Finland is known for its openness to trade and investment and holds a reputation of an attractive location for business. Based on a recent study however, the amount of foreign investments to Finland in relation to GDP has declined compared to other Nordics and the Baltics. Finnish business environment faces certain challenges but nothing that cannot be tackled with a little bit of streamlining. And Finland is committed to work for it.
Finland is one of the most open economies in the OECD area with fewer legal restrictions to FDI than its peers, stable economy and society, strong institutions, and low corruption as well as high-level of knowledge in technology and innovation. However, it seems there is a gap between Finland and the neighboring countries when it comes to the amount of new foreign investments. The OECD report "The Impact of Regulation on International Investment in Finland", launched on 19th of May 2021, benchmarks Finland's regulatory environment for investment against other Nordics and the Baltic countries and identifies the needs for improvements. Domestic regulation, bureaucracy, long duration of business operation processes and inflexibility of labor markets were identified as the biggest bottlenecks for new investments to Finland.
As a tech savvy country Finland tends to get thanked for its well-functioning digital infrastructure. However, the report suggests further development of digital solutions to ease the administrative burden of companies. Enhancing the digital solutions could, for example, further streamline the administrative steps needed for foreign companies to set up a business in Finland. Also, they could help to shorten processing times to obtain necessary business permits and licences. Luckily, the need for change has already been noticed by public-private operators that have recently piloted a solution, allowing foreign companies to electronically register their business in Finland. The next step is to set up the e-registration platform up and running.
The report also suggests engaging the foreign-owned companies already located in Finland more actively in the process of reviewing and streamlining policies in Finland. Business Finland has been carefully listening to the wishes of foreign companies and bringing them up to the decision-makers' tables. One example of these actions include Finland as a Business Location Barometer 2020 survey that covers the opinion of more than 400 business executives in Finland.
Inflexibility of the labor market has traditionally been a stumbling block for Finland. Foreign-owned companies point out in both OECD's report and Finland as a Business Location Barometer 2020 that they wish for more flexible salaries, work time and hiring and lay-off policies. Recently, there have been some changes on the Finnish labor market that enable more leeway in the field. For example, in the end of 2020 and beginning of 2021, Finnish Forest Industries and Technology Industries of Finland announced that they withdraw partly from collecting bargaining. This de-centralization of the bargaining system strengthens the competitiveness of companies operating in Finland.
Finland is known for the highly skilled workforce especially in knowledge-intensive sectors, such as ICT and health-tech and technical expertise in R&D projects. The need for talented professionals is constantly growing, sometimes resulting in demand exceeding the available resources. Bureaucracy for the recruitment of foreign talent from outside the EU/EEA and long waiting times for foreign employees' work permits are perceived as hurdles for expanding operations in Finland. Conscious of this challenge, Finnish Government has initiated several reforms to ensure easier and faster permit processes for foreign talents. For example, Ministry for Economic Affairs and Employment and Business Finland's Talent Boost program is constantly facilitating foreign talent attraction in Finland, especially for special skills that are lacking in Finland. Fortunately, according to the Finnish Immigration Service, the latest developments for a fast-track work-based residence permit have proven to be efficient and the average process time for knowledge-based workers and startups is currently only two weeks or under.
In order to fully exploit the potential of foreign investment in Finland the issues listed in the report are taken seriously, many of which are already work in progress.
"Finland offers a favorable place for businesses, including the foreign ones, and we want to keep it that way. The challenges pointed out in the report are valuable information for us and actions are taken to tackle them. We've seen significant changes in the business environment lately and more is yet to come. We need further developments and streamlining of processes in order to guarantee Finland's attractiveness also in the future. We value companies' insights and are eager to engage them in the development of the processes also in the long run", says Antti Aumo, Head of Invest in Finland at Business Finland.
Senior Advisor, Global Insight, Business Finland, Invest in Finland
annabella.polo (at) businessfinland.fi
Head of International Investment Statistics Unit, OECD
francesca.spinelli (at) oecd.org