The Hindu Business Line : Denmark's success formula: No fairy tale

ON THE 200th birthday of Hans Christian Andersen, my wife and I drove over to the quaint island of Fiona in Denmark, where Odense is located. It was here that the famous story-teller was born.

We had always wondered how Andersen, a self-obsessed, social misfit went on to create this world of engaging fantasy. The answer lay in his writing style, which cut across all barriers of language and culture. While fairy tales of his time were didactic, Anderson's own work carried an element of delightful ambiguity and revealed an optimistic triumph of good. That was his formula for success. But, Denmark's economic success is no fairy tale!

Today, Odense is a boom-town — smart houses have sprung up amid an unprecedented rise in construction and people drive expensive cars.

Denmark could well be a role model for the EU. This is because, the Danes have achieved a high rate of employment by virtue of high flexibility, and at the same time they are among the most satisfied citizens in the EU when it comes to working life.

Europe's superpowers — the UK, France and Germany — are currently studying Denmark's success in ensuring a high rate of employment and good social security benefits for its citizens. They are also inspired by the Scandinavian model, with its active labour market policy and the importance given to public services such as kindergartens and nursery schools — and the resulting high rate of employment.

The annual economic growth in Denmark is at 2.54 per cent. By comparison, the 12 EU countries showed a combined growth of 1.36 per cent last year. The Danish economy has a surplus on the balance of payments, and surplus on the State Budget and is at the peak of economic growth in Europe, which has very flat growth and considerable unemployment.

The Economist Intelligence Unit (EIU) has hailed Denmark the best location for business. Denmark tops the list of the 60 countries surveyed by the EIU, which included the US, Canada, Singapore and Hong Kong, as well as the rest of the EU.

Denmark's top position reflects the country's stable economic environment, its excellent infrastructure and a series of structural reforms that have made the labour market highly flexible. As a result the country is becoming an attractive testing ground for new technologies apart from Finland and Sweden.

The government's policies on foreign investment, rules and regulations are clear and transparent, with virtually no limitations to foreign ownership of companies.

Thanks to the high degree of efficiency in the its banking sector, financing has become one of Denmark's strongest points.The costs to borrowers are generally lower than in the neighbouring countries.

Although the country already boasts an excellent transport and communications infrastructure, there is broad political consensus in favour of further improvement. The Danish government is making progress with its German counterpart concerning the construction of a new bridge to link the two countries.

Not only are rules and regulations on foreign investment both clear and transparent but, procedures for setting up a company have been simplified. On-line incorporation has reduced the time taken to establish a company to just a few hours!

Denmark has a long tradition of open and transparent parliamentary democracy and scores highly on the effectiveness of its political system.

As a small open economy Denmark is and has always been a strong advocate of free trade and has consequently supported the expansion of the EU to remove trade barriers with countries in the Baltic, Eastern Europe and southern Mediterranean.

This commitment to free trade, and to the EU in particular, is easily explained. Denmark's geographical position is the turnpike linking the Nordic region with core Europe.

The labour market is also remarkably flexible, with no restrictions on hiring or firing employees, and no social contributions paid by employers, unlike most other countries in Western Europe, such as Sweden, France and Germany. There are numerous advantages despite the high wage costs. These include generally harmonious labour relations, a well-educated workforce, where the use of English is common.

Recently, Global Entrepreneurship Monitor selected Denmark as a world leader in intrapreneurship. Intrapreneurship is the ability to develop new knowledge and new ideas for the further development of existing business fast and cost effectively.

Creative competence is deeply anchored in the Danish corporate culture where senior people delegate responsibility and employees act fast and effectively to an extent that is unsurpassed by other Nordic countries and Europe.

The Øresund link between Copenhagen and Malmö in Sweden has created a metropolitan area with Copenhagen as the largest and wealthiest conurbation in Scandinavia and the Baltic region with more than three million inhabitants. This region is home to Medicon Valley, an expanding centre for biotechnological/medical and scientific research. Medicon Valley is attracting more and more biotech companies, while the pharma, IT and food industries hold strong positions in the Øresund Region.

The Economist predicts that from now until 2009, no other EU country will do better than Denmark in terms of government policy, macro-economic stability, infrastructure and funding opportunities, and accommodating companies that wish to invest in the country. Denmark is also a leader in information technology, making it easier to establish knowledge and research centres. Fashion, fashion design, biotechnology and food science are cited as examples.

In the spring of 1940, the people of Denmark were very afraid. Only six months earlier, in September 1939, Germany had attacked Poland. Now Germany — a large and powerful country — had its eyes on Denmark. King Christian X knew that Germany would beat Denmark terribly if the two countries went to war.

When Germany finally invaded Denmark on April 9, 1940, the Danes people barely put up a fight. Denmark made the right decision. Fortunately, Germany's invasion was not violent. Very few Danes were injured, and Germany allowed Denmark to keep its government and its military.

All Danes used one of the secret ways to work against Germany. It was known as the `V' campaign. People used the letter `V' as often as possible in letters, in the newspaper, on radio, and even in graffiti written on buildings and sidewalks. The `V' stood for `victory over Germany.' Though Danes could not talk about Germany losing, they could use the `V' as a way to remind themselves that victory over Germany was possible.

That was then. Today, the Danes have achieved economic victory over the rest of Europe. And this is no Anderson fairyland, but modern Denmark.

(The author is former Europe Director, CII, and lives in Cologne, Germany. Feedback may be sent to mohan.murti@t-online.de)

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