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Sweden remains strong on macroeconomic drivers of growth potential but shows worrying weaknesses in the microeconomic foundations of competitiveness.
Stockholm, 28 September 2005 – The 2005-2006 Global Competitiveness Report shows Sweden on rank 3 in the Growth Competitiveness Index, unchanged from 2004, but dropping to rank 12 in the Business Competitiveness Index, down from rank 4 last year. The rankings are based on a combination of hard data and the results of the World Economic Forum’s Executive Opinion Survey that this year polled more then 10,000 business leaders in a record 117 economies worldwide. The Report is used by policy makers, business leaders, and investors around the world.
“Sweden remains strong on the innovative capacity that is critical for the country’s medium-term growth potential. But weaknesses become apparent in the microeconomic conditions that drive company productivity; these weaknesses could severely limit the level of national prosperity that will actually be realized,” says Dr Christian Ketels, Senior Research Fellow at the Stockholm School of Economics Centre for Strategy and Competitiveness (CSC).
“We need to fully embrace the microeconomic competitiveness agenda - and this year’s drop in ranking points to critical areas for improvement: quality of the educational system, faith in the legal system, and incentive effects from taxes,” adds Professor Örjan Sölvell, Dean of the SSE MBA and Director of CSC, the World Economic Forum’s Swedish GCR partner institute.
Both of them agree that “we need to take the views of the more than 40 Swedish business executives included in this year’s global survey very seriously. These are the individuals that will decide whether or not to make investments and create new jobs in Sweden. Even if politicians don’t share their views they will still need to change them in order to sustain further economic progress in our country.”
Key highlights for Sweden
In the Growth Competitiveness Index (GCI), Sweden ranks 3rd overall based on its 4th rank in the technology subindex that accounts for 50% of the overall rank. It ranks significantly lower on the macroeconomic environment subindex (rank 12) and on the public institutions subindex (rank 17). The GCI aims to measure the potential for medium-term growth in the economy.
In the Business Competitiveness Index (BCI), Sweden’s overall 12th rank reflects a stronger 7th rank on company sophistication but an even lower 14th rank on business environment quality. The BCI aims to measure the level of prosperity (GDP per capita, purchasing power parity-adjusted) that an economy can sustain; it explains more than 80% of the cross-country variation of prosperity across the 117 countries in this year’s GCR.
Sweden’s position in the BCI is on a more detailed level based on strengths in measures of company sophistication, the strength of clusters, the formal openness of the economy to competition, the neutrality of government, and, most importantly, the country’s strong innovative capacity. Weaknesses are apparent in the educational system, the efficiency of the legal system, the incentive effects of taxes, and the actual intensity of competition on domestic markets.
Sweden’s massive drop in the BCI, the second largest among high-income countries, is strongly influenced by the broadening of the Swedish sample to include more small- and medium sized companies (SMEs) to better reflect the profile of the overall economy. SMEs everywhere tend to be more skeptical about the business environment they face, but the gap in Sweden is almost five times as high as the average of all 117 countries in our sample. Swedish SMEs are especially worried about the quality of the education system, including management education, and the effectiveness of the legal system.
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For more information, please contact:
Dr Christian Ketels
Stockholm School of Economics
Phone: 070 491 4626
The full results of the Global Competitiveness Report are reported in the Executive Summary and available online at www.weforum.org/gcr
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