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Business plan
for Sweden
New conditions for economic growth
We live in a time of opportunity. We also live
in a time of transition, particularly with respect
to our economy. Business and industry
in Sweden are changing through increased
productivity, a wave of business start-ups,
restructuring, increased competition and
above all, an increase in internationalisation.
Basically, we are in a period of structural
transformation. The “Business Plan for Sweden”
project was assigned the task of answering
the following questions:
– What has been happening to the economy
in Sweden over the past few decades and
what is the situation today?
– What may happen in the future?
– What do we need to do to promote
further economic growth?

Percentage of jobs per sector in 2003.
Source: New Facts and Statistics, Business
Plan for Sweden, Nutek. No. 1 December
2005.
Industry in Sweden yesterday
and today
Figure 4. Average annual productivity
growth 1995-2003
It is important to be competitive in an international perspective to promote
development, create more job opportunities and generate growth. Another
important question to ask is: Where will the new jobs come from and how
will this happen? Today we have a good understanding of what has happened
to the economy over the past decade, what it looks like today and what
may take place over the next decade. We do not, however, know everything
about the future. This would be impossible. The future will be shaped by
how we act today and as we move forward based on our understanding
of the priorities for the future. We have some suggestions regarding what
might be worth pursuing in order to be better prepared for the future.
Care sector, 17%
The state of Swedish companies is good. They are competitive in the international
arena, they are highly productive and are demonstrating good
growth. At the same time, the globalisation trend is considerable and in sectors
particularly exposed to international competition, such as “technology
companies” and “medicine and life sciences,” growth and productivity are
high. For sectors that focus on domestic markets, such as the construction
industry and labour-intensive services, growth and productivity are lower.
Labour-intensive services
Construction industry
Care sector
Consulting
Education
Industry as a whole
Infrastructure services
Raw materials and proces-
sing industry
Commerce
Medicine and live sciences
Technology companies
Consulting, 5%
Education, 11%
Government
agencies
and
organisations,
7%
Unknown,
2%
Labour-intensive
services, 9%
Raw materials
and processing
industry,
7%
Infrastructure
services, 11%
Technology
companies,
12%
Medicine and life
sciences, 1%
Construction
industry, 6%
Commerce,
12%
-1 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0
Per cent
NB: Labour productivity growth is defi ned as the change in volume in the value added divided by the change in the
number of hours worked.
Source: SCB Nutek’s analysis

Business in the future
It is also clear that a new development trend is affecting the growth of industry,
since much of the growth in employment is in the service industries.
Furthermore, many manufacturing companies are increasingly regarding
themselves as service companies. The growth of employment in the Swedish
service industries is, however, still weak in comparison to other countries.
Growth in Swedish industry is still associated with development of older
and more mature companies. New businesses and small and medium-sized
companies have not developed to the same extent. The business climate in
Sweden is more conducive to support for the growth of established structures
rather than the dynamics of emerging industries and small and mediumsized
companies. It is the experience of more and more small companies
that government rules and requirements are increasingly impeding their
growth.
The atmosphere among Swedish businesses is very dynamic. It is clear
that new enterprise is on the rise and that more and more individuals are
considering launching new ventures. There is also a positive link between
the creation and closure of places of work. In new emerging sectors there is
considerable turbulence and companies are reinventing themselves. This is
particularly obvious in the consulting and labour-intensive service sectors.
We still need to close the gap between peoples’ desire to start a company
and their ability to actually support themselves as entrepreneurs. The number
of people actually supporting themselves as business owners in Sweden
is lower today than in 1995.
An empirical analysis of Swedish companies shows that there are three
clear challenges for Sweden:
• Sweden has not fully unleashed the job-creating power of the service
society.
• New companies as well as small and medium-sized ones are demonstrating
the weakest growth in Sweden, which means that the country
continues to be dependent on growth in older, mature sectors.
• Despite the increase in new enterprise, Sweden needs greater incentives
for individuals to choose to develop businesses and support themselves
as entrepreneurs.
When entrepreneurs and individuals who understand the long-term competitive
potential of business have the chance to speak out, there are a number
of common factors in their views on the future. The challenges facing Swedish
companies can be categorised into fi ve issues:
• Internationalisation will continue. Sweden’s economic future will involve
exploiting the possibilities afforded by internationalisation. Sweden has
the potential to do this, but this means that Sweden in the future needs to
focus even more on transparency and the ability to change and adapt.
• Competence. Almost all interviews and seminar discussions present the
same picture: gaps in competence and the lack of knowledgeable customers
with high expectations is a major threat for Sweden in the long
term.
• “Servicisation” of more and more sectors of the economy. The “servicisation”
trend shows that there is a different type of development in play
on the market than in the past, where the focus is on the importance of
business development.

Number of Swedish company acquisitions
outside Sweden 1989-2004
Proposed measures
• Organisation development. There is consensus among the business leaders
interviewed that, in the future, organisational innovation will be as
important as technical innovation.
• The signifi cance of customers and brands. An important competitive factor
in the future will be focusing on developing brands. Increasing the
customer value of a product or service and involving the consumer or
end customer in development work is seen as crucial.
140
120
100
80
60
40
20
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Thomson
Sweden is facing major challenges that, to some degree, confl ict with traditional
values. Much of the growth in employment in the future will, for
example, very likely be in the service industry, although the traditional and
major industries in Sweden will continue to be important for economic
growth. It is therefore clear that policies are needed that support the growth
of new industries and, at the same time, support the established corporations
in their efforts to develop. It would be unfortunate if these two groups
were pitted against each other. The nine proposals are as follows:
Increase investment in lifelong learning
Proposals: Additional and vigorous initiatives are needed in the area of
competence development in Sweden. Competence development initiatives
should, to a greater extent than today, be aimed at and adapted to the future
needs, and particularly the international needs of industry. If this is to
happen, we need greater interplay and more distinct division of responsibilities
between the players in the “education infrastructure.” The quality of
vocational programmes and higher education also needs to be improved.
Finally, the labour market players should join forces to develop a system
for “individual competence development” taking into account the needs of
industry as well as the individual.
Increase the Government’s civil initiatives in research to at least 1 per cent of the
BNP and provide incentives for universities to engage in entrepreneurial activity.
Proposals: Bearing in mind future competition and in relation to critical
mass requirements within various sectors, the resources that are being invested
in research in Sweden are too limited. Government investment in civil
research therefore needs to be increased as soon as possible and brought
in line with the previously established goal of 1 per cent of the GNP, and
signifi cantly more in the future. Investment is needed in areas such as IT and
telecoms, automotive engineering, medicine and life sciences, care, energy
and the environment, forestry and materials. Faculty grants should also be

increased. Resources should be invested in making small and medium-sized
companies more actively involved in research & development, and ensuring
that research results are available to these types of companies. There should
be a focus on development and utilisation of services and other cross-border
knowledge areas. Create stronger ties between Swedish initiatives/Swedish
players and European research funding. Develop research tools to create
more market pull in the research system. This could be done through greater
economic freedom and by allowing universities to have a more independent
and active role as players in the innovation system.
Promote growth and job opportunities within labour-intensive services
Proposals: Enable service operations, such as retail, restaurant and tourism,
to grow. To make this possible, the regulatory frameworks that prevent
these companies from growing to the same extent as their counterparts in
other countries need to be reviewed. An example of a regulatory change
would be allowing working hours to be adapted so suit customer and business
needs. The way in which the rules and supervisory controls dictated by
the authorities are applied also needs to be reconsidered, e.g. the municipal
plan processes. There are currently strategy programmes in place for different
sectors of industry that have been produced jointly by politicians and
industry. Similar initiatives need to be developed for the service sector. This
should be regarded as a fi rst step towards dealing with future international
competition.
Promote opportunities for entrepreneurship within the care sector
Proposals: The primary consideration of healthcare is to provide welfare
to the country’s citizens. It is therefore especially important to be able to
increase productivity and cost effectiveness. The fact that there are many
healthcare providers in addition to the public providers means that there are
opportunities to increase effi ciency gains. Society can choose to take these
effi ciency gains in the form of cost savings or use them to fi nance additional
welfare services. Even if the care sector today is different to other markets,
there is still considerable growth potential which society needs to utilise.
We believe that this is best done by reviewing the sector’s regulations so that
people can continue to rely on the fact that the Government will live up to
its responsibility at the same time as we utilise the creativity and knowledge
of a number of different players.
Facilitate internationalisation of the service sectors
Proposals: Swedish growth is closely related to the ability of Swedish companies
to compete and expand outside the country. This, of course, applies
to all industries, but at this time it is particularly important to emphasise
the internationalisation of the service industries. Sweden has a number of
service industries with world-leading expertise but where the level of internationalisation
is low, particularly within the “care sector,” “education,”
“consulting” and “labour-intensive services.” It is important for these new
and growing service industries to be exposed to competition and to be internationalised
early on along their development path. If this does not happen,
they risk being driven out of the market by competition from players from
other countries. To speed up the process of internationalisation, a number
of regulatory issues need to be addressed. Of particular importance is the
service directive being discussed within the EU. The Government should act
to increase competition in the service markets. Work on the Bologna Process
– a harmonisation of parts of the education sector within the EU –is another
area to focus on. This process is an important factor in increasing mobility
among students.

Overhaul the tax system
Proposals: A general review is needed of the tax system so that it can form
a solid foundation for industry in the future, can be internationally competitive
and can fi nance welfare systems. Internationalisation is putting new
types of pressure on the tax system.
Associate increased mobility with individual security, security in transition
Proposals: The various labour market players should work together to produce
a strategy that stimulates change in the labour market. They should
agree on introducing solutions in Sweden that involve increased fl exibility
in the labour market while increasing individual security. Develop solutions
at the same time as investments in skills development are increased. First
and foremost, it is necessary to encourage small companies in Sweden to be
willing to risk taking on new employees.
Guarantee the long-term energy supply
Proposals: An important measure in creating the necessary conditions for competitive
industry is to guarantee the long-term energy supply. Sweden needs a longterm
energy policy for a number of reasons, one of which relates to the major
advances that have been made in the fi elds of nuclear power, solar energy, oil, coal
and biofuels. Industry, energy companies, government agencies, research players,
professional and industrial organisations and politicians should therefore join forces
to agree on a long-term energy policy to guarantee Sweden’s energy supply.
The challenge is, on the one hand, to manage today’s energy and environmental
issues, and on the other, to establish reasonable energy price levels for Sweden’s
citizens and industries. Competition in the energy producer market must be
deregulated and strengthened. Transmission capacity needs to be improved, both
within the Nordic region and between the regions in Europe. At the same time,
the system of emission rights must be changed without delay so that the costs
do not force marginal pricing on electricity.
Form a globalisation council to focus on and strengthen industry’s long-term
development and competitiveness
Proposals: Sweden is facing major challenges and the international structural
transformation requires a far-sighted and well-established economic
policy. A consistent and long-term focus on the challenges facing Sweden
is needed. An international development council would provide the Government
with a valuable platform from which to establish economic policies
and could provide advice on important economic policy issues. The
council should include political decision-makers and representatives from
companies, unions, and from the education and research sector. The council
should be commissioned to analyse and interpret the signifi cance of deregulation
and other important international trends, and to present proposals
for measures that should be implemented to enable industry to more easily
change and adapt and provide the necessary conditions for new industries
to emerge.
STEERING COMMITTEE