IV.       POLITICAL ENVIRONMENT


U.S.-Finnish Relationship

Relations between the United States and Finland are excellent and
free from bilateral disputes except for the occasional minor
trade dispute.  The U.S. cooperates constructively with Finland
in various international organizations such as the UN and the
OECD.  Both countries share an interest in the stable political
and economic development of the former Soviet Union and have
targeted their assistance programs accordingly.  The United
States has expressed support for Finnish membership in the
European Union if the Finnish people so decide.


Political Issues Affecting the Business Climate

Finnish membership in the European Union will likely dominate the
domestic political debate for the remainder of 1994.  Finnish
business associations and labor unions are strongly supporting EU
membership and are hoping that membership will stimulate
additional economic growth, investment and employment growth.
Should Finland not decide to join the EU, most economists are
expecting a negative economic impact, including slower growth and
reduced business confidence.

Possible additional measures to introduce more flexibility into
the labor market and the government's stance towards becoming
involved in labor-management incomes talks will likely be the
source of some political contention.  To date, unions and
opposition parties have taken a guarded attitude regarding
efforts to restructure the incomes talks framework and to change
rules governing working conditions.  Efforts to cut back and
retarget welfare state benefits in light of reduced budgetary
resources and changing demographics have also been contentious.

Taxation is another political issue which is likely to be of
continuing concern; the current government has had some success
in reducing the tax burden on business, although non-wage labor
costs remain high.  The degree to which state-controlled
companies should be privatized and the amount of participation of
political figures on corporate boards of state-controlled
companies in the interim is an additional area of contention.


The Finnish Political System

Finland is a parliamentary democracy.  Its head of state is a
president elected for a six-year term.  The current president is
Martti Ahtisaari, who took office in March 1994.  The head of
government is the prime minister, currently Esko Aho of the
Center Party.  Parliamentary elections are scheduled for March
1995; the parliament is elected for a four-year term but early
elections are possible.  Nine parties are represented in the 200-
member unicameral legislature.  The parties are the Center Party
(55 seats), Social Democrats (48 seats), Conservatives (40
seats), Leftist Alliance (19 seats), Swedish People's Party (12
seats), Greens (10 seats), Christian League (8 seats), Rural
Party (5 seats), Liberal Party (1 seat), plus 2 independents.
The governing coalition is made up of the Center Party,
Conservatives, Swedish People's Party and the Christian League.


Principal Political Parties

Center Party: The Center Party has a rural base and is
particularly concerned with agricultural interests.  The party
has tied its support for EU membership with additional subsidies
for agriculture.  It has supported economic restructuring and has
resisted calls for large economic stimulation packages.

Social Democratic Party: The SDP is an urban-based party with
close ties to labor unions.  The party is in favor of EU
membership, although rank and file sentiment is about evenly
divided.  While acknowledging a need for cost-cutting measures,
the party has tried to avoid cuts in social welfare expenditures.

Conservative Party: The largely urban-based Conservative Party is
strongly supportive of EU membership.  It has also been in favor
of cutting spending and deregulation.  The Conservatives draw
much of their support from the business community.

Leftist Alliance: The Leftist Alliance was formed from the
Communist Party and other left-oriented parties.  It is largely
opposed to EU membership and has resisted cuts in welfare state
expenditures.

Swedish People's Party: The party draws its main support from
Finland's small (six percent of the population) Swedish-speaking
community.  It is generally center-right in orientation and
strongly supports EU membership.