– outcome and proposal of method for future analysis
A report on international competitiveness at a time when the world is undergoing a global financial crisis and where quantitative data is still limited with regard to the crisis’ structural effects is naturally limited in what it can analyse.
In its Letter of Appropriations for 2009, the Swedish Agency for Growth Policy Analysis (Growth Analysis) was commissioned to produce a report that analyses Swedish competitiveness on an overall level and to analyse competitiveness on the industry and regional levels. This assignment included illustrating how political decisions on a national and regional level affect the development of Swedish competitiveness.
In Chapter 2, this report presents the overall development of competitiveness in the form of competitiveness indicators with regard to income and production. In addition to this, the development of the terms of trade, labour productivity and the unit labour cost are also presented. The indicators are chosen based on the Growth Analysis Letter of Appropriation assignment and based on indicators previously developed by the Swedish Institute for Growth Policy Studies (ITPS). Chapter 2 notes that the collective impression upon comparing the indicators is that:
- Sweden has regained ground that was lost in the 1990s and now has income and production on a par with a weighted average of our most important competitor countries. According to this measure of competition, Sweden recently lost some strength as a result of the financial crisis and the prevailing recession.
- The income indicator (with regard to real GDP) shows that Sweden had a lower income per person of a gainfully employable age compared to 14 competitor countries beginning in 1992. This trend was broken after 2001 and in 2007, Sweden reached the same income level as the aggregate of the competition countries. In 2008, this trend turned downwards again, however.
- The production indicator (with regard to real GDP) indicates a positive trend beginning in 1998. Sweden had higher growth in the production than the competitor countries, but this development began at a lower level. This trend has stagnated since 2006.
- The terms of trade, the relationship between export prices and import prices, exhibited a negative trend beginning in 1990. Beginning in 2000, import prices were higher than export prices. The main explanations of this were the price increase on oil, price decreases on telecom products and the development or sensitivity of the SEK rate of exchange. In 2007, the trend turned, but import prices are still somewhat higher than export prices.
- Swedish labour productivity was somewhat below its closest competitor countries beginning in 1993. Labour productivity is converging somewhat as the variance between Sweden and important competitor countries is decreasing. Labour productivity was somewhat larger than the competition countries in 2005 and 2006, but turned down at the latest measurement point in 2008.
- Since 2006, the unit labour costs have been decreasing in large countries such as the US, Germany and the UK, which places pressure on Sweden.
A country analysis indicates that it is mainly against the US and Norway that Sweden has difficulties competing. Sweden has more production than the other competition countries chosen. The overall analysis indicates that the SEK’s relationship to the surrounding world affects several of the indicators, in many cases negatively. Gross national income (GNI) is developing slower than the gross domestic product (GDP). Commodity prices are set in USD, which has a major impact on the terms of trade.
In Chapter 3, the analysis shifts to international competitiveness on an industry level by utilising existing foreign trade statistics in a new way. Based on foreign trade data, the goods/products are derived, which during an eight-year period can be identified as:
- successfully competing on characteristics with high relative export prices and export growth, and successfully competing on price with low relative export prices and high export growth.
- having problems in competition where the export value declines for product groups that compete on price and characteristics.
The three dimensions at the product group level make it possible to identify business segments and companies that work with this kind of product in its business areas. In 2005, Sweden’s exports amounted to approximately SEK 900 billion. Of more than 8,000 product groups named in Sweden’s export statistics, approximately 100 account for half of the export value. A large proportion of them can be said to compete on international markets. The analysis at the lowest industry level or product level indicates that:
- The largest number of fast-growing export products has a high quality index. Of the total number of fast-growing products, slightly more than 40 per cent had a high quality index.
- Sweden has comparative advantages in the higher quality segments in various product areas. Note that low and medium-technology industries can also be divided into various quality segments.
- Product variants that had a high quality index in 1997 accounted for 35 per cent of the total export value in the same year. The same product variants accounted for 40 per cent of the value in 2005.
- Among export products of medium quality, there was a somewhat lower number of fast-growing products, but they accounted for more than 50 per cent of the export value from fast-growing product variants.
- Products with a low quality index accounted for less than 10 per cent during the period.
The analysis in Chapter 3 has not exhausted the possibilities of describing the development of Swedish competitiveness on an industry level. Chapter 4 discusses how one can use this approach as a selection instrument for studies or expert panels where companies are placed in a national and regional context. This approach can provide in-depth understanding of how economic policy has affected competitiveness on an industry level, but also how it can be developed to support future development. Consequently, the method can be said to make it possible to supplement information produced by other more overall analyses.
In commissioning Growth Analysis, the Ministry of Enterprise, Energy and Communications requested a review of the barriers to the development of competitiveness and exports that can be influenced by political actors. Growth Analysis must admit that the ministry’s wishes could not be met here. This was due to the issues’ considerable complexity and the time and resources that Growth Analysis had at its disposal for completion of the assignment. Growth Analysis must instead return to the issue continuously in the next few years as it lies within the scope of the entire agency’s activities. In other words, providing advice and recommendations on how Sweden will be able to strengthen its international competitiveness on the long term is one of Growth Analysis’ most important assignments and constitutes the core of many future products.
Swedish competitiveness – outcome and proposal of method for future analysis
Serial number: Report 2009:09
Reference number: 2009/057