By Ritsuko Ando
HAMINA, Finland (Reuters) - Google will invest another 450 million euros ($607 million) over the next few years in a data center in Finland, boosting a country struggling with Nokia's decline and weakness in its paper and steel industries.
Prime Minister Jyrki Katainen welcomed the move, one of the biggest foreign direct investments in Finland, and said the government planned to reduce electricity taxes for data centers to encourage more such stakes.
The new pledge by the world's No. 1 Internet search company is in addition to 350 million euros it has already spent on the data center, built on the site of paper company Stora Enso's former mill in Hamina, southeastern Finland.
Google bought the mill in 2009, turning it into one of its most efficient data centers by taking advantage of the Bay of Finland's chilly seawater to cool its servers.
Katainen said Google's move showed that Finland, with its highly skilled work force, remained competitive.
"Finland's strength is in finding creative solutions to global challenges," he said on Monday during a visit to the site. He said the government would do its part by lowering electricity taxes for such sites starting in 2014, although the move still needs approval from the European Commission.
"Our job from the government side is to create and enable good infrastructure for various fields of business."
Finland has been trying to shore up business confidence hard-hit in September when Nokia, struggling for years to catch up with Apple and Samsung in smartphones, announced it was selling the handset business to Microsoft.
Finland has one of the few remaining triple-A rated economies in the euro zone, but Europe's prolonged downturn has restrained exports and accelerated a decline in industries such as forestry, tipping the current account into deficit.
The government has forecast GDP to contract 0.5 percent this year. But there have been some positive signs, especially in Finland's gaming industry led by Rovio of Angry Birds fame.
Japanese tech and telecoms group SoftBank Corp announced in October that it was paying 150 billion yen ($1.53 billion) for a 51 percent stake in Finnish mobile game maker Supercell, valuing the small maker of hit games "Clash of Clans" and "Hay Day" at $3 billion.
EXPANDING DATA centerS
Data centers have also been rare bright spots.
Microsoft has said it will invest more than $250 million in a new data center in Finland. Yandex, Russia's biggest search engine, started building a data center in Mantsala, southern Finland, in July.
The increasing use of cloud computing, which allows software and services including email and online music libraries to be offered over the Internet, is seen driving up the use of data center usage in the coming years.
Technology companies such as Google have been looking for cheaper ways to run them, and Finland and other northern European countries have been popular sites due to cooler climates that help to reduce cooling costs.
At the Hamina facility, one of some 13 Google data centers in the world, seawater is pumped through the facility to dissipate heat from the data center's servers. The water is then cooled down before being returned to the sea.
There are also environmental considerations. Around 2 percent of global greenhouse gas emissions come from the technology sector. Of that, data centers account for around 17 percent, according to the Global e-Sustainability Initiative, an industry-sponsored research group specializing in topics such as climate change.
Mika Perttunen, a director of regional development company Cursor that has been trying to lure businesses to the area, said Google's announcement showed Finland was recovering not only from Nokia's downfall but also from a decline in paper manufacturing.
Stora Enso's 60-year-old mill, before shutting down in early 2008, employed around 450 people. The data center currently only employs around 125 people but Google said it planned to increase staff over the coming years.
"We used to read newspapers, and nowadays we use tablets for the same information. This is a good symbol of change," Perttunen said.
($1 = 0.7414 euros)
(Editing by Mark Heinrich)