Your Excellencies, Ladies and Gentlemen,
It is a pleasure to attend Amcham Finland’s Annual General Meeting Celebration 2014. I am delighted to see such a broad audience here today. To me this demonstrates appreciation for the significant work Amcham Finland is doing. By providing an important business hub for hundreds of companies, both for Finnish and foreign owned companies from all around the world, Amcham Finland is not only serving its members, but also other stake holders including public sector.
During difficult economic times like today we need to ponder “Is Finnish economy on a right track in her globalization?” In my opinion, the answer is clearly ‘yes’ and ‘no’. ‘Yes’, since our large enterprises are performing well and have succeeded in making a strong presence in the global market. But overall we are ‘not’ in the right track with our poor exports performance since the 2008 financial crisis. Clear areas of improvement include improvement of internationalization performance of our small and medium sized companies as well as Finland’s ability to attract foreign direct investments.
In a broad scope exports and international trade have been the backbone of the Finnish economy. Our wellbeing is largely relying on exports based on our know-how, expertise and natural resources. Finnish exports were hit hard in the aftermath of the recent financial crisis. The loss of market shares and the shifting of production from Finland abroad coincided with the financial crisis – unfortunately.
Furthermore, our exports are heavily dependent on very few enterprises. Ten largest enterprises in 2012 contributed around a third (32%) of total exports and the five largest exporters accounted for almost a quarter of (23 %) of the total exports.
Despite the success of our large global companies in the world markets the structural change of Finnish SMEs to increasingly participate in the global value chains has not taken place fast enough. I strongly believe that there is plenty of untapped potential among the SMEs. Technical knowhow residing in SMEs would allow much larger market share of the global value chains when combined with correct of international business competences and sufficient risk financing.
Market entry and expansion of international business is naturally done in the companies themselves. We in the public sector can support this development by providing catalytic instruments and risk sharing financing. I will not go into details of public support system, but underline two lines of development.
As we all know, we have initiated the Team Finland activity. The core aim of the Team Finland is to get improved and most beneficial internationalization services especially for SMEs in the time of scarce and diminishing resources. We are doing this by enhancing the cooperation among public services across ministries and various organizations.
The largest restructuring is taking place in our internationalization organization, Finpro. As I informed last fall, we are reinforcing Finpro’s public services especially to SMEs by directing Finpro’s government subsidy entirely to public services. This naturally stops the subsidized internationalization consulting work at Finpro and the consulting arm of Finpro will be cut off to operate in the competitive private consultancy market. To compensate for the loss of this subsidized consultancy services we are preparing a new financial instrument to support SMEs when they need external consultancy help. The new instrument is aimed directly at the SMEs and can be used to purchase consultancy from service provider of SME’s choice. The changeover from present system to the new will take place during this coming summer.
The new public service Finpro provides an excellent platform to consolidate our public internationalization services. As you are well aware, the Invest in Finland activities have already been integrated into Finpro platform and next fall also the tourism promotion activities of “MEK” will follow suit. In both cases the synergies of operating on the Finpro’s global platform, with export centers all around the world, will provide new possibilities to strengthen both the foreign investment promotion and tourism promotion alike.
With these changes, among others, our sincere intention is to provide support for Finnish SMEs in their quest to bring their competences to global markets and reap the benefits of their special knowledge as an integral part of increasingly complex value chains dominated by the multinational corporations. SMEs need to be active and present in the growing markets and they can no longer rely solely on large Finnish companies to pave their way to international markets. They have to be ready to take a risk and to invest in their own international success.
The second area of improvement is the attractiveness of Finnish economy for the foreign direct investments (FDI). Finnish firms are actively investing and operating abroad, but the flow of FDI to Finland has been lagging behind our peers. Finland is doing very well in many other global comparisons, but not in FDI performance.
FDI flows to developed countries have remained at a historically low share of the global total FDI flows for the past few years. UNCTAD – United Nations Conference on Trade and Development – forecasts that FDI flows will rise gradually in 2014 and 2015. However, uneven levels of growth, fragility and unpredictability in a number of economies could dampen the FDI recovery.
Taxes are always on the table when FDIs are discussed; consequently, I sincerely hope that the lowering of corporate income taxes and reducing the electricity tax for data centers (from the beginning of April) are seen as clear improvements in the investment climate of Finland.
In our Ministry’s structures Invest in Finland operating on the Finpro’s platform, is the primary national body in promoting foreign direct investments. IIF has launched a new aftercare service last year. This activity consists of identification of new investment opportunities as well as direct contacts with the IIF customers who already have invested in Finland. More than 200 IIF’s customers have already been approached through the aftercare activities.
I am pleased that there are so many foreign-owned companies present here today. According to results of the Research Institute of the Finnish Economy ETLA’s study, productivity is higher in foreign-owned companies than in Finnish companies. Foreign-owned companies are the most productive, followed by Finnish companies that operate internationally, while companies operating domestically are the least productive.
Foreign operators increase competition and bring new methods, goods and services to the market. Competitive pressure also forces domestic companies to innovate and to develop their activity. This provides a positive boost to the productivity. Foreign companies have also paid more direct taxes relative to their number of personnel than domestic companies and they employ higher educated personnel.
Ladies and gentlemen,
It is essential to enhance public-private partnership in promotion of foreign investment. By setting up the Council of Foreign Investors the Ministry of Employment and the Economy recognizes the foreign-owned companies’ role in the Finnish society and economy. Only every one hundredth enterprise located in Finland is under foreign control. However, 15 % of the personnel of all enterprises in Finland are employed by these about 3000 enterprises. The respective share of turnover is even higher, around 20 %. This underlines the importance of FDI for the entire Finnish economy and welfare.
We consider the Council as a very important instrument to deepen the dialogue between our ministry and companies that already have made the decision to significantly invest in Finland. With the Council we wish to reach three goals. We wish to learn from the Council members about needed improvements we need to make in order to make Finland even more attractive investment destination. Secondly, we wish to promote the expansion of the investments by these companies that already have established themselves in Finland. And thirdly, we would appreciate, if the Council members could act as “investment ambassadors” of Finland in their extensive networks in the global business community.
The Ministry of Employment and the Economy and Amcham Finland are integrally connected with the investment promotion activities. Amcham is represented in the Council for Foreign Investors and the ministry in the ROI Finland program of Amcham. I find this collaboration very fruitful and support these joint activities.
Ladies and gentlemen,
A strong, competitive economy is the most attractive for companies considering investments. Another important element in the Finnish offer to international business is our continued commitment to an open, non-discriminatory, transparent and efficient regulatory regime.
Nevertheless, we must remember that we are running a marathon, not a sprint.
With these words I wish you a pleasant annual general meeting celebration and every success in the future.