'Nokia-driven economic chill overblown'

Finnish envoy has intellectual debate with Korean students

By Kang Hyun-kyung

Is Samsung’s influence on the Korean economy comparable to that of Nokia on the Finnish economy? And if so, will the Korean economy freeze if Samsung collapses, just like the Finnish economy did after Nokia’s downfall?

The above questions were raised on June 3 when Finnish Ambassador to Korea Mattie Heimonen met with 21 Joongdong High School students at his Seoul residence, as part of the Finnish Embassy’s efforts to reach out to the Korean public. The students were first- and second-year students at the southern Seoul high school and were members of a student society that aims to promote a better understanding of foreign cultures and international affairs.

One of the students raised the hypothetical questions shortly after Heimonen gave them an overview of Finland and the European Union.

“They are questions that Korean journalists often ask,” Heimonen said.

In response, the envoy first corrected the student’s expression, stressing that Nokia didn’t fail. The company is still doing business and has been focusing on information networks and data technologies since it sold its smartphone business to Microsoft last year.

“Regarding Nokia’s impact on the Finnish economy, I would say that the impact of neighboring countries’ economic situations on our economy is much greater than Nokia’s. Finland is an export-led economy, and thus, the eurozone crisis has had a real impact on the economy.”

He dismissed the popular belief that the stagnant Finnish economy is a direct result of Nokia’s consecutive losses in the years before it restructured. However, he stopped short of directly answering the student’s question about the possible impact of Samsung’s hypothetical failure on the Korean economy. Diplomats are trained not to comment on a host country’s domestic issues.

The similarities between Nokia and Samsung have prompted industry watchers to compare the two companies’ roles in their home countries’ economies. They wonder whether Samsung’s hypothetical failure would impact the Korean economy in the same way that Nokia’s restructuring did the Finnish economy.

From 1998 to 2007, Nokia reportedly contributed a quarter of Finnish economic growth. Its corporate tax payments during the period accounted for 23 percent of the nation’s total.

At its peak, the then handset giant’s revenues accounted for nearly 20 percent of Finland’s gross domestic product. However, its sales fell dramatically after the company lost the global smartphone market to Samsung and Apple.

Former Finnish Prime Minister Alexander Stubb attributed Nokia’s defeat to the rise of the iPhone.

“A little bit paradoxically, I guess one could say that the iPhone killed Nokia and the iPad killed the Finnish paper industry. But we will come back,” he told CNBC last year.

In 2012, Samsung overtook Nokia as the world’s No. 1 smartphone provider in terms of market share. A year later, Samsung accounted for 16 percent of the total corporate tax paid in Korea.

The comparison of Nokia and Samsung and their respective roles in their home countries’ economies has evolved into a debate about how the Korean government should treat conglomerates.

Advocates of conglomerates call for policy incentives, saying the fate of the Korean economy depends on those of these global companies. Meanwhile, opponents urge the government to come up with measures to cut the economy’s reliance on these conglomerates.

Despite the continuing contraction of the Finnish economy, Heimonen remains optimistic about its future because of the emerging innovative startups and the strong education system in Finland.

“In Finland, there are lots of innovative startups. After Nokia sold its handset business to Microsoft and laid off employees, many of those engineers created startups. Hundreds of startups have been created by these people,” he noted.

Another similarity between Korea and Finland is that students in both countries have topped the Program for International Student Assessment run by the Organization for Economic Cooperation and Development.

In Finland, Heimonen said, equality is at the heart of education and teachers focus on making sure that no children are left behind in class.

“Finland’s equal opportunity for education lies behind its free tuition policy. Even foreign students don’t pay tuition. I am not sure if free tuition policy for foreigners would continue in the future though,” he said.

“The history of Finland is the history of education.”

Teachers are required to have a masters’ or higher degree and are highly respected in the European country, he said when asked to cite the differences in education between Korea and Finland.

The Finnish Embassy regarded the meeting between Heimonen and the Korean students as part of its effort to engage with the Korean public, and more specifically, to promote a good impression of Finland to Korean youth, who are Korea’s future leaders.

Baek Geun-ho, a second-year student, said he learned a lot about Finland through the interactive meeting with the Finnish ambassador.

“While preparing questions that I was going to ask to the ambassador, I realized that Korea and Finland have a lot in common. Both countries have a strong tradition in education,” he said.