INTERNATIONALISATION OF THE FINNISH ECONOMY : IMPLICATIONS FOR SINGAPORE

Abstract

As countries in the world realise their interdependence on one another for trade, internationalisation of national economies become increasingly important. In the case of Finland, internationalisation is important: Firstly, Finland is not self sufficient. Raw materials and production necessities form the bulk of imports. Secondly, as a small open economy, growth alternatives in the domestic economy for local Finnish firms are highly restricted. Export potentialities thus become closely linked with the growth of the economy. However in Finland, there is no tradition of high dependence on foreign MNCs to establish links to the external world. As such, internationalisation predominantly depends on the local firms using different international business methods, especially export operations to establish links. Internationalisation strategies are also planned carefully to reduce risks and commitment of resources. In Singapore, internationalisation of local firms, though crucial for growth, is very limited. In 1983, although 67% of total establishments were wholly-owned by locals, they contributed only 10.3% of total direct exports of all establishments. For this reason, the Model of Internationalisation of Finnish firms is examined and implications drawn for Singapore local firms which share similar characteristics and also operate within the context of a small open economy. For internationalisation to proceed smoothly, local firms must work in close co-operation with the government. The experiences of Finland in adjusting to challenges posed by internationalisation are examined and some lessons will be drawn for the Singapore economy. In the process of internationalisation, Finnish firms have ventured into the South-East Asian markets looking for both export and investment opportunities. This is because the growth of demand for exports in the OECD countries has slowed down and Eastern trade showed little prospects for growth. Singapore seems to hold a comparative advantage to the Finns who are newcomers to the region. From 1980 - 1985, the number of Finnish-related companies in Singapore is increased from 6 to 44. out of these 8 are manufacturing concerns. As our development strategy hinges on export industrialisation which in turn is highly dependent on MNCs, the Finnish investment is evaluated. The focus of attention is the joint-ventures between locals and Finns in manufacturing activities. These joint-venture companies have been personally interviewed and a summary of the main findings presented. Of concern will be questions relating to the structures of production, employment, distribution, the transfer of technology and the problems operating in Singapore. These in turn will not only provide lessons for Singapore in the implementation of public policy but more importantly, enable us to examine the future possibilities of co-operation. It would seem that because our foreign investment policies are presently biased towards high technology, we may not be able to attract the Finnish investment at the rate at which we are able to attract the Japanese or the Americans. In fact, because of our small domestic market and lack of resources which the Finns have the expertise in exploiting, the Finns have indicated that they are more interested in using Singapore as a 'launching pad' to other Asian countries. It is with these in mind that the possibilities of areas of co-operation between Finland and Singapore are evaluated.