The financial crisis and recession hit Finland much harder than the other Nordic countries. Despite healthy growth recently, cumulative GDP growth since 2008 in Finland is 8% behind Eurozone average. Closing the gap would require a challenging 3% annual growth for the next five years. The growth gap compared to Sweden is even bigger – as much as 20%, equaling 38 billion euros in annual Finnish GDP.
EY Nordic Attractiveness Report highlights Finland as the clear leader in number of received FDI projects for the sixth consecutive year, with a remarkable 44% growth in 2017. Pull factors include the strengths of the country: a leading education system, proven by international benchmarks, and technological innovation capability, largely thanks to the rise of the Nokia cluster during the last few decades.
One might expect that in a recession period, public investments in growth would be prioritized to encourage businesses to invest as well, but the Finnish government has failed to do so. Public R&D investments, accounting for about 1/4 of all R&D funding, have seriously declined since 2008. During the same period, public R&D investments in the other Nordic countries have increased clearly.
The Research and Innovation Council of Finland, an advisory body chaired by the Prime Minister, has now created a vision to make Finland the most attractive and competent environment for experiment and innovation. This vision includes a commitment to raise R&D investment funding from current 2,7% to 4% of GDP by 2030. This sets a good direction, but the implementation remains to be seen. Current domestic R&D investment level is alarmingly low.
The education system needs renewal to prepare for the disruption of businesses and the future of work. Universities should offer modular life-long learning in co-operation with the businesses. Employees across industries are in immediate need of new digital capabilities learning. Technology education should be included already in elementary schools. Mathematics should be prioritized in high schools and made compulsory subject in matriculation exams. The whole education system should be more agile than today to address rapidly changing needs of businesses. Many of these actions are already on the agenda, but rapid implementation is key to respond to the global competition on time. Finnish technology industries alone need 53.000 new employees by 2021, while the current education system can barely produce half of them.
The EY report is welcome evidence of foreign investors’ increasing trust in Finland. Hopefully Finnish investors join the club!
Read EY’s Nordics Attractiveness Report here.
Technology Industries of Finland