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Finnish R&D on the ropes: Private investments drop by 1B-euros over past decade

The head of the public funding agency Business Finland says 10 years ago Finland could hold its own in terms of R&D spending, but now trails in many comparisons.

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The head of the country's newly-reconstituted research funding agency Business Finland is calling for increased investment in research and development. Director general Pekka Soini said he wants government to address the situation before the next administration takes office in 2019.

As part of an eye-watering austerity programme, the current government reduced spending on R&D from Business Finland as well as one of its predecessor companies, Tekes, the innovation funding agency said.

Soini noted that back in 2008, Finland was able to hold its own with other countries in terms of R&D spending. However, 10 years later following the hardships of the global financial crisis, Finland has fallen far behind. Soini said that the period has seen research investments shrink in both the public and private sectors.

Speaking on Yle’s Aamu-tv breakfast programme Thursday, Soini noted that a decision by former mobile phone maker Nokia to sell off its phone business had a deep impact on research spending, as the one-time market leader and its partners previously spent heavily on product development. Nokia-branded mobile phones are still being produced and marketed, but under a licencing deal with Finnish firm HMD Global - not by Nokia itself.

“What is worrying here is that altogether, private sector investment in R&D has decreased by nearly one billion euros between 2008 and today. At the same time, public spending has also fallen,” Soini remarked.

When the financial outlook dims, both the state and the corporate sector often seek savings by cutting back on R&D spending.

Long-term competitiveness affected

Soini charged that including R&D costs as part of business support programmes is the wrong approach.

“The government should invest in the future. R&D spending is an investment, not a cost. It should not be counted as business support,” he declared.

Soini noted that it might seem easy to target R&D for savings programmes, since the impact of such cuts is not immediately visible. However he said that in the long term, pinching pennies on research will degrade competitiveness.

“This is the same as if one were to somehow lose control of life and be unable to invest in your own health. You wouldn’t necessarily see the ill-effects right away.”

Product development is essential to create products that would sell in global markets. Nokia’s success was backed by heavy investments in research and product development.

“When you focus on savings, you sometimes throw the baby out with the bath water. That’s been proven and this should now be corrected before the next government takes office. This can’t be fixed with a one-year push, but it requires a long-term commitment,” Soini argued.

Soini concluded that raising the level of R&D spending would send a clear message to the international community that Finland is an attractive investment destination.

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