Agenda Magazine

There has been contradictory information regarding the end of the financial crisis and the recession in Finland, with some saying the crisis is over and others stating that the worst is yet to come. What is the real situation and what can we expect in 2010?

The worst of the crisis is behind us, but the upswing is still very weak, very fragile, and nobody can promise any quick, speedy recovery; we have to be prepared for several years of slow, modest growth. This means that unemployment, particularly, may stay at a high level for several years to come. How to handle an unemployment rate of around 10% is a big challenge for any government and any society.

On the other hand, one can see that there is no panic in Finnish society and people are rather relaxed. We have learned some lessons from the crisis of the 1990s when the Finnish economy dipped sharply. The reasons were different then and the economy was not at all prepared, but now our companies and banks are much stronger to face a blow, and our society has an array of safety nets ensuring that no one drops out completely. Finns recognise that we are in a downturn but they also know from previous experience that an upturn will follow. I think everybody is aware that there will not be a steep upturn and that times will be difficult. As the public sector is going to be deeply indebted, people should already know that the public service will not solve their problems.

What new measures have the Government taken to support the economy?

The budget proposal of the government now in front of Parliament, which I believe will be approved without any major changes, outlines how money will be spent to help get Finland out of the crisis. Initially planned for 2011 and 2012, investment in infrastructure, training, employment and renovations of care centres, schools and homes for the elderly will be undertaken this year in order to support recovery. We also increased funding for organisations supporting companies, such as TEKES, Finnvera and Finnish Export Credit. Equally, starting from this year, we abolished the employer's national pension fee.

The state also increased support for companies' internationalisation, particularly to environmental technology and wood products. The Finnish stimulus package was 1.8% of the GDP in 2009 and is 1.4% in 2010, one of the largest in the Euro Zone. Since we cannot help the Finnish economy too much through exports - Finland mostly sells goods that countries are using when they are developing - we have to find other ways to stimulate our own economy as much as we can.

What can be Finland's role in the global economy today?

Finland is a small economy in the world's market place, but we are known as a well-organised and wealthy society, and are often held as an example of how a small country can restructure and modernise the economy and improve wealth, so, in this respect, we count for much more than our contribution to the world's GDP. Finland has changed very quickly in 20 years from a raw material exporter into a high technology exporter. The world is also interested in the high rankings we have received in different surveys over the years, such as competitiveness, education, environmental protection and lack of corruption, although we have faltered with the latter following recent stories of financing in political parties that was perceived as corruption.

However, it is generally known that the Finnish political class is not corrupt and that you can rely on civil servants. In the Nordic states we believe that one should work hard, educate population, have good, transparent and open policies; that one should promote fair and equal policy among genders and fully use women's capacities. Each of these is an aspect that other countries are coming to see just how we achieved them.

Attracting investment is a priority for all countries, so what are the incentives Finland offers potential investors?

We have a very highly-developed infrastructure and an educated workforce who generally speak a number of languages. We neighbour Russia and are inside the EU, so Finland can be the perfect gateway for somebody interested in manufacturing goods or exporting them to European and/or Russian markets. We also have attractive policies at the municipal level - companies get all the services they need, there is no corruption, administration runs smoothly and quickly, and one gets answers to questions rather rapidly.

On the other hand, in which international economies do you recommend Finnish companies to search for new developments?

Even though most of the world looks rather sluggish, there are a number of countries that are growing satisfactorily right now and Finnish companies should pay close attention to them. These countries include China, India, Vietnam and Brazil, so while companies may know nothing about these economies this is where the Finpro machinery can help them.

What some of Finland's booming business areas that foreign companies should be investing?

Last year the Finnish economy dropped by 6.7%, so there is currently no particular booming sector, but one area of interest for investors is technology-related products. Finnish engineers have been undertaking basic research and development, and they now need help to launch production and marketing. The field of telecommunication, even though it is not growing as fast as a decade ago, is still interesting, while areas such as energy efficiency, technologies concerning reduction of emissions, waste management and environmental are now the most attractive for foreign investors - in this sense, creation of partnerships between Finnish companies and American investors is, for example, an aspect that the U.S. Ambassador Mr. Bruce Oreck is looking at.

Finnish Ministers have expressed the wish that industrialised and other countries would not resort to protectionism and that they should encourage foreign trade in order to help the economy recover. Still, it is common knowledge among foreigners doing business in Finland that Finns prefer to buy Finnish - from vegetables at the supermarket to clothing and technology. Isn't this a contradiction between the declaration and the Finnish reality?

Finland's trade policy has been traditionally protectionist in very few sectors, mainly in agriculture, because of our climate conditions and the structure of Finnish farms - they are very small and are not competitive even on an EU scale, so we have been keen to protect them; in this sector we are as protectionist as many other EU countries. Since we became EU members the number of farms has diminished very much, but it would have decreased in any case because of the age structure of farmers. The young generation is generally not willing to stay on the farms, but want to go to the city and do something fancier.

Since the war, when all food import was strictly regulated, we have gradually liberated our foreign trade, and now we have a liberal economy; the EU, in my vision, is also promoting a liberal economy. Some media and competitors want to label the EU as protectionist, but I don't consider this to be true. No other trade entities are importing as much from developing countries as the EU does. The EU is granting full access to her market to the poorest countries in all areas, with the notable exception of weapons.

Now, at the business level, there are perhaps in Finland companies who do not want to see too many competitors, but the government has nothing to do with that. As for families who would rather buy Finnish food than imported food there are possibly three reasons. One is that they do want to keep Finnish agriculture going; people know that if they only buy domestic food then farmers in this country will survive. We have to maintain some self-sufficiency within reasonable limits, in case of an emergency when food imports would not be possible.

Secondly, some might take an environmental stance when choosing domestic food - they don't want to buy food that has been transported from the other side of the world, because this leads to emissions and use of energy. The third reason could be related to food safety and the basis of stories people have seen in the media; they don't feel sure how animals were treated and what they were fed on or what pesticides it might contain. Based on the controls we have in Finland, people know what to expect when buying domestic food, but the fact that food supplies were rationed during the war and we could not import much has impacted people's buying policies for a long time. However, there is no contradiction between ministers' wishes and our official trade policy.

In the light of this current economic crisis, how has the relationship between politics and economy been shaped?

This crisis changed and will keep influencing power relations in the world economy in the sense that we have to pay more and more attention to some world powers whose economies are growing despite the crisis, such as China, India and South Korea, or those traditionally known as an important economical power, such as Vietnam, Brazil and Russia. Russia is currently suffering from the downturn, shrinking close to 10% this year in terms of GDP, so its growth is not as before.

Russia really has to solve several issues in order to reach the path of sustainable growth. It cannot rely only on oil and gas prices; it has to modernise and to diversify its economy, as President Medvedev is saying. We hope that he is successful in his strategy because if Russia grows rapidly then Finland is one of the first countries to benefit. As we are here next door, when Russian demand picks up Finnish companies are the first ones to benefit. In 2009 our exports and imports with Russia have diminished in a dramatic way, about 40%, but we aim at setting our trade with Russia again on a growing path.

Did Finland learn from the way other countries managed the crisis?

My feeling is that in this crisis we did not have much to learn from others because we had learned from our own crisis back in the '90s - now we were in position to teach other countries what we did back then. Even in international meetings inside the EU, Eurogroup, OECD and other delegations listened carefully to how we handled the situation back then and what we think should be done now.

For example, asking all governments to make stress tests for their banks to see how many bad assets these banks have on the books, and then see what governments should do in order to alleviate the situation was an idea that Finland advocated and successfully pushed through despite some resistance. Based on our experience, we felt that such stress tests should be at the disposal of all governments in order to have a realistic policy towards banks; we were the teachers rather than the pupils in this matter.

The question of harmonising climate change and economical development is a must, so what is Finland's policy to balance these aspects?

Climate policy is not, as such, the responsibility of this ministry, but we do play a role in the trans-border aspects. In the field of trade policy we say that if we want to combat climate change the first step is to liberalise trade in environmental technology products. If we would do that then it would be cheaper to install and bring about improvements in terms of lesser emissions, cleaner production and facilities. This is, of course, not enough to reach the targets the EU has set for itself, so we need other governmental measures in order to reach these targets. For Finland, the target is to cut emissions by 20% and increase the share of renewable energy to 38% of total energy production.

We basically need sticks and carrots - we need tax policies to lead companies and individuals to be more energy efficient, but also subsidies and support for companies that are doing research and development in the field of environmental energies. You then need to change the attitudes at individual levels, so that people can start to think about what they buy, how they consume, how they travel. Many Finns, at all levels, are already thinking about these aspects because they have seen over the past five or six years just how the climate has become warmer even in Finland. With the snow and minus temperatures we had for Christmas around the world, more people were just joking about climate change, but, although the weather was perfect for the Christmas season, we still have to believe the specialists who say climate change is a fact, and act accordingly.

How is Finnish diplomacy going to be affected by the new diplomatic services stipulated in the Lisbon Treaty?

It will take some time before the European diplomatic corps will be fully operational and it will have its own duties. It will complement what we are doing, but I don't think it will ever replace the need for Finnish diplomacy and Finnish diplomatic representation abroad. We are going to place about six to ten Finns in the EU's diplomatic service, yet this does not mean we would cut back on our own network of embassies, although financial constraints might imply changes. I hope the EU structure, with a president of the Council and Foreign Minister, will streamline the EU's actions as an entity in international politics, crises and hot spots. It is too early to speculate how successful Ms. Ashton will be and only time will show how she can use her new function when the occasion presents itself.

Drawing on your long experience as a diplomat, what is your message to young diplomats?

I have had the possibility to speak to future diplomats towards the end of their course, after they had received loads of factual information. Rather than speak about trade policy I have tried to discuss with them on how to approach life as a diplomat and what to do besides working from dawn till dusk. I have tried to emphasise versatility and readiness to undertake all kinds of jobs in this Ministry.

My message to them is the following: Try to be a generalist instead of a being highly-specialised, so that you can have many options regarding posts abroad and at home. Try to accept that whatever post you get, it can be made very interesting if you just put yourself into it and learn from it, and refuse to see it as boring or difficult. Try to be a person that makes the best out of each situation in which you might find yourself. In order to be successful in this job, one has to be realistic - do not daydream of what this profession is about - this is basically very hard work, this is about travelling extensively, about reading papers, about writing papers, about explaining what you have done, reporting, convincing, negotiating. You are going to be very busy if you are to be a serious diplomat.

This can be very exhausting, as for Finns it also implies mostly working in a foreign language. Then, try to read something that has nothing to do with your work, such as literature and history - I think one should be interested in history if one has to work as a diplomat - and particularly the history of your own domain. You should have cultural interests, which includes sport, gastronomy and travel, so you can talk with people on various topics. To be an interesting diplomat you have to be able to talk about something other than your work.

As young diplomats, if you want to have various interests, you have to start building them straight away. You can't focus only on working, working, and working, and think that you will see operas and museums and read those famous books once you have retired because, in the meantime, you are not a very interesting partner for any discussion. Although you can be a very good specialist in your own field, you'll not be an interesting diplomat or an interesting person. My final word of advice is to keep your head on your shoulders, don't confuse real life with the hype and protocol diplomatic life often involves.