Promotion of Internationalisation by Mr Leif Fagernäs, Under-Secretary of State

Opening of the ETPO 42 Conference in Helsinki June 15, 2000

Ladies and Gentelemen,

Everybody knows, or everybody should know that the society and business are becoming more and more international. As the markets converge and the conditions of production become more identical - in one word, as the markets globalise - the possibilities of growth for any advanced company will in principle multiply. On the other hand the danger of loosing ones share of domestic or export markets is equally increasing. The competition gets tougher and more and more new skills are needed for survival and growth. Investments are increasingly needed into development of both skills, products and risk management.

To what extend should governments promote acquisition of skills - that is internationalisation and what principles should be applied in this work?
Another important question is why should governments support just internationalisation of companies and not primarily exports? Here the pitfall often seems obvious; does the government - in supporting internationalisation - not also support outward investments; and how is that compatible with the objective of the reduction of unemployment.

International competition meets companies increasingly in their domestic market. The protection created by the home market has disappeared. Instead of areas defined by state borders global market windows have become central in the activities of companies. Those who are fast enough to make use of these possibilities will prosper. In this race one cannot succeed only by following the traditional model, by promoting exports from one country to another. In our view the competitiveness of companies will be better promoted through internationalisation in the new global environment. New exports will materialise provided it suits their development strategies.

Apart from technological know how two things, international marketing skills and capability of raising the capital required by rapid growth will emerge as crucial factors of success in the new environment of competition. Product development, production and marketing cannot be seen as separate sequential processes, but companies will have to struggle with these issues simultaneously.

The programs of the Finnish governments since early 90s have attempted to address these challenges, by concentrating on the development of skills, know how and technology as well as on the improvement of financial services for the SMEs. The factors of succesful international business will be developed as parts of a whole. Likewise the whole economic innovation system will be looked at as one single entity of development.

Promotion of internationalisation is an inseparable part of this strategy. Jobs requiring high skills will not be created without international networking, and if the need arises, wihout investments abroad. That is why also governments must promote internationalisation.

In order to succeed in today´s competitive environment companies must at the same time invest in technology, marketing and machines. The rapid changes in the world economy also constitute a challenge to the organisations dealing with promotion of technological development, marketing, exports and finance.

It is important that the objectives of governmental programs with regard to internationalisation be reflected in annual budgets. Expenditure on technology and R & D and on marketing should not be regarded as separate from each other. It is of paramount importance to refute the perception of innovation as a purely technological phenomenon and promotion of marketing as a subsidy to companies. Nor should the innovation environment be seen as a chain with marketing and commercialisation of products as its last link.

FINPRO sees itself, as a result of a thorough reform, as a part of the network of organisations, who promote growth of companies in the international market through means of market management, technology and specialised finance. The added value FINPRO brings to this process consists of its ability to introduce the market standpoint into various stages of the business plan, from the development of the business idea to succesfull entries into new export markets.

The whole innovation complex works for the internationalisation of companies, because the ability to compete in international markets has become a precondition for success also in the domestic market. The internationalisation of the economy is therefore the way to achieve various positive effects in the society, like increase in investments, employment, entrepreneurship and know how. In Finland, FINPRO is one of many organisations working for internationalisation and it is specialised in the management of the process of internationalisation of the SMEs, who look for fast growing business.

According to various studies marketing and management - not technology and finance- are the areas of business activities where further development and support is most needed. This is particularly true for SMEs. Still internationalisation as a concept is not familiar to all SMEs. It is always a great challenge for smaller companies and often not even their basic objective. The current view in many SMEs still is that the TPOs are predominantly a source of government funding. Even if that is not the case, TPOs should in principle be able to provide information and basic services to every exporting company and in line with the actual SME demand situation. The same goes for market entry services, services to promote companies abroad and the image of the country as an attractive business partner. Here the scarce resources of various organisations at home and abroad should be used as efficiently as possible, making use of the possible synergies and not necessarily entrusting this work to one particular organisation alone. It is important that the system as a whole is also capable of detecting new business opportunities opened by changes in economic policies and development locally, regionally and in global markets.

Very few countries can afford to neclect these services, particularly with regard to SMEs. An important part of the strategy is, however, to see to it that the companies starting their international operations are sufficiently competitive and that exports in general would fit their development strategies


The demands of SMEs are different, the role of the government is subject to discussion and the trade promotion organisation is under constant change in many OECD countries. These also are some of the observations of a recent study carried out by my ministry, the MFA on the structure, objectives and finance of trade promotion in 20 OECD countries.

In most of these countries either the ministry of economy or trade or the foreign ministry is responsible for the administration of trade promotion, but the practical operations are carried out by specialised organisations with public support. Close cooperation takes place between the trade promotion organisations and embassies abroad. In a number of countries the embassies are also in charge of the operative work.

Trade promotion is mostly understood to cover the promotion of commercial interests in the wide sense including promotion of internationalisation of companies. In some cases also promotion of foreign direct investment is carried out by trade promotion organisations. In many cases they operate on the basis of a wider economic policy objectives. In all countries SMEs are the main target of operations

In a number of countries trade promotion is regarded as public service, whose costs are almost entirely covered by the state budget. In most cases, however, the costs will be partially covered by the client companies. The share of the client will usually increase in relation to the specificity of the consulting to be carried out. In some cases competition with private consultancy services is obvious, which adds fuel to the discussion on what is the appropriate distribution of public support between the various type of activities of trade promotion and internationalisation.

As a rule government funding should not be proactively used for services that compete with those of the private sector. TPOs must promote their uniqueness, making sure they concentrate on services that are not easily accessible elsewhere.

One of the observations of the study is that the more there are organisations in charge of trade promotion the bigger the coordination problems. Efforts have been made to solve these problems through a number of formal and informal forms of cooperation.

In almost all countries embassies and consulates do have at least a complementary role in trade promotion abroad, although practical operations are mostly carried out by others than carrier diplomats.

I would not come from the MFA if I would not like to say a couple of words
of the role of diplomatic missions in trade promotion in my country.

In Finland promotion of exports and investments is a central part of the activities of the foreign service. The further we go from OECD countries the more the ambassadors and other diplomats can complement the work of the trade commissioners in the promotion of our commercial interests. Companies establishing themselves abroad do need the information provided by embassies on the economic and political development of the host countries. The particular strenght of the ambassadors are often the high level contacts they have established with the authorities and the leadership of major companies. Companies expect and ask the embasssies to open important doors for them. Embassies are actively involved in various information activities. They can and they should be able to detect and contribute to the dismantling of various technical barriers to trade. They should maintain close contacts with the media, including economic information services. They are of course responsible for all official visits with economic and trade promotion content. All in all they should be able to map out the potential created by eventual changes in economic policy and development in their host country.

These are some examples where added value and synergy can be found of close cooperation between the trade commissioners and the rest of the foreign service both at home and abroad.

I know that the location of Trade Commissioners is a passionate subject.
In Finland we are at the moment carrying out a major review of our own network of Trade Commissioners. Maintaining trade commissioners or trade centres abroad cannot be an end in itself. This network will have to meet the needs of business. The companies will eventually decide, through the use of their services, where they should be located. If there is enough interest in a particular region, the TPOs and the government should work together to provide the services needed, as a part of the whole innovation system.