SPEECH BY MR MARTTI AHTISAARI,

THE PRESIDENT OF THE REPUBLIC OF FINLAND

St. Petersburg, 16.1.1995

Mr Mayor,

Ladies and Gentlemen,

Since the foundation of the city nearly 300 years ago, St. Petersburg has been part of Finland's destiny. That has presented us Finns with both opportunities and challenges. During our years of autonomy within the Czarist empire, St. Petersburg often symbolised the best that Russia had to offer.

Today, North-West Russia offers unprecedented opportunities for contacts and cooperation. This vast area is of particular political and economic interest to Finland. Now that Finland is a member, the European Union is much closer to Russia in concrete terms. The border between our countries has become also the interface between Russia and the European Union. In fact, it is the EU's only land border with Russia. However, that is not the only factor that adds a new dimension to relations between us. Finnish EU membership puts at our disposal an additional set of instruments and facilities for strengthening our cross-border cooperation.

Therefore, Ladies and Gentlemen, I find it more than appropriate to have this opportunity to visit St. Petersburg. This is the first visit made by the President of Finland after our entry to the European Union.

The latest enlargement has given the EU a Nordic dimension and brought it to the doorstep of St. Petersburg and North-West Russia. Within the context of the EU, Finland's unique position vis-à-vis Russia gives her an opportunity to develop new forms of regional cooperation with the aim of strengthening democracy, the rule of law and the market economy in her neighbouring areas.

Today, St. Petersburg and the other parts of Russia are striving to make the transition to a functioning market economy and private enterprise. Privatisation is proceeding so well in several service, trade and production sectors, where large numbers of companies are already in private ownership.

Cooperation between Finland, on the one hand, and St. Petersburg together with the Leningrad area, Karelia and the Murmansk region, on the other, has developed favourably in many fields. Areas of common interest include environment, agriculture, energy, trade, transport and communications, industry and culture, to name only a few. But since the development of industry and enterprise is the key to economic and social progress, let me concentrate briefly on those opportunities and challenges.

We in Finland now see the Baltic Sea area and North-West Russia as a region of growth. Its strengths include an advantageous location, good transport and communications links, educated and qualified human resources and a large industrial network. The scientific and technological base is strong in St. Petersburg. Russian and Finnish companies now have the opportunity to convert this potential into innovations and new marketable products. The local leadership's genuine commitment to political and economic reform ensures a further prerequisite for success.

In a 1993 poll of members of the Finnish-Russian Chamber of Commerce, some one-third of companies interviewed stated that they had already established a subsidiary or an equity joint venture in the St. Petersburg region or in Karelia.

Another third indicated that they had definite plans to invest in the region. The combined plans of these companies represented a very sizable investment volume. The audience here today includes representatives of many of the companies that now have a presence in this city and region.

Finnish entrepreneurs have, however, often found the uncertainties of the Russian market very considerable. Among their greatest concerns are economic legislation, including laws with a bearing on foreign trade, taxes, customs duties and fees, which can often change unpredictably. Difficulty in establishing legal title to land or other fixed assets creates a major obstacle to securing finance for projects and investment. These and other concerns have been emphasised when entrepreneurs have expressed their thoughts about the future.

What can be done? There is a role for both the public authorities and private enterprise. The private sector must play a leadership role, employing its industrial and professional know-how, innovation and enterprise. For their part, the public authorities could act promptly and prudently by creating an attractive and stable investment climate within a transparent legal and institutional framework, thereby enabling private initiative and enterprise to prosper.

The Finnish private sector is keen to proceed as investment conditions improve. Given our similar northern climatic and weather conditions and comparable consumption and cultural patterns, our technologies can be useful in tackling the acute needs of North-Western Russia. The great variety that we have to offer includes building materials, woodworking machinery, energy, environmental and telecommunications technology, and a wide range of consumer goods. The quality of Finnish products and the know-how that goes into making them speak for themselves in international markets.

One of the main obstacles to development is clearly the limited access of companies to long-term finance. Although the commercial banking sector has made good progress in this respect in recent years, the long-term financing so essential for industry is still basically lacking, and this hampers the creation of new ventures. It gives me great pleasure to note that there is a plan to establish, in the very near future, a financial institution with the specific task of addressing these urgent and important needs. I would like to wish the best of success for these plans, about which the experts here will be telling us more today.

Mr Mayor,

Ladies and Gentlemen,

The specific problems that Finnish and other Western business activities encounter in Russia are often directly related to your internal process of transition. Finland has consistently supported your work of political and economic reform. We believe that only a democratic Russia, based on the rule of law and respect for human rights, can be a stable and attractive neighbour to Finland and the European Union. In this new Russia St. Petersburg will be a bridge and a gateway to Western Europe, thus regaining her historical role as a pluralistic cultural and economic metropolis.