2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report

Openness to, and Restrictions Upon, Foreign Investment

Sweden is generally considered a favorable country in which to invest. Sweden offers an extremely competitive, largely corruption-free economy with access to new products, technologies, skills, and innovations. The largest market in the Baltic Sea region, Sweden is the gateway to Northern Europe and the Baltic Sea region. Low levels of corporate tax, the absence of withholding tax on dividends, and a favorable holding company regime combine to make Sweden particularly attractive for doing business.

Combined with a well-educated labor force, outstanding telecommunications network, and a stable political environment, Sweden has become more competitive as a choice for American and foreign companies establishing a presence in the Nordic region. In the World Economic Forum’s 2012-2013 report, Sweden ranked fourth out of 144 countries in overall competiveness and productivity and has been in the top five for the past ten years. The measure includes multiple indicators, summarized in the following excerpt:

“Sweden: Like Switzerland, the country has been placing significant emphasis on creating the conditions for innovation-led growth. The quality of its public institutions remains first-rate, with a very high degree of efficiency, trust, and transparency. Private institutions also receive excellent marks, with firms that demonstrate excellent ethical behavior. Nevertheless, we registered a slight but consistent deterioration in the country’s institutional framework over the past three years. Additional strengths include goods and financial markets that are very efficient, although the labor market could be more flexible (ranking 92nd on the flexibility subpillar). Combined with a strong focus on education over the years and a high level of technological readiness (1st), Sweden has developed a very sophisticated business culture (5th) and is one of the world’s leading innovators (4th). Last but not least, the country boasts a stable macroeconomic environment (13th), with a balanced budget and manageable public debt levels. These characteristics come together to make Sweden one of the most productive and competitive economies in the world.” (World Economic Forum: The Global Competitiveness Report 2012-2013: Country Highlights)

Also in 2012, Transparency International ranked Sweden as one of the most corruption-free countries in the world; fourth out of 176. Sweden’s economy has strong potential to benefit from intensifying, technology-driven global competition. Sweden already hosts one of the most internationally integrated economies in the world. Large flows of trade, capital, and foreign investment attest to Sweden’s global competitiveness. It is seen as a frontrunner in adopting new technologies and setting new consumer trends. Manufacturers can take advantage of a test market full of demanding customers and high levels of technical sophistication.

Sweden, like other EU countries, has been highly affected by the ups and downs of the global financial crisis. Swedish GDP contracted severely in 2009, rebounded in 2010, and then continued to grow at a moderate and steady rate in 2011 amidst the continuing eurozone crisis. Export volumes increased by 6.9 percent through 3 Q 2012. Sweden’s current account surplus continued to strengthen during 2012; Trade in goods and services resulted in a surplus of SEK 164.4 billion through the third quarter -- trade in goods contributed SEK 58.6 billion to the surplus while services contributed a further SEK 105.8 billion .

In 2010, the United States was Sweden’s sixth largest export market after Germany, Norway, Denmark, the United Kingdom, and Finland. Innovation and exports drive Sweden’s economy, and the government recognizes the need to support those exports through promoting innovation. The government’s innovation strategy aims to improve the business climate for entrepreneurs, education, and the flow of research from the lab to the market. Sweden spends the highest amount per capita on research and development in the European Union, and Parliament recently approved record levels of spending on research as part of Sweden’s “Innovation for Growth” project. With this latest increase SEK 4 billion additional spending on research and innovation, the Government has increased spending by SEK 9 billion over the last eight years.

Surveys conducted by investors in recent years ranking the investment climate in Sweden show little variation in their appraisals: positives mentioned are a well-trained and educated workforce; low corporate tax rates; excellent infrastructure; and easy access to capital. On the negative side are the high cost of labor, rigid labor legislation, high individual tax rates, and overall high costs in Sweden.

In Nordic labor markets, labor and management do not see each other as enemies, but strive for consensus. Labor market relations are characterized by mutual respect for negotiated contracts among employers and unions. Labor unions are generally supportive of new technology. Swedish unions have helped implement business rationalization, and strongly favor employee education and technical progress. For most of the 20th century in Sweden, political legislation played a smaller role in regulating labor market relations than voluntary agreements between strong unions and equally strong employer’s federations, often at the national level. Unions in Nordic countries more or less adhere to the view that sick leave and unemployment insurance systems should be shaped in ways that are both generous and advantageous to growth. About 71% of the Swedish labor force is unionized, although membership is declining. For most unions, there is a counterpart employers' organization for businesses. Unions and employer organizations are independent of both the government and political parties, although the largest federation of unions, the National Swedish Confederation of Trade Unions (LO), has always maintained close links to Sweden’s largest political party for most of the last century, the Social Democrats. There is no national minimum wage. Instead, wages are set by collective bargaining. In recent years, the government has increased flexibility to negotiate wages at the company level. Swedish law requires that union members be represented on the board of any company with more than 25 employees. This law also requires management to negotiate with the appropriate union or unions prior to implementing certain major changes in company activities. It calls for a company to furnish information on many aspects of its economic status to labor representatives, though in the end, management has the final say on the direction that the company will take. By and large, this system has worked to the benefit of both labor and management.

Having only 9.5 million people, Sweden is highly dependent on exports. It is one of the most pro-free trade countries in the world. Low barriers to trade combine with collective risk sharing through social programs and labor market institutions that have provided a form of protection against the risks associated with economic openness.

The General Government Attitude toward Foreign Direct Investment

Until the mid‑1980s, Sweden's approach to direct investment from abroad was quite restrictive and governed by a complex system of laws and regulations. Sweden’s entry into the European Union (EU) in 1995 has greatly improved the investment climate and attracted foreign investors to the country. The number of foreign subsidiaries in Sweden increased sharply from the mid 1990s, from just over 3,000 to over 10,000 ten years later. Despite substantial FDI inflows, the stock of Swedish assets held abroad still exceeds the stock of foreign assets in Sweden. In 2011, the stock of foreign direct investments in Sweden amounted to 63 percent of GDP, placing Sweden in 8th place among OECD countries, after Luxemburg, Belgium, Ireland, Switzerland, Iceland, Estonia, and the Netherlands. The 2011 OECD average was about 29 percent of GDP.

In a 2003 public referendum on whether or not to join the European Monetary Union (EMU), a majority voted for Sweden to remain outside. In 2009, public opinion shifted somewhat and a majority of Swedes viewed the euro positively for the first time ever. However, the 2010 debt crises in the eurozone have caused public opinion to once again favor retention of the SEK, which has weathered the financial crisis well. We do not expect the EMU issue to be put to the electorate in the current four year political cycle, which ends in 2014.

Swedish authorities have implemented a number of reforms to improve the business regulatory environment and benefit investment inflows. The Moderate Party-led center-right coalition government (also known as the Alliance Government) elected in September 2006 set a goal of selling some US$31 billion in state assets between 2007 and 2010 to stimulate growth and raise revenue to pay down the national debt. In 2008, the Swedish government sold liquor company V&S (Vin & Sprit AB) to French company Pernod Ricard for US$8.3 billion and the Swedish OMX stock exchange to Nasdaq for US$318 Million. Further deregulation progress was made in the beginning of 2010 as the state-owned and former Government-run pharmaceutical company Apoteket was split into two parts, one public and one private. The deregulation trend was reversed by an opposition-led majority vote in March of 2011 in Parliament that put a halt to the sale of stakes in SBAB bank, telecom firm TeliaSonera, power utility Vattenfall and Posten, the Swedish postal service. Such a consolidated opposition indicates that the future of privatization will be a function of politics, and thus is difficult to predict.

The Alliance government has pursued a macroeconomic policy favorable to the business sector. While the government lost its majority in Parliamentary elections in September 2010, the election results were nonetheless considered an endorsement of the government’s economic policies, especially as the Social Democrat-led opposition fared poorly in the elections. The Moderate Party-led coalition has continued its pro-business sector policies as a minority government.

Sweden is also actively seeking ways to ensure wider ownership in Swedish industry, which it believes will increase competition and lead to greater efficiency on the markets. As a result, foreign ownership in Sweden has increased rapidly in the last decade. Approximately 50 percent of foreign-owned firms are acquisitions, and 30 percent are new establishments. Foreign‑owned firms now employ almost 25 percent of the work force in the business sector, mostly in the service and manufacturing industries. In 2011, foreign companies in Sweden employed about 631,000 employees. Foreign ownership in urban areas of Sweden is dominated by Norway and EU countries. Approximately 1,300 U.S. companies with 72,510 employees are established in Sweden, many of which are active in computer software or hardware, pharmaceuticals, telecoms, or finance. In terms of number of employees in Sweden, the U.S. is the largest individual investment country.

Financial Crisis and Recovery

Although economic conditions in Sweden are better than in many other countries, Sweden and Swedish banks have been affected by not having access to long-term funding, and by commercial bank exposure to the Baltic region. Swedish banks experienced a similar crisis in 1990-1994 involving real estate loans and defaults on high figure loans. Swedish banks became more restrictive with credit in the wake of the 1990s crisis. The experience gleaned from the 1990s banking crisis helped prepare the government and banks to respond quickly and relatively successfully to the 2008/2009 global financial crisis.

By 2008/2009, Swedish banks were relying relatively heavily on wholesale funding, with deposits ranging from 30 percent to 40 percent of total liabilities at the larger banks. As funding in international capital markets became more restrictive in 2008, Swedish authorities responded with a bank support package that included US$205 billion of guarantees for new debt issuance and US$6 billion recapitalization, doubled deposit insurance coverage to include savings of up to SEK 500,000 (US$73,855) per customer and created a fund to be prepared to take direct stakes in banks. The Central Bank lowered its main steering rate for the economy (also known as the repo rate) to 0.25 percent, and the balance sheet of the Central Bank tripled during 2008, mainly due to increased lending facilities to commercial banks.

The Swedish banking sector is highly concentrated, with the four large banking groups – Nordea, Svenska Handelsbanken, Swedbank and SEB (all of which number among the 30 companies on OMX Stockholm 30 Exchange Index (OMXS30)) – accounting for roughly 80 percent of sector assets. Due in part to the lessons learned in the Swedish banking crisis of the 90s, those banks managed to navigate the global financial turmoil without any bankruptcies. They did, however, have substantial credit losses. Those credit losses decelerated in 2010, and by the end of 2010, all the four major banks exceeded expectations in key indicators such as operating income, net profit, and net interest income. Continued conservatism on the part of the banks in 2011 secured their position as some of the healthiest banks in Europe.

The global economic downturn of 2008-2009 and its aftermath have also had significant effects on Sweden’s non-banking economy. GDP contracted by nearly 5 percent in 2009, and then rose to previous levels in 2010. Third quarter results for 2012 showed only a 0.7 percent GDP gain compared to the third quarter of 2011, whereas GDP has been dropping in the euro area for the last four quarters. The weak developments in the euro area have affected growth to a greater extent than what was expected. GDP is expected to grow at a slower pace than normal for most of 2013. As a result, the Central Bank lowered its growth projections for the Swedish economy. For 2013, the Central Bank now expects a GDP-growth of 1.2 percent, and by around 3 percent in 2014 and 2015.

Because inflationary pressures remain low, and to support measures to counter the rising unemployment figures and to boost the weak economic activity in the economy -- in December 2012 the Central Bank cut its main steering rate (the repo rate) by 0.25 percentage points to 1 percent, and is expected to reduce further, to 0.75 percent as early as February 2013. The repo rate is expected to remain low through the first quarter 2014.

The Stockholm Stock Exchange Index (OMXS30) fell by just over 40 percent during 2008, but regained the lost value during 2009 as the Index OMXS30 experienced a record year and closed at an increase of around 50 percent and rose a further 20 percent in 2010. In 2011 it decreased 16 percent and recovered slightly in 2012 with 11 percent. The SEK dropped sharply in value both against the dollar and euro at the outset of the financial crisis, in an illustration of the risk of having a small, marginal currency. However, during 2010 the SEK returned to the levels prevailing before the financial crisis and appreciated at a rate above original forecasts while the US dollar and EU have been weakened by the euro zone crisis as well as uncertain economic prospects and low expected policy rates. Finally, in 2011, the SEK lost some of its gains against the dollar, presumably the result of concern about its EU export dependency.

Laws/Rules/Practices Affecting Foreign Investment

During the 1990s, Sweden made considerable progress deregulating its product markets. In a number of areas, including the electricity and telecommunication markets, Sweden has been on the leading edge of reform. These reforms have resulted in more efficient sectors and lower prices. Nevertheless, a number of practical impediments to direct investments remain in Sweden. These include a fairly extensive, though non-discriminatory, system of permits and authorizations needed to engage in many activities and the dominance of few, very large players in certain sectors, such as construction and food wholesaling.

Regulation on foreign ownership in financial services has been liberalized. Foreign banks, insurance companies, brokerage firms, and cooperative mortgage institutions are permitted to establish branches in Sweden on equal terms with domestic firms, although a permit is required. Swedes and foreigners alike may acquire shares in any company listed on the Stockholm Stock Exchange.

Government monopolies: Despite extensive deregulation, foreign and domestic investors are still barred from retail sale of alcoholic beverages. In early 2010, the Swedish Government went through with the privatization of pharmaceutical company Apoteket, allowing for private retailing of pharmaceuticals. Approximately 600 pharmacies have been sold to private enterprises, and the total amount of pharmacies in Sweden is expected to rise sharply to reach the same level of saturation found in other European countries. The previously monopolized market for vehicle emissions testing was opened to certified private parties in 2010. The vehicle emissions testing centers were divided into three equivalent groups, of which two became independent subsidiaries in March 2012.

Legal Aspects: Swedish company law provides various forms under which a business can be organized. The main difference between these forms is whether the founder must own capital and to what extent the founder is personally liable for the company’s debt. The Swedish Law, Act (1992:160) on Foreign Branches, applies to foreign companies operating some form of business through a branch and also to people residing abroad who run a business in Sweden. A branch must have a president who resides within the European Economic Area (EEA). All business enterprises in Sweden (including branches) are required to register at the Swedish Companies Registration Office. An invention or trademark must be registered in Sweden in order to obtain legal protection. A bank from a non-EEA country needs special permission from the Financial Supervision Authority to establish a branch in Sweden.

Taxes

Sweden’s taxation structure is straightforward and corporate tax levels are low. As of 2013 Sweden has a corporate tax of 22 percent in nominal terms, lowered from 26.3 percent. The effective rate can be even lower as companies have the option of making deductible annual appropriations to a tax allocation reserve of up to 25 percent of their pretax profit for the year. Companies can make pre-tax allocations to untaxed reserves, which are subject to tax only when utilized. Certain amounts of untaxed reserves may be used to cover losses.

Due to tax exemptions on capital gains and dividends, as well as other competitive tax rules such as low effective corporate tax rates, deductible interest costs for tax purposes, no withholding tax on interest, no stamp duty or capital duties on share capital, and an extensive double tax treaty network, Sweden is among Europe’s most favorable jurisdictions for holding companies. Unlisted shares are always tax-exempt, meaning no qualification time or minimum holding of votes or capital. Listed shares are exempt if the holding represents at least 10 percent of the voting rights (or is contingent on the holder’s business) and the shares are held for at least one year.

Personal income taxes are among the highest in the world. Since public finances have improved due to extensive consolidation packages to reduce deficits, the government has been able to reduce the tax pressure as a percentage of GDP. Currently, it is below 50 percent for the first time in decades. One particular focus has been tax reductions to encourage employers to hire the long-term unemployed. The government introduced additional cuts for personal income taxes in 2008, followed by additional cuts in January 2009 and 2010. Expectations are that the taxes will stay at this level during the year and will not increase or decrease because of the financial instability. In 2011 the breaking point for state taxes increased. It is now only at an income over SEK 32,967 (approx. US$4900) per month that a state income tax of 20 percent will be levied. When earnings exceed SEK 46,741 (approx. US$6900) per month, an additional 5 percent state tax is applied.

One tax reform to help bring foreign experts to Sweden is a reduction of key foreign personnel’s income tax. Under the reform, only 75 percent of the person’s income is taxable for the first three years of employment in Sweden. Likewise, their employers pay social security contributions on only 75 percent of the taxable salary. This tax relief applies to all salaries and benefits in kind, as well as stock options and other compensations offered by the employer. This applies to foreign key personnel such as executives, researchers, and experts employed by a Swedish company. The tax relief is not applicable to individuals assigned to Sweden by a foreign company that has no operations in Sweden.

Dividends paid by foreign subsidiaries in Sweden to their parent company are not subject to Swedish taxation. Dividends distributed to other foreign shareholders are subject to a 30 percent withholding tax under domestic law, unless dividends are exempt or taxed at a lower rate under a tax treaty. Tax liability may also be eliminated under the EC Parent Subsidiary Directive. Profits of a Swedish branch of a foreign company may be remitted abroad without being subject to any other tax than the regular corporate income tax. Sweden has no foreign exchange controls or restrictions.

The Swedish system of allowing A and B preferred stock has been identified by some, both in and outside of the EU, as an obstacle to takeover efforts of Swedish companies and the free flow of capital. A and B stocks differ from common preferred stocks in that owners of A stocks have a greater number of votes than owners of B stocks. Both A and B stocks have the same right to dividends.

Incentives: The Swedish government offers certain incentives to set up a business in targeted depressed areas. Loans are available on favorable terms from the Swedish Agency for Economic and Regional Growth (Tillvaxtverket) and from regional development funds. A range of regional support programs, including location and employment grants, low rent industrial parks, and economic free zones are also available. Regional development support is concentrated in the lightly populated northern two-thirds of the country. There are also several European funds that offer subsidies for starting enterprises and a range of incentives to research and development programs provided by the Swedish Government.

Stock options: There is no exit taxation and no specific rules regarding taxation of stock options received before a move to Sweden. Instead, cases of double taxation are solved by applying tax treaties and cover not only moves within the EU but all countries, including the United States.

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Measure

Year

Index or Rank

TI Corruption Index

2012

Score: 88; 4

Heritage Foundation’s Economic Freedom index

2013

Score: 86.8; 12-t

World Bank’s Doing Business Report

2013

13

WEF – Global Competitiveness Report

2012-2013

4

Conversion and Transfer Policies

There are no foreign exchange controls in Sweden, nor are there any restrictions on remittances of profits, proceeds from the liquidation of an investment, or royalty and license fee payments. A subsidiary or branch may transfer fees to a parent company outside of Sweden for management services, research expenditures, etc. In general, yields on invested funds, such as dividends and interest receipts, may be freely transferred. A foreign-owned firm may also raise foreign currency loans both from its parent corporation and credit institutions abroad.

Expropriation and Compensation

Private property is only expropriated for public purposes, in a non‑discriminatory manner, with reasonable compensation, and in accordance with established principles of international law.

Dispute Settlement

There have been no major disputes over investment in Sweden in recent years. The country has written and consistently applied commercial and bankruptcy laws, and secured interests in property are recognized and enforced.

Sweden is a member of the International Center for the Settlement of Investment Disputes and is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards. The Arbitration Institute of the Stockholm Chamber of Commerce is one of the leading arbitration centers in the world, with many of its cases originating in East‑West business relations. An agreement between the American Arbitration Association and the Russian Federation Chamber of Commerce, stemming back to the 1990’s, provides for arbitration to take place in Sweden under the rules of the United Nations Commission on International Trade Law, with the Stockholm Chamber of Commerce administering the cases and acting as appointing authority if needed.

Performance Requirements/Incentives

Sweden imposes no performance requirements on presumptive foreign investors.

Right to Private Ownership and Establishment

Rights of this kind are not specifically written into Swedish law, but individuals and Swedish entities are well protected by the legal system. Private and public enterprises enjoy equal access to markets necessary for conducting business operations.

Protection of Property Rights

Swedish law generally provides adequate protection of all property rights, including intellectual property. As a member of the European Union, Sweden adheres to a series of multilateral conventions on industrial, intellectual, and commercial property.

Patents ‑ Protection in all areas of technology may be obtained for 20 years. Sweden is a party to the Patent Cooperation Treaty and the European Patent Convention of 1973; both entered into force in 1978.

Copyrights ‑ Sweden is a signatory to various multilateral conventions on the protection of copyrights, including the Berne Convention of 1971, the Rome Convention of 1961, and the WTO's trade related intellectual property (TRIPS) agreement. Swedish copyright law protects computer programs and databases. More recently, Sweden gained notoriety as somewhat of a safe haven for internet piracy, due to rapid internet connection speeds, a lag in implementing EU Directives, and weak enforcement efforts. Over the course of 2009, however, Sweden implemented the EU’s Intellectual Property Rights Enforcement Directive (IPRED) 2004/48/EC, and continued to step up its enforcement against internet piracy. The last few years also saw the conviction of the operators behind the Pirate Bay.org, a notorious BitTorrent tracker for illegal file-sharing, and an increase in legal file-sharing. The 2010 appeal trial upheld the guilty verdict, signaling that Sweden is no longer a safe haven for internet piracy. Legislative measures, combined with added resources on the enforcement side and the emergence of successful legal alternative such as Sweden-based sites Spotify and Voddler all contributed to a substantial increase in 2010-2011 for music and film distribution using legal means.

Trademarks ‑ Sweden protects trademarks under a specific trademark act (1960:644) and is a signatory to the 1989 Madrid Protocol.

Trade secrets ‑ proprietary information is protected under Sweden’s patent and copyright laws unless acquired by a government ministry or authority, in which case it may be made available to the public on demand.

Transparency of the Regulatory System

As an EU member, Sweden has altered its legislation to comply with the EU’s stringent rules on competition. The country has made extensive changes in its laws and regulations to harmonize with EU practices, all with a view to avoiding distortions in or impediments to the efficient mobilization and allocation of investment.

Efficient Capital Markets and Portfolio Investment

Credit is allocated on market terms and is made available to foreign investors in a non‑discriminatory fashion. The private sector has access to a variety of credit instruments. Legal, regulatory, and accounting systems are transparent and consistent with international norms.

The Stockholm Stock Exchange (Stockholmsbörsen) is a modern, open, and active forum for domestic and foreign portfolio investment. It is an official institution and operates under specific legislation.

The banking crisis of the early 1990s changed the structure of the banking sector, with a large number of savings banks being converted into commercial banks. Several foreign banks have established branch offices in Sweden, and several niche banks have started to compete in the retail bank market. Danske Bank is the largest foreign bank and the fifth largest bank in Sweden. A deposit insurance system was introduced in 1996, whereby individuals received protection of up to SEK 250,000 (US$36,927) of their deposits in case of bank insolvency. This guarantee was increased to SEK 500,000 (US$73,855) in the fall of 2008 in response to the onset of the global financial crisis, and altered to cover all types of accounts, regardless of the availability of account funds for withdrawal. On December 31, 2010, the maximum compensation was raised again as a result of amendments in the EC directive and is now the SEK equivalent of 100,000 euro (US$128,534).

Competition from State-Owned Enterprises (SOE’s)

Private enterprises compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations.

The Swedish state is Sweden's largest company owner and employer. As of December 2011, fifty-eight companies/concerns are managed through the Government Offices, 43 of which are entirely state-owned and 15 companies partially state-owned. Approximately 183,000 people are employed by these companies. As mentioned above, the government has committed to privatizing some of them, but even after the conclusion of that process -- which has been delayed by the financial crisis -- several major actors will remain. Sectors which feature State-Owned Enterprises include energy/power generation, forestry, mining, finance, telecom, postal services, gambling, and liquor retail sales.

These companies operate under the same laws as private companies, although the government appoints board members representing the owners. Like private companies, SOE’s have appointed boards of directors, and the government is constitutionally prevented from direct involvement in the company’s operations. Like private companies, SOE’s publish their annual reports, and they are subject to independent audit.

There is no sovereign wealth fund in Sweden.

Corporate Social Responsibility (CSR)

There is wide-spread awareness of corporate social responsibility among both producers and consumers in Sweden. Firms who pursue CSR are viewed favorably, often publicizing their adherence to generally accepted CSR principles such those contained in OECD guidelines.

Political Violence

Sweden is politically stable and no changes are expected.

Corruption

For those interested to invest in Sweden, corruption will probably not be an issue. While there have been cases of domestic corruption at the municipal level, most companies have high anti-corruption standards and an investor would not typically be put in the position of having to make a bribe to do business here.

However, it’s possible that some Swedish companies operating overseas have indulged in bribery of foreign officials. Although Sweden has comprehensive laws against corruption, and has ratified the 1997 OECD Anti-bribery Convention, in June of 2012 the OECD Anti-Bribery Working Group gave an unfavorable review of Swedish compliance to the dictates of that Convention. The group faulted Sweden for not having a single conviction of a Swedish company for bribery in the last eight years, for having unreasonably low fines, and for not re-framing their legal system so that a corporation could be charged with a crime. Swedish officials object to the review, claiming that lack of convictions is not proof of prosecutorial indifference, but rather indicative of high standards of ethics in Swedish companies. Recently, several high profile bribery scandals call that into question, and Swedish officials are responding with vigilance.

Bilateral Investment Agreements

Sweden has concluded investment protection agreements with the following countries:

Albania, Algeria, Argentina, Armenia, Belarus, Bolivia, Bosnia and Herzegovina, Bulgaria, Chile, China, Cote d’Ivoire, Croatia, Czech Republic, Ecuador, Egypt, Estonia, Ethiopia, Georgia, Guatemala, Hong Kong, Hungary, India, Indonesia, Iran, Kazakhstan, Kyrgyzstan, Kuwait, Laos, Latvia, Lithuania, Lebanon, Madagascar, Macedonia, Malaysia, Malta, Mauritius, Mexico, Mongolia, Morocco, Mozambique, Nicaragua, Nigeria, Oman, Pakistan, Panama, Peru, Philippines, Poland, Republic of Korea, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Slovakia, Slovenia, South Africa, Sri Lanka, , Tanzania, Thailand, Tunisia, Turkey, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen and Zimbabwe.

There is a bilateral taxation agreement between the U.S. and Sweden, but no bilateral investment protection agreement.

Labor

Sweden's labor force of 4.6 million is disciplined, well-educated, and experienced in all modern technologies. About 71 percent of the workforce belongs to labor unions. Swedish unions have helped to implement business rationalization, and strongly favor employee education and technical progress. Management labor cooperation is generally excellent and nonconfrontational.

The cost of doing business in Sweden is generally comparable to most OECD countries, though some country-specific cost advantages are present. Overall salary costs have become increasingly competitive due to relatively modest wage increases over the last decade and a favorable exchange rate. This development is even more pronounced for highly qualified personnel and researchers. The leverage in terms of high productivity and skills is substantial and offers investors good value for money.

There is no fixed minimum wage by legislation. Instead, wages are set by collective bargaining. The traditionally low wage differential has increased in recent years as a result of increased wage setting flexibility at the company level. Still, Swedish unskilled employees are relatively well paid, while well-educated Swedish employees are low-paid compared to those in competitor countries. The average increases in real wages in recent years have been high by historical standards, in large due to price stability. Even so nominal wages in recent years have been slightly above those in competitor countries, about 3 percent annually.

Employers must pay social security fees of about 31.5 percent. The fee consists of statutory contributions for pensions, health insurance and other social benefits. For employees under 25, the fee is 15.5 percent.

Sweden has co‑determination legislation, which provides for labor representation on the boards of corporate directors once a company has reached a certain size. This law also requires management to negotiate with the appropriate union or unions prior to implementing certain major changes in company activities. It calls for a company to furnish information on many aspects of its economic status to labor representatives. But in the end, management has the final say. Labor and management usually find this system works to both sides' benefit.

Sweden has ratified most International Labor Organization (ILO) conventions dealing with workers rights, freedom of association, collective bargaining, and the major working conditions and occupational safety and health conventions.

Foreign Trade Zones/Free Ports

Sweden has foreign trade zones with bonded warehouses in the ports of Stockholm, Göteborg, Malmö, and Jonköping. Goods may be stored indefinitely in these zones without customs clearance, but they may not be consumed or sold on a retail basis. Permission may be granted to use these goods as materials for industrial operations within a free trade zone. The same tax and labor laws apply to foreign trade zones as to other workplaces in Sweden.

Foreign Direct Investment Statistics

Swedish Direct Investments abroad resulted in an outflow of SEK 119 billion (US$17.6 billion) during the first three quarters of 2012, compared to SEK 138 billion (US$20.3 billion) during the first three quarters of 2011. Foreign Investments in Sweden during the equivalent quarters of 2012 resulted in an inflow of SEK 52 billion (US$7.7 billion), down by 79 billion (US$11.7 billion) compared to the first three quarters of 2011. This resulted in a net outflow of SEK 68 billion (US$10.1 billion) the first three quarters of 2012, up from SEK 8 billion (US$1.9 billion) for the corresponding period in 2011.

Both the origin of foreign direct investments in Sweden, as well as the net result of Swedish direct investments abroad fluctuates greatly from year to year. The major actors are usually the U.S. and countries within the EU.

Table I: Flow of FDI into Sweden (SEK Million)

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A positive value indicates that investment is larger than disinvestment.

Figures for 2012 are 1-3 Q

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Selection of countries

2010

2011

2012

OECD

-31,244

91,324

14,164

EU27

-25,179

4,410

-746

United States

-18,330

21,779

9,211

Total

-1,971

60,038

51.927

Percentage of GDP

0.3

2.7

1.9

Source: National Board of Trade

Table II: Stock of FDI in Sweden (SEK Billion)

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Selection of countries

2009

2010

2011

OECD

2,236

2,218

2,268

EU

1,849

1,859

1,885

United States

164

146

158

Asia

25

34

33

The Nordic countries

567

527

532

Total

2,355

2,321

2,362

Percentage of GDP

82

76

63

Source: Statistics Sweden

Table III: Flow of Swedish FDI abroad (SEK Million)

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A negative value indicates a net out-flow from Sweden

Figures for 2012 are 1-3 Q

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Selection of countries

2010

2011

2012

OECD

-34,022

-60,783

-3,429

EU27

41,520

-38,441

-3,656

United States

-54,845

-1,965

333

Total

-145,431

-182,722

-119,472

Percentage of GDP

4.0

5.1

4.6

Source: National Board of Trade

Table IV: Swedish Stock of FDI Abroad (SEK Billion)

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Selection of countries

2009

2010

2011

OECD

2,182

2,153

2,242

EU

1,588

1,484,

1,536

United States

258

412

418

The Nordic countries

671

637

650

Asia

112

129

142

Total

2,461

2,451

2,544

Percentage of GDP

87

80

68

Source: Statistics Sweden

Major Foreign Investors

Major foreign investment in the past few years has been in the chemical and pharmaceutical industry, as well as in the energy sector. Other sectors that figure prominently are the IT-sector, consulting services, staffing services, and the defense industry.

Major U.S. investors, in terms of number of employees in Sweden:

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Company

# of employees in Sweden

Manpower

10,800

General Electric

7,300

IBM

3,200

Ernst & Young

1,800

Hewlett Packard

1,400

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