Economy

Headquarters of Nokia, Finland's largest company. Angry Birds, a mobile phone game developed in Finland, has become a commercial hit both domestically and internationally. Main article: Economy of Finland See also: List of companies of Finland and Helsinki Stock Exchange

Finland has a highly industrialized mixed economy with a per capita output equal to that of other European economies such as France, Germany, Belgium or the UK. The largest sector of the economy is services at 66%, followed by manufacturing and refining at 31%. Primary production is 2.9%. With respect to foreign trade, the key economic sector is manufacturing. The largest industries are electronics (22%), machinery, vehicles and other engineered metal products (21.1%), forest industry (13%) and chemicals (11%).

Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 3 billion euros annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP. In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest after Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors – especially agriculture and low-technology manufacturing – second largest after Ireland. Overall short-term outlook was good and GDP growth has been above many EU peers.

Finland's real-terms GDP growth, 1998–2011.

Finland is highly integrated in the global economy, and international trade is a third of GDP. The European Union makes 60% of the total trade. The largest trade flows are with Germany, Russia, Sweden, United Kingdom, United States, Netherlands and China. Trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture. Finland is the only Nordic country to have joined the Eurozone.

Finland's climate and soils make growing crops a particular challenge. The country lies between latitudes 60°N and 70°N, and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, Finland contains half of the world's arable land north of 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate, farmers have relied on quick-ripening and frost-resistant varieties of crops, and they have cultivated south-facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralize excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water. Finland's agriculture was efficient and productive—at least when compared with farming in other European countries.

Aleksanterinkatu, a commercial street in Helsinki.

Forests play a key role in the country's economy, making it one of the world's leading wood producers and providing raw materials at competitive prices for the crucial wood-processing industries. As in agriculture, the government has long played a leading role in forestry, regulating tree cutting, sponsoring technical improvements, and establishing long-term plans to ensure that the country's forests continue to supply the wood-processing industries. To maintain the country's comparative advantage in forest products, Finnish authorities moved to raise lumber output toward the country's ecological limits. In 1984 the government published the Forest 2000 plan, drawn up by the Ministry of Agriculture and Forestry. The plan aimed at increasing forest harvests by about 3% per year, while conserving forestland for recreation and other uses.

Private sector employees amount to 1.8 million, out of which around a third with tertiary education. The average cost of a private sector employee per hour was 25.1 euros in 2004. As of 2008 average purchasing power-adjusted income levels are similar to those of Italy, Sweden, Germany and France. In 2006, 62% of the workforce worked for enterprises with less than 250 employees and they accounted for 49% of total business turnover and had the strongest rate of growth. The female employment rate is high. Gender segregation between male-dominated professions and female-dominated professions is higher than in the US. The proportion of part-time workers was one of the lowest in OECD in 1999.

Graphical depiction of Finland's product exports in 28 colour-coded categories. Finland is part of the Eurozone (dark blue), the EU single market and the Schengen Area.

The employment rate was 68% and the unemployment rate was 6.8% in early 2008. 18% of residents are outside the job market at the age of 50 and less than a third are working at the age of 61. Unfunded pensions and other promises such as health insurances are a dominant future liability, though Finland is much better prepared than countries such as France or Germany. Directly held public debt has been reduced to around 32% of GDP in 2007. In 2007, the average household savings rate was −3.8 and household debt 101% of annual disposable income, a typical level in Europe. Home ownership rate is 60%.

As of 2006, 2.4 million households reside in Finland. The average size is 2.1 persons; 40% of households consist of a single person, 32% two persons and 28% three or more persons. Residential buildings total 1.2 million and the average residential space is 38 m2 per person. The average residential property without land costs 1,187 euro per sq metre and residential land 8.6 euro per sq metre. 74% of households had a car. There are 2.5 million cars and 0.4 million other vehicles.

Around 92% have a mobile phone and 83.5% (2009) Internet connection at home. The average total household consumption was 20,000 euro, out of which housing consisted of about 5500 euro, transport about 3000 euro, food and beverages excluding alcoholic beverages at around 2500 euro, and recreation and culture at around 2000 euro. According to Invest in Finland, private consumption grew by 3% in 2006 and consumer trends included durables, high quality products, and spending on well-being.

Energy The two existing units of the Olkiluoto Nuclear Power Plant. On the far left is a visualization of a third unit, which, when completed around 2014, will become Finland's fifth commercial nuclear reactor. See also: Nordic energy market and Nuclear power in Finland

Anyone can enter the free and largely privately owned financial and physical Nordic energy markets traded in NASDAQ OMX Commodities Europe and Nord Pool Spot exchanges, which have provided competitive prices compared to other EU countries. As of 2007, Finland has roughly the lowest industrial electricity prices in the EU-15 (equal to France).

In 2006, the energy market was around 90 terawatt hours and the peak demand around 15 gigawatts in winter. This means that the energy consumption per capita is around 7.2 tons of oil equivalent per year. Industry and construction consumed 51% of total consumption, a relatively high figure reflecting Finland's industries. Finland's hydrocarbon resources are limited to peat and wood. About 10–15% of the electricity is produced by hydropower, which is little compared to more mountainous Sweden or Norway. In 2008, renewable energy forms (mainly hydropower and various forms of wood energy) made high 30.5% compared to the EU average 10.3% in final energy consumption.

Finland has four privately owned nuclear reactors producing 18% of the country's energy, one research reactor at the Otaniemi campus, and the fifth AREVA-Siemens-built reactor—the world's largest at 1600 MWe and a focal point of Europe's nuclear industry—is currently scheduled to be operational by 2014. A varying amount (5–17%) of electricity has been imported from Russia (at around 3 gigawatt power line capacity), Sweden and Norway.

Finland negotiated itself expensive Kyoto and EU emission terms. They might be causing an increase in energy prices, amplified by the aging and soon decommissioned production capacity. Energy companies are about to increase nuclear power production, as in July 2010 the Finnish parliament granted permits for additional two new reactors.

Transport Wild animals, chiefly moose and reindeer, cause several thousand traffic accidents every year. Main article: Transport in Finland

The extensive road system is utilized by most internal cargo and passenger traffic. The annual road network expenditure of around 1 billion euro is paid with vehicle and fuel taxes which amount to around 1.5 billion euro and 1 billion euro.

Icebreakers enable shipping even during severe winters. Helsinki-Vantaa Airport is Finland's largest and busiest airport. The state-owned VR Group operates a railway network serving all major cities.

The main international passenger gateway is Helsinki-Vantaa Airport with almost 15 million passengers in 2011. Oulu Airport is the second largest and around 25 airports have scheduled passenger services. The Helsinki-Vantaa based Finnair, Blue1 and Finncomm Airlines sell air services both domestically and internationally. Helsinki has an optimal location for great circle (i.e. the shortest and most efficient) routes between Western Europe and the Far East.

Despite low population density, the Government spends annually around 350 million euro in maintaining 5,865 kilometres (3,644 mi) of railway tracks. Rail transport is handled by state owned VR Group, which has 5% passenger market share (out of which 80% are urban trips in Greater Helsinki) and 25% cargo market share. Since 12 December 2010, Karelian Trains, a joint venture between Russian Railways and VR (Finnish Railways), has been running Alstom Pendolino operated high-speed services between Saint Petersburg's Finlyandsky and Helsinki's Central railway stations. These services are branded as "Allegro" trains. Journey from Helsinki to Saint Petersburg takes only three and a half hours.

The majority of international cargo utilizes ports. Port logistics prices are low. Vuosaari Harbour in Helsinki is the largest container port after completion in 2008 and others include Kotka, Hamina, Hanko, Pori, Rauma, and Oulu. There is passenger traffic from Helsinki and Turku, which have ferry connections to Tallinn, Mariehamn and Stockholm. The Helsinki–Tallinn route, one of the busiest passenger sea routes in the world, has also been served by a helicopter line.

Industry Main article: Economy of Finland

Finland was rapidly industrialized after the Second World War, achieving GDP per capita levels equal to that of Japan or the UK in the beginning of 1970s. Initially, most development was based on two broad groups of export-led industries, the "metal industry" (metalliteollisuus) and "forest industry" (metsäteollisuus). The "metal industry" includes shipbuilding, metalworking, the car industry, engineered products such as motors and electronics, and production of metals (steel, copper and chromium). The world's biggest cruise ships are built in Finnish shipyards. The "forest industry" (metsäteollisuus) includes forestry, timber, pulp and paper, and is a logical development based on Finland's extensive forest resources (77% of the area is covered by forest, most of it in renewable use). In the pulp and paper industry, many of the largest companies are based in Finland (Ahlstrom, M-real, UPM). However, the Finnish economy has diversified, with expansion into fields such as electronics (e.g. Nokia), metrology (Vaisala), transport fuels (Neste Oil), chemicals (Kemira), engineering consulting (Pöyry) and information technology (e.g. Rovio, known for Angry Birds), and is no longer dominated by the two sectors of metal and forest industry. Likewise, the structure has changed, with the service sector growing, with manufacturing reducing in importance; agriculture is only a minor part. Despite this, production for export is still more prominent than in Western Europe, thus making Finland more vulnerable to global economic trends.

Based on the Economist Intelligence Unit report released in September 2011, Finland has clinched the second place after the United States on Benchmarking IT Industry Competitiveness 2011 which scored on 6 key indicators: overall business environment, technology infrastructure, human capital, legal framework, public support for industry development, and research and development landscape.

Public policy See also: Nordic model

Finnish politicians have often emulated other Nordics and the Nordic model. Nordics have been free-trading and relatively welcoming to skilled migrants for over a century, though in Finland immigration is relatively new. The level of protection in commodity trade has been low, except for agricultural products.

Finland has top levels of economic freedom in many areas, although there is a heavy tax burden and inflexible job market. Finland is ranked 16th in the 2008 global Index of Economic Freedom and 9th in Europe. While the manufacturing sector is thriving, the OECD points out that the service sector would benefit substantially from policy improvements.

The 2007 IMD World Competitiveness Yearbook ranked Finland 17th most competitive. The World Economic Forum 2008 index ranked Finland the 6th most competitive. In both indicators, Finland's performance was next to Germany, and significantly higher than most European countries. In the Business competitiveness index 2007–08 Finland ranked third in the world.

Economists attribute much growth to reforms in the product markets. According to the OECD, only four EU-15 countries have less regulated product markets (UK, Ireland, Denmark and Sweden) and only one has less regulated financial markets (Denmark). Nordic countries were pioneers in liberalizing energy, postal, and other markets in Europe. The legal system is clear and business bureaucracy less than most countries. Property rights are well protected and contractual agreements are strictly honoured. Finland is rated the least corrupted country in the world in the Corruption Perceptions Index and 13th in the Ease of Doing Business Index. This indicates exceptional ease in cross-border trading (5th), contract enforcement (7th), business closure (5th), tax payment (83rd) and low worker hardship (127th).

Finnish law forces all workers to obey the national contracts that are drafted every few years for each profession and seniority level. The agreement becomes universally enforceable provided that more than 50% of the employees support it, in practice by being a member of a relevant trade union. The unionization rate is high (70%), especially in the middle class (AKAVA—80%). A lack of a national agreement in an industry is considered an exception.

Tourism Now lying within Helsinki, Suomenlinna is a UNESCO World Heritage Site consisting of an inhabited sea fortress built on six islands. It is one of Finland's most popular tourist attractions. Main article: Tourism in Finland

In 2005, Finnish tourism grossed over €6.7 billion with a 5% increase from the previous year. Much of the sudden growth can be attributed to the globalisation and modernisation of the country as well as a rise in positive publicity and awareness. There are many attractions in Finland which attracted over 4 million visitors in 2005.

The Finnish landscape is covered with thick pine forests, rolling hills and complemented with a labyrinth of lakes and inlets. Much of Finland is pristine and virgin as it contains 37 national parks from the Southern shores of the Gulf of Finland to the high fells of Lapland. It is also an urbanised region with many cultural events and activities.

Commercial cruises between major coastal and port cities in the Baltic region, including Helsinki, Turku, Tallinn, Stockholm and Travemünde, play a significant role in the local tourism industry. Finland is regarded as the home of Saint Nicholas or Santa Claus, living in the northern Lapland region. Above the Arctic Circle, in midwinter, there is a polar night, a period when the sun does not rise for days or weeks, or even months, and correspondingly, midnight sun in the summer, with no sunset even at midnight. Lapland is so far north that the Aurora Borealis, fluorescence in the high atmosphere due to solar wind, is seen regularly in the fall, winter and spring.

Outdoor activities range from Nordic skiing, golf, fishing, yachting, lake cruises, hiking, kayaking among many others. At Finland's northernmost point, in the heart of summer, the Sun does not completely set for 73 consecutive days. Wildlife is abundant in Finland. Bird-watching is popular for those fond of avifauna, however hunting is also popular. Elk and hare are common game in Finland. Olavinlinna in Savonlinna hosts the annual Savonlinna Opera Festival.