Finland’s eight eastern and southeastern border regions – Lapland, North Ostrobothnia, Kainuu, North Savo, North Karelia, South Karelia, South Savo, and Kymenlaakso – are experiencing one of the most significant transformations in their modern history. The closure of the Finnish-Russian border in 2023, alongside the far-reaching consequences of Russia’s full-scale war of aggression against Ukraine, has reshaped the regions’ economic, social, and security context. Once defined by cross-border trade, tourism, and labour mobility, the regions now find themselves on NATO’s and the EU’s longest external land border with Russia – shifting from being economic gateways to becoming strategic security frontlines.
The analysis carried out in this report reveals a complex and interlinked set of challenges. Population decline, accelerated by youth outmigration and low birth rates, is eroding the working-age population and straining public service provision. While international immigration has partly offset losses, ageing is increasing service costs and reducing tax revenues. Economic impacts have been severe: exports to Russia have collapsed from 5% of Finland’s total in 2021 to under 1% in 2023; tourism and logistics linked to Russia have disappeared; and many SMEs face pressure to reorient to new markets.
The regions’ economic base is uneven. Even before Russia’s aggression against Ukraine and the closure of the border, Lapland and North Ostrobothnia retained relatively strong labour markets, partly due to increased tourism from EU countries and overseas, mining, and high-tech activities, but South Savo, Kainuu, and others face lower employment rates and limited sectoral diversity. These challenges have further deepened since 2022 as cross-border trade and tourism ceased. Manufacturing has declined in some areas, while services and tourism have grown in others. Structural disadvantages – remoteness, limited transport connectivity, weaker innovation ecosystems – compound these issues. EU Cohesion Policy and national development programmes provide significant support, but governance fragmentation, overlapping regional frameworks, and limited capacity constrain their impact.
The strategic response set out in this report is built on two mutually reinforcing pillars:
1. Integration of regional development and security – recognising the border regions’ dual role as communities and as part of the EU’s strategic security infrastructure. This includes systematically embedding border security, defence-related infrastructure, security of supply, and cybersecurity into regional planning.
2. Balancing traditional regional development with targeted support for geopolitical challenges – adapting EU and national policy frameworks to reflect the regions’ exceptional circumstances: geopolitical exposure, market isolation, climate conditions, and demographic decline.
At the national level, the recommendations emphasise:
Securing additional funding and support mechanisms, leveraging the European Commission’s July 2025 budget proposal for 2028 - 2034, which proposes increased funding for border management, internal security, and flexible cohesion spending.
Promoting economic diversification into defence manufacturing, cybersecurity, bioeconomy, clean energy (including hydrogen, solar, and bio-based fuels), and sustainable tourism, with exploration of a Special Economic Zone pilot to attract investment.
Strengthening regional security and defence preparedness by investing in dual-use infrastructure, security of supply, and regional innovation ecosystems - including defence, cybersecurity, and critical technology sectors - to ensure that national and EU security priorities also contribute to sustainable regional development.
Upgrading strategic infrastructure in transport, energy, and digital connectivity to improve resilience, competitiveness, and security preparedness.
Strengthening investment promotion through co‑ordinated national-regional approaches, tailored investment profiles, and sector-specific outreach.
Enhancing multi-level governance, potentially combining Eastern and Northern Finland programmes into one integrated framework, while ensuring the different policy environments and challenges are addressed and securing longer term nomination for the high-level envoy for the border regions.
Investing in human capital by reforming vocational education, targeting critical skills shortages in sectors with growth potential - such as clean energy, bioeconomy, defence and security industries, mining, digitalisation, and sustainable tourism - expanding youth participation in planning, and attracting and retaining skilled labour through targeted incentives and relocation support.
Establishing a national research and monitoring programme to track economic, social, and security trends in the eastern and southeastern border regions and support evidence-based policymaking.
For the border region as a whole, the report calls for the creation of a Joint Co‑ordinating Body (JCB) to:
Align strategies, reduce duplication, and strengthen the region’s advocacy at national and EU levels.
Co‑ordinate investment in dual-use infrastructure and innovation hubs.
Pool technical expertise, project development capacity, and policy planning.
Improve access to external funding and promote coherent branding of the region as a secure and competitive location.
For each of the eight regions individually, the report identifies a mix of shared and tailored actions across six thematic areas:
Economic resilience and diversification – accelerating renewable energy and circular economy projects, developing defence and dual-use industries, and fostering sustainable tourism.
Labour market and skills development – aligning education with industry needs, attracting skilled workers, and retaining youth.
Infrastructure and connectivity – improving east–west transport corridors, broadband, and 5G coverage.
Environmental sustainability – supporting the green transition while protecting natural assets.
Security and readiness – enhancing crisis preparedness, decentralised energy, and dual-use capacity.
Multi-level governance – streamlining strategic frameworks, deepening cross-regional co‑operation, and formalising youth participation.
Overall, the integrated diagnostic and recommendations aim to turn the eastern and southeastern border regions into resilient, competitive, and secure areas that serve both as vibrant communities and as a cornerstone of Finland’s and Europe’s security. This will require co‑ordinated national, regional, and local action; sustained investment; and a long-term commitment to aligning economic, social, environmental, and security priorities in a single, forward-looking transition strategy.
