Canadian and Icelandic Investment and Trade Opportunities.
"Iceland - a fresh location
for investment and trade
with natural resources
and specialized skills for growth"
Ladies and Gentlemen.
"New Opportunities - Period of Growth".
The Icelandic economy is in a period of renewed and strong growth and I am pleased to present new opportunities for investment and trade in Iceland for canadian companies and investors. Further I express my hope that new opportunities between our countries will emerge in the new year.
In regard of various business opportunities in Iceland I want to highlight the following:
- Iceland is a fresh location for investment with clean environment, clean renewable energy resources and access to fresh resources for food production.
- Iceland with its Mid Atlantic Location is even placed to serve the two largest market blocks, namely the European Economic area and NAFTA.
- Iceland provides excellent location for specialized production with a dedecated and highly educated labour force.
The dynamic growth of the economy is demonstrated by the following:
- Iceland is one of the fastest growing economy in the OECD group of countries as evidenced by an annual 5% GDP growth in Iceland for the period 1996-98 as compared to about 3% in the Nordic Countries and 2% in the EU.
- Investment levels have risen sharply and are now projected to be above the OECD average in this new year.
- Foreign direct investment in Iceland has increased rapidly with three new large scale projects being approved in the past 18 months. These include enlargement of two existing plants, as well as new large greenfield investment. These three projects total an investment of about 1 billion USD and the participants consist of European and US investors.
"Iceland Welcomes Foreign Investment".
The Government of Iceland welcomes foreign investment and views increased international cooperation as important to ensure sustained economic growth. As part of its wider economic policy, the current government is further liberalising the legislation on foreign investment, with the aim of diversifying the economy.
Increased foreign direct investment is an important catalyst to transfer of management, technology and marketing know how.
"Liberalisation of the Investment Act".
Freedom to invest has been the basic principle applied in Iceland since the first comprehensive foreign investment act was enacted in 1991. Icelandic legislation is aimed at creating a friendly investment environment for foreign investors and corporations. It assures:
- A full right to own property related to industrial investments
- Complete freedom of capital movements
- Full right to repatriation of profits
The government is also ensuring a streamlined decision making procedure at all levels to help the entry of foreign investors to Iceland.
"Government emphasis on stability, employment and growth".
Continued economic growth and the creation of employment have been the highest priorities of the Government of Iceland over the past years. The government is also determined to create conditions for a managable, long term growth based on open foreign trade and investment policy.
Economic stability has been maintained and that is best seen by the fact that Iceland is one out of a select few countries in Europe which have met the European Monetary Union criteria for participation in European Monetary union. These criteria relate to:
- Public sector balance.
- Public sector debt.
- Inflation rate.
- Long term interest rates.
Price stability is being maintained in Iceland through a combination of a stable exchange rate policy and moderate wage settlements.
This policy has ensured growth in new employment and a low unemployment rate of less than 4% as compared to about 9-10% in the nordic countries and Europe.
"Foreign Investment - Recent Trends".
Foreign investment has played an important part in the industrial development in Iceland, in particular in the field of power intensive industries. Increased foreign investment in services, including financial services and the transport sector, are also evident. With the liberalisation of foreign investments being introduced this year, we see new areas of growth in:
- Food production, including aquaculture
- Energy and energy intensive industries
- Financial services
- Investments in the growing software industry in Iceland
- Tourism and health facilities
- Value added - retail processing.
- Specialized production of high tech equipment for fisheries sector.
"Favourable Tax Rates".
The Icelandic Corporate Tax rate is 33% and with liberal dividend payments the effective tax rate can be about 24-26%. Bilateral taxation arrangements with Canada provide for a 5% dividend tax on distributed profits.
Social security contributions and other wage related taxes are low in Iceland or about 40% compared to 70-90% in several European countries.
"European Location for Export Oriented Companies".
Iceland is an island and more dependent on foreign trade than most other OECD countries. The total export from Iceland, as a percentage of GDP, have been above 30% while the same figure for Sweden was about 25% and for the United States about 10%. Total imports to Iceland as a percentage of GDP have been in the same range. Liberal world trade and active participation in common economic areas and liberal bilateral trade arrangements are therefore crucial for Iceland due to the vital importance of foreign trade to the Icelandic economy.
The European Economic Area Agreement with the European Union (The EEA) provides for wide-ranging economic cooperation and assures foreign investors of the basic EU freedoms regarding unrestricted movements of goods, persons, services and capital. Iceland is an active member of the European market, has implemented all important EU trade legislation and is participating in all aspects of European harmonisation of laws and regulation.
"The EEA and Foreign Investors".
Iceland's membership of the EEA represents a guarantee for foreign investors. The Agreement makes adherence to EU provisions and conditions the norm in Iceland, thus providing for direct rights for non-national investors. This is controlled by seperate surveillance authority. A company from any other member countries of the EEA has the same right for operations in Iceland as an Icelandic registered company.
The OECD capital codes provide all OECD companies the same basic rights with regard to investment and trade in Iceland as those afforded to EEA members. There Iceland can serve as an excellent location for Canadian companies to serve the European Market. Using Iceland as a base for further production can ensure duty free access to this large unified market.
"Trade and Investment between Iceland and Canada".
Canada is one of Iceland's closest foreign partners. For centuries there have been strong cultural and political links dating back to the strong wave of Icelandic emigration to Canada in the 18th Century. This has however not lead to as strong commercial links as one would have expected. In particular foreign direct investment has not developed between the countries in the past. Only last year some direct investment has started mainly Icelandic companies investing in the Atlantic region of Canada.
Canada has for several years now however, been an import export market accounting for about 1% of our total exports. Our main exports are, not surprisingly, dominatet by fish and fish products and high tech equipments for the fisheries sector. Iceland's main imports from Canada are wood, paper and household goods.
"Bilateral Arrangements for Investment and Trade"
In order to encourage trade and investments, various initatives are being taken to strengthen the bilateral arrangements between Canada and Iceland.
- Firstly, a new convention between Iceland and Canada for the avoidance of double taxation has been concluded and it will enter into force in 1998. The purpose of the convention is to encourage investments and trade through avoidance of double taxation. )
- Secondly, a new arrangement on trade and economic cooperation have recently been proposed between Iceland and Canada. The objectives are to enhance economic relations with trade in goods, services and investments and liberalize trade. A consultative group will be set up to ensure the fulfilment of the arrangement and to promote trade and investment. Both public and private sector participation is anticipatet in this Group.
- Thirdly, In regard to bilateral arrangements, I believe that regional programms of cooperation can be of great importance. One example is a programme sponsored by the Atlantic Canadian Islands, Iceland, the Fareo Island and the Isle of Man to enhance cooperation between SME's in these countries.
"Strengthening Bilateral Relations"
My hope is that cooperation between Icelandic and Canadian companies will continue to strengthen. I believe this can be achieved by:
- Icelandic companies using Atlantic Canada as basis for North American operation.
- Atlantic Canadian companies using Iceland as basis for North European operation.
- Cooperation on export of services.
Again I express my hope that stronger ties will be developed between Canada, in particular the Atlantic region and Iceland. We should build on the excellent air and sea connections between Iceland and this region to foster increased cooperation on all levels.
Thank you.