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Sweden’s Position in the Global Economy

Sweden’s Position in the Global Economy. Swedish Globalization Forum May 2012 Christian Ketels. Sweden’s Position in the Global Economy Scope of the Report. How is Sweden’s economic performance in a global context?

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Sweden’s Position in the Global Economy

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  1. Sweden’s Position in the Global Economy Swedish Globalization Forum May 2012 Christian Ketels

  2. Sweden’s Position in the Global EconomyScope of the Report • How is Sweden’s economic performance in a global context? • What are critical root causes for this performance that Swedish policy makers can affect? • Base report going wide, not deep • Provides synthesis, key data, and a framework • Identifies key challenges for Sweden going forward ; suggests directions for action

  3. The Conceptual Framework Performance Prosperity Outcomes Global Economic Activity MACRO MICRO Fundamentals Institutions Macro-economic Policies Business Environment Conditions Company Operations and Strategy

  4. Long-Term Trends in Prosperity GDP per capita, US-$, PPP-adjusted Countries that have surpassed Swedenin terms of prosperity: 1970s: Canada, Iceland, Norway 1980s: Austria, Denmark 1990s: Australia, Ireland Sweden United States EU-15 Countries that Sweden has surpassed in terms of prosperity: 2000s: Germany, Denmark, Ireland, Canada, Iceland Source: Groningen Growth and Development Center, The Conference Board, 2006

  5. Labor MobilizationHours worked per Capita Annual hours worked per Capita Source: Conference Board (2012)

  6. Swedish World Market Export Shares Swedish World Market Export Share, in % Service exports Total exports Goods exports Source: WTO (2011)

  7. Relative Change in World Export Market Share, 2000 – 2010Change in Market Share 2010 to 2000 as % of 2000 Market Share Source: WTO (2011)

  8. SwedenExport Portfolio By Cluster, 2000-2010 Change In Sweden’s Overall World Export Share: -0.02% Forest Products Sweden’s world export market share, 2010 Business Services Furniture Communications Services Communications Equipment Heavy Machinery Fishing and Fishing Products Metals and Metal Manufacturing Transportation and Logistics Biopharmaceuticals Power and Power Generation Equipment Aerospace Engines Sweden’s Average World Export Share: 1.2% Hospitality and Tourism Automotive Construction Services Aerospace Vehicles and Defense Oil and Gas Change in Sweden’s world export market share, 2000 – 2010 Note: Bubble size is proportional to total export value in 2010 Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.

  9. Change of Share of Chinese ImportsSelected European Countries Share of Country in Chinese Imports, Level in 2000 = 1 Switzerland Germany Norway Denmark Sweden Finland Source: UNCTAD (2011), author’s analysis.

  10. Chinese Imports from SwedenShare by Product Group 2000 2010 Source: UNCTAD (2011), author’s analysis.

  11. Swedish Exports by Firm SizeSelected Markets SMEs share in total Swedish export value, 2007 All Swedish exports: + 6.9% Norway Germany All Swedish exports: 31.7% BRIC US Change in SMEs share in total Swedish exports, 2000 - 2007 Note: SMEs defined as <200 employees, bubble size proportional to total export valueSource: Statistics Sweden, KTH (2012), author’s analysis

  12. Sweden’s Foreign Direct Investment Position World market share Flows (3-year moving average) Outward FDI Stocks Inward FDI Source: UNCTAD (2011), author’s analysis.

  13. The Shifting Face of GlobalizationThe Role of Trade and FDI in the Swedish Economy Relative to GDP InwardStock Imports Outward Stock Exports TRADE FDI Source: UNCTAD (2011), Statistics Sweden (2011), author’s analysis.

  14. Cluster Sector Employment over TimeShare of Total Employment Sweden 11 EU countries Source: European Cluster Observatory (2012), author’s analysis.

  15. Employment by ClusterSweden, 2000-2008 Absolute Job Gains Absolute Job Losses Paper products Information Technology Automotive Heavy Machinery Analytical Instruments Metal Manufacturing Telecom products Sweden’s EU employment share, 2008 Lightning and Electrical Products Business Services Production Technology Medical Devices Transportation and Logistics Construction Entertainment Products Oil and Gas Pharmaceuticals Processed Food Farming and animal husbandry Aerospace Change in LQ (fixed country sample), 2000 - 2008 Total employees, 2008: Source: European Cluster Observatory (2012), author’s analysis.

  16. Competitiveness Profile of Sweden2011 Micro Macro Business Environment Quality Company Sophistication Social Infra-structure and Pol. Institutions Macroeconomic Policy Context for Strategy and Rivalry Political Institutions Related and Supporting Industries Rule of Law Global Rank DemandConditions Human Development <5 Significant advantage 5-8 Moderateadvantage Factor InputConditions 9-11 Neutral 12-15 Moderate disadvantage Capital Admin. Logistic. >15 Significant disadvantage Innov. Skills Comm. Source: Unpublished data from the Global Competitiveness Report (2011), author’s analysis.

  17. Doing Business in Sweden Source: World Bank(2012)

  18. Innovative OutputSelected OECD Countries, 1999 to 2009 Average U.S. utility patents per 1 million population, 2007-2009 Taiwan 10,000 patents (avg. 1999 – 2009) = CAGR of US-registered patents, 1999 to 2009 Source: USPTO (2010), Groningen Growth and Development Centre, Total Economy Database (2010)

  19. Innovation PerformanceSweden’s Rank among European countries Enablers Firm Activities Outputs Note: Coloring indicates relative strengths and weaknessesSource: Innovation Union Scoreboard (2012), author’s analysis.

  20. Learning Outcomes Across Countries2009 Finland Proficiency Score, 2009 Germany SWEDEN Norway Denmark Source: OECD, Pisa 2009 database

  21. Key Issues Impact of Policy Reforms • Level of educational attainment is modest compared to international peers • Labor market reforms have had an impact but worked largely through increasing labor supply • Innovation systems remains highly ranked but structural challenges are growing Impact of Changes in the Global Economy • Smaller companies become increasingly important for exports and innovation. • Foreign markets are increasingly served through FDI • The majority of net job creation occurs in sectors that serve local markets

  22. Action Areas Impact of Policy Reforms Impact of Changes in the Global Economy Integrate reform efforts across individual policy areas Position Sweden in the global economy Realign policy tools with changing patterns of firm behavior

  23. Action Areas: Integrated Action Integrate reform efforts across individual policy areas Realign policy tools with changing patterns of firm behavior Position Sweden in the global economy • Current policy approach too often targeted on narrow problems • Lack of incentives to enter the labor market • Lack of competition in education system • Lack of incentives to commercialize research • While these problems are real and important, a step-change in outcomes will require a more systemic approach • Address supply (incentives, quality of education, relevance of science) • Address demand (skill demand, returns to education, returns to business-academia collaboration • Address linkages (matching, information, collaboration platforms)

  24. Action Areas: Policy Tools Integrate reform efforts across individual policy areas Realign policy tools with changing patterns of firm behavior Position Sweden in the global economy • Current policy approach is too oftenbased on traditional economic structures • Internationalization seen as export promotion • Research collaboration seen as spin-offs or linkages to multinationals • While the policy tools applied in these areas are important, they are insufficiently aligned with the needs of the emerging economic structures • FDI (inward and outward) and exports are simultaneous elements of firms’ internationalization strategy • Growing role of SMEs in trade and innovation • Innovation is taking place in internationally connected regional clusters of research institutions and firms of different sizes

  25. Action Areas: Global Positioning Integrate reform efforts across individual policy areas Realign policy tools with changing patterns of firm behavior Position Sweden in the global economy • Current policy approach is too oriented on doing what is good in general rather than on what benefits Sweden most in particular • Focus of policy reforms on weaknesses • Focus on cross-cutting dimensions • Positioning is not about picking winners, but about focusing policy on creating competitive advantages for the location • Specific business environment strengths • Specific clusters • Integrated policy packages in high-priority areas

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