Under eastern European and Asian competitions owned large amount of low-salary employees, how can Finnes to keep Finnish companies stay at Finland?

The motivation to discuss on the topic:
Recently, Taiwan’s factories start to move to other counties for cheaper labors. Finland also meets the same problem. What are solutions of Finland? Is it possible to keep those manufacturers stay at their home countries and keep jobs of blue-collar workers.

A piece of news:
In 2006, there was a piece of economic news related to both Finland and Taiwan from a newspaper. Taiwan’s largest manufacturer of electronic components Foxconn decided to dismiss 295 labors in Finland. Originally, Foxconn’s Finnish division employed more than a total of 500 people in southern Finland. Foxconn had a layoff in 2005 to close a factory in Hollola and cut 600 labors. Now, Foxconn already stops the component product in Finland and focus on consumer service. After ending the production in Finland, Foxconn started to build a huge factory in Chennai of India, close to Nokia’s and Motorola’s factories. In other words, Foxconn is following policies of other mobile phone giants. Based on the newspaper, the main cause made the layoff is Finland doesn’t have big market for low and medium-priced handsets, and it is not efficient for Foxconn to continue its mobile phone production in Finland.

One thing in the newspaper made me impressive. It said that the layoff is a very bad news for the dismissed employees because the unemployment rate in the Lahti area, the factory located on, is very high.

Finnish Experience:
By the classical economics, there are two ways to keep the growth of economics in a country, the first one is to increase the number of labors under fixed worth of output per person. The second one is to increase the worth of output per person when population is not increasing. Obviously, the reason of present growth of Finnish economics is the second one. Although Finland has to face the competition from eastern European countries with cheaper labors, Finland still can keep high-tech companies by her high-quality employees. Before eastern European countries joined European Union in 2004, the major industrial structure of Finland is already based on high-tech information and communications industry.

Because quality of employees is most important factor for IT companies, most of Finnish companies still stay at Finnish due to this reason. However, many Finnish manufacturers also start to move to eastern European countries. For example, the most famous Finnish mobile phone giant Nokia will build factory to product its handset in Romania in the middle of 2008. Salcomp, one of the world’s leading Finnish manufacturers of mobile phone chargers and power supplies for mobile phones, also have moved its factories to China, Brazil and India. The heavy employment costs in Finland make manufacturers move to eastern European and Asia with cheap labors.

In addition, in the end of 2007, also because of high cost and in order to make sure long-term profitability, Stora Enso, a big Finnish pulp and paper manufacturer, said that the company will permanently close its three factories in Finland. There will be 1100 Finnish people lose their jobs.

Finnish reaction:
There are so many bad news for Finnish labors. Actually, the reminding companies which stay at Finland are the operation part of them or need high technologies. From 1995, Finland focus on developing her innovation economics based on selling high-tech products, professional know-how and high-value services, including biotechnical industry and information and communications technology (ICT) sector. Finland government pays much attention on Finnish biotechnical industry. Through the favors of Academy of Finland, National Technology Agency of Finland (TEKES),the Finnish Innovation Fund (SITRA), Finland government organizes biotechnical companies in Helsinki SciencePark, Biomedicum in Helsinki, Turku’s BioCity, Oulu’s Medipolis and Kuopio’s Technology Center Teknia [1]. Biotechnical industry needs high-quality and professional employees and researchers more than cheaper labors. Of course the industry is very suitable for Finland.

On ICT sector, in 2007, Nokia products 36% mobile phones in the world. And, there are many successful Finnish security software companies, say Stonesoft, F-Secure and SSH. Finnish users and companies always can adopt a technology very quickly. Finland has the highest mobile phone and Internet user density in the world. Finland’s ICT foreign trade is in surplus and R&D investment in relation to GNP is the top position in the world. Because of Finnish good research abilities, Finland already is the pioneer and a famous research center of high-tech products. IBM, Siemens, HP and Lotus all have their Finnish research division. Naturally, those international companies also would have cooperation with Finnish companies and improve the development of those Finnish firms. Finnish small and medium-sized companies organize special networks with international and domestic giants for research, training and corporate cooperation.

Finland also has become the export-driven place for the international companies because Finland’s location is close to one of the most potential markets, Russia. Comparing the law systems, social and political factors, many companies would like to product or assemble their goods in Finland. So, by the advantage of Finland’s location, Finnish people still can have huge amount of investments from other countries and keep many factories stay at Finland although the market of Finland is small.

For Finland, the challenge of its economic policy in the future is to continue enhance Finnish ability of innovation and technology knowledge for reminding at the top position in the world. For a country with small market, it is the best choice for Finnish people to survive under the global competition.

Lessons Taiwan can learn from Finland:
On labors market in Taiwan, there is similar situation in Taiwan. Because mainland China and Vietnam have cheaper employees, many Taiwan’s companies move their factories there. It makes many labors in Taiwan lose jobs. A difference between Finland and Taiwan is that the main industry of Taiwan is manufacture. Taiwan’s companies don’t pay much money on long term R&D. So, there are several lessons Taiwan can learn from Finland.

First, Both corporate and government should invest more money to R&D. Taiwan already doesn’t have good competitiveness on manufacture for low-cost products. Second, Taiwan should use the advantage of her location. Because of political dispute, Taiwan’s government bans any boats and airplanes to operate between Taiwan and mainland China. However, in economic opinion, the ban is very bad for Taiwan’s economy because many international companies have business in both Taiwan and China and the ban makes inconvenience for businessmen. Third, Taiwan should grow up a industry giant like Nokia in Finland. Right now, Taiwan only has small and medium-sized companies. Unlike Nokia, those companies can’t have ability to be an engine of Taiwan’s economy.

How to remain the global competitiveness is a very serious issue for people in Taiwan. Because of the historically political problem with PRC’s government, the issue is more difficult to deal with for Taiwan’s people. But if we only consider economic factors, it is clearer and very obvious what Taiwan’s people should do for their economic competetiveness.

Reference:
[1] W.-B. Zheng, “A strategic approach of building national technology strength - Finland as case study,” master thesis of National Sun Yat-sen University, 2001.