Sweden shines in Europe's modernisation drive

Sweden shines in Europe's modernisation drive

When EU leaders gather in Stockholm this weekend to discuss how to turn the union into the world's most competitive economy, they could do worse than look around themselves.

An interactive exhibition at the conference centre on the importance of information technology for growth and employment will showcase Sweden as a leading IT nation.

And delegates at a reception in Stockholm's City Hall have been asked to bring their mobile phones to try out the latest in Swedish wireless technology, from virtual opinion polls to mobile games, for an insight into the "city of tomorrow".

But Sweden has not only turned itself into a hi-tech powerhouse.

Despite its reputation as a high-tax society, with an unwieldy public sector running a cradle-to-grave welfare system, it has stolen a march on countries on both sides of the Atlantic in areas ranging from job creation to industry deregulation.

Swedish officials do not like to boast about it openly, but the country has already met and exceeded EU goals.

At a summit in Lisbon a year ago, the 15-nation bloc set itself the target of becoming the world's most competitive knowledge-based economy by 2010.


The plan is to harness new technology and reform internal markets to match the economic dynamism of the United States, and boost employment to 70 from 61 percent by the end of the decade.

The summit in Stockholm starting on Friday will be the first opportunity for the heads of state and government to check their progress towards that goal.

Sweden already has an employment rate of 74.5 percent and fully liberalised internal markets, including finances, telecoms, electricity and postal services - areas where many EU states are reluctant to accept a more open approach.

In new technologies Sweden is not only a European, but in many cases a world leader.

"Up here in the north is where things are happening," said Jean Pierre Verhoeven, vice-president of Cisco Northern Europe, when the U.S. telecoms systems giant bought small, privately owned Swedish Qeyton Systems last year for $800 million.

Sweden is home to the world's biggest producer of telecoms systems, Ericsson, and a vast number of information technology companies clustered around Ericsson's headquarters in the Kista science park outside Stockholm, often called Europe's Silicon Valley.

But the saturation with technology also means the country has also seen some of the most spectacular falls of Internet and mobile telephony firms over the past 12 months amid the change of global sentiment towards the once mighty sector.

Two Internet consultancies Framtidsfabriken and Icon Medialab, formerly in Europe's top three, have seen their share prices plummet 98 percent since March 2000 peaks, and the biggest telecoms operator Telia has fallen 32 percent since an initial public offering in June.

Ericsson, which rose from a small telegraph repair workshop in central Stockholm in 1876 to become the world's biggest producer of mobile networks and third biggest supplier of mobile phones, has lost 75 percent of its value over 12 months.


The Swedish technological hotbed and low corporate taxes - in contrast to hefty personal rates - have attracted all the world's major players in the industry, from IBM to Intel and Microsoft to Motorola.

Sweden has even attracted foreign direct investment from India, itself an emerging market hi-tech powerhouse.

"The country was prematurely written off in the 1990s as a lost case of euro-sclerotic social democracy," wrote Edward Bannerman of the British think-tank Centre for European Reform in a report on progress on the Lisbon goals in EU.

"Now the Swedes enjoy vigorous growth, low unemployment and are at the forefront of the 'new economy' - thanks to their strength in key knowledge-based industries such as IT and biotechnology."

In 1999 Sweden invested 7.7 percent of gross domestic product in the IT and telecoms sector against 7.3 percent in the United States and 5.9 percent on average in the EU.

Research and development got 3.7 percent of GDP, again above a U.S. figure of 3.1 percent and the EU average of 2.8 percent.

In a country where there are few public telephone booths because 72 percent of people have a mobile phone and more than every second household boasts a computer and access to the Internet, the knowledge-based economy is a reality rather than a vision.

"After the financial crisis of the early 1990s, there has been a dramatic change in the economy and a clear move towards knowledge-based industries," said Harry Flam, professor of international economics at Stockholm University.

The move from previously resource-and processing-dominated to a knowledge-based economy helped create jobs, and is a key factor which helped halve unemployment to around four percent.

The ability to find data and learn using information technology tools is part of the Swedish national curriculum in compulsory education, as is English, the dominant language of business and the Internet.


Companies leasing computers to all their staff have been able to do so tax-free since 1998. As a result more than two thirds of Swedish households now have a home PC.

"The computer leasing was a brilliant move on the part of the government, which could be copied elsewhere - all of a sudden everybody had a computer at home and that's why Sweden leads in Internet access," Flam said.

Sweden ranked first in IT development and Internet maturity in last year's IDC World Times survey, which compares PC infrastructure, Internet usage and education levels, among other factors, in 55 countries.

Sweden's technological advance has its roots in the construction of ports, railways and roads in the late 19th and early 20th centuries to span the sparsely populated Nordic country's vast distances and ship goods abroad from a small domestic market providing insufficient demand.

A tradition of innovation and entrepreneurship boasts the inventor of dynamite Alfred Nobel and a range of world-class companies such as Europe's biggest truckmaker Volvo, the world's biggest roller-bearings maker SKF, and the world's biggest appliance maker Electrolux.

Ericsson, although hard hit by the global economic slowdown and struggling to turn around its loss-making handset division, remains a leader in developing wireless Internet access and communication between various devices, accounting for 15 percent of Sweden's exports and 2.6 percent of GDP in 1999.

"One of the factors behind the economic success of Sweden is the rise of Ericsson and other telecoms companies, which created an aura of optimism and enterpreneurship," Flam said.

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