Go to Index

Introducing Sweden as a Location for Foreign Investment

Sweden has recently undergone a major change in the pattern of international investment. This is a clear indication of the nation's increased competitiveness and its attractiveness for foreign investors.

Sweden, on a per capita basis, is home to more multinational companies than any nation in the world. Starting with Alfred Nobel's multinational dynamite empire in the mid-1800s, Swedish companies have continually expanded abroad, many of them becoming world giants in their fields.

In 1993, Sweden experienced a net inflow of direct investment for the first time in 25 years. Foreign investment in Sweden amounted to SEK 50 billion (USD 7 billion) in 1994 and increased to almost SEK 100 billion in 1995. While mergers and acquisitions, as in all countries, accounted for the bulk of these capital flows, an increasing number of green-field and expansion investments have also been undertaken.

Between 1990 and 1995, the number of foreign-owned businesses in Sweden increased by approximately 30 percent, from 2,600 to 3,300 enterprises. Meanwhile, total employment in foreign-owned companies has risen from 200,000 to 250,000. The United States has emerged as the largest foreign owner. Since 1990, the number of American companies represented in Sweden has increased from 350 to 470.

Several main factors explain the increase in foreign interest in Sweden as a location for investment. Since the late 1980s, the Swedish economic and political environment has gone through a series of important changes which substantially improved the investment climate. Some of the most significant:

• The abolition of currency exchange controls and elimination of restrictions on foreign acquisition of Swedish companies.
• Through extensive deregulation and privatization, Sweden is today one of the world's most liberal economies. This business freedom covers important sectors, including banking and financial services, telecommunications, transportation, and production and distribution of electricity.
• A major tax reform in 1991 reduced the corporate tax rate to only 28 percent. With profit allocation reserves, the effective corporate tax rate is even lower.
• Sweden joined the European Union in 1995, ensuring access to the EU's 370 million consumers.
• Elimination of clauses in corporate by-laws that limited foreign stock ownership.

These and other deregulation measures created a completely new environment for investment. As a result, after three years of recession, the Swedish economy showed signs of a fast turnaround in 1994 and 1995. The Government is committed to fiscal prudence and has launched a series of measures to eliminate the budget deficit by 1998. Depreciation of the krona in the early 1990s and productivity gains have combined to reduce relative labor costs to the lowest levels in 25 years. Enhanced competitiveness has led to rising investments, surging exports and a widening trade surplus. Despite strong GDP growth in 1995, inflationary pressures have been contained, and interest rates have declined.

Recent political and economic developments have changed the geopolitical environment in the area surrounding Sweden. Following the breakdown of communism and the extension of the European Union, Sweden holds a strategic position in three significant areas:

* The Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) have a population of 25 million people. Sweden has traditionally held a central position in this region.

* The Baltic region, with more than 100 million inhabitants undergoing rapid economic growth. Trade and investment flows are expanding sharply with Poland, the St. Petersburg region of Russia and the three Baltic Republics (Estonia, Latvia and Lithuania). Companies are responding to the new opportunities by establishing operations in the area. A growing number of foreign multinationals have located their Baltic regional headquarters in Sweden, as a base for eastward expansion.

* Sweden's membership in the European Union makes it part of the world's largest free-trade area.

Another key Swedish advantage is the presence of industrial clusters of world repute. Sweden holds a leading edge in many high-tech fields, including telecommunications, information technology, pharmaceuticals and healthcare, and enjoys a strong position in the automotive, electrical equipment, steel, pulp and paper industries. Sweden invests proportionately more in R&D than any other country: 3 percent of GDP. The nation has a strong technological base in academics as well as industry.

A large number of multinational corporations originated in Sweden and are based here. These include internationally known firms, many of them leaders in their industries. The list is long, but to name just a few: ABB, AGA, Astra, Atlas Copco, Electrolux, Ericsson, Gambro, Hasselblad, Ikea, MoDo, Saab, Sandvik, Scania, Skanska, SKF, Stora, Tetra Laval and Volvo.

Of course, like any country, Sweden has liabilities as well as assets. The key question is naturally whether the advantages far outweigh the disadvantages, making Sweden attractive for investors. The answers will vary greatly, depending on the type of project involved. But in a number of sectors, Sweden is definitely a highly attractive location for foreign companies wishing to expand in Europe.

Foreign-owned enterprises and employees by home country, 1995 and 1990

Choose chapter:
 | Introducing Sweden | Establishing a Company | Labor Market | Wages and Social Insurance Contributions | Education | Real Estate | Banking and Finance | Taxes | Regional Localization Assistance | 

© 1999 by Invest in Sweden Agency

Go to the
Danish Guide