Law Library Stacks

Back to Regulation of Foreign Aid

Finland is one of the Nordic countries that give the least in aid.  Lagging behind Denmark, Sweden, and Norway, which all give close to 1% of gross national income (GNI) in aid, Finland gives some 0.55%.  As a member of the European Union (EU), Finland has pledged to meet the 0.7% United Nations Millennium Goal threshold by 2015.

I.  Introduction

A.  Official Development Assistance Figures

Finland is currently not meeting the United Nations’ Millennium Development Goals of 0.7% of GNI in aid but has pledge to meet the threshold by 2015.[1]  As of 2010, Finland donates some €966 million (approximately US$1,328 million) in official development assistance (ODA), which is equivalent to 0.55% of Finland’s GNI.[2]  This figure is just 0.01% short of the “collective” EU goal of 0.56% for 2010,[3] yet it is a sharp increase from 2004 when the total official figures only totaled 0.36% of GNI.[4]

For the fiscal year of 2012, the suggested figures are €290 million (approximately US$398 million) for multilateral development cooperation, and close to €255 million (approximately US$350 million) for bilateral development cooperation.[5]  In addition, Finland has appropriated €58.9 million (approximately US$81 million) for the European Development Fund, another €57.7 million (approximately US$79 million) for unspecified development cooperation, and €91 million (approximately US$125 million) for humanitarian aid.  The 2012 budget includes some €11 million (approximately US$15 million) in administrative costs associated with planning, evaluating, and revising development aid.[6]

B.  Private Contribution Figures

According to Organisation for Economic Co-operation and Development (OECD) figures from 2009, the Finnish private contribution to Finland’s total aid was US$1,741 million.[7]

There is also an umbrella organization for all Finnish organizations that work with international development issues called KePa,[8] also known as the Service Centre for Development Cooperation, but it does not provide an official figure for private contributions to development cooperation. 

C.  Snapshot of Foreign Aid Activity

Finland gives both multilateral and bilateral aid.  The three largest recipients of aid in 2010 were Mozambique, Tanzania, and Vietnam.[9]  The Foreign Ministry maintains oversight of development projects, which include bilateral, multilateral, and nongovernmental organization (NGO) projects, as well as the granting of concessional credits (i.e. export credits).[10]  These projects include budget support as well as more specific activities, e.g., a district heating project in a Chinese province.[11]

Back to Top

II.   Legal Framework

A.  Regulation of ODAs

1.  Overview

The appropriation of development assistance is governed by Finland’s annual budget legislation.[12] The implementing agency is the Ministry of Foreign Affairs of Finland.  The agency may enter into bilateral and multilateral agreements that bind Finland but only as specified in the annual budget.  In addition to the annual budget, Finland, through decisions by Parliament, may legally bind itself to foreign aid pledges.

2.  Implementing Agencies

The Finnish Ministry of Foreign Affairs distributes Finland’s foreign aid.  The Ministry operates a webpage dedicated to development cooperation issues.[13]  The Ministry has a special department for development policy which, in turn, is divided into various units (e.g., general development policy and planning, sectoral policy, NGOs, UN development, financing institutions, international environmental policy, and humanitarian assistance).[14]  The Ministry of Foreign Affairs provides an annual report to Parliament on all its activities and expenses.[15]

Finnish foreign aid policy is also carried out through a range of public-private partnerships, including Finnfund and Finnpartnership, as well as through concessional credits for exports.

Finnfund is a development finance company that is largely (89%) owned by the Finnish state.[16]  The main purpose of Finnfund is to provide financing for projects in developing countries that involve risks that prevent the project from receiving financing from other sources.[17]  The oversight and mission of Finnfund is regulated by the Finnfund Act.[18]

Finnpartnership is a trade promotion agency with a “mission to increase commercial cooperation between Finland and developing countries” and it also distributes de minimis aid (aid that, within a three-year period, is less than €200,000 (approximately US$275,000).[19] 

3.  Restrictions

Because ODA is regulated in the annual budget, there are no permanent restrictions on ODA other than that any assistance must be made in accordance with Finnish export laws.  In addition, sums appropriated as transferable appropriations may only be used for the following:

  • 1)   Payment of costs that are incurred for use as specified by the disposition plan;
  • 2)   Payment of costs for the management of development cooperation, when used for educating employees; business travel the employees within the development cooperation department make to or within the recipient countries, or to international multilateral organizations and financial institutions that focus on issues related to these countries as well as to the EU; purchase of office automation; and payment of experts in connection with development cooperation projects;
  • 3)   Humanitarian aid; the appropriation may be used for aid to countries other than developing nations only if an exceptionally extensive humanitarian crisis requires it and the aid award is based on the country’s request for assistance, and only if the Finnish government makes such decision; or
  • 4)   Payment of costs for cooperation projects between the Ministry and the Austrian Development Agency (ADA), the Nordic Development Fund (NDF), Norway’s Foreign Ministry, Luxemburg’s Foreign Ministry, and the German development cooperation agency (GIZ).[20]

4.  Discretionary Aid

Finland uses so-called framework appropriations when it allocates resources for international development cooperation.  This means that the budget is divided among countries, regions, and types of development cooperation, but does not specify any particular project that must be supported.[21]  The budget also provides some discretionary funds to be used for new development cooperation agreements.[22]  For example, some €201,773,000 (approximately US$277,480,000) are to be used for new agreements; although an estimated future appropriation is provided, it need not be followed.[23] There are three types of appropriations: “estimated appropriations,” which may be exceeded; “transferrable appropriations,” which may not be exceeded but may be transferred to a coming year; and “fixed appropriations,” which cannot be transferred or exceeded.[24]

5.  Oversight

The main agency for review of development cooperation spending is the National Audit Office of Finland, which reports directly to Parliament.[25]  The National Audit Office checks compliance with the budget and oversees the state finances.[26]  Also, as noted above, the Ministry of Foreign Affairs must provide an annual report on its expenses to Parliament, which includes development cooperation expenditures.[27]  A recent evaluation of Finnish aid in relation to trade determined that there was a need for a “more strategic approach and fewer projects.”[28]

6.  Policy Considerations

The Finnish government’s overriding policy is that it should aim at reaching the United Nations’ Millennium Development Goals by focusing aid on “climate and environment, prevention of crises, [and] support for peace-building processes.”[29]  In this work, special focus is placed on gender equality, children’s rights, and the fight against HIV/AIDS.[30]

B.  Regulation of Private Contributions

1.  Legislative Regulations

There are no legislative restrictions in Finnish law that prevent private donors or corporations from contributing to charitable organizations or international development cooperation efforts.  However, “technical support” to developing countries that includes technology that may have dual uses is regulated by the Export Controls Act and its amendments.[31]  These regulations include license requirements for export of products that may have dual uses.[32]  Even if not on the specified EU list of products that require licenses, the Finnish government may require licenses for products that can be used in connection with “chemical, biological or nuclear” powers.[33]  Moreover certain dual products may not be exported due to military embargoes on individual countries.[34]

2.  Tax Incentives for Charitable Contributions

Finland, together with Austria and Sweden, are the only remaining Development Credit Authority (DCA) countries that do not allow any tax deductions for private donations to development cooperation or humanitarian aid efforts.[35]  However, Finland did allow tax deductions during a short period in the 1980s.[36]  At present, there are no indications that such a tax incentive will be reintroduced, despite lobbying from the Finnish UNICEF, the Finnish Red Cross, and the Finnish Church Aid.[37]  The Finnish government is instead discussing a tax deduction for corporate costs associated with education of local workers in developing countries.[38]  The measure is intended to stimulate Finnish corporations’ activities and corporate responsibility in developing countries.[39]

Back to Top

III.  Foreign Aid Appropriations Process

The foreign aid budget, together with all other State expenses, is appropriated annually in the annual budget bill that is approved by the Finnish Parliament.[40] 

There is no legislative act other than the current budget that mandates the percentage of aid given.  However, Finland, as a member of the EU, has made commitments to increase its foreign aid budget to 0.7% of GNI by 2015.[41]  In addition, the Finnish government has pledged to keep development cooperation for the least developed nations at 0.15% of GNI as the overall percentage of foreign aid increases to 0.7%.[42]  Finland has also pledged some €110 million (approximately US$151 million) in foreign aid between 2010 and (through) 2012 as part of the EU’s pledge at the 15th Conference of the Parties (COP15) meeting in 2009.[43]

The procedure for enacting the budget is regulated by “Parliament’s Working Order.”[44]  Generally, budget preparations (and the appropriations process) start in January with the Ministers Committee.[45]  In March, the Treasury Department approves the overall figure that should be spent in the budget, a sum that is later divided among the departments.[46]  The Minister of each department allocates the sum for the department, and a joint discussion of the appropriations is held in August.[47]  The final draft budget is passed in Parliament in December.[48]  Generally the budget also includes references to expenditures outside of the current budget year.[49]  If a budget is not agreed upon, the Treasury must suggest to the Parliament how the draft budget should be interpreted in the short-term.[50] 

Back to Top

IV.  Other Types of ‘Aid’

Remittances from Finland are recognized as an internationally vital source of development cooperation.[51]  However, Finnish official figures for remittances have been low, with “compensation of employees” for 2006 at US$251 million for outward and US$698 million for inward remittance.[52]  In 2005, Finland had twice the number of emigrants as immigrants.[53]  The numerical difference between immigrants and emigrants corresponds to the discrepancies in the figures above and explains why, in 2008, the Finns ranked “third to last” on total contributions to developing nations in a study comparing twenty-two major donor countries despite a sizeable official ODA contribution.[54]  Although the Finnish government provides no tax incentive to promote remittances, it has discussed increasing competition on the market among financial institutions to make remittance payments easier and less expensive.[55] 

Back to Top

Prepared by Edith Palmer, Chief
Foreign, Comparative and International Law Division II
Global Legal Research Center
and Elin Hofverberg
Law Library Intern
October 2011


[1] Finlands utrikespolitik 2020, utrikesministeriets framtidsöversikt, available at http://formin.finland.fi/ public/download.aspx?ID=69699&GUID={579DB143-06DF-4DC1-893A-76CCF3E7BE0E}(last visited Oct. 12, 2011). 

[2] Id.

[3] European Commission, Monterrey Consensus, Aug. 30, 2011, http://ec.europa.eu/europeaid/how/ delivering-aid/monterrey_en.htm

[4] See Valtiovarainministeriö [Treasury], Stadsbudgetten 2012 – 30 Internationellt utvecklingssamarbete [Proposed Budget Bill 2012 – expense 30 International Development Cooperation], at 2, http://budjetti.vm.fi/ indox/indoxservlet?documentrole=taefop&t3_param=string:year:2012&t3_param=string:lang:sv&fullpathxpointer=
/2012/TAE/ruotsi/pl24/pl24ml30.xml%23/1&documentrole=taerp2012
(last visited Oct 17, 2011).

[5] Id. at 3.

[6] Id.

[7] OECD, Table 5. Total Net Private Flowsa by DAC Country, http://www.oecd.org/dataoecd/ 31/38/47452671.xls (last visited Oct. 12, 2011).

[8] Kepa, Vad är kepa? [What is Kepa?], http://www.kepa.fi/svenska/vad-ar-kepa (last visited Oct. 17, 2011).

[9] Utrikesministeriet, Utvecklingssamarbete 2010 [Development cooperation 2010], at 7, http://www.formin.fi/public/download.aspx?ID=79041&GUID={CA0CBD8F-B95D-4B3B-97D5-60ADDE76CB43} (last visited Oct. 12, 2011). 

[10] Ministry of Foreign Affairs of Finland, Development Projects, http://formin.finland.fi/public/ default.aspx?nodeid=38721&contentlan=2&culture=en-US (last visited Oct. 17, 2011).

[11] Id.

[12] (Författningssamling [Förfs] 11.6.1999/731) Finlands grundlag [Finnish Constitution], ch. 7:83-85, available in Swedish at http://www.finlex.fi/sv/laki/ajantasa/1999/19990731.

[14] See Ministry of Foreign Affairs, Utvecklingspolitiska avdelningen [Development Policy Department], http://formin.finland.fi/public/default.aspx?nodeid=15871&contentlan=2&culture=en-US (last visited Oct. 17, 2011).

[15] Finnish Constitution, supra note 12, ch. 4:46.

[16] Finnfund, Finnfund in brief, http://www.finnfund.fi/yritys/en_GB/brief/ (last visited Oct. 17, 2011).  

[17] Id.

[18] Finnfund Act 291/79, available at http://www.finnfund.fi/yritys/en_GB/ffact/ (last visited Oct. 17, 2011).

[19] Ministry of Foreign Affairs of Finland, Finnpartnership offers new business cooperation opportunities, Mar. 6, 2011, http://formin.finland.fi/public/default.aspx?nodeid=31479&contentlan=2&culture=en-US

[20] Valtiovarainministeriö [Treasury], Stadsbudgeten 2012, supra note 4, at 3 (translation by author).

[21] See id. (generally).

[22] Id.

[23] Id.

[24] Finnish Constitution, supra note 12, ch. 7:85 §1 (translation by author).

[25] National Audit Office, National Audit Office of Finland, http://www.vtv.fi/en/?lang=2&menu_id=1 (last visited Oct. 12, 2011).

[26] Finnish Constitution, supra note 12, ch. 7:90 §1.

[27] Id. ch. 4:46.

[28] Utrikesministeriet, Evaluering visar: Handelsfrämjande bistånd kräver finslipning, [Trade-promoting aid requires some fine-tuning] (Sept. 5, 2011), http://www.formin.fi/public/default.aspx?contentid=227959&nodeid= 15148&contentlan=3&culture=sv-FI (translation by author).

[29] Ministry of Foreign Affairs of Finland, Finland’s Development Policy Programme, Feb. 22, 2008, http://www.formin.fi/public/default.aspx?nodeid=15319&contentlan=2&culture=en-US

[30] Id.

[31] The most recent amendment, Lag 226/2011 om ändring av lagen om kontroll av export av produkter med dubbel användning [change in the legislation of control of export of products with multiple uses], is available in Swedish at http://www.finlex.fi/sv/laki/alkup/2011/20110226, and in Finnish at http://www.finlex.fi/fi/laki/ alkup/2011/20110226 (both last visited Oct. 18, 2011).

[32] Id. at 3 §.

[33] Id. at 4 §1.

[34] Id. at 4 §2.

[35] Utrikesministeriet (Finland), Bred utvecklingsfinansiering –utökad finansiering av utvecklingssamarbete i samverkan med den offentliga och privata sektorn samt civilsamhället [Broad Development Financing – Increased Financing of Development Cooperation in Conjunction with the Public and Private Sector as well as Civil Society] (U002:00/2010) at 9, available at http://formin.finland.fi/public/download.aspx?ID=74524&GUID={B4345E70-FE19-443C-88CE-E6F5E5E414AD} (last visited Oct. 13, 2011).

[36] Id. at 11.

[37] Id. at 11–12.

[38] Id. at 14.

[39] Id.

[40] Finnish Constitution, supra note 12, ch. 7:83.

[41] European Commission, Monterrey Consensus, (Aug. 30, 2011), http://ec.europa.eu/europeaid/how/ delivering-aid/monterrey_en.htm

[42] Valtiovarainministeriö [Treasury], Stadsbudgetten 2012, supra note 4, at 1. 

[43] See id.

[44] FINLEX, (Författningssamling [Förfs] 40/2000) Riksdagens Arbetsordning [The Parliament Working Order] at 59, http://www.finlex.fi/ sv/laki/ajantasa/2000/20000040 (last visited Oct. 18, 2011) (translation from Swedish by the author).

[45] Ministry of Finance, Budgeten [The Budget], http://www.vm.fi/vm/sv/09_statsfinanserna/01_budgeten/ index.jsp (last visited Oct. 18, 2011).

[46] Id.

[47] Finnish Government, Stadsbugeten, http://www.vn.fi/toiminta/talousarvio/sv.jsp (last visited Oct. 18, 2011).

[48] IdSee also Finnish Constitution, supra note 12.

[49] See for instance Valtiovarainministeriö [Treasury], Statsbudget 2012, supra note 4 (freezing the total foreign aid appropriation at 0.56% of GNI for 2013 through 2015). 

[50] FINLEX, Riksdagens arbetsordning, supra note 44.

[51] See Utrikesministeriet (Finland), Bred utvecklingsfinansiering, supra note 35, at 7.

[52] World Bank, Migration and Remittances in Finland, Migration and Remittances Factbook – Development Prospect Group, http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1181678518183/Finland.pdf (last visited Oct. 12, 2011).

[53] Id.

[54] See Utrikesministeriet (Finland), Bred utvecklingsfinansiering, supra note 35, at 8.

[55] Id. at 7.

Back to Top

 

 

Last Updated: 06/09/2015