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Successfully investing in Finland

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   last updated on 27 May 2020 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Finland?

Finland's economy will grow somewhat more slowly in 2020 than in 2019. The new Prime minister Sanna Marin’s government is investing in infrastructure, education and climate protection.
 
So far, the building boom is losing strength and exports are weakening. In return, the government abandons its strict austerity policy – and invests. This year's growth will also be supported by private consumption. Consumer growth is supported by the improvement in household purchasing power. Wage costs in the economy will grow roughly as fast as this year, as income levels will rise more rapidly than in recent years.   
Systematic and long-term work to advance digitalisation has borne fruit as Finland ranked number one in last year’s DESI (“The Digital Economy and Society Index” – DESI) comparison of digitalisation. Finland excels in digital public services and integration of digital technologies. The high competence level is one of Finland's strongest competitive advantages: 76 per cent of the population have at least basic digital skills, which is a long way above the EU average (57 per cent).
 
From a global perspective, Finland is also one of the most digitised countries in the world with high availability of fast, mobile broadband, high digital literacy and high internet usage. The high affinity for everything digital can be seen in the high level of acceptance of new digital business concepts. Examples are start-ups like Whim (mobility) and ResQ (food). The advanced e-government and e-health system is also used intensively. Citizens have great confidence in the government. 
 

How would you describe the investment climate in Finland? Which sectors offer the largest potential?

The general sentiment in business and industry reflects uncertainty. That is leading to stagnant investment growth this year. The R&D expenditure growth spurt seen in 2017-18 is also abating, but the outlook for 2020-21 is cautiously optimistic. Shortage of skilled employees and competence in sectors such as ICT and the software industry is holding back growth.
 
Finland has significant growth potential in many sectors and specialised niches, including the bioeconomy, circular economy, the food sector, diagnostics and photonics.
 
The growth will continue in mining and exploration. Joint development projects are under way involving several themes such as the battery cluster, the environmental impact of mines, development work on a test enrichment facility for the Geological Survey of Finland, and research into geoenergy and peat.
 
Last year, Finland's third largest forest industry company, Metsä Group, announced its plans to invest around 1.5 bio. Euro in a new pulp mill in Kemi in northern Finland. The final investment decision should be made in summer 2020. If the project is realised, it would be the largest investment ever made by the national forest industry. The current record is also held by a Metsä Group production plant in Äänekoski, which went into operation in 2017 and cost around 1.2 billion Euro.
 
Several large projects are on the agenda in the forestry industry. Boreal Bioref (950 million. Euro in Kemijärvi) and KaiCell Fibers (900 million Euro in Paltamo) are on the list of large new pulp production plants.
 

What challenges do German companies face during their business ventures into Finland?

Finnish licensing and certification requirements differ from those in other European countries. For this reason, it makes sense to take advantage of advisory services to meet domestic legal and regulatory requirements on site. This enables a smooth entry into the Finnish market. For many, the Finnish language could also be a real challenge. However, Finland is a very international country, where one can also survive with English, Swedish or even German and Russian.
 

Finland's experiment with an unconditional basic income seems to have failed. What conclusions can be drawn from this?

The employment effects of the basic income experiment remained low. According to the final results of the experiment, employment of people with basic income improved only slightly more during the experiment than in the comparison group.

 

The Finnish government introduced a new activation policy into the Finnish unemployment system at the beginning of 2018 – that is, during the second year of the experiment – which contaminated the control group. It is now no longer possible to see if the differences between the experiment and control groups are due to basic income or due to tougher conditionality faced by the control group. According to the researchers, the activation policy has practically confused the analysis of the 2018 results.

 

Unfortunately, the experiment was flawed because it was too immediate and too little money was budgeted for it. The budget for the experiment was only 20 million Euros. This meant that the unemployed person who had already received a benefit had to be selected into the comparison group in order to cut costs.

 

However, recipients of basic income were more satisfied with their lives and less psychologically stressed than those in the comparison group. They also felt that their financial wellbeing was better.

 

In your opinion, how will Finland develop?

Fortunately, despite the current situation, positive characteristics are in sight, as inflation is likely to remain low and purchasing power is likely to improve, even if increments in wages remain moderate.

Low price of oil stimulates Finland's economy in the other export markets, improves consumer purchasing power and lowers the cost of business. The oil price influences (among other things) transport prices.
 
Finland will focus on relationships with dynamic Asian economies for the next few years. Both the transport connections to these countries are being expanded, as are the economic contacts.

In China, the main destination for pulp exports, the forestry industry is starting to return to normal after the acute crisis and most companies have started operating. According to current estimates, cellulose exports from Finland will remain at the previous year's level and even increase slightly.

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