Besides a positive business environment, Denmark has the highest rate of Internet penetration, mobile phone penetration and e-business implementation in Europe together with the highest IT spending level per capita in the world is a clear indication that Denmark is at the forefront in IT. Greater Copenhagen, the largest IT cluster in Denmark, is located in the centre of the cross-border region comprising Southern Sweden and the greater Copenhagen Area named the Aresund region. Copenhagen consists of numerous fast growing sectors and industries. The city's importance is further emphasised by being the most densely populated area in Northern Europe with 3.5 million inhabitants within a 50 km radius. This cluster accounts for more than 100,000 IT employees. All major international IT companies have located large R&D activities in order to gain a strong foothold in the region.

The comparative attractiveness of the US business environment is set to decline over the next five years as a result of mounting financial and macroeconomic risks, increased protectionism, security concerns and strained international relations.

The latest set of the Economist Intelligence Unit's business environment rankings show that the US rank for 2008-12 falls to ninth (the lowest the US has ever ranked since the launch of the rankings in 1997), down from fourth for 2003-07. Ireland dipped from ninth to eleventh and Denmark took the top rank from Singapore.

Fundamental features of the US business environment will remain attractive (deregulated labour markets, the high quality of infrastructure, leadership in technology) and the differences between countries at the top of the business environments league are fairly small—so the changes for the US should not be exaggerated. Nonetheless, there are undoubtedly also signs of deterioration in key areas and causes for concern. Other countries will make progress in improving their business environment, while the overall quality of conditions in the US will stagnate. As a result, the US will be overtaken in the rankings by Canada, Switzerland, Hong Kong, the Netherlands and Australia.

Key concerns over the US business environment include:

• Macroeconomic risks: Risks stemming from macroeconomic imbalances were apparent even before the recent financial turbulence. After a sharp slowdown in 2007 and 2008 the US economy will recover from 2009, but average growth in 2008-12 will be below growth rates of the recent past.  
• Protectionist threats and international relations: Under a Democratic president—the most likely outcome of the election in November 2008—protectionist pressures are likely to strengthen and, contrary to some expectations, US relations with the outside world are unlikely to improve significantly.  
• Tax changes: An extension of the Bush tax cuts is likely, but there will also be substantial changes to the structure of the tax system that may have an adverse effect on business.

Intensifying protectionism

US foreign trade policy and policy towards foreign investment is likely to become less liberal over the next five years. Protectionist rhetoric has already increased sharply, and the weakening of the economy will induce many politicians to blame foreign competition for rising unemployment. The US has become more active in challenging China at the WTO, and the number of specific disputes with China is likely to increase. The US recently amended legislation dealing with scrutiny of FDI deals. This will lengthen the time it takes to win approval for proposed crossborder mergers and acquisitions in sensitive sectors and increase the chances of deals being blocked.

In a recent survey of over 600 multinational company executives that was conducted for the Economist Intelligence Unit's World Investment Prospects report, almost one in five respondents expected FDI protectionism to be a "high risk" in the US in the medium term, well ahead of the proportion who expect the same situation in other developed countries. The US and France were the only two developed markets for which a higher share of respondents thought that officials were today less receptive to foreign investors than they were five years ago.

The global picture
Globally, the business environment rankings still paint a relatively favourable picture of the global investment environment over the next five years. There are difficulties, of course. Rising protectionism, security risks and macroeconomic imbalances are not only confined to the US, and pose significant global threats. However, globalisation is not about to be derailed. The worldwide trend for liberalisation and deregulation will continue to be underpinned by powerful factors such as increasing competitive pressures on multinational corporations and competition among countries for foreign investment. Average world GDP growth in 2008-12 will slow from recent peaks, but remain high by historic standards. Progress in further international trade liberalisation may be slow, but foreign trade and exchange regimes will be freer than at any time since the early part of the 20th century. In most countries the quality of infrastructure will continue to improve. Reform of labour and product markets, even if frequently halting and subject to strong opposition, will continue. As a result, the global business environment will improve, despite the disappointing outlook for the US.

Other features of the Economist Intelligence Unit's latest set of business environment rankings include:

• Denmark tops the rankings: Denmark retains its leading position for 2008-12. The country stands out for the successful balance that it appears to have struck between the state and the market. Product markets operate efficiently and labour markets are flexible (with low non-wage labour costs and few restrictions on hiring and firing). Denmark compensates for its high tax burden with the quality of its public goods, notably infrastructure and higher education.  
• Structural reform to proceed only slowly in western Europe: Although the recent outbreak of "economic nationalism" in parts of western Europe, especially in France, is not expected to lead to a descent into lasting protectionism or arrest FDI flows, the pace of structural reform in the key euro zone countries will remain behind the best-rated countries.  
• Emerging Asia leads the developing regions: Among emerging markets, East Asia will remain the most attractive region for investment. The pursuit of EU membership has driven improvements in business environment in much of central and eastern Europe, although the incentive to reform is blunted after a country becomes a member. Many Latin American countries slip down the rankings in 2008-12, as the pace of reform flags in these countries. Oil-exporting countries in the Middle East and elsewhere tend to be well-represented in the lower part of the rankings. The market opportunities arising from natural resource endowments are often offset by the fact that most other aspects of the business environment tend to be very poor.

About the rankings
The Economist Intelligence Unit's business environment rankings model seeks to measure the attractiveness of a country's business environment and its key components. The assessment of the business environment—based on the opportunities for, and hindrances to, the conduct of business—enables each of the 82 countries covered to be ranked on its overall position and in each of ten categories on a global and a regional basis. The model uses quantitative data, business surveys and expert assessments to measure the attractiveness of countries' business environments. The framework has been designed to reflect the main criteria used by companies to formulate their global business strategies and investment location decisions. The overall scores (on a 1-10 scale) and rankings are based on scores for 91 indicators, grouped into ten categories of the business environment.