Finland: impressive economic record

Finland's strength lies in the fact that its economy is one of the most technologically advanced in the world.
The World Economic Forum - WEF report cites Finland's "strong political institutions, a focus on technology, and sound macroeconomic management" as some of the reasons for this country's impressive economic performance.
There are three almost equally important exports sectors in the Finnish economy: electronics and electro technical goods account for about 27.5% of exports, metal and engineering products account for about 27.1% and forest industry products -paper and timber - account for about 26.5%. The fourth biggest export sector is the chemical industry.
The volume of exported goods grew by 6%. Trade with developing countries accounted for 13.2% of total exports.
Along with the forest sector and metal and engineering, high technology now represents a major source of export revenues. The increasing significance of high technology is difficult to explain statistically given the role of state-of-the-art electronics in many industrial sectors. Depending on the mode of calculation, high technology competes for the top position in Finnish export statistics.
NOKIA, which transformed itself from a conglomerate to a high-tech group to be reckoned with, can be considered a model for the new technology's rise to prominence.
In a short period of time, the company went from paper all the way to mobile phones and telecommunications systems via televisions and computer terminals.
Nordic co-operation has also been vital to Finnish industry. Finland's western neighbour, Sweden, has always been an important trading partner.
It nevertheless became necessary to broaden horizons. The Nordic countries looked for common solutions to their trade with the European Continent.
The Finnish Asset Management industry is small compare to the other European Union members.
However, the mutual funds industry continued to grow since the beginning of the calendar year 2002-03.
Since August 2002 the cumulative net subscriptions for last 12-month period were EURO 4.4 billion for the whole industry.
Total assets under management have grown from EURO 15.7 billion to EURO 20.4 billion during the first seven months of 2003.
This corresponds to 30.5 % increase.
STOCK FUNDS: Net subscriptions in all categories of Asset Management have been positive throughout the year in general.
The net assets rose only by EUR 678 million during 2002-03.
BOND FUNDS: Last year, EURO 145 million was accumulated in bond funds.
Switching from volatile equity funds to more safe bond or money market funds was the main reason.
MONEY MARKET FUNDS: The first short term fixed income funds (money market funds) was launched in 1995.
Money Market Funds has seen a tremendous growth since the beginning of 2003. Net subscription equals EUR 3,490 million during the last 12 months (see, chart 2, below).
Uncertainty in stock market has been the main reason for the growth in money market funds.
ASSET ALLOCATION FUNDS/FUND OF FUNDS: Last year EURO 68.1 million was accumulated in fund of funds.
TRENDS CONCERNING INTERNATIONAL INVESTMENT FUNDS: There is no particular strong trend. Although we have seen a moderate hike in the popularity of the emerging market equity funds.
LEGAL AND REGULATORY DEVELOPMENTS
REGULATORY NEWS CONCERNING INVESTMENT FUNDS
The implementation of the new EU directives on investment funds (UCITS III) is currently taking place in Finland.
The regulatory proposals will be forwarded to the parliament by early October. The UCITS III directive has left EU Member States some discretion over the investment limits of the mutual fund products.
Finland plans to take up all national options with regards to investment limits, thus ensuring the competitive advantage for Finnish fund managers.
Furthermore, Finland will employ the option of allowing individual portfolio management for UCITS fund management companies, along with the UCITS implementation, several technical changes in current legislation will be adopted as well.
The pending proposal includes also the possibility for funds to issue units, which differ in the level of management fees charged.
This is a major development for the Finnish market structure, allowing our contractual based funds to compete on even basis with SICAV style structured products.
NEW TAX REGULATIONS: A government sponsor working group has published a memorandum on long-term saving schemes and is expected to come up with a proposal for new tax rules on individual pension saving.
Currently only insurance companies have been allowed to provide tax favoured voluntary pension products.
The Ministry of Finance working group is about to propose a model for investors to directly invest in mutual funds with fund invested in pension funds, would enjoy similar tax benefits as voluntary pension insurance products.
NEW PRODUCTS: Recent product development has taken place mostly in field of nationally regulated funds, as opposed to funds being regulated under the European Union UCITS directive.
A clear trend among new fund launches is in the class of hedge funds seeking absolute return.
CROSS-BORDER DISTRIBUTION: There is no reliable statistics concerning the cross-border distribution of funds. Our estimation is that the cross-border flow would represent some 15 - 20 % of the value of Finnish mutual fund market.
Finally, The investment fund market has kept growing despite the three-year plunge in stock market. The relatively young investment fund market is far from mature in Finland, and enjoys growth.
The Bearish trend in stock markets seems to have come to end, at least for the moment, it is expected that equity funds will grow in the near future.
The EU enlargement towards Baltic States is expected to increase economic opportunities in the area and contribute to a positive market sentiment, due to the proximity of Finland.
The Swedish OM Group, which operated the Stockholm Stock Exchange, has acquired the Helsinki Exchanges Group (HEX).
This should result in enhanced efficiency in stock trading and ultimately benefit the investor.-MUFAP