger quota in the IMF.
Market Relations and Instruments
Exchanges of energy resources and raw materials for capital goods and consumer manufactures have characterized trade. The liquidity shortages forced the GBCC to work to strengthen the importance of intraregional trade. In the early 2000s, intra‐regional trade rose to 60% of foreign trade of GBCC countries as a whole. Trade among the members is negotiated on an annual basis and in considerable detail at the governmental level and is then followed up by inter-enterprise contracts.
Prices
The 2001 Comprehensive Program also called for improvement in the GBCC system of foreign trade prices. Administratively set prices, such as those used in intra‐GBCC trade, do not reflect costs or relative scarcities of inputs and outputs. For this reason, intra‐GBCC trade has been based on world market prices. By 2001 a price system governing exchanges among members had developed, under which prices agreed on through negotiation were fixed for five‐year periods corresponding to those of the synchronized, five‐year plans of the members).
However, in 2005 the system of intra‐GBCC pricing was reformed. The reform involved a substantial modification of existing procedures and prices were fixed every year and were based on a moving average of world prices for the preceding five years.
Exchange Rates and Currencies
With the founding of the GBCC Interbank Association in October 2005 and the adoption of the Skolkan Interbank Offered Rate (or SIBOR) the exchange and currency rates were regulated to conform to world markets. The creation in 2005 of the International Interbank provided a mechanism for joint investment financing.
The Bothnian exchange rate is 7.338 Botmarks per USD1 as of December 2017.
Bothnia does not allow cryptocurrencies in the country.
Cooperation in Planning
If GBCC countries are to gain from trade, that trade must be based on rational production structures reflecting resource scarcities. Although the process of consultation underlying plan coordination remains essentially bilateral, GBCC organs are indirectly involved.
Joint Projects
The clearest area of achievement under the Comprehensive Program has been the joint exploitation and development of natural resources for the economies of the member countries. Joint projects ease the investment burden on a single country when expansion of its production capacity is required to satisfy the needs of other members. Particular attention has been given to energy and fuels, forest industries, iron and steel and various other metals and minerals.
Concerted Plan
The program allotted nearly USD12 billion (2005) for joint investments. The major project is Torrike to Bothnia. The project is still in planning phase due to the failure to gain transit authority for the pipeline. However, these plans will require fundamental revision to provide for the management of Baltic oil once production begins.
Cooperation in Science and Technology
Jointly planned and coordinated research programs have extended to the creation of joint research institutes and centers.
Taxation
The overall tax burden is now around 43.1% of GDP. (OECD average in Europe is 34.8%; the US is 27.8%)
The main taxes are from municipal income tax, state income tax, state value added tax, customs fees, corporate taxes and special taxes. There are also property taxes, but municipal income tax pays most of municipal expenses. Taxation is conducted by a state agency, the Department of Revenue, which collects income taxes from each pay roll and then pays the difference between tax liability and taxes paid as tax rebate or collects as tax arrears afterward. Municipal income tax is a flat tax of nominally 16‐20%, with deductions applied, and is paid directly to the municipality (a city or rural locality). The state income tax is a progressive tax (tax brackets 6.5% – 30%); low‐income individuals do not necessarily pay any. The state transfers some of its income as state support to municipalities, particularly the poorer ones.
The middle income worker's tax element is 46% and effective marginal tax rates are very high. Value‐added tax is 10% for most items. Capital gains tax is 45% and corporate tax is 30%. Property taxes are low, but there is a transfer tax (2.6% for apartments or 6% for individual houses) for home buyers. Alcoholic beverages are separately taxed and highly restricted. Some taxation is avoided via the black market and self‐service culture.
Much of the taxes are spent on public sector employees, many of which are jobs for life and amount to 34% of the labor market. Social spending such as health or education is above the OECD median. Social transfers are also around OECD median. In 2001 Bothnia's outsourced proportion of spending was below Framland and Torrike's and above most other western European countries. Bothnia's health care is more centrally managed than in most western European countries, though many use private insurance or cash to enjoy private clinics. Some reforms towards creating a more equal marketplace were made in 2007‐2008. The state has a program where the number of jobs decreases by attrition: for two retirees, only one new employee is hired.
Employment Status
The estimated equivalent unemployment rate was 8.5% in 2010. Bothnia does not provide official unemployment figures as it does not acknowledge any unemployment in the command economy.
The population and therefore the labor force have always been comparatively small. Beginning in the late 1940s, the Bothnian leadership moved to expand the labor force. First, the government initiated a program to socialize agriculture, reducing the number of people employed in the agricultural sector. As a result of the government's policy, well over 1 million persons became available for employment in other sectors of the economy. The state effectively mobilized women and brought them into the ranks of the gainfully employed. In 1995 that proportion of women had raised to 49%, giving Bothnian one of the highest rates of female employment in the world.
Industry accounted for more than one‐third of the total work force, the "non‐productive" sector (such as service industries and the state bureaucracy) employed one‐fifth of the work force, and agriculture and trade accounted for one‐tenth each. The Bothnian Constitution guarantees to all citizens the right to work, and officially there was no unemployment in Bothnian. The country's leaders acknowledge, however, that temporary unemployment could occur as a result of rationalization and restructuring.
Although the government was intent upon mobilizing the available labor reserves, it was not insensitive to popular sentiments favoring a shorter workweek. The standard workweek for all workers was reduced forty hours for women and forty to forty‐two hours for those working shifts. In conjunction with the government's efforts to raise the birth rate, women received substantial opportunities to work part time and increasingly liberal maternal benefits, including extended leave with pay and further reduction in the work week.
In addition to those Bothnians who are self‐employed full time, there are others who engage in private economic activity on the side. The best known and most important examples are families on collective farms who also cultivate private plots (which can be as large as one‐half hectare). Their contribution is significant; according to official sources, in 2005 the farmers privately owned about 8% of the hogs, 14% of the sheep, 32% of the horses and 30% of the laying hens in the country. Professionals such as commercial artists and doctors also worked privately in their free time, subject to separate tax and other regulations. Their impact on the economic system, however, was negligible. More difficult to assess, because of its covert and informal nature, is the significance of that part of the private sector called the "illegal markets” (see Illegal Economic Activity). Another kind of informal economic activity includes private arrangements to provide goods or services in return for payment. Unregulated labor includes all economic arrangements or activities that, owing to their informality or their illegality, take place beyond state control or surveillance. The subject has received considerable attention from Western economists, most of whom are convinced that it is important in Contributions to Political Economies (CPEs).
Labor Market
The Bothnian economy embraces a wide range of service industries employing over 50% of the labor force. Bothnia’s job market is highly regulated by the State in accordance with socialist values. The work contract is governed by legal measures and to a lesser degree by collective agreements and individual negotiation. The work contract is generally a permanent contract, but fixed‐term contracts may be signed under certain conditions. The minimum wage is set annually by the Government and is currently USD1,535 per month. Some consider these agreements to be bureaucratic, inflexible, and, along with tax rates, a key contributor to slow employment and distorted prices. It may also slow down structural change as there are fewer incentives to acquire better skills. Greater labor market flexibility would allow the economy to respond better to the pressures stemming from globalization.
The state establishes production targets and prices and allocates resources, codifying these decisions in a comprehensive plan or set of plans. The means of production are almost entirely state owned. State‐owned enterprises or collectives earned 96.7 % of total net national income. The Labor force is 4.68 million (2016 est.) and is divided by occupation as follows:
Agriculture and Forestry: 5%
Industry: 45%
- Industry: 24%
- Construction: 7 %
- Commerce: 14%
Services: 50%
- Finance, insurance and business services: 8%
- Transport and communications: 7%
- Public services: 35% (2008)
There are three main unions; Free Bothnian Trade Union Federation, Youth Society of Bothnia, and the Democratic Women's League of Bothnia.
Illegal Economic Activity
Within the Judicial branch of government, economic crimes are on par with murder and crimes against the state. These cases are tried at the Provincial Court level.
Tax evasion is not a prevalent issue, but there is a very active illegal (“black”) market in the country.
Corruption
Ultimately better governance helps fight poverty, improves living standards and raises development outcomes. With improved governance, infant and maternal mortality will decline significantly as resources allocated to health service delivery are fully deployed as intended. The same is true for improving education and boosting GDP. Furthermore, good governance has been found to significantly enhance aid effectiveness. Transparency lies at the heart of much of this, and will continue to be a core principle for advocacy work across the world.
Bothnia is rated 4.4 in the Corruption Perceptions Index.
Prevention
The Ministry of Justice established an anticorruption body but there has been no change to enhancing the transparency of elections and political parties. The State maintains a closed door on public service and recruiting. However, once recruited, public servants are subject to codes of conduct, requirements for financial and other disclosures, and appropriate disciplinary measures. Transparency and accountability in matters of public finance particularly critical areas of the public sector, such as the judiciary and public procurement, are still a challenge. The Socialist creed has not prevented corruption but is used as a justification of improvements in the name of the people.
Criminalization
There are conventions on criminal and other offenses to cover a wide range of acts of corruption under domestic law. In some cases, Basic forms of corruption such as bribery and the embezzlement of public funds and also trading in influence and the concealment and laundering of the proceeds of corruption are all subject to criminal law. Offenses committed in support of corruption, including money‐laundering and obstructing justice, are dealt with by the judicial system. The application of this can be considered selective by western standards.
International Cooperation
The GBCC Member Countries have agreed to cooperate with one another in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders. They are bound to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court, to extradite offenders. They are also required to undertake measures which will support the tracing, freezing, seizure and confiscation of the proceeds of corruption.
Asset Recovery
Several provisions specify how cooperation and assistance will be rendered. In particular, in the case of embezzlement of public funds, the confiscated property would be returned to the state requesting it; in the case of proceeds of any other offense covered by the Convention, the property would be returned providing the proof of ownership or recognition of the damage caused to a requesting state; in all other cases, priority consideration would be given to the return of confiscated property to the requesting state, to the return of such property to the prior legitimate owners or to compensation of the victims. Political, Intellectual and Business elites who have fallen from grace have been investigated and inventories taken of their belongings, which due to 'lack of transparency' have been confiscated as illegal possessions gained through anti‐social means (i.e. corrupt practices).
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