SPEECH BY THE PRESIDENT OF THE REPUBLIC TO THE FINNISH-SOUTH AFRICAN BUSINESS FORUM IN JOHANNESBURG ON 15.5.1997

I would like to begin by saying how much it pleases me to see South African and Finnish business life represented here by such a large and prestigious group. On behalf of the Finnish authorities, I extend warm thanks to the organisations responsible for the arrangements. I also greatly appreciate the fact that Premier Tokyo Sexwale has honoured this function with his attendance.

What better place could there be for this business meeting than Johannesburg, the capital of Gauteng Province and the dynamic centre of business and banking in the whole of South Africa? The vast majority of the Finnish companies that have established in South Africa are here in Gauteng, when they have more than a dozen Finnish subsidiaries employing 700-plus South Africans. In addition to them, there are dozens of local companies representing Finnish principals. More and more of them are small and medium enterprises, which are becoming an important link between our countries.

Relations between Finland and South Africa have a long history. Where trade is concerned, they go back 150 years. From the 1850s onwards Finland was supplying timber to your country to meet the needs of the expanding mining sector and fruit exporters. Typically, it was the British that took care of the actual trade in those days and it was only in the 1920s that the Finns awakened to the possibility of having direct links with your country. Unfortunately, no suitable Finns could be found to serve as our honorary consuls and other Scandinavians were appointed instead; our foreign ministry later suspected that they were more concerned with looking after their own countries' commercial interests.

Owing to the straitened state of our government finances, it was not until 1937 that the first Finnish diplomatic mission was opened in Africa, in Pretoria. By that time, South Africa had developed into an important trade partner of Finland's. A career diplomat was placed in charge of the consulate. On the very eve of the Second World War, the mission was upgraded to the status of a Consulate-General headed by Mr. Ville Niskanen, who later became Finland's first Ambassador to the United Nations.

One of the more exotic tasks performed by the Consulate-General in Pretoria involved forwarding the 27,000 litres of Cape Brandy that the South-African Government donated to our men on the Winter War front in 1939. As it happened, the consignment got no further than our legation in London, where it was gradually consumed in diplomatic salons. A much more important demonstration of solidarity with Finland as she fought to defend her independence was Prime Minister Jan Smuts' gift of 28 fighter aircraft. Fortunately, they made it all the way to their destination and contributed to preserving the independence of Finland. One of them can still be seen in the aviation museum in Kuorevesi.

Trade between our countries was at its peak between the wars, when Finland became South Africa's biggest timber supplier. Trade quickly got under way again after the Second World War and Finland re-opened her diplomatic mission in Pretoria in 1949. Our paper exporters also opened their own agencies in Johannesburg and Cape Town.

Finland was one of the countries that scrupulously observed the UN's sanctions policy towards the South African apartheid regime. Thus our bilateral trade dwindled to virtually nothing in the period 1985-91. In 1991, when it was clear that the political reforms begun in South Africa had become irreversible, the Finnish Government lifted restrictions on trade in goods and services, and two years later the ban on investment. Trade relations normalised rapidly after that.

The new South Africa is today a reality. The political and economic transformation process has not been easy, but it enjoys the staunch support of your country's citizens and the international community. The Finnish Government and economic sector have likewise made their contributions to building democracy and prosperity in South Africa. That the goals and actions of the state authorities and the private sector have the same orientation is one of the central features of the Finnish economic system. Thus we can also share the South Africans' joy that your economy has embarked on a path of solid growth.

Trade between us has changed from the wood-dominated pattern of yesteryear and is nowadays much more diversified. In the light of statistics for last year, exports to Finland by South Africa's important forest industries cluster have grown to the point where they now represent the second-biggest product category after fruit. New ground was conquered a few days ago when a South African state-of-the-art vehicle simulator was handed over to the Finnish Technical Research Centre in Helsinki. It tells about the growing role of high-tech products in our bilateral trade. Technology Minister Lionel Mtshali discussed about this recently during his visit to Finland.

Finnish exports to South Africa, in turn, are divided fairly evenly between machinery, paper and telecommunications equipment. The total value of trade between us broke the one billion rand barrier for the first time in 1995. However, we have every prospect of raising the total to a considerably higher level more commensurate with the great potential that obviously exists.

I base my optimism mainly on three features of the development in your country: First, liberalisation of trade and abolition of various barriers to it have gotten well under way in South Africa. Supporting this development is the progress that is being made in economic integration in Southern Africa. Second, South Africa intends to continue dismantling foreign exchange controls, something that is a basic prerequisite for your economic sector and foreign trade being able to function freely. Third, the macroeconomic programme being implemented by your Government under the heading Growth, Employment and Redistribution Strategy or GEAR is increasing confidence on the part of both domestic and foreign investors that South Africa guarantees them profitability and protection.

These official measures combined with solid infrastructure, abundant natural resources and competitive production costs makes your country the dynamo of economic development in the whole of Southern Africa. Your Government's responsible actions to promote stable regional development are likewise a factor that creates faith in foreign trade and the profitability of investment not only in South Africa, but also more broadly in her neighbouring countries. That gateway role that your country is playing has been noticed by Finnish industry, which strives to use South Africa as a bridgehead for operations in the entire region.

Membership of the European Union since the beginning of 1995 has brought Finland new cooperation channels also in our relations with South Africa. Within the Union we have worked consistently towards the goal of a free-trade agreement that accords with the interests of both parties being concluded between South Africa and the EU at the earliest possible date. That would offer South African companies, which are already strongly established in Europe, new commercial opportunities in the EU with its 370 million consumers and enormous purchasing power. A gradual and asymmetric transition to as free exchange of goods as possible with the EU would also guarantee that those of your country's industrial sectors that have been isolated for so long would be given the period of adjustment they need.

In the course of the last few decades, Finland gradually opened her own market to international competition and consistently integrated into international and Western European regional economic organisations. Our experience shows that protecting one's own industry from international competition by means of closed markets and subsidies is a short-sighted policy. Only by opening up are companies given the wherewithal to cope also in the global market.

In order to succeed in tough international competition Finnish industry has depended on a strategy in which there is a strong emphasis on creating advanced technology and know-how in certain areas of special expertise and then striving to be among the world leaders in those sectors. In a key position is research and development, on which we are now spending over two per cent of our gross domestic product. The Government has decided to increase that percentage to three by the end of the decade, and that will be one of the highest figures among the industrial countries. The strong innovation chain that we have created between universities, research institutions and companies is one of the main pillars supporting our national competitiveness.

Finland has high-level and competitive technology to offer in many sectors, especially forest products, the mining and metallurgical industry, telecommunications, energy and environmental protection, a field that is constantly growing in importance. All of those sectors have key roles also in plans to develop the South African economy.

Forests are Finland's most important and almost only natural resource, one that we are used to cherishing carefully. That requirement has forced our industry to develop technological solutions that increase wood production and lessen the load on the environment. Today, Finland is one of the world's leading producers of paper, paperboard and pulp. Finnish-made wood-processing machinery and equipment and forestry machines are likewise well-known in your country.

The South African and Finnish forest products industries face the same strategic choices in relation to ensuring supplies of raw materials, modernising production and meeting the requirements of sustainable development. Although we are partly competitors, it is certainly possible for our industries to find new ways of cooperating to respond to those challenges.

Thanks to your rich deposits of ore and minerals, a highly-developed and modern mining industry is the backbone of the South African economy. Finnish mining companies and equipment suppliers have a well-established position in your country as dependable business partners. This high-level technological know-how on both sides places us in an excellent position to broaden cooperation between us. We in Finland are interested in hearing about your experience of harnessing and using natural resources in other African countries. There could be opportunities for cooperation between us also in this area.

Efficient telecommunications are an essential prerequisite for economic development in a country like South Africa, where geographical distances are great. Indeed, your country's reconstruction and development plan contains ambitious goals to bring telephone and other communication systems to the most remote districts. Rapidly-developing mobile phone technology offers one alternative here. Finland is among the world's leading developers and producers of telephone and especially mobile phone systems and equipment. This is a growing sector in trade between our countries.

Environmental protection has become one of the greatest global challenges of our era and a prerequisite for sustainable development. We have had to pay special attention to this matter for a long time in Finland so as to ensure that the demands of our industrial society do not unduly burden our vulnerable Arctic natural environment. Indeed, our industry has managed well to respond to that challenge by developing environmentally-friendly industrial processes that minimise emissions. In South Africa, the Finnish Government is participating in the work of revising water legislation, a matter of great importance to the entire population.

The few examples that I have mentioned show clearly that there are excellent opportunities to increase trade and economic cooperation between our countries. Yet I have the impression that the diversity of the range of products that Finnish industry offers is not yet particularly well-known in your country. Correspondingly, there is a need in Finland for additional information on what South African exporters have to offer. This business forum as well as the cooperation agreement signed today between our industrial confederations will serve exactly that purpose.

Together with the Finnish business delegation accompanying me, I am very interested in getting to know Johannesburg, with its legendary reputation as a city of gold, as well as its dynamic economic sector. We have noted that freedom to engage in economic activities has in recent years brought forth new entrepreneurs that were formerly aside from the mainstream of industry. We hope that we will also be able to establish contact with those forces, which will certainly make new breezes blow in the South African corporate world and thereby strengthen its competitiveness.

The governments of Finland and South Africa are trying to make their respective contributions to creating the best possible framework for trade and economic cooperation between us. The participation in this state visit of such a large and high-level corporate delegation is a demonstration of the great interest that Finnish industry has for South Africa's rapidly-growing and developing market. It is now time to roll up our sleeves and get down to work in earnest.

Many thanks.