Table Of ContentThe Impact of Regulation
on International Investment
in Finland
The Impact of Regulation
on International Investment
in Finland
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Please cite this publication as:
OECD (2021), The Impact of Regulation on International Investment in Finland, OECD Publishing, Paris,
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Foreword
This report examines Finland’s recent foreign direct investment (FDI) trends and how the country’s
domestic regulatory landscape may affect its ability to attract foreign investors. The report compares
different sources of FDI activity in Finland to those in other Nordic-Baltic economies, benchmarks Finland’s
regulatory environment and broader investment climate against those of its neighbours and explores the
link between regulatory frameworks and FDI flows. It brings novel, granular evidence on FDI flows towards
Finland through an analysis of transaction-level data and gathers businesses’ views on the country as a
destination for FDI, adding new perspectives to the OECD’s analysis of Finnish policies in the areas of
international trade and investment.
The work leading to this publication was undertaken in the context of and co-financed by the European
Commission’s Structural Reform Support Programme, which seeks to advance institutional, administrative
and growth-sustaining reforms in EU Member States across a variety of policy areas. A steering group,
composed of representatives from the Ministry of Economic Affairs and Employment of Finland, the
Ministry for Foreign Affairs of Finland, Business Finland, the European Commission and the OECD,
provided support and oversight of the project from start to completion. The role of the steering group in the
preparation of this report was limited to advisory functions to ensure the independence of the analytical
work and results.
The research and analysis were jointly carried out by the OECD Directorate for Financial and Enterprise
Affairs and Trade and Agriculture Directorate, using in-house indicators, such as the OECD Services Trade
Restrictiveness Index and the OECD International Direct Investment Statistics database, as well as various
other data sources. Stakeholder consultations, consisting of a business questionnaire and a series of
interviews, were held in October 2020 to complement the quantitative assessment. In addition to interviews
with senior executives of foreign-owned companies in Finland, additional comments were sought from
Finnish authorities, business organisations and research institutes (such as Amcham Finland, the
Confederation of Finnish Industries, Helsinki Business Hub and VATT Institute for Economic Research).
The purpose of this report is to contribute to a better understanding of what drives FDI towards Finland
and which regulatory aspects may act as impediments to foreign investment flows into the country. It
identifies areas where Finland could consider reviewing its domestic regulation to further improve its
investment climate. The set of policy conclusions put forward in this report are intended to support Finnish
policy makers in the development and implementation of measures that will strengthen the country’s
attractiveness as a destination for FDI. The proposed policy actions have potential to also benefit existing
players in the Finnish economy, by improving the country’s general business environment and reinforcing
the positive impact of FDI in Finland.
THE IMPACT OF REGULATION ON INTERNATIONAL INVESTMENT IN FINLAND © OECD 2021
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Acknowledgements
The report was prepared by a team led by Francesca Spinelli and comprising Polina Knutsson and Laura
Kuusela from the OECD Investment Division, under the overall guidance of Ana Novik, Head of OECD
Investment Division. The authors would like to thank Liisa Lundelin-Nuortio and Satu Vasamo-Koskinen
from the Finnish Ministry of Economic Affairs and Employment; Kimmo Sinivuori from the Finnish Ministry
for Foreign Affairs; Antti Aumo, Annabella Polo and Kaija Laitinen from Business Finland; and Enrico
Pesaresi, Iulia-Mirela Serban, Stratis Kastrissianakis and Akis Kyriacou from the European Commission
for their excellent support and advice as part of the Steering Group overseeing the project. The authors
are also grateful to Mike Gestrin and Cecilia Caliandro for all their work in the early stages of this project.
Edward Smiley prepared the report for publication. Kany Ondzotto and Marie-Laure Garcia provided
administrative assistance.
Comments and inputs were received from Ana Novik, Stephen Thomsen, Fernando Mistura, Joachim Pohl,
Martin Wermelinger, Emilie Kothe and Perla Ibarlucea Flores from the Investment Division; John
Drummond, Janos Ferencz, Frédéric Gonzales and Inese Rozensteine from the Trade and Agriculture
Directorate; Florentin Blanc, Mike Pfister and Daniel Trnka from the Directorate for Public Governance;
and Alexandre Georgieff from the Directorate for Employment, Labour and Social Affairs. Comments from
Finnish ministries were collected and received with the assistance of the Cooperative working group for
improving law drafting, chaired by the Ministry of Justice. The report also benefitted from inputs by Ari
Grönroos and Annamari Soikkeli from Business Finland, and exchanges with the Finnish Competition and
Consumer Authority (Mika Maliranta), VATT (Elina Berghäll, Seppo Kari and Janne Tukiainen), EK (Sami
Pakarinen), Yrittäjät (Mika Kuismanen) and Statistics Finland (Petri Kinnarinen). Valuable insights on the
business environment were provided by Marja-Liisa Niinikoski and Laine Valkama from Helsinki Business
Hub, and in particular by Rosa Thurman from Amcham Finland, who further supported the authors in
reaching out to a broader audience of international companies. Lastly, the authors are also grateful to
CEOs and senior officials of several foreign-owned companies based in Finland, who contributed to enrich
this report by sharing their experiences on the overall business climate in Finland.
The report was carried out with funding by the European Union via the Structural Reform Support
Programme and in cooperation with the European Commission's DG REFORM.
THE IMPACT OF REGULATION ON INTERNATIONAL INVESTMENT IN FINLAND © OECD 2021
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Table of contents
Foreword 3
Acknowledgements 4
Abbreviations and acronyms 9
Executive summary 11
1 Trends and benefits of foreign investment 13
1.1. Introduction 14
1.2. Recent FDI trends in Finland and in the Nordic-Baltic region 15
1.3. Trends in cross-border Mergers & Acquisitions and greenfield projects 19
1.4. The benefits of foreign investment in Finland 29
1.5. Conclusions 36
References 37
Annex 1.A. Data sources 40
Notes 42
2 Finland’s domestic policy and regulatory setting 47
2.1. Introduction 48
2.2. The general regulatory environment 49
2.3. Sector-specific regulation 63
2.4. Favourable regulatory environment for digital trade 78
2.5. Regulatory heterogeneity and the Single Market 79
2.6. Conclusions 83
References 83
Annex 2.A. Finland screens certain foreign corporate acquisitions 86
Notes 87
3 The impact of regulatory barriers on FDI into the Nordic-Baltic region 103
3.1. Introduction 104
3.2. Empirical approach 105
3.3. Main findings 105
3.4. Conclusions 112
References 113
Annex 3.A. Methodology 115
Annex 3.B. Definition of variables and estimation results 117
Notes 123
THE IMPACT OF REGULATION ON INTERNATIONAL INVESTMENT IN FINLAND © OECD 2021
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4 Finland's business climate in the eyes of foreign investors 127
4.1. Introduction 128
4.2. Respondent’s profile 129
4.3. Drivers of FDI 131
4.4. Regulatory obstacles 133
4.5. Funding opportunities and incentives 142
4.6. Investment trends 143
4.7. Impact of COVID-19 144
4.8. Conclusions 147
References 148
Notes 149
5 Policy conclusions 157
5.1. Introduction 158
5.2. General policy implications 159
5.3. Sector-specific policy considerations 164
5.4. Towards a more attractive destination for FDI 166
References 170
Notes 170
Tables
Table 2.1. Finland and its neighbours share similar rulebooks in many sectors 80
Annex Table 3.B.1. Definition of variables and data sources 117
Annex Table 3.B.2. Regulatory barriers and cross-border M&As 118
Annex Table 3.B.3. Regulatory barriers and greenfield investment 119
Annex Table 3.B.4. Regulatory barriers by type of M&A 120
Annex Table 3.B.5. Regulatory barriers and larger greenfield investors 121
Annex Table 3.B.6. Regulatory heterogeneity and FDI 122
Annex Table 3.B.7. Restrictions to digital services and FDI 122
Annex Table 3.B.8. Country-level regulatory landscape and FDI 123
Figures
Figure 1.1. FDI orientation in the Nordic and Baltic region, 2019 16
Figure 1.2. Finland’s gap with other economies in inward FDI stock is widening 16
Figure 1.3. Inward FDI flows in Finland are recovering 17
Figure 1.4. Finland's large-scale investors 18
Figure 1.5. An increasing share of investment into Finland originates outside the EU 18
Figure 1.6. Services attract most FDI 19
Figure 1.7. Equity capital flows, cross-border M&As and greenfield investment, 2006-2019 20
Figure 1.8. Foreign transactions account for a large share of M&A deals in 2019 20
Figure 1.9. Number of deals and their value vary over time 21
Figure 1.10. Finland experiences a decrease in cross-border M&A deal values 21
Figure 1.11. M&As target different sectors across countries 22
Figure 1.12. Many foreign M&As in Finland originate outside the EU’s single market 23
Figure 1.13. Largest M&A investors in Finland 23
Figure 1.14. Finland is leading in the number of greenfield projects in 2019 24
Figure 1.15. Number of projects and their value vary over time 25
Figure 1.16. Greenfield activity in Finland is starting to decline 25
Figure 1.17. Greenfield projects target different sectors across countries 26
Figure 1.18. Most greenfield investments to Finland originate inside the EU’s single market 27
Figure 1.19. Largest greenfield investors in Finland 27
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Figure 1.20. Share of energy-related projects in total foreign investment projects, 2006-2019 28
Figure 1.21. Foreign MNEs contribution to value added and employment in 2018 29
Figure 1.22. Multinationals have deeper pockets, particularly for talented employees 30
Figure 1.23. The gender pay gap persists 31
Figure 1.24. Foreign firm penetration in Finnish sectors 32
Figure 1.25. MNEs as gateways to foreign markets 34
Figure 1.26. A large share of domestic inputs is embedded in gross exports 34
Figure 1.27. Jobs sustained by exports of foreign MNEs in Finland 35
Figure 1.28. Services embodied in gross exports, 2016 36
Figure 2.1. Finland has few statutory restrictions to FDI 51
Figure 2.2. More pro-competitive regulation would be beneficial in certain areas 61
Figure 2.3. Finland has more restrictions than most of its neighbours in many services sectors 63
Figure 2.4. Telecommunications 64
Figure 2.5. Construction 65
Figure 2.6. Professional services 68
Figure 2.7. Transport services 71
Figure 2.8. Logistics 74
Figure 2.9. Postal and courier services 75
Figure 2.10. Distribution 77
Figure 2.11. Digital STRI 78
Figure 2.12. Regional integration has reduced barriers in all sectors 81
Figure 2.13. Clusters of regulation 82
Figure 3.1. Estimated change in probability of observing FDI, STRI score 106
Figure 3.2. Estimated change in probability of observing FDI, modes of supply 109
Figure 3.3. Estimated change in probability of observing FDI, types of policies 110
Figure 4.1. Technology and skills are the main drivers of inward FDI 131
Figure 4.2. Other drivers of FDI into Finland 132
Figure 4.3. Regulatory transparency and red-tape 135
Figure 4.4. Residence permits are the main obstacle to recruiting foreign talents 138
Figure 4.5. Many businesses see labour market regulation as an obstacle 140
Figure 4.6. Other regulatory aspects 141
Figure 4.7. The different impact of COVID-19 on business activity 144
Figure 4.8. Many firms kept their investment plans unchanged 145
Figure 4.9. Responses to COVID-19 146
Boxes
Box 1.1. Greenfield investment can bring clean hopes 28
Box 2.1. Foreign ownership in some sectors remains restricted in Finland 51
Box 2.2. Impact of COVID-19 on FDI screening 53
Box 2.3. Prospective foreign investors use business visits to survey a new market 59
Box 2.4. The OECD Services Trade Restrictiveness Index 66
Box 2.5. Swift recognition of foreign qualifications supports international labour mobility 67
Box 2.6. Customs clearance is relatively streamlined in Finland 76
Box 3.1. The burden of regulatory restrictiveness can vary across foreign investors 107
Box 4.1. Methodology of the business consultations 130
Box 4.2. Strict approach in transposing EU legislation may bring additional costs to businesses 136
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