VZCZCXRO4184
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHHE #0824/01 2301019
ZNR UUUUU ZZH
R 181019Z AUG 06
FM AMEMBASSY HELSINKI
TO RUEHC/SECSTATE WASHDC 2325
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 HELSINKI 000824 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON BEXP TNGD TSPL ELAB FI
SUBJECT: AMBASSADOR'S MEETING WITH LEIF FAGERNAS, DG 
CONFEDERATION OF FINNISH INDUSTRIES (EK) 
 
REF: HELSINKI 00787 
 
¶1. (U) Summary: Ambassador met with Leif Fagernas, Director 
General of the Confederation of Finnish Industries (EK) on 
August 9.  They discussed Finland's efforts to remain 
competitive in the face of a rapidly aging population, the 
significant strains on its social programs, and increasing 
global competition.  Fagernas stated that an alarming 50 
percent of the current Finnish workforce would retire over 
the next 15 years. (Note: Post believes the figure is 
closer to 40 percent.)  Fagernas cited opposition by the 
GOF Finance Ministry to increased R&D funding as a missed 
opportunity for Finland to become more competitive through 
innovation.  The Ambassador offered her assistance to 
further dialogue between innovative American and Finnish 
companies.  End Summary. 
 
¶2. (U) Background: The Confederation of Finnish Industries 
(EK) has nearly 15,000 member companies representing 
900,000 employees.  EK member companies represent more than 
70 percent of Finland's gross domestic product (GDP), and 
over 95 percent of Finland's exports.  Leif Fagernas, 
previously Finnish Ambassador to Germany, has been Director 
General of the Confederation of Finnish Industries (EK) 
since January 1, 2005.  End background. 
 
 -------------------- ------------------------------- 
Aging Workforce, Need for Immigration 
 -------------------- ------------------------------- 
 
¶3. (U) Fagernas addressed the growing pressure Finnish 
companies were facing as many low-skill industry jobs leave 
Finland for Asia.  Though Finnish investment in R&D is 
quite high, (the second highest in Europe behind Sweden at 
3% of GDP), it still trails U.S. and Asian levels. 
Fagernas noted the difficulties of convincing many of EK's 
trade unions that they needed to adapt to a rapidly 
changing world. 
 
¶4. (SBU) Fagernas pointed to the rapidly aging Finnish 
domestic workforce, stating that an alarming 50 percent of 
the Finnish workforce would retire over the next 15 years. 
By the year 2030 the dependency ratio (workers to retirees 
over 65) is expected to more than double, from 24 percent 
to 45 percent - the highest level in the EU.  Fagernas said 
this would create a significant strain on Finland's social 
security system as retirees are not adequately replaced by 
new workers.  One solution to this dilemma is attracting 
worker from other countries, though this solution continues 
to be viewed unfavorably by much of the Finnish population 
and especially EK members.  This resistance has roots in 
traditionally high levels of unemployment (8.1 percent as 
of June 2006) and distrust of foreigners, particularly from 
Russia. 
 
¶5. (U) Annually about 30,000 foreign workers come to 
Finland to work on at least a seasonal basis.  Some 
estimates predict that as many as 300,000 foreign workers 
will be needed by 2030 to overcome the deficit in the 
projected workforce due to retirees. 
 
¶6. (U) Fagernas mentioned two recent GOF reports that state 
that more foreign labor is needed in the Finnish labor 
market, and that this labor will serve to complement the 
Finnish labor force rather than replace it.  Fagernas was 
concerned that he had heard nothing further about 
implementing the findings of the reports. 
 
¶7. (U) Fagernas was skeptical that the recently proposed 
GOF work relocation program would help improve the 
employment situation in Finland.  He said the proposal is 
purely political and that 500 Euros to offset relocation 
expenses is simply not enough to encourage workers to 
relocate for employment.  EK is working on its own proposal 
to improve employment in Finland which they hope to present 
to the GOF during the next week.  The EK proposal will 
include a mix of retraining and basic education, as well as 
assisting workers in finding new employment. 
 
 ------------- ----------------------- 
Finnish Focus on R&D 
 --------------- --------------------- 
¶8. (SBU) The Trade and Industry Ministry previously 
announced a comprehensive program to increase R&D to 4 
percent by the end of the decade.  This proposal has thus 
far been opposed by GOF Finance Minister Heinaluoma due to 
budgetary concerns.  Given that 70% of R&D spending in 
Finland is by private companies, with another 15-20% coming 
from universities (also state-funded, but from another pot 
of money), Fagernas observed that the government need only 
 
HELSINKI 00000824  002 OF 002 
 
 
supply a "marginal increase" (his words).  Fagernas thought 
it was unfortunate that the Finance Ministry was not 
budgeting for this increase in the current budget. 
 
 ------------------------- -------------------- 
--------------------- 
Dialogue between American and Finnish Companies 
 -------------------------- --------------------- 
-------------------- 
¶9. (U) Fagernas was concerned about the lack of significant 
new foreign investment in Finnish industries, citing one 
survey that didn't even rank Finland as one of the top 35 
economies in which to invest.  The Ambassador offered to 
pursue further avenues to open a better dialogue between 
innovative American companies and Finnish companies.  The 
focus of this dialogue would be to demonstrate how R&D 
efforts can profitably exist within a company's business 
model. 
 
¶10. (SBU) Comment: Since Finland will realize a slight 
budgetary surplus this year (as it has for the last 5-6 
years), there is money, but apparently no political will, 
to fund an increase in R&D.  The Finns have exercised 
budgetary restraint in recent years in an effort to build 
reserves for the future when they expect to have increased 
social spending to serve their aging population.  End 
Comment. 
 
HYATT