Finland lags behind the other Nordic and Baltic countries as a destination for foreign investments. In 2019, foreign direct investment (FDI) to Finland accounted for 31% of gross domestic product (GDP), which is less than in 2010 and well below the 49% average in the peer countries.
The OECD's report 'The Impact of regulation on International Investment in Finland', published on 19 May, compares Finland's regulatory landscape with that of Nordic and Baltic countries.
The report highlights how Finland's relatively open business climate "creates a favourable environment for foreign-owned firms," but also identifies "a number of aspects indicating that Finland might be underperforming in terms of attracting FDI."
Those bottlenecks have to do especially with the uncertainty surrounding the implementation of the Finnish FDI screening mechanism, bureaucracy and the administrative burden on companies.
The OECD, a club which includes the most developed economies on the planet, also points to the excessively slow, and highly bureaucratic visa-granting mechanism for foreign workers, which is drawing talent out of the country, and to some restrictions on competition, particularly in sectors such as transportation.
The OECD highlights that setting up a business takes longer in Finland than in other countries in the region, and foreign investors have limited access to online company registration. Long processing times of operational permits slow down, or undermine, investment projects.
As national regulation can increase the costs of conducting business, in some cases it influences investors’ choice of where to invest, says the OECD.
In this sense, the organization recommends Finnish authorities to streamline company registration and operational permits to facilitate investment projects.
"Digital solutions can reduce waiting times and administrative burden on all businesses and enable non-EEA investors to register their company online, possibly in English," reads the report.
Residence pemits
The OECD also recommends that Finland implement reforms aimed at accelerating the entry of foreign talent.
"Recruiting and retaining skilled foreign workers could be further facilitated by simplifying the residence permit system and fast-tracking work-based permits for post-graduate students and researchers. Continue to promote Finland’s attractiveness for international talent and facilitate their integration by further lowering language barriers and setting up one-stop-shops for entry services."
Permit procedures related to business activities should also be developed to make them less lengthy.
The report also recommends that foreign-owned companies should become more actively involved in the reform of business regulation. And to strengthen the dialogue between the government and the business community to gain a better understanding of companies’ needs and explore further opportunities for co-operation.
Benefits from FDI
According to the OECD report, Finland benefits from FDI in many ways.
Although foreign-owned companies accounted for slightly over 1% of all companies operating in Finland in 2019, they generated almost a quarter of the total turnover and employed 18% of the workforce.
Foreign companies accounted for almost one-third of research and development expenditure.
The Finnish Ministry of Economic Affairs and Employment said in a press release that Finland has already recognised some of the bottlenecks described in the report.
"For example, the Talent Boost programme to attract international experts to Finland includes ongoing reforms that will speed up the residence permit procedure and improve access to language studies. The Government’s objective is to increase work-based immigration by 50,000 people by 2030," highlights the Ministry.
