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Vanessa Hamilton

Updated at 2021-10-02 10:31:15 UTC

Looking For a Prime Location to Make Your Business Stand Out? Here Are Interesting Facts About Denmark That You Should Know!

Den  

Copenhagen – Denmark is a top innovation and test market and a front runner for new tech solutions. Excellent infrastructure, flexible business conditions and an internationally-minded workforce; just three of the reasons why Denmark is the ideal place for company's service centre. 

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Denmark is a place at the forefront of technology in a flexible, cost-efficient and low-risk environment and it is a global hub of world-class innovation with talented people, a good education system and a track record of entrepreneurial success.

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Foreign direct investment (FDI) in Denmark

FDI in Figures

The level of FDI in Denmark is still far below the country's potential. In addition, due to the effects of the Covid-19 pandemic, FDI inflows have slowed down sharply. According to UNCTAD's 2021 World Investment Report, FDI inflows fell from USD 1.2 billion in 2019 to USD 3.6 billion in 2020. In the same year, FDI stocks reached USD 135 billion. Investments are mostly oriented towards finance and insurance, business services, wholesale and retail trade, manufacturing, real estate and information and communication. FDI stocks are mainly owned by the Netherlands, Sweden, the UK and Luxembourg. FDIs to Denmark often pass through the Netherlands and Luxembourg as transit countries; however, if taking into consideration the country that ultimately controls the investments, the USA are the largest investor (around 30% of total FDIs, according to the Bank of Denmark).

The country's strengths include a highly skilled and multilingual workforce, a flexible labour market, ultramodern infrastructure (telecommunications, transportation, etc.) and attractive tax incentives for companies. On the other end, the internal market is small and vulnerable to external shocks, and the external debt level is high. The Danish government proposed the introduction of an FDI screening scheme for investments in sectors that may pose a threat to national security and public order, which should be discussed in 2021. The business environment is so well developed that the World Bank has ranked Denmark 4th out of 190 countries in its 2020 Doing Business ranking, one position lower compared to the previous year, but still the best country in Europe.


 
Foreign Direct Investment
2018
2019
2020
FDI Inward Flow (million USD)
1,198
3,587
1,151
FDI Stock (million USD)
116,251
121,482
135,125
Number of Greenfield Investments*
93
147
58
Value of Greenfield Investments (million USD)
1,287
1,216
2,130

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.


 
Country Comparison For the Protection of Investors
Denmark
OECD
United States
Germany
Index of Transaction Transparency*
7.0
6.0
7.4
5.0
Index of Manager’s Responsibility**
5.0
5.0
8.6
5.0
Index of Shareholders’ Power***
8.0
7.0
9.0
5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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What to consider if you invest in Denmark

Strong Points

Advantages for FDI in Denmark:

  • A skilled and multilingual workforce
  • Political stability
  • Solid public finances
  • High purchasing power
  • Well-developed and good quality infrastructure, especially in telecommunications (very high rate of numeric services utilisation) 
  • Great flexibility
  • Vitality of the banking sector
  • Variety of energy resources
  • Various economic sectors are well-positioned for exports
  • A relatively low company taxation rate (22%)
  • Expatriates can benefit from a special tax regime

Weak Points

Disdvantages for FDI in Denmark:

  • Relatively high income tax rate
  • Small domestic market
  • High household indebtedness and a high price of real estate
  • High proportion of jobs dependent on the public sector
  • Lack of labour-force in certain domains
  • An economic system that is too dependent on international economic fluctuations       
  • Government Measures to Motivate or Restrict FDI.
    Laws and regulations implemented by the Government in recent years are
  • orientated towards more openness and are non-discriminatory. The business
  • climate in Denmark is regarded as one of the best worldwide, as its excellent
  • rankings by the international evaluation institutions show. The Danish Government
  • has concentrated its efforts on the improvement of general investment conditions
  • and on reducing structural obstacles to market access. Significant progress has
  • been made in privatisation, de-monopolisation and competitiveness.

  • According to the Danish Competition Act, companies must receive permission
  • from the EU commission for large-scale mergers and acquisitions. Denmark
  • applies European Union law in regards to investment, and investments coming
  • from member-states are treated the same way as Danish investments. In the eyes of
  • investors, Denmark has the advantage of being strategically geographically
  • situated. It is a natural doorway to Scandinavian countries and to the Baltic region.

  • The Danish Government has also set up an investment promotion website for the
  • purpose of attracting potential investors.
  • Bilateral investment conventions signed by Denmark
Denmark has concluded Bilateral investment agreements with more than 50 
countries. The list can be consulted on UNCTAD's website.


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