Saturday, August 13, 2016

Finnish export services – eternal source of hope or source of new economic growth?

In early 2015, Kauppalehti reported a recession of Finnish export services. After the financial crisis, the growth of Finnish export services stagnated - due to e.g. decrease in industrial services. The representatives of Finnish service employers, Palta, stated that Finnish service exports should see faster growth than that of other industries. Palta wished for initiatives boosting role of export services.
What are Finnish export services really?
Palta´s economic outlook 2016 reports following as service industries: logistics (e.g. air, land, sea, postal services), information and communications (e.g. media, audiovisual, publishing), expert services (e.g. consultancy, marketing, research, technical), administrative and support services (e.g. recruitment, travel, rental, leasing, security), entertainment (culture, sports, gambling/gaming/lottery), other services (e.g. real estate).
What role do export services play today in our overall foreign trade?
Statistics Finland reports Finnish export services having grown by Eur 2 bill in 2015. Export services grew in all segments with exception of postal services. Export services totalled Eur 16,9 bill. According to Palta private services within 2000´s have generated 200.000 new jobs. Talouselämä article on export services states more than 40% of Finnish export services come from IT, such as telecommunications and information services. With some markets, services already exceed the export of goods. More than half of export services go to EU countries, USA and China.
It is expected that private services are to have moderate growth within a wider number of industries. It is also predicted the number of employees will increase. However, Palta lists a number of global factors that may affect these trends, e.g. downturn of developing countries, impact of Brexit, and the overall restructuring of the Finnish economy.
Why should Finland boost export services?
Palta has a number of relevant suggestions. First, international trade brings growth potential. Since domestic growth potential is limited, we need to go abroad. Second, there is high level of innovation in Finland yet only one fourth of companies do export. Of those companies focusing on digital services, one half are doing export. This is low given digital services open immediate doors to global business. Third, we need to increase added value from Finland ie part of products and services generated in Finland. Finland is not the hub for mass production. Our strengths are in generating high value for customers.
And has Palta´s 2015 wish for a service export program to boost internationalization of services been heard? At least majority of Finpro´s Export Finland programs today focus on technology and service excellence. One recent example is establishment of Luovimo, a growth program tailored for creative companies focusing eg on digital services.
Export services are a source for future growth. Industries being transferred to service businesses, as well as internationalisation of services is a strategic contest where our skills may be of best use. Palta´s Matti Paavonen view in May 2016 report: increasing the national value of export is more important than the overall gross value. Ie we need to be able to produce bigger share of service in Finland. In service business, given our level of education and innovation opportunities, we can give and gain more. Signals are in the air - currently majority of export growth comes from service business.