25 Jan Economy made strong through public-private cooperation
Brian Mikkelsen, CEO, Dansk Erhverv, details Denmark’s current leading industries and how strong collaboration between the state and the private sector can strengthen a country’s gross domestic product.
What are Denmark’s current main challenges and how is it looking to overcome them?
In Denmark our biggest challenge is the lack of labor and finding the right balance between supply and demand in our education system. We do not undergo nearly enough science, technology, engineering and mathematics education as we need. Another issue is that the costs for companies in Denmark are quite high. There is a welfare system available for all, but this also means that the cost of production and tax fees are elevated. To be competitive at a global level, we need to find a way to lower these costs. We are currently lobbying to lower the corporate tax from 22 percent to 19 percent. In Denmark we have the highest marginal tax rate at 55 percent, and we are looking to lower that to 40 percent. Overall, we are working on having more skilled workers and lowering taxes. That said, we have an extremely positive business climate in Denmark. Most of the population are in favor of private businesses because they know that they finance our welfare system. We do not have many ideological battles because of that; people accept that we need a free private sector and stable conditions.
What is Denmark doing to address its labor shortage?
The labor shortage is a disaster for Denmark because we will get poorer. If companies lack labor, they cannot develop innovative solutions or produce. They will not receive income on what people are ordering. The most pressing problem is the long-term effects of being unable to create a proper environment for innovation that skilled workers bring. A high-tech company in Denmark that lacks the right people with digital competences and bright engineers may look at other markets to move their headquarters. If they find the research and development skills they are looking for elsewhere, they may move their production line there.
We are looking into getting more people working who are under state aid. The government forged an excellent agreement with the majority of partners in parliament about the retirement age. In Denmark as in the rest of the world, people are not getting older as quickly as before; we are getting healthier. It does not require complex political decisions to hire retirees and it is not a new discussion. This is a fall-back solution for the economic system and labor supply. We are also looking to get students out of universities earlier than they currently are. Students currently coming out of university receive higher unemployment benefits than their study payments. Currently, three times the amount of people are unemployed when they finish university as compared to the standard. The goal is to remove that so people can get into the workforce as soon as possible. Additionally, we would like to bring in more foreign labor. One way is to lower the minimum salary needed to be able to enter the country as an immigrant. We would welcome anyone who would like to come to Denmark to work; we see it as a win-win situation.
What sectors best represent Denmark’s industrial strengths?
Many world-class companies are based in Denmark and that attracts more clusters of business. There are exceptional life science companies, a large shipping industry, quite a few renewable energy entities and food products and bio-solutions companies. Apart from our leadership in biotech and life sciences, we are probably the strongest in the world when it comes to wind energy. Vestas is the largest company and Siemens’s windmill production and technology development operations are in Denmark. Vestas is one of our largest members.
Another successful industry in Denmark is, surprisingly, hearing aids. Out of the five largest companies in the world, three of them are Danish: Oticon, Widex, and GN Store Nord. In the 1950s, there was a private-public finance project in which we handed out hearing aids to the Danish public. Danish companies saw the possibilities in producing, developing and creating innovation in hearing aids, which led to our global success. The same model was used with wind technology. In the 1970s, we began to build windmills and Danish politicians saw the promise in the industry. The sector grew along with the entire supply team. Danish investors began to inject research and development and funding into offshore windmills. The success of all our growing industries boils down to public-private partnerships.
What companies are leading the way in terms of innovation and growth?
We have a tremendously influential life science hub in Denmark. Novo Nordisk and its work on diabetes and insulin is a driving force together with strong players such as Lundbek, LEO Pharma and ALK-Abelló. Our life science exports grew through the pandemic. Around 22 percent of our total exports now comes from life science or pharma products. Another huge industry for us is shipping, with A.P. Moller – Maersk and other large companies in that space. A third burgeoning industry is clean technology which is incredibly important for the whole economy in terms of job creation. Under the umbrella moving towards a green economy, we also have the biosolutions sector that some very important Danish companies participate in. We are looking to grow our startups. We have public-private partnerships in hospitals, elderly homes and innovative technologies. We see immense value in exporting this model to other countries that have the same challenges that we have solved.
What sectors are the most attractive for foreign direct investment?
Technology, life science and digitalization are attractive sectors in Denmark. There is an initiative put on the table by our chamber of commerce that the government adopted last year in which companies operating in Denmark can deduct 130 percent of their research and development funding. Essentially you get more back than you invest. We are currently in discussion with the government on the current cap on the maximum amount. We would like to remove that cap. This is a very attractive incentive for foreign investors. If we succeed in removing the cap, numbers will definitely grow.
Denmark is an extremely good place to do business. It is a stable country; as business leaders, we do not like surprises. We know what lays ahead of us in the next five to ten years. It will be the same system and conditions only a little better. We expect to have an extremely skilled labor force. The population is vastly probusiness. While we have challenges, we are highly aware of them and steadfastly working to improve them.
How has the country faced the challenges presented by the COVID-19 pandemic?
The answer to Denmark’s resilience during the pandemic is the same as with the growth of our industries; it comes down to public-private partnerships. There was powerful collaboration between the government, manufacturers, private companies and non-governmental organizations. All of us were in it together. One of our greatest strengths is our tremendously efficient testing capabilities. We tested almost everybody. There were times when we would test 5-7 percent of the entire population on a daily basis. This meant we could easily track the virus. Employment of testing and vaccination staff solved many of the challenges. Now, we have no problem with it whatsoever; it was contained at every stage of the pandemic. Testing was performed by private companies in collaboration with the public sector. In Denmark there are only public hospitals, but private companies oversee all the testing.
Our economy, much like that of Europe and the United States, is currently booming. We have had the highest gross domestic product in Denmark for a long time and the highest employment rate. There has been a sharp increase in jobs over a brief period. Our biggest issue now is that there is a shortage of skilled labor in almost all industries. Attractive aid packages for the industry helped a great deal. We have not had so few companies go bankrupt in the last 25 years; this is an amazing statistic to quote in the midst of a global pandemic. Financial assistance not only enabled companies to stay afloat, but also allowed people to keep their jobs.
What is Dansk Erhverv doing to promote the use of digital technologies in industry?
Our roadmap focuses mainly on the possibilities of technology and how we can leverage this in all industries. We want to help speed up digitalization of Danish society as this will solve many climate and health challenges. Our population is growing older and there are fewer people of working age to earn money for the elderly. Today there are 11 workers who provide for one person over 80 years old. In 2040, this will decrease to only six people. We need to find better ways to solve these challenges. Digitalization should focus on clean technology and educating the right people. A good part of our energy is being poured into this effort.
We recently formed a digitalization partnership between business leaders from the largest companies together with ministries to design new policies. The chair of the partnership is Jim Snabe, who is the chair of Siemens and A.P. Moller – Maersk, the shipping company. The most important public and private stakeholders came together to work out guidelines for the digitalization of Denmark. When it comes to public digitalization, we are probably the best in the world. Every Dane has a computer and access to the internet. All information goes through digital communication. Royal Mail is going out of business because they no longer send any more notifications through postal services.
A large challenge is digitalizing small and medium-sized enterprises (SMEs) in Denmark. They are not as digital as larger firms and there is a direct correlation between being digital and being productive and earning money. Together with the ministry of business, we conducted a survey that showed that if an SME was above average digitally, they earned about 20 percent more. We are making an effort to push for more digitalization in all SMEs in Denmark, which make up 90 percent of the economy. We are looking to give them tools. Towards this end we formed a partnership initiative called SME Digital where we give grants to SMEs who are interested in investing in artificial intelligence, big data, 3D printing and other digital tools. There is now a governmental scheme supporting SMEs with direct funding if they wish to grow in the digital space. Everyone is talking about artificial intelligence; it is being explored at universities and in large companies. We want to see how smaller organizations can use it practically. SMEs can come on board and take advantage of the exceptional data we have available for companies in Denmark.
How important is sustainability to Denmark’s public and private sectors?
What has made Denmark the most famous around the world is our climate politics. We had a strong focus on climate and energy way before it was trendy. We have had ambitious goals that have helped us put an onus on sustainability policies and technologies. The goal is to be completely free from any dependency on fossil fuels by 2050. For the private sector and the political system, sustainability is a prerequisite for long-term economic growth and prosperity. There is a wealth of possibilities as we delve increasingly into the issue. For decades we have been global leaders in clean transition, especially in wind technologies. Denmark has shown the world that it is possible to reduce carbon emissions while still having growth and creating new jobs.
However, there is no doubt that the global competition will begin to get fiercer within the clean technology space as companies begin to develop new cutting-edge solutions. To combat this, we need to ensure the best possible framework conditions to create clear incentives for companies and consumers to accelerate the transition towards carbon neutrality. We are looking to innovators, entrepreneurs and companies to create an effective hub in Denmark to continue to strive and find revolutionary solutions for sustainability and growth.
How cohesive is collaboration between the private sector and academic institutions?
The relationship is improving, although other countries are doing a bit better than we are. For example, in Israel they created a hub for both entrepreneurs and the university at the largest hospital outside of Tel Aviv that allows access to all the data from the hospital. We are currently discussing having collaborations between Danish hospitals and universities to open up the tremendous possibilities of the rich data we collect in Denmark due to our advanced level of digitalization. We still have challenges in seeking better cooperation between universities and the private sector, but it has improved a great deal. When we have a contract with universities from the political level, they are obliged to cooperate with the public sector. There are many foundations in Denmark that support this effort, such as Novo Nordisk. All parties are aware of this challenge and need; we are determined to improve on it.
How does Denmark view trade restrictions in the EU?
Denmark holds an office at the EU level, despite negativity when one talks about a common EU industry policy. We believe in a free market between the 27 countries, and Denmark trades with all of them. The office I am sitting in right now is the world’s oldest stock exchange. It is 400 years old. At that time, the stock exchange began with the intention of trading goods among all our colonies around the world. We did not have as many colonies as France, but we had colonies in Africa, India and the Americas. For the last four to five hundred years, we have kept up this strong history as a trading nation. In the EU we are in favor of bringing down all borders.