Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|USG or International Statistical Source
||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)
|Foreign Direct Investment
||Host Country Statistical Source
||USG or International Statistical Source
||USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)
||BEA data available at http://bea.gov/international/direct_investment_
|Host country’s FDI in the United States ($M USD, stock positions)
||BEA data available at http://bea.gov/international/direct_investment_
|Total inbound stock of FDI as % host GDP
Table 3: Sources and Destination of FDI
Host country statistical source: Statistics Denmark: http://www.dst.dk/en/Statistik/emner/nationalregnskab-og-offentlige-finanser/aarligt-nationalregnskab
The total stock of FDI inbound to Denmark in 2015 corresponded to 46.1 percent of GDP (current prices, exclusive of pass-through investments). Danish outbound direct investment corresponded to 70 percent of GDP in 2015. The largest foreign investor in Denmark in 2015 was Sweden, followed by the Netherlands, UK, Norway and Luxembourg. U.S. investment accounted for 6.9 percent of the total 2015 FDI stock in Denmark, the sixth largest source of FDI.
Major U.S. direct investment in Denmark is in telecommunications, energy utility, information technology, biotechnology, data centers, oil exploration, financial services and facility services. During recent years, several U.S.-based private equity funds have invested in Danish firms, such as DONG, ISS, the Legoland Parks, and TDC. Apple and Facebook are currently constructing data centers in Viborg and Odense, respectively, estimated to cost in the hundreds of millions of dollars. Over 400 U.S. companies have subsidiaries in Denmark, of which several are regional headquarters.
The main destinations for Danish FDI are Sweden (15 percent), United Kingdom (12 percent), Germany (10 percent), the United States (9 percent) and Singapore (6 percent). EU countries held 60.4 percent of the stock in Denmark in 2015.
|Direct Investment from/in Counterpart Economy Data
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
|Inward Direct Investment
||Outward Direct Investment
|“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets
|Top Five Partners (Millions, US Dollars)
||Total Debt Securities
Other Areas in the Kingdom of Denmark
Greenland’s status within the Kingdom of Denmark is outlined in the Self Rule Act (SRA) of 2009, which details the Greenlandic government’s right to assume a number of responsibilities from the Danish government, including the administration of justice, business and labor, aviation, immigration and border control, as well as financial regulation and supervision. Greenland has already acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark continues to have control over the Realm’s foreign affairs, security, and defense policy, in consultation with Greenland and the Faroe Islands. Denmark also retains authority over border control issues, including immigration into Greenland. Greenland is not a part of the EU or Schengen Area, and special rules apply for foreigners arriving from a Schengen country. Denmark provides Greenland with an annual block grant of DKK 3.6 billion — roughly $540 million — that accounts for a quarter of Greenland’s GDP and about half the public budget.
The Greenlandic government proposes to increase revenues by promoting greater development of fisheries, extractive resources, and tourism, and by trimming the public sector through privatization of enterprises currently owned by the government. Key initiatives include improving access to financing for new businesses and enhancing Greenland’s corporate tax competitiveness. Rising prices for fish and shellfish, the predominant Greenlandic exports, have generated good earnings for large parts of the fisheries sector, and catches of prawn, by far the most important single species, have increased recently following years of declines. Catches of mackerel are also on the rise and could become an important addition to revenue.
Efforts to develop tourism include increases in accommodation (hotel rooms), a reduction in passenger tax for cruise ships, and a focus on promoting foreign language education to create a more multilingual workforce. The government is calling for stricter safety requirements for navigation in Greenlandic waters. In the mineral extractives sector, two smaller mines (ruby and anorthosite) are expected to come online in 2017, while two other companies have applied for permission to extract rare earth elements in southern Greenland, in one case combined with extraction of uranium. The government endorses maintaining the previous government’s relaxation of a ban on uranium mining, and states that all IAEA and EURATOM standards must be met. However, the issue of uranium mining in Greenland remains sensitive.
Greenlandic Economic Outlook
Greenland is currently enjoying an economic upswing, though its highly specialized economy – over 90 percent of exports is fisheries – also faces significant challenges. The economy contracted between 2012 and 2014, grew by 1.7% in 2015 and Greenland’s government estimates nominal GDP growth of 5 percent in 2016, followed by 0.5– 1 percent growth in 2017. The 2016 upswing is driven by an increase in the prawn quota off West Greenland, increasing municipal construction budgets and the expansion of the port in Nuuk, and the government-financed construction of a prison in Nuuk along with court buildings in several coastal towns. There are also indications that private consumption and tourism contributed positively to GDP growth in 2016, and will continue to do so in 2017. Increasing public spending at government and local levels is expected to have an expansionary effect in 2016 and 2017.
Inatsisartut (the Greenland Parliament) and Naalakkersuisut (the Government of Greenland) adopted a Finance Act for 2017 with an annual budget deficit of DKK 145 million ($21.5 million) from 2017 to 2020, which could jeopardize the government’s ability to handle a future downturn. The municipalities and government have no net debt, but including government-owned enterprises, the net debt totaled DKK 1.9 billion ($280 million) in 2015, which corresponds to approximately 13 percent of GDP.
The Greenland Economic Council – an independent advisory council –concluded in the Council’s 2014 report that, “Five years after the implementation of the Self-Rule Government, the reforms that would be necessary for the creation of a self-sustaining economy have not been put into place.” The Council warns of the effects of increasing public expenditures as demographic shifts push larger portions of the population into retirement, resulting in fewer Greenlanders active in the labor market. The Greenlandic Government’s 2016 Growth and Sustainability Plan is deemed by the Council as an ambitious and realistic way to close the gap between expected expenditures and revenues, if the Government is willing to make tough and often unpopular choices.
Natural resource exploration (i.e. hydrocarbons and minerals) has declined in recent years, and Greenland’s undiversified economy is lacking in new revenue streams as a demographic burden puts greater pressure on the public budgets. Exploration for hydrocarbons off the west coast of Greenland, previously expected to generate approximately DKK 5 billion ($745 million) from 2010 – 2011, has since declined. No exploration was conducted in 2012 to 2014 and in spring 2016 all but one oil company handed back licenses for oil exploration off West Greenland. There remains significant potential for offshore hydrocarbons and minerals in Greenland, but reserves are unproven and given depressed world commodity prices, lack of infrastructure and a generally difficult environment, it is unclear when further exploration and exploitation will become viable.
Greenland exported DKK 2.786 billion ($414 million) in the first nine months of 2016, a 39.8 percent increase over the same period in 2015, mainly attributable to shrimp and halibut. 88 percent of Greenlandic exports were fish products, with the remainder being raw materials and machinery. Exports went primarily to Denmark (76 percent), followed by Portugal (9.7 percent), and Iceland (4.2 percent). Greenland imported goods worth DKK 3.090 billion ($586 million) in the first nine months of 2016, primarily machinery (23.5 percent), foods (22.4 percent), intermediate products (15.4 percent), and fuels (12.5 percent). Imports came from Denmark (71 percent), Sweden (12.7 percent), and China (2.6 percent) among others. Imports from the United States represented 0.9 percent of total imports. Due to its vast geographic expanse, Greenland’s physical and telecommunications infrastructure is less interconnected and developed than in other parts of the Kingdom of Denmark. The labor force was comprised of 26,844 people in 2015, and the average unemployment rate was 9.1 percent. The Greenlandic government is actively trying to attract investments to Greenland to diversify the economy and integrate it into the world economy as part of a long-term path toward eventual independence from Denmark.
Establishing a Company in Greenland
A foreign company can establish a commercial enterprise in Greenland in one of the following ways: through a subsidiary, a registered affiliate, a representative office or a taxable entity. A subsidiary is only liable for its own assets. The capital requirement for establishing a corporation (A/S) is DKK 500,000 (approx. $74,400) and for establishing a private limited liability company (ApS) is DKK 125,000 (approx. $18,600). At least one of the founders of an A/S must be a resident of Greenland.
An established company planning to do business in Greenland must obtain a GER (Greenland’s Company Register) registration number. This also applies to subsidiaries. A registration number can be acquired from the Greenlandic Tax Authorities.
A registered affiliate has no capital requirements, but only a company with a legally registered office in the EU, USA, Canada or the Nordic countries can open an affiliate. It is legally not treated as an independent company, but rather as an extension of the main company. This means that the head office is liable for all the affiliate’s assets.
A representative office is not regulated or defined, and may not enter contracts or deliver services. It is meant to be a marketing office, or an office to establish contacts with the goal of eventually entering the market.
An exploration license is viewed as a taxable entity. There is more lenient regulation in the extraction industry regarding company composition: if a foreign company is granted an exploration license, it is not required to register as an affiliate, but the license is taxable, and therefore the firm must submit tax information like a regular company. However, a loss can be carried forward and written off against future profits. A GER registration is required.
A foreign company can do business in Greenland in a consecutive or non-consecutive 90 day period over 12 months without being required to register as a business.
Greenland has double taxation treaties with the following countries: Denmark, Faroe Islands, Iceland, and Norway. Greenland has signed a Foreign Accounts Tax Compliance Act (FATCA) agreement with the United States.
The corporate income tax rate is 30 percent. An additional surcharge of six percent of the tax payable is charged, bringing the total corporate tax rate to 31.8 percent. Companies which are operating under the Mineral Resources Act can apply for an exemption of the surcharge, thereby lowering the tax rate to 30 percent.
Taxation of royalty payments is 30 percent. Greenland has no value added tax (VAT) system, sales tax or similar taxes. There are, however, some payable duties, such as taxes for cruise liners, ports duties, etc. There are four types of depreciation in the Greenlandic tax law. Buildings can be depreciated five percent annually. Ships, planes, and hydrocarbon prospecting can be depreciated 10 percent annually. Mineral licenses can be depreciated 25 percent annually, and operating equipment can be depreciated at a rate of 30 percent annually. Assets with a cost of less than DKK 100,000 ($14,900) may be depreciated in the year of acquisition.
The Greenlandic labor force was 26,844 persons in 2015. Average unemployment for 2015 was 9.1 percent – higher than the OECD average of 6.78 percent, yet a decrease from 10.3 percent in 2014. According to Statistics Greenland, 39 percent of the Greenlandic population in 2015 has an education beyond primary school. Of those, 56.4 percent have a vocational education.
In December 2012, Greenland passed legislation known as the “Large Scale Act,” which allows companies to use foreign labor during the construction phase of development when project costs exceed DKK 5 billion ($743 million) and workforce requirements exceed the local labor supply. The Act is intended for potential mining or infrastructure projects in Greenland. The Act lays out the framework for politically-negotiated Impact Benefit Agreements (IBA) for the Government of Greenland and the employer to agree on the exact conditions of employment for foreign labor. The scale of Greenlandic labor utilized will be negotiated for each project and will vary depending on local capacity and the negotiated agreement for each project.
Foreign workers will enjoy the same legal protections as Greenlandic workers, in theory, including the same $13.85 per hour minimum wage and retention of the right to strike, but employers may deduct up to $180 from their pay each week to cover the cost of company-provided lodging, food, and clothing.
Investment in Natural Resources
Greenland possesses significant mineral deposits, including rare earth elements, zinc, lead, molybdenum, uranium, gold, platinum, ruby and pink sapphires, and other critical minerals. Greenland is also believed to have large quantities of iron ore and copper, although there has been limited exploration to date. Despite a harsh climate and ice coverage in Greenland, satellite images taken over the past several decades record a continuing significant disappearance of surface ice from the island. If the trend continues as expected, mining industry experts anticipate the retreating ice will make the island’s rich stores of raw materials more easily accessible.
Greenland’s policy framework is relatively attractive for most mining activities. In October 2013, the Greenlandic Parliament abolished the country’s 25-year “zero-tolerance” policy towards uranium and other radioactive minerals, lifting the ban on mining where uranium is present. This decision will facilitate the exploitation of rare earth mineral deposits, which are often found co-mingled with radioactive minerals in Greenland.
With the 2009 SRA, Greenland gained rights to its mineral and hydrocarbon resources, and it acquired the regulatory authority over these on January 1, 2010. The SRA also created a revenue mechanism: if exploitation of Greenland’s natural resources becomes commercially viable, Greenland will keep the first DKK 75 million ($11.1 million) in annual revenues derived from these resources, with further revenues split equally between the Danish and Greenlandic Governments. Denmark’s share will be transferred by deducing the equivalent amount from the annual block grant to Greenland of DKK 3.6 billion ($535 million). Once the value of the block grant has been reached, any additional revenue will be subject to negotiations between the Danish and Greenlandic governments. The Greenlandic Government welcomes this lucrative eventuality, but remains aware of the potential impact that an influx of wealth from these activities could have on Greenlandic society.
Most of Greenland’s identified rare earth deposits are licensed by the Bureau of Minerals and Petroleum and some have reached advanced stages of exploration. Greenland was granted the award for “best country to do mining in 2013-2014,” together with Mongolia, Azerbaijan, and Australia, at Europe’s Mines & Money conference in December 2013. However, by 2016, Greenland’s ranking had slid in the annual mining survey from Canadian Fraser Institute, to 55th out of 104 mining jurisdictions surveyed, in terms of investment attractiveness.
Greenland General Business Information
OPIC programs are not applicable to U.S. investments in Greenland. Information about the Greenlandic Government can be found at: http://naalakkersuisut.gl/en . Information from the Greenlandic Government on natural resource exploration and extraction can be found at: http://www.govmin.gl .
Statistics on Greenland can be found at: http://www.stat.gl/default.asp?lang=en
By law, private property can only be expropriated for public purposes in areas where the Greenlandic Self-government has the competencies, in a non-discriminatory manner, and with reasonable compensation. There have been no recent expropriations of significance in Greenland and there is no reason to expect significant expropriations in the near future.
There have been no major disputes over foreign investment in Greenland in recent years. While it is common that disputes are settled in Greenlandic courts, the Danish Supreme Court remains the highest appeals court for disputes in Greenland. If the dispute is very specialized and within the purview of the Danish Administration of Justice Act, the parties involved can choose the Danish Maritime and Commercial Court as a court of first instance. Potential investors should be cognizant of the need to manage expectations in Greenland with regard to understanding corporate responsibility and financial obligations.
While democratic institutions and the legal framework in general are strong, there have been some concerns about legislation being passed through parliament without significant hearing processes and public input.
The Faroe Islands
For more than two centuries the Faroese economy has relied on fisheries and related industries. Fisheries remain the key sector, accounting for about 95 percent of exports. Salmon alone accounts for 45 percent of exports. The Faroe Islands’ small, open, but non-diversified economy makes it highly vulnerable to changes in international markets. The Faroe Islands have full powers to set tax rates and fees, and to set levels of spending on the services they provide. Denmark upholds an annual block grant of DKK 642 million – roughly $95 million.
In 2013, the Faroese economy began a strong recovery, after several years of stagnation. The Economic Council for the Faroe Islands estimates that nominal GDP rose 5.8 in 2014 followed by estimated growth of 6.2 percent in current year prices in 2015 and upwards of 8.5 percent in current year prices for 2016. Growth in nominal GDP in 2014 was mainly export driven while growth in 2015 and 2016 was primarily driven by domestic demand. The Council estimates nominal growth of 4.1 percent in 2017 again driven by domestic demand. Fish exports, with increased catches of mackerel and herring as well as higher prices for salmon globally, also contributed to growth. Unemployment is low and falling at 2.3 percent in January 2016, down from 8 percent in 2011.
The fall in world oil prices acted as a stimulus by improving the terms of trade considerably. Central and local government and publicly owned companies are planning massive investments in infrastructure and hospitals. Investment in 2016 is expected to total $1.3 billion ($193 million) or 7.3 per cent of GDP, which is 20 percent higher than in 2014. Public sector investment is expected to rise by a further 34 per cent until 2018. Construction of the Eysturoy and Sundoy tunnels to connect the Faroe island chain, with an expected cost of approximately DKK 2.64 billion ($390 million) or 13 percent of GDP, are planned for the period 2016-21. This enormous investment resulted in the Danish Systemic Risk Council issuing an official warning of the buildup of systemic risk on the Faroe Islands in the fall of 2016. Seven in ten construction firms say that shortage of labor is an impediment to growth, and the magnitude of the public investments could further push the economy beyond its labor capacity limit.
According to the Danish Central Bank, the biannual confidence indicators show that Faroese firms and consumers are generally not as optimistic about the economy as they have been in previous years. In particular, consumers take a less positive view of their own finances and the Faroese economic outlook in the near term. Looking further ahead, the Faroe Islands face a demographic challenge. Currently there are 4.5 people in the working age group aged 16 to 66, for every person aged 67 or older. By 2050, the number will have decreased to 2.1 persons for every dependent elder. The Economic Council for the Faroe Islands estimates that a permanent fiscal improvement of 5 percent of GDP will be required in order to stabilize government debt, which is currently at a low level.
The Faroe Islands have in recent years engaged in several disputes with the EU over fishing quotas. The disagreements escalated in September 2012, when the EU adopted measures which allowed it to impose penalties on the Faroe Islands. In March 2013, the Faroe Islands unilaterally increased their quota for herring and mackerel. EU member states responded by voting in favor of imposing sanctions which went into force in August 2013; these were lifted a year later after a political understanding between the two parties was reached on herring catches. Subsequently a five year agreement with the other coastal states in the North Atlantic was signed on mackerel quotas, reducing uncertainty for fisheries and improving profitability, since the agreement allows for more efficient capacity utilization. Fisheries account for close to one-sixth of the total gross value added in the Faroe Islands and about 95 percent of goods exports, excluding ships and aircraft.
As a non-EU member, the Faroe Islands continue to have open access to the Russian market despite Russia’s retaliatory trade embargo on certain food imports from the EU. This has allowed the Faroese to sell increased quantities of salmon to the Russian market at higher than normal prices, even while prices have dropped significantly in the European market.
In February 2017, credit agency Moody’s reaffirmed the Faroe Islands’ “Aa3” rating of high quality and very low credit risk, with a stable outlook, reflecting its fiscal autonomy and revenue and expense flexibility with a track record of prudent budgeting. The stable and historical relationship with Denmark is deemed an additional strength.
The Faroe Islands retain control over most of their internal affairs, including the conservation and management of living marine resources within the 200 nautical mile fisheries zone, natural resources, financial regulation and supervision and transport. Denmark continues to exercise control over foreign affairs, security, and defense, in consultation with the Faroese Government.
The Islands exported approximately DKK 7.973 billion ($1.18 billion) worth of goods in 2016, 96.1 percent of which were fish products, with the remainder being marine vessels and aircraft. In recent years, construction, transportation, banking, and other financial services sectors have grown, and offshore oil and gas exploration is developing, though commercially viable finds have not been made. In 2015, the majority of exports went to Russia (25.9 percent), the U.S. (8.8 percent), followed by the UK (8.6 percent), Denmark (7.5 percent), and Germany (5.3 percent). Goods imports totaled DKK 6.588 billion ($978 million) in 2016. The vast majority of imports came from Europe in 2015; 1.3 percent originated in the United States. Denmark provided 27.7 percent of imports, Norway 15.3 percent, Germany 10 percent, Netherlands 6.2 percent, China 6.0 percent, and Sweden 4.7 percent. Imports consist of items for household consumption (21.8 percent), e.g. food, tobacco and beverages; input to industry (22.1 percent) machinery (13.0 percent) and fuels (9.8 percent).
The labor force comprised about 25,810 people in December 2016. In many areas, the Faroese labor market model resembles that of the other Nordic countries, with high standards of living, well-established welfare schemes and independent labor unions. A majority of people in the Faroe Islands are bilingual or multilingual, with Danish and English being most widely spoken after Faroese. The Islands boast well-developed physical and telecommunications infrastructure and have well-established political, legal, and social structures. The standard of living for the total population (expected to reach 50,000 in spring 2017) is high by world standards, and Gross National Disposable Income per capita eclipsed that of Denmark in 2014. The Faroe Islands opened their own securities exchange in 2000; active trading of shares followed in 2005. The exchange is collaboration with the VMF Icelandic exchange on the Nasdaq OMX Nordic Exchange Iceland.
The most recent figures available show Foreign Direct Investment into the Faroe Islands totaled DKK 1.6 billion ($238 million) in 2012, about half of which originated from Denmark. The Faroese government has indicated interest in attracting further foreign investment. “Invest in the Faroes” is the Faroese government unit promoting Faroese trade. The website is http://www.government.fo/