h:user/aig/vorlesungen/linz_ss_2010/linz_ss_2010_5.ppt länderstrategien irland, schweden, finnland...
TRANSCRIPT
WIFO
H:user/aig/vorlesungen/Linz_SS_2010/Linz_SS_2010_5.ppt
Länderstrategien Irland, Schweden, FinnlandSeminar LVA 239.231 „Firmen und Märkte“
Karl Aiginger
Dienstag, 13.4.2010, 10.15 – 12.00 K 269D und 13.15 – 15.15 UC6
WIFO
IrlandSeminar LVA 239.231 „Firmen und Märkte“
Karl Aiginger
Dienstag, 13.4.2010, 10.15 – 12.00 K 269D und 13.15 – 15.15 UC6
WIFOIRELAND:
Catching up and forging ahead
Fastest growing European economy in the nineties: GDP +8% p.a. (EU +1.9%, US +3.3%)
Catching up much faster than the famous 2% rule GDP/employee: +3.2% vs. EU (4.2% – 1.0%; 1990-2000) Productivity manufacturing + 4.9% (8.0% - 3.1; 1990-2000)
Three core elements
(i) selective inward FDI
(ii) skilled workforce
(iii) prudent coherent policy
In 3 decades: from agrarian, economy to above average GDP/capita GDP per capita 2000: 26.700 EURO (EU: 22.500) from 63% in 1970 to 119% in 2000
WIFO
History:
Agrarian country
Celtic population (Gales)
Main product: potatoes
Many crisis incl. Famines in 19th century
Emigration to US, declining population
Land owned by Great Britain
Split into protestant North, catholic south
Member of EU since 1973
1. EURO introduced in 2002 (not in UK)
WIFO
Size, location and income
Population: 3.7 mill GDP: 102 bn EURO 2000 (1% of EU) GDP/capita: 26.700 EURO at PPP GSP: 80 bn EURO (difference to GDP: profits to MNE) Exports 94 bn EURO Imports 80 bn EURO
Specifity from the European Angle
Periphery North-North- East location Hub for re-exports into US Exports to US 13% of GDP (five time EU average)
WIFOThe roots of the success
The deliberate choices:
Openness and EU membership
Outward orientation
Determinedness for change
The institutions:
Social partnership & consistent public policy
Development focus with informal public/private networks
5- years indicative planning: consistent policy framework
IDA, Enterprise Ireland, Regional planning
Three pillars in the implementation:
Cheap production strategy: taxation, EU structural policy
Selective FDI: High tech based FDI, export oriented; not for domestic demand
Skilled and flexible labor, upgrading, connecting
WIFOThe role of government:
Development planning of the competitive environment
Consistent strategy, not firm targets or industry targets
1958: National Development Strategy shift: from forbidding to encouraging MNE
1985: 1st comprehensive plan
Structural targets: selective policy in favor of 3 C's
Computers
Communication (call centers)
Chemicals (largest industry; incl. Pharma 1/3 % of value added)
Ex post evaluations of Industrial Policy
1982 Telesis Report 1992 Culliton Report Education and training, R&D Infrastructure, taxes Education and training, R&D. Infrastructure, taxes Cluster formation recommended
WIFO Some prudent measures of Irish Industrial Policy:
Fiber optic lines to all European centers (call center location)
National Linkage Program 1985 IDA enforces backward linkages of MNE firms Forbait (Enterprise Ireland) supports SME's
Indigenous firms have to prove export base to get grants
High profile headquarters and R&D activities in Irish subsidy a priority of NDP
Incomes from patents developed in Ireland are tax free (Tobin 1997)
Measures in Irish regional policy:
All regions have development plans
And make use of domestic and EU subsidies (contrast to Italy)
Investment grants are contingent on value added and intangibles
Dublin, Cork, Waterford, Galway (ports)
Galway in the North West: Silicon Valley
Shannon center for MNE
Belfast industrial center
WIFO The importance of FDI
Inward FDI investment/ GNP
Flow 2000: 22% of GDP
7% in EU
6% in Spain
Share and characteristics of MNE
16% of firms
47% of manufacturing employment
91% of exports foreign owned
40% of GDP produced by MNE
88% of Irish MNE production is exported
The selectivity of Irish FDI policy:
No FDI in labor intensive industries
Leading EU location for high-end US FDI in electronics
33% of PCs sold in Europe are from IRE
40% of PC software, 60% of business application produced in IRE
9 of top 10 pharmaceutical companies have plants in Ireland
10 out of 15 medical device companies
WIFO
The role of FDI and the European Integration
FDI - Type: greenfield investments for re-export Locations advantages Institutional credibility (well organized development agency)
Financial incentives: Low costs, taxes, cheap loans Skills (technical, local entrepreneurs, English language)
Low transport costs (via sea and towards non European countries)
Negligible local market Export based production
No fear of substitution of local firms Greenfield + export orientation
WIFO
History: Ireland had not always been open for FDI:
Pre 1950 anti FDI approach:
prohibition of foreign ownership (incl. UK firms) protection of incipient industry (infant industry argument) a few tariff jumping MNE
Policy change in 1958: Economic Development 1st comprehensive national plan
Abolishion of Control of Manufacturers Plan
Shannon Airport Development Company
Aggressively enforcing inward FDI
WIFORole of European integration
Membership 1973
Large share of regional and structural funds Used actively for upgrading regions (contrast to Italy)
Continued proactive role of national government (contrast to Greece) Ireland most pro active industrial policy (Ruane 1999) Hands on micro dirigism (Ruane and Görg 1999) Incentives tied to employment and R&D content Upfront payments with repayment if target were not fulfilled High tech favored Clusters: the three C's
EU demands less distorting rules for attracting investment
Tax exemption for MNE
Tax differentiation manufacturing / other industries
WIFO Examples for large MNE
In ICT- industries
Intel: 4000 employees, building 3rd wafer fabric
Dell: 5000 employees, regional center for EU, Middle East, Africa
IBM: 3000 employees, support, software, global e-procurement
Hewlett Packard: 2000 employees, manufacturing, banking, e.business
Microsoft: 2000 employees, product development, internet hosting
In Healthcare and Pharmaceuticals
Production and exports of blockbusters like Lipitor and Viagra
Production sites for cardiac, optical, orthopedic devices
2 recent success stories in 2002:
Wyeth Medica decides to build largest bio-pharma plant ever Microsoft buys NAVISON for 1.5 bn Euro as entry into European software market
Largest Irish Firms:
CRH
Bank of Ireland
Allied Irish Bank
Smurfit
Irish Life and Permanent
WIFO Cheap production strategies
EU Structural funds 3% of GDP in early 90s, 2% in late 90s
Taxes: profit tax waived for MNE
1982 10% for manufacturing; 28% for other firms tax will increase to 12.5% (starting in 2003) but 10% remains for existing firms up to 2010
remind: tax is 35% for other European countries
Social partnership lead to moderate wage increases and
Enabled a consensus that high profits of MNE are positive
Profits make up 40% of GDP
Wages 24% below EU average (2000)
Wages make up only 26% of value added (1998; EU 52%)
Unit labor costs have fallen by 44% in nineties Productivity increase not fully reflected in wages
A policy which may change and is not fully optimal At the verge of a knowledge based economy
Result: Share of manufacturing in GDP increases in Ireland from 34% to 40%
Growth of output in nineties: 8% p.a. In contrast to declining share of manufacturing in all industrialized countries
And less than 20% in the US
WIFOEducation and Skills: the method to attract technological firms and to induce them to upgrade plants
Highest rate of investment in human capital between 1960-1985 according to Mankiw, Romer, Weill 1992
7 universities, many colleagues
60% of students in business and science
2nd highest education outlays (after Finland)
57% of graduates in engineering, science, compute, business
Media lab Europe (sister of MIT Media Lab)
Result:
Ireland evaded the development trap
Is not hooked on subsidies if they decrease
WIFO Growth drivers:
Research increasing but below EU average
60% of research expenditure by MNE
first only “peripheral R&D” in Ireland
now attempts of “upgrading” (Amin et 1994 new functions)
Excellent education
Technology diffusion
Asset for the future:
Young and increasing population
40% are younger than 26 yr.; 30% in EU
Pensions costs/GDP 3% in 2040 Between 12% and 18% in other countries (max I, D, SF) OECD, FT 23 11 99
Liability: Low domestic savings ratio Currently not binding due to high inward FDI
WIFO The National Development Plan (NDP) 2002-2006
Focus at the policy shift needed
When Ireland passes European average And subsidies and cheap production strategies have to be abandoned
Investment of over EUR 52 bn over the period 2000-2006 in health services, social housing, education, roads, public transport, rural development, water and waste services.
Now 90% from domestic sources EU will contribute EUR 6 bn EUR 3.8 bn from the Structural and Cohesion Funds EUR 2.2 billion under the Common Agricultural Policy (CAP) Rural Development Plan
Shift to research and education www.ndp.ie
Science foundation Ireland www.sfi.ie
New policy become necessary recently wage restraint became more difficult knowledge based society needs skills and training immigration of skilled people benchmarking of public sector payments initiative for 3rd level research capability
WIFOIreland as seen from Theory:
Dynamic specialization against H-O model
Export oriented FDI
Catching up faster than 2% rule
Catching up and forging ahead in productivity
High investment without high savings
Skills and Research in underdeveloped economy
Foreign investment lead to growth,
Ireland escaped from development trap
Ireland as seen from policy strategies:
Policy plans in market economy
Incomes policy: social partners coordinated with government
Prudent industrial and regional policy
Determined not to be “the poor's corner”
WIFOStatus 2002:
Productivity no 4 in world (after B, US, I)
Highest labor productivity in manufacturing in EU
High unit value of exports
High share of technology driven industries
Productivity higher, wages lower than EU average
GDP per head (domestic value added) above EU GSP (Income per head) lower GSP/GDP 80%; difference profit flow to MNE
Asset price inflation (mortgage lending, house prices)
Infrastructure deficit in some regions
WIFO Summing up: no miracle but economic success based on
Openness and economic integration
Prudent, active, cooperative institutions
Selective FDI, low costs and skills
And the knowledge that the factors defining success will change
Final question marks: Celtic Bubble or Celtic Tiger?
Will the process continue ?
Is a BSP 20% below BIP sustainable ?
Part of BIP extra profits and transfer prices
Is it sustainable that own investment is low (and complemented by FDI?)
Inflationary pressure increases (EU )
Crowding out of indigenous firms via wage increase (input market)
What happens if cheap production strategy and structural funds are lost ?
The coherence of the society, the prudent planning and the determinedness of the people together with investment in research, education and new technologies
Favor a continued growth scenario (however at a smaller difference to Europe)
WIFO References: Sean Dorgan: Competitiveness in the Science Based Economy, WIFO Symposioum, Vienna 2002
Paul Tobin: Ireland Dublin, 1999
Denis O`Hearn: Inside the Celtic Tiger: the Irish Economy and the Asian model” London, Sterling, 1998
Frank Barry (ed) Understanding Irelands Economic Growth, Basingstroke London 1999
Ana Tavares: Systems, Evolution and Integration: Modelling the Impact of Economic Integration on Multinationals’ Strategies’. PHD Dissertation, University of Porto
A. Tavares: ‘The Dialectic Between Regional and Corporate Integration: The Impact of the Single Market Programme on the Strategic Orientation of Multinational Enterprises, with an Application to the Portuguese Case’.
A. Tavares: ‘Multinational Subsidiary Evolution and Public Policy: Two Tales from the European Periphery’ Journal of Industry, Competition and Trade (2002), forthcoming.
Robert J. Barro und Xavier Sala-I-Martin „Convergence across States and Regions" Brookings Papers on Economic Activity 1: 1991, S. 107-182.
Eurostat/EU-Kommission „Europäische Wirtschaft„ Nr.70, 2000, S. 186f.
Tim Callan und Brian Nolan „Income Inequality in Ireland in the 1980s and 1990s" in Frank Barry (ed.) „Understanding Ireland’s Economic Growth" Basingstoke/London 1999, S.176.
Europäische Kommission „Einheit Europas, Solidarität der Völker, Vielfalt der Regionen. Zweiter Bericht über den wirtschaftlichen und sozialen Zusammenhalt – Statistischer Anhang„ Brüssel 2001, Tabelle A2.
Paul Sweeney „The Celtic Tiger. Ireland’s Continuing Economic Miracle" Dublin 1999, S.37
EU Kommission „Sechster Periodischer Bericht über die sozioökonomische Lage der Regionen der Europäischen Union„, Brüssel 1999, S. 221
Denis O’Hearn „Inside the Celtic Tiger. The Irish Economy and the Asian Model" London/Sterling 1998,
Bart van Ark und Robert H. Mc Guckin „International comparisons of labor productivity and per capita income„ Monthly Labor Review July 1999, S. 36
European Commission „The Economic and Financial Situation in Ireland: Ireland in the Transition to EMU" special issue of European Economy 1996 (zitiert bei O’Hearn, S.85).
Wirtschafts- und Sozialausschuss der EU (CES) „Opinion of the Economic and Social Committee on The EU Economy 1999: Review" 369/2000, Appendix „Ireland: An Example of Economic Policy Success"
WIFO
SchwedenSeminar LVA 239.231 „Firmen und Märkte“
Karl Aiginger
Dienstag, 13.4.2010, 10.15 – 12.00 K 269D und 13.15 – 15.15 UC6
WIFO SWEDEN: A REFORMED WELFARE STATE AS A LEADER IN INFORMATION TECHNOLOGY
The very long term view: growth deceleration
Slow growth over decades: 75-2000: 1.8% S (EU 2.4%)
Consumption increase by only 5%: 76 – 95 (+ 33% in OECD)
Falling back from 80% of the US (smallest gap of a EU country) To 68% of US in GDP/capita
Loosing a 14% lead to EU average within two decades
Macroeconomic performance in the nineties:
GDP per capita 2000: 22.900 EURO; 2% above EU average GDP/employee and per hour 10% below High employment ratio 74.6% (EU: 65.5%, US 75.1%) Low inflation and unemployment
Growth acceleration in manufacturing
Low GDP growth in nineties: 1.3% (EU: 1.9%) Productivity higher 2.0% (EU: 1.0%) High growth in manufacturing: 4.2% (EU 1.7%) productivity growth 5.3% (3rd rank and > USA) Focus: to push productivity to increase competitiveness Despite of low growth (macro economy) Based on high growth (manufacturing)
WIFOThe socio-political system in Sweden A Welfare State: indeed “the” model
High incomes + social security + equality Social Partnership Nordic Style
Re-distributive Inclusive Impact on all kinds of policy High share of public sector Taxation of capital lower than in other countries
Trade Unions have specific large impact Social democrats were leading the country most time Influence on large firms via codetermination and shareholdings of pension funds Position attitude to outward FDI Productivity orientation
Early liberalization of utilities Liberalization of post and telecom 1993 Liberalization of letter distribution 1993 Deregulation of taxis 1990 Entry of foreign airlines 1997
Today: Most deregulated telecom sectors Highest productivity in transport Vertically separated railways (with public ownership in grip)
WIFOSweden experienced a severe crisis in 1992/93:
The crisis
High inflation up to 13% Negative real interest rates Unemployment increased: an unknown phenomenon to Sweden Budget deficit increased quickly as the economy retarded Public expenditures between 60% and 65% of GDP
Turnaround with excellent results in 2nd half 90ties
3rd highest growth in industrial output
Today:
Leading European Country in Growth drivers and innovation
WIFOThe Crisis Sweden was suffering slow growth of output
And high costs of production (wages, taxes) Since decades (as many leading countries)
Unsuccessful devaluation 1982:
Restructuring economy from domestic, sheltered to open, based on competitive export sector Unsuccessful due to inflationary pressure
Capital intensive, resource oriented industry structure
High share of wood products, pulp and paper, of non ferrous metal and steel industry; With second stronghold in machinery, car, engineering industry
Finish crisis added to the problems
Loss of former Soviet market Similar industry structure with price competition
WIFO
The cure: 4 pillars of reform in crisis 1992/93
1. Cheap cost elements:
Another devaluation (with strict after care) Wage restraint
2. Fiscal responsibility and 7.5% budget reform package
3. Enforcing incentives (small steps in welfare reform)
Elements of work to welfare Reducing benefit levels
4. Boosting long run growth:
Increasing research Fostering telecom Emphasize education
WIFOThe Budget Reform Bill 1994/95: the 7.5% package
Commitment to future expenditure limits Consolidation package of 118 bn Swedish Krona (7.5% of GDP) Decreasing expenditures by 71.2 BN Swedish Krona -34.6 transfers to households - 8.1 subsidies - 6.8 government consumption -21.7 others (roads, medicines, education) Increasing taxes 69.0 BN Swedsh Krona 23.7 insurance contributions 4.7 taxes for high income earners 6.1 production taxes 27.5 others Distribution effect calculated: 43% of burden highest fifth of incomes
11% lowest fifth Source: Swedish Government: Fiscal consolidation government bill 2000/2001 Annex 5: An account of fiscal and monetary policies in the 90s
WIFO Institutions and incentives
Reform of institutions
Reinforcing independence of Swedish Central Bank Liberalization of financial sector (foreign banks allowed) Enforcing competition policy Increasing efficiency and competition in public sector Shift housing policy from firms to tenants Deregulation of transport, communication energy
Enforcing incentives:
Reducing marginal tax rate for persons and making capital taxis more uniform
Increasing incentives to work Qualifying day for sick payments First two weeks to be paid by employer Compensation from 90% to 80% Connecting pension to contributions paid EU membership in 1995 (but not in EMU)
WIFO Program: Creating an information society for all
3 Strategic Goals: Confidence in IT Competence in IT Access to IT
Five specific measures: Employers buy computers for personal use of employed
Goal: fighting “digital divide” Measure: tax incentive for firms (start 1998)
Vocational education for unemployed (SWIT Project: 1998–2000) Goal: alternative labor market program Industry managed/government financed Education IT and IT related professions 12.000 people; 90% certificate, 82% became job
Swedish alliance for Electronic commerce GEA Legal framework (electronic signature) Information, education, dissemination Standards, security
Svea Project for SME Goal: increase business value through electronic business 100.000 firms should have heard up to end 2002 30.000 SME should have adopted and experienced value increase funding government plus private partners
Broadband investment Quantitative targets for national back-bone network Regional network Local network
WIFO
Next plans (as of 2002)
Science park for IT connected with 13 universities, 23 university colleges International cooperation: North S - North Finland Sweden - Baltic countries Sweden - Denmark Invest in Sweden Agency with IT focus Direct investments: Inflow 1999 24.7% of GDP
Outflow 7.9%
WIFO The Swedish model of corporate governance
A guided capitalism with Institutions, investment funds and private foundations as owner
Firewall against hostile takeovers: Special shares voting non voting shares 50% of large firms have split shares
Wallenberg owns 10 out of 25 largest Swedish firms e.g. 4.8% of shares of Ericsson, but 38.8% of voting rights Other large shareholders AB Industrievärden, Investor AB Wallenbergstiftung, Pensionsstiftels Svenska Handelsbanken
Bias of financial system and political priorities towards large companies High share of large firms in country and within top 500 The same firms over decades Friendly to mergers, soft competition policy Model of structural change within firms Not via exit/entry Not via unfriendly takeovers Relative low corporate tax rate 28%, A 34% 15 firms out of big 500 are Swedish
Relative to size three times more than in US
WIFO Status 2000: Excellent performance in growth drivers
Top ranks in research, education, ICT Research outlays 3.5% , rank 1 in EU, higher than EU 1.83 (2000) and US 2.7 up from 2% in 1990
Patents and industry research double the EU average Public expenditures to education: 7.8% (EU 5.5%)
Share of secondary education 76% vs. 58% Of tertiary 28% vs. 20% Leading country in ICT expenditure and use
Higher share of internet users than in US Close to US in Indicators on Knowledge Based Industry
Out of the 16 drivers for growth (in advance economies 8 top 1 position 19 our of 20 among top five EU countries only deficit share of new/improved products which is a SME stronghold
Improvement in most indicators on future strength Consistent investment through the crisis of 92/93
Lower share of physical investment GDP
Industry structure changed from capital intensive industries to ICT Productivity increased more than 10% p.a. in electronics Exports in ICT now more than that of traditional industries
WIFO
Competitiveness 2000 Wages in manufacturing 15% above EU level
10% Lower than in Germany, Denmark
Tax/GDP ratio 61%, ways above EU average High taxes on income, property Statutory and effective profit tax far below EU average
Growth of output and productivity regained Specifically in manufacturing, 2nd half 90ties
Heavily investing into the future: R%D, Education, ICT
WIFOGeneral assessment A reformed welfare state of Northern European type Double strategy of lowering costs and pushing productivity Reform of institutions and enhancing incentives Still much larger impact of non market institutions than in
Anglo American model Taxes low for firms, but higher (60% of GDP) than in other countries A consensus of the interest groups and a positive role for government and
institutions Problems may come up if the ICT crisis wold be long term Disappointing macro- productivity (in non manufacturing) Insufficient dynamics of medium sized firms and low entry Inclusive social model with high equality retained A leading country in the upcoming knowledge intensive society
WIFO
Largest firms in Sweden
Rank in
Europe
Name Industry Sales Employment Market Value
50 Ericsson Telecom. 30,881.7 105,129 49,974.2
74 Skandia Insurance 23,021.3 6,717 13,086.9
118 Volvo Cars, trucks 14,682.9 79,820 5,459.0
123 Electrolux Electric machinery 14,053.4 91,758 6,477.4
130 Skanska Construction 13,054.6 45,063 4,608.0
WIFOFigure 1m: Location and basic facts: Sweden
WIFOFigure 8b: GDP per capita at PPP in relation to the EU
40
50
60
70
80
90
100
1960 1965 1970 1975 1980 1985 1990 1995 2000
Sweden Finland EU
WIFOFigure 8i: GDP per capita at PPP in relation to the EU
50
60
70
80
90
100
110
120
130
1960 1965 1970 1975 1980 1985 1990 1995 2000
Sweden Finland EU
WIFO Figure 10b: GDP at 1995 market prices Growth rates (3 years moving average)
-4
-2
0
2
4
6
8
1971 1976 1981 1986 1991 1996 2001
Sweden Finland EU
WIFOFigure 10i: Growth differences in real GDP of country vs. EU
-4
-2
0
2
4
6
8
1971 1976 1981 1986 1991 1996 2001
Sweden Finland EU
WIFOFigure 11b: Taxes in % of GDP
40
45
50
55
60
65
70
1980 1985 1990 1995 2000
Sweden Finland EU
WIFOFigure 12b: Government outlays in % of GDP
40
45
50
55
60
65
70
75
1980 1985 1990 1995 2000
Sweden Finland EU
WIFOFigure 13b: Budget deficit/surplus in % of GDP
-10
-5
0
5
10
15
1980 1985 1990 1995 2000
Sweden Finland EU
WIFO Figure 16b: Currency in relation to EURO
Remark: A decrease in the line marks a devaluation of the currency relative to the EURO.
10
12
14
16
18
20
22
1970 1975 1980 1985 1990 1995 2000
Sweden Finland
WIFO
Figure 4: Macroeconomic performance: Sweden
0
1
2
Real growth
1975/2000Real growth
1990/2000
Productivity growth
1975/2000
Productivity growth
1990/2000
Inflation rate
1990/2000
Unemployment rate
2000
Employment rate
2000
Industry growth
1975/2000
Industry growth
1990/2000
GDP/capita
2000
GDP/employee
2000
GDP/hour worked
1999
Value added
manufacturing
per employee
1999
WIFO
Figure 5: Growth drivers: Sweden
0
1
2
3
4
Real growth of GDP
1990/2000
Macro productivity
1990/2000Growth of
manufacturing
1990/2000
Productivity growth
manufacturing
1990/2000
Investment
/GDP
R&D/GDP
Research
intensity
Patent
activity
Education
expenditure
/GDPSecondary
education
Tertiary
education
ICT/
GDP
PC
per
capita
Internet users
per
capita
ICT
share
manufacturing
Innovation
expenditures
/sales
New products/
sales
Share of
co-operations
Firms with continuous
research
WIFO
Figure 6: Policy profiles: Sweden
0
1
2
3
GDP per
capita at PPP
2000 Value added
per employee
1999Structural change
superindicator
Openness
Outflows
in % of GDP
1996-2000
Inflows
in % of GDP
1996-2000
Product
market
regulation
Competition
telecom
Open
tenders
Sectoral aid
Labour
market
regulation
Untrained
school dropouts
Long-term
unemployment rate
Lifelong
learning
Venture
capital
Market
capitalisation
Social
expenditure
/GDP
Fiscal debt
/GDP
Energy
efficiency
CO2/GDP
WIFO
Figure 7: Country profiles: Industry structure and quality position: Sweden
0
1
2
3
Value added
per head in
manufacturing
Real growth of
manufacturing
Productivity in
manufacturing
Value added
(High RQE)
Exports
(High RQE)
Exports
(High PPS)
Export
unit value
Import
unit value
Relative
export
unit value
Value added
(Sunk cost
industries)
Exports
(Sunk cost
industries)
0
1
2
3
Value added
per head in
manufacturing
Real growth of
manufacturing
Productivity in
manufacturing
Value added
(Skill
intensive
industries)
Exports
(Skill
intensive
industries)
Value added
(Knowledge
based services)
Exports
(Knowledge
based services)
Value added
(High product
differentiation)
Exports
(High product
differentiation)
Value added
(Globalised
industries)
Exports
(Globalised
industries)
WIFO
Figure 17m: The main industries: Sweden
0 1 2 3 4 5 6 7 8 9 10 11 12
Motor vehicles
Pulp, paper and paperboard
TV, and radio transmitters,apparatus for line telephony
Pharmaceuticals
Other general purposemachinery
Other special purposemachinery
Publishing
Basic chemicals
Parts and accessories for motorvehicles
Cutlery, tools and generalhardware
Specialisation
Share 1998
WIFO
FinnlandSeminar LVA 239.231 „Firmen und Märkte“
Karl Aiginger
Dienstag, 13.4.2010, 10.15 – 12.00 K 269D und 13.15 – 15.15 UC6
WIFO FINLAND: FROM PAPER TO TELECOM
Geography:
Northern country, thinly populated (17 persons/m2)
Close ties and long border to former Soviet Union
Traditional resource based structure
5.2 million people, 6th largest region
Performance:
GDP/capita 23,200; 7. position, 3% above EU average
Growth in nineties higher, specifically 2nd half
Excellent performance of industry: + 6% p.a.
High and increasing productivity
High share of manufacturing in GDP
Employment rate in EU average, but lower than in most Nordic countries
Severe Crisis in 1993
Deeper than in Sweden: -10%
Unemployment up to 17%
Product structure: Wood, paper, textile industry
Breakdown of Soviet market
WIFONordic Policy model
Corporate governance corporatism
Large, stable firms with internal restructuring in existing firms
Average age of large firms more than 100 years
Nokia: from pulp, boots, cables to telecom
Tripartite social partnership with influence from government
The turnaround
Technology policy: public infrastructure
Government as leader in implementing ICT
Upgrading education
Regional centers for development (3 objective 1 regions)
Upgrading the wood and paper cluster (“forestry cluster”)
Devaluation
WIFO
Telecom Strategy
Telecom Society Plan
Quantitative targets for schools, government etc.
Early liberalization of telecom
1990 open competition for network and services
Tradition of local competition
No "one network, one supplier" strategy
Stock options for employees (tax reduced)
WIFO The importance of Nokia
World leader in mobile telecom
58.000 employees
30% of exports
The homebase and the internalization
2% of demand in Finland
20% of production
80% of research
Facit:
without technology focus at industrial policy,
without ICT skills provided by educational system and
1. without early start of electronic government Nokia would not have been that successful
WIFOLarge industries and large firms
The largest industries
Pulp and paper
Telecom
Special purpose machinery
Publishing
Basis chemicals
The largest firms
Nokia telecom equipment, software
Stora Enso paper
Fortum energy, oil, gas
UPM Kymmene paper
Metso conglomerate
WIFO Internationalization
A new awareness of the necessity to "go west"
Finland had low export/import ratios
And high shares of trade with former Soviet Union
Shifted exports to EU countries
Internationalized firms
Passive and then active FDI
Up to nineties higher inward FDI, since 1991 more outward, today outward vs. inward 2:1
ICL, IBM, Siemens, Hewlett Packard, Ericsson, Lotus have plants in SF
Nokia: software for the next generation is spread to other countries with excellent skill basis
Member of EU 1995
Founding member of European Monetary Union
WIFO The growth drivers
Research and patents now well above average
Increasing research even in deepest crisis
Eighty technology parks
Education: high expenditures and high outcomes
Leading in recurrent education
High ranked n PISA ranking of educational skills
Open universities with specific programs
For people with work experience
ICT use among leading countries High share of co-operations High share of continuous research
Among 16 growth drivers Finland is leading in 6, and among the top 5 in 15
Cost position
Wages 10% above EU, but 5% lower than in Sweden
Taxes/GDP 53%, 7 points higher than in EU, but 8% lower than in Sweden
WIFO An overall evaluation
Status 2000
Extremely successful in manufacturing
Productivity acceleration
Specifically 2nd half of nineties
Unemployment down from 19%, but still near 10%
Leading country in ICT
The strategy
Coherent industry, technology, regional policy
Cooperative business climate: “Connecting People”
Fostering research, education, new technologies
Liberalization plus competitive infrastructure
Elements of success
Awareness due to large crisis
Tripartite policy coordination
The luck to host Nokia
Upgrading of traditional industries
Restructuring ability of large firms
Determined for future growth
WIFOFigure 1l: Location and basic facts: Finland
WIFO
Figure 4: Macroeconomic performance: Finland
0
1
2
Real growth
1975/2000Real growth
1990/2000
Productivity growth
1975/2000
Productivity growth
1990/2000
Inflation rate
1990/2000
Unemployment rate
2000
Employment rate
2000
Industry growth
1975/2000
Industry growth
1990/2000
GDP/capita
2000
GDP/employee
2000
GDP/hour worked
1999
Value added
manufacturing
per employee
1999
WIFO
Figure 5: Growth drivers: Finland
0
1
2
3
4
Real growth of GDP
1990/2000
Macro productivity
1990/2000Growth of
manufacturing
1990/2000
Productivity growth
manufacturing
1990/2000
Investment
/GDP
R&D/GDP
Research
intensity
Patent
activity
Education
expenditure
/GDPSecondary
education
Tertiary
education
ICT/
GDP
PC
per
capita
Internet users
per
capita
ICT
share
manufacturing
Innovation
expenditures
/sales
New products/
sales
Share of
co-operations
Firms with continuous
research
WIFO
Figure 6: Policy profiles: Finland
0
1
2
3
GDP per
capita at PPP
2000 Value added
per employee
1999Structural change
superindicator
Openness
Outflows
in % of GDP
1996-2000
Inflows
in % of GDP
1996-2000
Product
market
regulation
Competition
telecom
Open
tenders
Sectoral aid
Labour
market
regulation
Untrained
school dropouts
Long-term
unemployment rate
Lifelong
learning
Venture
capital
Market
capitalisation
Social
expenditure
/GDP
Fiscal debt
/GDP
Energy
efficiency
CO2/GDP
WIFO
Figure 7: Country profiles: Industry structure and quality position: Finland
0
1
2
3
4
Value added
per head in
manufacturing
Real growth of
manufacturing
Productivity in
manufacturing
Value added
(High RQE)
Exports
(High RQE)
Exports
(High PPS)
Export
unit value
Import
unit value
Relative
export
unit value
Value added
(Sunk cost
industries)
Exports
(Sunk cost
industries)
0
1
2
3
4
Value added
per head in
manufacturing
Real growth of
manufacturing
Productivity in
manufacturing
Value added
(Skill
intensive
industries)
Exports
(Skill
intensive
industries)
Value added
(Knowledge
based services)
Exports
(Knowledge
based services)
Value added
(High product
differentiation)
Exports
(High product
differentiation)
Value added
(Globalised
industries)
Exports
(Globalised
industries)
WIFO
Figure 17l: The main industries: Finland
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Pulp, paper and paperboard
TV, and radio transmitters,apparatus for line telephony
Other special purposemachinery
Publishing
Basic chemicals
Other general purposemachinery
Basic iron and steel, ferro-alloys(ECSC)
Printing
Other food products
Plastic products
Specialisation
Share 1998
WIFO An overall evaluation
Status 2000
Extremely successful in manufacturing
Productivity acceleration
Specifically 2nd half of nineties
Unemployment down from 19%, but still near 10%
Leading country in ICT
The strategy
Coherent industry, technology, regional policy
Cooperative business climate: “Connecting People”
Fostering research, education, new technologies
Liberalization plus competitive infrastructure
Elements of success
Awareness due to large crisis
Tripartite policy coordination
The luck to host Nokia
Upgrading of traditional industries
Restructuring ability of large firms
Determined for future growth