It is a great pleasure for me to have this opportunity to speak at the Royal Castle. What better forum could there be for discussing economic cooperation than this place, where the things that unite us in historical experience, culture and geographical proximity come so well into focus!

I am greatly impressed by the strength of the positive development that has taken place in this country in recent years. Poland has been one of the forerunners among economies in transition. Your reforms have been successful, especially because they have been carried out in accordance with the requirements of the country. The results have earned the appreciation of the outside world.

We admire your impressive growth performance and the dynamism of your economy, which promise continuing rapid development. We are well aware of Poland's significance as a large market with excellent potential.

Poland was among the first Central European countries to sign an association agreement with the European Union, and has applied for membership.

Finland welcomes the positive development in Poland and fully supports you in your aspiration to attain membership of the EU.

I am pleased to note that Finnish-Polish economic and trade relations have always been good. Despite the earlier difference between our economic systems, our businesspeople were always able to maintain contact and got along well together. Since the introduction of a market economy, Poland has become our biggest trading partner in Central Europe; trade between us totalled about $800 million last year.

About 150 Finnish companies representing a wide range of sectors are involved in joint ventures here. Total Finnish investment in Poland is in the region of $260 million. I am quite certain that both countries are eager to increase trade even further.

There has been a trade surplus in Finland's favour for the last few years, whereas earlier the situation had been quite the opposite for more than two decades. I am confident that Poland has every chance of increasing her exports to Finland and that, in consequence, our trade relations will develop in a balanced manner.

The structure of our bilateral trade is also becoming more diversified; it is no longer based predominantly on exchanging timber and paper for coal. New markets have been found for other products, too. I could mention, with a certain pride, high-technology products such as telecommunication equipment. These together with energy and construction are examples of our new exports to Poland and elsewhere. Nor must we forget the foodstuffs industry and the services sector, both of which are also very important for us.

Correspondingly, Finland's open market, in which there is intense competition between Finnish and international suppliers, offers Polish industry opportunities to develop its exports and diversify its sources of supply. The Finnish market is not a large one, but our consumers have considerable purchasing power.

In a market economy the role of the state is primarily to create a framework for the real actors, in other words for companies and other suppliers of goods and services in the private sector. The decision-makers must make sure that agreements and arrangements regulating international trade and other economic activities correspond to current needs. That is the only way we can expect our companies to be successful in the numerous functions of international trade.

On becoming a member of the European Union, Finland adopted the Union's common trade policy and the framework of agreements with third countries. Accordingly, the earlier, well-functioning bilateral agreements were replaced by the Europe Agreement between Poland and the EU.

It is my firm view that the Europe Agreement will ensure a continuation of free trade between our countries. Compared with bilateral trade arrangements, the agreement between the EU and Poland is a modern and broad-ranging one which, in addition to traditional trade, regulates also services, labour, movement of capital, establishment of companies and cooperation in the financing sector. I consider it very positive that the Europe Agreement opens new and better horizons for participants in our bilateral trade, enabling them to operate in expanding European markets and paving the way for acting together in the Single Market in the future.

The European Union is changing both internally and externally. These changes are in many ways interlinked. Certain internal reforms will be necessary before the next enlargement. Negotiations between the member states to amend the basic treaties of the Union are approaching their final phase at the Intergovernmental Conference. The firm intention is to conclude the negotiations by the EU Summit in Amsterdam on 16-17 June. If this is achieved, the enlargement negotiations could be opened six months later.

A successful conclusion of the IGC is crucial not only for the present member states, but also for future ones. The purpose of the conference is to make the Union more efficient, more democratic and more transparent. Normal citizens should feel that the Union makes a difference in their everyday lives.

Certain institutional changes will be needed to make decision-making within the EU more efficient. The possibility of closer cooperation between a limited number of member states, the so-called flexibility rule, may also be introduced.

The negotiations are difficult but bound to succeed.

Another important project is EMU. Failure to implement the third phase on schedule in January 1999 would have negative repercussions on many other ambitions of the EU. Finland is one of the few countries currently meeting the criteria for the third phase. We are ready to join, should our Parliament so decide.

Finland fully supports enlargement of the EU. It is a historic opportunity to secure a stable and more prosperous future for all European states. The process will not be easy. However, the values at stake are so important, that all countries should be ready for some sacrifices to make it succeed.

We believe that negotiations with all applicants should commence at the same time. They could then proceed at different speeds. It is essential that all candidates are treated and judged on the basis of the same objective criteria.

The amount of work needed to meet the criteria for membership is huge. However, proper implementation of legislation is the only way to survive in the EU, which is very legalistic in nature. The basic principles of the Single Market require that all member states apply the same rules; no exceptions are possible. Only that way can equal treatment for citizens, the business world and governments be ensured. Once legislation is in force and being applied, and after the administration and the whole society have adapted to a new way of thinking, it will be possible to cope with the pressures of competition in the internal market.

I would also like to take a look at environmental issues, which are of equal concern to both of our countries. Poland has a crucial role in protecting the Baltic Sea: all environmental investments made here have immediate effects on the whole region.

Since both of our countries are on the shores of the Baltic, we share the same concerns and Poland is one of our most important partners in cooperation to protect the environment. Our very practical environmental cooperation began already in 1990 when we started discussions on a "debt for nature swap" arrangement. As a matter of fact, Finland was the first Western country to agree to reduce debt by using the ecoconversion arrangement. The "debt for nature swap" has directly increased exports of Finnish environmental technology and know-how to Poland. Secondly, the positive results of the ecoconversion deal with Finland have led to similar arrangements between Poland and other countries.

It gives me great pleasure to take this opportunity to inform you that the Government of Finland has decided to extend the ecoconversion arrangement up to the year 2000. Our very positive experience to date made that decision easy. I hope the extension will give companies even broader opportunities than they have enjoyed to date.

The states around the Baltic form a natural geographical entity and ties between them are strong. There are many opportunities to increase prosperity in the region, thereby enhancing the stability and security not only of the region itself but of the whole of Europe. Through economic reforms, consolidation of infrastructure, investment and overall integration, the Baltic can become a centre of economic dynamism, a growth area. If everything goes well, trade between the countries around the Baltic could grow up to tenfold by the year 2010.

Some 50 million people live in the Baltic region and many more are indirectly linked to it. Polish and Finnish companies have a major role to play in this large market.

The main responsibility for the development of trade cooperation lies within the business world itself. The scope and direction of economic relations between our countries will be determined ultimately by how well knowledge increases, how much better our marketing and export promotion efforts become as well as by our success in making companies more competitive.

In a changing world and an integrating Europe we have to reach out to each other to gain a better understanding of our respective cultures and ways of thinking. I am convinced that discussions between our business communities, our mutual exchange of views and other ways of communication will in time increase interaction between our economies for the benefit of both nations.

I wish the business people who are doing this extremely valuable work every success. Thank you.