Eu Agenda: Reviewing Finland’s Performance

Executive Summary

The EU strategy has a major goal of turning the EU into a sustainable, inclusive, and smart growth economy. In the EU agenda, SMART growth implies improving the EU states’ performances in fostering knowledge, education, research and innovation, and digital society. Since the inception of the EU agenda, not much investigation has been done on the performance of different nations in reference to EU 2020 targets. Hence, the following research focuses on how Finland is performing relative to its EU neighbors. The research assumes a cross-sectional study because it aims at comparing the performance among different EU countries. The significance of the study revolves around the fact that different member states portray significant variations in their performances in attaining the objectives of the EU plan. However, the study’s key focus is Finland. Hence, it compares Finland’s performance in SMART growth relative to its complementary EU members.

The European Commission prepared the Europe 2020 strategy, which was later adopted by the European Council. The aim of the EU 2020 is to enable European Union nations to achieve inclusive, sustainable, and SMART growth (Gros & Roth 2012). The initiative arose at an epoch when debt crisis had hit the Eurozone. In 2000, the Lisbon strategy was initiated with the goal of turning the EU into the most knowledge-based and competitive economy globally by 2010 (Walburn & Saublens 2011). However, due to its focus on market orientation and failure of the regional actors to be active in the process, the strategy failed to attain its objectives. Consequently, an innovative strategy, the Europe 2020, came up. The aim of Europe 2020 is to aid Europe to recuperate from its enduring economic crisis through enhancing competitiveness, economic convergence, and cohesion (European Political Strategy Centre 2015). The strategy set targets for research and development, education, poverty reduction, employment, and climate policy (Ministry of Finance 2013).

Since the Europe 2020 is due for mid-term review, there is a need to assess in a realistic and unsentimental way whether the growth strategy has produced positive results. The initiative needs to be a medium for dynamic debate and candid reflection, elucidating on convergence and progress, and informing policy makers how continual under-delivery influences the future of their nations. However, the level of progress among nations is quite underwhelming. Only some member-states are close to attaining the set targets and the gap between their performances in increasing (Tilford & Whyte 2010). The European Council approved recommendations for its member-states that would guide decision-making. As compared to other EU nations, Finland has shown accelerated reforms to liberalize its economy through SMART growth. Finland has ranked among the uppermost performers in EU by fostering knowledge, innovation, digital society, and education. In determining the competitiveness of Finland among the European member-states, there is a prime requirement to review the country’s current performance in EU 2020, government policies influencing smart growth, and the overall impact of the 2020 agenda on Finland.

Finland’s Current Performance

Finland has portrayed a notable improvement towards the achievement of the targets set in the Europe 2020 agenda. It has acquired a high rank in the competitiveness index owing to its robust performance in laying strong foundations for growth. Finland’s ranking derives from its performance in laying a basis for SMART growth. It has a strong focus on training and education, knowledge and innovation, and it leads the world in digital economy. Further, Finland has managed to channel its resources toward training and education, innovation, and technological adoption, which are the principal pillars of smart growth within a competitive environment (Tilford & Whyte 2010).

The economy of Finland is rising progressively since the inception of Europe 2020. It ranks second after Sweden. After constricting for two successive years, the country’s output assumed stability in 2014, and there followed a steady recovery in the subsequent two years. Improvements in research and development have aided in softening the negative effects of the great shrink in investments. Besides, the national targets of Finland are maintaining R&D expense at 4 percent of GDP and reducing the proportion of school leavers below 24 years to 8 percent (Ministry of Finance 2013). In fact, Finland has the highest score with 3.78% of the GDP expended on R&D. The lowest performers for the indicator are Cyprus and Romania with merely 0.48% of GDP (Wegmann 2013).

Key indicators of Finland’s performance in sustainable growth

Digital Society

The rates of ICT investment vary across EU states. While the Netherlands, Sweden, and Finland have invested higher than the United States in the last ten years, the UK and Germany have invested an equal share. However, the investment remains weak in EU’s southern members (Greece, Italy, Spain, and Portugal). The highest performing EU nations portray impressive intensity of internet use. In 2009, more than 75% of the households in Sweden, Denmark, Finland, the Netherlands, the UK, and Germany had gained access to the internet. They had already exceeded the EU average of 65% (Tilford & Whyte 2010). 

Finland is among the top innovation powerhouses within Europe (Tilford & Whyte 2010). It is a worldwide leader in progressing toward embracing a digital economy. Finland has initiated The Digital Agenda policy that endeavors at promoting productivity and growth throughout the society. The policy is ensuring digitalization of all sectors of life from education, workplace to leisure activities and service use. The enhancement of ICT in these sectors has improved productivity in private and public services.

The digital transformation has immeasurable effects on Finn’s well-being and lives. The digital world has provided them with a source of learning and has created new-fangled social innovations. Besides, by increasing globalization and bolstering the digital economy, Finland has accelerated the pace of its economic change. It is ascending on its success route by making the digital economy a novel pillar for welfare, growth, and competitiveness. Accordingly, the nation has assumed a leading position in both development and delivery of digital services, which comprise of infrastructure services, open and public data, and commercial customer. Open alliance in refining and processing information has brought about new business openings and innovations. In addition, the introduction of digital economy has enabled Finland to develop and realign traditional production practices and processes with the focus moving from products to services. This technique adds value to services offered to clients and as well endorses sustainable development. The Finnish administration has harnessed ICT because it has realized that it causes ripple effects in combating climate change, enhancing sustainable development, and improving R&D (Tilford & Whyte 2010).

Research and innovation

The Europe 2020 agenda indicated research and development as the measure for innovation (Gros & Roth 2012). The agenda’s benchmark in R&D has enlarged to incorporate intangible capital, such as novel financial products, architectural design, human capital, and scientific R&D and market research. The rate of investment in intangible capital differs vastly among the EU member-states whose measures are available. Sweden ranks highest at 10.6 percent, followed by Belgium and the UK at 9.4 percent and 9.02 percent respectively. Then follows France and the Netherlands at 8.59 percent and 8.44 percent respectively. Finland and Slovenia hold the sixth and seventh position (Gros & Roth 2012; pg. 27).

Compared to other nations globally, Finland has the highest scores in R&D. This owes to an increase in R&D intensities in the manufacturing, electronics, and services sectors. The EU set the R&D target at 3%, and only Sweden and Finland have met the target (Tilford & Whyte 2010). A majority of the member states have devoted less than 2% of their GDP to R&D, thus making their R&D performances lag behind. In 2011, Finland’s R&D expenditure dropped off to 3.78 percent of GDP from 3.87 percent in 2010, which is, nonetheless, the uppermost value in EU (European Union 2013). In 2016, Finland recorded a score of 0.67 in digitalization. Approximately 91 percent of Finnish population use internet regularly and its workforce have the highest number (6.7%) of ICT experts in the EU (Digital Single Market). Besides, Finland exploits digital technology for online services. Finland’s outstanding performance in R&D results from the fact that its economy is not only knowledge-intensive but also, it has attained a remarkable and continuous revolution toward a stronger high-tech and medium-tech specialization. The state boasts numerous hot spot collections in major technologies related to security, agriculture, food, materials, ICT, energy, and environment both at EU and worldwide (Eurostat Statistics 2016). Most regions within South-west and South Finland portray excellent performance in all the sectors whereas areas within Northern Finland are performing well in environmental technologies, security, ICT, and materials. On top of these clusters, Finland has rigorous patenting in health, biotechnologies, machine tools, pharmaceuticals, and medical technology. Moreover, Finnish research stands out in the fields of environment, agriculture and food, energy, and security with the principal strengths being security and ICT. Conversely, subsequent to its high intensity of R&D inputs, Finland suffers from a low contribution of high-tech products to the international trade balance. Hence, the shrink in the telecommunications sector has caused a decline in commerce R&D investments. To curb the rising challenges, the Finnish government has resolved to reform its innovation system by internationalizing it.

Research and innovation enables EU states to create new services and products that not only generate jobs and growth, but also assist in addressing social challenges. Finland’s top economical ranking derives from its powerful focus on building an attractive digital society. It embraces innovation priority dealings aimed at diversifying business structures and increasing the quantity of innovative and growing companies through commercialization of businesses (Anckar, Kuitto, Oberst & Jahn 2014).. To achieve these objectives, Finland targets the initiation of new organizations and the development of novel business operations. The state ensures that SMART growth is realized both at the regional and at the national levels by allocating investments towards R&D in the business sector. The research enables the county to identify its strong sectors as well as the regions facing changes. The operation creates an opportunity to generate new businesses along with redirecting the expansion of existing organizations.

Education

Finland holds the uppermost position in the training and higher education pillar following its sharp attention to education in the past decades. It has built its education policy on the rule of lifelong learning. The basics of the rule are free basic education and equal access to training and education. The country embraces approximately 30 polytechnics and 20 universities, and almost 70 percent of graduates gain entry into institutions of higher education. Nonetheless, the percentage of higher education graduates between the ages of 25 and 34 years has been low but the overall number of graduates in on the rise as compared to other EU states.

In Finland, the science and education policy is founded on an ultimate learning principle, which is aligned with the EU 2020 strategy (Baltic Sea Academy, Jarke & Hogeforster 2015). The policy bases on efficiency, quality, and internationalization. This has enabled Finland, among other EU member states such as Sweden, Lithuania, Denmark, the Netherlands, Latvia, and Cyprus to be able to meet and exceed the EU 2020 targets on enhancing higher education. The EU endeavors at reaching 40 percent of 30-34  year-olds having graduated from higher-learning institutions by 2020 (Simon 2013). Finland did set a concrete objective to raise its people’s education level while reducing the number of early school dropouts. Subsequently, the rate of school completion has been developing auspiciously in the country’s education system. The rate of completion is 87% in upper secondary, 71.3% in vocational training, 67.8% in youth polytechnic and Bachelor’s degrees, and 70.3% in Master’s degrees (Ministry of Education and Culture 2012). Moreover, the EU established compulsory school-attendance for four-year-olds. By 2020, participation rates must not be below 95 percent. In 2011, more than 13 member states had already attained the target. However, Finland, Poland, Greece, Slovakia, and Croatia recorded the least rates of between 70 and 80 percent (European Commission 2013).

Government policies for SMART growth

The Finnish government has devised policies to ensure that its smart is in proportion with the EU 2020 strategy. The government has set up a research and innovation policy whose major theme is innovation-driven entrepreneurship. In this context, the economic strategies that the government adopts must support innovation. Accordingly, the government ensures that all enterprises in the country have innovation activities allied to processes and products. In this milieu, the Finnish government set up the Vigo accelerator program for innovative and high-growth companies, which has drawn direct foreign investors into the country. The overall innovation policy encourages companies to seek novel growth markets on top of renewing businesses through commercialization of services and incentives. Besides, the government uses support system to ensure that innovation policies remain core to business processes.

Finland’s education sector is sustained by system-level policies encouraging equity and quality. The policy ensures that the government adopts an equitable education system. Therefore, basic education encompasses compulsory schooling for nine years and one voluntary year. Furthermore, the Finnish government has formulated structural transformations to education financial aid. To begin with, the government offers free education, textbooks, and daily meals for students. Additionally, it has reformed the financial aid system to support full-time studies as well as the hastened completion of studies. Financial aid has been made better in terms of sufficiency through index boost on top of loan guarantee and study grant. Consequently, the level of participation in training, apprenticeship, and vocational education, and basic education remains high. Besides, the government invented the structural policy program in 2013 to ensure that a significant amount of government expenditure goes to education (Ministry of Finance 2013). The policy has made it easy for the decentralized local authorities to make important choices regarding spending on education. Moreover, it is prompting improvements in primary education, vocational education, and the use of ICT in the education system.

Finland’s research and innovation council has outlined R&I (research and innovation) policy measures for 2015-2020 (European Commission 2016). The purpose is to boost Finland’s competitiveness and citizen’s well-being through bracing the effectiveness and quality of R&I activities. The policy summary provides an R&I reform program endeavored at inspiring the establishment of innovation system measures and structures. The program encompasses of themes and development targets, which include implementation of a radical reform of higher education, promotion of utilization of R&I outcomes, improvement of overall knowledge-base, and adequate funding of R&D. The government aims at increasing R&I funding to better meet global competition, while making sure that the funding strengthens Finland’s employment, knowledge base, and economy. To realize the program, the Council suggests that the central government’s funding on R&D be increased by 2 percent annually during the period between 2015 and 2020 (European Commission 2016). The funding is aimed at supporting quality R&I activities, endorse experimentation, get rid of inefficient structures, and improve the use of R&I results. Consequently, the program will enable the government to find innovative sources of growth, reinforce state competitive advantage, and create globally attractive expertise centers.

Impact of the 2020 Agenda on Finland

Finland has benefitted terrifically from the EU 2020 agenda. The strategy has assisted the country to recover from the implications of the deep recession. The country has assumed a top position in digital innovation, knowledge, and education among EU states. On top of having positive development in its economy, Finland has also gotten a strong voice internationally. Finland can easily play the role of an arbitrator, offering solutions to other nations.

According to WEF (World Economic Forum), Finland has managed to secure second position in the overall EU index and the fourth position among the top competitive nations in the world following the initiation of EU 2020 objectives. It has endorsed a digital society that promotes business creation through commercialization of the business sector. Besides, the agenda has enabled Finland to focus strongly on education, thus channeling its resources into training and education. The approach not only equips the workforce with the vital skills required to adapt rapidly to the revolutionizing environment, but it also lays the basis for high-tech innovation and adoption. Accordingly, Finland has become Europe’s innovation powerhouse. It also boasts an excellently performing labor market, healthy social inclusion, reduced social inequality, and healthy sustainable practices. Additionally, the country’s efficient infrastructure, stable economy, highly educated workforce, ideal international routes, and business-friendly environment offer numerous opportunities for investors.

Source: Ministry of Finance 2013

Conclusion

Europe 2020 plan presents an opportunity for EU states to rediscover their future by making sure that their policies are aligned with the objectives of the commission. Since the inception of Europe 2020, many member states have experienced profound reforms that are producing a development dividend. Finland portrays significant improvement in its competitiveness in the sector of SMART growth as designed by the Europe 2020. While the country’s productivity remains stable, it still has an opportunity for improvement compared to fellow EU member states. Although technological innovations are channeled towards societal challenges linked to health and environment, there is a disturbing decline in health-allied technologies. Nevertheless, Finland shows considerable progress in Europe 2020 SMART goals, including R&D innovation, knowledge, IT infrastructure, and education as compared to its complementary EU members.

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