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Paper cuts leave Finnish economy hurting

HELSINKI -- In the wake of mobile giant Nokia's spectacular fall, another pillar of the Finnish economy is struggling to adapt to the digital age: the paper industry.

As the distribution of everything from magazines to airline tickets shifts online, major Finnish paper suppliers are scrambling to find new sources of revenue.

The industry employs some 40,000 people, a figure that has dropped by more than a third over the past decade, but which still accounts for between 1.5 and two percent of employment in the country.

Paper plant closures have become commonplace across Europe as consumers use the Internet and digital devices for a growing range of services, sending demand for printing paper tumbling.

Despite the fall in demand, the Finnish paper and forestry industry maintains an advantage: an abundance of resources. Finland boasts four hectares of forest per inhabitant, around 10 times more than the European average.

But companies still struggle to find ways to make this advantage work for it in the global economy of today and tomorrow.

UPM-Kymmene, the world's biggest maker of magazine paper, in January announced 850,000 tons in capacity cuts this year. The seven percent reduction affected plants in Finland, Germany and France.

Another industry heavyweight, Stora Enso, in February lowered its capacity for newsprint paper to 475,000 tons, resulting in the shutdown of two facilities in Sweden.

A quick fix is unlikely to be around the corner. “There is no significant change within sight,” said Harri Taittonen, an analyst at Nordea.

The industry is hoping growth in other market segments will offset the inexorable decline in printing paper. Stora Enso and Metsae Board (formerly M-Real) is betting on the packaging sector.

“There is still potential, because digital devices can't compete and cardboard is a good alternative to plastic,” said Taittonen, noting that demand would rise in line with economic growth.

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In this Jan. 2, 2009 file photo, a stack of logs is pictured at the Forestry & Paper industry UPM-Kymmene factory in Pietarsaari, Finland. (AFP)

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