Sweden

08154201 李宥葶 08154238 李沁恩

08154242 林芷柔 08154250 林仕敏
Sweden is a country famous for its nature beauty and welfare system. In the following
report, we will introduce four aspects of Sweden which are political, economic, social
and environment and their influence for foreign companies respectively.

Political:
1. Taxation
International Tax Competitiveness Index (ITCI):
This is an index that reveals the overall economy performance, including
individual taxes, corporate taxes, consumption tax, property taxes and
international tax rules. The ITCI attempts to display not only which countries
provide the best tax environment for investment but also the best tax
environment for workers and businesses.

In 2020, Sweden was in the 7th place in ITCI, which was far ahead of other
countries (Tax Foundation, 2020).
 Individual Taxation: It includes individual income tax and payroll tax.
High marginal income tax rates impact decisions to work and reduce the
efficiency with which governments can raise revenue from their individual
tax systems. Sweden was ranked in the 19th, in the middle rank of OECD
members (Daniel Bunn & Elke Asen, 2020).

 Corporate Taxation:
This is a tax that will levy on corporate profits, and if country wants to
boost its ranking, it needs to lower the marginal tax rates so that more
company will be willing to invest.

First, we need to distinguish the difference from the resident companies and
the foreign companies. The biggest difference between them is that a
company is considered resident if it is incorporated under the Swedish
Company Act, which means it has to comply with local regulation. For the
 resident taxpayers, they need to pay taxes imposed on global income; for
instance, if they have branches in Asia, that region’s sale also needs to be
calculated. For the foreign taxpayers, they only need to afford taxes
imposed on profits in Sweden; however, there is no special tax rate for
foreign company.

2. Monetary Policy
*Relationship with International Unions: In 1995, Sweden joined European
Union, and it is one of the world’s largest trading blocks. Moreover, Sweden also
joined WTO, but when it comes to negotiating about international affairs,
Sweden is represented by EU as a group, which makes it have a great impact on
WTO decision.
 Swedish Krona:
The referendum of joining Eurozone in 2003 was rejected by the public, so
Sweden maintained the original currency, Swedish Krona, until now.

There are two potential reasons for not participating Eurozone. First,
Sweden is not willing to be influenced by European debt which cause by
PIIGS (Portugal, Italy, Ireland, Greece, Spain) because it might cause a
tremendous burden on country’s economy. Secondly, Sweden wants to
remain their control for trade so that it can manipulate their currency to
appreciate or depreciate.

3. Trade Tariff:
European Union Customs Union (EUCU)
As above have mentioned that Sweden has joined EU; therefore, Sweden also
joined EUCU. This is a union that imposes uniform tariffs on goods imported
from outside the Customs Union. Consequently, we can discover that the trend of
Sweden’s tariff is the same as other EU members’ tariff (Macrotrends, 2021).
 Customs Union: When a country is in the Customs Union, its tariff for all
imported countries is the same as the union’s members. For example, EU is
one of these types.
  Free Trade Agreement: When a country is in the Free Trade Agreement, it
will impose different ratio of tariff rates to different imported countries.
Take America for instance. It may impose 25% tariff to China, but 10% to
Singapore.

4. Conflict:
In 2015, a war erupted in the Middle East and lots of people in that region eager
to escape to the nearby countries like Europe. However, countries have different
degrees of accepting those refugees.

For Sweden, it has accommodated more refugees than other countries in Europe,
which is approximately 163,000 people. The refugees are mainly composed of
Syria, and after that is Afghanistan and Iraq. This trend might at first consider to
be humanitarian aid; nonetheless, it raised some society problems such as the
growth of crime rate, causing the rise of Far right, one of the political parties in
Sweden.

The Far-right advocates for keeping away refugees, claiming that the
government’s current social integration policy has failed and urgently needs
reform. Therefore, the party firmly opposes Sweden’s acceptance of too many
migrants before it has proposed an effective policy of integrating migrants into
Swedish society. They even come up with a slogan “Keep Sweden Swedish” to
declare their determination (CBS NEWS, 2019). Therefore, this might cause
danger for companies who want to invest in Sweden because workers may go on
strike and cause profit loss of companies.

Economic:
*Export-oriented Country: Sweden is country which rely on exporting goods to
other places. Exports account for the largest part of Sweden’s economic source and
often affect various aspects of economic indicators. One of the largest port cities in
Northern Europe is Goteborg.
1. Unemployment rate
 Though the unemployment rate in Sweden is not the highest in European
countries; however, it is still pretty high compared to other Northern Europe
countries (Macrotrends, 2021).

The labor force increased 7.4% due to refugees, whereas the unemployment rate
also increased because of them. The unemployment rate of Swedish-born is about
4%, while the unemployment rate of foreign-born is 15%. This is because of the
refugees are mostly low skilled workers, but the labor market in Sweden doesn’t
need that much of low skilled workers. If companies want to open branches in
Sweden, they can pay little money to employ people to do some simple labor.
However, if they need someone to perform high-knowledge work, companies will
have to pay more to hire local Swedish.

2. Interest Rate:
In order to fend off deflation, Sveriges Riksbank (Bank of Sweden) started an
experiment of negative interest rate in 2015 for 5 years. They did reach their
inflation target of 2% in 2018, but it fell back to 1.5% in 2019. However, the side
effect of the negative interest rate was hard to eliminate, for example, house prices
and household debt increased. It is clearly that this policy does not have much
change to the domestic inflation rate, instead, the impact on household debt and
real estate are even larger. They ended the experiment in the late 2019, rising the
interest rate to 0%. Moreover, this policy makes investors more willing to
withdraw money and put into the stock market, contributing a rise of economy.

3. Foreign Exchange Rate:

Since the effect of European debt crisis happened in 2012, Euro has depreciated.
Swedish Krona and Norwegian Krone become “safe heaven” to most of the
investors. Swedish Krona has appreciated by 10% against euro since 2010 to
2012.

In 2020, due to the outbreak of Covid-19, Swedish Krona fell to the lowest point
within ten years in March. Whereas it soon went back to the original level before
Coronavirus in May. Swedish Krona soon became a strong currency again in the
 second half of the year.
4. Economic Growth Pattern:
In 2007 the occurrence of the financial crisis impacted the whole world, and
Sweden is no exception. However, compared to other countries, Sweden
recovered faster than most of them thanks to their unique “Swedish model”
(Sveriges Riksbank). In the 1990s, Swedish financial crisis had a hard hit to their
“neoliberalism” policy at that time. They then learned from their failure and
created a new policy. A mixture of the capitalism and open economy and also
famous for its high taxation. The core of this policy is “social equality”,” full
employment”, and” perfect welfare system”.

During Covid-19, Sweden decided not to lock down. Their economic performance
does not have many differences compared to other Nordic countries, but still
better than most of the European countries. Though they saved their economy,
many people died because of this policy (Lars Calmfors, 2020).

Social:
1. Religion and Ethics
Sweden is a country with high degree of religious freedom. Statistic has shown
that Swedish Church is the largest religious group in Sweden. And 28.5% of
people are no religion belief because some of them are atheists or agnostics. Most
other sects are from immigrants.

2. Population
The northern part of Sweden is not suitable for living, so most people live in the
central and southern part. In Sweden, population density of city is high because
90% of residents live in the city. Most immigrants come from countries such as
Finland, Turkey, Germany, Denmark, Norway, Poland, Iran, Iraq and other
countries (World Fact Book, 2021).
 European Migrant Crisis:
In European Migrant Crisis, refugees preferred to flee to Sweden because of
the social welfare. Sweden can directly provide permanent residency for
 Syrian refugees who have sought to refuge in Sweden. This policy has been
implemented since 2013. Before that, about half of the Syrian refugees who
came to Switzerland were granted permanent residency, while the other half
were granted three-year residency.

 Labor Immigrants:
If you plan to work in Sweden, you need to apply for a work permit. It is
valid for up to two years, but it can renew. If you have lived in Sweden for
four years in the past seven years, you can apply for a permanent resident
permit. Due to the welfare, Sweden is considered to be one of best options
for people who plan to immigrate.

3. Demographics
Sweden’s population ranks first in the Northern Europe. However, it is one of the
most aging society in the world. According to population pyramid (World Fact
Book, 2021), it is a bullet shape. Due to their good health welfare, the average life
span is higher than normal countries. Another thing to mention is that people have
less confidence in the world economic situation, resulting in delaying childbirth.
Consequently, it leads to the lower fertility. Companies can revise the retired age
for employees since most people are more longevity.

4. Health
The most famous welfare in Sweden is the senior welfare. 70% of the national
medical funds come from people’s taxation. Sweden's healthcare system is divided
into seven parts, including neighborhood or home care, emergency services,
elective care, hospitalization, outpatient care, specialist treatment, and dental care
(Natalia Marczewska, 2011). For those whose age is below 18, the cost of
prescription drugs is out of charge. However, the age above 18, the cost of
prescription drugs only has discount. Since the medical resource is too generous,
government made some rules. To avoid wasting medical resource, complex
medical procedures are put into action; contrarily, this often delays the medical
treatment.
5. Education
The nine-year basic education is free. Besides, if your grade achieves to a certain
standard, you can apply for an additional study subsidy. The welfare helps
students to learn more. Furthermore, it can raise the teenager’s competitiveness.
Before the age of twelve, students do not receive any transcript from school, and
teachers do not rank students. Therefore, students do not compare with each
other, and the most important task for them is surpassing themselves. This
system makes Sweden become one of the most innovative country in the world.
Consequently, Sweden has lots of high intellectual people, it is a good chance for
companies to come to Sweden to find talented people.

6. Local Brand
Sweden is the origin of the world’s leading homeware retailer — IKEA. It had
433 large stores in 52 countries. In addition, IKEA’s logo is draped in the color of
the Swedish flag of blue and yellow. The concept of IKEA stemmed from
providing affordable furniture and furnishings to most people. Their philosophy is
to create a better life for customers. To avoid wasting the resource, IKEA also
announces their idea “Every piece of wood is used to minimize the unnecessary
waste in the production process”.

Environment:
1. Climate
Climate of Sweden can be divided into three parts: frigid zone, humid temperate
continental climate, and temperate marine climate. Sweden’s land is long and
narrow, so the temperature in north and in south is quite different. Because of the
cold climate, companies may be limited to engage in some specific industries.

2. Geographical Location
Iron ore, forests and waterpower are Sweden's three major nature resources
(World Fact Book, 2021). Sweden is the largest iron ore exporter in Europe. The
forest coverage rate is 54%, and the storage material is 2.64 billion cubic meters.
As a result, forestry industry is important for Sweden’s economy. The available
 water resources in a year are 2014 million kilowatts, 81% of which have been
developed.

The northern of Sweden is located in Arctic Circle. Therefore, the nighttime will
last for more than 24 hours in winter and the sun remains visible in the local
midnight in summer, this phenomenon is called polar night and polar day.

*Seasonal Affective Disorder (SAD): This is also known as winter depression. It

is an emotional disorder and often occurs in countries close to the Arctic and
Antarctica. This feeling of depression can be relieved or eliminated through
outdoor activities, especially on sunny days.

3. Land Use
In 2018, 68.7% of Sweden's land is forest, and arable land accounts for only 6.4%.
15% of the territory is located within the Arctic Circle. The water area is 39,960
km², and the total number of lakes is about 95,700 (World Fact Book, 2021).

4. Global Climate Change

 Average Water Level Rises:
When global become warmer, the period with ice cover on lakes is expected
to become even shorter. The number of ice-free years will also increase.
Significant amount of melted ice leads to the average water level rising.
Many countries are facing a big threat which is their territories will be
swallowed and Sweden is no exception (Swedish Portal, 2021). Therefore,
foreign companies need to consider the future prospect in order to keep their
companies save. On the other hand, to avoid the situation become worse,
world organization proposed some new solution. One of the methods is
“Carbon Offsets”.

5. Environment offsets
 Carbon Offsets:
Carbon offset is a process that individuals or organizations can reduce net
carbon emissions through their own actions or through carbon offset service
 providers.

There are many ways of carbon offset. Tree planting is the most prevalent
one, and it is more and more common to use renewable energy and energy
conservation as compensation methods, including emissions credit trading.

Companies and individuals can solve their inevitable emissions by

purchasing carbon credits from certification activities that support
community development or installing efficient technologies to reduce
atmospheric emissions (Carbon Offset Guide, 2020).

Conclusion:
After evaluating above country’s factors, Sweden is a good place to invest since their
political is stable and has no serious turmoil these years. Moreover, Sweden’s nature
environment is beneficial to develop forestry industry and it is a big opportunity for
companies to seize. Last but not least, companies have to be careful while dealing
with immigration issues.
Reference:
(2020). Taxes in Sweden. Tax Foundation. Retrieved December 2020, from
https://taxfoundation.org/country/sweden/
(2019, April 14). (Un)Welcome: Sweden's Rise of the Right. CBS NEWS.
https://www.cbsnews.com/news/sweden-rise-of-the-right-immigrants-unwelcome-
cbsn-originals/
(2021). Sweden Unemployment Rate 1991-2021. Macrotrends.
https://www.macrotrends.net/countries/SWE/sweden/unemployment-rate
(2018, February 1). The financial crisis 2007-2009. Sveriges Riksbank.
https://www.riksbank.se/en-gb/financial-stability/the-riksbanks-financial-stability-
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(2021, March 30). Explore All Countries – Sweden. The World Factbook.
https://www.cia.gov/the-world-factbook/countries/sweden/
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(2021). Sweden Tariff Rates 1988-2021. Macrotrends.
https://www.macrotrends.net/countries/SWE/sweden/tariff-rates
What is a Carbon Offset? Carbon Offset Guide.
https://www.offsetguide.org/understanding-carbon-offsets/what-is-a-carbon-offset/
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http://www.klimatanpassning.se/en/climate-change-in-sweden/climate-effects/water-
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(2021, February 26). Swedish weather and climate. Visit Sweden.
https://visitsweden.com/about-sweden/weather-and-climate/