The common response of most developed nations to an increasingly competitive global economy is to cultivate a knowledge-based economy. In few places has this strategy been implemented more successfully than in the republic of Finland. The country’s success in shifting from manufacturing to research and technology-based economic activity in less than two decades provides a potential blueprint for larger nations to follow.

Finland’s size – a population of five million – has contributed to its remarkable ability to adapt to a changing global economic landscape. Another factor is the progressive nature of its leadership, which successfully anticipated global trends and implemented policies and economic change to ensure future prosperity.


Onto the world stage

In her role as foreign ambassador for Finland, President Tarja Halonen has forged links overseas by stewarding the country’s entry onto the world platform. Although she believes that the historic basis for Finland’s success has been its broad, public, free-of-charge education system, more recently it was the stagnant European economy of the 1990s that prompted the search for ways to become more competitive.

The challenging economic climate in which Finland shifted from its traditional pulp and paper, forest and metal industries towards high-tech and research-based industries could not have taken place without a good education system. “The transition was also borne of co-operation between the private and public sectors with research institutes and entrepreneurs working together, and with perhaps a bit of luck too,” says Mrs Halonen.

The results are undeniable: research and development expenditure in relation to gross domestic product is one of the highest in the world, at about 3.5 %, and Finland has the highest proportion of researchers globally. The higher education entry figures are well above the Organisation for Economic Co-operation and Development average.

The biggest challenge was Finland’s reputation as an expensive country in which to operate. The leadership quickly understood that such a small economy had the best chance of succeeding on the basis of quality rather than quantity. Partnership, as well as attracting investment, is key, according to Mrs Halonen. Finland has a reputation of enlarging its enterprises through foreign partnerships, she says.

Finnish companies, such as Nokia, began investing abroad and forming foreign company partnership agreements, making Finland more visible abroad. “Our improved reputation abroad has increased interest in Finnish enterprises generally and brought more FDI into the country,” says Mrs Halonen.

Success story

Finland’s biggest success story, Nokia, has been and still is extremely important in attracting new foreign investment. “Though the enterprise itself is a private entity, Nokia originated through co-operation between the public and private sectors,” says Mrs Halonen.

Often the investments come from countries that have a high technological quality or that have already worked in R&D. They originate from countries with big capital resources, such as the Gulf states, and emerging economies, such as India; but mainly they are old friends such as Sweden, the UK, other EU countries and the US.

Globalisation and the trade links required to harness the opportunity it affords is not a new subject for Mrs Halonen, who in her role as president has guided Finland through the past eight years of globalisation with a level of involvement in world affairs usually reserved for UN heavy hitters. Although she is charged with overseeing Finland’s foreign policy in co-operation with the government, her involvement in international development goes beyond the realms of duty. She is co-chair of the UN Millennium Summit and recently she was the only Western head of state at the UN Trade Conference on and Development forum in Accra, Ghana.

Investors have become more cautious because the enthusiastic period of globalisation and its benefits is over, says Mrs Halonen. “In the past, when I referred to the negative aspects of globalisation people accused me of being pessimistic but I was just seeing the shadows as well as the light,” she says. “Today, the negative consequences are more visible for developed countries as they realise the need to become increasingly globally competitive.”

Millennium goals

In her role as co-chair of the UN Millennium Summit, Mrs Halonen sees first hand how global trade and development are intrinsically connected. “When trade is coupled with fair regulation, it can be a very positive factor in development,” she says. “Ultimately, this improves everyone’s human right to health, education and other welfare provision.”

The Millennium Development Goals, to be reviewed this year, are close to the president’s heart. “The goals are selected and adopted in order to manifest the political will of the international community to turn the wheel for development so that every nation can contribute.”

She recounts how an Indian friend once bemoaned how globalisation was so difficult because it was made for smaller countries such as Finland: “He meant that smaller countries are sometimes more flexible and effective, so they can do things more quickly. But Finland’s transition to a high-value economy has been in the making much longer than people think. People always ask what the secret is and I say that education has always been held in high regard in Finland.”

Staying competitive

Mrs Halonen says that to stay competitive and maintain an economy based on high-value, quality work, Finland must continuously seek to improve educational standards. “Education is the basis for our future; and what I say again and again is that every boy and girl should have the opportunity to study as much as they can.”

It is important not to concentrate just on the university level because the gap between working people and those in education is growing, she warns: “Working people need their education updated many times during their working life. We are trying to encourage people to find the joy of learning so it becomes a right and a natural thing to do. That is the challenge.”



2000Republic of Finland


1995Republic of Finland

Minister for foreign affairs

1990Republic of Finland

Minister of justice

1989Republic of Finland

Minister for Nordic co-operation