REMARKS BY MR MARTTI AHTISAARI, PRESIDENT OF THE REPUBLIC OF FINLAND, AT THE LUNCHEON HOSTED BY GEORGIA PACIFIC ON NOVEMBER 10, 1994

Dear Mr. Correll:

It was good of you to invite me to your headquarters to speak to such a distinguished audience. Early on I had expressed a wish to visit Atlanta during my first trip to the United States as the President of Finland. I had a few reasons in mind.

As you know, Finland's future depends on the success of our export industry. Atlanta is recognized as a top city for global business, the second in the United States after New York. I am taking the liberty of visiting these cities in reverse order, first Atlanta, then New York.

The other reason for my choice is that a number of major Finnish companies - in particular, those in the so-called forest cluster, notably Repola, and Ahlström - have long been established in this city.

This morning, I had the privilege of meeting former President Jimmy Carter, as well as Ted Turner at CNN. Our discussions were indeed memorable - another good reason to come here.

And finally, the city has made a bold move to host the 1996 Olympics. I am really looking forward to Finnish success in these games. When we hosted the Olympics in Helsinki in 1952 the Americans Remigino, Stanfield, Whitfield, Dillard and Moore split among themselves the gold medals in all the short distances, dash or hurdles, including half a mile. Paavo Nurmi and Lasse Viren are among the Finns who have had similar success in the longer distances. We'll see what happens in Atlanta.

I also have a personal note to add, if you don't mind. In 1952, in the eyes of a 15-year-old I then was, the Helsinki games really brought home the message of internationalism. Finland, just emerged from the war, was directing all its energies to reconstruction and reparations to Russia. By way of consumer goods, next to nothing was available. Then came the Olympic Games and Coca-Cola in those striking yellow wooden crates. This was a defining moment as far as my career choice was concerned. It had to be international.

Today, Finland as a nation faces another crucial moment in her history. Europe's cold war has now ended. Finland, like other countries, will promote her well-being in a different setting, that of integration, economic and political, instead of a confrontation between two hostile camps. We joined the Clinton initiative on the Partnership for Peace last spring. Three weeks ago the Finnish people voted to join the European Union in a referendum.

What do these decisions signify? We want to convey to the international community a willingness to participate in political and economic cooperation in our own region, as well as globally. To succeed, we will have to compensate for our small size with a technological edge. It is, of course, sobering for us Finns, who have prided ourselves of being the paper-producing nation of the world, to come and speak at Georgia Pacific, a company which is twice the size of the two biggest Finnish paper-makers combined. Yet competitiveness and technological innovation are important for all companies, great and small.

Let me briefly outline how Finland intends to present herself to the global economic community in the years to come.

You may be aware of the roller coaster ride the Finnish economy took over the last decade and a half. We had a long spell of good times, thirteen consecutive years of growth, over five per cent. Those years were followed by the steepest plunge our economy has ever taken in times of peace. A convergence of extraordinarily difficult circumstances played a hand here. The bottom fell out of Russian trade, which nearly disappeared. Simultaneously, Western markets experienced their worst stagnation during the post-war period, and all this was compounded by the consequences of deregulation of Finnish financial markets.

However, we are now in the process of getting back on our feet again. We can count on a well-educated and highly skilled work force with a strong motivation. Our people live in a stable society characterized by strong national cohesion.

The economy, which shrank for three years in a row, is now growing rapidly. Exports are doing well. Competitiveness has been restored, both by improved productivity and floating exchange rates. Yet two structural issues will remain with us for a long time to come: unemployment, which is three times higher than it has ever been, and the public debt, particularly our foreign debt, has grown exponentially in the past four years.

Unemployment resulted both from external factors - in particular from the steep decline in trade with the Soviet Union - and from structural adjustments to our own national economy.

Regarding unemployment, I am afraid I must express myself even more strongly than your President when he speaks about the need for job creation, high growth and a stable economic environment. Unemployment in excess of 17 per cent is just not acceptable, despite the fact that it is partly a result of otherwise laudable policies such as increasing the productivity and competitiveness of industry and curtailing growth in the public sector. So far, Finnish society and social safety net have been able to cope with this, but in the longer term, the burden on the public economy will be heavy, and disinvestment in human resources is about the worst thing that could happen to a country that relies on these resources for its development.

Regarding the public debt, the Finns - who were known for being extremely conservative with their money - had begun to embark on a different path. Fortunately, we started with practically no debt, and are only now reaching U.S. levels. If we manage to stop the debt from growing, we will secure a supply of social services in the future at the level we are used to. If not, those tenets of Finnish society based on the Scandinavian concepts of sharing and equality will not hold in the long run.

Curing these ills depends on the performance of the productive sector. As is normal for a small country, Finland has chosen the path of export - driven growth. Right now the picture looks very good. Industrial productivity has increased by over 20 per cent in the last few years, a remarkable figure. But it has a flip side: we are producing more manufactured goods than ever with only some 80 per cent of the work force. Unfortunately, from the employment perspective, one cannot reach tomorrow's objectives with yesterday's tools. In today's age of technology one has to maintain high growth rates to be able to tackle the unemployment.

The same approach is necessary for any strategy that relies on high technology. The road from an idea to a product, and from product to business, takes years and sometimes decades. The Finnish government embarked on this road in the early '80s, when resources faced few limitations. The proportion of high technology products in our exports rose from 4 per cent in 1980 to 16 per cent in 1993. We are not yet in the top group, with Japan, United States and UK (which have over 20 per cent), but we are in the next group, with Germany and Sweden (which have between 15 and 20 per cent).

A country with limited resources must by definition be selective. It must seek niche areas of production and be very good at these. About a year ago, we took a very hard look at where our competitive edge might be. We called it an "industrial strategy", which in this country is a bad name for a good cause. We might as well have used the current American term, "export strategy". Even the method was the same, Porter's cluster analysis.

Finland looked at its relative strengths, and the United States at the opportunities presented by the emerging markets of the world. Interestingly enough, many of our conclusions were the same: clusters such as telecommunications, the environment, energy and transportation figured among the strengths of both countries. Had we compared ourselves with Georgia, the leading cluster - forestry, paper and pulp - would also have been the same.

I hope I am not sounding too sumptious in comparing Finnish performance in certain industrial areas with that of the United States. But the truth remains that production is increasingly global, and whoever bases his production methods on modern technology is able to produce his products virtually anywhere.

But, geography must not be forgotten, for over two thirds of our markets are in Western Europe. We have always relied on trade policies aimed at securing our competitive position in our main markets. Our membership in the European Union will do just that. It will eliminate obstacles - economic and administrative - relating to two thirds of our exports. It will also force us to achieve changes in Finnish methods and practices that will further enhance our competitiveness.

But like the Americans, we are looking at emerging markets, too. We know full well that the present growth centres in Asia, but that is far away, and one often trades with one's neighbors.

In our geopolitical or economic neighbourhood the end of the Cold War brought significant opportunities. In the Baltics, three countries declared their independence and our kindred nation, Estonia, in particular, had an excellent economic performance in the past few years. In the East, St. Petersburg, Karelia and Murmansk offer opportunities for forestry and mining. Besides, St. Petersburg is as big as the Scandinavian capitals combined. Twice the population of Finland lives within 150 miles of our border. Yet the border between Finland and Russia is perhaps the most pronounced economic fault line in Europe.

This brings me to issue of Russian economic development. Finland has every reason to support it, particularly in our immediate vicinity. We are working to make that economic fault line less pronounced, and invite others to join us. Opportunities in the area of the environment, clean combustion, nuclear safety, forestry, and mining should be utilized. Our approach to these issues is not unlike the one Vice President Gore and Prime Minister Chernomyrdin have adopted in their commission: small projects focusing on increasing well-being at the grass roots level.

To succeed in today's international market, one needs an extraordinary dose of determination. We Finns like to think we are good at all sports which require the use of a helmet: ski jumping, ice hockey, car racing and American football. Success in today's international market needs much more than a helmet, but small countries which do not control the environment in which they operate, must be able to take the hits, too.