Transition Strategies for Finland’s Eastern and South‑Eastern Border Regions

9. Recommendations for the national level

Abstract

Chapter 9 presents national-level recommendations to strengthen the long-term resilience, security, and development of Finland’s eight eastern and southeastern border regions in response to the closure of the Russian border and ongoing geopolitical shifts. It sets out a comprehensive policy package built around several key priorities. These include securing additional EU and national support mechanisms, promoting economic diversification such as through potential Special Economic Zone (SEZ) pilots, upgrading strategic transport, energy and digital infrastructure, strengthening the regions’ investment attractiveness, and improving multi-level governance through better coordination and dedicated high-level leadership.

The closure of the Finnish-Russian border and the broader geopolitical realignment following Russia’s aggression against Ukraine have triggered profound and lasting impacts on Finland’s eastern and southeastern border regions. These strategically vital areas - already facing long-term demographic decline and structural economic challenges - now find themselves at the forefront of Europe’s changing security landscape. The consequences of the abrupt cessation of cross-border trade, tourism, and labour mobility have been compounded by broader economic disruptions, including the COVID-19 pandemic and global economic pressures. As a result, these regions are experiencing a unique convergence of economic, social, and security challenges that cannot be adequately addressed through standard regional policy tools.

This chapter presents a comprehensive set of policy recommendations for the national government to support the long-term resilience, economic revitalisation, and security preparedness of Finland’s eastern and southeastern regions. The recommendations are structured around seven interrelated priorities: identifying new support mechanisms, promoting economic diversification, upgrading strategic infrastructure, strengthening regional investment attractiveness, improving multi-level governance, enhancing social and human capital, and supporting data-driven policymaking.

A key recommendation is that Finland should actively seek to identify and pursue additional support mechanisms across levels of government. One potential avenue consists in making full use of the available instruments at EU level, particularly as part of discussions on the outcomes of the EU’s mid-term review of Cohesion Policy and the recent budget proposal by the European Commission for the EU’s long‑term budget (2028-34), presented on 16 July 2025 (Box 9.1).

Economic diversification is central to revitalising the affected regions. National efforts should focus on developing defence and cybersecurity industries, supporting high-value bioeconomy and clean energy projects, and exploring the establishment of a Special Economic Zone (SEZ) in the region. The SEZ would provide place-based incentives to attract investment while ensuring strong linkages with the local economy and innovation ecosystem.

Equally important are infrastructure upgrades that enhance both regional competitiveness and security. Strategic investments in transport, energy, and digital connectivity are needed to reinforce east-west linkages, reduce vulnerabilities, and position the region as an integral part of the national and EU security space.

Recognising the need for more effective co‑ordination, the chapter also recommends strengthening multi-level governance, including merging the current Eastern and Northern Finland programmes into a unified strategy and appointing a dedicated envoy or minister for the region1. Complementary actions are proposed to foster youth participation, expand mental health and housing services, and attract skilled labour through targeted incentives and vocational education reform.

Finally, the national government is encouraged to establish a dedicated research programme to monitor the ongoing transformation of Finland’s border regions. This will ensure that responses are guided by robust, real-time evidence and aligned with both national and EU strategic priorities.

Together, these recommendations aim to turn Finland’s eastern and southeastern border regions from perceived peripheries into resilient frontlines - economically dynamic, demographically sustainable, and geopolitically secure.

Identifying additional support mechanisms

Given the significant economic disruptions and heightened security challenges stemming from geopolitical shifts, Finland's eastern and southeastern border regions face distinct vulnerabilities requiring additional government support. Existing support mechanisms, while valuable, may be insufficient to fully address these unique and evolving challenges. It is therefore important for Finland to identify and pursue additional support mechanisms, including from the EU, that can effectively strengthen resilience, economic diversification, infrastructure investments, and security preparedness in these strategically important regions.

One potential avenue for such support lies in ongoing discussions within the EU framework, particularly as part of the mid-term review of Cohesion Policy. These discussions are exploring how Cohesion Policy could evolve to better address asymmetric regional impacts of geopolitical shifts. They are expected to lead to new forms of support, including within the existing Cohesion Policy framework.

Finland could consider different options of specific funding instruments to address the unique economic and security challenges faced by Finland’s eastern and southeastern border regions, including with the support from the European Commission.

New support mechanisms could prioritise critical infrastructure investments, ensuring the modernisation and protection of transport, energy, digital, communication, water, and emergency health and rescue networks essential for both regional development and security. If such tools are developed, a key focus should be on strategic dual-use investments, where infrastructure and technological advancements serve both civilian and defence purposes. This includes, for example:

• Strengthening transport and logistics networks to improve connectivity while ensuring rapid mobility for security, emergency response, and crisis management.

• Enhancing energy security, including investments in renewable energy and decentralised energy grids to reduce dependency on external sources and ensure resilience in crisis situations.

• Fortifying digital infrastructure to improve cybersecurity, protect against hybrid threats, and ensure the uninterrupted operation of critical services.

• Enhancing security of supply, water and food security, delivery of critical raw materials, and environmental sustainability.

• Expanding emergency health, rescue, and disaster preparedness capabilities, including medical response capacity, cross-border co‑ordination, and infrastructure for crisis management.

• Supporting innovation and R&D in security-related technologies that contribute to regional resilience, emergency response systems, and broader EU security objectives.

• By integrating economic development, critical infrastructure, and comprehensive security, this funding instrument would not only enhance the resilience of border regions but also contribute to the security and stability of the entire EU area.

Box 9.1. European Commission July 2025 MFF proposal: An eastern border perspective

In July 2025, the European Commission unveiled its proposal for the 2028–2034 Multiannual Financial Framework (MFF), with a total budget approaching €2 trillion. A cornerstone of this new budget is the substantial scaling-up of funding for migration, border management, and internal security, which is set to triple to reach approximately €81 billion in total.

Structural reforms in cohesion policy

The proposal introduces a fundamental shift in cohesion funding delivery. Rather than managing separate operational programmes per fund, Member States will plan and implement cohesion and related interventions through a single National and Regional Partnership Plan (NRP), complemented by a dedicated Interreg Plan for cross border co‑operation.

The total envelope for NRP based support amounts to €865 billion over 2028–2034, with approximately €450 billion attributed to cohesion, rural development, and fisheries -broadly maintaining 2021–2027 funding levels. The proposal includes a guaranteed minimum allocation of €218 billion for less-developed regions, featuring differentiated co-financing rates and safeguards that prevent reductions compared to the current period.

Strategic implications for eastern border states and regions

From the perspective of EU Member States along the eastern border with Russia - particularly Finland - these developments carry significant strategic importance. The tripled funding for internal security and border management creates opportunities for major investments in frontier infrastructure. The new NRP structure provides administrative flexibility, enabling countries to direct EU support toward place-based needs. The separate Interreg Plan maintains channels for Nordic–Baltic cross‑border connectivity, helping to offset suspended co‑operation with Russia.

Summary and outlook

The July proposal preserves cohesion funding at scale while simplifying administrative structures and incorporating enhanced flexibility and performance orientation. The dramatically expanded borders and migration budget underscores the EU's commitment to strategic resilience along its eastern flank.

For Finland and other eastern border countries, this proposal creates scope for comprehensive, agile, and EU-backed regional adjustment strategies that address both immediate security challenges and long-term economic resilience needs.

Sources: (European Commission, 2025[1]; European Commission, 2025[2])

Economic diversification and business support

To address the economic challenges posed by geopolitical shifts, Finland should implement a comprehensive economic diversification strategy covering the eastern and southeastern border regions, integrating the establishment of a Special Economic Zone (SEZ) with broader support measures for businesses and industries.

Encouraging sectoral diversification

Sectoral diversification is essential for enhancing the resilience, economic vitality, and long-term sustainability of eastern and southeastern Finland. To this end, a co‑ordinated effort is needed to build competitive strengths in multiple sectors, while aligning with national strategic priorities and EU objectives.

A key opportunity lies in strengthening the regional framework for defence and security-related industries. Eastern and southeastern Finland could be positioned as strategic hubs for defence manufacturing2, cybersecurity, and surveillance technologies. This would support national and EU security goals while creating new employment opportunities and increasing regional value-added. Diversification into defence sectors also contributes to broader economic resilience and should be supported by an enabling policy environment, as further outlined in the recommendation on a security-driven investment framework.

In parallel, the region should further leverage its strengths in the bioeconomy, forestry, and circular economy sectors. This requires co‑ordinated national action to foster innovation and value-added production. Key measures include the development of clear regulatory frameworks and incentive systems that attract private investment into bio-manufacturing, advanced wood processing, sustainable agriculture and aquaculture, and circular economy solutions. National and EU-level funding should be secured and co‑ordinated to support the commercialisation and refinement of high-value bio-based and circular products.

Private-sector infrastructure investment should also be encouraged through targeted co-financing, including support for pilot facilities, bio-refineries, and circular production hubs. In addition, dedicated research and innovation programmes should be funded to advance new technologies, processes, and business models for sustainable and efficient use of biological and recyclable resources. To strengthen international competitiveness, Finland should also facilitate global market access through trade policies, agreements, and export promotion activities focused on high-value, sustainable products.

Given the constraints on wind energy development in many areas due to Defence Forces’ radar restrictions and high mitigation costs, it is critical that eastern and southeastern Finland prioritise the development of alternative energy sources. This supports both regional energy self-sufficiency and national decarbonisation and green growth goals. Strategic actions should include expanding solar energy capacity, establishing hydrogen production hubs, accelerating bioenergy and circular energy projects, and investing in smart grid infrastructure and energy storage solutions. Implementation should emphasise strategic planning and public-private partnerships, supported by national and EU financing instruments. Regional innovation hubs should also be expanded in collaboration with universities and research institutions to drive forward technological advancement and workforce development in clean energy fields.

At the same time, the region should capitalise on its unique environmental and cultural assets by promoting responsible nature-based tourism. This includes supporting regional investments in low-impact tourism infrastructure such as sustainable accommodation, eco-friendly transport, and digital tourism services. Tourism development should prioritise environmental sustainability and community well-being, and foster international partnerships - particularly within the EU - to attract visitors while maintaining high standards of environmental stewardship and cultural respect.

Finally, support for the growth of the IT and software sectors should be reinforced by improving digital infrastructure, creating favourable conditions for start-ups, and investing in workforce training tailored to high-demand digital skills. This will contribute to economic diversification, job creation, and regional attractiveness in the knowledge economy.

Establishing a special economic zone (SEZ)

To foster long-term economic renewal in eastern and southeastern Finland, the government should explore the establishment of a Special Economic Zone (SEZ), drawing on experiences from OECD and EU Member States. Models from Poland, Italy, and Latvia demonstrate that geographically targeted investment incentives, when combined with strong local government engagement, can stimulate economic transformation, create jobs, and attract strategic investment.

In Finland, it is recommended that the SEZ begin as a fixed-term pilot implemented in one or several selected locations across the eastern and south-eastern border regions. A phased approach would allow for real-time monitoring and evaluation of economic impacts, including companies’ responsiveness to incentives, the development of local supplier linkages, and engagement with research and education institutions. The pilot phase would involve data collection, analysing economic impacts, gathering input from businesses, municipalities, and regional development agencies, and making data-driven adjustments to incentive structures, governance frameworks, and sectoral priorities. Lessons learned would guide the expansion or modification of the SEZ model, ensuring long-term effectiveness without rigid policy commitments.

A successful Finnish SEZ should be closely integrated with local and regional economies. Firms operating within the zone should be incentivised to collaborate with local suppliers, SMEs, and research institutions, ensuring that the benefits of increased investment are widely distributed across the region. This approach has been effective in Poland’s SEZs, where incentives extend to domestic firms as well as international ones, while involving other stakeholders such as local governments and research institutions (Box 9.2).

The SEZ’s incentive structure should be diversified and tailored to regional needs. Recognising concerns in Finland about the effectiveness and fairness of regional tax incentives, a balanced and time-bound mix of incentives should be explored. This could include limited and carefully assessed reductions in employer costs or taxation, but the emphasis should be placed on non-fiscal measures - such as improved infrastructure, enhanced digital connectivity, access to skilled labour, and streamlined administrative procedures.

Importantly, the experience of Poland shows that the long-term effectiveness of SEZs depends on designing the incentive framework to ensure transparency, support broad-based regional development, and avoid concentrating benefits among a narrow set of beneficiaries. A broader support package, aligned with regional strengths and priorities, can enhance long-term investment attractiveness and reflects the more successful elements of SEZ models in Ireland, Northern Norway, and selected regions of Poland.

In terms of geographic design, a flexible territorial approach is recommended. Rather than confining the SEZ to a rigid geographic boundary, incentives should be available in areas where local and regional governments commit to complementary investments - such as infrastructure upgrades or workforce development. This model has been effectively applied in Italy, Latvia, and Poland, allowing for broader economic spillovers and alignment with regional development strategies.

The place-based nature of the SEZ must also be emphasised. Given significant variation in economic attractiveness and physical and digital connectivity and logistics within the eastern and southeastern border region, the incentive framework should account for these disparities. Finland should calibrate its incentive levels to support the regions facing the greatest structural challenges.

Effective SEZ implementation will depend on strong multi-level governance (MLG). Co‑ordination between national, regional, and local authorities is essential to align policy goals, investment priorities, and regulatory frameworks. Italy’s national SEZ “Unica” policy offers a strong reference point for how a dedicated co‑ordination body can facilitate intergovernmental alignment and cross-sector collaboration.

The SEZ should also have a clear strategic sector focus, aligned with the Smart Specialisation Strategies (S3) of the eastern and southeastern border regions. Targeted branches of the SEZ could focus on sectors such as forest bioeconomy, cybersecurity, advanced manufacturing, or circular economy innovation, but opportunities also in new emerging sectors such as defence manufacturing should be explored.

Partnerships with higher education and vocational institutions should be central to SEZ planning. These institutions will be essential in developing a skilled labour force tailored to the needs of SEZ-based industries. Poland’s Łódź SEZ provides a compelling example, operating a dedicated vocational school in automation and robotics to prepare workers for industry-specific roles.

Box 9.2. The Łódź Special Economic Zone: Education–industry co‑operation in the broader debate on SEZ effectiveness

Established in 1997, the Łódź Special Economic Zone (LSEZ) is one of Poland’s most well-known special economic zones. Spanning over 1 300 hectares across multiple locations in central Poland, it has become a reference point for how SEZs can foster regional economic development through targeted investment incentives and strong integration with the education and skills ecosystem.

The LSEZ is particularly recognised for its close co‑operation with local universities, vocational schools, and private sector investors. In partnership with companies, the zone has helped to develop apprenticeship programmes for both young and experienced workers. In higher education, the SEZ has facilitated the creation of tailored study programmes, including “Linguistics for Business” and “Data Analysis Engineering” at the University of Łódź.

The LSEZ has also fostered local economic linkages by organising business mixers and networking events, enabling local firms to connect with foreign investors and regional stakeholders, thereby reinforcing the innovation ecosystem.

While the Łódź SEZ has shown clear strengths, critics argue that the broader SEZ framework has lacked efficiency and fairness - particularly in the use of public subsidies and the uneven distribution of benefits between firms inside and outside the zones. SEZs are also seen as having limited impact on national growth, with disproportionate benefits for mid-level regions. Additionally, early site selection has been criticised for potential political influence, possibly leading to suboptimal location choices.

Taken together, these insights suggest that while the Łódź SEZ stands out as a model for skills development and education–industry co‑operation, the broader experience of Poland’s SEZs underscores the need for clear, transparent, and evidence-based criteria for SEZ designation and evaluation - something of relevance for Finland as it explores similar models.

Sources: (OECD, 2018[3]; OECD, 2016[4]; Grzegorczyk, 2015[5])

Enhance support for SMEs and growth companies

In parallel, there is a need to enhance support for SMEs and growth companies, which remain the backbone of regional economies. Financing options available through Finnvera, Business Finland, and the regional Centre for Economic Development, Transport and the Environment (ELY Centres, to be restructured as Economic Development Centres in 2026) should be expanded and their accessibility ensured. Some regions have proposed the establishment of joint local service points or one-stop-shop models to streamline access to financing, advisory services, and export support. These models merit further consideration and exploration. Particular attention should be given to businesses that have suffered from the loss of Russian trade, especially in sectors such as tourism, logistics, and manufacturing. These firms should benefit from targeted, temporary support measures to help stabilise operations and reorient towards new markets.

Strategic infrastructure investments

To strengthen economic and security resilience in eastern and southeastern border regions, Finland should prioritise investments in transportation, energy, and digital connectivity.

Upgrade east-west transport networks

Improving east–west connectivity is vital for enhancing the economic integration, diversification, security, and resilience of eastern and south-eastern Finland. To this end, targeted investment is needed in critical road, port, and rail infrastructure to strengthen connections between these border regions and national as well as Nordic markets.

In addition, the upgrade of western border crossings is a strategic priority. Modernising these crossing points will facilitate more efficient trade logistics, ensure the swift movement of goods and services, and enhance military mobility and emergency response capacity - both of which are increasingly relevant in the current security context. Strengthening these east–west corridors will help to balance Finland’s regional development and reinforce its role as a stable and well-connected part of the Nordic and EU transport network.

Expand energy infrastructure

Strengthening energy infrastructure is essential to ensure long-term energy resilience, support regional development, and align with Finland’s national clean energy transition. A particular priority is to reinforce the electricity transmission network, especially in eastern Finland, where energy demand is expected to grow due to industrial diversification and electrification.

To this end, the timely implementation of Fingrid’s 10-year network development plan is critical. This includes the expansion of the 400 kV transmission grid, which will help accommodate increasing electricity needs driven by clean energy generation and electrified industrial processes. Strategic national planning should be accompanied by clear regional co‑ordination.

It is equally important to ensure that regional grid development in eastern Finland progresses in step with evolving transmission needs, the maturity of new energy investments, and broader national grid priorities. Projects such as the Huutokoski–Kontiolahti route play a key role in supporting these objectives and should be advanced in a timely and co‑ordinated manner.

Finally, regional energy infrastructure planning should promote connectivity and grid flexibility in a way that reinforces national energy security, affordability, and sustainability. Improved regional transmission capacity will help integrate renewable energy sources, enable local energy storage solutions, and ensure a more resilient and balanced energy system across Finland.

Improve digital connectivity

Enhancing digital connectivity is essential for improving regional inclusion, supporting business development, and attracting talent and investment to eastern and south-eastern Finland. To address current infrastructure gaps, it is vital to secure dedicated funding to expand broadband and 5G network coverage, particularly in remote and sparsely populated border communities. In areas along the immediate border where 5G coverage is not feasible - due to security restrictions or technical limitations - broadband and alternative wireless solutions should be deployed. A target of 100% coverage should be established to ensure that no community is left behind in the digital transition.

Overall, investments in digital infrastructure should be prioritised as key enablers of regional attractiveness, in line with international best practices. The OECD’s regional attractiveness framework highlights the essential role of digital access and quality in fostering innovation, economic development, and population retention. Connectivity improvements should therefore be monitored through clear indicators, including coverage rates and performance metrics such as download and upload speeds. At the same time, the region’s digital infrastructure should be enhanced to meet the needs of businesses, remote workers, and security-related applications. Ensuring that all areas are fully integrated into national and EU-level digital strategies will help unlock new economic opportunities and strengthen regional resilience in an increasingly digitised economy.

Ireland’s National Broadband Plan offers a strong example of how a state-led approach, supported by long-term public–private partnerships and clear rural coverage commitments, can successfully bridge digital divides and support regional development goals (see Box 9.3). The experience also highlights the importance of local engagement, performance monitoring, and aligning digital infrastructure with broader socio-economic strategies.

Box 9.3. Ireland’s National Broadband Plan: Bridging the digital divide

Ireland’s National Broadband Plan (NBP) is a government-led initiative to provide high-speed broadband to every home, business, farm, and school in the country - particularly in areas where commercial providers are unwilling to invest. Covering over 560 000 premises, it is the largest infrastructure project in rural Ireland since electrification and plays a central role in the country’s rural development, digital transformation, and inclusive growth strategies.

The plan is delivered through a 25-year public–private partnership with National Broadband Ireland (NBI), which is responsible for designing, building, and operating a future-proof fibre network. The rollout involves laying approximately 140 000 km of fibre, with interim access provided through Broadband Connection Points (BCPs) in community hubs.

An independent evaluation in 2024 confirmed the plan’s positive impact on quality of life, business productivity, and access to education and healthcare. The OECD has also recognised the NBP as a good practice example of state intervention supporting digital equity in rural areas.

Key lessons learned:

• Target state support to areas of market failure, ensuring public funding addresses commercial gaps without displacing private investment.

• Use long-term public–private partnerships to provide delivery certainty and attract private capital for future-proof infrastructure.

• Set ambitious targets (e.g. 100% coverage) while allowing for phased rollout and flexible technological solutions (e.g  broadband or alternative wireless).

• Ensure strong national co‑ordination with local engagement, particularly in remote and border communities.

• Maintain transparency and conduct independent impact evaluations, including regional monitoring of access, speed, and service quality.

• Leverage flexible EU State aid mechanisms to support investment in otherwise commercially unviable areas.

• Embed digital infrastructure within broader regional development policy, positioning it as an enabler of economic resilience, service access, and demographic sustainability.

Ireland’s approach shows how comprehensive planning, strategic partnerships, and targeted state support can close the digital divide and support regional competitiveness -offering valuable lessons for Finland’s eastern and southeastern border regions.

Sources: (OECD, 2021[6]; Ireland Department of the Environment, 2025[7])

Strengthening the regional investment attractiveness

To address the current imbalance in foreign direct investment (FDI) attraction capacity across Finland’s eastern and south-eastern border regions, the Ministry of Economic Affairs and Employment should strengthen co‑operation with Business Finland, regional councils, municipalities, and the regional state organisations Centre for Economic Development, Transport and the Environment (ELY Centres) - which will become Economic Development Centres from 1 January 2026. A co‑ordinated and targeted approach is needed to enhance regional visibility and investment readiness in these structurally disadvantaged areas.

A first step involves providing dedicated funding for investment professionals who operate jointly across levels - within Business Finland, ELY Centres, and local or regional investment promotion agencies (IPAs), such as Business Joensuu. Although Business Finland’s Team Finland network currently includes 16 regional offices, its operational linkages with existing local and regional IPAs remain limited. These could be significantly strengthened by combining regional and municipal investment promotion efforts into a more integrated and collaborative system, allowing for more consistent messaging and resource sharing.

Second, regions should be supported to develop tailored regional investment profiles, building on international good practice, such as Canada’s Invest in Canada model (Box 9.4). These profiles should communicate the distinctive value propositions of each region - covering not only investment levers such as industrial capacity or sectoral strengths, but also complementary regional assets, including infrastructure, quality of life, housing availability, higher education institutions, and the local talent pipeline. Should Finland adopt a region-specific incentive structure under the proposed SEZ framework, these profiles would provide a strategic platform for communicating and promoting those incentives to international investors.

Additionally, the government should conduct a targeted scoping analysis of investment opportunities along the defence sector supply chain, focusing particularly on dual-use technologies that offer benefits for both military and civilian purposes. This analysis should inform investment promotion efforts, building on international examples from countries such as Korea and Poland (see Box 9.7 a few pages down). It should also be aligned with regional Smart Specialisation Strategies, while zooming in on more localised (TL3/NUTS-3) specialisms that could position regions competitively for foreign investment. Spain’s national investment promotion agency, ICEX, offers a relevant model, having developed industry-investment matrices for each region and a systematic approach to screening investment opportunities based on local industrial advantages (Box 9.4).

By reinforcing co‑operation between national, regional, and local actors, and tailoring FDI promotion to regional strengths and sectoral opportunities, Finland can level the playing field and increase the visibility and competitiveness of its eastern and south-eastern border regions in the global investment landscape.

Box 9.4. Supporting regional investment attraction programmes in OECD countries

The Business France model for National-Regional Co‑operation

Business France works closely with regional and local economic development agencies (EDAs) through formal partnerships, namely the “Team France Invest” Initiative. This is a national co‑ordination mechanism that brings together Business France and regional agencies. It includes co-financed investment desks, with regional agencies contributing funding to support Business France’s international outreach targeting their region. For example, if Grand Est or Occitanie wants to attract investment in aerospace or biotech, they co-fund a Business France officer abroad focused on that sector and region. There are regional business support desks staffed with officers who identify potential investors, promote specific sectors and regional attractiveness assets, as well as organizing investor visits and due diligence trips – this is in addition to co-financed regional investment promotion officers located abroad in certain cases.

Invest in Canada’ Hub

The Invest in Canada Hub was established in 2018 as Canada’s dedicated national agency for attracting Foreign Direct Investment. The Hub promotes Canada as an investment destination by integrating national and regional efforts: it aligns federal policies with provincial and municipal initiatives, ensuring effective collaboration across government levels and offers tailored support to foreign investors. The Hub provides both centralised services - acting as a single point of contact for international investors and offering services such as market insights and guidance through Canada's regulatory environment - and operates through strong regional and local partnerships. Through its ‘Regional Spotlight’ series it promotes different parts of the country, providing overviews of the different regions and their characteristics (for example including labour force and sectoral statistics, working closely with provinces and cities to identify and promote local opportunities and leverage regional strengths, while maintaining a cohesive national strategy and avoiding inefficient competition. Lastly, it offers customised support to investors, including around navigating regulatory requirements, finding suitable locations and providing bespoke solutions to investors’ needs.

ICEX – Invest in Spain

In Spain, the national investment agency ICEX-Invest in Spain collaborates closely with regional governments to conduct detailed sector-region scoping analyses that identify the most suitable types of FDI for each autonomous community. These efforts include creating sector-region matrices that align local strengths - such as infrastructure, labour skills, and innovation capacity - with international investor demand. For example, Catalonia is promoted for technology and design-based FDI, the Basque Country for advanced manufacturing and Industry 4.0, and Andalusia for agro-tech and renewable energy, particularly solar. This regional targeting approach allows for more effective and tailored investment promotion strategies.

Source: (Government of Spain, n.d.[8]; Invest in Canada, n.d.[9])

Strengthening the multi-level governance and policy co‑ordination

Effective responses to the complex and evolving challenges facing Finland’s eastern and southeastern border regions require seamless co‑ordination across all levels of government. Fragmented governance structures can hinder strategic planning, dilute the impact of policy measures, and lead to inefficiencies in the use of resources. To ensure that national, regional, and municipal actions are aligned and mutually reinforcing, stronger multi-level governance (MLG) mechanisms are essential.

Two key measures are proposed to enhance policy coherence and implementation. First, it is recommended that the Eastern and Northern Finland Programmes are merged into a single, integrated programme for the entire eastern and southeastern border region3. This would provide a unified strategic framework for addressing shared challenges - ranging from economic diversification and infrastructure development to labour market and security issues - across the eight affected regions. Integration would reduce duplication, streamline objectives, and enable more efficient targeting of national and EU funding (see international examples of similar collaboration in Box 9.5).

Box 9.5. Examples of joint regional development across several regions

United States: The Tennessee Valley Authority (TVA)

Established in 1933 as part of President Roosevelt’s New Deal, the TVA is a federally owned corporation created to revitalise the economically depressed Tennessee Valley, spanning parts of seven southeastern states. It consolidated various infrastructure and development initiatives - hydropower generation, flood control, rural electrification, and agricultural improvement - under one agency to deliver co‑ordinated, long-term regional transformation. The TVA’s integrated, top-down approach helped modernise one of the poorest US regions and continues today as the largest public utility in the US, now transitioning toward cleaner energy. It is still referenced in policy circles as a model of strategic, multi-sectoral regional intervention.

Italy: National Strategy for Inner Areas (SNAI)

Launched in 2014, SNAI is a place-based policy initiative targeting Italy’s “inner areas” - rural and remote territories suffering from population decline, limited access to services, and economic marginalisation. Rather than a single agency, the strategy uses a multi-level governance model combining national, regional, and local actors. It integrates EU and national funds to support service accessibility, economic development, and civic engagement. SNAI’s strength lies in its bottom-up approach: local areas co-design tailored development strategies based on their specific assets and challenges. It represents a modern, participatory model for balanced territorial development across diverse contexts.

Source: (Tennessee Valley Authority, 2025[10]; Office of the Prime Minister, 2025[11]; Barca, Casavola and Lucatelli, 2014[12])

Second, a dedicated high-level political role - such as a "Minister for Eastern and Southeastern Border Regions" or a “special envoy” - should be established to oversee implementation and co‑ordination. This official would ensure that the region’s unique priorities remain visible on the national policy agenda and facilitate inter-ministerial co‑operation. A central point of leadership would also help to guarantee that investments and reforms are responsive to regional needs and equitably distributed, strengthening the overall effectiveness of government support. It is important to ensure that such role is backed with sufficient authority, resources, and continuity to deliver meaningful results (see UK and Italy examples in Box 9.6).

The Finnish Government made decision on May 9^th to appoint Commercial Counsellor, Mr Harri Broman as Special Representative to specifically support the swift implementation of the strategic measures proposed in the Programme for Eastern Finland. The current appointment is until end of March 2026. The Special Representative's role is to co‑ordinate co‑operation among regional actors. The Special Representative is also responsible for preparing a proposal for a special economic zone concept to be piloted in Eastern Finland, within a clearly defined area to be specified during the development of the concept.

Given that the current appointment is until March 2026, and it covers the Eastern Finland Programme area, it is recommended that the appointment would be extended until 2030 and that the area would cover the eight eastern and southeastern border regions.

Box 9.6. Examples from United Kingdom and Italy on a ministerial role co‑ordinating cross-government action and advocating for a region in crisis

UK’s Minister of Portsmouth

The appointment of a dedicated Minister for Portsmouth in the United Kingdom in 2014, following the closure of BAE Systems’ shipbuilding operations and the loss of 940 jobs, is an example of targeted governmental intervention for regional recovery.

This ministerial position raised national awareness of Portsmouth’s economic challenges, signalled strong government commitment, facilitated cross-departmental collaboration, and promoted the city as a destination for investment.

The initiative yielded some positive outcomes. Efforts to repurpose shipbuilding facilities attracted companies such as BAE Systems, Burgess Marine, and Magma Structures to utilise ship halls at Portsmouth Naval Base, supporting regional job creation. The city began shifting towards greater economic diversification beyond traditional shipbuilding, while the heightened national attention encouraged broader discussions on regional support mechanisms.

Italy: A dedicated minister for Southern Italy

The Minister for Southern Italy and Territorial Cohesion plays an important role in the Italian government’s efforts to reduce long-standing regional disparities between the country’s northern and southern areas. The position is particularly focused on supporting the Mezzogiorno - consisting of the regions of Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, and the islands of Sicily and Sardinia - which continues to face structural challenges such as high unemployment, lower productivity, demographic decline, and underinvestment in infrastructure and services.

The Minister’s responsibilities include co‑ordinating national cohesion policies and overseeing the strategic use of European Structural and Investment Funds in the less developed southern regions. A key part of the role involves promoting inclusive economic development by supporting investment in innovation, infrastructure, education, and entrepreneurship, tailored to the specific needs and assets of Southern Italy.

In addition, the Minister contributes to the implementation of Italy’s broader recovery and resilience strategy, ensuring that resources – including those from the EU Recovery and Resilience Facility – are deployed equitably to strengthen territorial cohesion. The position requires close co‑operation with other ministries, regional and local governments, and European institutions to align policies and funding instruments with long-term development objectives. Through these efforts, the Minister aims to foster sustainable growth and improve living standards across the southern regions.

Source: (UK Government, 2025[13]; Italian Government, 2025[14])

Security-driven investment framework

Finland’s eastern and southeastern border is by no means just a peripheral area - it is now a frontline region at the intersection of national defence, EU security, and regional resilience. In response to growing geopolitical instability and hybrid threats, this region should be recognised and developed as a key strategic asset. Ensuring its stability and preparedness requires a fundamental shift in how investments are prioritised and co‑ordinated.

The recommendations made in this report call for the development of a comprehensive, security-driven investment framework that integrates national defence objectives with regional economic development and infrastructure planning. Such an approach aligns with both Finland’s security strategy and broader EU goals for resilience, connectivity, and strategic autonomy. It also provides a basis for advocating EU support through existing and new funding mechanisms.

As was discussed in above, these recommendations do not suggest locating defence manufacturing or critical infrastructure directly at the immediate border or in strategically vulnerable locations. Rather, it envisions broader ecosystem development across the eastern and southeastern regions, with due consideration for security, risk, and existing industrial capacity. The location and nature of any future activities will ultimately depend on decisions by private firms, guided by market demand, risk assessments, and available incentives. Given the current high demand for defence and dual-use goods across Europe, manufacturing in these regions could focus on less sensitive products or components, aligned with regional strengths and national security priorities.

To this end, the following recommendations are made:

Developing a comprehensive, security-driven investment framework to align national defence objectives with regional economic development and infrastructure planning. Such an approach is consistent with Finland’s security strategy and broader EU goals for resilience, connectivity, and strategic autonomy. It also strengthens the case for Finland to advocate for increased EU support through both existing and new funding mechanisms.

Prioritising strategic infrastructure development that enhance both economic resilience and security preparedness. Strengthening critical transport and energy networks will simultaneously enhance regional competitiveness and improve preparedness for crisis response and military mobility. Upgrading regional road, port, rail and airport networks is essential for facilitating emergency response and ensuring that the area remains accessible and functional in times of crisis.

Positioning eastern border regions as hubs for defence, cybersecurity, and dual-use technology industries. This includes establishing innovation hubs focused on defence and security technologies, where businesses can collaborate with universities, research institutions, the Defence Forces, NATO, and the private sector. Targeted incentives, potentially delivered through proposed Special Economic Zones (SEZs), should be offered to attract investment in this space. Business Finland can help explore and promote the dual-use sector to foreign investors, drawing lessons from initiatives such as the Polish Trade & Investment Agency’s successful promotion of its defence sector (see Box 9.7).

Leveraging public-private partnerships to promote innovation and technology transfer between the private sector and national security agencies. Close co‑ordination with both Finland’s national defence and security strategies and those of the EU will be necessary, especially in pursuit of funding opportunities, participation in joint exercises, and involvement in certification processes. The region’s unique exposure to real-world security threats - such as GPS interference, cyber-attacks, digital espionage, information warfare, drone intrusions, and hybrid migration pressure - can be leveraged as a “competitive advantage,” turning it into a real-world testing ground for surveillance, cybersecurity, and resilience technologies.

Expanding emergency response capabilities in border regions. This includes upgrading civil protection infrastructure, establishing regional co‑ordination centres, and implementing advanced AI-driven surveillance and early-warning systems. Expanding monitoring capacity and border control technologies is necessary to strengthen security in vulnerable areas. At the same time, it is critical to ensure comprehensive coverage of essential public security services - including police, rescue, and emergency healthcare - in remote border communities, where service gaps currently exist.

Aligning national investments with EU security objectives and funding mechanisms. Finland should actively advocate for and co‑ordinate efforts to secure support from European instruments such as the European Regional Development Fund (ERDF) and the Connecting Europe Facility (CEF), ensuring that security-driven infrastructure projects are aligned with EU priorities. By doing so, Finland can reinforce the resilience and strategic value of its border regions, both within the national context and as part of a strengthened European security space.

Building diplomatic coalitions for security in the High North can help finance geostrategically important dual-use logistics and shared infrastructure projects, boosting the competitiveness of the border region - for example, through the Nordic Defence Concept area in co‑operation with JEF partners like Norway and the UK, alongside national and Connecting Europe Facility (CEF) funding.

Box 9.7. Mapping and marketing opportunities for dual-use investments in regions

Polish Investment & Trade Agency’s Long-Term Plan for the Dual-Use Goods Sector in Eastern Regions

The Polish Investment and Trade Agency (PAIH) adopted a strategy that highlights Poland's capabilities in the security and dual-use goods sector, showcasing advanced military technologies and infrastructure to attract investment. By fostering innovation, enhancing logistics (especially in eastern regions like Podkarpacie), and leveraging partnerships through NATO and export growth, the plan strengthens economic and defence resilience. Supporting infrastructure, skilled workforce development, and incentivising foreign direct investments aim to boost these regions' long-term development. The plan is complemented by an online portal, giving prospective investors a window into the Polish defence industry and the entrepreneurs and innovation networks within it, with whom they may eventually establish linkages.

Korea’s Defense Innovation Clusters

Defense Industry Innovation Clusters are co‑ordinated by the Ministry of National Defense and designate dual-use innovation clusters tied to local economic needs. Regional examples include Gumi (North Gyeongsang) which concentrates on electronics and defense manufacturing and Changwon (South Gyeongsang) where machinery, robotics and smart systems are the focus. The Ministry has allocated targeted funding to engage universities and research institutions; to support the involvement of small and medium-sized enterprises in cluster activities and, essentially, to retain youth and skilled workers in declining industrial cities. Since adopting the strategy in 2020, Korea has looked to dual-use technologies to support regions to diversify their industrial base beyond traditional manufacturing and to combat long-standing challenges with demographic decline.

Source: (Polish Investment and Trade Agency, 2023[15]; Jang and Park, 2024[16])

Enhancing youth inclusion and participation in regional decision-making

Strengthening social resilience is critical to maintaining regional sustainability and addressing demographic challenges.

Establishing institutional mechanisms to ensure youth participation and engagement in regional planning processes

Enhancing youth inclusion and participation in regional decision-making processes is essential for strengthening social resilience and addressing persistent demographic challenges. To ensure that young people are meaningfully engaged in shaping the future of their regions, institutional mechanisms should be established to formalise youth involvement in strategic planning and governance.

The Regional Councils (RCs) should be mandated to consult systematically with Youth Councils (YCs) and other youth stakeholders, including through targeted outreach to vulnerable young people. This consultation should form an integral part of regional strategic planning and decision-making processes. Each RC should also designate a specific person responsible for youth participation and engagement, ensuring continuity and accountability in youth-related initiatives. Moreover, formal co‑operation agreements between RCs, Wellbeing Services Counties (WSCs), municipalities, and Youth Councils should be created to clearly define roles, responsibilities, and engagement structures across governance levels. For youth participation to be sustainable and effective, it is vital that youth stakeholders - including YCs, youth organisations, and individual young people - receive adequate financial, organisational, and technical support. This support will allow them to contribute meaningfully and consistently to regional policymaking processes. Several OECD countries offer useful examples of how young people can be engaged as partners in policymaking, including Japan and France. As shown in Box 9.8, Japan appoints Special Youth Rapporteurs to advise on national priorities, while France’s Youth Policy Orientation Council (Conseil d’orientation des politiques de jeunesse) provides formal input on youth-related laws and government strategies.

Box 9.8. Mobilising young people as partners of government action in selected OECD countries

Japan: Special Youth Rapporteurs inform government planning. The Japanese Cabinet Office appoints students as Special Youth Rapporteurs to inform government planning, legislation and regulations related to childhood and young people. The rapporteurs are asked to give their opinion on government thematic priorities, which are selected by the Cabinet Office. Their inputs are then shared across relevant ministries and government agencies and are published online on the website of the Cabinet Office.

France: Youth Policy Orientation Council (Conseil d’orientation des politiques de jeunesse). Since 2016, the Conseil d’orientation des politiques de jeunesse (CoJ), acts as an advisory body to the prime minister. The CoJ contributes to the co-ordination and evaluation of youth-related policies and is composed of commissions dealing with education and participation in policymaking. Its 79 members, including ministers, youth representatives and youth organisations, can also be consulted on legislative or regulatory drafts on issues relating to young people and may examine any general draft laws relating to youth policies.

Source: (OECD, 2020[17])

Develop a national youth-specific regional data monitoring system

In parallel, a national youth-specific regional database and a monitoring system using that data should be developed to better inform policy and planning. This should include expanded regional data collection on key issues such as housing affordability, public transport access, temporary employment, and the use of public services by young people. Crucially, youth-related indicators should be disaggregated by age, gender, and socio-economic background to provide a more nuanced understanding of different youth experiences and support the design of more equitable policies. Data-sharing mechanisms between RCs, WSCs, municipalities, and national agencies should also be established to ensure co‑ordinated, evidence-based decision-making.

To support long-term planning, research initiatives should move beyond short-term, project-based studies to systematically investigate the experiences, needs, and outcomes of young people. As part of this effort, a national scoreboard should be developed to complement existing data systems (such as those of Finnish Institute for Health and Welfare (THL)), focusing specifically on regional planning and youth issues. The scoreboard should track service uptake, barriers to accessibility, economic security, and youth participation in policymaking.

Expand youth mental health services

Addressing youth mental health should also be a regional priority. Mental health support services tailored to young people should be expanded and diversified to include online counselling, school-based services, and mobile health units. The availability of youth-friendly spaces and supportive community networks should be enhanced to reduce social isolation and foster overall well-being. Improved co‑ordination between mental health services, educational institutions, and employment agencies is needed to provide integrated support to young people, particularly those at risk of social exclusion. A relevant example is Australia's headspace model, which demonstrates how comprehensive, youth-friendly services can be scaled nationally while maintaining strong local partnerships and tailoring support to regional needs (Box 9.9).

Box 9.9. Comprehensive, youth-friendly mental health services in Australia

In 2007 Australia launched 10 headspace centres in response to rising concern over youth mental health. By 2023, this had grown to a national network of 154 services - the world’s largest dedicated youth mental health network. The model has since informed similar initiatives in Ireland, Canada, Denmark, Israel, the UK, and parts of the US.

Headspace provides early intervention and prevention services for young people aged 12–25, with a focus on mild to moderate mental health conditions. The service supports approximately 100 000 young people annually, many of whom have not received a prior diagnosis. Around 75% of users present with depression or anxiety, with over one in five receiving a formal diagnosis or referral.

Centres offer integrated support across four key domains: mental health, physical and sexual health, substance use, and vocational support. Services are co-designed with young people and delivered through a multidisciplinary team, including general practitioners, therapists, social workers, and employment specialists. The approach promotes youth agency and whole-person well-being.

A notable strength is the reach into regional and rural areas: of the 154 centres in 2023, 84 operate outside major metropolitan areas. Each headspace site is supported by a local consortium of service providers, helping tailor delivery to local needs and strengthen collaboration with state and local government

Source: (OECD, 2024[18])

Improve access to affordable housing and social services

Improving access to affordable housing and social services is also important. This includes expanding financial assistance and social support for low-income youth, particularly those balancing employment and study. Efforts should be made to increase the availability of affordable student and social housing, especially in border regions and tourist destinations where high rent and energy costs create disproportionate pressure. Regional policies should also ensure that all young people, regardless of income level, can access cultural, leisure, and social activities, thereby supporting inclusion and quality of life.

Workforce development and talent attraction

To address labor shortages and demographic decline in eastern and southeastern Finland, the national government should implement targeted policies to attract and retain skilled workers in these regions.

Introduce targeted incentives for talent attraction and retention

To address demographic decline and labour shortages in Finland’s eastern and south-eastern border regions, it is essential to introduce targeted incentives that support the attraction and retention of skilled workers. These measures should be grounded in a clear understanding of regional labour market needs and tailored to the specific challenges of border and rural areas.

A first step in this direction is to establish regionalised critical skills lists, which can better identify and anticipate local labour and skill shortages. This effort could at least partly build on existing tools - such as the labour force barometer, which gathers occupational and skills data through ELY Centre workshops with regional stakeholders - while also improving data quality and ensuring systematic input from businesses and higher education institutions.

Finland should consider launching a pilot experiment to test the effectiveness of student loan compensation schemes and regional wage subsidies in attracting and retaining qualified workers in less populated regions.

Additionally, relocation support for workers moving to the eastern and southeastern border regions should be enhanced, with a particular focus on housing availability and integration services. This support will be especially important for young professionals and families who are willing to move but face practical and financial barriers.

The specific needs of international families should also be taken into account. A useful example can be drawn from Lolland, Denmark, where authorities have opened a public international school offering both Danish and English instruction, and established an international talent hub providing tailored newcomer support. The initiative also includes “international ambassadors” who could help new arrivals integrate into the local community and job market - an approach that could be adapted in the Finnish context to foster greater inclusivity and retention of foreign professionals.

Finally, Finland should focus on developing strong multi-level governance frameworks that bring together immigration authorities, employers, regional and municipal governments, and settlement service providers. These co‑ordinated efforts can help build clearer and more accessible pathways for international talent to find employment and settle in regional locations. A relevant model is Canada’s Atlantic Immigration Program (AIP) (see Box Box 9.10), which demonstrates how regional co‑operation and targeted support mechanisms can successfully channel skilled immigrants to areas facing acute labour shortages.

Box 9.10. Multi-level governance for talent attraction and retention: Canada

The Atlantic Immigration Program (AIP) is a good example of regionally co-ordinated talent attraction policy

The four provinces that make up the Atlantic Canada Region [New Brunswick (N.B.), Nova Scotia (N.S.), Prince Edward Island (P.E.I) and Newfoundland and Labrador (N.L.)] face a harsh demographic decline that is expected to continue over the next decades. The population of Atlantic Canada represented 6.5% of national population in 2020, compared to 7 % in 2011, and is aging more rapidly. For example, between 2007 and 2017, seniors (those aged 65 and above), as a percentage of the population, rose by 3.6% nationally (from 13.4% to 17%), compared to 5% in Atlantic Canada (from 15% to 20%).

The AIP was launched in 2016 as a pilot program designed to respond specifically to these challenges and was made permanent in 2022 after an evaluation confirmed its proof of concept. It is based on a partnership between employers, government, and settlement services. While most immigration programs begin with an individual applying to immigrate to Canada, under the AIP, designated employers can endorse a potential immigrant prior to the permanent residence application. They do not need to obtain a Labour Market Impact Assessment, which shortens the hiring process.

Between 2015 and 2022, Atlantic Canada’s population grew at 0.9% per year on average (based on mid-year estimates), up from 0.2% per annum between 2008 and 2015. The increase in population growth in Atlantic Canada post 2015 was four times greater than the national average, which had also showed positive momentum. While not solely attributable to the AIP program, economic growth has also burgeoned, jumping from 0.1% per year on average (from 2008 to 2015) to 1.3% per year between 2015 and 2021, illustrating significant regional momentum after a period of lagging development.

The program was designed with a collaborative approach. Immigration, Refugees and Citizenship Canada (IRCC) and the Atlantic provinces are the core governance and delivery partners. Other organisations, such as settlement service provider organisations (SPOs) and the Atlantic Canada Opportunities Agency (ACOA), play valued program delivery roles, but do not participate in governance.

Source: (OECD, 2022[19])

Expand vocational and higher education programs to match labor market needs

To ensure a strong and responsive talent pipeline in Finland’s eastern and south-eastern border regions, greater emphasis is needed on aligning vocational and higher education provision with evolving labour market needs - particularly in strategic, sustainable, and dual-use sectors such as clean energy, advanced manufacturing, and cybersecurity.

While university-based partnerships with large multinational firms have generally proven effective, there remains untapped potential in vocational schools, which are well-placed to train workers for many emerging occupations in technical and industrial sectors. To address this, targeted support should be directed to vocational institutions to strengthen their capacity to deliver training in strategic areas. These efforts should be closely aligned with the proposed Special Economic Zone (SEZ) strategy, if applied, creating direct pathways from training to employment in firms attracted by new regional investment incentives.

Stronger co‑operation between universities, Employment Regions (työllisyysalueet), vocational schools, and businesses is essential to ensure that the supply of skills aligns with regional economic priorities and workforce demand. This requires structured dialogue between education providers and employers, as well as mechanisms to jointly plan training programmes, adapt curricula, and offer practical learning opportunities (see Box 9.11 for an example from Sweden). In parallel, linkages between higher education institutions (HEIs) and businesses should be further strengthened to promote applied research, internships, and innovation collaboration. Such partnerships not only accelerate the adoption of new technologies in the private sector but also provide students with valuable hands-on experience in key industries.

To support co‑ordination, Finland could consider establishing Regional Competence Councils or taskforces, bringing together representatives from municipalities, regional authorities, employment services, educational institutions, and employers. These platforms could facilitate joint labour market analysis, align adult and vocational training with local industry needs, and improve the recognition of prior learning. As demonstrated by the Norrbotten Regional Competence Council in Sweden (Box 9.11), such initiatives can also support new solutions, such as remote learning centres or targeted retraining programmes, in response to demographic, economic, or geopolitical shifts.

Box 9.11. Norrbotten’s Regional Competence Council: co‑ordinating regional skills development (Sweden)

The Norrbotten Regional Competence Council in Sweden is a taskforce that co‑ordinates skills development and governance. It includes representatives from local municipalities, the regional government, the regional employment service, and academic institutions such as Luleå University of Technology and vocational schools. The Council meets every four months to address skills co‑ordination. Firstly, it conducts labour market analyses and forecasts. Secondly, it aligns adult vocational training with the needs of local employers. For example, Region Norrbotten has invested in skills development programmes to address gender imbalances in the labour market, enabling women to enter industrial jobs. Thirdly, the Council has established regional systems for recognising prior learning, creating consistency between larger and more remote municipalities. Lastly, it helped set up Distant Learning Centres (Lärcentrum), enabling adult students to access vocational and university courses and teacher support remotely. Amidst the war in Ukraine, the Council was able to quickly set up an initiative to support the inclusion of Ukrainians into the local community.

Source: (Lulea Kommun, 2024[20])

Support municipalities in scaling up initiatives that connect both multinational and domestic firms with HEIs, ensuring that educational institutions contribute to regional economic growth

Municipalities can play a critical role in fostering collaboration between higher education institutions (HEIs) and both multinational and domestic firms, ensuring that education contributes directly to regional economic growth. To fully realise this potential, technical and funding support should be provided to scale up local initiatives that connect educational institutions with the business community, particularly in sectors with strong research and development capacity.

It is essential that small and medium-sized enterprises (SMEs) benefit from these partnerships, not only by collaborating directly with HEIs, but also by participating in innovation diffusion initiatives led by larger firms with high R&D capabilities. To enable this, national funding incentives should be introduced to encourage structured collaboration between vocational schools, universities, SMEs, and multinational enterprises. These partnerships can help ensure that innovation is not concentrated within large firms alone, but is shared across the broader regional business ecosystem.

In parallel, tailored innovation support programmes could be developed to help SMEs prototype new ideas, establish apprenticeship schemes, and integrate into the value chains of larger companies. This would not only strengthen regional supply chains but also enhance the competitiveness and resilience of smaller firms, while offering students and trainees practical routes into employment in high-value sectors.

Research and data-driven policy

A dedicated research program is recommended to systematically analyse the long-term economic and social impacts of geopolitical changes.

Establish a national research program on eastern and southeastern border regions to inform and support their development

To better understand and respond to the long-term implications of the current geopolitical landscape, Finland should establish a comprehensive national research programme focused on the eastern and southeastern border regions. The closure of the eastern border and the broader effects of sanctions on trade and mobility have introduced deep and still-evolving economic and social challenges. A dedicated, large-scale research initiative is therefore essential to provide timely evidence-based analyses that can guide effective policy responses, strategic investments, and cross-sectoral resilience measures.

Such programme should also systematically track and analyse key indicators related to the transformation of the regions. These could include metrics such as business closures, employment trends, migration flows, and shifts in trade patterns, alongside the emerging costs associated with security, infrastructure, and regional restructuring. In doing so, the programme could draw inspiration from international indicator frameworks (see Box 9.12 for an example) used to assess regional attractiveness, including data on innovation, connectivity, service accessibility, and visitor flows - applied at the NUTS-3 (TL3) level to ensure policy responses are locally relevant and precisely targeted. This approach would also help ensure that national and EU funding mechanisms accurately reflect the financial burden and investment needs faced by these regions.

Key outputs of the suggested research initiative could include:

• Annual reports to government and policymakers assessing economic, social, and security developments in the border regions;

• The development of early-warning systems to anticipate economic distress and labour market shifts;

• Evidence-based recommendations for investment priorities, business support schemes, infrastructure development, and resilience measures;

• Stronger alignment with EU regional and security funding strategies, ensuring that Finland’s eastern and southeastern regions are adequately supported and not left behind.

To ensure the credibility and relevance of its outputs, the programme should bring together the regions, and key Finnish institutions with expertise in economic modelling, regional development, and data analysis. These would include:

• Statistics Finland for economic trend monitoring and indicator development;

• The VATT Institute for Economic Research and Datahuone for data-analysis and economic impact evaluations;

• Regional universities, which offer deep knowledge of social and community dynamics in the affected areas.

An interdisciplinary structure is essential to fully integrate economic, social, and security perspectives into a coherent national analysis. The programme should also establish partnerships with an international consortium of researchers, for example to investigate the growing strategic and economic role of the defence sector as a catalyst for regional development and resilience.

By anchoring policymaking in robust and timely evidence, this research programme would enhance Finland’s capacity to manage complex transitions and ensure that the country’s eastern and southeastern regions receive the strategic attention and investment they require in the years ahead. By establishing a dedicated research programme, Finland could ensure timely, high-quality analysis of the evolving situation in its eastern and south-eastern regions. This initiative would provide the data and insights needed to shape an effective, proportional, and sustainable response to the challenges posed by economic and geopolitical changes.

Box 9.12. OECD work on regional well-being

The OECD’s regional well-being agenda provides a framework for assessing and improving quality of life across regions, recognising that national averages often conceal large subnational disparities. This work supports governments in designing more inclusive, equitable, and place-sensitive regional development policies.

At the core is the OECD Regional Well-being Framework, which measures well-being across 11 dimensions - including income, jobs, health, education, environment, safety, access to services, and civic engagement - using comparable indicators at both large (TL2) and small (TL3) regional levels.

The OECD’s Regional Well-being Database covers over 400 regions across OECD countries, enabling policymakers to benchmark performance, monitor disparities, and identify priority areas for intervention. This database is complemented by key publications such as “How’s Life in Your Region?” and “Regions and Cities at a Glance”, which provide insights into territorial inequalities and well-being trends.

Regional well-being metrics are increasingly used to guide:

• Place-based investment strategies;

• Just transition and resilience planning;

• Territorial monitoring of climate and demographic change;

• Recovery policies in response to major shocks such as COVID-19.

This approach shifts the focus from GDP alone to the broader factors that shape people’s lives, helping regions to assess progress and tailor development strategies to local needs and strengths.

Source: (OECD, 2014[21]; OECD, 2025[22])

Proposal for Action Plan

The proposed action plan presented in Table 9.1 sets out a comprehensive framework for actions that strengthen the resilience and development of Finland’s eight eastern and southeastern border regions.

The action plan translates the strategic recommendations presented above into concrete national-level actions, specifying the key actors, timelines, resources, and indicators needed for implementation. Taken together, these proposed actions aim to provide a clear roadmap for national authorities to support the eight eastern and southeastern border regions. Their implementation would not only address the immediate challenges faced by these areas but also contribute to Finland’s long-term security, competitiveness, and balanced territorial development.

The proposed action plan is not aiming to be a replacement for regional development programmes but a complementary framework that would ensure coherence across ministries, agencies, and regional councils. Importantly, the proposed actions also provide a basis upon which government could later set appropriate numerical targets, aligned with national strategies, EU frameworks, and available baseline data.

Several thematic priorities are highlighted. Under Support mechanisms, Finland should actively shape EU funding instruments and advocate for dual-use investments in border regions. Economic diversification and SEZs call for pilots in special economic zones, sectoral R&D programmes, and skills development to stimulate growth in future-oriented industries such as bioeconomy, clean energy, and cybersecurity. Investments in strategic infrastructure – from east–west transport corridors and energy grids to broadband and inland waterways – are essential for connectivity, resilience, and competitiveness.

Equally important are measures to strengthen governance and social resilience. A unified development framework for Eastern and Northern Finland, backed by a high-level envoy or ministerial mandate, would enhance cross-government co‑ordination. Expanding youth participation structures, mental health support, and housing services addresses pressing demographic and social challenges, while dedicated research and monitoring mechanisms ensure that progress is tracked and policies remain evidence-based.

Table 9.1. Proposed national-level action plan for supporting Finland’s eastern and southeastern border regions

Theme1	Key actions	Key actors	Timeline	Resources	Potential indicators
Support mechanisms	Explore and advocate for targeted EU funding mechanisms tailored to Eastern and border regions, leveraging the priorities of the forthcoming new MFF.	Prime Minister’s Office, Ministry of Economic Affairs and Employment, Ministry of Foreign Affairs	2026-2028; A 3-year horizon allows for agenda-setting, alliance-building, and formal proposal development.	EU technical support, national funding, legal and policy expertise	EU funding secured for Eastern and southeastern border-region initiatives (e.g. amount of EU funding)
	Advocate for strategic dual-use investments in border regions	Prime Minister’s Office; Ministry of Defence; Ministry of Interior; Ministry of Economic Affairs and Employment; Regional Councils; JCB.	2026–2028. Advocacy and agenda-setting during the early phase of the 2028–2034 MFF implementation cycle, with ongoing reinforcement as new funding calls and instruments are designed.	National budget; EU technical support (SG REFORM, DG REGIO, DG DEFIS); partnerships with NATO/EU defence innovation networks.	Number of dual-use investment proposals accepted by EU/national instruments; volume of funding secured for dual-use projects.
	Co‑ordinate with the European Commission and other EU Member States	Prime Minister’s Office; Ministry of Foreign Affairs; Permanent Representation of Finland to the EU; Ministry of Economic Affairs and Employment; JCB; Regional Councils.	2026–2029. A 3–4 year period for structured engagement with EU institutions and coalition-building with like-minded member states to influence MFF implementation and programme design.	National resources; EU technical support facilities (SG REFORM); utilising expert groups and advisory platforms	Number of joint advocacy initiatives with other EU Member States.
Economic diversification and SEZ	Launch SEZ pilot(s)	Ministry of Economic Affairs and Employment, Ministry of Finance, Business Finland, Regional Councils, Economic Development Centres; Ministry of Agriculture and Forestry	2026-2031; A 5-year period allows for the planning, pilot implementation, and evaluation phases.	National and EU funding, regional incentives, private sector co-investment, targeted EU instrument (if established under the forthcoming new MFF)	SEZ pilot launched; investment volume attracted.; number of firms established in SEZ; jobs created; export growth
	Establish sector-specific R&D and innovation support programmes targeting defence, cybersecurity, bioeconomy, and clean energy (e.g. competitive calls, public procurement for innovation, or co-financed R&D consortia).	Ministry of Economic Affairs and Employment; Ministry of Defence; Ministry of the Environment; Ministry of Education and Culture; Business Finland; universities and VTT.	2026–2032. Programme design in 2026; first calls in 2027; scaling and renewal by 2030–2032.	National innovation funding (including, where feasible, new or additional TKI envelopes prioritised for border-region sectors); Horizon Europe; ERDF; suggested EU Competitiveness Fund (ECF)	Volume of funding mobilised; number of cross-regional consortia funded; patents and commercialisation outcomes.
	Create targeted skills and training initiatives linked to diversification sectors (cybersecurity, bioeconomy, clean energy, dual-use technologies), including VET modules, reskilling programmes, and partnerships with employers.	Ministry of Education and Culture; Ministry of Economic Affairs and Employment; municipalities; VET providers; universities; employers’ associations JCB; Regional Councils.	2026–2031. Pilot training modules from 2026–2027; integration into national VET/HE curricula by 2029–2031.	National education budgets; ESF+; CAP/Rural Development Fund for rural skills initiatives; municipal support; employer co-financing (apprenticeships, training placements)	Number of new sector-specific training programmes; student enrolment in specialised tracks; share of graduates employed in target sectors; employer satisfaction surveys.
	Promote regional tourism through co‑ordinated campaigns, cross-regional packages, and strengthened links with national and international tourism platforms.	Ministry of Economic Affairs and Employment; Regional Councils; municipalities; Visit Finland; JCB; local tourism businesses and associations.	2026–2030. Joint promotional work can begin in 2026; rollout of cross-regional campaigns and packages from 2027; measurable visitor growth by 2030.	Tourism development grants; ERDF; national marketing support; private-sector co-financing from tourism operators.	Number of joint regional campaigns implemented; participation of local businesses; visitor numbers and overnight stays; regional tourism revenue.
Strategic infrastructure	Upgrade east–west transport links (e.g. feasibility studies, assessment against Liikenne 12 objectives, prioritisation in TEN-T/CEF, logistics hub pilots); Promote dual-use projects of national significance in line with national prioritisation criteria, while remaining open to adjusting priorities if additional EU resources become available..	Ministry of Economic Affairs and Employment; Ministry of Transport and Communications, Fingrid, Traficom, municipalities/regional councils;	2026-2033; A 7-year period matches typical infrastructure planning and delivery cycles.	CEF/ERDF; state budget, PPP frameworks; Horizon Europe/Innovation Fund for pilots; targeted EU instrument (if established)	Kilometres of rail/road corridors upgraded or planned in TEN-T; Number of logistics hub or pilot projects launched.
	Expand energy grids (transmission upgrades, renewable integration, rural microgrids).	Ministry of Economic Affairs and Employment; Fingrid; energy utilities; municipalities/regional councils; Ministry of Agriculture and Forestry (for rural microgrids).	2026–2033; Grid upgrades require long planning and permitting phases.	CEF/ERDF; Horizon Europe/Innovation Fund for pilots; CAP/Rural Development Fund; EAFRD (rural microgrids); state budget¸ targeted EU instrument (if established)	Transmission capacity added (MW); number of rural microgrids established; renewable capacity integrated.
	Improve broadband/5G coverage primarily through market-based provision, complemented where justified by state aid schemes or pilots (e.g. 5G pilot corridors2, rural coverage gaps, streamlined permitting).	Ministry of Economic Affairs and Employment; Ministry of Transport and Communications; Traficom; municipalities/regional councils; telecom providers.	2026–2033; Rollout aligned with telecom investment cycles and permitting processes.	CEF/ERDF (digitalisation); state aid schemes; telecom private investment; Horizon Europe/Innovation Fund for pilots, EAFRD (rural microgrids); targeted EU instrument (if established)	Share of households/businesses with 1 Gbps broadband; share of population covered by 5G.
Regional investment attractiveness	Strengthen Business Finland and regional investment promotion agencies´ (IPA) collaboration; develop and adapt regional investment promotion strategies, including tailored regional investment profiles; promote dual-use tech sectors through targeted campaigns and international outreach.	Business Finland, Ministry of Economic Affairs and Employment, ELY Centres, regional authorities, Economic Development Centres	2026-2029; Relevant agencies could quickly adapt strategy in 2026–2027, but results (FDI, project starts) are only expected after a few years.	State funding for IPAs, international promotion budgets, trade delegations, targeted EU instrument (if established)	Investment leads generated; investor visits; FDI volume in target sectors; share of FDI directed to priority sectors (dual-use, clean energy, bioeconomy, cybersecurity)
Multi-level governance	Explore synergies and co‑ordination between the Eastern and Northern Finland programmes to improve visibility and coherence, while respecting their distinct governance structures; support continuation of the already agreed joint strategy process for Northern Finland, Sweden, and Norway; ensure continuation of Special Envoy for border regions to provide high-level leadership, advocacy, and co‑ordination across ministries and with the EU.	Prime Minister’s Office, Ministry of Economic Affairs and Employment, Ministry of Finance, regional councils	2026-2027; Requires high-level political support post-2025 with programme merger and representative appointment to be completed during the 2026–2027 policy cycle	Legislative adjustments (if required);, administrative co‑ordination across ministries; dedicated political mandate; national budget	New unified programme formally approved; term of high-level representative continued
Workforce and education	Pilot talent attraction and retention incentives (e.g. relocation grants, housing support, career services – recognising that student loan compensation has raised concerns); adapt and tailor vocational and higher education programmes in priority sectors (cybersecurity, bioeconomy, clean energy, health) through modular and short training formats; develop regional agreements with HEIs, municipalities, and employers on target fields, volumes, and integration support for international students and workers; strengthen municipal - higher education institution (HEI) collaboration through joint training centres, applied R&D projects, and student mobility schemes.	Ministry of Education and Culture, Ministry of Economic Affairs and Employment, municipalities, HEIs, regional authorities; Ministry of Agriculture and Forestry	2026-2031; A 5-year window allows for design and testing of pilot incentive schemes (2026–2027), scaling of successful models (2028–2029), and full integration into national/regional education systems by 2030–2031.	National education budgets, ERDF and ESF+ for skills and training, employer co-financing for placements and apprenticeships; CAP/Rural Development Fund (for VET and skills in rural sectors); EAFRD (VET/skills in rural sectors); targeted EU instrument (if established)	Number of talent incentive pilots launched and scaled; participation rates in new VET and HEI programmes; graduate retention rates in the region after 1–3 years; share of vacancies filled in target sectors; employer satisfaction with workforce skills (survey-based).
Youth and social resilience	Support youth participation structures (e.g. youth councils, participatory budgeting); expand access to mental health and housing services tailored to young people; develop youth-specific regional data systems to monitor well-being, education, and employment outcomes.	Ministry of Social Affairs and Health, Ministry of Education and Culture, THL, municipalities (e.g. municipal youth services/etsivä nuorisotyö), regional councils, wellbeing services counties; youth organisations; Ministry of Agriculture and Forestry (CAP-supported youth/rural services)	2026-2030; A 4–5-year horizon allows time to design and institutionalise participation mechanisms, expand service capacity, and generate first measurable outcomes in youth well-being and retention. 2026–2030.	Public health and social budgets; municipal and regional co-financing; ESF+/ERDF for service expansion and data systems; CAP/Rural Development Fund (for youth services in rural areas); EAFRD (youth in rural areas); targeted EU instrument (if established)	Number of youth participation structures established and active; youth engagement in planning processes; coverage and utilisation of youth mental health services; youth well-being indicators; availability and use of youth-specific data systems; improvement in youth well-being and retention indicators.
Research and monitoring	Establish a national research programme on eastern and border-region resilience and development; develop regional scoreboard tracking socio-economic, demographic, and security indicators; co‑ordinate indicator development and data harmonisation across national and regional levels.	VATT, Statistics Finland, Datahuone, regional universities research institutes, regional councils; relevant ministries.	2026-2030; A 3–4 year window allows for institutional co‑ordination, launch research calls, and delivery of initial monitoring and evaluation outputs outputs to inform policy from 2026 onward.	Dedicated research programme funding; inter-ministerial co‑ordination resources; EU research and technical assistance instruments (e.g. Horizon Europe, Interreg, ESPON); targeted EU instrument (if established)	National research programme adopted; annual scoreboard reports published; indicators integrated into regional and national policy documents; number ofdata-sharing protocols and partnerships established

1. Actions are generally presented together under each theme as a single entity when their key actors, resources, and indicators are largely shared. To distinguish multiple actions within one row, they are separated by semicolons (“;”) rather than bullet points. This ensures clarity and avoids unnecessary duplication across the table. Where actions differ significantly in terms of actors, resources, timelines, or indicators, they are listed in separate rows with distinct entries.

2. 5G pilot corridors refer to designated transport routes or regional zones where advanced 5G networks are deployed and tested under real-life conditions. These corridors serve as testing grounds for applications. 5G pilot corridors are typically established along major roadways, railway lines, ports, and cross-border routes.

References

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Notes

← 1.  As will be discussed in section below titled as “Strengthening the multi-level governance and policy coordination”, Finland has recently appointed Mr Harri Broman as Special Representative to specifically support the swift implementation of the strategic measures proposed in the Programme for Eastern Finland, until end March 2026.

← 2.  Some stakeholders have rightly raised concerns about the vulnerability of defence-related infrastructure and activities located in immediate proximity to the border. These concerns are valid and should be carefully weighed in the planning and implementation of any future initiatives. However, it is important to underline that the notion of a "strategic hub" does not imply the concentration of critical assets in a single high-risk location. Rather, it refers to the broader development of research capacity, innovation ecosystems, skills, and industrial capabilities that support national resilience and regional economic diversification. It should also be noted that the eight border regions covered in this report represent a geographically extensive and varied territory - not just the narrow frontier line - and within this broader space, risk-informed planning could guide the placement of sensitive infrastructure and activities.

← 3.  This would also align directly with the suggested establishment of the unified regional framework and the proposed Joint Coordinating Body (JCB) – see a recommendation made later in this document under section “Recommendations for the entire Border Region (eight Regions), Multi-level governance and policy coordination”.