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Country Commercial Guides for FY 2000: Sweden Report prepared by U.S. Embassy Stockholm, released July, 1999 Note*

I. EXECUTIVE SUMMARY

The Country Commercial Guide (CCG) presents a comprehensive look at Sweden's commercial environment, using economic, political, and market analysis. The CCG's were established by recommendation of the Trade Promotion Coordinating Committee, (TPCC) a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. Embassies through the combined efforts of several U.S. government agencies.

Sweden, the fifth largest country in Europe, with less than 9 million inhabitants has a rich history filled with unique twists and contradictions. Perhaps a study of the past would help the reader better understand the current commercial situation in Sweden, which is unique and at times contradictory. Sweden is the most "American" of European Union members, however that does not mean the Swedish market replicates that in the United States. Assuming that it does, often leads to problems for American exporters.

Twenty years ago Sweden was the world's best example of a prosperous, democratic state with an homogeneous population, generous social support system, equitable distribution of wealth and a very high standard of living. Only 5 years ago Sweden was second to Switzerland in ranking of GDP per capita. The country suffered through some rough economic times with recession, a bank crisis, inflation, budget deficits, and labor problems. Meeting the EU "membership" standards caused additional disruption to the market. However, as we move into the next century, all the economic factors look reasonably good, with the possible exception of employment data. Considering the strong economic situation and perhaps the world's most secure social safety net, why, one might ask, did a recent survey find that 62% of all young, well educated Swedes say they have considered moving abroad?

Sweden is unquestionably attractive to foreign investors, offering a well-educated highly efficient work force, outstanding management skills and the second lowest corporate tax rate in Europe. The number of foreign owned companies increased more than 40% between 1990 and 1997. Foreign owned businesses employ over 14% of the Swedish work force. The United States in second only to Finland as the largest provider of foreign direct investment. The number of American invested companies in Sweden has grown from 350 to over 600 in the past 7 years. Cumulative foreign direct investment has increased more in Sweden than any other European country. Why, one might ask, are major Swedish investors selling their companies? It has been written that Investor AB, the Wallenberg Foundation holding company has moved into the divestiture phase. The question might be are foreign companies acquiring Swedish firms because of the market potential or their good price value ratio? (60% of FDI is mergers and acquisitions). If Sweden is such a great place to invest, why are Swedes selling what some consider the countries corporate jewels?

Numerous surveys rank Sweden among the top three countries that provide the best climate for innovation in the world. Among the factors considered are investment in R&D (4% of Swedish GDP), number of patents, and the percentage of industry that is classified high tech. One should not be surprised that the country whose citizens invented the telephone switch, safety match, adjustable wrench, artificial kidney, pacemaker and the zipper, would be so highly ranked. What is surprising however is that in 1997 863 Masters of Engineering emigrated, a four-fold increase from 1986? While the environment for innovation is superb, the lack of venture capital to grow these new concepts and the high taxation on the individual entrepreneurs dampens the full value of innovation. The government of Sweden recognizes this situation and is addressing both concerns.

Sweden and the United States are the leading IT nations in the world in terms of IT hardware, software and services. Sweden has the highest number of phone lines (fixed and mobile) per capita as well as the highest percentage of Internet users in the world. The market is completely open and deregulated, consequently IT investments equal more than 6% of GDP. Over 50% of those that have Internet connections use it daily. Over 35% have purchased something on the Internet within the past 3 months. These and other facts suggest that the market for computer hardware, software and services is strong and growing.

Sweden also ranks among the countries with the highest levels of international expertise and success. In 1998, 29 of the 500 largest companies in Europe were Swedish; the highest number per capita in Europe and perhaps the rest of the world. The brands of these large Swedish companies are the best known in the world. A recent World Economic Forum study ranked Swedish managers as the best in the world in terms of international experience and language skills. Business travel is a big business in Sweden. Swedish winters are long, dark and cold. In addition to the mandated 5 weeks of vacation Swedish workers get a growing number of special holidays. In 1998, there were 14 million international departures from Stockholm airports. Travel for business and pleasure is the largest industry in Sweden and seems well developed to withstand changes in economic conditions.

Sweden is a great place for Americans to do business. American made products are highly regarded and well-received. As discussed in this report, the legal system provides protection to corporate interests; the political system is stable and the workforce is skilled, efficient and well educated. Significantly, the government is business friendly. It not only recognizes the few minor problems facing the business community, unemployment, high personal tax, labor immobility, and lack of a strong venture capital market, but also has plans to do something about the concerns. Sweden enjoys a trade surplus with the United States in 1998, Swedish exports to the US grew 5.9% to $ 7.2 billion, while imports from the US increased 2.3 % to $ 4.0 billion. Trade in services, especially travel, tourism and information technology continues to grow rapidly offsetting much of the merchandise deficit.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact Stat-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.mac.doc.gov, http://1997-2001.state.gov, and http://www.stat-usa.gov. They also can be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information / assistance and country specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone sat 1-800-USA-TRAD (E) or by fax at 202 482 44730.