Science, Technology and Industry Co-operation in Finland - Technopolis: Best Practices for Science and Technology Cities - page 431

Finland is 5.3 million and Finland has two official languages, Finnish (92 %) and
Swedish (6 %). Finland is a constitutional republic and became a member of the
European Union in the year 1995. The capital of Finland is Helsinki. A quarter of
the country's total area lies north of the Arctic Circle. Forest covers about 75 % of
Finland and water bodies, around 188,000 lakes, make about 10 % of the country.
Finland has been ranked the best or one of the best at the World Economic
Forum's Global Competitiveness Report Index Ranking during the last 5 years.
The innovation system has shown to be one of the best in the world. The situation
is

not static—in the global competition continuous change and strive to

improvement is a necessity.

2 Innovation Environment

Finland suffered from a severe economic recession with high levels of unem-
ployment at the end of the 1980s and beginning of the 1990s, resulting from
among others the limited competitiveness of the more traditional sectors domi-
nating the Finnish economy by that time, such as pulp and paper and wood
products. In order to address the severe economic recession, caused by the
structural problems of the Finnish innovation system, the government identified
research and innovation as an important driver for future economic growth. Since
the 1980s, the Finnish government has therefore focussed its policy and instru-
ments on improving R&D intensity, thereby formulating ambitious targets for
Gross Domestic Expenditure on R&D (GERD) and Business Enterprise Expen-
diture on R&D (BERD).
Finland's strategy has proven to be effective: the economic growth in the 1990s
outpaced most of its competitors. Although the burst of the ICT bubble slowed
down development at the beginning of the new century, the current economic
growth of 2.9 % (2005) lies above the EU 25 average. The emphasis on R&D and
innovation in its policy has made the Finnish innovation system one of the best
performing in the world. A specific characteristic is its high level of expenditure on
research and innovation. Total R&D spending amounted to 3.5 % of Finland's
GDP in 2004, well above the overall 3 % EU target for 2010. About 70 % of R&D
spending is financed by the private sector. In the NRP, the Finnish government
announces a target of raising total R&D spending to 4 % of GDP by the end of the
decade. Public spending on R&D is projected to increase by 5-7 % each year over
the same period. The increasing levels of R&D expenditure by the government
since the 1980s have been accompanied by increasing levels of BERD, especially
from the emerging ICT sector in Finland (De Heide 2007 ).