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Danish Business and Economy

Denmark has one of the strongest economies in Europe, characterised by a balanced state budget, stable currency, low interest rates and low inflation.

Trade

The Danish economy is small, open and highly geared to trade with other countries. Germany is by far Denmark's most important trading partner, though Sweden, Great Britain and Norway are also of significance; outside Europe, the US and Japan are also important trading partners. This reliance on trade makes Denmark keen to trade freely in goods and services with other countries. As a result, Denmark is a member of collaborative organisations such as the EU, OECD and WTO and has actively lobbied within this framework for the removal of barriers to free trade.

In the post-war era, the composition of Denmark's exports has radically changed, with industrial goods supplanting agricultural products as the country's main exports. Indeed, by the mid-1990s, industrial products accounted for 75 percent of total exports, while the share of agricultural exports had dropped to 15 percent - a dramatic reversal in the country's traditional status.

 

Economic Policy

Denmark seeks as far as possible to regulate economic activity and inflation through fiscal policy; while monetary policy has to an increasing extent been aimed at supporting exchange rate policy, aiming to ensure a stable exchange rate for the Danish krone. Since the Second World War, Denmark has taken part in a number of international programs of exchange rate cooperation including: the Bretton Woods Agreement from 1948 to its breakdown in 1971; then the purely European exchange rate agreements: from 1972 to 1979, the so-called "snake" and the European Monetary System (EMS), which in the 1990s is being developed into an Economic and Monetary Union (EMU). However, Denmark has chosen to stay outside the third phase of EMU, which started in 1999. The currency in Denmark is thus still the Danish Krone (DKK) and not the Euro although the Krone is thightly pegged to the Euro.

 

Promotion of Foreign Direct Investments

Denmark is located in Europe's most prosperous region from which trade with the Nordic countries, Western and Central Europe, as well as the expanding economies of Eastern Europe. Further, Denmark's membership in the European Union provides unlimited access to a total EU market of 350 million people and a further 200 million to the east.

Businesses investing in Denmark not only profit from an attractive macroeconomic climate, but also from competitive conditions in relation to taxation and labour costs. Investors in Denmark are offered a number of important tax advantages, companies in Denmark also benefit from favourable rules on depreciation. Denmark offers competitive labour costs when both wages and non-wages are taken into consideration - mainly because of the employer's low cost burden in terms of social security, labour taxes, etc. Competitive labour costs and high productivity levels combine to make Denmark's work force one of the most efficient in Europe.

 

Agriculture

Danish agriculture produces enough foodstuffs for around 15 million people - three times the population of Denmark. Although agriculture's role in the Danish economy has steadily declined with the rise of industrialisation and economic development, it is still an important place as a result of its foreign currency earning capacity, its effect on employment and its importance in supplying everyday foodstuffs.

 

Manufacturing

The manufacturing sector in Denmark is varied and produces a large number of goods, both for export and for domestic consumption. Bacon factories, dairies, corn mills and breweries are among the most important sectors of the food, beverages and tobacco industries. Petrol, insulin and plastic goods are among the most successful in the chemical industry. The mechanical engineering industry produces motors, agricultural machines, pumps, thermostats, refrigerators, telecommunications equipment and shipping. Finally, furniture, clothing, toys and newspapers are among the Danish industrial products sold in the greatest numbers.

 

Energy

Denmark is the third largest oil producer in Western Europe, after Norway and Britain. Together with gas production, oil is an important reason why Denmark has had a balance of payments surplus since the beginning of the 1990s. Denmark's energy production is mainly based on imported coal, oil and natural gas from the Danish sector of the North Sea, as well as wind energy. In the Danish sector of the North Sea, oil and natural gas are produced in considerably larger quantities than are needed for domestic consumption. The oil and gas are taken ashore, distributed and exported via pipelines. The gas is exported to Sweden and Germany, while the surplus oil is mainly sold in the spot market.

 

The Financial Sector

The high economic growth until the first oil crisis brought about a sizeable increase in activity in the financial sector, while liberalisation of the financial markets and technological developments for the supply of financial products created fertile ground for a particularly strong increase in employment in the second half of the 1980s. The end of the 1980s was characterised by a clear tendency towards concentration in Danish business life in the form of takeovers and mergers, which created a need for larger and financially stronger Danish financial institutions. As a result, during these years the financial sector experienced a period of amalgamations which, broadly speaking, halved the number of financial institutions and eventually saw the establishment of the two major banks, Den Danske Bank and Nordea.

 

Transport

Transport is one of Denmark's most important sectors. In 1996, it accounted for around 9 percent of Denmark's total production value and around 7 percent of total employment. The sector is extremely varied with regard to the size of the individual undertakings. On the one hand there is a very small number of large public or private undertakings in the field of public transport, shipping and aviation. On the other hand, there are a considerable number of smaller firms concerned with both the transport of goods (haulage contractors) and personal transport (taxi companies).

 

Communications

The real production value within postal and telecommunication services and telecommunications rose by just under 50 percent between 1986 and 1996, more than any other business sector in Denmark. The growth is mainly due to the technological advances in the 1980s in the fields of computing and data transmission, which has produced a marked increase in new telecommunication activities.

 

Educational status and industry

The level of education of the work force has risen between 1940 and 2006, as is seen partly in the fact that the proportion of salaried employees and skilled workers has risen at the cost of self-employed persons and unskilled workers. This in its turn is also connected with the shift in recent years in employment in different industries. Since the 1970s, the number of people in work has grown primarily on account of increased employment in the public sector. On the other hand, employment in agriculture and manufacturing has fallen. For the remaining industries taken together, employment has remained unchanged.

 

Labour market

In contrast to the labour markets of most other European countries - where essential conditions are regulated by legislation - the Danish labour market is mainly founded on agreements between employer and employee organisations. These encompass basic areas such as minimum wages, the right to strike and work hours. In recent times, despite help from a conciliation board, these two groups have not been able to come to agreement. In such cases the Folketing typically legislates to enforce a compromise proposal put forward by the conciliation officer. Membership of unions in Denmark is very common, comprising around 80 percent of the work-force.

 

Unemployment

While unemployment in the 1960s and early 1970s was under 3 percent, it has been rising steadily since 1973 (time of the oil crisis), hitting an all-time high in 1993 at 11 percent for men and 14 percent for women. With the sound growth rates and an increasing emphasis on a more active labour market policy (training and job offers), in which attempts are made to improve the qualifications of the unemployed, unemployment has been falling since the mid-1990'ies to a low level compared with other European countries. By 2011 it had fallen to 6.2%