Infrastructure sector in Finland

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INFRASTR UCTURE SECT OR

IN FINLAND

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Infrastructure sector in Finland

April 2017 Païvi Sievänen Flanders Investment & Trade c/o Embassy of Belgium in Helsinki

Aleksanterinkatu 17 00100 Helsinki helsinki@flanderstrade.com

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Country overview

Finland is located between the 60th and 70th parallels of latitude and is one of the most northern countries in the world. The total area is 338,424 km² (11 times the size of Belgium). Finland is sparsely populated; the total population is only 5,508,366 (November 2016).

Finland can be called a big and a small country at the same time. The market is small due to the population. Most people live in the south of the country, especially around the capital metropolitan area (1,250,000 inhabitants) and around other bigger cities such as Tampere, Turku, and Oulu.

People are more and more relocating to the cities, especially the young people. In Helsinki, the costs of a housing are becoming very high, and the demand is constantly increasing, whereas the rural areas are dying out. This puts pressure to the infrastructure sector. About 10% of the country’s area is in lakes and other bodies of fresh water.

Forests cover 69% of the land. The country has 1000 kilometres of coast. In nature areas dirt roads are still common.

The Finnish soil consists of multiple sediments. The bottom layer above bedrock is glacial till formed during the ice age.

Above this layer is gravel. On top of this layer is usually clay and as a top layer is sand. There tends to be a thin layer of dirt on the sand.

The official languages are Finnish (90%) and Swedish (5%), but English is widely spoken. Finnish companies can be approached in English.

Finland joined the European Union in 1995 and the euro was taken into circulation in 2002. Joining the EU gave foreign companies more access into the Finnish market and new products were introduced to the Finnish consumers.

Map source: geography.about.com

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Industry overview

In Finland, technical infrastructure industry is defined as companies that build and maintain the country’s infrastructure. They are considered a part of the construction industry as a whole.

Infrastructure as an industry is composed of different types of segments. It is impossible to describe the industry precisely without acknowledging its fragmented nature. There are a handful of sectors that this market study will take into account and research more in detail.

In Finland, the most prominent parts of infrastructure industry are as follows:

 Roads and bridges

 Harbours and airports

 Technical networks, such as water and electricity

 Information technology connections

 Infrastructure engineering and construction

 Greenspace and landscaping

The most important sectors this study researches are roads and railways, harbours and airports, and infrastructure engineering and construction. The study also touches upon legislation and procurement practices of the industry, as well as introduces some of the key infrastructure projects that are planned or currently ongoing.

In Finland, there are 105,000 kilometres of road and streets and 350,000 kilometres of privately owned roads. The rail network consists of nearly 6,000 kilometres of tracks. The water and sewage system is approximately 150,000 kilometres long, while electric grid and heating networks are around 11,500 kilometres. There are 20 commercial ports for cargo and around 10 ports with international connections meant for passengers. There are also 26 airports in Finland, 24 of which are operated by the state-owned company Finavia. 20 of them are for civilian use only, 4 are for both military and civilian use and 2 are solely for the military. On top this, there are many airfields around Finland.

These are smaller than the regular airports and they are not officially considered airports.

Of the 2013 budget, source: www.infrakuntoon.fi

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Due to the sparsity of the population, roads play a pivotal role in the Finnish infrastructure. The Finnish Transportation Agency calculated that the road network has a repair deficit of 2.5 billion euro.

This means that 2.5 billion euro would have to be put into fixing and upgrading the road network.

Almost half of this money would have to be spent on roads and the other half on railroads, with only a tiny amount going to the waterways. The roads require special attention, because 93% of people and 68% of goods and freight transports were done by using roads.

Over a quarter of all construction work in Finland is related to building or maintaining the infrastructure in place. The worth of repairing, maintaining and building infrastructure in Finland is approximately 8 billion euro annually. The main clients are the central government and municipalities, but in the private sector groundwork for buildings and mining are important as well. Currently the infrastructure industry in specific employs 45,000 people, while construction industries put together employ 250,000, approximately 20% of the Finnish workforce. In the Helsinki metropolitan area, every 4^th employer in the house construction industry is a foreigner and elsewhere 5% of the employers is from another country. In the infrastructure industry 10% of the workers is from another country. Building infrastructure is an industry that requires know-how and skills from various fields due to the large size of the projects.

Source: www.rakennusteollisuus.fi

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Trends

In 2017, many sectors within the infrastructure industry are expected to grow or at least stay the same.

While roads, streets, energy, water and building constructions are growing, construction of telecommunications and railroads decrease in growth. Environmental projects, the opening of mines and maintenance of properties’ outside areas have not slowed down, but it is unlikely that they will grow either. Overall, the Finnish infrastructural industry is expected to grow slightly in 2017.

Another trend in the infrastructure and construction business is building more compactly. The large cities, such as Helsinki, have only a limited amount of space and there is not a lot of land left for new building. Therefore, the new building projects include a lot of complementary building. New buildings are being built on the existing lots of houses and in some houses floors have been added to the residential houses. The adding of floors is always a decision of the owners of the residential house, not the city of Helsinki. This form of construction is growing, due to social and private needs.

More and more, people are migrating towards the Helsinki metropolitan region. The population of Helsinki will grow to 710,000 to 735,000 inhabitants in 2030, and to 750,000 to 860,000 inhabitants in 2050. The current amount is about 630,000 inhabitants.

Some companies want to utilize their roof space. There are many ways for the companies to make use of their roof area. These solutions include solar panels and gardening. A few restaurants utilize roof gardens. Overall there are a few hundred roof gardens around the Helsinki metropolitan area, but the number is growing. Though compared to some other European countries, Finns only build a fraction of the roof gardens.

Like many other industries, infrastructure industry has become more digitalized. Currently it affects companies of all sizes and it requires them to update their skillset. Although some new technological innovations are already being implemented, the industry still needs a lot of new digital solutions.

Current problems in the industry

In 2016 the experts discovered a new problem with new buildings and constructions in Finland. In a few occasions, projects have been postponed due to the concrete’s severe lack of durability. In tests done at various construction sites, the inspectors have noticed that in some cases the concrete has been weaker and less durable by over 50% of what it should be. This has led to the fact that many construction projects have been delayed and some structures, such as bridges, cannot be used as long as intended. The reason for this loss of durability is not currently known and the Finnish Safety and Chemicals Agency (Tukes) is investigating the cause (January 2017).

However, the biggest problem in the 2000s with Finnish buildings has been mould. Approximately 600,000 to 800,000 Finnish people are exposed to mould in the buildings. The problem started in 1980s when most of the buildings with mould were constructed. The constructions were required to follow the new energy saving goals, which caused the buildings to be constructed in such a manner that moisture started to accumulate without the building sufficiently drying. The mould has been a large problem for both the companies and the citizens as the mould problem affects both public and private buildings. It has been estimated that repairing the totality of the mould damages would cost 200 to 300 million euro.

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Currently there are not enough capable infrastructure planners for specific fields, such as bridges and geo infrastructure, and project management. The infrastructure industry in Finland needs more skilled workers especially in the planning process. The problem is expected to grow due to the government’s education budget cuts, lack of study places and the incapability of assimilating foreign students into the Finnish society. This has led to an issue that reduces the number of workers that are needed.

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Projects

Many of the projects are done by local construction companies, but there is room for foreign suppliers who provide specialized technology and for the consultancy companies with the knowhow. There are a few examples of foreign suppliers, such as Siemens, working with the Finnish construction companies on the infrastructure projects. It is also good to note that the majority of these infrastructure projects are contracted out by governmental bodies. The Finnish Transport Agency can give more information regarding the upcoming projects.

The contacts of the Finnish construction companies are listed at the end of this study.

The map below shows the ongoing maintenance projects of roads (green), waterways (blue) and railroads (red). There is a total of 28 different types of projects being completed around the country.

These projects were started in 2016, but there are more that are being planned and will be started in the near future. Of the 2.5-billion-euro repair deficit about the half comes from roads, and the other half from railways network. The railway network is very important also in the decreasing of emissions in which Finland is committed to. Finland´s repair deficit program from 2016 to 2018 has a total of 596 million euro to use (roads get 325 million, railroads 223 million, waterways 12 million, and digitalization and new services 35 million).

Overall the government plans to invest 1 to 1.4 billion euro to basic transport facility management.

The government wants to build more railroad connections between cities, especially in Central Finland.

There are also a few bridge construction projects, such as Kruunusillat-bridges that connect the city of Helsinki to an area called Laajasalo. The total worth of the bridge project is expected to be around

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360 million euro. The construction is expected to start in 2018 and be done by 2025. This bridge will be the longest bridge (1200 meters) in Finland. Currently the Finnish Transport Agency is also trying to upgrade the sides of roads and railways around the country. The goal is to make the railway a more efficient and reliable mode of transport.

Source: www.rakennusteollisuus.fi

Railways

In the city of Tampere, the city council agreed to build a tram network in the city. In 2016 they decided which part of the system will be built first. The construction will begin in 2017. The first part of the network will be done in 2021 according to the plan. In Helsinki, there is already a tram system in use.

However, it is not possible to implement this system to Tampere. This is because Helsinki utilizes nonstandard tram tracks, which are more narrow than the standard tracks. The tram track in Tampere will have the European standard width.

Helsinki and its neighbour city Espoo will get a 25 km long light rail line to connect the cities.

The construction of this line should start in 2019, and the estimated cost is about 275 million euro.

There is a new metro route called Länsimetro being currently built between Helsinki and Espoo.

It includes 21 kilometres of track and 13 new metro stations. The project is infamous for its delays.

There were many reasons why the project is overdue, but one part of the track is expected to be finished in the summer of 2017, finally. Once this part of the route has been opened, the construction of the rest will continue.

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harbour and allows more traffic into the port. Annually about 11,6 million passengers pass through the Port of Helsinki harbours.

Airports

The largest airport in Finland called Helsinki Airport is being expanded. The area of the airport will be increased with 45% and the project will be finished in 2020. The project value is estimated to be around 900 million euro and is one of the largest construction project in Finland. The new expansions are meant for flights going outside the Schengen region. Now 16.4 million passenger travel through the airport and in 2020 the number is expected to be 20 million.

Malmi Airport in Helsinki was the first international airport in Finland, but currently the airport is not widely used for passenger flights. The city council of Helsinki decided that the airport area might be turned residential and new apartments would be built there. However, the airport is allowed to function at least until the year 2020 when its current lease ends.

Other

Estonia and Finland are planning to build a tunnel connection between the two countries, going from Helsinki to Tallinn. EU has financed the planning of FinEst Link project. The purpose of these plans is to analyse the technical, economic and social aspects of the tunnel project. It is also important for these plans to investigate if the construction of the tunnel is safe, what the environmental effects are and if there are other possible requirements. The tunnel would not only connect Finland to Estonia, but also to the rest of the Baltic States. The Baltic States have a rail network project called ‘Rail Baltic’ that connects the Baltics.

Many wind farms are being built around Finland. Among these projects is the first offshore wind farm built in Finland. The offshore wind farm is going to be built in Tahkoluoto and will consist of 10 wind turbines that produce 4 megawatts of energy. The wind farm is being built by the wind energy company

‘Hyötytuuli’. This company already has multiple wind farm construction projects around Finland.

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Procurement

The contracting entities of big infrastructure projects in Finland are practically always public authorities, and are thus subject to the strict requirements of the public procurement law. Calls for bids are published in either the Finnish government’s procurement database HILMA or in the EU’s TED database in case the contracts exceed a certain sector-based threshold. Examples of these thresholds are explained later in this chapter. Foreign businesses are allowed take part in the calls for bids on HILMA but they are mostly only published in Finnish or Swedish.

A qualifying bidder has: Technical capacity, Financial standing and Awareness of ‘local data’

Source: Bergmann – Tendering in Finland 2015

The regular procurement negotiation process is visible in the chart below. In case of a tender of the public sector, the most economically advantageous bid is not always awarded with the contract.

The cheapest price does not automatically win, also other factors are considered. More detailed evaluation criteria are listed in the call for bids.

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Source: Bergmann – Infrastructure Finland Opportunities 2016/17

Public procurement law reform

The law regarding procurement has recently been reformed and entered into force on 01/01/2017.

The reform simplifies bureaucracy of procurements and allows the authorities to take quality into account. It also emphasizes e.g. innovativeness, responsibility and sustainability of contracts. The reform enhances the chances of small and medium-sized enterprises in competitive bidding. The reform is based on EU procurement directives.

According to the new public procurement law (Finnish Act on Public Contracts and Concession 1397/2016), the service of goods procurement has to be acquired through competitive bidding if the tax-free value of the procurement is over € 60,000. The national threshold for construction procurement is € 150,000. Other thresholds have also increased with the new law. The national procurements are also required to be executed more transparently and equally than before.

The Finnish Competition and Consumer Authority is responsible for supervising public procurements.

The current EU thresholds for public procurements for the construction contracts is € 5,225,000.

This means if the EU threshold is exceeded in the expected value of the contract, stricter EU rules are applied.

More information on the public procurement: hankinnat.fi

Foreign workers, legislation

There is a new law regarding to employers sent from other countries to work in Finland. This especially affects the infrastructure industry, because in Finland there is a significant number of foreign workers from other European countries working in this sector. The law is based on EU directives. The core of the law is that the Finnish workers’ labour agreement will include the people sent to work in Finland.

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Also, the company sending their workers to Finland has to be responsible for informing the authorities about their employees coming to work in the country. Hereby more information from the Ministry of Economic Affairs and Employment.

Permits

The government of Finland is reducing the regulations and bureaucracy regarding to the infrastructure industry. An example of this is the combining of permits. Currently, a company does not have to get two different construction permits for the same project, but can get one permit that covers the whole project. Also, the municipalities are now able to plan their zoning without the approval of the Ministry of the Environment. These permits are available in a virtual form, so that the companies can request a permit on the website. The Ministry of the Environment handles the permits which can be applied for, on the website: www.lupapiste.fi/.

Contacts

In the lists below there are examples of Finnish companies and other contacts in the infrastructure industry. For a more comprehensive list of contacts, please contact the Flanders Investment & Trade agency in Helsinki (helsinki@flanderstrade.com).

Agencies

Finnish Transport Agency: A governmental agency responsible for the efficiency and safety of transportation in Finland. They handle many of the possible infrastructure projects related to roads and other transport modes.

Website: www.liikennevirasto.fi/web/en/homeAssociations

Centre for Economic Development, Transport and the Environment (ELY): An organization consisting of multiple centres responsible for the regional implementation and development tasks of the central government.

Website: www.ely-keskus.fi/en/web/ely-en/

Exhibitions

Infratech 2017: An exhibition for the professional in the infrastructure industry.

Website: www.yhdyskuntatekniikka.fi/in_english

Finnbuild: A large construction industry event that has a handful of exhibitions in one place, including Infraexpo. The next exhibition will be held in 2018.

Website: http://finnbuild.messukeskushelsinki.fi/?lang=en

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member companies through promotion of supervision of their interests and importance of the industry in Finland. Their members employ 55,000 people and have a combined turnover of over 10 billion euro.

Website: www.rakennusteollisuus.fi/English/Frontpage/

Infra Contractors Association: An organization for companies that build and maintain the infrastructure. These businesses employ 15,000 people and have a revenue of 4.1 billion euro.

Website: www.rakennusteollisuus.fi/INFRA/en/Front-page/

Finnish Road Association: A non-profit organization that aims to promote roads and traffic in Finland.

They are member of the European Road Federation ERF. They also have delegate members in various other organizations, such as Finnish Transport Agency, manufacturers and municipalities.

Website: www.tieyhdistys.fi/en/

Infrastructure and construction companies

1. Ab Tallqvist Oy

Website: www.tallqvist.fi/english.html Email: infra@tallqvist.fi

2. Lemminkäinen Infra Oy

Website: www.lemminkainen.com/?_ga=1.113662798.877659050.1480412649 Email: info@lemminkainen.com

3. NCC Industry Oy

Website: www.ncc.group/ (Group) and www.ncc.fi/ (Finnish) Contact list: www.ncc.group/contact-us/contacts/

4. Destia Rail Oy

Website: www.destia.fi/en/home.html Email: tiedotus@destia.fi

5. Graniittirakennus Kallio Oy Website: www.grk.fi/en/

Contact list: www.grk.fi/en/people/office-staff/

6. Kreate Oy

Website: www.kreate.fi/en/

Contact form: www.kreate.fi/en/company/contact-us/

7. Skanska Asfaltti Oy / Skanska Infra Oy

Website: http://group.skanska.com/ (Group)and www.skanska.fi (Finnish) Contact list: http://group.skanska.com/contact

8. SRV Infra Oy

Website: www.srv.fi/en Email: info@srv.fi

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9. YIT Rakennus Oy INFRAPALVELUT

Website: www.yitgroup.com/ (Group) and www.yit.fi (Finnish)

Contact form: www.yitgroup.com/en/forsuppliers/contact-informations

Earthwork and environmental construction companies

1. Asfalttikallio Oy

Website: www.asfalttikallio.fi Email: info@asfalttikallio.fi 2. Tapojärvi Oy

Website: www.tapojarvi.com/en/home Email: tapojarvioy@tapojarvi.fi

3. Maarakennus Niemeläinen Website: www.maarakennus.net/

Email: info@maarakennus.net 4. Terrawise

Website: www.terrawise.fi Email: info@terrawise.fi

Energy companies

1. Fennovoima

Website: www.fennovoima.fi/en Email: communications@fennovoima.fi 2. Fortum

Website: www.fortum.com/frontpage/com/en/?from=irene Email: purchasing.corp@fortum.com

3. Teollisuuden Voima Oyj Website: www.tvo.fi/Home Email: viestinta@tvo.fi

IT connection infrastructure companies

1. TLT Group

Website: www.tltgroup.fi/fi Email: info@tltgroup.fi

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3. Saarijärvi Infra

Website: http://saarijarviinfra.com/en/main/

Email: info@saarijarviinfra.com 4. Tekniikka-Tuominen

Website: www.tekniikka-tuominen.fi/tekniikka-tuominen-oy Contact list: www.tekniikka-tuominen.fi/ota-yhteytta

Large cities with infrastructure projects

1. Helsinki http://en.uuttahelsinkia.fi/

 HSL (Helsinki Region Traffic):

Website: www.hsl.fi/en Email: hsl@hsl.fi

 HKL (Helsinki Transport Service) Website: www.hel.fi/www/hkl/en Email: helsinki.kirjaamo@hel.fi 2. Tampere

Website: www.tampere.fi/en/index.html Email: kirjaamo@tampere.fi

3. Turku

Website: www.turku.fi/en/business-services/procurements-0 Email: hankinnat@turku.fi

Other

1. Terramare Oy – Focuses on the infrastructure of harbours and ports Website: https://terramare.boskalis.com/en.html

Email: terramare@boskalis.com

2. Delete – Does demolition for the infrastructure industry Website: www.delete.fi/en

Email: info@delete.fi 3. Hyötytuuli

Website: http://hyotytuuli.fi/en/

Contact list: http://hyotytuuli.fi/en/contact

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References

Bergmann Attorneys at Law – Finland Infrastructure Opportunities 2016/17

Bergmann Attorneys at Law ‘Tendering in Finland 2015’ www.bergmann.fi/pdf/tendering_finland.pdf https://asiakas.kotisivukone.com/files/mank.kotisivukone.com/Infrasuhdanteet_2016-2017.pdf www.rakennusteollisuus.fi/INFRA/Tietoa-infra-alasta/

www.rakennusteollisuus.fi/INFRA/Tietoa-infra-alasta/Vaylat-ja-sillat www.andamentgroup.fi/2016/10/infra-ala-ponnistaa-digiloikkaan/

http://solidhouse.fi/kattojen-hyotykaytto-on-nouseva-trendi/

www.tampere.fi/liikenne-ja-kadut/liikenne-ja-katusuunnittelu/raitiotie.html www.hs.fi/kotimaa/a1475895506160

www.infrakuntoon.fi/

www.infrakuntoon.fi/ennakointi-kannattaa.html http://lansimetro.fi/

www.hs.fi/kaupunki/a1451878605981

www.iltasanomat.fi/taloussanomat/art-2000001914021.html

www.rakennusteollisuus.fi/INFRA/Ajankohtaista/tiedotteet2-kansio/2016/hallitus-purkaa-normeja--- purku-urakka-puolivalissa/

www.rakennusteollisuus.fi/Tietoa-alasta/Talous-tilastot-ja-suhdanteet/

www.rakennusteollisuus.fi/Tietoa-alasta/Tyoelama/Tietoja-tyovoimasta-rakennusalalla/

www.rakennusteollisuus.fi/globalassets/infra/jasenpalvelu/jasentiedotteet/2016/tm_6_2016.pdf www.rakennusteollisuus.fi/globalassets/infra/jasenpalvelu/jasentiedotteet/2016/ek_2_2016.pdf www.hs.fi/kotimaa/art-2000005029275.html

www.hs.fi/politiikka/art-2000005020027.html

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www.tieyhdistys.fi/en/

www.discoveringfinland.com/fi/tietoa-suomesta/yleistietoa/faktaa-lukuja/

www.haminakotka.fi/sites/default/files/public/HKS_Loiste_2016_2_ENG_0712_0.pdf www.liikennevirasto.fi/ratahankkeet/rata_rakenteilla

http://lexia.fi/2016/02/05/complementary-building-strongly-promoted-in-the-helsinki-metropolitan- area/

https://ec.europa.eu/growth/single-market/public-procurement/rules- implementation/thresholds_en

http://stm.fi/ymparistoterveys/kosteus-ja-homevauriot

www.uusisuomi.fi/kotimaa/57560-800-000-suomalaisen-ongelma-1980-luvun-erehdys-uhkaa-toistua www.hs.fi/kaupunki/art-2000005016813.html

Helsingin Sanomat 17.1.2017

www.iltasanomat.fi/taloussanomat/art-2000001912603.html

www.hel.fi/www/Helsinki/fi/kaupunki-ja-hallinto/tietoa-helsingista/tilastot-ja- tutkimukset/vaesto/vaesto-ja-vaestonmuutokset/

Helsingin Sanomat 31.01.2017 ”Mistä rahat korjausvelan maksuun?”

http://raidejokeri.info/?page_id=695

Infrastructure sector in Finland

INFRASTR UCTURE SECT OR

IN FINLAND

Infrastructure sector in Finland

Contents

Country overview

Industry overview

Trends

Current problems in the industry

Projects

Railways

Airports

Other

Procurement

Public procurement law reform

Foreign workers, legislation

Permits

Contacts

Agencies

Exhibitions

Infrastructure and construction companies

Earthwork and environmental construction companies

Energy companies

IT connection infrastructure companies

Large cities with infrastructure projects

Other

References