Development of foreign direct investment in Finland

During 1990 to 2009, Foreign Direct Investment (FDI henceforth) in Finland has fluctuated greatly. This paper focused on analyzing the overall development and basic characteristics of Foreign Direct Investment in Finland, covering the period from 1990 to present. By comparing FDI in Finland with FDI in other countries, the picture of Finland’s FDI position in the world market is clearer. A lot of statistical data, tables and figures are used to describe the trend of Foreign Direct Investment in Finland. All the data used in this study were obtained from Statistics Finland, UNCTAD, OECD, World Bank and International Labor Office, Investment map website and etc. It is also found that there is a big, long-lasting and increasing imbalance of the inward FDI and outward FDI in Finland, the performance of outward FDI is stronger than the inward FDI in Finland. Finland’s position of FDI in the world is rather modest. And based on existing theories, I tried to analyze the factors that might determine the size of the inflows of FDI in Finland. The econometric model of my thesis is based on time series data ranging from 1990 to 2007. A Log linear regression model is adopted to analyze the impact of each variable. The regression results showed that Labor Cost and Investment in Education have a negative influence on the FDI inflows into Finland. Too high labor cost is the main impediment of FDI in Finland, explaining the relative small size of FDI inflows into Finland. GDP and Economy openness have a significant positive impact on the inflows of FDI into Finland; other variables do not emerge as significant factor in affecting the size of FDI inflows in Finland as expected. Meanwhile, the impacts of the most recent financial and economic crisis on FDI in the world and in Finland are discussed as well. FDI inflows worldwide and in Finland have suffered from a big setback from the 2008 global crisis. The economic crisis has undoubtedly significant negative influence on the FDI flows in the world and in Finland. Nevertheless, apart from the negative impact, the crisis itself also brings in chances for policymakers to implement more efficient policies in order to create a pro-business and pro-investment climate for the recovery of FDI inflows. . The correspondent policies and measures aiming to accelerate the recovery of the falling FDI were discussed correspondently.