Assingment #3 top 3 economies of the world

Strategic Marketing Assignment # 3

Top Three Economies of the

WorldProgram: MBA (Evening)

Submitted To:Sir Abdul Qayyum Qureshi

Submitted By:Muhammad Tayyab

Roll # 111405

Page

[ ] April 17, 2013

Economy of Switzerland

The Swiss economy

Switzerland’s economy is based on a highly qualified labour force performing highly skilled work.

The main areas include microtechnology, hitech, biotechnology and pharmaceuticals, as well as

banking and insurance know-how. The service sector now employs the greatest number of people.

Most of the people working in Switzerland are employed by small and medium-sized enterprises,

which play an extremely important role in the Swiss economy.

The Swiss are concerned that economic activity should have as little impact as possible on the

environment. Switzerland's energy and transport policies aim to be environmentally friendly.

The age of unlimited economic growth in Switzerland is over. Fear of unemployment has been one

of the main concerns of the Swiss for several years.

Facts and Figure of Switzerland

Zurich, Switzerland's largest city

Rank 27th Currency 1 Swiss franc (CHF 1)Fiscal year Calendar yearTrade organisations

EFTA, WTO and OECD

StatisticsGDP CHF 550.6 billion (2010)

$622.8 billion (2012 est.)$364.5 billion PPP

GDP growth 0.8% (2012 est.)1.7% per capita nominal2.7% real1.6% per capita real

GDP per capita CHF 70,334$75,440 current (nominal)

Page

[ ] April 17, 2013

$46,815 PPPGDP by sector agriculture (1.2%)

industry (27.5%)services (71.3%) (2011 est.)

Inflation (CPI) 0.2%Populationbelow poverty line

4.8 %

Gini coefficient 33.7 (2008)Labour force 4.547 millionLabour forceby occupation

agriculture (3.4%)Industry (23.4%)services (73.2%) (2010)

Unemployment 3.1% (2011) Main industries machinery, chemicals, watches, textiles, precision instrumentsEase of Doing Business Rank

28th

ExternalExports $308.3 billion (2011 est.)Export goods machinery, chemicals, metals, watches, agricultural productsMain export partners

Germany 19.2%, US 10.2%, Italy 7.9%,France 7.7%, UK 5.9% (2010)

Imports $299.6 billion (2011 est.)Import goods machinery, chemicals, vehicles, metals; agricultural products, textilesMain import partners

Germany 32%, Italy 10.2%, France 8.5%,US 5.3%, Netherlands 4.5%, Austria 4.3% (2010)

FDI stock $395.6 billion (31 December 2009 est.)Gross external debt

$1.346 trillion (30 June 2011)

Public financesPublic debt 46.7% of GDP (2012 est.) Revenues $222 billion (2011 est.)Expenses $216.8 billion (2011 est.)Economic aid donor: ODA CHF2.31 billion (0.47% of GDP) Credit rating Standard & Poor's:

AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)Outlook: Stable

Moody's: AaaOutlook: Stable

Fitch: AAAOutlook: Stable

Foreign reserves

US$291.073 billion (March 2011)

Page

[ ] April 17, 2013

Trade

Swiss companies are extremely competitive in world markets. In some branches, more than 90% of goods and services are exported. The best-known export items are watches, chocolate and cheese, but in fact mechanical and electrical engineering and chemicals together account for over half Swiss export revenues.

The areas where Switzerland is a leading supplier include looms, paper and printing machinery,

blanking tools for metalworking, elevators and escalators, packaging equipment and rack-and-

pinion railways. However, many of the components for these items are now manufactured abroad.

Consultancy, insurance and tourism are also part of the export trade. Exports of goods and

services alone amount to about 25,000 francs - 16,000 dollars - per head per year, according to the

OSEC business network, which promotes Swiss foreign trade.

Switzerland's main trading partners are European Union members. By far the biggest partner is

Germany. In 2010 it was followed in descending order by Italy, France, the Netherlands, the US

and the United Kingdom. In 2009, 59.7% of exports went to EU countries, and 78% of the imports

came from EU states. This is despite the fact that the Swiss have consistently voted to remain

outside the body.

Swiss economic policy has always been based on free trade, with low import duties and virtually no

import quotas - the only exception being for agricultural produce. Even here many of the

restrictions are being eased as a result of recent agreements with the EU.

Companies

Nestlé headquarters in Vevey, on Lake Geneva© Nestlé S.A.

Most businesses are small or medium-sized. According to the 2008

business census, more than 99% of enterprises had fewer than 250 full-

time workers, employing about two-thirds of the total work force.

The largest company is Nestlé, the biggest food company in the world. It has around 278,000

employees, about 97% of them outside Switzerland (2009).

In 2010, 15 Swiss firms, including the pharmaceutical giant Novartis (No. 160) featured on the

“Fortune Global 500”, an annual ranking of the 500 most powerful corporations which is compiled

by the eponymous American business magazine.

Many companies are still in the hands of families who founded them. However, a survey conducted

in 2002 showed the impact of globalisation on large firms: it found 40% of board members and

Page

[ ] April 17, 2013

26% of managers were non-Swiss, mostly from Germany, the UK and France. However, there

were still few foreign managers in medium and small businesses

A mainstay of the Swiss economy

When you mention Switzerland, most people automatically think of

mountains and cheese, with banks coming a close third. This is not

surprising given that the Swiss financial centre is a central pillar of the

Swiss economy, generating over 10 % of Swiss GDP. At the end of 2011, some 211,000 people

(full-time equivalents) – or 6 % of Switzerland’s total working population – were directly employed

by banks, insurance companies and other financial institutions.

The term "financial centre" generally refers to major cities like New York and London, which have a

dense network of banks, financial companies, stock exchanges, insurance companies and

international trading firms. These centres boast a high concentration of myriad financial services.

Switzerland’s financial centre has four main hubs - Zurich, Geneva, Basel and Lugano.

Players and services

The key players in the Swiss financial centre are the banks. One of their core businesses is wealth

management. This is reflected in a ranking of the world’s largest wealth managers, which places

three Swiss banks in the top ten. At the end of 2011 Swiss banks managed assets totalling CHF

5,600 billion. In terms of cross-border private wealth management, Switzerland is the undisputed

world market leader with a share of 27%, or CHF 2,100 billion (cf. table below).

The second most important players are insurers. Close to 70% of their global premium income in

2011 was generated overseas, indicating a high degree of internationalisation. Swiss insurance

companies have increasingly specialised in re-insurance, i.e. where an insurer insures other

insurers, making Switzerland the fourth largest reinsurer in the world.

The Swiss financial centre is also a major international force in currency trading, commodity trading

and the management of funds of hedge funds. However, in other financial services, such as the

funds business, institutional asset management, investment banking, as well as commerce and

corporate banking, it continues to play only a minor role.

International comparison

Switzerland is a relatively small country in terms of population, but it is an international

heavyweight when it comes to financial services.

The table below provides an overview of the largest asset managers worldwide.

Page

[ ] April 17, 2013

Share of assets under management in international private banking, 2011

Source: Boston Consulting Group, 2012  

Switzerland 27%

United Kingdom 25%

Luxemburg 6%

Caribbean 13%

Singapore and Hong Kong 13%

United States 8%

Other 8%

Energy policy

The Emosson dam and reservoir in Canton Valais, which produces nearly 900 million KW hours per year© Lucyna Koch

As a small country in the middle of Europe, Switzerland's energy policy is

aligned with that of its neighbours. Switzerland is part of the western

European power grid. In the summer it is able to export electricity, but in

winter it generally has to import it.

Energy policy

The two main planks of Swiss energy policy are to promote the use of

renewable resources and to encourage efficiency.

The government sees this as particularly important in the face of the upcoming liberalisation of the

European energy market, which Switzerland cannot avoid. Greater competition is likely to bring

down the prices of fossil fuels. This would boost their use yet further, which would have a

detrimental effect on the environment, undermining Switzerland's determination to cut its CO2

emissions by 2010 to 90% of its 1990 level.

Consumption

Switzerland's per capita electricity consumption is slightly higher than that of its neighbours, though

well below that in Scandinavia, the US and Canada.

However, it is worth remembering that in many countries a significant proportion of the electricity

used is consumed by large industrial plants, which Switzerland does not have. If it were unable to

import goods produced by such plants and had to make them itself, its per capita consumption

would be higher.

Switzerland, like most other countries, obtains its electric power from a number of different

sources.

Page

[ ] April 17, 2013

Transit traffic

Switzerland stands on the route linking northern and southern Europe, but the Alps made transit

difficult until tunnels were built through them. The Gotthard railway tunnel, 15 km (9.3 miles) long,

was built more than 100 years ago. The Gotthard road tunnel, opened in 1980, was the longest in

the world at 17 km (10.6 miles) until Norway's Laerdal tunnel (24.5 km/15 miles) opened in

November 2000.

Switzerland's position as a transit country has exposed it to ever increasing amounts of freight

traffic. As Europe moves closer together, frontiers are no longer a barrier to trade. As a result, the

road network is coming under heavy pressure, and gigantic queues build up, especially on

the Gotthard route.

The situation is at its worst during the vacation season in western Europe, when sunseeking

holidaymakers join the lines of trucks with their cars and caravans.

 High wages, long hours

The Swiss work a lot, an average of 41.6 hours a week for full-time employees in 2005. Full-time

employees are entitled to leave of only 20 working days per year. This is less than in many other

European countries. Public holidays vary from canton to canton, but there are generally 8 or 9.

In 1985, the Swiss rejected a general increase in vacation entitlement from four to five weeks and

in 2002 they voted against the introduction of the 36 hour week.

Strikes are rare and workplace absenteeism is low.

About three quarters of absences from the work place are for health reasons, but over 13% are for

military service or its civilian equivalent.

A survey of 71 cities round the world carried out by the Swiss bank UBS in 2006 showed both

Zurich and Geneva offered higher net salaries but demanded a higher number of hours than did

comparable cities across the world.

EarningsAccording to a survey carried out by economic experts in Canton Aargau published in 2006, the

best-paid job in Switzerland is that of a long-haul airline pilot, who can expect a basic monthly

salary of 18,193 francs after 20 years experience.

There are large regional differences between salary levels.

A survey conducted by the Federal Statistical Office in 2004 showed a difference of over one

thousand francs per month in the median wage between the best and worst paid areas. In the

Zurich region it was 5,984 francs, while in Ticino it was 4,823. (The median wage is situated at the

Page

[ ] April 17, 2013

half way point on the wage scale: half the wages under consideration are higher, and half are

lower.)

The disparity is to be explained by the nature of the economic activity conducted in the different

areas. Banking, insurance and research account for the high median wage in the Zurich region. 

Cost of living

Statistics released by the European Union in 2002 showed that Switzerland was the third most

expensive country in Europe, after Norway and Iceland. The Swiss pay particularly high prices for

meat, cooking oil, fish and vegetables.

Nevertheless, Swiss wages take the cost of living into account. A survey of 71 cities round the

world carried out by the Swiss bank UBS in 2006 showed that it takes less time for workers in

Switzerland to earn enough to buy a loaf and a hamburger than it does in many other countries.

Expenditure

Food and clothing accounts for an ever smaller proportion of household budgets, dropping from

16% in 1992 to 12% in 1998 to just under 11% in 2005.

Housing is expensive, and most people live in rented accommodation. Switzerland has by far the

lowest rate of owner occupiers in Europe: in 2000 only 34.6% of homes belonged to the people

who lived in them.

Taxation is relatively low in comparison with the neighboring countries. On the other hand, the

Swiss spend a lot on insurance, including compulsory health insurance, which alone accounts for

over 5.6% of their expenditure. They spend another 5% on private insurance; the more people

have, the more they want to - or must - insure.

Important items in the household budget

Items Percent

Source: Federal Statistical Office (2005)  

food and beverages 7.7%

alcohol and tobacco 1.2%

Page

[ ] April 17, 2013

Items Percent

clothing and shoes 2.9%

housing and energy 16.9%

furnishing and maintenance 3.2%

health care 4.0%

transport and communications 9.9%

entertainment, recreation, culture 12.5%

Economy of Singapore

Singapore has a highly developed and successful market economy. It has an open, pro-business

environment, relatively corruption-free and transparent, stable prices, low tax rates (14.2% of GDP)

compared to other developed economies, and one of the highest per-capita gross domestic

Page

[ ] April 17, 2013

products (GDP) in the world. Its innovative yet steadfast form of economics that combines

economic planning of Singapore Economic Development Board with free-market has given it the

nickname the Singapore Model. Singapore's sovereign wealth fund Temasek Holdings is a large

investor in the economy, holding majority stakes in several of the nation's largest companies, such

as Singapore Airlines,SingTel, ST Engineering and Media Corp.

Exports, particularly in electronics and chemicals, and services including the posture that

Singapore is the regional hub for wealth management  (and the opening of the city state's first

casino in 2010 ) provide the main source of revenue for the economy, which allows it to

purchase natural resources and raw goods which it does not have. Moreover, water is a scarcity in

Singapore therefore water is defined as a precious resource in Singapore along with the scarcity of

land to be treated with land fill of Pulau Semakau. Singapore has limited arable land  that

Singapore has to rely on the agrotechnology park for agricultural production and

consumption. Human Resource is another vital issue for the health of Singaporean economy.

Singapore could thus be said to rely on an extended concept of intermediary trade

to Entrepôt trade, by purchasing raw goods and refining them for re-export, such as in the wafer

fabrication industry and oil refining. Singapore also has a strategic port which makes it more

competitive than many of its neighbors in carrying out such entre pot activities. The Port of

Singapore is the busiest in the world, surpassing Rotterdam and Hong Kong. In addition,

Singapore's port infrastructure and skilled workforce, which is due to the success of the country's

education policy in producing skilled workers, is also fundamental in this aspect as they provide

easier access to markets for both importing and exporting, and also provide the skill(s) needed

to refine imports into exports.

Singapore's government promotes high levels of savings and investment through policies such as

the Central Provident Fund, which is used to fund its citizen's healthcare and retirement needs.

Most companies in Singapore are registered as private limited-liability companies (commonly

known as "private limited companies"). A private limited company in Singapore is a separate legal

entity, and shareholders are not liable for the company's debts beyond the amount of share capital

they have contributed.

Facts and figure of Singapore

Page

[ ] April 17, 2013

Currency Singapore dollar (SGD); Brunei Dollar(B$)Fiscal year 1 April - 31 MarchTrade organisations

WTO, APEC, IOR-ARC, ASEAN

StatisticsGDP $318.9 billion (2011 est. PPP)GDP growth 0.3% (Q3 2012)GDP per capita $62,100 (PPP, 2010 est.),[1] $43,117 (nominal, 2010 est.)[2]

GDP by sector agriculture: 0%; industry: 26.6%;services: 73.4% (2011 est.)Inflation (CPI) 5.2% (2011 est.)Populationbelow poverty line

N/A

Gini coefficient 47.3 (2011)Labour force 3.237 million (2011 est.)Labour forceby occupation

agriculture 0.1%, industry 19.6% 18%, services 80.3% (2011)

Unemployment 1.9% (2012 est.)Main industries electronics, chemicals, financial services, oil drilling equipment,petroleum

refining, rubber processing and rubber products, processed foodand beverages, ship repair, offshore platform construction, life sciences,entrepot trade

Ease of Doing Business Rank

1st[3]

ExternalExports $414.8 billion (2011 est.)[1]

Export goods machinery and equipment (including electronics and telecommunications), pharmaceuticals and other chemicals, refined petroleum products

Main export partners

Malaysia 12.2%, Hong Kong 11.0%,China 10.4%, Indonesia 10.4%, United States 5.45%, Japan 4.5%, (2011 est.)

Imports $311.7 billion (2011 est.)[1]

Import goods machinery and equipment, mineral fuels, chemicals, foodstuffs, consumer goodsMain import partners

Malaysia 10.7%, United States 10.7%,China 10.4%, Japan 7.2%, South Korea5.9%, Taiwan 5.9% (2011 est)

FDI stock $497 billion (31 December 2011 est.)Gross external debt

$23.58 billion (31 December 2011 est.)

Public financesPublic debt 118.2% of GDP (2011 est.)Revenues S$40.53 billion (2011 est]Expenses S$37.18 billion (2011 est.) note: expenditures include both operational and

Page

[ ] April 17, 2013

development expendituresEconomic aid noneCredit rating Standard & Poor's:[4]

AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)Outlook: Stable[5]

Moody's:[5]

AaaOutlook: Stable

Fitch:[5]

AAAOutlook: Stable

Foreign reserves

US$233.368 billion (March 2011)[6]

Main data source: CIA World Fact Book

All values, unless otherwise stated, ar

Economic history

This is a chart of trend of gross domestic product of Singapore at market prices estimated by the

International Monetary Fund.

YearGross Domestic Product

($ millions)US Dollar Exchange

Nominal Per Capita GDP(as % of USA)

PPP Per Capita GDP(as % of USA)

1980 25,117 2.14 Singapore Dollars 39.65 55.00

1985 39,036 2.20 Singapore Dollars 36.63 63.41

1990 66,778 1.81 Singapore Dollars 52.09 74.76

1995 119,470 1.41 Singapore Dollars 86.14 90.60

2000 159,840 1.72 Singapore Dollars 66.19 91.48

2005 194,360 1.64 Singapore Dollars 67.54 103.03

2007 224,412 1.42 Singapore Dollars 74.61 107.92

2008 235,632 1.37 Singapore Dollars 73.71 107.27

2009 268,900 1.50 Singapore Dollars 78.53 108.33

2010 309,400 1.32 Singapore Dollars 82.13 119.54

2011 270,020 1.29 Singapore Dollars - -

Singapore's strategic location on major sea lanes and industrious population have given the

country an economic importance in South-east Asia disproportionate to its small size. Upon

separation from Malaysia in 1965, Singapore was faced with a lack of physical resources and a

small domestic market. In response, the Singapore Government adopted a pro-business, pro-

foreign investment, export-oriented economic policy combined with state-directed investments in

strategic government-owned corporations. Whilst nominally socialist in the 1960s, the ruling party

increasingly became openly capitalist but self-described as 'pragmatic', described by some as a

euphemism for capitalism with authoritarian social controls Singapore's government moved

Page

[ ] April 17, 2013

towards guiding the economy and investing in medicine and infrastructure. Living standards

steadily rose, with more families moving from a lower-income status to middle-income security with

increased household incomes. During a National Day Rally speech in 1987, Lee Kuan-

Yew claimed that (based on the homeownership criterion) 80% of Singaporeans could now be

considered to be members of the middle-class.

Singapore's economic strategy produced real growth averaging 8.0% from 1960 to 1999. The

economy picked up in 1999 after the regional financial crisis, with a growth rate of 5.4%, followed

by 9.9% for 2000. However, the economic slowdown in the United States, Japan and the European

Union, as well as the worldwide electronics slump, had reduced the estimated economic growth in

2001 to a negative 2.0%. The economy expanded by 2.2% the following year, and by 1.1% in 2003

when Singapore was affected by the SARSoutbreak. Subsequently, a major turnaround occurred in

2004 allowed it to make a significant recovery of 8.3% growth in Singapore, although the actual

growth fell short of the target growth for the year more than half with only 2.5%. In 2005, economic

growth was 6.4%; and in 2006, 7.9%.

Singapore's unemployment rate is around 2.2% as of 20 February 2009. As of 8 August 2010,

Singapore is the fastest growing economy in the world, with a growth rate of 17.9% for the first half

of 2010. As of 2012, despite attracting the highest figure in foreign direct investments among

countries in Southeast Asia, Singapore has 0.3% growth for its third quarter year-on-year, the

lowest among its peers in the region opposite Philippines' which got 7.1% on the same quarter but

getting the lowest foreign direct investments at only $2.1 billion.

Sectors

Manufacturing and financial business services accounted for 26% and 22%, respectively, of

Singapore's gross domestic product in 2000. The electronics industry leads Singapore's

manufacturing sector, accounting for 48% of total industrial output, but the government also is

prioritising development of the chemicals and biotechnology industries.

To maintain its competitive position despite rising wages, the government seeks to promote higher

value-added activities in the manufacturing and services sectors. It also has opened, or is in the

process of opening, the financial services, telecommunications, and power generation and retailing

sectors up to foreign service providers and greater competition. The government has also

attempted some measures including wage restraint measures and release of unused buildings in

an effort to control rising commercial rents with the view to lowering the cost of doing business in

Singapore when central business district office rents tripled in 2006.

Banking

Singapore is a financial centre in Southeast Asia. According to the Human Rights Watch, due to its

role as a financial hub for the region, Singapore has continually been criticized for reportedly

Page

[ ] April 17, 2013

hosting bank accounts containing ill-gotten gains of corrupt leaders and their associates, including

billions of dollars of Burma’s state gas revenues hidden from national accounts.

Biotechnology

Singapore is aggressively promoting and developing its biotechnology industry. Hundred of millions

of dollars were invested into the sector to build up infrastructure, fund research and development

and to recruit top international scientists to Singapore. Leading drug makers, such

as GlaxoSmithKline (GSK), Pfizer and Merck & Co., have set up plants in Singapore. On 8 June

2006, GSK announced that it is investing another S$300 million to build another plant to

produce pediatric vaccines, its first such facility in Asia.[27]Pharmaceuticals now account for more

than 16% of the country's manufacturing production.

Energy and infrastructure

Singapore is the pricing centre and leading oil trading hub in Asia. The oil industry makes up 5 per

cent of Singapore's GDP, with Singapore being one of the top three export refining centres in the

world. In 2007 it exported 68.1 million tonnes of oil. The oil industry has led to the promotion of the

chemical industry as well as oil and gas equipment manufacturing. Singapore has 70 per cent of

the world market for both jack-up rigs and for the conversion of Floating Production Storage

Offloading units. It has 20 per cent of the world market for ship repair, and in 2008 the marine and

offshore industry employed almost 70,000 workers.

Trade, investment and aid

Singaporean exports in 2006

Singapore's total trade in 2000 amounted to S$373 billion, an increase of 21% from 1999. Despite

its small size, Singapore is currently the fifteenth-largest trading partner of the United States. In

2000, Singapore's imports totaled $135 billion, and exports totaled $138 billion. Malaysia was

Singapore's main import source, as well as its largest export market, absorbing 18% of Singapore's

Page

[ ] April 17, 2013

exports, with the United States close behind. Re-exports accounted for 43% of Singapore's total

sales to other countries in 2000. Singapore's principal exports are petroleum products,

food/beverages, chemicals, textile/garments, electronic components, telecommunication

apparatus, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum

products, electronic components, radio and television receivers/parts, motor vehicles, chemicals,

food/beverages, iron/steel, and textile yarns/fabrics.

Singapore workforceIn 2000, Singapore had a workforce of about 2.2 million. The National Trades Union Congress (NTUC), the sole trade union federation which has a symbiotic relationship with the ruling party, comprises almost 99% of total organized labour. Government policy and pro-activity rather than labour legislation controls general labour and trade union matters. The Employment Act offers little protection to white-collar workers due to an income threshold. The Industrial Arbitration Court handles labour-management disputes that cannot be resolved informally through the Ministry of Manpower. The Singapore Government has stressed the importance of cooperation between unions, management and government (tripartism), as well as the early resolution of disputes. There has been only one strike in the past 15 years.

Singapore has enjoyed virtually full employment for long periods of time. Amid an economic slump, the unemployment rate rose to 4.0% by the end of 2001, from 2.4% early in the year. Unemployment has since declined and as of 2012 the unemployment rate stands at 1.9%.

While the Singapore government has taken a stance against minimum wage and unemployment benefit schemes, the government has introduced a Workfare Income Supplement (WIS) scheme to supplement wages of low-skilled workers.

Public financeGovernment spending in Singapore has risen since the start of the global financial crisis, from around 15% of GDP in 2008 to 17% in 2012. The government's total expenditure as a percentage of GDP ranks among the lowest internationally and allows for a competitive tax regime. The government has no foreign debt and consistent budget surpluses. Singapore government debt is issued for investment purposes, and not for fiscal needs.

Personal income taxes in Singapore are among the lowest in the world, ranging from 0% to 20% for incomes above S$320,000. There are no capital gains or inheritance taxes in Singapore. Singapore attracts entrepreneurs, and established corporations from around the world, with a corporate tax structure that encourages startups and provides incentives for international business. The corporate tax rate of 17% is low relative to other developed nations. Singapore has a single-tier corporate income tax system, which means there is no double-taxation for shareholders.

Economy of FinlandFinland has a highly industrialized, mixed economy with a per capita output equal to that of other western economies such as France, Germany, Sweden or the United Kingdom. The largest sector

Page

[ ] April 17, 2013

of the economy is services at 65.7 percent, followed by manufacturing and refining at 31.4 percent. Primary production is 2.9 percent.

With respect to foreign trade, the key economic sector is manufacturing. The largest industries are electronics (21.6 percent), machinery, vehicles and other engineered metal products (21.1 percent), forest industry (13.1 percent), and chemicals (10.9 percent). Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP.

In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest after Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors – especially agriculture and low-technology manufacturing – second largest after Ireland Investment was below expected. Overall short-term outlook was good and GDP growth has been above many EU peers. Finland has the 4th largest knowledge economy in Europe, behind Sweden, Denmark and the UK.

Finland is highly integrated in the global economy, and international trade is a third of GDP. The European Union makes 60 percent of the total trade. The largest trade flows are with Germany, Russia, Sweden, the United Kingdom, the United States, Netherlands and China. Trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture. Finland is the only Nordic country to have joined the Eurozone; Denmark and Sweden have retained their traditional currencies, where as Iceland and Norway are not members of the EU at all.

Economy of Finland

Helsinki

Rank 54Currency Euro (EUR)Fiscal year calendar yearTrade Organizations

European UnionWorld Trade Organization (WTO)Organisation for Economic Co-operation and Development (OECD)others

StatisticsGDP $247.2 billion (2012 est.)

Page

[ ] April 17, 2013

GDP growth 0.3% (2012 est.)

GDP per capita $36,700 (2011 est.) (PPP)

GDP by sector agriculture: 2.6%; industry: 29.1%; services: 68.2% (2010 est.)

Inflation (CPI) 3.3% (2011 est.)

Populationbelow poverty line

17.9% at risk of poverty or social exclusion

Gini coefficient 28.2 (2010)

Labour force 2,818 million (2011)

Labour forceby occupation

agriculture and forestry 4.5%, industry 18.3%, construction 7.3%, commerce 16%, finance, insurance, and business services 14.5%, transport and communications 7%, public services 32.4% (2008)

Unemployment 7.3% (2012 est.)

Average gross salary

3,463 € / 4,675 $, monthly (2006)

Average net salary

2,043 € / 2,758 $, monthly (2006)

Main industries metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, clothing

Ease of Doing Business Rank

11th

External

Exports $78.83 billion (2011 est.)

Export goods Electrical and optical equipment, machinery, transport equipment, paper and pulp, chemicals, basic metals; timber

Main export partners

Sweden 11.8%, Germany 10%, Russia9.2%, Netherlands 6.8%, United Kingdom 5.2%, United States 4.9%,China 4.7% (2011)

Imports $80.34 billion (2011 est.)

Import goods foodstuffs, petroleum and petroleum products, chemicals, transport equipment, iron and steel, machinery, textile yarn and fabrics, grains

Main import partners

Russia 17.6%, Sweden 13.6%,Germany 13.6%, Netherlands 7.6%,China 4.2% (2011)

FDI stock $87.99 billion (31 Dec. 2010 est.)

Gross external debt

$370.8 billion (30 June 2010)

Public finances

Public debt 53.5% of GDP (2012 est.), net debt 17.4% of GDP

Revenues $129.4 billion (2012 est.)

Page

[ ] April 17, 2013

Expenses $134 billion (2012 est.)

Economic aid donor: ODA, $1.023 billion (2007)

Credit rating AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)(Standard & Poor's)

Foreign reserves

US$11.492 billion (March 2011)

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

History

Finland started out as a relatively poor country that was vulnerable to shocks to the economy such as the great famine of the 1860s. Until the 1930s, the Finnish economy was predominantly agrarian, and, as late as in the 1950s, more than half the population and 40 percent of output were still in the primary sector

LiberalizationLike other Nordic countries, Finland has modified its system of economic regulation since late 1980s. Financial and product market regulations were modified. Some state enterprises were privatized and some tax rates were altered.

European UnionFinland joined the European Union in 1995. The central bank was given an inflation-targeting mandate until Finland joined the euro zone. The growth rate has since been one of the highest of OECD countries and Finland has topped many indicators of national performance.

Finland was one of the 11 countries joining the third phase of the Economic and Monetary Union of the European Union, adopting the euro as the country's currency, on January 1, 1999. The national currency markka (FIM) was withdrawn from circulation and replaced by the euro (EUR) at the beginning of 2002.

Agriculture

Finland's climate and soils make growing crops a particular challenge. The country lies between 60° and 70° north latitude - as far north as Alaska - and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, and because of the relatively low elevation of the land area, Finland contains half of the world's arable land north of 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate,

Page

[ ] April 17, 2013

farmers have relied on quick-ripening and frost-resistant varieties of crops, and they have cultivated south-facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralise excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water.

Industry

Since the 1990s, Finnish industry, which for centuries had relied on the country's vast forests, has become increasingly dominated by electronics and services, as globalization lead to a decline of more traditional industries.[20] Outsourcing resulted in more manufacturing being transferred abroad, with Finnish-based industry focusing to a greater extent on R&D and hi-tech electronics.

ElectronicsThe Finnish electronics and electrotechnics industry relies on heavy investment in R&D, and has been accelerated by the liberalisation of global markets. Electrical engineering started in the late 19th century with generators and electric motors built by Gottfried Strömberg, now part of the ABB Group. Other Finnish companies – such as Instru, Vaisala and Neles (now part of Metso) - have succeeded in areas such as industrial automation, medical and meteorological technology. Nokia was once a world leader in mobile telecommunications.

Metals, engineering and manufacturingFinland has an abundance of minerals, but many large mines have closed down, and most raw materials are now imported. For this reason, companies now tend to focus on high added-value processing of metals. The exports include the production steel, copper, chromium, zinc and nickel, and finished products such as steel roofing and cladding, welded steel pipes, copper pipe and coated sheets. Outokumpu is known for developing the flash smelting process for copper production and stainless steel.

With regard to vehicles, the Finnish motor industry consists mostly of manufacturers of tractors (Valtra, formerly Valmet tractor), forest machines (f.ex. Ponsse), military vehicles (Sisu, Patria), trucks (Sisu Auto), buses and Valmet Automotive, a contract manufacturer, whose factory in Uusikaupunki produces Fisker electric cars. Shipbuilding is an important industry: the world's largest cruise ships are built in Finland; also, the Finnish company Wärtsilä produces the world's largest diesel engines. In addition, Finland also produces trainrolling stock.

The manufacturing industry is a significant employer of about 400,000 people.

Chemical industryThe chemical industry is one of the Finland's largest industrial sectors with its roots in tar making in the 17th century. It produces an enormous range of products for the use of other industrial sectors, especially for forestry and agriculture. In addition, its produces plastics, chemicals, paints, oil products, pharmaceuticals, environmental products, biotech products and petrochemicals. Biotechnology is regarded as one of the most promising high-tech sectors in Finland and it is growing rapidly.

Page

[ ] April 17, 2013

Pulp and paper industryForest products has been the major export industry in the past, but diversification and growth of the economy has reduced its share. In the 1970s, the pulp and paper industry accounted for half of Finnish exports. Although this share has shrank, pulp and paper is still a major industry with 52 sites across the country. Furthermore, several of large international corporations in this business are based in Finland. Stora Enso and UPM were placed #1 and #3 by output in the world, both producing more than ten million tons. M-real and Myllykoskialso appear on the top 100 list.

Energy industryFinland's energy supply is divided as follows: nuclear power - 26%, net imports - 20%, hydroelectric power - 16%, combined production district heat - 18%, combined production industry - 13%, condensing power - 6%.One half of all the energy consumed in Finland goes to industry, one fifth to heating buildings and one fifth to transport. Lacking indigenous fossil fuel resources, Finland has been an energy importer. This might change in the future since Finland is currently building its fifth and approved the building permits for its sixth and seventh reactors. There are some uranium resources in Finland, but to date no commercially viable deposits have been identified for exclusive mining of uranium. However, permits have been granted to Talvivaara to produce uranium from the tailings of their nickel-cobalt mine.

Companies

Aleksanterinkatu, a commercial street in Helsinki.

Notable companies in Finland include Nokia, the former market leader in mobile telephony;Stora Enso, the largest paper manufacturer in the world; Neste Oil, an oil refining and marketing company; UPM-Kymmene, the third largest paper manufacturer in the world; Aker Finnyards, the manufacturer of the world's largest cruise ships (such as Royal Caribbean'sFreedom of the Seas); Rovio Mobile, video game developer most notable for creating Angry Birds; KONE, a manufacturer of elevators and escalators; Wärtsilä, a producer of power plants and ship engines; and Finnair, the largest Helsinki-Vantaa based internationalairline. Additionally, many Nordic design firms are headquartered in Finland. These include the Fiskars owned Iittala Group, Artek a furniture design firm co-created by Alvar Aalto, and Marimekko made famous by Jacqueline Kennedy. Finland has sophisticated financial markets comparable to UK in efficiency. Though foreign investment is as not high as some other European countries, the largest foreign-headquartered companies included names such as ABB, Tellabs, Carlsberg, and Siemens.[33]

Page

[ ] April 17, 2013

Household income and consumption

Finland's income is generated by the approximately 1.8 million private sector workers, who make an average 25.1 euro per hour (before the median 60% tax wedge) in 2007. According to a 2003 report, residents worked on average around 10 years for the same employee ]and around 5 different jobs over a lifetime. 62 percent worked for small and medium-sized enterprises. Female employment rate was high and gender segregation on career choices was higher than in the US. In 1999 part-time work rate was one of the smallest in OECD.

Future liabilities are dominated by the pension deficit. Unlike in Sweden, where pension savers can manage their investments, in Finland employer chooses a pension fund for the employee. The pension funding rate is higher than in most Western European countries, but still only a portion of it is funded and pensions exclude health insurances and other unaccounted promises. Directly held public debt has been reduced to around 32 percent in 2007.  In 2007, the average household savings rate was -3.8 and household debt 101 percent of annual disposable income, a typical level in Europe.

In 2008, the OECD reported that "the gap between rich and poor has widened more in Finland than in any other wealthy industrialized country over the past decade" and that "Finland is also one of the few countries where inequality of incomes has grown between the rich and the middle-class, and not only between rich and poor."[44]

In 2006, there were 2,381,500 households of average size 2.1 people. Forty percent of households consisted of single person, 32 percent two and 28 percent three or more. There were 1.2 million residential buildings in Finland and the average residential space was 38 square metres per person. The average residential property (without land) cost 1,187 euro per square metre (without land) and residential land on 8.6 euro per square metre. Consumer energy prices were 8-12 euro cent per kilowatt hour. 74 percent of households had a car. There were 2.5 million cars and 0.4 other vehicles. Around 92 percent has mobile phone and 58 percent Internet connection at home. The average total household consumption was 20,000 euro, out of which housing at around 5500 euro, transport at around 3000 euro, food and beverages excluding alcoholic at around 2500 euro, recreation and culture at around 2000 euro. Upper-level white-collar households (409,653) consumed an average 27,456 euro, lower-level white-collar households (394,313) 20,935 euro, and blue-collar households (471,370) 19,415 euro

Unemployment

The unemployment rate was 8.7% in January 2013. The employment rate is (persons aged 15–64) 68,6%,Unemployment security benefits for those seeking employment are at an average OECD level. The labor administration funds labour market training for unemployed job seekers, the training for unemployed job seeker can last up to 6 months, which is often vocational. The aim of the training is to improve the channels of finding employment.

Page

[ ] April 17, 2013

Product marketEconomists attribute much growth to reforms in the product markets. According to OECD, only four EU-15 countries have less regulated product markets (UK, Ireland, Denmark and Sweden) and only one has less regulated financial markets (Denmark). Nordic countries were pioneers in liberalizing energy, postal, and other markets in Europe. The legal system is clear and business bureaucracy less than most countries. For instance, starting a business takes an average of 14 days, compared to the world average of 43 days and Denmark's average of 6 days. Property rights are well protected and contractual agreements are strictly honored. Finland is rated one of the least corrupted countries in Corruption Perceptions Index. Finland is rated 13th in the Ease of Doing Business Index. It indicates exceptional ease to trade across borders (5th), enforce contracts (7th), and close a business (5th), and exceptional hardship to employ workers (127th) and pay taxes (83rd).

Job marketAccording to the OECD, Finland's job market is the least flexible of the Nordic countries.[50] Finland increased job market regulation in the 1970s to provide stability to manufacturers. In contrast, during the 1990s, Denmark liberalised its job market, Sweden moved to more decentralised contracts, whereas Finnish trade unions blocked many reforms. Many professions have legally recognized industry-wide contracts that lay down common terms of employment including seniority levels, holiday entitlements, and salary levels, usually as part of a Comprehensive Income Policy Agreement. Those who favor less centralized labor market policies consider these agreements bureaucratic, inflexible, and along with tax rates, a key contributor to unemployment and distorted prices. Centralized agreements may hinder structural change as there are fewer incentives to acquire better skills, although Finland already enjoys one of the highest skill-levels in the world.

TaxationMain article: Taxation in Finland

Tax is collected mainly from municipal income tax, state income tax, state value added tax, customs fees, corporate taxes and special taxes. There are also property taxes, but municipal income tax pays most of municipal expenses. Taxation is conducted by a state agency, Verohallitus, which collects income taxes from each paycheck, and then pays the difference between tax liability and taxes paid as tax rebate or collects as tax arrears afterward. Municipal income tax is a flat tax of nominally 15-20%,with deductions applied, and directly funds the municipality (a city or rural locality). The state income tax is a progressive tax; low-income individuals do not necessarily pay any. The state transfers some of its income as state support to municipalities, particularly the poorer ones. Additionally, the state churches - Finnish Evangelical Lutheran Church and Finnish Orthodox Church - are integrated to the taxation system in order to tax their members.

The middle income worker's tax wedge is 46% (Nation Master) and effective marginal tax rates are very high. Value-added tax is 24% for most items. Capital gains tax is 28% and corporate tax is 26%, about the EU median. Property taxes are low, but there is atransfer tax (1.6% for apartments

Page

[ ] April 17, 2013

or 4% for individual houses) for home buyers. Alcoholic beverages are separately taxed and highly restricted. For instance, McKinsey estimates that a worker has to pay around 1600 euro for another's 400 euro service[57] - restricting service supply and demand - though some taxation is avoided in the black market and self-service culture. Another study by Karlson, Johansson & Johnsson estimates that the percentage of the buyer’s income entering the service vendor’s wallet (inverted tax wedge) is slightly over 15%, compared to 10% in Belgium, 25% in France, 40% in Switzerland and 50% in the United States. Tax cuts have been in every post-depression government's agenda and the overall tax burden is now around 43% of GDP compared to 51.1% in Sweden, 34.7% in Germany, 33.5% in Canada, and 30.5% in Ireland.

State and municipal politicians have struggled to cut their consumption, which is very high at 51.7% of GDP compared to 56.6% in Sweden, 46.9 in Germany, 39.3 in Canada, and 33.5% in Ireland. Much of the taxes are spent on public sector employees, many of which are jobs-for-life and amount to 124,000 state employees and 430,000 municipal employees. That is 113 per 1000 residents (over a quarter of workforce) compared to 74 in the US, 70 in Germany, and 42 in Japan (8% of workforce). The Economist Intelligence Unit's ranking for Finland's e-readiness is high at 13th, compared to 1st for United States, 3rd for Sweden, 5th for Denmark, and 14th for Germany. Also, early and generous retirement schemes have contributed to high pension costs. Social spending such as health or education is around OECD median. Social transfers are also around OECD median. In 2001 Finland's outsourced proportion of spending was below Sweden's and above most other Western European countries. Finland's health care is more bureaucrat-managed than in most Western European countries, though many use private insurance or cash to enjoy private clinics. Some reforms toward more equal marketplace have been made in 2007-2008. In education, child nurseries, and elderly nurseries private competition is bottom-ranking compared to Sweden and most other Western countries. Some public monopolies such Alkoremain, and are sometimes challenged by the European Union. The state has a programme where the number of jobs decreases byattrition: for two retirees, only one new employee is hired.

Occupational and income structure

Finland's export-dependent economy continuously adapted to the world market; in doing so, it changed Finnish society as well. The prolonged worldwide boom, beginning in the late 1940s and lasting until the first oil crisis in 1973, was a challenge that Finland met and from which it emerged with a highly sophisticated and diversified economy, including a new occupational structure. Some sectors kept a fairly constant share of the work force. Transportation and construction, for example, each accounted for between 7 and 8 percent in both 1950 and 1985, and manufacturing's share rose only from 22 to 24 percent. However, both the commercial and the service sectors more than doubled their share of the work force, accounting, respectively, for 21 and 28 percent in 1985. The greatest change was the decline of the economically active population employed in agriculture and forestry, from approximately 50 percent in 1950 to 10 percent in 1985. The exodus from farms and forests provided the manpower needed for the growth of other sectors.