Race to the Finnish: Why foreign investors are flocking to Finland

How does the country keep its corporate citizens so happy and healthy? 

Finland is becoming an ever-attractive destination for foreign investment, driven by its innovation-led economy and backed by a highly digitalised, knowledge-based society.

Its membership of the European Union (EU) and eurozone, together with its openness to investment in the globalised economy, combine to strengthen its allure for international investors.

What’s more, Finland’s open and fair treatment of foreign investors remains a cornerstone of its dynamic business environment. All companies, regardless of their country of origin, are treated in an impartial manner under Finnish business and tax laws, furthering its international appeal.

One of the world’s most open and competitive economies

The high levels of stability, continuity and predictability offered by Finland to foreign investors adds real value to its growing reputation as one of the world’s most competitive and open economies. Finland offers foreign investors access to advanced and secure communications networks, in addition to a deep skills pool of software and other engineering talent—buttressed by a world-class education system.

At 20%, Finland’s corporation tax rate is the lowest of any Nordic country. Finland’s tax-friendly image was enhanced in January 2021 after the enactment of a new law giving companies a 150 % tax deduction for joint research and development (R&D) projects covering 2021-2025.

The tax change by Prime Minister Sanna Marin’s centre-left coalition government aims to bolster R&D activity in Finland and drive its policy goal to raise the share of R&D in GDP to 4 % by 2030.

The fostering of sustainable growth is a cornerstone of Finland’s inward investment policy, says Antti Aumo, executive director of Invest in Finland, the state investment promotion agency that operates as part of Business Finland.

“What this means is that as an organisation we do not push Finland as a solution to companies for whom we do not believe Finland is the right solution. In other words, we don’t sell Finland at all costs just to meet our goals,” Mr Aumo says.

Why predictability, patience and “soft persuasion” is key

Invest in Finland’s “soft persuasion” approach reflects the Finnish character of patient planning and prudence, says Mr Aumo.

“We prefer a step-by-step approach that features making small changes. That kind of stability brings a high level of predictability and benefits. We hear this from both Finnish and foreign companies. The predictability factor is key. Foreign companies need to feel that this is a very friendly environment for them to operate in,” Mr Aumo says.

Finland’s distinctive perspective to securing foreign investment is influenced by wanting “optimum outcomes”, he adds.

“The predictability factor is key. Foreign companies need to feel that this is a very friendly environment for them to operate in.” Antti Aumo, Executive Director of Invest in Finland

“Our rationale is quite simple. If we get a company to establish operations in Finland when it’s not a true fit, six or twelve months later they will discover the reality. The outcome may be they pack and leave. That scenario is not in the interest of anyone, not for the company bearing costs to locate in Finland and not for Finland,” Mr Aumo says.

This “soft persuasion” approach is producing positive results. Successes in the FDI domain include Fujitsu, IBM, Microsoft, Huawei and Denso, all of which have established R&D centres here. Google, GE Healthcare, Schaeffler, Bayer and Muji are also present in Finland. Google will invest €1.2bn to build a sixth data centre in Finland in 2021.

Innovation is nurtured

Innovation is a traditional driver of economic growth in Finland, spanning all industries, from telecommunications to cleantech, circular economy and bioeconomy sectors. Finland is the birthplace of Nokia, modern mobile messaging, 5G mobile data technology, the Linux open-source operating system and, more recently, a vibrant gaming domain led by Supercell (Clash of Clans) and Rovio (Angry Birds). The country also supports sustainable business, developing and commercialising green energy and manufacturing technologies based on clean solutions.

In the sphere of feeding innovation, Finland’s world-class education system is consistently ranked among the best by the Programme for International Student Assessment (PISA). Teachers in Finland are required to hold a master’s degree and education-specific qualifications. Over one-third of Finland’s working population has a degree or higher qualification.

The high importance placed on technology and digital skills in Finnish education is drawing domestic and foreign ICT companies, including actors in the gaming industry, to partner with schools in support of their next-generation digital, e-education and distance learning solutions.

Finland’s increased focus on technologies, including digital health, e-learning, Internet of Things, artificial intelligence (AI), fintech-driven cybersecurity and 5G and 6G development, continues to drive opportunities for foreign investors. The University of Oulu has opened its 6G flagship research programme to international companies interested in developing wireless technologies.

“Data centres require a super reliable supply of energy, and the Finnish electric grid constantly presents as the most reliable in the world.” – Antti Aumo, Executive Director of Invest in Finland.

In 2017, Finland became the first EU country to develop a national AI strategy to position the country as a global leader in its application.

As one of the world’s Mobility-as-a-Service pioneers, Finland offers substantial opportunities for foreign investors to join and build innovation ecosystems, utilise test platforms and set up R&D operations.

The openness of Finland’s digital health and industry ecosystems to international collaboration presents foreign investors with a ready source of possibilities for innovation and ideas, says Nora Kaarela, enterprise ecosystem lead at Roche Oy.

“Finland is in a quite advanced place when it comes to digital technologies and awareness of the opportunities and benefits of digital health. The digital health ecosystem in Finland is strong and stands up very well by comparison to other countries in Europe,” says Ms Kaarela.

External investors find the whole of Finland’s digital health ecosystem of interest against the backdrop of new laws governing the use of health and social data, she adds.

Connecting digital health and data

“Legislation put in place in the past five years, and specifically the law relating to the secondary use of health and social data, enables companies to access and utilise digital health data for developing data-driven health innovations, quite often jointly with leading hospitals and research institutions. This is a unique law that gives Finland a very competitive advantage from an international perspective,” Ms Kaarela says.

Legislated in 2019, Finland’s Secondary Use of Health and Social Data Act offers researchers and businesses access to vast reserves of data on the Finnish population, says Ms Kaarela.

“Having access to biobanks and quality data is the ultimate criteria for being able to create impact-driven, data-intensive, innovative healthcare solutions for patients and citizens globally. The next phase is to build a whole new industry in the space of the health data economy,” Ms Kaarela says.

Finland’s geographic location combined with a high-performance national grid and access to relatively low-cost renewable energy has provided Invest in Finland with much greater scope to lure global players within the data centre domain, says Mr Aumo.

“Having access to biobanks and quality data is the ultimate criteria for being able to create impact-driven, data-intensive, innovative healthcare solutions for patients and citizens globally.” – Nora Kaarela, enterprise ecosystem lead at Roche Oy.

“Having a cold climate is certainly an advantage. Finland offers the most cost-efficient and lowest latency location for digital platforms among Europe, USA and Asia. Data centres require a super reliable supply of energy, and the Finnish electric grid constantly presents as the most reliable in the world,” Mr Aumo says.

Global tech groups are closely tracking the 10,000 km Arctic Cable project, the first trans-Arctic submarine telecom cable between Europe and Asia. The project, open to foreign investors, is a partnership between Finland’s Cinia Alliance and Russia’s mobile operator MegaFon. First-phase construction is set to begin in 2022, and Finland is optimistic it can reap a strong FDI dividend, specific to data centres, from the project.

Global investors are increasingly leaning on Finnish expertise, encouraged by its stable society, high levels of tech fluency and even the Nordic weather to develop their businesses there—and boost the country’s business climate as a whole.