Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany. Despite its small landmass and small population (614,000), Luxembourg is the second-wealthiest country in the world when measured on a Gross Domestic Product (GDP) per capita basis.
Since 2002, the Luxembourg Government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment. The Government focused on key innovative industries that showed promise for supporting economic growth: logistics, information and communications technology (ICT), health technologies including biotechnology and biomedical research; clean energy technologies, and most recently, space technology and financial services technologies.
While the economy has evolved and flourished, its 2018 GDP did not grow as strongly as projected. However, the economy did post a GDP growth rate of 2.6 percent, higher than the EU average of 2 percent. The Luxembourg government projects a growth rate of 3 percent in 2019. Luxembourg offers a diverse and stable platform and outsized growth potential for a wide variety of U.S. investments and trade within the EU and beyond.
Luxembourg remains a financial powerhouse thanks to the exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s. Luxembourg is the world’s second-largest investment fund asset domicile, after only the United States, with USD 5 trillion of assets in custody in financial institutions.
Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign-ownership. It is also consistently ranked as one of the world’s most competitive and least-corrupt economies.
Luxembourg ranks as the world’s safest city in the Mercer city index.
Over the past decade, Luxembourg has adopted major fiscal reforms to counter money-laundering, terrorist-financing, and tax evasion.
The Government of Luxembourg actively supports the development of new sectors in an effort to diversify the country’s economy, given the dominance of the financial sector. Target sectors include space, logistics, and information technology, including financial technology and biomedicine.
Luxembourg launched its SpaceResources.lu initiative in 2016 and in 2017 announced a fund offering financial support for the space resources industry. More than 50 companies dedicated to space initiatives are now active in Luxembourg.
Luxembourg has positioned itself as “the gateway to Europe” to establish European company headquarter operations by virtue of its central European location and advanced road, railway, and air connectivity. Due to uncertainties related to Brexit, some 50 insurers, asset managers and banking institutions have decided to re-locate their EU headquarters to Luxembourg or transfer a significant part of their activity to the country.
Luxembourg is actively seeking logistics companies to expand the new logistics hub at Luxembourg Airport, home to Cargolux, Europe’s largest all cargo airline. Inaugurated in 2017, the Luxembourg Intermodal Terminal (LIT) is ideally positioned as an international hub for the consolidation of multimodal transport flows across Europe and beyond.
Luxembourg is also seeking ICT companies to use the existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs. Through various initiatives, Luxembourg seeks to attract financial technology and biomedical start-ups and small companies to make Luxembourg home.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||9 of 175||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||66 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||15 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$676,418||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$70,260||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|