Minister Toivakka's address at the Kungliga Vetenskapsakademien breakfast in Stockholm
Ms. Lenita Toivakka, Minister for European Affairs and Foreign Trade
28 October 2014
[Check against delivery]
Ladies and gentlemen,
It is an honor to speak to such an influential audience. Close dialogue between politics and business is the key to success for small countries such as Finland or Sweden. Therefore I warmly thank you for the opportunity to be here today.
Sweden has always been and will continue to be Finland's closest partner.
Our two countries share more than a common history. We share common values: democracy, rule of law, free market, social justice and high environmental standards.
Naturally we compete in many areas – and I am not only speaking of hockey and other sports. But more often than not, we have shared interests. We both are small, open economies who must succeed in global competition in order to uphold our Nordic welfare model.
In terms of our friendly economic rivalry, Sweden is once again getting ahead of Finland. At the moment your economy is in many ways much stronger than ours. We have so much to learn from you that our Prime Minister Alexander Stubb has asked Anders Borg to offer his advice on the Finnish economy.
I really look forward to your perspectives and your advice once we get to the discussion part of this session.
But before that, I wanted to tell you how we see Finland's - and Europe's - economic challenges and what we are doing about them.
Finland is still waiting for its economy to take a turn for the better. Our economic development has been weak for several years now and will see only modest growth in the coming years.
We are faced with multiple challenges at once. Our main export markets in Europe and Russia have low demand for our products and services. Global developments in technology and manufacturing have put our traditional industries under pressure. Our structural problems are mounting as the population ages and public spending grows
Russia is no longer as important for our economy as it used to be. Russia still is an important trading partner of us, but Russia’s share is only 8 % of our total exports. It is good to remember that our exports to EU-countries are seven-fold.
This January-June, our exports to Russia fell by 12 per cent. The Russian economy is near recession: the rouble is weak, the investments low and the private consumption has slowed down. Those years when the Russian economy grew 6 to 7 per cent a year are over.
The Ukraine crises and Western sanctions are clearly not the reason for Russia's slowdown but obviously they add to the uncertainty.
And of course the Russian countermeasures hit certain industries in Finland, especially the dairy sector.
Still, Finland has supported EU sanctions all along. We are trading people, but our values are not for sale.
But we are not only waiting, we are also taking action.
We have lowered the corporate tax rate by 6 points to 20 per cent.
We concluded a two-year wage deal keeping the rise of labour cost at a minimum.
We are about to raise the minimum retirement age by two years to 65.
We are reorganizing our health and social services, and streamlining local government.
We are creating incentives for unemployed people to accept a job.
And while we balance our public budgets we are also making investments in research and growth-enhancing infrastructure.
These are reforms that Sweden implemented already years ago. That probably explains the difference in our economies today.
But Finland is getting there.
In these economically challenging times countries are searching for new solutions for growth and competitiveness. In order to promote new growth we in Finland have taken action to speed up the restructuring of our industries.
We are investing in education and research to create something new, the value of which I am sure this audience understands better than anyone else. Moving forward, Finland needs greater public investment in education, training and innovation. We need to get more people into the labor market. We need more productivity gains from ICT and digitalization. We need more competition and less regulation, less barriers for growth.
It is not the government's job to say which industry sectors will grow in the future. But we do see great potential in A, B, C and D sectors: A for arctic technologies, B for bio economy, C for cleantech and D for digitalization.
For example this year, Finland took second place in the world in Global Cleantech Innovation Index.
And we can continue the alphabet: growth can be found also in sectors where we are already strong, such as D for design, E for education and F for food.
In addition to creating new growth we continue to promote our national competitiveness. A key tool to increase competitiveness is investments to research, development and innovations. Finland’s investments to these have traditionally been high, almost four per cent over the last years.
Ladies and gentlemen, as a former entrepreneur myself, I believe strongly that SMEs are the key to growth. Because we all know that at the end it is not the government that creates growth, but companies. The role of the government is to create conditions for growth and entrepreneurship.
And although I named some sectors we have identified from the government’s side, I would like to stress that all sectors, all enterprises where the entrepreneur sees an opportunity for growth and wants to take the risks involved, are equally important.
Here an entrepreneur- and investment-friendly environment is the key factor. Personally, I feel that you in Sweden have succeeded better than us in Finland in creating this kind of climate, and I hope that during the discussion you are willing to share some of your secrets with me.
Ladies and gentlemen, one of my main ambitions as Minister for Foreign Trade is to help SMEs with their innovative products and solutions to go international. At the moment, the five biggest Finnish export companies make almost 25 % of all our exports, when the share of SMEs is mere 13 %. And I believe that for Finnish SMEs, for example the Swedish markets are a direction to look at.
But of course there are important markets in emerging markets, especially in Asia. As you know, I am also the Minister for Nordic Co-operation. The Nordic brand is a strong brand outside the Nordic countries. We should take profit from this. As I said in the beginning, we have more to win together. The emerging markets are full of opportunities for all of us. There are countries where small countries such as Finland or Sweden are stronger if we team up more together. We have already created a Team Finland to promote Finland abroad. But as our former Prime Minister Jyrki Katainen has suggested, in some markets we need a Team Norden.
Dear friends, Finland and Sweden are members of the European Union. One of the key factors to our growth is to relaunch the growth in Europe. The worst of the financial crisis may be behind us but Europe's economic troubles are far from over. We desperately need growth to create jobs and balance public finances.
Without growth and jobs we risk witnessing more social problems and growing disappointment with the political establishment. We have seen this in recent elections across Europe, also in Finland and in Sweden.
I spoke a few minutes ago about structural reforms in Finland. And structural reforms are necessary also in Europe. It is the way to support growth and competitiveness.
Here, in front of this audience, I will not have to defend economic competitiveness against welfare. I know that both in Sweden and in Finland we see economic competitiveness as the only way of preserving and improving our Nordic model. In an open economy, such as ours, competitiveness and generous welfare society go hand in hand. The two are friends, not enemies.
It is no coincidence that the Nordic countries rank high both in competitiveness and in social justice. The German foundation Bertelsmann Stiftung just recently published its new index comparing the social justice of all 28 EU states. The top three countries were Sweden, Finland and Denmark – all strong believers in competitiveness.
We need also more investments. The Euro Summit last week discussed the need role of investments in relaunching the growth. Here I see that promoting private investments is particularly important.
Ladies and gentlemen, for trade nations such as Finland and Sweden, free trade is the key to future growth and we need to work in order to facilitate the global trade.
According to the European Commission, if we were to complete all our current free trade talks tomorrow, we could add 2.2% to the EU's GDP. This is equivalent of adding a country as big as Austria or Denmark to the EU economy. In terms of employment, these agreements could generate 2.2 million new jobs or additional 1% of the EU total workforce.
Especially I would like to highlight the current negotiations on Transatlantic Trade and Investment Partnership between the EU and the US, better known by the acronym TTIP. The European Union is the largest economy in the world with over 500 million citizens and the United States the second largest with over 300 million. Together with the US, European economies account for about half the entire world GDP and for nearly a third of world trade flows.
Finland is a strong supporter of the TTIP agreement. We see it as a billion euro opportunity Europe simply cannot afford to miss. The European Commission estimates it would create hundreds of thousands of jobs in Europe. We see it a great opportunity also for Finnish businesses, big and small.
TTIP is equally an opportunity for us to lay down the rules and standards for the future in global trade. If we do not do this – someone else sure will. I believe we should be standard-setters, not standard-takers.
Needless to say, TTIP is one of the most important single issues in defining the future landscape of global trade. I am confident that the new, Swedish Trade Commissioner, Cecilia Malmström, whom I met only last week, will do an excellent work on this extremely important issue.
Ladies and gentlemen, before I stop, I wanted to raise one final point. I say this because as a former entrepreneur, I know that economy is also a matter of expectations and confidence.
To change our economies for the better, we must not only make that change happen, we must also believe in it. We Finns tend sometimes to be cautious, perhaps a bit too much. We need more optimism and courage- this is something I would also like to bring back home from Sweden.
Thank you for your attention