OECD - OECD Mining Regions and Cities Case Study

The mining sector is relevant for economic development and for well-functioning societies. Raw materials are essential for the production of good and services, for the development of new technologies and the global transition towards a low carbon economy. Ensuring access to a stable supply of raw materials is a priority for many countries and regions. As one of the richest countries in mineral deposits in Europe, Finland can play a key role in the raw materials agenda of the European Union. However, mining policy in Finland is spatially blind, and better integration with regional characteristics and local development strategies are needed.

The subnational dimension is critical to understanding how to deliver better policies for economies that are specialised in mining and extractive activities. Unlike other industries, mining activity is geographically located where the deposits are, which creates a particular interaction with local communities and the environment. Mining specialisation generates a number of opportunities including greater investments and technological innovation, higher-wage jobs and participation in global value chains. Yet such specialisation also brings challenges involving vulnerability to external shocks, inflationary effects and environmental and social impacts. These impacts, both positive and negative, are amplified at regional and local scales.

North Karelia Region, in Finland, can be instrumental to support the national mineral strategy. In the region, the small municipality of Outokumpu was known as the key mining area in Finland for most of the 20 th century. Since the 1980s, Outokumpu has experienced a long-term transition associated with the closure of a major copper mine. The transition from mining to a manufacturing-based economy has been a positive experience, leading to an economy based on subcontracting and exports of metal technologies and mining services. Yet, currently, North Karelia and Outokumpu face development challenges, particularly in terms of generating a more dynamic business environment and labour market.

Outokumpu has a number of competitive advantages benefitting from a strategic location within the local labour market of Joensuu (the largest in North Karelia), a relatively high share of manufacturing activities with outstanding mining know-how and an enabling socio-political environment for mining activities. Yet, the municipality needs to overcome various bottlenecks to mobilise its assets and attain sustainable growth in the long term. They include a declining and ageing population, mismatches in the labour market, a low share of high-skilled workforce and a declining rate of entrepreneurship with stagnation in the establishment of new enterprises.

This study identifies how Outokumpu and North Karelia can build on its competitive advantages and address challenges by mobilising the potential of its mining value chain, diversifying and developing new sources of economic growth and improving governance co-ordination.

This study is part of the OECD Mining Regions and Cities Project that is focused on supporting countries in the implementation of better regional development policies in a mining and extractive context.