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The transformation of the forestry-related industries

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Title Finland as a knowledge economy The emergence and transformation of the forestry-related industries Author: Christopher Palmberg Last modified by – PowerPoint PPT presentation

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Title: The transformation of the forestry-related industries


1
The transformation of the forestry-related
industries A Knowledge Economy perspective
  • Christopher Palmberg
  • Etlatieto

2
Structure of presentation
  1. Position of the forestry-related industries in
    Finland and globally
  2. Co-evolution of the forestry-related industries
    and the Knowledge Economy
  3. Preliminary conclusions and next steps

3
Position of forestry-related industries in
Finland and globally
4
Contribution to the volume of manufacturing
production
(Source ETLA database)
5
Economic significance of pulp paper industries
Share of Total Value Added
Share of Total Employment
(Source OECD 2003)
6
Forestry-related industries in Finland
1980 1985 1990 1995 2000 2002
Manufacturing output 23.4 18.8 19.0 25.0 24.0 19.8
Employment 4.5 3.8 3.4 3.4 3.1 2.9
GDP 6.6 3.3 4.5 6.5 5.9 4.8
Exports 42.4 36.2 37.6 33.7 26.1 25.4
(Source Lindström et al. 2004)
7
The relative technological advantage of Finland
(Source Balaguer Tsai 2004)
(RTArelative share of US patents in class X in
Finland/relative share US patents in class X for
the world)
8
Finlands share of the Worlds...
forest resources

softwood growing stock
timber removal
harvesting of industrial wood
forest industry output
forest industry exports
paper and paperboard exports
printing and writing paper exports
paper machinery exports
pulp machinery exports
0
5
10
15
20
25
30
35
40
(Source Finnish Forest Industries Federation
2003)
9
2. Co-evolution of the forestry-related
industries and the Knowledge Economy
10
Key issues to be addressed
  • How have the forestry-related industries
    contributed to the development of the Finnish
    knowledge economy?
  • How can the knowledge economy contribute to the
    further development of the Finnish
    forestry-related industries?
  • What can be learnt from the viewpoint of other
    countries the development of knowledge
    economies based on traditional/resource-based
    industries?

11
Value of exports of forestry-related industries

12
The forestry cluster in Finland
13
Basis for competitiveness ICT versus
forestry-related industries
2000
2000
1980
1980
1960
14
A phasewise account
  • An import-phase 1860-1917
  • An import-substituting phase 1920s-1950s
  • A phase of technological and productivity gains
    1960s-1970s
  • An ongoing phase of internationalisation,
    consolidation and globalisation

15
Forestry-related industries as early lead users
of electronics and IT in 1970s and 1980s
Knowledge economy developments emergence of
ICT at the core
Intensified ICT usage of future key importance
to forestry cluster?
16
1. Import-phase until 1917
  • First pulp mill started production in 1860
  • Close cultural ties, especially with Germany,
    paved way for imports of machinery technology
    transfer
  • Early integration between pulp paper and
    related engineering an atypical pattern!!
  • Restictions on acquistition of land from
    peasentry
  • Transportation routes frozen during winter
    in-house maintenece a necessity
  • Numerous transportation equipment demanded
    indigenous engineering skills

17
2. Import-substitution phase 1920s-1950s
  • World War I stalled engineering imports, while
    export markets were lost
  • Finlands independence in 1917 fuelled strives
    towards national self-reliance
  • Extensive state-involvement nationalistaion,
    state-owned companies, high tariffs, export
    cartels
  • RD-base strenghtened, KCL founded 1916, METLA
    founded 1917 etc.
  • Inventories, legislation on forest depletion etc.
  • Licensing combined with emerging user-producer
    ties an intelligent followers strategy

18
  • World War II stalled imports and exports
    againloss of forestry resources
  • War repatriations contributed to futher
    development of indigenous capability
  • Consolidation and shift towards integrated
    production
  • User-producer ties emerge, related industries and
    services (e.g Jaako Pöyry, VTT in 1942)
    embryotic cluster identifiable
  • Diversification from sawn wood towards paper
    brands, paper board and machinery
  • Exports reach pre-war levels by end of 1950s

19
Integrated production
20
3. Technological and productivity gains
1960s-1970s
  • Developments (again) spurred by external
    developments
  • Liberalisation of trade - Finland participates in
    EFTA
  • Post-war boomfollowed by energy crises and price
    hikes
  • High and fluctuating stumpage prices for wood
  • Microprocessors, accelerating computerization of
    production
  • Massive capital investments to increase
    productivity, competitiveness and value-added
    average plant size grows
  • Development and adoption of process control and
    automation systems to optimize value chains
  • User-producer ties between paper and machinery
    makers strenghten further, first computer in 1963
  • From foreign licenses towards in-house adaptation
  • In-house ? spinn-offs ? outsourcing,

21
  • The knowledge economy context
  • governmental initiatives
  • State Computer Center (VTKK) founded in 1964
  • ADP Advisory Board established in 1975
  • Technology Council founded in 1979
  • forestry-related industries provide early market
    for pioneering electronics/ICT firms
  • Strömberg, Ahlström-Altim Control-Honeywell,Kajaan
    i Electronics, Roibox, Acatec,Beamix,Valmet-Metso,
    Suomen Kaapelitehdas (Nokia),Tietotehdas-Carelcom
    p-Tietoenator, IBM etc.
  • Export-orientation replaces import-substitution
  • The great leap of the forestry-related
    industries

22
4. Ongoing phase of consolidation,
internationalisation and globalisation
  • Consolidation, internationalisation and further
    capital investments prompted by
  • intensfied competition, EU membership - EMU
  • Southeast Asian countries enter global
    competition
  • continued rise in value-added of end-products
    customization
  • global shift in investment and consumption from
    US and Europe towards Asia (especially China)
  • Consolidation ? specialisation ? changing
    division of labour within forestry cluster
  • Internationalisation and globalisation ?
    intensified usage of ICT services to mange global
    value chains

23
Consolidation the Million Tonners Club in
pulp paper
1. International Paper 14 423 000 USA
2. Stora Enso 12 971 000 Finland
3. Georgia-Pacific 11 555 000 USA
4. UPM-Kymmene 8 285 000 Finland
5. Nippon Unipac Holding 7 957 000 Japan
6. Smurfit-Stone Container Corp. 7 445 000 USA
7. Oji Paper 7 111 000 Japan
8. Abitibi-Consolidated 6 406 000 Canada
9. Mondi International 5 967 000 South Africa
10. Weyerhaeuser 5 442 000 USA
13. M-Real 4 219 000 Finland
31. Myllykoski 1 859 000 Finland
(Source Finnish Forestry Industries Federation
2003)
24
Specialisation - changing division of labour
within cluster
Forest industry
  • Outsourcing to suppliers
  • engineering
  • management of investment projects
  • maintenance
  • RD
  • Outsourcing to suppliers
  • ICT
  • RD
  • Project management
  • Marketing
  • Consultancy
  • Logistics
  • Maintenance

The changing division of labour
Services
Engineering and Machinery
  • Outsourcing to suppliers
  • Maintenance
  • RD

-
(Source Lindström et al. 2004)
25
Globalisation and ICT usage major Finnish pulp
paper firms
Procurement of external ICT services
(Source Lindström et al. 2004)
26
3. Preliminary conclusions and next steps
27
Conclusionsto be specified
  • Forestry-related industries constitute the first,
    but still significant, pillar of the Finnish
    economy
  • An atypical pattern of evolution of
    forestry-related industries from sawn wood to
    quality paper brands and high-tech
  • Geography
  • Governmental initiatives and policies
  • External constraints and possibilities
  • RD, managerial issues
  • The contribution of forestry-related industries
    to knowlede economy developments
  • Backward linkages from forestry to
    engineering/machinery
  • Forward linkages from engineering/machinery to
    electronics/ICT
  • Consolidation, internationalisation and
    globalistion knowledge economy developments of
    key importance?
  • Tailor-made ICT content, intensified ICT usage
  • Internationalisation of ICT service providers

28
Next steps
  • Greater focus on knowledge-economy viewpoints
  • Early phase of the building of the knowledge
    economy in Finland
  • Present challenges?
  • Highlight developments since 1970s, less emphasis
    on pre-war history
  • Illustrative firm-level examples

29
Some important references
  • Lovio, R (1989) Suomalainen menestystarina -
    Tietoteollisen verkostotalouden läpimurto
  • Raumolin, J (1992) The diffusion of technology
    in the forest and mining ssector in Finland
  • Kässi, T (1994) Engineering ala Suomessa
    toimialasta klusteriksi?
  • Lammi, M (1994) Paperin, koneiden ja osaamisen
    menestystarina
  • Palmberg, C (2001) Sectoral patterns of
    innovation and competence requirements A closer
    look at low-tech industries
  • Jääskeläinen, J Lovio,R (2003) Globalisaatio
    saapui Varkauteen
  • Lindström, M, Martikainen, O Hernesniemi, H
    (2004) Tietointensiivisten palvelujen rooli
    metsäklusterissa
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