Wired up: The growth of Finland's hi-tech sector

Scandinavian Review, Autumn 1997 by Gibson, Marcus

No country in Europe was hit harder by the worldwide recession of the early 1990s than Finland. Unemployment-which leaped sixfold in three years-reached unprecedented levels, Finnish banks fell like ninepins, traditional markets in Russia and eastern Europe evaporated, and cutbacks in key markets in Germany and the UK threatened the foundation of the economy.

Five years ago Finland's hi-tech sector was tiny by European standards, even when compared with other Nordic countries. Finland's postwar economy had been secure behind solid, steady markets in pulp, metals and heavy engineering. But faced with such a long and intractable crisis, and with their parents' memories of the bitter 1930s recession ringing in their ears, Finnish politicians and businessmen resolved to invent a hi-tech sector as an absolute national priority.

Now, half a decade later, they have achieved nothing less than one of Europe's quickest and most vigorous economic recoveries. Since 1992 Finnish hi-tech products have grown faster than in any other OECD country-27% on average. By 1994, joblessness began to fall at last.

Wanted: One Hi-Tech Sector...and 250,000 Jobs The most crucial areas where world-class technologies are being exported are telecoms, computer equipment, electrical devices, environmental technology, medical items, chemicals, power and automation, buildings and energy conservation, and many types of instruments. Of total industrial production, high technology accounts for nearly 10% of output.

Better still, sophisticated products also account for almost 20% of exports-an astonishing rise-and are continuing to grow markedly. Soon the sector's contribution will begin to rival that of the pulp and paper industry. The value of exports of telephone equipment alone rose to 14 billion Finnish marks.

One spur for growth has been national pride-since Finland, along with Sweden and Austria, entered the EU in early 1995. The last thing

Finns wanted was to find themselves low down on Europe's performance league tables. The level of investment required in R&D, however, has been immense. In 1994 alone, expenditure grew 15%. But because Finland's universities and research institutes have more than met the challenge of providing both trained manpower and back-up R&D expertise, the flow of high-value added products has turned into a flood. In addition, eight technology centerslinked closely to local universitieshave emerged, and these are busy translating ideas into projects.

Dialing Up a National Recovery

Jorma Ollila, Nokia's president, once pointed out that the number of Finns with PhDs had doubled since 1985. Around 35% of all higher degrees taken by Finns are in science and technology. Even Japan manages only a rate of 24%.

So which hi-tech products are most valued beyond Finland's borders? Any discussion about Finnish hi-tech success must begin with that corporate phenomenon Nokia, now the world's second biggest maker of GSM/DCS phone systems (see above).

In 1990 Nokia amounted to just 4% of the Helsinki Stock Market. Today it forms 24.2%, but more significantly accounts for a staggering 27% of total market business.

Of course, as far back as June 1992 it was in Finland that the core digital cellular technology of GSM was first perfected. Today there are over 150 networks operating to the GSM standard, serving 20 million subscribers in four continents.

Nokia, which has snatched 15% of the Japanese mobile phone market, is still the only European phone available there. Asia-Pacific now buys 27% of all Nokia mobile phones, and Thailand has recently ordered a 230 million Finnish marks extension to its existing Nokia network. Finland: A Nation Drunk on "Techno-holism"

International companies such as Xerox and Canon have long used techno-holic Scandinavians as human guinea pigs for new electronic paraphernalia. "They actually read the manuals," said a startled Xerox executive. When it comes to grasping the latest electronics, Finns have a knack for elbowing their way to the front of every international statistic. First, in November 1996 it was a source of considerable pride that the country was able to announce that it had achieved the highest density of cellular phones with a coverage of 27.5%, having just overtaken the Swedes with 27.4%. And who said Finns were the silent type? Sixty per cent of Finnish households now have a mobile phone, while the number of fixed connections is actually in decline.

Secondly, Finland has the highest number of Internet subscribers in the world-43.11 per 1,000 inhabitants, according to the World Competitiveness Report, produced annually by the IMD business institute in Lausanne, Switzerland. Only Icelanders come close to the Finns, say researchers.

FUNET, a data network of universities and research hubs, is a prime Internet developer in the country, and the proud owner of Europe's biggest file server-brimming with 600,000 files and 50 galaxy-sized gigabytes of space. Ilkka Sssalo, the development chief of FUNET, said, "The server has a complete range of data from computer games to scientific programs."