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Foreign trade and investment is growing in the 11 Nordics and Baltic Sea Region countries, and there are still plenty of cost-competitive opportunities, especially in the tech sector. Sebastian Shehadi reports. 

There are a “plethora of opportunities” in the Nordics and Baltic Sea Region (NBSR), which includes the more prosperous Nordic countries as well as the lower-cost Baltic ones, says a report from researcher MCJ Lemagnen Associates, Corporate Investment Opportunities in the NBSR 2016

Consisting of 11 countries, the NBSR stretches from Norway to Baltic Russia. It represents a direct market of 52 million consumers, out of 500 million in Europe and Russia, and a labour force of 27 million. The NBSR’s combined economic worth is around €1700bn, states the report.

The region’s countries have unique selling points and their GDP varies, especially from east to west. Based largely on the perceptions of international investors, MCJ Lemagnen’s report compares these national attractions and highlights the NBSR’s pan-regional advantages.

Open for business

NBSR nations receive an estimated average of 1300 investments – greenfield and M&A – each year. Sweden, Norway and Finland received the highest number of FDI projects between 2010 and 2014, says the report. Foreign investment has increased consistently since the economic crash and its cumulative stock was around $900bn by the end of 2014, 40% of the region’s GDP.

Like investment, foreign trade has grown strongly since the 1990s. Exports range from 30% of GDP in Russia to 80% in Estonia and Lithuania. Despite growing feelings of anti-immigration, the report finds the region open to immigration with, for example, foreign nationals making significant minorities in Sweden and Denmark.

The region is also dotted with special economic zones that offer substantial financial incentives to corporate investors. More generally, the report highlights “tax incentives, open regulation, costs, dynamic business culture and modern governance” as key strengths of the region. For instance, Estonia’s pioneering e-residency scheme, which simplifies inbound FDI, has attracted 12,000 e-residents from 132 nations.

Julia Lemagnen, director of MCJ Lemagnen, said: “Sweden and Denmark are the top ranked countries for ‘familiarity and attractiveness’ as an investment location. Then came Finland, Baltic Germany, Norway and Estonia.” Clearly, the eastern European NBSR countries have lagging reputations.

Industry diversity

The manufacturing base in the NBSR is very diverse. Generally, the more easterly countries provide cheaper, labour-intensive, low- and medium-tech manufacturing, such as car assembly in St Petersburg. The more westerly countries offer some of the most sophisticated factories for ultra-high-tech products, for example, Hamburg’s Airbus.

Although more expensive, “these nations can be very cost competitive for operations such as R&D, high-tech manufacturing and internet data centres”, says the report.

The Nordic countries are also global leaders in cleantech and renewable energies. “The Baltic States and Baltic Poland have established themselves as among the best location for business process outsourcing, shared services and contact centres,” concludes the report. St Petersburg is particularly strong in IT outsourcing and R&D.

Education and innovation

With more than 2.5 million students in total, the NBSR countries also offer a high proportion of university-educated workers. Owning truly world-class institutions, especially in Sweden, the region can boast highly skilled workforces, as reflected by the fact that “most people [competently] speak at least one foreign language (normally English)”, the report says.

The NBSR’s skilled labour force is also evidence by its world-class R&D and innovation. “Baltic Germany and Nordic countries are world leaders…[not least] thanks to public research institutions such as the Danish Technological Institute, Germany’s Fraunhofer, VTT in Finland and Sweden’s Vinnova,” the report says.  

This article is sourced from fDi Magazine
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