How a sound business operating environment supports growth
Sweden is an open, trade-oriented economy with a strong emphasis on supporting enterprise. It is therefore perhaps unsurprising, if still pleasing, to find the economy ranked third for the dynamism of our business operating environment in the Grant Thornton Global Dynamism Index (GDI) 2013. We are behind only Ireland and Canada on this measure in the 60-economy study.
So why is a sound operating environment so important to growing businesses? And what is Sweden doing so well in this area?
A strong operating environment offers key safeguards and security to business leaders. But the weaker the operating environment, the higher the risk of a particular investment. Take the expropriation of YPF from Spanish company Repsol by the Argentinian Government last year. Repsol have still to be compensated, even though Chevron agreed a deal earlier this year to move in and invest. The case highlights the difficulties businesses can face when investing in different jurisdictions. Perhaps tellingly, Spain ranks 21 for the dynamism of its business operating environment, with Argentina down at 55.
Sweden performs well across this category, not ranking outside the top ten for any of the four indicators. The economy ranks second globally for both political stability – only Switzerland is ranked higher – and legal and regulatory risk. This speaks to the stability of the economic and political environment and the transparency which permeates local business operating frameworks.
In terms of policy towards private enterprise and competition, we rank tenth, level with Hong Kong, Switzerland and Singapore. We also rank tenth for our foreign trade and exchange regime, ahead of all our Nordic neighbours. This reinforces the point that Sweden is open to foreign investment. Domestic legislation applies to foreign-owned businesses and there are no restrictions on non-Swedish operations or ownership.
Elsewhere in the GDI, Sweden ranks fourth for science & technology, behind just South Korea, Israel and Finland. This is driven by high levels of R&D (3.4% of GDP) which befits a knowledge-intensive economy which has brought companies such as Skype and Spotify to the world in recent years. Despite lower rankings in the other categories, this supports us to an overall ranking of ninth, just ahead of Norway.
The message from the GDI is clear: Sweden is open for business.
Peter Bodin is Managing partner of Grant Thornton Sweden.