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Rights in Sectors with u.s. Investment

U.S. capital is invested primarily in the following sectors: petroleum, food and related products, chemicals and related products, primary and fabricated metals, non-electrical machinery, electric and electronics equipment, and other manufacturing. Workers in those sectors enjoy all the rights guaranteed under the Spanish constitution and law, and conditions in these sectors do not differ from those in other sectors of the economy.

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(D)-Suppressed to avoid disclosing data of individual companies


U.S. Department of Commerce, Survey of Current Business
August 1991, Vol. 71, No. 8, Table 11.3

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1/ Value added at factor cost, 1985 prices. 27 Per capita gross national product in kronor, 1985 prices. 31 Year end and 08/31/91. Includes treasury discount notes held by public plus accrued monies in deductible national savings scheme. Central Bank does not compile Ml. 4/ Industrial bonds, 30-month adjusted rates, percent. Annual averages and average for first 8 months of 1991. 57 Ratio of personal saving to disposable personal income. 6/ Ratio of gross investment to GDP. 71 Change between annual CPI averages. 8/ Product prices for total industry excluding shipbuilding. 97 Swedish kronor (SEK). Average annual market exchange rate for U.S.$1.00. Estimate for 1990. 107 Central Government position at year end and 09/30/91 at


prevailing exchange rates. 11/ Interest and amortizations on central government external funded debt. For 1991, a forecast. 12/ Year end and 09/30/91. Sources: Economic Research Institute, Central Bank, and Statistics Sweden.

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Sweden is an advanced, industrialized country with a high standard of living and an extensive social services system. The Social Democratic Party, which has been in power much of the time since the early 1930s, was replaced by a four-party coalition government in 1991 elections. Sweden has a modern distribution system, excellent internal and external communications, and a skilled and educated work force. Timber and hydroelectric power are the traditional resources of the economy.

Approximately one-third of GDP is exported. Consequently, Sweden is a strong supporter of liberal trading practices. Privately owned firms account for nearly 90 percent of industrial output, with the engineering sector, which includes the production of electrical and transportation equipment, machinery, and metal goods, accounting for nearly half of all industrial production and exports. Much of the high-technology component of this production, which is growing, derives from U.S. technology.

In early 1991, approximately 680 manufacturing firms in Sweden were wholly owned or controlled by foreign entities, employing around 136,000 people, or 16 percent of jobs in the manufacturing field. When firms with foreign minority interests are included, the foreign share of employment in Sweden's manufacturing sector increases to some 23 percent. Countries with the largest foreign investment in Sweden, measured by the number of employees in foreign-owned firms in all sectors of the economy in 1989, are Switzerland, Finland, the United States, Denmark, the Netherlands, and the United Kingdom. Harmonization with EC practices will remove existing barriers to most foreign acquisitions by 1992. Sweden ranks high among the industrialized countries in R & D expenditure as a percentage of GDP.

Swedish firms are prospective customers for U.S. companies that can offer new technology, as well as quality goods and services, in a number of growth industries. These include automation (robotics, process control equipment, computer software), health-related industries (pharmaceuticals, biotechnology and medical equipment), and information technology (telecommunications systems, data processing equipment, and peripheral systems).

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The country is a signatory to the General Agreement on Tariffs and Trade, a member of the OECD and the European Free Trade Association (EFTA), and its industrial products enjoy duty-free access to the European Common Market (EC). Sweden applied for membership in the EC in the summer of 1991. Like other EFTA countries, Sweden hopes the creation of the


European Economic Area (EEA) between the EC and EFTA will result in close harmonization of Swedish legislation and practices with those of the EC.

Domestic economic policy goals are aimed at regenerating economic growth while striving for a reasonable degree of price stability and low unemployment. The policy instruments used to achieve these goals are the traditional monetary and fiscal ones, as well as an active labor market policy (retraining and structural adjustment) and regional development policy (support to economically weak areas). Over the past few decades, these policies brought the level of the country's national debt, as at mid-year 1991, to 44 percent of GDP.

Roughly one-eighth is financed by foreign loans, the remainder by government bonds, treasury notes, a national savings scheme, and so forth.

In late 1991, Sweden found itself in the trough of a recession, with unemployment at the unprecedentedly high level of around 4 percent. The official outlook for 1992 remains bleak.

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Between 1973 and 1977, Sweden linked its currency to those in the European Common Market's monetary "snake" system. The krona was thereafter pegged to a trade-weighted "basket" of foreign currencies in which the U.S. dollar was accorded double weight because of its importance for international trade in such commodities as oil, pulp, and paper. Wage-cost pressures during the early 1980s, however, brought two successive Swedish devaluations of 10 and 16 percent. By 1991, there was again speculation that the krona might again be devalued. In consequence, the krona weakened against other currencies. To prevent foreign exchange from fleeing the country, the Central Bank intervened in the money market to keep interest rates high. In order to lay the ghost of devaluation permanently to rest, the Central Bank, with the Government's blessing, announced in May that the krona would henceforth be tied to the European Currency Unit (ECU) at a benchmark of SEK 7.4 to the ECU, plus or minus 1.5 percent.

Sweden applied a battery of foreign exchange controls until the international deregulation process, particularly that occurring in the EC, forced it to follow suit in the latter half of the 1980s. Following liberalization in mid-1990, the only remaining restrictions of this legacy involve the requirement that Swedish government bonds acquired by interests outside the country must be deposited in a Swedish bank or with an authorized stockbroker, and the stipulation that Swedish individuals (and some Swedish firms) are still prohibited from making deposits in foreign banks and from paying unlimited life insurance premiums to insurance companies outside the country. Various transaction requirements remain in place to maintain statistical coverage and ensure satisfactory tax control.

There are no restrictions on remittances of profits, of proceeds from liquidation of an investment, or of royalty and license fee payments. Similarly, 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.

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The Swedish tax burden is the highest in the OECD, with government receipts (direct/indirect taxes and social security) equivalent to about 64 percent of GDP, versus an OECD average of 38 percent. Since 1982, approximately nine-tenths of Sweden's economic growth has been taken by increased taxes. The marginal tax rates levied on personal income inched up over the years to levels which are now recognized as being detrimental to the efficient working of the economy. A broad tax reform of 1990-91, by reducing marginal income tax rates, is increasing the real disposable income of most Swedes. On the corporate side, effective taxes are comparatively low and depreciation allowances on plant and equipment are generous, though social security contributions for the work force add a further one-third or so to employers' wage bills.

Like the situation in the EC countries, most goods and services for domestic consumption are subject to a value-added tax. The general rate was raised to an effective 25 percent of retail price in mid-1989. Beginning in 1992, lower rates will be applied to food, domestic transportation, and tourist-related services, and over time the Government intends to lower the general rate to bring it in closer harmony with levels in the EC. Trade in industrial products between Sweden and EC and EFTA countries are not subject to customs duty, nor is a significant proportion of Sweden's imports from developing countries. Import duties are among the lowest in the world, averaging less than 5 percent ad valorem on finished goods and around 3 percent on semi-manufactures. Most raw materials are imported duty free.

Until recently, two areas of the economy were particularly affected by government regulation: agriculture, and clothing and textiles. Sweden implemented a new food and agricultural policy in mid-1991 aimed at abolishing its complicated postwar system of regulating agricultural prices. Among other things, the new policy removed farm gate price guarantees. Instead, those prices are now determined by both domestic and export demand, though they continue to be supported by import levies. Funds for the subsidization of exports may no longer be raised collectively from producers, but production surpluses of grain and meat are, transitionally, still receiving government export subsidization. For 1992, there will be a grain surplus of around one million metric tons but less significant exportable amounts of other agricultural commodities.

As to clothing and textiles, Sweden removed all barriers to trade in this area in mid-1991, with the expiry of the Multi-Fiber Arrangement. Support is being provided until mid-1992 to allow the domestic industry to adjust.

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