International business

Contents

1.        Introduction        2

2.        General information of Finland        3

3.        Finland economic evolution        4

4.        Trade between Finland and Russia        9

5.        Information and communication Technologies industry        12

6.        Doing business        14

7.        Relation Finland – Estonia        15

8.        Conclusion        19

9.        List of Exhibits        20

10.        Bibliography        26

1. Introduction

Finland is a small country with only 0.7% of the world population. Small but exclusive, this is the way to describe this state of Angry Birds and Nokia's inventors. What better describes Finland than saunas, Santa Claus and Northern Lights? It is also important to mention economic stability, human security, tolerance and freedom in the country - after all, these aspects make Finns one of the happiest nations in the world!

The historical evolution of the country has meant an easy change to contrast the encounter in its market and economic policies. All this added to the resilience and is today among the strongest economies in Europe. It is a very attractive country to conduct an in-depth economic study.

The purpose of studying this topic is to know the global economy and international trade of Finland. The relationship of this country with two fundamental pillars when developing in the international market, such as Russia and Estonia, has been analyzed.

Although it is a country that stands out in different sectors, the relationship between its economic stability and the situation of the technology sector is closely linked. Being this sector one of the impulses of the economy of the country.

1. General information of Finland

Finland is a democratic, parliamentary republic, which has been part of the EU since 1997 and its currency is EURO. Being the only one Nordic country that uses the Euro. Despite having had past economic policies in communism, they currently enjoy free markets.

It has 5.5 million inhabitants, although its surface extends to 338432 km 2, this means that it is the 7 largest European country in terms of dimensions, however, of the least populated countries.

The capital of the country is Helsinki and the official languages are Finnish and Swedish, and much of its population speaks English. This country borders Sweden, Estonia and Russia.

1. Finland economic evolution

Finland inside the Russian Empire

In 1809 Finland becomes part of the Russian Empire, as it was ceded from Sweden to Russia. This affected the economy of Finland. In 1860, on this decade there were significant legislative reforms carried out. It was this decade when Finland’s economic policy was liberalized and international relations could be opened strongly, as trade guilds were abolished.  Also, Finland gained its own monetary unit on this year. 

At the same time, researcher has pointed out the 1860’s as the decade of Finland’s Industrial. It is worth to highlight the fact that the finish population grew about 1% annually between 1820 and 1860.

First World War and Civil War

Right before the First World War occurred (1914-1948) Finland’s economy was working according to the rules previously accorded, during the time: 1860-1880. Those were the decades when it was forming the market economy. The Gold Standard and freeing the foreign trade were some of the actions that linked the economy of Finland within the World’s economy. When it comes to the labour market, the power of trade union was limited and Finland’s internal and external situation in politics changed radically. 

“On 1917 the country transformed itself into a sovereign state and had a civil war. As it became an independent country, so did the Finnish economy.”^[1] Civil War in Finland started at the beginning of the following year (1918), which means that regular economical activities were troubled for half a year. Also, the inflation that was going on at Russia also arrived to Finland in 1917, devaluing the Markka, to less than a third of the level of 1913. This was followed by a huge demand as all the importations came to an end. 

After the whole process of Finland’s independence, the economy of the country needed to find new markets that could exchange the Russian ones.

A period of acceleration growth followed the First World War and it lasted until the end of the 1920’s. These years were characterised for being a transition period when the investment-ratio was very high on the administration system. Also, we can consider decades, (1920’ and post-depression 1930’s) as the years where Finland returned to the old growth path. 

The years of the Great Depression (1929-1932)

In many European countries the Great Depression years started on 1930’s, except in Finland that began a year earlier. Some of the facts that came along those years were:

• A decline on the GDP
• Higher unemployment
• Falling prices
• Economic death on both industrial and agricultural sectors

However, Finland as other Nordic countries, entered on the Great Depression with less severe damages and shorter decline in its GDP level, it got 4% lower on 1932.  It could be explained with tools provided:

Employment↓ → Interest Rate (i) ↑ →Monetary Supply↓ → Inflation↓ → Exchange Rate↑ → Exports (X) ↓ → GDP↓

Main consequences of the Great Depression:

1. The harvest failure in 1928 increased imports and caused a deficit in the trade balance;
2. Wholesale prices fell by 17 percent from 1928 to 1931;
3. The volume of private consumption fell at the same time by 17 %. (In other countries the proportions were usually the reverse: consumption fell less than GDP);
4. The basis of export recovery lay in the devaluation of the Markka in 1931.

Second World War

The GDP in Finland went down just about a 10% between 1938 and 1940 (war years), although the Second World War brought many changes to the country, mostly in its economy.

We can highlight the fact that foreign trade and financial markets were finally truly regulated. At the same time, the war brought quite a change into the labour market of the country.

Once the War came to an end, Finland, like some other developed places, started a sustainable phase of economic growth, which was called “the golden years”. The Gross Domestic Product increased a 4.2% between 1945 and 1990. While the GDP per capita also grew a 3.6%, which meant that the economy was going quite well for the country. 

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