DENMARK IS NO.1

THE ECONOMIST INTELLIGENCE UNIT:

BUSINESS CLIMATE: It’s not a question of taxes or wage levels –it’s a question of quality of society; of flexibility and creating value for business. Denmark scores high on education, infrastructure and a sophisticated financial sector.

What makes Denmark the best place in the world to invest and conduct business? It is not size; Denmark is small. It is not wage levels; Danes earn high salaries. It is not language; Danish is incomprehensible. But, paradoxically, it might be all these things put together that have forced the Danes to create a society and economy, which are uniquely efficient, flexible and adaptable to changing circumstances, creating huge value for business and society. In short, Denmark seems to have found a working solution to compete in a globalised economy.

Hire & Fire

According to the Economist Intelligence Unit ranking in Global Outlook (May 2006) Denmark will have the best business environment in the world in the period 2006-2010. This is no spurious result, since Den-mark obtained the same position last year, when the 2005 EIU ranking placed Den-mark top of the world for the period 2005-2009 – and the margin is widening.

According to the EIU study Denmark stands out for the successful balance that it has struck between the state and market. Product markets operate efficiently and labour markets are flexible (with low non-wage labour costs and few restrictions on hiring and firing). Denmark’s top rank appears to belie the claim that globalisation is forcing countries to engage in a “race to the bottom” by slashing taxes. Companies’ investment decisions are motivated by more than tax differentials. Furthermore, Denmark compensates for its high tax burden with the quality of its public goods, notably infrastructure and higher education.

Stability

Denmark scores well across the whole range of categories in the business environment (10 in all) covered by the EIU. Among the most prominent are the political and institutional environment, macroeconomic stability, policy towards private enterprise, foreign investment policy, financing and infrastructure, and a labour market characterized by a highly educated and flexible workforce. In addition the financial system is transparent and diversified, with a strong banking sector. The transport network is among the best in the world, with further improvements expected, especially in and around Copenhagen. The construction of bridges linking the island of Sealand with Germany via Jutland, and Co-penhagen with Malmö in Sweden, has made Denmark a hub for businesses shipping products to other Nordic countries and to Central and Eastern Europe.

The “Danish model”

Denmark’s highly developed infrastructure and institutions, skilled labour force, political and economic stability and sophisticated financial sector are features shared by other developed EU states. However, Denmark stands out in that its business-friendly governments have strongly encouraged private enterprise and competition. Furthermore, Denmark followed the earlier experience of the Anglo-Saxon countries in implementing a host of structural reforms that have liberalised its labour market and made it highly flexible. The country has had a carefully managed fiscal policy which targets budget surpluses while at the same time ensuring high levels of public services. Contrary to the trend in some countries, Denmark has refused to compromise its social welfare system in order to compete on low taxes. It is significant that the country has achieved a high degree of competitiveness and a favourable investment climate without resorting to radical public spending and tax cuts.

Global leader

Denmark is also a global leader in the development of information and communications technology infrastructure. In a recent study by IBM and the Economist Intelligence Unit of Web-savvy nations Denmark remained No.1 in taking advantage of the Internet, both connecting citizens securely over broadband and wireless networks as well as using its near ubiquitous hook-ups for Internet banking and government services such as tax returns. “E-procurement (for public services) is saving Danish businesses EUR 50 million (USD 62.1 million) and taxpayers as much as EUR 150 million per year. The rest of Europe is expected to follow Denmark’s lead,” the study said.

Steve Balmer of Microsoft is among the international businessmen who have long been aware of Danish opportunities: “My ambition is to make the whole world Danish,” the Microsoft CEO said in a keynote speech at the company’s Worldwide Partner Conference in Toronto. “If we were just as successful in other countries as we are in Denmark, the Microsoft Business Solutions (unit) would be a factor of 10 bigger in terms of revenue.”

View the picture in full size