Regional Localization Assistance
Regional localization assistance programs and subsidies are readily available to foreign investors, just as they are to Swedish investors. Swedish assistance programs have the following features:
- Fast decision-making, at the local county level.
- Only large projects require national approval.
- Readily-available local specialists who provide full information, assistance and guidance in applying for grants.
- Municipal officials highly motivated to attract and assist investors.
- Clearly-defined regional areas in which support is available.
- Programs cover support for investments in building and machinery, product and marketing development, employment, recruitment, social welfare fees, transportation and small enterprise establishment.
- Universities and technical institutes in cooperation with regional industry in support areas.
Regional Localization Assistance The primary aim of the localization programs is to help companies get established and operate during a start-up phase, in regions in special need of employment opportunities.
Programs are largely administered on a county level. However, in some cases, Nutek, (the Swedish National Board for Industrial and Technical Development) or the Government itself decides on assistance. State involvement is largely devoted to infrastructure improvements in such things as communications, training, research, tourism, etc. Investments in telecommunications and deregulation of telecoms have been extensive.
Excellent and low cost tele- and datacommunications is one reason why the airline SAS has its book-ing office in northern Sweden. The courier company DHL and Telit Galesi with its call center are other
examples.
Sweden has "Assistance Areas", most of them situated in the northern part of the country. This is a geographically large region covering more than half the country, but it is relatively thinly-populated. A large number of jobs in the region have been eliminated through automation of lumbering and mining, and concentration of pulp, paper and steel mills.
Area 1 is mainly the northeastern region and the western north areas of Lapland and Jämtland.
Area 2 covers northern areas closer to the coast and a west-central area that includes the provinces of Värmland and Dalecarlia. A small area of southeastern Sweden, and two towns in the south are also in Area 2.
Forms of Assistance
There are seven different forms of regional assistance.
Localization Grants and Loans are generally available for investments in buildings and machinery. Loans are granted only for those projects that could probably not be financed on the open credit market.
In Assistance Area 1, grants of up to 40 percent of investment costs are available to small and medium-sized companies*, and up to 35 percent for larger companies. Total assistance, that is, grant and loan, may not exceed 70 percent of the cost of the project. In Assistance Area 2, the maximum grant is generally 20 percent, and the total of grant and loan may not exceed 50 percent.
Decisions on the grants and loans are made by the local county administrative board (länsstyrelsen). Where total investment exceeds SEK 20 million, the decision is made by Nutek or the Government, and not by the county.
For investments in certain service sectors, the grants may also cover relocation of machinery and equipment, investments in research and development, and recruitment and training of personnel. Loans can also be based on working capital requirements for the initial phase.
Development Grants generally take the form of a grant and in some cases a conditional loan. In Area 1, soft investments (product development, marketing, training, etc.) qualify for grants of up to 40 percent for small and medium-sized companies, and up to 35 percent for others. In Assistance Area 2, the maximum grant is generally 20 percent. Total support can be increased to 50 percent through conditional loans. Such loans can have a number of conditions attached, such as repayment depending on profitability.
Employment Grants are granted to projects that create new and hopefully permanent job opportunities in the Assistance Areas. Subsidies are highest in the first year and are successively scaled down and discontinued after five years.
The total subsidy granted for a new full-time job is SEK 200,000 in Assistance Area 1 and SEK 120,000 in Assistance Area 2. (For comparison, a Swedish industrial worker is paid about SEK 180,000 per year, with the employer paying an additional 40 percent in social costs.) The subsidy is paid retroactively to the employer once a year.
Reduced Social Cost Contribution is applied to certain lines of business and in certain regions of the Assistance Areas. A 10 percent reduction is available at present. The reduction is not allowed for basic industries (mining, steel, paper and pulp). The lines of business eligible differ somewhat in the two Assistance Areas. The reduction is based on company income tax returns.
Transport aid is granted for transport of certain goods for undertakings in the northern provinces (Norrland) and for large parts of the western provinces (Värmland and Dalecarlia). Subsidies vary between 10 and 50 percent of net expenditure, depending on location and distance. Transport subsidies are granted by Nutek.
Investment Trust Loans can be granted to investment trusts if the money is applied to operations eligible for assistance and conducted mainly within the Assistance Areas. Conditions are defined by the Government in each individual case.
Rural Assistance is available to commercial companies in any line of business established in an Assistance Area or a rural or sparsely-populated area as determined by the county administrative board. Assistance may cover either hard investments (buildings, machinery, etc.) or soft investments (product development, marketing, etc.). Maximum assistance over a three-year period is SEK 800,000.
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Project Qualification
Most business undertakings and operations can obtain some form of assistance when starting up or expanding in the Assistance Areas. However, European Union rules on state assistance impose restrictions on assistance to the steel, automotive and synthetic fiber industries.
Projects that qualify for assistance include: Manufacturing and processing, industrial services, such as machine and tool design and service, inspection of production, data processing centers, etc. (although servicing of vehicles and buildings does not qualify for assistance), wholesale trades important to business and industry development in the region, and business services, such as consulting firms in engineering, construction and marketing.
Also qualifying are personal service companies not aimed at the local or regional market, construction of rental facilities for activities qualifying for assistance, tourist facilities, production of solid fuels, fur farming and aquaculture, and other operations of vital importance to the regional economy or of regional significance.
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Applications, Formalities
The formalities involved in applying for grants, loans and other assistances are relatively simple. Each county administrative board has a regional economic unit that provides information, advice, assistance and details about qualifications for assistance. They also handle applications. Municipalities also have enterprise departments that are eager to assist new businesses get established in their communities. They will help with applications.
Local banks are an excellent source of knowledge, assistance and introductions and can help with financing not covered by assistance.
Applications must be accompanied with the applicant firm's annual reports for the past three years (if in business that long) and budgets for three years ahead. These will include costs, financing, profitability calculations and possibly market analyses and plans. A recruitment plan is an important decisive factor for certain grants.
Investments dependent on assistance should not be made until the assistance application has been approved by the county administrative board or Nutek. Sometimes, the board will have independent specialists help assess a project.
If the application is well prepared and complete, a preliminary decision will usually be made within a month. However, larger projects needing Nutek or government approval will normally take longer because the county administrative board must be consulted first.
An interim decision can enable a project to get started. Interim decisions do not automatically lead to assistance being granted. When assistance is approved, funds are released successively as the project proceeds. The size of the final grant will be determined when the project is completed and all costs are known. Assistance exceeding SEK 1 million can be paid in two installments. Assistance for very large or long projects can be divided into more than two installments.
Each project is followed up by the county administrative board or by Nutek. This involves checking the company's accounts and financial and corporate status, verifying invoices and payments, checking that the recruitment plan has been followed, etc. If all is in order, final assistance payments are released according to the primary decision.
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© 1996 by Invest in Sweden Agency