Moated castle in Southern Sweden
BRIEF OVERVIEW
Sweden is a sparsely populated country, characterized by its long coastline, extensive forests and numerous lakes. It is one of the world’s northernmost countries. In terms of surface area it is comparable to Spain, Thailand or the American state of California. Sweden’s borders have been unchanged since 1905 and the country has not been at war since 1814.
The Gulf Stream
Considering its geographic location, Sweden enjoys a favourable climate. This is mainly because of the Gulf Stream, a warm ocean current that flows off Norway’s west coast.
The Government Of The Kingdom Of Sweden
The current government of the Kingdom of Sweden was established in 1975 after adopting the 1974 Instrument of Government Act. This act formalized the government as a Constitutional monarchy. Therefore, the monarchy no longer takes executive decisions, but rather serves as a symbolic head of state. The government consists of the Riksdag (a legislative body), the Prime Minister, and Cabinet ministers.
A military power during the 17th century, Sweden has not participated in any war for two centuries. An armed neutrality was preserved in both world wars.
Sweden joined the EU in 1995, but the public rejected the introduction of the euro in a 2003 referendum.
ECONOMIC OVERVIEW
Sweden has achieved an enviable standard of living with its combination of free-market capitalism and extensive welfare benefits. Sweden remains outside the euro zone largely out of concern that joining the European Economic and Monetary Union would diminish the country’s sovereignty over its welfare system. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade.
Sweden’s long-successful economic formula of a capitalist system intermixed with substantial welfare elements was challenged in the 1990s by high unemployment and in 2000-02 and 2009 by the global economic downturns, but fiscal discipline over the past several years has allowed the country to weather economic vagaries. Sweden’s economy experienced modest growth in 2014-16, with real GDP growth above 2%, but continues to struggle with deflationary pressure.
Sweden’s today economic overview
The economy is growing strongly, underpinned by solid demand, labour force expansion and rising productivity. Sweden weathered the global financial and economic crisis with limited damage, thanks to strong macroeconomic, fiscal and financial fundamentals, as well as a competitive and diversified business sector. Economic growth has brought down unemployment, but it remains relatively high for vulnerable groups, such as foreign born, immigrants and lowed skilled.
Growth should remain robust in 2018, despite dipping somewhat compared to the high rates recorded in recent years. The economy will be supported by a tightening labor market, expansionary fiscal policy and solid fixed investment. However, a downside risk exists in the form of high household debt. Focus Economics panelists see GDP rising 2.6% in 2018, which is up 0.1 percentage points from last month’s forecast, and 2.2% in 2019.
Sweden is particularly exposed to developments in world trade as well as its trading partners, including China and United Kingdom, which accounted respectively for about 4% and 7% of Swedish total exports in 2015. Even though a direct impact of Brexit on Swedish exports is likely to be limited, there is uncertainty about potential indirect effects on economy.
Industrial production increases in September
Industrial production rose a seasonally-adjusted 2.2% in September over the previous month according to Statistics Sweden (SCB), down from August’s revised 1.6% decline (previously reported: -1.7% mom). The increase was underpinned by greater output in the mines and quarries, manufacturing and electricity, gas, steam and hot water plants sub-sectors.
Annual average growth in industrial production increased from 3.8% in August to 4.0% in September.
FocusEconomics Consensus Forecast panelists project that industrial production will increase 2.6% in 2018 and 2.3% in 2019.
FOREIGN DIRECT INVESTMENTS – FDI
Sweden is one of the world’s largest investors. FDI influx sharply rose in 2016, reaching USD 19 billion compared to USD 6.2 billion the previous year. Despite the unfavourable international situation, the country maintains a high level of appeal to foreign investors, because of its multilingual and qualified workforce, very high per capita purchasing power, economy at the forefront of new technologies and innovation, as well as its advantageous tax regime. The Government has undertaken measures to develop support for investment, focusing on key sectors (biotechnologies and food processing), as well as rapidly growing markets (Baltic countries, India, Brazil, etc.). There are gaps in the food-processing field, as well as in the housing and interior design sectors. As evidence of the quality of the Swedish business climate, the country ranked 9th out of 190 economies in the 2017 Doing Business report issued by the World Bank.
Main Invested Sectors 2015, in %
Manufacturing 31.0
Transport equipment 22.0
Legal, professional, scientific and technical activities 15.0
Oil and chemical products 11.0
Trade and maintenance 10.0
Form of Company Preferred By Foreign Investors
The limited liability company is the simplest and most preferred structure, especially for foreign companies (SMEs wishing to set up in Sweden).
In 2010, foreign companies in Sweden employed about 590,000 employees
Sources of Statistics Invest in Sweden Agency (ISA)
WHY YOU SHOULD CHOOSE TO INVEST IN SWEDEN
Strong Points
The political and economic situation is very favourable. The traditionally high quality business environment influences the way companies behave in making payments and as a result the probability of defaulting is very low.
According to the World Bank, Sweden is among the world’s top ten economies in terms of facility of business undertakings. This survey takes into account the following indicators: the formation of one’s own company, hiring and dismissing employees, executing contracts, loan availability, registering capital and investor security.
The Swedish tax system is direct and corporate tax is amongst the lowest in Europe. The country applies contribution exemptions, authorizes total tax deductions on interest, and does not have strict capitalization rules.
The legal system is balanced and ensures sound, transparent and reliable hearings. Contracts are standardized and documents are often used for simple procedures, especially for mortgages.
The quality of management and consultancy services is very high, and commercial formalities and procedures are easy to undertake.
In 2014, Sweden was ranked third in the world in the Networked Readiness Index by the World Economic Forum’s Global IT Report.
Weak Points
The country’s weak points are the high cost of manpower, rigid labour legislation, high individual tax rates, and overall high living costs in Sweden.
Government Measures to Motivate or Restrict FDI
Since it joined the European Union, the Swedish government has established a number of reforms to improve the business legal environment. This has enabled it to attract foreign investors and increase competitiveness.
Sweden is ranked 1st by the OECD in terms of public spending, especially in promoting investment.
Investment Opportunities
The Key Sectors of the National Economy – Automobile, shops, cleaning, natural resources, packaging.
In early 2010, the Swedish Government went through with the privatization of pharmaceutical company Apoteket, allowing for private retailing of pharmaceuticals.
The privatization trend has slowed and its future will depend primarily on political factors.
Advanced and competitive industries in Sweden, such as manufacturing, retail and finance, are all investing heavily in digitalization. Digitalization of government services is also a priority, making it the 2nd largest sector in terms of IT spend.
According to Forrester’s European Tech Market Outlook, IT investments in the Nordics increased by 4.8 percent during 2017 compared to last year and is estimated to reach 66 billion Euro, twice as much compared to other European countries such as Germany and the UK. Business tech alone, including CRM-systems, marketing automation, e-commerce, is expected to grow by 6 percent the coming year.
Being one of the world’s most innovative country, Sweden is a leading country for start-ups, especially within Fintech, IoT and Gaming. In terms of unicorns per capita, Stockholm ranks 2nd, right behind the leader Silicon Valley.
Being the best country in the world for doing business according to Forbes 2017, it is easy to set up and run a company, with no restrictions on foreign ownership or need for local partners.
In addition, Swedish IT and Telecom Industry Association reports that Sweden needs 30,000 IT professionals, a figure expected to double by 2020.
In Forbes’ annual ranking Sweden has climbed from 17th place in 2006 and finally become number one. The other Nordic countries are not far behind: Denmark #6, Finland #8 and Norway #9.
Forbes’ ranking is based on a comprehensive compilation of data on 139 countries. The countries receive scores in 11 categories: protection of property rights, innovation, tax burden, technology, prevalence of corruption, freedom (personal, trade and monetary), bureaucracy, investor protection and stock market performance. Sweden ranks among the top ten countries in seven of these categories.
Sweden has undergone a transformation to reach the top. Forbes paints a picture of ‘a transformation built on deregulation and budget self-restraint with cuts to Sweden’s welfare state. The reductions in the scope of the Swedish welfare state has allowed tax cuts, incentivized employment, and, together with some scrapped taxes on wealth, successfully made Sweden consistently ranked the most or one of the most competitive economies in the world.
In global rankings, Sweden frequently appears at or near the top
According to World Economic Forum
- It’s easy to do business
- It’s globally competitive
- It has the best reputation
- It’s highly innovative
- It has good gender equality
- It has a powerful passport
- It’s a great place to grow old
- Language skills
CORPORATE SOCIAL RESPONSIBILITY – CSR
The term corporate social responsibility (CSR), also known as sustainable business practice, is used to describe the work companies do that has a positive impact on society, the environment or the economy. In 2011, the EU Commission defined CSR as the ‘responsibility of enterprises for their impacts on society’. Efforts to reduce emissions of carbon dioxide, promotion of equal career opportunities, and involvement with local communities are examples of CSR initiatives.
Environment
Sweden fares well in energy and environmental technology, coming third in the Global Cleantech Innovation Index 2012, after Denmark and Israel.
Gender equality
The 2012 report ranks Sweden as fourth in the world.
Anti-corruption
Corruption, identified by the World Bank as one of the greatest threats to growth, has become one of the biggest challenges within CSR. Sweden remains one of the world’s least corrupt countries, ranked fourth on Transparency International’s Corruption Perceptions Index 2012.
Environmental initiatives
Strict environmental legislation combined with high levels of environmental awareness and knowledge have led Swedish companies to be environmentally innovative and efficient in their operations. Low-impact production techniques, in particular within industrial production, are now often exported to other countries.
Sweden also plays a prominent role in cleantech sectors such as non-fossil fuels and water quality, with several companies as leaders in their fields. SEKAB, for example, is a major European supplier of ethanol and ethanol derivatives, used for fuels and low-environmental-impact chemicals, while water-technology company Xylem has operations in more than 150 countries.