Defense Market Overview

An Expert's View about Aircraft Parts and Equipment in Finland

Last updated: 30 Jun 2011

Summary
Finland’s total defense budget for 2011 is $3.7 billion (EUR 2.8 billion) representing 5.7 percent of total government expenditure and 1.5 percent of GDP. The Finnish defense forces spent $928 million (EUR 700 million) on defense equipment and materiel procurement in 2010, which is about 26 percent of the total defense budget. The Finnish Defense Contracts Bulletin, published by the Finnish Defense Forces, provides information on military orders from national and international programs and projects. In principle, all requirements of the Finnish Defense Forces valued at one million euros or more are made public for domestic and international industries.

Market Overview
Finland is a relatively large country by area, covering 132,000 square miles with a small population of 5.3 million and 2.4 million households. The three largest cities house over 25 percent of the population, leaving the rest of the country sparsely inhabited. Finland has solid communications infrastructure including an extensive road network, railway system, air service, and telecommunications. Finland has been a member of the European Union (EU) since 1995 and is the only Nordic country using Euro (EUR) as its monetary unit.

The basic factors for Finnish security policy are non-participation in military alliances, a credible defense capability, and membership in the EU. Finland’s security position is mainly influenced by the long shared border with Russia, as well as by the situation in Northern Europe and the Baltic Sea region and the development of relations between NATO and Russia.

Finland participates in international efforts to promote security and stability within the UN, the Organization for Security and Co-operation in Europe (OSCE), EU and NATO’s Partnership for Peace PfP program, and emphasizes Nordic cooperation. Currently, Finland is taking part in nine military crisis management operations with approximately 500 troops.

The Finnish Defense Forces are divided into the army, navy, and the air force. The army is made up of infantry, field artillery, ground-based air defense, and engineer, signal and army aviation branches. The navy comprises Naval Command units and Coastal District units. The air force comprises Air Command and support units. Each year, about 25,000 conscripts and 25,000 reservists (by defense forces) are trained. The wartime strength of the Finnish Defense Forces is about 350,000 men and women.

In 2011, the total defense budget is $3.7 billion, representing 5.7 percent of government expenditure. The Finnish defense budget’s share of GDP, about 1.5 percent in 2011, is low in comparison with the figures for other EU member states and non-EU NATO members. Defense spending as a share of GDP has fluctuated within the range of 1.2-1.6 percent in the period of 1994-2010. In 2010, the defense forces spent $928 million on defense equipment and materiel procurement, which is about 26 percent of the total defense budget.

Defense Industry Environment
The size of the Finnish defense industry is relatively small and is a function of the level of military expenditure. Still the Finnish defense industry is cost-effective and has competence to maintain and repair large and technically demanding systems, including complex information networks. It also has the ability to integrate systems and to manufacture certain critical components. Most Finnish defense products are dual-use products designed primarily for civilian markets.

  Finnish industry is well known for its production of detectors for chemical warfare agents, mobile laboratories with mobile communication systems, and collective protection technologies. Finnish advanced logistics and cargo handling systems, mobile housing systems, and single-fuel aircraft heaters are in use in Europe and the United States. The Finnish telecommunications industry has designed and supplied Finland and other countries with TETRA standard-based telecommunication systems, which facilitate reliable communication among authorities.

Finnish Defense Industry Production / International Cooperation
The Finnish defense industry has traditionally concentrated on conventional production. In the future, Finland will concentrate on developing existing – and new – core technical competencies in order to improve the industry’s competitiveness and role as a major industrial partner in the increasingly international defense industrial business. Such technologies include, for example, information and communication technologies in which Finnish industry has supplied many innovative solutions for demanding military needs. This know-how and technological resources are a result of extensive cooperation and partnership among the military customer, defense industry, and universities and research institutions, which all have contributed special expertise to development work. Procurement based on partnership has also created extensive industrial capabilities in modification, updating, and repair of foreign military equipment.

A technologically and economically competitive defense industry is one of the cornerstones of Finland’s national defense. Both the government and industry recognize that technological competence and competitiveness are also prerequisites for successful international cooperation. Finland, with its Defense forces and industry, is receptive to industrial cooperation and partnerships in Finland and abroad. In 2009, Finland and the NATO Consultation, Command and Control Agency (NC3A) signed a memorandum of understanding on mutual cooperation in key defense technology areas. The agreement facilitates collaboration in new areas such as netenabled technologies that support peace operations, and the verification and validation of interoperability of key systems and technologies.

The Association of Finnish Defense and Aerospace Industries (AFDA) is a non-profit organization that consists of 100 members and covers nearly the entire defense industry sector in Finland. AFDA is in regular contact with the armed forces and the Ministry of Defense and represents Finland in the European cooperation organization, ASD (Aerospace and Defense Industries Association of Europe). AFDA also serves as a link to contacts with NIAG (NATO Industrial Advisory Group).

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Posted: 30 June 2011, last updated 30 June 2011

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