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.

In 2019, Finland’s inward FDI stock was 31% of its GDP, lower than an average 49% in the Nordic-Baltic countries. Finland hosts the largest number of greenfield investment projects in the region, but the average value of such projects has been declining since 2016. The value of cross-border M&A deals has also decreased in recent years. COVID-19 brings additional challenges to Finland’s ability to reverse these trends.

This chapter presents main trends of FDI activity in Finland in comparison with other countries in the Nordic-Baltic region. It provides an overview of the sources of foreign capital and a sectoral breakdown of foreign investment into the Finnish economy. It also offers further insights into equity capital flows by taking stock of recent trends in cross-border Mergers & Acquisitions and greenfield investment projects, assessing Finland’s relative performance in attracting these types of FDI, as well as their sectoral and geographical allocation. In addition, it explores the broader social, economic and environmental benefits of foreign multinational activities in Finland, with respect to, for instance, value added, employment and wages, gender pay gaps, technology spill-overs and export performance.

This chapter provides a comparative overview of policies that might affect FDI, benchmarking Finland’s regulatory framework against those of other Nordic-Baltic countries. It first assesses at-the-border and behind-the-border regulation applicable to all sectors of the economy that might influence foreign investment decisions and affect market entry of foreign-owned firms, as well as their operations in Finland. This assessment is complemented by an evaluation of regulatory aspects that might have an effect on investment, trade and competition in selected services sectors: ICT, construction, transport, logistics, courier, distribution and professional services. The chapter also discusses how similar Finland’s regulatory framework is to those of its neighbouring trade and investment partners and to what extent barriers are lower for investors from within the EEA due to regulatory harmonisation within the Single Market.

This chapter explores the possible links between regulatory restrictions on foreign investment and FDI flows through an econometric analysis of transaction-level data on cross-border Mergers & Acquisitions and greenfield investment projects into Finland and other Nordic-Baltic economies. The regulatory factors considered include economy-wide and sector-specific settings, regulatory differences between the host and the country of origin, restrictions to digital trade, customs efficiency and corporate tax rates. By examining patterns of foreign transactions, this chapter evaluates to what extent differences in the regulatory landscape across the Nordic-Baltic region are linked to the probability that foreign investors establish a presence in a given country.

This chapter complements the assessment of Finland’s regulatory framework and its potential impact on FDI by outlining foreign investors' views on regulation and the general business environment in the country. Describing the results of consultations held with foreign-owned businesses in Finland, and other Finnish stakeholders, the chapter reports foreign investors’ motivations for choosing Finland as an investment location. It then discusses companies and other stakeholders' perceptions of various aspects of Finland’s regulatory environment and whether these factors represent obstacles to entering the country and running day-to-day operations. In addition, the chapter maps out consulted businesses’ use of funding and incentive mechanisms available in Finland, their future investment plans, and past and expected impact of the COVID-19 outbreak on the respondents’ business activity.

This chapter compiles the main findings of the report and provides policy considerations that could improve Finland’s overall business climate and support efforts to attract and retain more FDI, while increasing its positive social and economic contribution. It proposes policy actions in areas that affect the Finnish economy as a whole, such as access to skilled domestic labour and foreign talent, labour market flexibility, investment screening, company registration and obtaining necessary operational permits, and finally, regulatory transparency. It also presents targeted policy measures that the Finnish government could consider to facilitate market access and boost competition in selected sectors of strategic importance. Finally, it delineates measures that could further enhance Finland’s visibility as an investment location, promote the inclusiveness and wider spread of the benefits of FDI across the country and strengthen the dialogue between the government and the business community, inclusive of foreign-owned companies.