By Dan Steinbock, February 2011
What will form brand Finland as we move farther into the 21st century?
During the past decade, Finland has been one of the most competitive economies worldwide, despite recent erosion in rankings.
Usually, such nations attract foreign investment like magnets. That has not been the case in Finland – not least because of its small size, demanding climate conditions and complex geopolitics.
In the postwar era, Finland was known for "sisu, sauna, and Sibelius." (Sisu refers to a uniquely Finnish combination of courage and endurance.) Until the end of the Cold War, however, Finland's draconian restrictions on foreign investment were some of the most restrictive in the developed world.
It was only in the 1990s that the forestry and metal clusters were augmented by Nokia's high-tech success. During the past three decades, Finland's inward foreign direct investment (FDI) as percentage of GDP has soared from just 1 percent to 30 percent. In international comparison, however, Finland's inward FDI performance has been on decline since 2000.
Today, nation branding and public diplomacy represents a thriving field of theory and practice which seeks to measure, build and manage the reputations of countries.
Often, nation branding has been sparked by periods of growth and affluence, or expectations thereof, as exemplified by the Cool Britannia campaign of Tony Blair's New Labour government in the late 1990s.
According to the proponents of nation branding, success stories comprise post-Yugoslav countries like Slovenia and Croatia, which launched aggressive marketing campaigns following their respective secessions.
Other countries have been disappointed with branding campaigns – including Switzerland, which seized a branding campaign after a row in which Swiss banks were publicly accused of holding Nazi gold.
The success of nation-branding depends on a number of variables, especially on the quality of the product the country is trying to sell. It requires far more than sustained collaboration of high-level senior executives and government leaders (which, as such, can be very difficult to achieve).
A true nation brand must walk the talk. Whatever it promises, it must back up in deeds.
Ultimately, small and open economies can better their positions by reinforcing social cohesion and embracing pro-growth policies internally, as well as global and regional integration externally.
In Finland, the implication is that the sound macroeconomic fundamentals, which spared the small and open economy from the worst excesses of the great global crisis, must be sustained in far more adverse circumstances in the future as well.
It also means that the pro-growth policies, which are vital to sustain the welfare state, will require more flexible labour markets, and new incentives for entrepreneurship and innovation. Old clusters no longer suffice.
An energetic brand is impossible in a geriatric nation where soaring dependency ratios demolish vitality. A cool brand requires more liberal retirement policies and immigration laws, a new approach to birth rates, and multiculturalism in action rather than rhetoric.
In 2005, the share of foreign citizens was 7 percent in Denmark and 12 percent in Sweden. In Finland, it was less than 3 percent – not so different from that of Nepal or Iran.
"Our land is poor, and so shall be," go the words of J.L. Runeberg in the Finnish national anthem. "The strangers proudly pass..."
With Europe's debt crisis and aging demographics, however, Finland cannot rely on its internal resources in the future. Brand Finland can no longer be just about Finland in the world, but about the world in Finland.
Dan Steinbock at the India, China and America Institute
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