Finnish Chamber of Commerce in Japan

FCCJ Luncheon Meeting 22 January 2008

Guest Speaker: Mr. Dr. Vesa Vihriälä
State Under-Secretary, Economic Affairs, Secretariat of the Economic Council

Theme: Finland's growth policy in the age of globalisation"

RECAP

The essence of Finnish growth policy
Ever since the 1950s growth (as opposed to cyclical stabilisation) the key priority of economic policy, first promoting fixed investment in manufacturing the core. Starting in the late 1960s gradual reorientation with more emphasis put on accumulating human capital and creating social policies to support labour market participation.

Boom-bust period forces reassessment, but not policy reversal
In the late 1980s a boom led by financial liberalisation

Macro economically unsustainable

The collapse of the Soviet market an extra shock

The deepest economic crisis in the OECD area since the 1930s

GDP declined by over 10 % in 1991-1993, by almost 20 % relative to trend

500 000 jobs lost, unemployment rate: 3.5 % -> 17 %

Central government borrowing to over 15 % of GDP

Policy response

Restoration of price competitiveness through

Devaluation, floating and further depreciation of the currency

Pay freeze, successive moderate incomes policy agreements

Cleaning up of the banking sector (at the fiscal cost of almost 10 % of DGP)

Fiscal consolidation: cuts of expenditure, tax increases

Nevertheless, substantial and sustained increase in R&D expenditure, in particular on ICT

EU-membership followed by EMU-membership

Later on gradual reduction of labour taxes (which still high)

New thinking about economic growth becomes prevalent
The new growth model: education, research and technology the key drivers. Fixed investment becomes relatively less important, R&D expenditure relatively more important.

The meeting ended with a very lively Q&A session.

IMAGES FROM THE MEETING

Before the start of the luncheon some networking.	FCCJ Board member Marko Saarelainen opens the meeting.
Ambassador Jorma Julin with Dr. Vihriälä	The guest speaker starts his presentation.

	Tero Huopaniemi, Peka Laitinen, Anu Saarela and Jukka Viitanen.
Takaaki Satake, Hirohiko Okabe and Marko Karppinen.	Marko Saarelainen starts the Q&A session by making a question of his own, the speaker makes notes.
Jukka Viitanen of Tekes makes a question.	Kimio Hashida and Quentin O'Mahoney ponders about the response.
The guest speaker with Ambassador Jorma Julin and Isao Nishimura.	Marko Saarelainen hands over a small present to the guest speaker.
The meeting, held at Hotel Okura, was attended by 26 members and guests.