Embassy of Finland

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Some Aspects of the success of Finnish Economy

• Presentation at the Launch of the Feel Finland in
  Science 2006, Jan. 12, 2006
• Juha Niemi
• 1st Secretary
• Embassy of Finland, Tokyo

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FINLAND

• Location Northern Europe, between Sweden and
  Russia
• Independence 6.12.1917
• Capitol Helsinki
• Official languages Finnish and Swedish
• Population 5,2 million
• Area 338 000 km2
• Population density 17/km2
• appr. 180 000 lakes, 70 of area covered by
  forests
• GDP/capita 2003 28 700 US (ppp OECD)
• A typical Nordic Welfare State

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Good scores in recent international comparisons

• World Economic Forum Global Competitiveness
  Report 2005 1st place
• Institute for Management Development (IMD) World
  Competitiveness Scoreboard 2005 6th place
• Transparency International Corruption Perceptions
  Index 2004 lowest level of corruption
• OECD/Pisa on education 1st place
• UNDP Human Development index 2005 13th place
• WEF environment comparison 1st

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Finnish Economy and Society

• Finnish economy has been one of the best
  performers among the OECD countries
• brisk economic growth (04 3,6), low inflation
  (less than 1) , high surplus in current account
  (04 4,1)
• government debt at 44 of GDP one of the lowest
  among OECD countries
• problem persistent unemployment (currently 7-8
  )
• one of the top countries in terms of equality in
  incomes

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Finlands Real GDP Growth 1990-2004
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Drivers behind Finlands economic success

• 1. Quality education with equal opportunity
• 2. Investments in RD for technology development
• 3. Good regulatory framework and efficient public
  service
• 4. Open economy
• 5. Social model

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1. Quality education with equal opportunity

• cultural undercurrent importance of education
  stressed since independence
• investment to the educational system currently
  6 of GDP directed to public education
• high-level, free and universal education from
  comprehensive school to university
• rationale small country with scarce natural
  resources, important to mobilize all human and
  intellectual resources
• A corollary Finland one of the most advanced
  countries in the world in gender equality
• High participation of women in the work force

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2. Heavy Investment in RD
Total 5.0 billion euros, 3.5 percent ofthe Gross
Domestic Product (GDP) in 2003.
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RD funding/GDP in 2003comparison of selected
countries
/ GDP
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Patents
High technology EPO patent applications
High tech. patents granted in the USA
- Applications per million inhabitants in 2002
- Patents granted per million inhabitants in 2002
Finland
Netherl.
Sweden
USA
Germany
Denmark
Japan
UK
France
EU
Ireland
Austria
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Other Tools...

• promoting co-operation particularly within our
  main industry clusters
• triangular co-operation universities/research
  institutes, enterprises, central and local
  government institutions
• to lower barriers between public, private
  academia, especially important when nurturing new
  technologies
• 22 science parks and technology centres
• 12 centres of excellence in universities
• incubators
• co-financing of research by public and private
  actors

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3. Sound regulatory framework and efficient
public service

• Premise Sound and predictable regulatory
  framework important for business to thrive
• Impartial, transparent and reliable public
  service
• Finland one of the least corrupt countries
• Efficiency aim at expanding room for private
  sector to maneuver
• less red tape
• public authorities more as regulators and less as
  service providers
• Consistent efforts at deregulation since 1980's
• liberalization of telcom markets in the early
  1980's Nokia, ICT industry
• privatization of postal services in the 1990's,
  increased outsourcing of various public services,
  private provision of day care for children,
  public private partnerships etc.

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4. Open economy

• Finnish mindset embrace globalization rather
  than seek recourse to protectionism
• Benefit allows access for wider markets and
  foreign capital and forces to continuously
  improve performance and stay competitive
• Finland, a firm believer in international trade
  liberalization
• FTA with the EU in 1973, member of the European
  Union 1995, member of the Euro-zone 2002, WTO
• descriptive of Finland almost 40 of GDP derived
  from exports

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5. Social Model the Welfare State

• "double edged sword" in competitiveness rankings
  high taxation
• Finlands tax to GDP ratio 44.3 in 2004, 5th
  highest in OECD (Japan 2003 25,3 )
• however, the system offers also benefits
• free health care, free tuition, safety net which
  contributes to social cohesion and political
  stability
• welfare state enjoys wide support

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Challenges

• Fast-paced progress of globalization,
  intensifying competition
• To remain competitive
• build on strengths, invest in knowledge
  intensive, make sure that the business
  environment remains attractive
• No room for complacency! Need to revisit all
  aspects behind competitiveness continously!
• streamlining welfare state, streamlining
  bureaucracy etc.
• Easier to get to the top than to stay there

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Doumo arigatou gozaimashita!