Mundus February Brief

Mundus February Brief
The Mundus Brief is our summary of the important Swedish news stories over the past month

The main stories in February

February turned out to be the month where the spotlight suddenly shone on a number of issues that had been festering in the background. And of course, it was full of the usual mix of crime and safety, immigration and electioneering issues.

In the January Brief we reported on problems at the New Karolinska Hospital (NKS). The signs portended a storm, but it was unclear how hard it would rage. Now we can say, that the tempest blew hard and is sweeping the decks clean. As reported in the February Monthly Policy Review, the optics around a variety of management issues at NKS didn’t look good. Given that the decisions had been made under a previous Alliance administration, the opportunity proved to be too tempting for the Social Democrats to miss in an election year. The Finance Minister and then the Prime Minister called for an enquiry, and a Crisis Commission was eventually established. According to Anders Ygeman, the Social Democratic group leader, “what happened is exceptional, with a bitter stream of new disclosures. The effects of many bad decisions are affecting the citizens of Stockholm, but also risks significantly damaging the confidence of people in politicians and healthcare throughout the country.”  Jan Svenonius, the Manager of Procurement for the Nya Karolinska Hospital and coincidentally the husband of County Council Director for Finance, Irene Svenonus, a Moderate politician, was forced to resign. The Social Democrats are keen to make healthcare an election issue, promising investments worth SEK 10 billion and an additional 14,000 new healthcare jobs.

Trouble was also brewing at H&M. Last month we wrote that the management would be glad to have January behind them. Except, it got worse. A year ago its stock was trading at SEK 240, but today it trades at SEK 135 and shareholders have had enough. The Financial Times reported that an anonymous investor briefed the paper that the CEO, Karl-Johan Persson “is definitely not the right person. The problem is that he does not risk being kicked out.” Later the same week the company held a Capital Markets Day, which it planned to rally support for the company’s strategy. But the event ended up flopping badly, with shares down a further 4.6% on the day, although they did later rebound. H&M has fallen from its perch as the most valuable Swedish company, and is now ranked only sixth. Stories about very low wage rates in Ethiopia and alleged prisoner labour in China rounded off an atrocious month for the firm.

A diplomatic dispute between Sweden and China over publisher, Gui Minhai escalated in February. The Minister for Foreign Affairs, Margot Wallström insisted Gui be released, ”demanding that our citizen be given the opportunity to meet Swedish diplomatic and medical staff, and to be released so that he can be reunited with his daughter and family”. The United States and European Union also called for Gui’s release.

Sentiments about the role that China plays in Swedish affairs are sweeping into politics. In late January a Chinese investor pulled out of a project to build a large port at Lysekil, near Gothenburg, after negative pressure being exerted in social media and newspapers. Ulf Kristersson, the Moderate’s leader says that China’s influence in Europe is becoming too big, and the EU needs a tougher attitude towards the country. But Mikael Damberg, the Minister for Enterprise and Innovation, warned that Sweden should not make it difficult for Chinese investors to enter the country. ”If Sweden is pulled into a protectionist trend, we will be one of the countries most affected,” said the Minister. At the same time, he believes that one should not be naive and raises an ongoing investigation as to whether the protection can be strengthened for sensitive investments in, for example, infrastructure.

Another project with links to China is a long-mooted high-speed rail project between Stockholm and Oslo, which received a delegation from China to discuss linking cities along an E18 corridor. The SEK 170 billion price tag has been too much for either Sweden or Norway to fund, but the Chinese group hopes to overcome this and is searching for local partners with interesting technology.

Chinese investments in Sweden are attracting international interest, none more so than in the auto industry, which is undergoing a massive technological transformation. In a major analysis, the FT reports on the likely reasons behind Geely’s 10% investment in Germany’s Daimler. 20 years ago, Geely was a little-known motorcycle manufacturer. However, the ambitions and talents of its owner, Li Shifu, have seen it emerge as one of the most promising car firms globally. In 2010, Geely bought an ailing Volvo from Ford, and has been widely credited for successfully delivering Volvo’s turnaround; allowing the Swedish management considerable independence, and at the same time reassuring workers. Volvo’s Swedish workforce has almost doubled to 21,000 as a result.

In 2017, Geely and Volvo co-launched two new brands: Lynk & Co., and Polestar. Lynk is on sale in China, targeting young urban buyers with built-in mobile internet apps. Polestar is a premium electric-car company designed to take on Tesla, and is set to hit the market in 2019. Geely’s investment in Daimler marks a new phase for the parent, which has also invested in Volvo Group, a leading truck manufacturer, and other car makers. Citing research by Bernstein, the FT says that “the most plausible explanation is a China Inc deal. Geely’s buying spree is remarkable also for its timing, coming at a time when are being criticized by Beijing for excessive overseas spending.” According to Bernstein, it is likely that “Geely was the vehicle chosen by China’s top brass to make a deal, or at least received their blessing to do so”. The Wall Street Journal writes that Geely will use its purchase of Volvo to improve its technology and emerge as the number one local brand in China and grow globally. In another ramification of the corporate dealings, Volvo Cars CEO, Håkan Samuelsson, will leave the Board of Volvo Group (the truckmaker), given the conflict of interest arising from the cross-ownership by Geely of Daimler and Volvo Group – both truckmakers.

Other business and economic news was less dramatic. Spotify finally announced that it was listing on the New York Stock Exchange, after seeing its revenues rise 40% in the year. Northvolt continued to progress with its milestones, securing SEK 520 million from the European Investment Bank to develop a demonstration plant in Västerås. Three more prognoses on the Swedish economy, from SEB, the European Commission and Finance Minister Andersson all concluded that the economy was strong, but that growth would be a little weaker next year.

Bloomberg reports that the amount of cash in circulation in Sweden last year dropped to the lowest level since 1990, and is now more than 40% below its 2007 peak. The declines in 2016 and 2017 were the biggest on record. People in the north of Sweden are at risk of losing access to cash, which would be worrying in the event of natural disaster or a technological breakdown, with people potentially unable to buy the basics needed to survive. The head of the Riksbank worries that Sweden is heading for a situation where public funds are controlled by commercial actors, calling for caution from Riksdag parliamentarians, who are investigating a new national bank framework.

In case anyone had forgotten, Sweden is now only 6 months away from its next election. In the March Monthly Policy Review we provide an in-depth scene setter for the polls. Mundus will be following the campaign very closely, given the massive uncertainties and significant differences in parties’ direction. The most important election issue for voters this year is law and order followed by immigration and healthcare, according to research by pollsters Demoskop. Some 19% of Swedes believe that law and order is the most important topic, double what voters answered last year. “Old norms that the election campaigning is all about health, schools, care and work does not seem to apply this time.

The public’s fear for crime has gone up and especially among women,” says the Head of Opinion Analysis at Demoskop. Voters appear to be saying that the Moderate Party has the best policies on law and order, alongside the economy, jobs and defence. The Moderates were active in their profiling of law and order in February. The party’s legal spokesman, Tomas Tobé, says that the party wants to make it easier to deport foreign citizens who have committed crimes in Sweden, and introduce a new crime category for burglary, with a minimum sentence of one year in prison and give Customs the mandate to stop people attempting to export stolen goods from Sweden. The Minister for Justice, Morgan Johansson, also presented a number of measures to be taken against international criminal gangs active in Sweden, which he says have their bases in Lithuania, Romania, Poland and Georgia. Tobé wants to map the ethnic origin of criminals, believing that statistics can provide important information to help prevent crime. The Government’s struggle to contest on law and order would appear to explain its focus on healthcare, as an issue that they believe that they can win on. However, it is only the most important issue for 7% of voters.

Immigration and integration are the second most important issue to voters, and the Government is fighting hard to ensure that it is not out-positioned here. It continues to enforce policies that restrict the flow of immigrants into Sweden, and has now opened up a push for immigrants to adopt Swedish values. But, this may not be easy, as the March Monthly Policy Review investigates. We are also following this issue in our new Expat Blog.

And finally, the March Monthly Policy Review also compares and contrasts the security and defence debate in Sweden and Finland. The Finns, it seems, are more used to dealing with the Russians. Its no minor deal – the Supreme Commander had just requested another SEK 168 billion to build up Sweden’s defence forces. If only Swedes could learn to be as phlegmatic as the Finns in dealing with beasts from the east, it would be much cheaper.


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Sean is responsible for Mundus’ strategy and commercial activities. He began his career in the oil industry Australia. After working internationally in commercial roles with BP in South Africa, the UK and Singapore he moved to Sweden with his family in 2009. He worked in business development and then as the Strategy and Growth Director for NASDAQ Commodities from 2009 to 2015. Sean holds an engineering degree from Adelaide University and an MBA from the Darden Business School at the University of Virginia.