In the first of four articles, COLIN JAMES explains how research helped Finland, which used to get 50 per cent of its income from primary production, make strides towards the knowledge economy.
Teenagers spend hours on the phone. In upbeat Finland that means talking on a cellphone - for the unsophisticated, that is. The smart young set sends written electronic notes between mobiles. It's cheap, its sassy, it's the way to stay in touch. We live in a backwater by comparison.
When I first went to Finland in the mid-1970s it was measured and affluent - some attractive womenswear, glass and pottery design, but otherwise unremarkable apart from its impenetrable language, Arctic weather and bizarre liquor laws that required you to be seated before you could be served.
There still is a Government monopoly on alcohol but you can now drink standing up. Except for the stratospheric prices, you would notice little difference between Helsinki's bars and cafes and Auckland's.
But backstage where the money is made there is a difference. Finland, which only 50 years ago had half its population in primary production, is well on the way to the knowledge economy. Newsweek magazine in November 1998 named Helsinki one of the world's top 10 technology cities.
It helps that Nokia, the world's biggest cellphone company, happens to be Finnish-based. Nokia's expansion alone adds around 1 per cent to Finland's GDP each year.
But it is not an accident that Nokia is Finnish. Successive governments have deliberately aimed to create a culture of investment, with special attention to research and development. Nokia owes at least some of its startling success to that drive. Higher education is free. There has been a deliberate programme to encourage students into the sciences: engineering displaced the humanities as the top choice between 1987 and 1997. A 1998 statement of purpose for the universities says "the emphasis will be on scientific research and outstanding artistic activity as a basis for instruction. Every effort will be made to provide the operating conditions necessary for high-quality basic research and researcher training."
In this country, students are actively discouraged from science by higher fees. Scientists' starting salaries in the Government research institutes are an insult. Scientists with a track record can command double their salaries offshore. One research institute says a Queensland institution recently made a bid for the whole of one of its sections at vastly higher salaries.
Finland spends 3 per cent of GDP on science, research and development, one-third of that by the Government. We spend 1 per cent of GDP, two-thirds of it by the Government. Perhaps a more important difference is that we steer a lot of our research towards products, Finland towards value-added processing.
Government funding in Finland is via the universities and polytechnics and a stand-alone organisation, TEKES (the Technology Development Centre). In 1998, TEKES funded or part-funded 2454 projects, including 1393 in the 1064 companies in the private sector. The total invested by TEKES came to $NZ715 million, of which $440 million was in the private sector and the rest in universities and research institutes. With co-funding from the organisations in which it invested in projects, the total research and development spending on projects in which it was involved was $1.55 billion.
TEKES reckons that for every $330,000 it invests, six or seven permanent jobs are created and additional turnover of $7 million-$14 million is created and additional exports of $3 million-$10 million are won.
The result has been a marked shift up the technology tree. In 1990, the independent economic research institute ETLA says, high-technology exports were 6 per cent of total exports. By 1998 the figure was 19 per cent. This compares with 1996 figures of 25 per cent in the United States, 21 per cent in Britain, 11 per cent in Germany and 10 per cent in Denmark, says Pekka Yla-Anttila, research director of ETLA (the independent Research Institute for the Finnish Economy).
Mr Yla-Anttila says with planned increases in 2000, Finland's research and development spending will be the highest in the world as a percentage of GDP. He reckons there is a lag of from three to 10 years between research and development investment and resulting exports. Electronics rise this decade, Mr Yla-Anttila says, is the result of 1980s research.
Telecommunications, thanks to Nokia, has the lion's share of high-technology exports. And Nokia has an excellent local testing base: in Finland six out of 10 people have a mobile phone (here it is two out 10) and Professor Olli Martikaninen of the Helsinki University of Technology predicts "all personal communication will soon be based on cellular phones".
Two early influences contributed to the telecommunications success. One was that right from the start there was competition in telephone services - there are still 45 local network operators - and they made exacting demands of equipment suppliers, who were not sheltered from foreign competition. This, combined with the special technical challenges of a hostile, cold climate to encourage innovation.
A second influence was a Government contract to Nokia in the early 1960s to develop radio-communications equipment for the Finnish army. Out of this came the first mobile network - in 1971 (yes, 1971) - and the first fully automated network was in operation by 1981. More recently, according to ETLA, "public investments in the industry have been remarkable", disproportionate to the industry's size.
"Without minimising the contribution of Nokia and other telecommunications companies, it can be stated that without public support, a comparable progress would have been improbable."
Next off the rank will be software. But, interestingly for New Zealand, TEKES also has a programme on food technology.
Finland has only a short growing season between its long far-north winters. Producers have been hit by the need to lower subsidies to the European Union's (still high) level and compete on equal terms with other European producers from more favourable climates.
Policymakers' response has not been to leave the farmers to their fate but to launch an "innovation in foods programme", starting in 1997, to improve processing to exploit a sort of "clean and green" reputation for local food.
Successfully competing internationally "requires products with a high added value and effective production processes", TEKES says. So it aims at product development, effective use by industry of research, new forms of cooperation between the food industry and other industries, such as pharmaceuticals, biotechnology and information and networking of small and medium-sized companies.
Note the health connection, aiming to ride a rising consumer wave in rich countries. This is lightyears from competing on price.
And note that top of the TEKES programme's list is milk. Before you fall off your chair hooting in derision, remember that trees and rubber gumboots were once Nokia's mainstays.
Research pushes Finland towards the top of world knowledge league
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