2011 Reports

Inward FDI in Finland and its policy context

Steinbock, Dan

From independence to the collapse of the Soviet Union, inward foreign direct investment (IFDI) in Finland was either marginal (1917-1939) or insignificant (1945-early 1990s). Throughout this period, the success of Finland's core production clusters in forestry, metal engineering, chemicals, and plastics was based on exports, not IFDI (or outward FDI). However, with the end of the Cold War and the globalization of Finnish industries (especially the mobile communications cluster) in a period of strong export-led economic growth, IFDI in Finland took off rapidly from the mid-1990s. This period of growth came to an end with the global crisis of 2008-2009. In 2009, the Finnish economy shrank roughly by 8%, the sharpest plunge since the country's civil war in 1918. The recovery since 2010 has been relatively strong in comparison to that in most European Union (EU) economies, but Finland remains vulnerable to the Eurozone crisis. Today, IFDI is seen as an untapped resource, and the Finnish Government hopes to develop an IFDI promotion strategy in cooperation with the private sector and integrated with the national innovation system.