Surge in investment abroad by Finnish companies in recent years

Foreign investments make wage negotiations more difficult

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About 40 percent of "available funds" of Finnish industry was invested abroad between 1995 and 2003, say researchers Ritva Pitkänen and Pekka Sauramo in a report published on Tuesday. The study examines the greater internationalisation of Finnish companies and its implications for Finnish incomes policy.
      Pitkänen and Sauramo see the EUR 40 billion in foreign investments as a very large amount. During the period under study, approximately the same amount was spent on investments aimed boosting production capacity in Finland.
     
The study, commissioned by the Labour Institute for Economic Research, examines investments and corporate acquisitions of Finnish companies, and the use of profits that remained with the companies after the payment of dividends.
      The financial resources of Finnish companies have improved, but Pitkänen and Sauramo say that companies have invested rather little in Finland, preferring instead to acquire companies in other countries.
      The report also assesses how the "social capital" based on the mutual trust of labour market organisations is affected by the global economy and global investment.
      The two conclude that the investment of profits in companies abroad can hinder labour market negotiations, if the economic impact of wage settlements no longer directly affects the Finnish economy.
      "Wage moderation does not necessarily lead to employment trends that are as positive as labour union representatives who are concerned about unemployment, would like", the researchers say in their review of the study.
      "In a closed economy, incomes talks were significantly easier", said Sauramo on Tuesday.
     
Sauramo noted that Finland’s current account balance has been showing a long-term surplus in recent years, after being in the red for a long time. This means that Finland is a prosperous country that generates more income than it pays expenses, and that it has become an exporter of capital.
      Ritva Pitkänen says that 80 percent of the financing of investments during the period under investigation came from corporate profits. The remaining 20 percent was covered by share issues and borrowed money.
      "Internationalisation has been carried out at the corporate level", Pitkänen concluded on the basis of research material which was gleaned from data on corporate accounts from Statistics Finland.


Previously in HS International Edition:
  Metsä-Botnia to build massive pulp factory in Uruguay (8.3.2005)

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