Speech by President of the Republic of Finland Tarja Halonen at a luncheon with Nippon Keidanren and accompanying Finnish business delegation in Tokyo on October 22, 2004

It is a great pleasure for me to address this distinguished audience today. I would like to warmly thank Nippon Keidanren for organising this luncheon and I hope that it will further reinforce the already existing good ties between the Finnish and Japanese business communities.

These days we talk a lot about globalization. Globalization has led to positive effects in many countries. Hundreds of millions of people have escaped poverty with the opening-up of the global economy. However, it is evident that at present the benefits of globalization are not distributed evenly between and within countries. Poverty remains one of the greatest problems of our day.

One important ingredient in poverty reduction is economic growth and this demands trade and investment. Business communities therefore have an important role to play in reducing poverty.

Liberalisation of trade is a means for achieving ultimate objectives such as high and sustainable growth, full employment and the reduction of poverty. I therefore fully support a rapid and successful conclusion to the ongoing Doha Development Round. The European Union has committed itself to significant reforms in order to move the Doha Round forward. It is vital that all industrialised countries show flexibility in the negotiations in order to safeguard its accomplishment.

Liberalisation of trade entails difficult adjustments for all participating countries. For example, the necessary opening-up of the agricultural sector is a difficult question for the EU as well as for Japan. And yet the need for agricultural reform in the North and in the South is not in question. We know that agricultural subsidies in industrialised countries amount to over 1 billion US dollars per day, while 70 per cent of the world’s poor live on less than 1 dollar a day. This is a clear injustice.

Finland has been among the greatest beneficiaries of globalization. With its small economy and small domestic market, it would not have attained its current position as one of the world’s richest countries without embracing international trade and participating in the ongoing globalization. Exports now play a crucial role in our economy; accunting for around 40 % of GDP. The relationship between of direct Finnish investments abroad and GDP is twice the world average. One third of our companies’ employees are located abroad. In recent years an increasing number of investments have been directed at the fast developing markets in China, Russia, Brazil, India and the new EU member states.

This global phenomenon has also caused concern about the loss of jobs and other negative effects of globalization. Words such as outsourcing and delocalisation have entered our daily vocabulary. This discussion reflects the fears that Western Europe is in danger of losing its attractiveness as a place for business. The central question is how we can remain competitive in the ever tightening race for investments and jobs.

In March 2000, the European Council set out a ten-year strategy to make the EU the world's most dynamic and competitive economy. As we now approach the mid-term of its implementation, I regret to say that progress in many priority areas has been insufficient. The mid-term targets for employment creation will not be met. The productivity gap with the US is widening, not narrowing. For this reason it is necessary for all EU member states to intensify their efforts to reach the goals set and I am convinced that we will do this.

Finland like many other industrialized countries face at the same time shortage of labour and unemployment. We cannot compete with China and other emerging economies with cheap labour. Our future is thus dependent on our ability to increase productivity and to create and commercialise new innovations; it is imperative to invest even more in education and research and development.

The ageing population poses another set of challenges. It has been said that we have to open our borders and our society to foreign expertise and labour. Even more we need to be innovative and use new technologies and partnerships in the service sector including healthcare and social services. I believe many of these challenges are also familiar to Japan.

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Despite the many challenges, Finland is still a good country in which to do business. Regulatory impediments are low and the workforce is one of the best educated in the world. According to a recent World Bank report, Finland was one of the most active countries in enacting investment climate reforms and the World Economic Forum ranked Finland once again as number one in competitiveness. Our situation in the Nordic region of Europe with proximity to Russia and the Baltic States makes Finland a good location for regional operations. I have been very pleased to note that some Japanese companies have also established themselves in Finland in order to take advantage of these benefits.

When looking at Finnish-Japanese trade relations, I can state that Japan continuously maintains its position as one of the most important trading partners for Finnish companies in Asia. Last year, Finnish exports to Japan totalled 1 billion euros and Japanese exports to Finland 1,5 billion euros.

As to the Finnish business presence in Japan, the focus has shifted from manufacturing to strategic partnerships and genuine co-operation in research and product development. Partnerships have been created primarily in the strong areas of Finnish and Japanese know-how, such as engineering and ICT. Now we are extending our cooperation to other new and exiting sectors such as the Well-Being Centre in Sendai. I also repeat my welcome for Japanese companies to come and establish partnerships in Finland.

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The Asia-Europe Meeting ASEM is a central platform for regional dialogue between Asia and Europe. Finland will host the next ASEM Summit and the Confederation of Finnish Industries the next Asia-Europe Business Forum (AEBF) in September 2006.

It is generally acknowledged that the Business Forum needs reforms. The recent enlargement of ASEM to 39 members poses another huge challenge for the functioning of the Business Forum. We hope to receive Nippon Keidanren’s support for the renewal of the Asia-Europe Business Forum and for making the 10th AEBF a success. In this spirit I warmly welcome you all to the AEBF 10 in Finland in September 2006.

With these words I once again thank you very much for this delicious luncheon and propose a toast to all Japanese and Finnish business leaders, who are working for the further development and deepening of Finnish-Japanese business relations.