RDI investment, smart capital and increasing knowledge and skills as enablers of Finland’s growth
The key challenge for the Finnish economy is to rise above the slow growth of the past decade. The economic challenges are not primarily related to the coronavirus recession. In Finland, with its ageing population, weak economic growth is a genuine threat to safeguarding the wellbeing of Finns. The working group considers average economic growth of 2% up to 2030 to be a realistic, if demanding, goal.
In the view of the working group, better growth requires a clear increase in RDI activity, allocation of funding to key ecosystems, overcoming the talent deficit, and increasing “smart capital”.
The conclusions are presented in the report of the working group on sustainable growth, which was appointed by Minister of Economic Affairs Mika Lintilä. The report was presented to the Minister by Pekka Ala-Pietilä, chair of the working group, on 24 February 2021.
“Finland has what it takes to ensure growth of wellbeing in a sustainable and inclusive way. Success, however, requires setting ambitious goals and devising measures to meet those goals that extend across government terms – plus determined implementation,” emphasises Ala-Pietilä.
Increasing public RDI financing is essential
The road to sustainable growth is through accelerating innovation. In Finland, R&D expenditure vital to innovation has fallen short of that in peer countries, however.
“The investment in innovation highlighted by the working group must now finally be taken seriously. Raising research and development expenditure to 4% requires long-term commitment,” comments Minister Lintilä.
According to the working group’s report, achieving this goal is possible if public sector R&D financing is raised to 1.2% of GDP by 2030. Well-targeted, public RDI financing creates incentives for private innovation investments. This is not enough, however; investments must be used effectively. Funding must be directed to ecosystems with actors that possess strong knowledge and skills: businesses, research institutes and higher education establishments.
The working group considers the ambitious implementation of RDI policy to be essential, and this will require its strong prioritisation in government action.
More talent needed from both Finland and abroad
The availability of skilled labour is of key significance in both innovation activity and expanding production. Finland has a talent deficit at a number of levels and in various sectors. This talent deficit is particularly evident in the most demanding tasks requiring investment in innovation and RDI.
Many measures are required to facilitate the availability of labour. Higher education should be expanded. The skills required by business and industry must be identified better than at present. Incentives for the supply and reallocation of labour need to be improved. Special attention should be paid to attracting skilled labour from abroad and to the return migration of talent.
More ambitious goals must be set for the talent programme. Attracting talent must be a permanent part of Finland’s growth-oriented economic policy. The attractiveness of Finland must be improved in many ways. The immigration process must be substantially simplified. The working group proposes the establishment of a permanent Work in Finland organisation under the Ministry of Economic Affairs and Employment.
“Too often, matching of work and workers is deficient. We need extensive cooperation in strengthening and maintaining knowledge and skills. And while domestic expertise must be increased, we also increasingly need talent from abroad. This means that channels and processes for promoting work-based immigration must be successfully put in place,” says Minister Lintilä.
More smart capital is required
The scaling up of innovations into new high value-added production requires considerable risk-taking. This requires investors with strong business expertise. Finland’s problem is that smart capital such as this in the country is low compared to Sweden, for example.
A competitive financing ecosystem is required to improve access to smart capital. This requires, for example, regulatory development. In addition to domestic capital, foreign risk capital is needed. It is important to attract more foreign fund investors to Finland.
“In addition to domestic ownership, we need determined action to attract international investments to Finland. Both need well-functioning financing processes and predictable regulation to support them,” says Minister Lintilä.
The operating environment also needs to be developed more extensively. Besides three identified bottlenecks, a stronger enabling environment for economic activity is also needed. Increasing growth must be in harmony with environmental sustainability and take place in a way that enables citizens to widely share in the fruits of growth.
On 29 June 2020, Minister of Economic Affairs Mika Lintilä appointed an expert working group to prepare a strategy and an action plan aimed at creating a foundation and roadmaps to secure sustainable wellbeing through economic growth and competitive business and industry.
The report now published is based on view that extends to 2030 and beyond. The proposed measures are intended for decisions and actions to be implemented during the current government term. In a final written submission, to be published in autumn 2021, the working group aims to focus on proposed measures intended for implementation in the 2023–2027 government term.
Jenny Hasu, Special Adviser to the Minister of Economic Affairs, Ministry of Economic Affairs and Employment, tel. +358 40 65 83510
Sampsa Nissinen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 29 50 47189
Pekka Ala-Pietilä, Chair of the Working Group, interview requests: Anna-Mari Purola, tel. +358 400 469 843