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About Finland - The Economy
Considering that Finland has developed from an agrarian outpost
to its present position as a beacon of high technology, the economy
is quite a success story. Traditionally, Finland has been a net
importer of capital to finance industrial growth; in recent years
it has become a net exporter of capital. Finland has one of the
best performing economies in the EU and Europe.
Finland has a highly industrialized, largely free-market economy,
with per capita output roughly that of the UK, France, Germany,
and Italy. Its key economic sector is manufacturing—principally
the wood, metals, engineering, telecommunications, and electronics
industries. Trade is important, with the export of goods representing
about 30% of GDP. Except for timber and several minerals, Finland
depends on imports of raw materials, energy, and some components
for manufactured goods. Because of the climate, agricultural development
is limited to maintaining self-sufficiency in basic products. Forestry,
an important export earner, provides a secondary occupation for
the rural population. The economy has recovered from the recession
of 1990-92, which had been caused by economic overheating, depressed
foreign markets, and the dismantling of the barter system between
Finland and the former Soviet Union. A relatively high unemployment
rate (estimated at 7.9% in 2005) has been persistent but recent
indicators show that the situation may be improving.
Finland successfully joined the euro zone and has outperformed
euro-area partners in terms of economic growth and public finance.
During recent years the government cut taxes and tempered inflation
in order to incite private consumption to prompt a growth in GDP.
Growth in GDP is forecasted at 3.6% in 2006.
Labour legislation, collective bargaining and social welfare are
the framework of the Finnish labour market system. The industrial
relations are above all regulated by collective agreements which
also regulate the minimum conditions for the work and establish
labour peace. Distinctive for the Finnish labour market system is
the high trade union density and collective bargaining coverage.
About 70 per cent of employees are members in trade unions and 90
per cent of employees are covered by collective agreements. Also
the membership in employers´ associations is high. The target
of the employers is to shift more decision-making in wage conditions
and pay rises to the company level.
Foreign-owned companies are eligible for government incentives
on an equal footing with Finnish-owned companies. Most state and
EU-sponsored incentive programmes are intended to promote investment
in economically less developed regions and might not be applicable
for the greater Helsinki area. There are several business aid-,
tax relief-, and R&D incentives specially targeted at the SME
sector.
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