Upon returning to Finland after years of serving as an ambassador, Jari Gustafsson was concerned about the lack of crisis awareness in Finland. Gustafsson, who started his post as Permanent Secretary of Finland’s Ministry of Employment and Economy in October, says now that although there is plenty of crisis awareness, the pace of the reforms has been slow.
Finland’s economy has been stagnant for almost ten years: the GDP is virtually the same as when Gustafsson left Finland. At the same time, economic growth and change outside Europe have been faster.
“There’s no sense in sitting around waiting for the economy to pick up; new opportunities must be seized. Things will never go back to what they were. The global economy has permanently changed,” Gustafsson notes.
“Companies must be encouraged to grow.”
Gustafsson spent the past couple of years as Ambassador of Finland to China and prior to that as the Finnish Ambassador to Japan. The fast economic growth in China and the rest of East Asia during those years impressed him.
“I was there to witness the global-level transformation. China moved to the epicenter of the global economy, it became a regional head-office economy and a big political player with its economic power,” he describes.
Gustafsson says that China is a strong example of how the economy and companies grow and citizens prosper through their own efforts, i.e. without the government’s strong guidance or abundant financial backing.
“Private players play a huge role in China.”
Gustafsson hopes for a similar path for Finland. New entrepreneurial activity must be developed and wealth must be created from private resources more so than they are today because public financing options are shrinking. Increasingly, growth companies are seeking funding and new business know-how from abroad.
New opportunities every day
Gustafsson encourages companies to update their business plan and to be more willing to pursue growth from new markets.
“Don’t just look at the economic trends. Their significance has lessened in the new global economy because prosperity is on the rise and reforms are unlocking new growth markets every day.”
Gustafsson hopes that Finnish companies would have more courage to seize opportunities. He travelled to Indonesia and Brazil this autumn and he points to these countries, along with China, as examples of rapidly growing major economies. Policy decisions in both countries are opening interesting market segments, which leads to investments and orders for the foreign companies that are able to seize the opportunities there.
China, for instance, has pushed air pollution mitigation to the top of its investment programme, and the next on the list is water pollution mitigation. Meanwhile in Brazil – environmental protection investments will create big markets for technology suppliers, of course after the economy recovers.
Gustafsson hopes to see more foreign investments for Finland because they bring capital as well as valuable know-how. This has increasing significance as Finnish companies pursue growth from distant and thus quite unfamiliar markets. Gustafsson cites Chinese investments in Finnish air cleaning technology production as an example. In addition to capital, Chinese investors brought their knowledge of China’s local markets to support the export efforts of Finnish companies.
Growth from far-away places
The Finnish State can help companies by, among other things, collecting and sharing information about policy changes and new market openings in countries far away. Companies in the initial steps of internationalization usually lack the resources to collect such market information independently. Team Finland, a network of State-funded organizations promoting internationalization, helps companies in many ways, including by sharing information.
“Team Finland focuses on companies pursuing international growth. Actually, there are no longer leading Finnish companies with Finnish clusters around them. The subcontracting networks are international. Finnish SMEs have to internationalize on their own,” Gustafsson reports.
The government has a target to create more than 100,000 new jobs in Finland during its term. Gustafsson is concerned that Finland has only 250-300 growth companies, and 50 of them are mid-sized companies employing a bigger number of people. Finland needs more growth companies, more international growers, and a lot of new jobs.
“We need to get more companies into the growth pipeline. Companies must be encouraged to grow.”
“Team Finland aims to improve this situation.”
In light of international comparisons, more Finnish small companies than now should be able to grow into medium-sized companies that create plenty of new jobs, and, respectively, many medium-sized companies should be able to grow into big international companies. The Finns should have all the prerequisites for this.
Gustafsson sums up that the State can widen bottlenecks, fix market shortcomings, and offer new opportunities and, above all, an attractive environment for investments. Doors also need to be opened.
“The farther away from Finland, the more politics and the economy are linked to each other. So, the Finnish State can do its part to help companies gain access to new markets. The State must be ready to participate in this way.”
An example, says Gustafsson, is Finnish President Sauli Niinistö’s visit to Indonesia in November when a memorandum of understanding on energy sector collaboration between the countries was signed. Now the energy sector companies hold the ball.
Venture capital and private equity investing is another important way to promote company growth and internationalization.
“FII has a clear role in this. FII supports company growth and internationalization in collaboration with private equity investors. It must have sufficient funding so that it can participate in the funding arrangements of companies,” Gustafsson notes.
- Permanent Secretary of the Ministry of Employment and Economy, since October 1, 2015.
- Master of Political Science.
- 57 years old.
- Finnish Ambassador in Tokyo 2009-2013, and in Beijing 2013-2015.
- EBRD, member of the Board of Directors 2007-2009 (London).
- Deputy Director General at the Ministry for Foreign Affairs 2003-2006.
- Various positions at the Ministry of Trade and Industry 1987-1995 and 1998-2003.
- Counselor in Finland’s Permanent Representation to the OECD in Paris 1995-1998.