Director General's statement

Knowledge for renewal and transformation in turbulent times
 

Seeing the whole picture

We need to be able to see the whole picture and beyond the crises. Developing the regulatory frameworks, safeguarding access to capital and services, to skills provision, to infrastructure and to sustainable investments are of crucial importance. When Growth Analysis asked representatives¹ from regions and municipalities what they thought was most important, the answer was: There is no single factor that determines how well we do in the future! We always have to strive towards further development of an attractive whole; to achieve good sector coordination and to keep together the various levels in society; to achieve cost-effective but also ecologically sustainable development. In the final analysis, it is about strong political leadership that is capable of further developing good prerequisites for growth - nationally, regionally, municipally and locally.

Rules of the game

One fundamental is continued, patient work on the rules of the game to make markets work smoothly, so that they can replace the old with the new quickly and without unnecessary cost. The rules must also be implemented in such a way that the necessary transformation is facilitated. This could mean, for example, striving to shorten the time taken to handle planning and building regulation matters, so that desirable investments - that may be able to ameliorate the effects of the crises - can start quickly. In the pharmacy market, changes are already providing increased room for additional actors and new business models. The Ministry of Enterprise, Energy and Communications has mandated Growth Analysis to follow up and evaluate the changes. Growth Analysis has also been given the special task of further developing the knowledge about the impact of rules on business dynamics from an international perspective.²

Financing and advisory inputs 

In a financial situation under pressure, the various financing and advisory inputs of the Government become extra important. Even now, SEK 3-4 billion are invested into entrepreneurship and small companies each year via various public authorities. Regions and municipalities invest at least as much³ and recently, SEK 2 billion has been set aside for Inlandsinnovation AB, a state-run venture capital company. In total, this is money that if correctly used can contribute to transformation and increased competitiveness at times and in locations where private financiers are hesitating. In several reports,⁴ Growth Analysis has analysed this joint funds arsenal in order to find out how Government risk capital inputs can be put to better use. Here there is already a long-term agenda for change, based on Swedish and international experiences - a greater proportion of the resources is to be invested in start-up and early development, which is particularly urgent in times of crisis.

Research and a skilled workforce 

The single most important factor behind a successful structural transformation is access to research and a skilled workforce in companies and public operations. During autumn 2010, Growth Analysis interviewed representatives of 320 multinational companies in Sweden, responsible for a large proportion of employment within trade and industry.⁵ They provided a relatively positive picture of Sweden's prerequisites, although they were critical of parts of the tax system, and in particular the taxation of foreign experts, something that the Government has already brought up in this year's budget. The general opinion among those asked was that: "We will continue to develop and invest in Sweden, as long as there is a skilled workforce and relevant research that can be accessed."

The experiences from the so-called "emergency coordination" - where the Government gathered together leading representatives from all regions in the country during the financial crisis - point in the same direction: that it is crucial to safeguard the supply of skills, using everything from targeted skills development with support from the European Social Fund to coordinated regional work with skills platforms.

Collaboration is fundamental

Collaboration between research and business is fundamental. Much is being done within innovation bridge bodies, incubators, holding companies and institutes to develop innovations in interaction between the public sector, academia and business. An evaluation by the OECD will answer the question of how this operation stands up to international comparison and how the system as a whole can be made more efficient. But already now, in a report⁶ on the Swedish innovation system, Growth Analysis has established that over the last 15 year period, Swedish productivity development has been at the same level as that of other comparable countries, and Sweden is well placed on several ranking lists.

In practice, public investment in infrastructure is entirely crucial for the growth prerequisites of the regions. Growth Analysis has been tasked to produce indicators that measure transport economy and at the same time the effects of improved business dynamics, where regional enlargement, available labour markets and expanded markets for (service) companies strengthens the ability to develop. The authority is also monitoring broadband improvements, services in sparsely populated areas and other accessibility issues.⁷ 
 

Development towards a sustainable society 

The debt and financial crises can provide arguments for hastening developments towards an ecologically sustainable society. It may be rational to stimulate the economy and at the same time "steer" the structural transformation towards environmentally friendly energy and transport systems, for example. The continued active work with regulations and binding emission levels, financial control measures, risk financing and information is of course necessary. But we also need direct investments in new technology and new organisational solutions of the type the Swedish Energy Agency, VINNOVA and several other public authorities are contributing to. And of course new solutions can provide a good basis for profitable business in growing companies. The Government's recently presented strategy for environmental technology export is a step in this direction. Growth Analysis has the task of evaluating the direct investments in environmentally-driven business development. Here too, international experience shows that success is often based on solutions where private and public actors collaborate. When the state provides "steering" in a sustainable direction and private actors provide market know-how, the result can be a new type of "winner" that meets both market and (environmental) policy needs.

Seeing the opportunities

Growth Analysis' statistics show that the structural transformation "is working". Every year, around 300,000 jobs are created in new and existing companies, and as many "old" jobs disappear.⁸ The new jobs have prerequisites for being "greener" than the old ones. 7,000 companies went bankrupt in 2010, and so far this year the number has fallen slightly. Bankruptcy seldom means that everything is closed down. On the contrary, often the competitive parts of the bankruptcy estate continue under new management. Bankruptcies and shut-downs in a market economy then frees up resources that can be better used in other businesses. For Sweden – despite considerable shipbuilding, steel and textile crises – the transformation has in the longer term been positive, and has entailed more jobs and a better environment. When the markets fade – as in the difficult position we are currently in – there is a risk of the spotlight being trained on what is "disappearing" – on crises and bankruptcies, with a well-intentioned ambition to "save the jobs". It is then that we have to hold fast to seeing the opportunities in efficient renewal and structural transformation.

[1] Tillväxtanalys 2011:01 Utvecklingskraft i kommuner och regioner - tillväxtarbete i flernivåstyrningens tidevarv (Development Power in Municipalities and Regions - Growth Work in the Era of Multi-Level Steering)
[2] Earlier studies are: Tillväxtanalys 2010:7 Regelbörda och ekonomisk utveckling – en forskningsöversikt (The Regulatory Burden and Economic Development - a Research Review) and 2010:14 Regelbördans ekonomiska effekter (The Economic Effect of the Regulatory Burden)
[3] See Tillväxtanalys 2011:01 above
[4] Tillväxtanalys 2011:05 Kompetent kapital? - tre länder tre försök (Competent capital? - the attempts of three countries) 2010:01 Staten och riskkapitalet (The state and risk capital) et al.
[5] Tillväxtanalys WP/PM 2011:18 Lokalisering av huvudkontor, produktion och FoU i Sverige (Location of Head Offices, Production and R&D in Sweden)
[6] Tillväxtanalys 2011:04 The Performance and Challenges of the Swedish Innovation System
[7] Tillväxtanalys 2010:11 IT i landsbygder - IT-användning med fokus på mikroföretag (IT in rural areas - IT Use with Focus on Micro-Companies, 2011:35 Tillgänglighet och näringslivets konkurrenskraft (Accessibility and Competitiveness of Business)
[8] 2010 Tillväxtfakta (Growth Data), Tillväxtanalys 2010:12 Regional tillväxt 2010 - En rapport om tillstånd och utveckling i och inom Sveriges FA-regioner (Regional Growth 2010 - A Report about the Condition and Development within and outside Sweden's Functional Analysis Regions)