Does the secondary education (with skilled

labour) serve the needs of Foreign Investors?

Attila, Debreczeni Senior Consultant

Secondary education – Economy – Regional Development

Finpro CSE – March 17, 2009

© Finpro ry© Finpro ry

Topics

Foreign Direct

investments –

academic &

Finnish way

Finnish Foreign Direct

Investments –

Developments &

Presence in Hungary

Case

studies &

feedbacks

Future outlook

& feedbacks

Are the labour

availability &

skills the critical

factors?

© Finpro ry

FDI – academic approach & Finnish way in the CSE Region

Resource-seeking

Market-seeking

Efficiency-seeking

Strategy assets-seeking

Industrial

organisation

(Mason)

Neoclassical – Int.

Trade Theory

(Smith, Ricardo)

Product life cycle

(Vernon)

Finnish way

Approach/

Region

Market-

seeking

Resource

-seeking

Efficiency-

seeking

Strategy

assets-

seeking

Scandinavia X X X

Baltic X X X X

Russia X X

Germany X X

Western EU X X

Eastern EU X X X

China X X

India X X

USA X X

Source: Finpro analyses, 2008

Development of Finnish FDI

• Total stock of Finnish FDI: € 60.2 bn.

• Quadrupled in 10 years

• Major sectors (2007): Manufacturing (~36%), Financials

& insurance (~33%) & other services (~31%),

• Manufacturing share decreasing

• FDI destinations: majority in Sweden (~23-25%),

Netherlands (~20-22%), Belgium (~23-25%),, Germany &

USA

Development of Finnish Trade & FDI in CSE

FDI Hot spots

Presence of Finnish FDI and companies in Hungary

1999

1990

2008

~ € 1.2 – 1.3 bn.

350 Exporters

Almost 200 companies with Finnish capital

Appr. 20 manufacturing companies

Finnish-Hungarian trade exceeds 1 bn. euro

Total Finnish investments ca. 1,200 -1,300 million euros

Finnish companies employ close to 20,000 persons in Hungary

Nokia Mobile PhonesElcoteqSanoma BudapestPerlosSavcorM-RealStora Enso PackagingKemira GrowHowRautaruukkiScanfilLindströmHelkama ForsteClairiaHansa PrintRaflatacHuurre

Nokia R & D3C Hungary (CCC)ICM

UPMM-RealStora EnsoMartelaTikkurilaKoneKone CranesFiskarsWärtsiläEnstoEtc.

Productional R&D / PlanningSales offices

FDI History

Does the secondary education (with skilled labour)

serve the needs of Foreign Investors?

1. Main findings of some

case studies

2. Feedback from some

businessmen

1. Future outlooks

Suggestions

Case 1

Evaluator: City

Factor weight sub-weight score

1. COSTS 50 % 100 %

Cost development (#1 criterion) 70 % 65

Current costs: total cost, personnel costs as key component, travel costs from Oslo

and Hki, investment incentives (#2 criterion) 30 % 70

weighted score 66,5

2. COMPETENCIES 30 % 100 %

Skill availability (11 person) 70 % 80

Availability of English language and technical skills (from universities) 30 % 90

weighted score 83

3. INDUSTRY 10 % 100 %

Existing industry (SW industry, telecom sector (network vendors, operators, billing

system vendors –both large and SME’s), also examples for acquisition targets/

partner model 30 % 80

University co-operaration 20 % 75

Outsourcing availability/ culture (less important) 20 % 80

Employee turnover (qualitative estimate), too much competition? 30 % 60

weighted score 73

4. OTHER 10 % 100 %

Flight connections/ travel logistics (to Oslo & HKI, EU, CSEE, MENA) (3) 40 % 75

Attractiveness to expatriates (2) 30 % 80

Level of business culture (experiences from working with western companies) and

development trend (3) 30 % 80

weighted score 78

TOTAL SCORE/400 100 % 300,5

Factor weighted score/100 100 73

A Finnish software company

Costs 30%

Cost of Labour

Basic structure of labour costs

Statutory minimum wages

Annual development of average gross wages (region & local/blue collar, white collar, management)

Annual development of average net wages (region & local/blue collar, white collar, management)

Employers contributions 2006

Employees contributions 2006

Development of employee contributions 2000-2005

Development of employers contributions 2000-2005

Typical benefits on top of base salary for blue collar workers

Typical benefits on top of base salary for managers

Typical benefits on top of base salary for white collar workers

Market movement 2000-2005 on base pay and total

compensation

Government and EU employment support availability?

A Finnish electronics

company

Case 2

A Finnish manufacturing company

Factor weight sub-weight

1. SUPPLIER BASE 20 %

Within ~400 km radius / 8-9 hours

truck drive 100 %

2. RESOURCES 35 % 100 %

Management & other white collars 40 %

Blue collars 40 %

Corporate support, `easy access` 20 %

3. OPERATIONAL SCALABILITY 15 % 100 %

Factory in 6,000 sqm; 10,000 sqm;

20,000 sqm (in 2011) 80 %

Outside storage space: ~ 20,000 sqm 20 %

4. POLITICAL INVESTMENT

MANAGEMENT 10 % 100 %

Enforceability of local contracts 50 %

Possibility for investment incentives 50 %

5. COST COMPETITIVENESS 20 %

Labour 80 %

Facility 20 %

100 %

Case 3

5 Finnish businessmen were interviewed;

Sectors: ICT & Manufacturing

Special note: Not representative research

Feedbacks from Finnish Businessman

Decision factors Factors Weights, %Country macro-stability 10

Labour costs 25Labour skills 10Location 30Incentive system 5Infrastructure, education system 20Total: 100 %

Table 1: Decision factors

Country attractiveness on labour issuesPoland Slovakia Hungary Romania Bulgaria

Skill availability 3 1 2 4 4Technical skills 3 1 2 4 3Availability of

English language 4 3 4 1 2Motivation & commitment 3 3 2 3 4

Innovative skills 3 2 2 4 4Supportive

educational system 3 3 3 3 4Total 16 13 15 19 21

Ranking III. I. II. IV. V.

Scales:1 - the best7 - the worst

Table 2: Country attractiveness on labour issues

- Main findigns

Hungary vs. CSE Region

Labour issues as Critical factors:1. Skills;

2. Available quantity in 50-60 km radius;

3. Other foreign companies in the neighbourhood - negative

4. Near by universities (mainly at ICT);

New comers

© Finpro ry

Future outlook: GDP – forecast for 2009

© Finpro ry

-1,2

-1,4

-5,0-2,8

-1,6 -2,0

-1,8

-1,9

-2,0

-2,3

?

-6,9

-4,0

-2,0

-1,2

+1,7

+2,7

-1,6

+1,8

+1,8

+0,6

-1,0

+2,0

-4,7

?

+0,2

+1,1

-0,9

+0,7

USA -09

-1,6EU -09

-1,8

UAE

+1,5%

JPN -09

-2,4

SA

+2,5%

USA 2010

+1,7

EU 2010

+0.5JPN 2010

-0,5

+1,0

+1,0

+7,0

+2,0

-4,0

n.a.

India

& China

Source: EU Commission

~ 10 -

12%

© Finpro ry

Future outlook: Unemployment and forecast > or <

© Finpro ry

7,8>

7,9>

9,7>8,2<

8,8> 16,1>

9,8->

8,0>

4,1>

7,7>

?

10,4>

8,8>

8,2>

5,1>

5,7>

10,6<

8,8>

7,0<

6,3>

5,2<

4,5>

8,4>

8,8>

?

9,0>

5,1>

4,9>

7,4>

EU -09

8,7

UAE

n.a.

SA

n.a.

EU 2010

+9,5

12<

10<

11

20

2,2>

n.a.

India

& China

Source: EU Commission

~ 8 -

14%

© Finpro ry© Finpro ry

Suggestions

Updated database on

available resources

-Alumni-

&

50-60 km radius

Improve English

language skills of students

Cooperation

With ITD Hungary &

relevant Trade promotion agencies

Promotion

English webpage

&Success stories

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Introduction of Finrpo CSE & ME

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Black See

Power Triangle

Region

5

RITs

Matrix organisation

Industries

Reg

ion

s

Construction

Logistics

Machinery

ICT

Energy

Environment

Forestry

Life Science

Hqr: Vienna

Prague

Budapest

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Sofia

Istanbul

Riyadh

Dubai

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