Finland (Wants To) Bets Big on Industry
Finland's government is asking Parliament to approve a fundamental shift in industrial policy, abandoning decades of market-based orthodoxy for active state intervention
Finland's export-dependent economy faces a stark choice; match rivals' industrial subsidies or watch investments flow to the U.S., China, and larger EU nations. The country's 100 largest exporters generate 60% of exports, making industrial competitiveness existential for Finnish prosperity.
This Government Report to Parliament (submitted June 5, 2025) emerges from Prime Minister Petteri Orpo's administration recognizing that "many things are changing in the operating environment of industry." Based on an industrial policy strategy submitted to Minister of Economic Affairs Wille Rydman in December 2024, the report seeks parliamentary discussion on Finland's industrial future. The government hopes this discussion will forge consensus on success factors for Finnish industry amid Trump's tariff threats, EU policy shifts, and accelerating state aid competition. The strategy was developed with extensive stakeholder input including industry federations, unions, ministries, and research organizations.
The timing is critical! The Finnish government acknowledges that traditional approaches have failed (I really wish more people can do the same), with Finland suffering prolonged trade deficits, weak productivity growth, and inadequate investment volumes for industrial renewal. By submitting this comprehensive review to Parliament, the government signals that industrial policy choices have become too consequential for executive decisions alone. The document serves both as a frank assessment of Finland's industrial challenges and a roadmap for parliamentary debate on transforming economic strategy.
The big picture: Trump's tariff threats and EU industrial policy shifts create a perfect storm for Nordic manufacturing. Finland's response marks a departure from its traditional market-based approach, embracing targeted state intervention to secure strategic investments.
Context: Finland's Industrial Evolution
Finland's industrial policy has evolved dramatically since World War II. The post-war period through the 1980s saw state-led industrialization rebuild the economy through strict steering and technology transfer, laying foundations for today's industrial clusters. The 1990s and 2000s shifted focus to innovation policy, with the state acting as opportunity provider while RDI investments targeted globalization opportunities and built the information society.
The 21st century brings new challenges where traditional innovation measures no longer sustain competitiveness. Mission-centered approaches now compete with securing jobs in traditional sectors, and industrial policy has become an umbrella concept implemented across multiple policy areas. The government acknowledges that "policy measures taken so far have not been sufficient" to address prolonged foreign trade deficits and weak productivity development.
The Stakes in Numbers
Finland faces massive investment needs with €270 billion in pending green transition projects, of which €14 billion is already in production. The clean transition alone requires €100-242 billion by 2050, translating to €3.3-8 billion annually. This creates potential for €3 billion in annual export growth from low-carbon solutions.
The investment landscape shows stark imbalances. Finnish companies have invested €130 billion abroad as of 2022, growing by €40 billion since 2015, while foreign investment in Finland stagnates at €78 billion with only €21 billion targeting industry. Despite this, Finland achieved record returns of €6.9 billion on foreign investments to its current account.
Industrial investment expectations turn positive with €9.7 billion expected in 2025, representing 4% growth. SMEs forecast 8% turnover growth for 2025, up from just 2% in 2024. The government targets state R&D funding of €3.75 billion annually to reach 1.2% of GDP by 2030, aiming for 4% combined public-private R&D investment.
Finland's Industrial Landscape
Finland's industrial structure remains concentrated with exports representing 41% of GDP compared to 51% in eurozone countries. Industry accounts for 18% of GDP, above the EU average of 16.8%, yet only 10% of Finnish companies engage in exports. Employment data reveals exports create 150,000 direct industrial jobs and 65,000 service sector positions, while indirect effects generate over 270,000 additional jobs, including 200,000 in services.
The metal industry leads exports at €29.0 billion with €56.1 billion in revenue and 116,300 employees, achieving 55% domestic value added. Chemical industry follows with €15.0 billion in exports and notably low 42% domestic value added despite €38.3 billion revenue. Electrical and electronic industries generate €13.9 billion in exports with 64% domestic value, while forest industry matches that export level but achieves 72% domestic content. Information and communication shows the highest domestic value at 78% with €8.8 billion exports, while transport and storage contributes €4.9 billion with 69% domestic content.
Global Forces Reshaping Competition
State aid competition has intensified as China systematically pursues self-sufficiency in strategic sectors, driving global acceleration of subsidies. The U.S. Inflation Reduction Act of 2022 escalated this race, and Trump's administration is expected to cut corporate taxes while increasing protectionism. The EU temporarily relaxed state aid rules for decarbonization, approving €155 billion in clean transition support schemes during 2023-2024.
These shifts accompany major supply chain disruptions from the pandemic and Ukraine war. Companies respond by increasing domestic production and diversifying suppliers while import dependencies undergo examination at national and EU levels. Risk assessments have become standard corporate practice as businesses navigate an increasingly fragmented global economy.
EU Industrial Policy Transformation
Mario Draghi's competitiveness report shapes the new Commission's agenda, identifying innovation gaps as the root cause of EU competitiveness issues. The Clean Industrial Deal continues the Green Deal's path while emphasizing regulatory simplification. Energy networks and competitive pricing have become central issues, particularly for Central European industrial powerhouses.
The proposed Competitiveness Coordination Tool would identify strategic investment needs while aligning industrial and research policies between EU and national levels. This tool aims to coordinate investments and promote shared priorities in strategic sectors. The Clean Industrial Deal ensures affordable energy access, increases European demand for EU-made clean products, promotes international partnerships, and develops skills programs while creating a new State Aid Framework for clean-tech.
Important Projects for Common European Interest (IPCEI) face proposed reforms including process simplification, scope expansion to new sectors, movement beyond breakthrough innovations, and potential EU funding alongside state aid. The Commission shows increased focus on basic industry, particularly energy-intensive sectors like steel and chemicals, with more flexible state aid for their decarbonization efforts.
Technology and Data as Change Drivers
Finland possesses strong expertise in emerging technologies including microelectronics, quantum technologies, wireless connectivity, high-performance computing, and artificial intelligence. The country also pioneers new materials, biotechnology, and energy technologies. These technologies offer dual-use applications that increase demand while holding strategic importance for economic security. Their system-level integration creates cross-sector renewal opportunities.
Significant sectors have emerged around technological competence, with data industry, microelectronics, and quantum technology offering leverage for other sectors' renewal. The changed security situation has increased demand for these critical technologies, enhancing their importance in building Europe's strategic competitiveness and economic security.
Clean Transition Economics
Global investment needs reach $3,500 billion annually, with Finland requiring €100-242 billion total by 2050. Pending projects worth €270 billion could increase GDP by €3 billion annually if just one-fifth materialize, creating 12,000 jobs and generating €16 billion in tax revenue over 30 years.
Finland's opportunity lies in producing clean electricity for growing industrial needs, leveraging renewable energy capacity and participating in electric system balancing. However, regional disparities emerge as western and southern Finland attract most investments while northern regions compete with Nordic neighbors for skilled labor and eastern areas struggle with Russian border impacts.
Defense Industry Expansion
NATO membership creates new opportunities, particularly for SMEs who represent the majority of Finnish defense industry actors. Networks through NATO enable knowledge expansion, solution testing, additional funding access, and procurement participation. Tesi's €33 million investment in the NATO Innovation Fund targets dual-use technology development.
The EU's strengthening defense industry policy generates value through R&D cooperation, funding, and joint procurement. Growing dual-use product markets require government-to-government connections that serve company export efforts, while technology integration and cost-effective system development become crucial capabilities.
Workforce and Financial Challenges
Finnish export companies employ workers with lower education levels than Nordic peers, affecting productivity development. Global competition for talent intensifies while education mismatches industry needs and company-led training remains insufficient. Future requirements include considerably more highly educated employees, IT and environmental competence for clean transition, sector-specific workforce forecasting, and enhanced international recruitment.
The financial market remains highly bank-driven, especially for SMEs, with stricter regulation over the past decade and increasing importance of sustainability criteria. Tesi's market analysis identifies gaps in late-stage venture capital and industrial-scale project funding, while international investors remain absent from seed-stage investments. Public actors including ELY centres, Business Finland, and Finnvera provide crucial SME support, with Tesi restructured to focus on leveraging private capital.
Regional Strengths and Industrial Clusters
Industrial location depends on logistics connections, raw material availability, subcontracting networks, and skilled labor pools. Industrial clusters gain importance as electrification harmonizes processes, side stream utilization increases, and clean energy proximity matters more. Cross-sector synergies emerge in centralized locations, making industrial parks crucial for attracting investments.
Special programs address regional challenges with Eastern Finland development responding to Russian border impacts and Northern Finland competing for skilled labor. The industrial parks strategy recognizes these facilities as growth centers that combine clean energy use with efficient logistics, infrastructure, and material flows.
Seven Strategic Objectives
1. Developing Competitive Investment Environment
The €400 million clean transition support program opens applications in spring 2025 for investments with eligible costs exceeding €30 million. Tax credits support climate-neutral investments through 2025 while Tesi Group launches with €300 million additional capitalization for industrial-scale projects. An investment task force coordinates strategic projects as permit process streamlining creates new agencies by 2026.
New measures include resource allocation for permit implementation, regulatory predictability improvements, and investment task force knowledge base enhancement. Alternative investment incentives explore options beyond 2025 while maintaining Finland's EU position that industrial renewal requirements remain prerequisites for funding, preventing aid as life support for declining industry.
2. Leveraging Public Funding for Private Capital
Tesi's centralization of venture capital operations accompanies Finnvera legislative reform strengthening export support. The Ministry of Finance develops a financial sector growth strategy while Economic Development Centres establish as part of regional reform.
Proposed intensification of public funder cooperation would improve division of work while growth funding through public-private partnerships addresses risk-sharing in scaling operations. Economic Development Centre integration with transferred TE services aims for more effective EU structural fund utilization, advancing Finland's goal of market-based instruments that reduce reliance on national state aid.
3. Boosting Productivity Through Intangible Capital
The high-growth entrepreneurship program accelerates medium-sized enterprise expansion while the national IPR strategy supports innovation through 2030. The data economy growth program launches spring 2025 through December 2026, recognizing data as critical input for industrial renewal.
R&D tax deduction evaluation considers expansion to broader intangible capital investments while data infrastructure standardization enables better utilization. Finland advocates for horizontal EU measures serving all sectors while enabling European Investment Bank funding for defense and dual-use development, ensuring Finnish participation in EU defense projects.
4. Scaling Innovation Through Networks
State R&D investments grow toward €3.75 billion annually, reaching 1.2% of GDP by 2030 with a 4% combined public-private target. The multiannual R&D funding plan guides implementation across administrative branches while the Research and Innovation Council monitors progress. Technology policy roadmap preparation involves cross-administrative coordination as the health sector RDI program boosts medical technology exports.
The quantum strategy, completing spring 2025, prepares companies for radical solution development while the national standardization strategy strengthens competitiveness in critical sectors. The Ministry of Economic Affairs will identify themes with best growth opportunities where companies eagerly allocate resources, directing state funding to company-relevant joint research and shared infrastructure including high-performance and quantum computing.
5. Capturing Clean Transition Opportunities
The Energy and Climate Strategy produces updated scenarios for energy needs and emissions while the High-Voltage Grid working group integrates increasing electricity generation with growing consumption. Support mechanisms for non-fossil flexibility increase market responsiveness as the Medium-Term Climate Change Policy Plan addresses burden-sharing sectors.
The Circular Economy Green Deal enables voluntary industrial commitments to resource efficiency while updated sectoral low-carbon roadmaps inform strategy preparation. The National Mineral Strategy, completed December 2024, examines Finland's mineral cluster and circular economy promotion. The National Forest Strategy 2035 coordinates forest sector development while the food production strategy, due December 2025, accompanies a food industry export growth program.
Proposed measures ensure competitive clean energy availability while developing networks for growing needs. Industry participation in electricity system balancing maximizes competitiveness and clean energy value. Support for electrification, resource efficiency, and fossil fuel replacement follows circular economy and bioeconomy strategies while streamlined corporate reporting reduces administrative burden.
6. Upgrading Logistics and Infrastructure
Government decisions strengthen Fingrid and Gasgrid capital for energy transmission development. The industrial parks report from January 2025 examines strengthening opportunities while Northern and Eastern Finland programs, published February 2025, promote investment attraction and competence development.
Logistics subgroup objectives address security of supply, international accessibility, and competitive logistics. Digital infrastructure development ensures adequate server, computing, and transmission capacity. Long-term energy infrastructure planning includes national hydrogen networks between industrial clusters while the development program combines clean energy use with efficient logistics and cross-sector synergies.
7. Securing Skilled Labor
Labor market reforms increase flexibility to support employment and productivity while Talent Boost 2023-2027 streamlines work permits and promotes foreign graduate employment. The Finnish National STEM Strategy advances technical competence as TE services transfer to municipalities for closer company connections.
Continuous learning opportunities require competence modules less extensive than degrees with flexible study paths. Short-term apprenticeship training gains recognition in vocational education while competence earned in working life receives better acknowledgment. Workforce skills foresight must consider planned investments and growth sectors in education planning and international recruitment while improving foreign degree understanding and work immigration services.
Finland's Strengths & Weaknesses
Finland's strengths include social stability, high-quality workforce, relatively low-cost skilled labor, reasonably priced clean energy with functioning infrastructure, public R&D funding, and critical minerals expertise.
Weaknesses encompass small domestic markets, distance from key markets, limited export diversity, low intangible capital investments, and limited risk-taking capacity for large projects.
Opportunities emerge from clean transition demand, regulatory predictability, AI and digitalization productivity gains, promising technology clusters, bio-based materials, NATO cooperation, and defense technology growth. Threats include state aid competition, EU market malfunction, geopolitical risks, disadvantageous EU policies, infrastructure capacity constraints, skilled labor competition, and climate impacts.
Bottomline
Finland's industrial policy represents a generational shift from pure innovation focus to active industrial support, acknowledging decades of market orthodoxy have reached their limits. The government hopes parliamentary discussion will establish common views on Finnish industry's success factors while identifying the most effective policy responses. With Trump's trade wars looming and EU policy shifting rapidly, execution speed becomes critical as competitors move faster with larger budgets. Industrial policy reflects the times — Finland's economic survival may depend on how quickly it can adapt.