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FINLAND: An Introduction to Shipping

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1 Current Economic Situation 

The World Economic Forum regularly ranks Finland in the top 10 of the most competitive countries worldwide. However, in January 2020 the Bank of Finland forecast that the peak of the cycle in the Finnish economy is now over and economic growth is temporarily losing momentum. Although growth for the current year was still good, there were clear signs of a slowdown. Growth had already slowed down important trading partners of Finland, and in the domestic economy both business and household confidence had been declining for some time. In March 2020, the Bank of Finland announced that the economy in Finland will head into recession in 2020 due to the coronavirus pandemic. In the end, how deep the plunge will be partly depends on the political measures and actions taken, and how fast the measures will be put into action.

However, in these exceptional circumstances Finland has many things to be grateful for. Finland's education system is globally renowned. For more than a decade, Finland has been one of the top performers in the Programme for International Student Assessment (PISA). Now that schools are closed and people are ordered to home offices and children to distance learning, Finland is very well equipped for this challenge, as many of the learning platforms used are available to all students online, as well as communication with the teachers. According to Ishita Barua in an article written for the World Economic Forum, “the Finns are not only outperforming others in the classroom; they are also frontrunners when it comes to change management, implementation of evidence-based measures and education in artificial intelligence (AI). These factors contribute to the image of Finland as an innovative and ambitious nation equipped to meet the new societal challenges ahead. There are undoubtedly many countries in the world that could benefit from looking to Finland. Finland changed from being an investment-driven economy to becoming a knowledge-driven economy. Thus in recent years, Finland has developed a leading start-up environment from the ashes of a fallen empire.” In our opinion, Finland is very well equipped for the challenges ahead, and history has proven that the nation’s ability to adapt to changes in the economic scene and to cope with crisis is very good.

2 Shipping and logistics 

2.1 In times of crisis 

Finland is dependent on sea traffic, its fluency and competitiveness. Almost 90% of exports and imports to Finland in 2019 were transported by sea; in this sense, Finland is an island. The continuity of shipping is essential for a working society in Finland. The Finnish National Emergency Supply Agency will continue to work in order to secure the export and functioning of the logistic sector in all circumstances. Even though passenger traffic has been restricted through recommendations by the Finnish government, this restriction has not concerned goods. The Finnish emergency supply is based on a long-term cooperation between private companies and the public sector, supported and coordinated by the National Emergency Supply Agency. It is critical to secure the functioning of the whole logistic chain through closely cooperating with shipowners, ports, agents, freight forwarders, pilots etc. Domestic passenger transport will have to remain operational in order to secure that critical functions can still continue, such as nurses and doctors getting to work. The domestic transport of goods, such as daily consumer goods, is also being secured. The government of Finland has stated that it will at times secure, in cooperation with authorities, shipowners, logistic companies and the Nationals Emergency Supply Agency, the transportation of goods and freight.

2.2 Economic outlook 

Seafaring builds value chains that create the basis for the growth of industry, tourism and other forms of trade. The Finnish shipowners are forerunners of technology and environmental innovations and are actively participating in developing solutions for sustainable shipping.

According to a transport barometer 1/2020 performed by the Finnish Transport and Logistics Association SKAL, many Finnish operators in the haulage and logistics sector forecast a decrease in turnover and transport volumes during 2020.

According to a yearly questionnaire performed by the Finnish Transport and Communication Agency, Finnish Shipowner’s Association and the Provincial Government of the Åland islands in 2019, directed foremost to Finnish shipowners, the positive economic trend has stagnated and the outlook is also negative. The ones participating in the questionnaire are of the opinion that freight rates have gone down and that there will be further competition. One of the obstacles amongst the participants was the problems in finding educated seafarers, increasing labour costs and costs associated with flying the Finnish flag. A positive aspect in the questionnaire was that some of the charterers seem to emphasise sustainability and are willing to pay for costs in relation to sustainability, such as costs for alternative fuels.

3 Trends and Developments 

3.1 The Maritime Cluster takes on the challenge of environmental technology and digitalisation as a means to reach sustainable solutions within the maritime industry

The Maritime Cluster continues growing. The positive news all seems to be from the Finnish Maritime Cluster. The goal of the Maritime Cluster is to be at the forefront of environmental technology and digitalisation. The Maritime Cluster in Finland is one of the largest in the world, since companies within maritime technology, cargo handling, ship design, power solutions, cruise and special purpose vessel yards etc., all cooperate. The Maritime Cluster comprehends approximately 3,000 companies and employs about 50,000 persons, which is in fact more than the forest industry employs. The Maritime Cluster has grown steadily in the last 10 years and continues to grow. The turnover within the cluster is approximately EUR13 million. One reason for the expected growth within the cluster is that Finnish companies are forerunners within digitalisation and finding environmentally friendly solutions. The positive outlooks that have prevailed in recent years are down to the development of autonomous maritime traffic among successful trials of the deployment of new, environmentally friendly technologies, and an upswing in cruise ship construction. The companies within the cluster also emphasise the open and unique cooperation with the authorities, which has enabled different types of tests and piloting of new innovations.

Examples of this include: the One Sea innovation ecosystem, which is promoting autonomous maritime traffic; the remote pilotage experiment, which is currently under preparation; and the smart fairway, which is based on using data and data exchange in an entirely new way.

The Maritime Cluster is also a pioneer in environmental innovation deployment of low-emission technologies that enhance energy efficiency. Liquefied natural gas (LNG), wind, electricity and biofuels manufactured from waste are already being used by Finnish shipowners.

Automation and digitalisation will lead to transformation of seafaring. Climate change is challenging the maritime cluster to identify solutions for low-emission maritime traffic.

The IMO envisages a total greenhouse gas emissions reduction from international shipping and has identified different levels of ambition.

There is focus on decreasing emissions from the Finnish Maritime Cluster. Especially the ports have started to fight emissions through the information available thanks to digitalisation.

The environmentally friendly newbuilds ordered by Finnish shipowners have also served as references worldwide. The first LNG fuelled passenger vessels have been ordered by Finnish shipowners.

The Finnish Maritime Cluster seem to be well prepared to reach the goals, partly through smarter processes, thanks to information available through digitalisation, but also through new technology which is constantly being developed and tested.

3.2 Finland and Sweden enter into an agreement on the design of the next generation icebreakers

The Finnish Transport Infrastructure Agency (FTIA) and the Swedish Maritime Administration (Sjöfartsverket) have signed a cooperation agreement for the design of the next generation of icebreakers.

The design of the icebreakers will be carried out as a joint procurement. The cooperation agreement now concluded concerns only the design of the icebreakers; no agreement has yet been made on the possible construction of the icebreakers. The agreement applies to the design of two icebreakers for Finland and three for Sweden.

The size of the vessels operating to Finnish and Swedish ports is increasing. The tightening of environmental requirements, however, is reducing the engine power of merchant ships, and this reduced engine power affects their ability to move through ice.

The close cooperation between the two agencies is based on intergovernmental agreements.

3.3 The climate policy for the transport sector 

In the Finnish National Energy and Climate Strategy for 2030, transport plays a key role as the transport sector produces some 40% of the Finnish greenhouse gas emissions and at the same time it is even more difficult to cut emissions in other sectors. The transport sector is preparing to reduce its emissions by up to 50% by 2030. The measures will focus especially on road traffic, which presents the greatest potential for emission reductions. The reduction goals for greenhouse gas emissions from international aviation and shipping and the mechanisms for reducing emissions are being developed by the ICAO and the IMO. The EU’s current emissions reduction systems (incl. aviation emissions trading) will be re-evaluated at the same time. Emission reduction measures can be divided into three categories: transport system level changes, improvements in vehicle energy efficiency and increased use of renewable fuels.

3.4 National transport system 

In December 2019, the government set up a parliamentary steering group that will outline the objectives of Finland's first 12-year national transport system plan and guide the preparation of the plan's action program. Timo Harakka, the Minister of Transport and Communications, was appointed chairman of the group.

The national transport system plan applies to all means of transport. It provides a basis for planning the entire Finnish transport network and traffic services.

The first national transport system plan will be drafted for 2021–2032. The plan is scheduled for completion during spring 2021.

The Ministry of Transport and Communications will launch negotiations to establish project companies for the one-hour Helsinki–Turku fast rail link and the Finland Railway line. The project companies would be responsible for planning related to the projects and for its funding until the construction phase.

3.5 Tender for commuter train services 

The Helsinki Region Transport Authority (HSL) has started the two-stage tendering procedure tender for the operating contract for commuter train services starting from 2021. Main goals for the tender were improving quality, reliability and cost efficiency of train services. HSL received only two offers, of which one was given by the incumbent, the Finnish VR Group, although seven companies had expressed interest in the tender. The decision on the winner will be made before the summer of 2020. Train operations and maintenance under the new contract will begin in June 2021 and the likely contract length is 10 years and approximate contract value EUR60 million per year.

4 New legislation that will have an effect on clients

4.1 Transport Services Act 

The Transport Code, formally the Act on Transport Services (320/2017), has been one of the government's chief initiatives. The main purpose of this ambitious, open-minded and future-oriented legislation project is to create a growth environment for business digitalisation and to promote transport business by deregulation. The Act unifies legislation governing different transport modes and reforms the strict regulation of all transport modes, so that at least the regulation itself will not become an obstacle to digitalisation, automation and new innovations and business models.

The essence of the Code is customer-oriented and digitalised transport services. The crucial thinking behind the Transport Code is based on the concept of “mobility as a service” (MaaS).

The Act is tailored to enable and promote the seamless and multimodal travel and transportation chains and other combined added value mobility services by opening up the data on traffic systems to be shared between customers, service providers and authorities as openly as possible to promote additional value. Not surprisingly, data protection issues and the GDPR have had a big role in legislation process.

4.2 Shipping 

Fairway dues have been halved for the period between 2019–2020. Reformation of the Finnish fairway due system is being examined, but possible reforms are intended to take effect at the earliest in 2021. Environmental regulation has a major influence especially on shipping. For example, the Energy Efficiency Design Index (EEDI) is a challenge to the Finnish shipping sector due to ice conditions during winter periods. It is also worth noting that remote pilotage, i.e. pilotage taking place outside a ship, is now allowed in Finland from February 2019.

4.3 Road 

The Finnish taxi market was opened to competition as part of the Transport Services Act in July 2018, and taxi fares are now allowed to be determined freely. As a consequence of the reform, the number of companies in the taxi market has increased and some foreign companies have also entered the market. However, even though deregulation improved the provision of new types of services, at the same time a legislative project has been launched with the purpose to resolve shortcomings related to the safety, quality, availability and pricing of taxi services, the role of brokering centres and increased grey economy.

Endnotes: 

The Bank of Finland homepage; https://www.bofbulletin.fi/en/2019/5/finland-s-economic-boom-over/. The Bank of Finland homepage; https://www.eurojatalous.fi/fi/2020/artikkelit/maaliskuun-2020-talouskatsaus-suomen-talous-taantumaan-koronaviruksen-takia/. Ishita Barua, MD & Research Scientist, University of Oslo, Three ways Finland leads the world aside from education; https://www.weforum.org/agenda/2019/03/three-ways-finland-is-punching-well-above-its-weight/, World Economic Forum.

The National Emergency Supply Agency of Finland; https://www.varmuudenvuoksi.fi/aihe/elintarvikehuolto/441/rajat_eivat_sulkeudu_tavaroilta Publications of the Centre for Maritime Studies Brahea Centre at the University of Turku, B 212, Jenny Katila, Minna Alhosalo; https://www.utu.fi/sites/default/files/media/MKK/Julkaisut/B212_Varustamobarometri-Rederibarometern-2019.pdf

http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Pages/GHG-Emissions.aspx https://vayla.fi/web/en/-/finland-and-sweden-agree-on-design-project-for-new-icebreakers

Finland_Report for PAMs and Projections_2019