Additional investments in research and development activities must be directed to applied research and diversification of the economic structure

There will be significant annual increases in public funding for research and development activities until the year 2030. Additional investments have been agreed upon among all parliamentary groups already during the previous government term, and Orpo’s government has committed to increasing funding for research and development activities. Due to the adjustment needs of central government finances, there may not be room for other growth investments, so additional funding should now be used in ways that best benefit the Finnish economy.

Development funding must be directed to the development of competitive and digital business and consumer services, the effective utilisation of intellectual property rights, creative content and design, the improvement of the customer experience, as well as the development of new business models and the adoption of technology. Finland must find new areas of business growth and be able to diversify its one-sided economic structure.

With digitalisation, Finnish service business and commerce are part of tightening international competition. According to associations, it is essential that research and development efforts are directed more effectively towards applied research, the adaptation of technology, and the concrete needs of service sectors and commercial enterprises. This will ensure that Finland remains competitive in the face of growing international competition and that the potential of the service sector as a source of productivity and well-being is fully realised.

Reforming industrial and innovation policy plays a key role in solving Finland’s productivity problem

The share of service sectors in employment and production will increase further. Among other things, the Finnish Productivity Board of the Ministry of Finance[1] has called for R&D policies aimed at the service sector. The OECD country report[2] encourages Finland to diversify its innovation ecosystem and, in accordance with the recommendations, Finland should especially invest in the commerce sector, logistics and SMEs.

According to a recent study by Etla[3], Finland does not sufficiently recognise the societal significance of so-called intangible production factors. Finland’s capital stock is still predominantly tangible, and the capital stock related to software, databases and data, for example, is four times higher in Sweden than in Finland.

The criteria for public development funding for companies have been a strong requirement of export efforts, which may not be suitable for all companies or development projects that improve productivity. In the future, funding criteria should also enable companies to develop in the domestic market. Development in the domestic market is also a response to growing international competition.

Service Sector Employers Palta and the Finnish Commerce Federation emphasise that the Finnish government’s goal of raising research and development expenditure to four per cent of GDP by 2030 can only be achieved if the needs of the entire economic structure are taken into account when allocating R&D funding. An increase in the number of companies engaged in research and development activities must be set as a key objective.

For further information, please contact:

Tatu Rauhamäki, Director, Service Sector Employers Palta, 050 521 2907, tatu.rauhamaki@palta.fi

Simo Hiilamo, Director, Public Policy and Advocacy, Finnish Commerce Federation, 050 350 7564, simo.hiilamo@kauppa.fi

[1] Skilled people create productivity : Skill shortage threatens to slow down the effectiveness of R&D investments and productivity growth – Valto (valtioneuvosto.fi)

[2] Finland Economic Snapshot – OECD

[3] How Do Intangible Capital Stocks of Finland, Sweden, and Germany Compare? (etla.fi)

[1] Osaavat ihmiset tekevät tuottavuuden : Osaajapula uhkaa hidastaa t&k-investointien tehoa ja tuottavuuden kasvua – Valto (valtioneuvosto.fi)

[2] Finland Economic Snapshot – OECD

[3] Miltä Suomen aineeton pääomakanta näyttää Ruotsiin ja Saksaan verrattuna? (etla.fi)