Dr., Deputy Managing Director,
German-Finnish Chamber of Commerce (AHK Finnland)
Since 2014, Germany has regained its position as Finland’s most important trade partner both in imports and exports. Only few know that Finland exports more goods to Germany than to North-, Central and South America combined. The economic relationships have undergone substantial changes over the years, and the biggest change is likely to be happening right now.
The economic ties between Germany and Finland have been an important building block for the prosperity of both countries for centuries. Long before Finland became a nation of its own, the country was a major producer of furs and lamp oil. Thanks to the Vikings and their trade, Finnish lamp oil ended up as far as the Middle East: A popular trade route, the Austrvegr, passed through the Finnish archipelago, via the Dnieper river, and ended as far as in Baghdad. The Vikings laid the foundation for the Hansa network, that helped transport a large share of Finland’s exports, many of which went through Germany. Quickly, the Hansa became Finland’s gate to the world.
After World War I, Germany was dependent on export to be able to pay for reparations. At the same time, young country Finland had to ramp up its own economy. By 1921 Germany was already Finland’s most important source of imports. In the following decades trading between Germany and Finland consisted mainly of exchanging Finnish wood against German manufactured goods.
Technology surpasses wood
During the second half of the 20th century trade became gradually more balanced towards an intra-industry exchange of similar products and product components. By the turn of the millennium, the electrotechnical industry surpassed the forest industry as the largest export sector, making up about 1/3 of total exports. For the first time since furs and lamp oil, Finland’s exports to Germany also included a significant amount of consumer products. And as the 2009 crisis developed, mobile phone exports began to decrease dramatically.
Finland is now one of the most digital countries of the world and is frontrunner in the EU’s most important asset for digitalization: a competent workforce.
The most digital country of the world
Another change in trade relationships has been making its way into the headlines gradually, and it likely has its roots in the downfall of Nokia’s mobile phones business. Finland is now one of the most digital countries of the world and is frontrunner in the EU’s most important asset for digitalization: a competent workforce. Combined with the fact that so far, many German companies have been rather slow when it comes to digitalization, this has opened up a tremendous amount of opportunities for Finnish companies. From smart energy grids and weather forecasts for autonomous cars to augmented reality solutions for factory shop floors and autonomous robots for agriculture, Finnish companies are helping to digitalize German small and medium enterprises – Germany’s famous “Mittelstand”. And it’s not only the Mittelstand that has found Finland. German startups are visiting the Slush startup conference in larger numbers every year to be part of the flow of innovation and investment that goes through Pasila every November.
The mindset to support change
When Germany’s president Frank-Walter Steinmeier visited Finland in September 2018, he was particularly interested in how Finland prepares for the future of work: A future where artificial intelligence is expected to impact the jobs of 30 percent of Finland’s workforce. Steinmeier was impressed by the same things that German companies in Finland commonly list as the country’s strengths: Finland’s education, infrastructure and mindset. The education system continuously adapts itself. Latest examples include private initiatives such as the “Elements of AI”, an online course on artificial intelligence accessible for everybody, as well as the Hive Helsinki coding school. Finland’s digital infrastructure is enabling high speed internet access even in the most remote summer cottage, creating possibilities for smart energy efficiency solutions. And the Finnish mindset has helped the country to create market leaders in various industries: a new technology is usually seen as a possibility, not as a threat.
German-Finnish digitalization partnership
In 2016 Finland’s and Germany’s chambers of commerce established a digitalization partnership. The idea was simple: Finnish digital solutions would be used to help German SME’s. The project would grow sales for Finnish companies on the one hand, and create an innovation flow to Germany on the other hand. The demand has been high: For the 14 Finnish companies that joined the program so far, over 400 meetings were arranged with potential German customers in a period of 18 months. Three of those companies have already established a subsidiary in Germany.
Next, the partnership will focus on innovations in the area of “Smart Building”. Germany’s 21 million buildings make up one of Europe’s largest market for smart building solutions. Be it the three-dimensional modelling of buildings (BIM), solutions for increasing the efficiency of use of resources, or virtually any digital solution helping to make building or maintenance more efficient, the demand is high and can be met by Finnish solutions.
The economic relationship between Germany and Finland is still as important for both countries as it has been since the Vikings sailed. Today, however, we can experience a deeper and possibly more balanced relationship than ever before. Products, services, and innovations are moving from and to both countries, driving prosperity and creating the level of competitiveness we need to thrive.
Expert article 2495