Muslim protests against Danish cartoons of the Prophet Mohammed have caused condemnation across the world. But how badly has the episode affected Denmark's economy?
Ian Briggs visited the country to find out.
WHAT started as a joke has turned sour, and for Danish farmers that sentiment rings true more than most.
Danish dairy giant Arla Foods says the ongoing boycott of its products in the Middle East will cost it about £38m this year.
As the Muslim worl
d continues to refuse to buy Danish goods in protest over cartoons published in a Danish newspaper, the boycott will also cost Arla Foods's 10,000 Danish and Swedish farmers an average of £3,700 each, as their supplies are cut because of the protests.
Those figures assume that Arla's cheese and butter products will return to Middle Eastern stores reasonably soon, and that, before the end of 2006, Arla, which manufactures Lurpak, will have recovered 50 per cent of its pre-boycott volumes.
Addressing 140 of Arla's co-operative members at a meeting in Aalborg, North Denmark, last week, managing director Peder Tuborgh, said: "Our challenge is to regain consumer confidence in the Middle East."
The £38m loss derives from lost revenue from the Middle Eastern markets, and the fact that surplus milk is now being sold at a loss as industrial butter and milk powder.
Mr Tuborgh said: "Despite the difficult situation, we believe that Arla has a future in the Middle East. Over 40 years, we have worked hard to build our brands in the Middle East in order to provide our co-operative members with a stable income. As a result we have an intimate knowledge of the market, and we will not give up easily."
Last year, Arla's turnover in the Middle East totalled £294m, of which two-thirds derived from Saudi Arabia. A spokesman for Leeds-based Arla Foods UK, the UK's biggest supplier of butter and milk, was keen to disassociate its operation with the Middle Eastern boycott.
It said it had not been affected by the episode, but admitted that the UK operation did market and distribute Lurpak and Anchor products supplied by the Danish Arla Foods.
The economic struggles felt by Arla and other Danish exporters have also forced many to change labelling, in an attempt to carry on selling in the Middle East, and has put jobs at stake.
Arla has been forced to lay off 125 staff in its factories in Bislev, near Aalborg, and has reduced the working hours of 40 other employees.
The offending cartoons featured caricatures of the Prophet Mohammed. including an image of the Prophet with a turban shaped like a bomb.
Although they were first published last September in Danish newspaper Jyllands-Posten, the touch paper of anger has been reignited ever since the cartoons were republished in a number of other European countries five weeks ago.
The backlash has caused demonstrations in countries including Pakistan and India, which have seen Danish flags burnt, shops looted, police pelted with stones and a number of deaths.
Danish embassies have been attacked, and there was uproar after 22-year-old Omad Khayam was pictured outside Denmark's embassy in London dressed like a suicide bomber, to denounce the cartoons.
Even Danish pastries have been renamed in Iran as the "Roses of the Prophet Mohammed" and advertisements for them have been covered up.
However, it was life as usual for people in Copenhagen who appeared baffled by the reaction to the offending material.
For many I spoke to in the country's picture-book capital of sailing ships and historic multi-coloured buildings, the cartoons were merely an extension of the Danes' open-minded views and opinions on everything from politics to pornography.
Steen Bocian, chief analyst at leading Danish bank Danske Bank, said: "Most Danes are surprised that these cartoons are making this much of a debate.
"The tradition for these kinds of cartoons are very widespread and we have made cartoons on everything."
He cites examples featuring the Danish royal family and less than complimentary caricatures of Jesus Christ.
"Many people think, 'What's the big fuss about', but then having said that, these cartoons can be seen as a more harsh tone towards Muslims in Denmark. But it was quite surprising among most Danes to see this reaction overseas, as Muslims in Denmark have not made that much of a bad reaction."
Mr Bocian is firmly in the camp that the country's economy has not been as badly hit as many believe.
"Looking at the impact of how the stand-off will affect the Danish economy, it's hard to find any significant effect from these boycotts," he said.
"If we look at the Muslim countries who are members of the Islamic world who we send products to, we are looking at 2.9 per cent of our exports. It's not very significant for the Danish economy. It will not be very devastating if you look at the fact that exports last year grew by 10 per cent so the magnitude of this problem is not that big."
But he said Arla Foods had been the biggest-hit business in Denmark. "Arla is probably the most impacted company as it's the largest company which exports its products to these countries.
"Around 15 per cent of our products to these countries are dairy products and Arla is the biggest player in that market. The cartoons have been very significant with Arla."
The Danish economy is worth about £138bn, with exports to Muslim countries worth around £1.3bn a year, of which about £736m are in the Middle East. Mr Bocian added that countries such as Turkey, which has a large Muslim population, would not boycott Danish exports. "Therefore the effect is much smaller than 2.9 per cent," he said.
He said the Danish economy was robust enough to resist a boycott by Muslim countries.
"Denmark has one of the best economies in the world. We have very low unemployment – 5.1 per cent. That is the lowest level in 30 years in Denmark. We have quite high growth rates and if you look at our GDP, we're among the five richest countries in the world.
"What has been driving the Danish economy since the summer of 2004 is that we've had a sustained pick-up in consumption. That has come from low interest rates. The low interest rates have pushed up house prices and the wealth of families and that has resulted in more confidence."
Despite the cartoons, polls have suggested business confidence in Denmark had risen in February, but consumer confidence had been affected, mainly because of a lull in post-Christmas trading.
"But we expect this category to go back in the right direction in the coming months," Mr Bocian said. "When people realise that the world must go on, things will return to normal."
He said he believed the cartoons raised more questions away from the economic perspective, and he suggested more emphasis should be put on the issue of the integration of the country's 200,000 Muslims into a population of just over five million.
"This is more of a political question and what might be more pressing is if this (the cartoons) makes it more difficult to integrate the immigrants we have in Denmark, but whether that will have a negative impact on the Danish economy is hard to say.
"Historically, Denmark has difficulty in integrating immigrants into the labour market. Some people say the episode might improve integration as things are out in the open and we can discuss it.
"You could also take the negative scenario but it is difficult to say as people are in two camps."
Claus Juel-Jensen, managing director of Netto, said the Danish discount store firm had been largely unaffected by the cartoons.
But speaking at the company's £45m state-of-the-art distribution warehouse near Copenhagen, made distinctive by the huge Scottie dog logo emblazoned on its exterior walls, he conceded: "It's not very easy for a relatively small country to be put in this position. For a small country like ours, that is quite liberal, it has been quite a shock."
ian.briggs@ypn.co.uk
