Greenland Benchmarking Report 2016

GREENLAND BENCHMARKING REPORT 2016

Published by the Arctic Cluster of Raw Materials (ACRM) in collaboration with Confederation of Danish Industry (DI) February 2016

www.di.dk/english

www.acrm.dk

Edited by

Oleg Izgorodin, Consultant at DI International Business Development Tel.: +45 3377 3708 Email: [email protected]

Johan Rasmussen, Business Analyst at DI International Business Development Tel.: +45 3377 3762 Email: [email protected]

Funded by the Bank of Greenland

ISBN: 978-87-7144-073-7 100.2.2016 Web version

FOREWORD

Greenland has a lot to offer potential investors. Its mineral-rich underground offers ample opportunities for companies involved in the extractive industry, and the Government of Greenland has ambitious plans for the sector’s development. Fishing and tourism are also essential sectors of the economy. Fish and shellfish exports amount to more than 90 per cent of the total export value, while Greenland’s natural beauty and adventure tourism opportunities attract a large number of travellers.

Despite the fact that Greenland has been a self-governing country within the Kingdom of Denmark since 1979 and was granted more authority in most administrative areas by the Act on Greenland Self-Government in 2009, data about its macroeconomic and business environment in well-respected international databases is rarely included.

This publication aims to fill that gap and shed light on the business conditions in Greenland by benchmarking its performance in a number of indicators against selected countries across the globe. We used data from internationally recognised sources, mostly the World Bank and International Monetary Fund. The data is internationally comparable and it is based on the latest available information (2013 or 2014 for most of the countries; when these values are not available, the last known value is used). All the data sources and the full list of indicators are provided in the end of this report.

This is the first edition and thus a novelty to have on Greenland. I hope that you enjoy the report and can use it as a reliable source of information about Greenland!

Niels Tanderup Kristensen Managing Director of ACRM and Deputy Director, Confederation of Danish Industry

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TABLE OF CONTENTS

2 GREENLAND AT A GLANCE

3 INTRODUCTION

4 MACROECONOMIC ANALYSIS 5 Macroeconomic analysis: Introduction 6 Country performance

27 BUSINESS ENVIRONMENT ANALYSIS 28 Business environment analysis: Introduction 29 Country performance 39 Overall results

40 SPECIAL THEMES 42 Special themes: Introduction 45 Mining 53 Fishing 59 Tourism

61 APPENDICES 62 Description of terms 63 Methodology 65 List of macroeconomic indicators 70 List of business environment indicators 72 Description of sources

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GREENLAND AT A GLANCE

Official name Kalaallit Nunaat (Greenland) Capital Nuuk Institutional system Parliamentary democracy (self-governing country within the Kingdom of Denmark) Area 2,166,086 km2 Currency Danish Krone (DKK) Official languages Kalaallisut (Greenlandic), Danish Religion Evangelical Lutheran Ethnic groups Born in Greenland – 89.3%, born outside – 10.7% (2015) Population 55,984 (Jan. 2015) Urban population 48,216 (Jan. 2015)

Source: Statistics Greenland

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INTRODUCTION

The Greenland Benchmarking Report 2016 is created with the aim of providing a detailed overview of Greenland’s economic conditions, business environment and key economic sectors. Greenland’s performance is also benchmarked against countries in the Arctic region, selected emerging economies, several island countries as well as G8 economies, which allows drawing con- clusions about Greenland’s relative performance with a broad range of economies.

The report is published by the Arctic Cluster of Raw Materials (ACRM). ACRM is established by Confederation of Danish Industry (DI), The Danish Industry Foundation (IF), Greenland Business Association (GBA), and the Technical University of Denmark (DTU). ACRM is a platform for companies with interests, experience, and competences within the extractive industries. ACRM’s main purpose is to strengthen the competitiveness of the industry in Greenland and Denmark and to contribute to sustainable growth and employment in both countries. The cluster offers a one door entrance to the Greenlandic extractive industries and key industry suppliers and decision makers.

This report is inspired by several similar reports, including the annual World Bank Doing Business Report, the Economist Intelligence Unit’s (EIU) Risk Briefing, the Global Benchmark Report published since 2006 by DI, and the MENA Benchmarking Report 2014, written and published by DI in 2015. Indicators used in the macroeconomic analysis are the same across the reports – only the countries analysed differ.

The Greenland Benchmarking Report 2016 opens with an analysis of Greenland’s macroeconomic conditions, followed by an assessment of the business environment in the country. The report also includes special theme chapters about the mining, fishing and tourism sectors in Greenland. These theme chapters are small appetisers on the DNA of Greenland from a private sector perspective. Description of terms, methodology, a list of all indicators as well as a list of sources used in the report are provided in the Appendices.

The report clearly identifies some of the structural challenges that Greenland is facing as a large island with a small scattered population. It shows where the country is not performing, but it also reveals that Greenland performs very well – and is in the top five among the countries analysed – in most of the indicators when it comes to its business environment.

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1 MACROECONOMIC ANALYSIS

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INTRODUCTION Macroeconomic analysis

Aggregate macroeconomic indicators are a useful source of information about the levels of economic development of different countries, their economic policies, business conditions and performance in the global market. Countries and regions across the world have historically experienced different levels of economic growth, driven by local conditions and government decisions as well as by global phenomena. For example, the recent financial crisis has had a profound effect on almost every world economy. Therefore, while analysing Greenland’s economic performance in isolation might be useful, it is extremely important to compare its performance to other countries as well.

The following pages provide data on the economic performance of Greenland and 21 other countries in 21 different macroeconomic indicators. We have been able to find official data on most indicators, however, for some of them data was not available. The indicators are grouped into nine categories:

 GDP and GDP growth  Diversification of economy  Investment  International trade  Government finance  Capital markets  Price level  Demographics  Employment

Greenland’s performance in all indicators is compared to eight countries from the G8 (Canada, France, Germany, Italy, Japan, Russian Federation, United Kingdom, and United States) and five Arctic countries (Denmark, Finland, Iceland, Norway, Sweden). The report also compares Green- land to three island countries (Dominica and St. Kitts and Nevis, selected because their population is similar to that of Greenland, as well as Indonesia, selected because its total area is similar to Greenland’s area), and five emerging economies from different regions of the world (Egypt, Mex- ico, Republic of Korea, Philippines and Turkey). The Description of Terms provides a detailed explanation of the groups of countries. Overall, Greenland’s macroeconomic performance is char- acterised by a declining GDP (2012-2014 average). The country has an average GDP per capita level compared to the selected countries, the highest ratio of imports to GDP, the lowest general government gross debt, the highest population decline, the second largest proportion of working age population, and one of the highest unemployment rates, but also one of the better labour force participation rates of both genders. GREENLAND BENCHMARKING REPORT 2016 6

MACROECONOMIC ANALYSIS GDP and GDP growth

1.a. Real GDP growth (average annual % growth in 2012-2014)

Philippines 6.6 Indonesia 5.5 St. Kitts and Nevis 3.8 Turkey 3.1 Korea, Rep. 2.8 Mexico 2.6 United States 2.3 Iceland 2.3 Egypt 2.2 Canada 2.1 United Kingdom 2.1 Norway 1.9 Russian Federation 1.8 Sweden 1.1 Japan 1.1 Dominica 1.1 Germany 0.8 France 0.3 Denmark 0.0 Finland -1.0 Greenland -1.1 Italy -1.7

Explanation and justification Notes Gross Domestic Product (GDP) is one of the main Data for all countries and years was acquired from economic indicators. It measures the total value the World Bank World Development Indicators of goods and services produced in a country over database, except for Greenland (data from Statis- a certain period of time. Real GDP growth is an tics Greenland). indicator of economic growth calculated at constant prices (eliminating the effect of price Comments changes in the country). In order to better reflect Greenland had the second lowest GDP growth the recent economic trends, average annual per- (-1.1%) in 2012-2014 among the countries ana- centage growth of Real GDP in the last three years lysed - only Italy performed worse (-1.7%). The fall is used instead of analysing one year only. in GDP was mostly a result of declining investment in exploration activities, a drop in fishing activity and a decline in the construction sector.

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MACROECONOMIC ANALYSIS GDP and GDP growth

1.b. GDP per capita, PPP (current international $, thousands)

Norway 65 United States 55 Germany 46 Sweden 45 Denmark 45 Canada 44 Iceland 43 Finland 40 United Kingdom 40 France 39 Japan 36 Italy 35 Korea, Rep. 34 Greenland 32 Russian Federation 26 St. Kitts and Nevis 23 Turkey 19 Mexico 17 Dominica 11 Egypt 11 Indonesia 11 Philippines 7

Explanation and justification Notes GDP per capita based on purchasing power parity Data for all countries is for year 2014 and was ac- (PPP) is defined by the World Bank as "gross do- quired from the World Bank World Development mestic product converted to international dollars Indicators database, except for Greenland (data using purchasing power parity rates. An interna- from Statistics Greenland in Danish Krone was tional dollar has the same purchasing power over converted to international dollars using the World GDP as the U.S. dollar has in the United States". Bank's PPP conversion factor for Denmark). When converted using PPP, GDP per capita is the total value of goods and services produced in a Comments country divided by the country's population, In terms of GDP per capita, Greenland has a me- measured in international dollars so that differ- dium performance among the analysed countries. ences in the purchasing power of currencies are It outperforms such countries as Russia, Turkey, eliminated. This allows for an easy comparison of Mexico and Egypt, but falls behind more ad- the level of economic development of countries. vanced countries (GDP per capita in Norway, for example, is double that of Greenland). GREENLAND BENCHMARKING REPORT 2016 8

MACROECONOMIC ANALYSIS Diversification of economy

1.c. Composition of GDP by sector (% of GDP)

Canada 2 28 71 Agriculture Denmark 1 22 76 Industry Dominica 16 15 69 Services Egypt 14 40 46

Finland 3 27 71

France 2 19 79

Germany 1 30 69

Greenland 11 14 75

Iceland 7 24 69

Indonesia 14 47 39

Italy 2 23 74

Japan 1 26 73

Korea, Rep. 2 38 59

Mexico 3 34 62

Norway 2 38 60

Philippines 11 31 57

Russian Federation 4 36 60

St. Kitts and Nevis 1 25 73

Sweden 1 26 73

Turkey 8 27 65

United Kingdom 1 21 78

United States 1 21 78

Explanation and justification Comments Composition of GDP by sector shows the propor- Developed economies usually have a low share of tion of value added in agriculture, industry and agriculture and a high share of services in their service sectors of the economy. It provides an GDP. For example, in the UK and the US, agricul- overview of the structure of the economy and the ture accounts for about 1%, industry - for 21%, level of its diversification. and services - for 78%. In Greenland, agriculture accounts for a relatively larger share (11%), indus- Notes try - for a slightly smaller share (14%), while the Data for all countries is for year 2014 and was ac- share of services is comparable, mostly due to the quired from the World Bank World Development public sector (public administration, education, Indicators database, except for: Canada (2010 social institutions). Other large service sectors in data), Greenland (DI calculations based on Statis- Greenland are real estate and wholesale trade. tics Greenland data), Iceland (2013 data), Indone- sia (2013 data), Japan (2013 data), United States (2013 data). GREENLAND BENCHMARKING REPORT 2016 9

MACROECONOMIC ANALYSIS Diversification of economy

1.d. Total natural resources rents (% of GDP)

Russian Federation 18.8 Egypt 10.9 Norway 10.7 Mexico 7.7 Indonesia 7.6 Canada 5.2 Philippines 3.2 Denmark 1.7 United States 1.3 Finland 1.3 Sweden 1.1 United Kingdom 1.0 Turkey 0.6 Italy 0.2 Germany 0.2 France 0.1 Dominica 0.1 Korea, Rep. 0.0 Japan 0.0 Iceland 0.0 Greenland N/A St. Kitts and Nevis N/A

Explanation and justification Comments Total natural resources rents include oil, natural Among analysed countries, Russia has the highest gas, coal, mineral, and forest rents. Rents are the level of rents from natural resources. Norway is difference between price and average cost of pro- the leader among Nordic countries. ducing (extracting) a commodity. Rents as % of GDP are an indicator of the reliance of economic Even though data for Greenland is not available, development on natural resource production. this and other indicators are included to be con- sistent with the reports that this publication is Notes based on (i.e., Global Benchmark Report, MENA Data for all countries is for year 2013 and ac- Benchmarking Report). quired from the World Bank World Development Indicators database. Data for Greenland and St. Kitts and Nevis is not available.

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MACROECONOMIC ANALYSIS Investment

1.e. Gross fixed capital formation (% of GDP)

Indonesia 33 St. Kitts and Nevis 30 Korea, Rep. 29 Norway 24 Canada 24 Sweden 24 Japan 22 France 22 Mexico 21 Philippines 21 Russian Federation 21 Finland 20 Turkey 20 Germany 20 United States 19 Denmark 19 Greenland 18 United Kingdom 17 Iceland 17 Italy 17 Dominica 15 Egypt 13

Explanation and justification Comments Gross fixed capital formation is one of the com- The share of investment in GDP in Greenland was ponents of GDP calculation using the expenditure relatively low in 2014, but is projected to increase approach. It measures the value of investments in the near future due to increased activity in the made in the economy (acquisition of plants, natural resources sector. Nevertheless, it was equipment, construction of infrastructure, etc.). above that of United Kingdom, Iceland and Italy This is an indicator of the contribution of invest- as well as Dominica and Egypt. ments to total GDP.

Notes Data for all countries is for year 2014 and was acquired from the World Bank World Development Indicators database, except for: Greenland (DI calculations based on Statistics Greenland data), Ja- pan (2013 data), United States (2013 data). GREENLAND BENCHMARKING REPORT 2016 11

MACROECONOMIC ANALYSIS Investment

1.f. Foreign direct investment, net inflows (BoP, current US$, millions)

United States 131,829 Canada 57,168 United Kingdom 45,457 Indonesia 26,349 Mexico 24,154 Russian Federation 22,891 Finland 14,812 Italy 13,727 Turkey 12,765 Norway 10,586 Korea, Rep. 9,899 Japan 9,070 Germany 8,390 France 7,957 Philippines 6,202 Egypt, Arab Rep. 4,783 Iceland 746 St. Kitts and Nevis 120 Dominica 41 Denmark -677 Sweden -2,535 Greenland N/A

Explanation and justification Notes Foreign direct investment (FDI) data provided by Data for all countries is for year 2014 and was ac- the World Bank are "the net inflows of investment quired from the World Bank World Development to acquire a lasting management interest (10 per- Indicators database. Data for Greenland is not cent or more of voting stock) in an enterprise op- available. erating in an economy other than that of the investor". Net inflows are new investments less dis- Comments investment, expressed in current U.S. dollars. This United States had the largest net FDI inflows indicator shows how attractive the country is to among the analysed countries, while Denmark foreign investors due to its openness, quality of and Sweden - the lowest (due to reverse invest- workforce, economic and business conditions, ment or disinvestment). Among Nordic countries, etc. Finland and Norway had the largest inflows of FDI.

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MACROECONOMIC ANALYSIS International trade

1.g. Exports of goods and services (% of GDP)

Denmark 54 Iceland 54 Korea, Rep. 51 Germany 46 Sweden 45 St. Kitts and Nevis 38 Norway 38 Finland 38 Dominica 34 Greenland 33 Mexico 32 Canada 32 Russian Federation 30 Italy 30 France 29 Philippines 29 United Kingdom 28 Turkey 28 Indonesia 24 Japan 16 Egypt 15 United States 13

Explanation and justification Indicators database, except for: Greenland (DI cal- Exports of goods and services measure the value culations based on Statistics Greenland data), Ja- of goods and services provided to other coun- pan (2013 data), and United States (2013 data). tries. Exports are one of the components of GDP calculation using the expenditure approach. Comments When measured as per cent of GDP, it indicates Exports of goods and services amounted to 33% the contribution of exports to total value of goods of GDP in Greenland in 2014, which is a medium and services produced and sold in a country. performance among the analysed countries. Ex- Share of exports in GDP is also an indicator of the ports of fish amount to about 90% of Greenland's competitiveness of locally produced products total exports; shrimp exports alone account for and services abroad. more than 50% of total exports. Falling shrimp quotas had a large negative impact on the coun- Notes try's export. Data for all countries is for year 2014 and was acquired from the World Bank World Development GREENLAND BENCHMARKING REPORT 2016 13

MACROECONOMIC ANALYSIS International trade

1.h. Imports of goods and services (% of GDP)

Greenland 52 Denmark 48 Dominica 48 Iceland 47 St. Kitts and Nevis 47 Korea, Rep. 45 Sweden 41 Germany 39 Finland 39 Mexico 33 Canada 33 Philippines 32 Turkey 32 France 31 United Kingdom 30 Norway 30 Italy 27 Indonesia 24 Egypt 24 Russian Federation 23 Japan 19 United States 17

Explanation and justification Indicators database, except for: Greenland (DI cal- Imports of goods and services measure the value culations based on Statistics Greenland data), Ja- of goods and services received from other coun- pan (2013 data), and United States (2013 data). tries. Imports are subtracted from GDP when cal- culating it using the expenditure approach. Im- Comments ports as per cent of GDP is an indicator of the re- Greenland is the leader among analysed coun- liance of the economy on foreign-produced tries in terms of imports as per cent of GDP as it goods and services. has to acquire large amounts of goods and services from other countries. The major import cat- Notes egories in Greenland are mineral fuels, machinery Data for all countries is for year 2014 and was ac- and transport equipment as well as food and live- quired from the World Bank World Development stock.

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MACROECONOMIC ANALYSIS Government finance

1.i. General government gross debt (% of GDP)

Greenland 5 Russian Federation 18 Indonesia 25 Norway 28 Turkey 34 Korea, Rep. 36 Philippines 36 Sweden 44 Denmark 45 Mexico 50 Finland 59 Germany 75 Dominica 76 St. Kitts and Nevis 80 Iceland 83 Canada 88 United Kingdom 89 Egypt 90 France 96 United States 105 Italy 132 Japan 246

Explanation and justification Comments General government gross debt includes all liabil- Greenland's government has the lowest amount ities of the government that require payment. of debt as per cent of GDP among the analysed Government debt as per cent of GDP is an indica- countries. In 2014, it amounted to about 5 per tor of government's indebtedness, financial sta- cent of GDP. United States, Italy and Japan are the bility and solvency. most indebted countries (with government debts of 105%, 132% and 246% of GDP, respectively). Notes Data for all countries is for year 2014 and was acquired from IMF World Economic Outlook database, except for Greenland (Danish National Bank data).

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MACROECONOMIC ANALYSIS Government finance

1.j. General government net lending (+)/borrowing (-), % of GDP

St. Kitts and Nevis 9.5 Norway 8.8 Greenland 2.9 Denmark 1.8 Philippines 0.9 Korea, Rep. 0.8 Germany 0.3 Iceland -0.2 Turkey -1.0 Russian Federation -1.2 Canada -1.6 Sweden -1.9 Indonesia -2.1 Italy -3.0 Finland -3.2 Dominica -3.4 France -4.0 United States -4.1 Mexico -4.6 United Kingdom -5.7 Japan -7.3 Egypt -13.6

Explanation and justification Comments Net lending/borrowing is a measure of govern- In 2014, Greenland was among the few analysed ment's fiscal balance, calculated as total govern- countries that had a general government surplus. ment revenue minus total expenditure. Deficits The major revenue sources for the country's gov- have to be financed either by using existing re- ernment are income taxes and transfers from serves or by undertaking additional borrowing. Denmark. Compensation of employees and gov- This is thus an indicator of government's financial ernment consumption are the main expenditure stability. categories of Greenland's government.

Notes Data for all countries is for year 2014 and was acquired from IMF World Economic Outlook database, except for Greenland (DI calculations based on Statistics Greenland data).

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MACROECONOMIC ANALYSIS Government finance

1.k. Long term sovereign debt rating by Moody's

Canada Aaa Denmark Aaa Finland Aaa Germany Aaa Norway Aaa Sweden Aaa United States Aaa United Kingdom Aa1 France Aa2 Korea, Rep. Aa2 Japan A1 Mexico A3 Iceland Baa2 Italy Baa2 Philippines Baa2 Indonesia Baa3 Turkey Baa3 Russian Federation Ba1 Egypt B3 Dominica N/A Greenland N/A St. Kitts and Nevis N/A

Explanation and justification Notes Sovereign debt is used as a mechanism of fund- The provided ratings are the latest available rating by governments. Moody's assessment of sov- ings published by Moody's. The agency does not ereign debt risk is based on four factors: eco- rate Dominica, Greenland and St. Kitts and Nevis. nomic strength, institutional strength, fiscal Moody's database was accessed on February 2, strength, and susceptibility to event risk. Sover- 2016. eign debt ratings are relative rankings of credit risk, which act as indicators of a country's default Comments probability and expected losses in the case of de- In general, advanced, developed economies have fault. lower sovereign debt risk and better credit ratings. Seven of the analysed countries achieve the highest possible rating (Aaa), while Egypt has the lowest credit rating (B3).

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MACROECONOMIC ANALYSIS Capital markets

1.l. Domestic credit to private sector (% of GDP)

Denmark 200 United States 192 Japan 188 United Kingdom 155 Sweden 135 Korea, Rep. 135 Canada 125 Italy 117 France 111 Finland 98 Germany 93 Iceland 92 Turkey 70 St. Kitts and Nevis 63 Dominica 56 Russian Federation 53 Indonesia 38 Philippines 36 Mexico 31 Egypt 28 Greenland N/A Norway N/A

Explanation and justification Notes Domestic credit to private sector as measured by Data for all countries is for year 2013 and ac- the World Bank is the amount of credit resources quired from the World Bank World Development provided to the private sector by financial corpo- Indicators database, except for Canada (2008 rations. On one hand, it shows the availability of data). Data for Greenland and Norway is not avail- credit in the economy which is needed for the ex- able. pansion of business services or other projects. On the other hand, it is an indicator of the level of Comments indebtedness of the private sector. The private sector in developing countries is the least indebted while advanced economies have the highest domestic credit to GDP ratios, which often exceed 100%. In Denmark, for example, domestic credit to private sector amounts to 200% of GDP - this can pose a certain threat to the economy. GREENLAND BENCHMARKING REPORT 2016 18

MACROECONOMIC ANALYSIS Capital markets

1.m. Market capitalization of listed companies (% of GDP)

United States 115 United Kingdom 115 Canada 111 Philippines 106 Sweden 103 Korea, Rep. 97 St. Kitts and Nevis 82 Denmark 70 France 68 Finland 62 Japan 62 Norway 51 Indonesia 45 Mexico 44 Russian Federation 43 Germany 42 Turkey 39 Italy 23 Egypt 22 Iceland 20 Dominica N/A Greenland N/A

Explanation and justification Notes Market capitalization is the market value of com- Data for all countries is for year 2012 and was ac- panies (share price times the number of shares quired from the World Bank World Development outstanding). Listed companies are the compa- Indicators database, except for St. Kitts and Nevis nies listed on the country's stock exchanges. This (2011 data). Data for Dominica and Greenland is indicator shows the level of development of the not available. country's financial markets, which also relates to the overall economic development because ac- Comments cess to equity finance is an important growth fac- The UK and US financial markets are the most de- tor for companies. veloped: market capitalization of companies listed on these exchanges exceeds the GDP of re- spective countries. Italy, Egypt and Iceland have the lowest market capitalizations among the analysed countries.

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MACROECONOMIC ANALYSIS Price level

1.n. Inflation, consumer prices (annual %)

Sweden -0.2 Italy 0.2 France 0.5 Denmark 0.6 St. Kitts and Nevis 0.8 Dominica 0.8 Germany 0.9 Finland 1.0 Korea, Rep. 1.3 Greenland 1.4 United Kingdom 1.5 United States 1.6 Canada 1.9 Norway 2.0 Iceland 2.0 Japan 2.7 Mexico 4.0 Philippines 4.1 Indonesia 6.4 Russian Federation 7.8 Turkey 8.9 Egypt 10.1

Explanation and justification Comments Consumer price inflation measures the change in Annual inflation in Greenland was 1.4% in July the cost of acquiring a specified basket of goods 2015, which is within the band of optimal, pre- and services. This is an indicator of price stability. ferred inflation rates. Sweden experienced defla- Low positive values of inflation are generally pre- tion in 2014, while inflation in Egypt exceeded 10 ferred. per cent.

Notes Data for all countries is for year 2014 and was acquired from the World Bank World Development Indicators database, except for Greenland (data from Statistics Greenland showing the change in consumer prices in July 2015 compared to July 2014).

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MACROECONOMIC ANALYSIS Demographics

1.o. Population growth (average annual % growth in 2012-2014)

Egypt 2.2 Philippines 1.6 Mexico 1.4 Indonesia 1.3 Turkey 1.2 Norway 1.2 St. Kitts and Nevis 1.2 Canada 1.1 Italy 1.1 Iceland 0.9 Sweden 0.8 United States 0.8 United Kingdom 0.7 Finland 0.5 France 0.4 Dominica 0.4 Korea, Rep. 0.4 Denmark 0.4 Russian Federation 0.2 Japan -0.2 Greenland -0.4

Explanation and justification Comments Population growth is one of the main demo- While most of the analysed countries experienced graphic indicators. It shows how fast the country's population growth in 2012-2014, Greenland and population is expanding/declining. In order to Japan saw their populations decrease. In Green- better reflect recent trends, average annual per- land, birth rates exceed death rates, but emigra- centage growth of population in the last three tion leads to the decline in population. years is used instead of analysing one year only.

Notes Data for all countries and years was acquired from the World Bank World Development Indicators database.

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MACROECONOMIC ANALYSIS Demographics

1.p. Population ages 15-64 (% of total)

Korea, Rep. 73 Greenland 71 Russian Federation 70 Canada 68 Indonesia 67 Turkey 67 United States 67 Iceland 66 Germany 66 Norway 66 Mexico 66 United Kingdom 65 Denmark 64 Italy 64 Finland 64 Sweden 63 Philippines 63 France 63 Egypt 62 Japan 61 Dominica N/A St. Kitts and Nevis N/A

Explanation and justification Indicators database, except for Greenland (DI cal- Population ages 15-64 as percentage of total culations based on Statistics Greenland data). population is an indicator of the percentage share of working age population, which can potentially Comments contribute to the economic development of the Greenland has one of the largest working age country. The larger the working age population is, populations among the analysed countries: 71% the lower is the share of population below age 15 of its population is between the ages 15-64. Japan and above age 64, which has to rely on the sup- had the lowest share of people aged 15-64 in port of others for their survival. 2014 (61%).

Notes Data for all countries is for year 2014 and was acquired from the World Bank World Development

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MACROECONOMIC ANALYSIS Employment

1.q. Unemployment, total (% of total labour force) (modeled ILO estimate)

St. Kitts and Nevis N/A Dominica N/A Norway 3.4 Korea, Rep. 3.5 Japan 3.7 Mexico 4.9 Iceland 5.0 Germany 5.0 Russian Federation 5.1 United States 6.2 Indonesia 6.2 United Kingdom 6.3 Denmark 6.6 Canada 6.9 Philippines 7.1 Sweden 8.0 Finland 8.6 Turkey 9.2 France 9.9 Greenland 10.1 Italy 12.5 Egypt 13.2

Explanation and justification Comments Total unemployment, as defined by the Interna- Unemployment in Greenland exceeded 10 per tional Labour Organization (ILO), is the share of cent in 2013 and was one of the highest among the labour force which is without work but seek- analysed countries, with only Italy and Egypt per- ing employment. This is an indicator of economic forming worse. The problem in Greenland is that activity in the country. High unemployment even though unemployment among the local shows that there is a misbalance between de- population is high, there is a large number of mand for and supply of labour. skilled workers from abroad hired in the country. This shows that local employees often lack the Notes skills required for high-skilled positions. Data for all countries is for year 2014 and was acquired from the World Bank World Development Indicators database, except for Greenland (Statis- tics Greenland data for 2013).

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MACROECONOMIC ANALYSIS Employment

1.r. Unemployment, youth total (% of total labour force ages 15-24) (modeled ILO estimate) St. Kitts and Nevis N/A Dominica N/A Japan 6.5 Germany 7.6 Norway 8.4 Mexico 9.9 Korea, Rep. 10.4 Iceland 10.9 Denmark 12.4 Russian Federation 12.9 Canada 13.4 United States 14.0 Greenland 16.0 Philippines 16.4 United Kingdom 16.7 Turkey 17.7 Finland 19.2 Indonesia 21.8 Sweden 22.8 France 23.9 Egypt 42.0 Italy 44.1

Explanation and justification Notes Youth unemployment, as defined by the Interna- Data for all countries is for year 2014 and was ac- tional Labour Organization (ILO), is the share of quired from the World Bank World Development the labour force ages 15-24 which is without work Indicators database, except for Greenland (Statis- but seeking employment. High youth unemploy- tics Greenland data for 2013 for the age group ment is an indicator of the inability of the labour 20-24). market to accommodate less experienced workers. Unemployed youth cannot contribute to eco- Comments nomic growth. High youth unemployment can While youth unemployment in Greenland is also result in less innovation and may lead to a higher than the total unemployment level, it is not loss of competitive advantages of a country. as high as in many other analysed countries. In Egypt and Italy, for example, youth unemployment exceeded 40%, while in Greenland it stood at 16% in 2013.

GREENLAND BENCHMARKING REPORT 2016 24

MACROECONOMIC ANALYSIS Employment

1.s. Labour force participation rate, total (% of total population ages 15+) (modeled ILO estimate) Greenland 74 Iceland 74 Indonesia 68 Canada 66 Philippines 65 Norway 65 Sweden 64 Russian Federation 64 Denmark 62 United States 62 United Kingdom 62 Mexico 62 Korea, Rep. 61 Germany 60 Finland 59 Japan 59 France 56 Turkey 49 Egypt 49 Italy 49 Dominica N/A St. Kitts and Nevis N/A

Explanation and justification Comments Labour force participation rate is defined by ILO Total labour force participation rate in Greenland as the share of the population ages 15 and older and Iceland, at 74%, was the highest among ana- that is economically active, that is all people who lysed countries, indicating a healthy rate of eco- supply labour for the production of goods and nomic activity. Turkey, Egypt and Italy had the services. Similarly to unemployment, this is an in- lowest labour participation rates. dicator of economic activity.

Notes Data for all countries is for year 2014 and was acquired from the World Bank World Development Indicators database, except for Greenland (DI calculations based on Statistics Greenland data for 2013 for the age group 18-64).

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MACROECONOMIC ANALYSIS Employment

1.t. Labour force participation rate, female (% of female population ages 15+) (modeled ILO estimate) Greenland 72 Iceland 70 Canada 61 Norway 61 Sweden 60 Denmark 59 Russian Federation 57 United States 56 United Kingdom 56 Finland 55 Germany 54 Indonesia 51 Philippines 51 France 51 Korea, Rep. 50 Japan 49 Mexico 45 Italy 40 Turkey 29 Egypt 24 Dominica N/A St. Kitts and Nevis N/A

Explanation and justification Indicators database, except for Greenland (DI cal- Total labour force participation rate usually does culations based on Statistics Greenland data for not reflect the major differences in participation 2013 for the age group 18-64). rates of female and male population. Female participation is usually lower than male participation Comments due to cultural, social and demographic trends. It As with total labour force participation, female is therefore important to analyse gender differ- participation in Greenland (72%) is above that of ences in employment. other analysed countries. Egypt (24%) and Turkey (29%) had very low participation rates of females Notes in the labour force. Data for all countries is for year 2014 and was acquired from the World Bank World Development

GREENLAND BENCHMARKING REPORT 2016 26

MACROECONOMIC ANALYSIS Employment

1.u. Labour force participation rate, male (% of male population ages 15+) (modeled ILO estimate) Indonesia 84 Mexico 80 Philippines 80 Iceland 77 Greenland 76 Egypt 75 Korea, Rep. 72 Russian Federation 72 Canada 71 Turkey 71 Japan 70 United States 69 United Kingdom 69 Norway 69 Sweden 68 Germany 66 Denmark 66 Finland 64 France 61 Italy 60 Dominica N/A St. Kitts and Nevis N/A

Explanation and justification Indicators database, except for Greenland (DI cal- Total labour force participation rate usually does culations based on Statistics Greenland data for not reflect the major differences in participation 2013 for the age group 18-64). rates of female and male population. Female participation is usually lower than male participation Comments due to cultural, social and demographic trends. It Male labour force participation in Greenland is therefore important to analyse gender differ- (76%) only slightly exceeds the female participa- ences in employment. tion rate (72%), indicating a high level of gender equality. Male participation rates were the highest Notes in developing countries (Indonesia, Mexico and Data for all countries is for year 2014 and was ac- Philippines), while Italy and France had the lowest quired from the World Bank World Development rates.

GREENLAND BENCBENCHMARKINGHMARKING REPORT 2016 27

2 BUSINESS ENVIRONMENT ANALYSIS

GREENLAND BENCHMARKING REPORT 2016 28

INTRODUCTION Business environment analysis

A favourable business environment is the key driver of a country’s economic development. Good conditions for starting new businesses or expanding current operations are critical for the suc- cessful functioning of the economy. Even though it is impossible to perfectly measure something as intangible as business conditions in a country, we believe that the indicators presented in this chapter provide a good overview of these conditions.

The business environment indicators used in this analysis come from the Economist Intelligence Unit’s (EIU) Risk Briefing. No other major sources of business environment data (e.g., Global En- trepreneurship Monitor, Index of Economic Freedom, Global Competitiveness Report, etc.) provide information about Greenland. Hence, the risk assessment done by the EIU is the best tool for comparing business conditions in Greenland and other countries. EIU’s risk ratings evaluate the risk to business profitability from 10 separate risk criteria based on current conditions and expectations for the next two years.

Graphs presented in this chapter display scores in each of the 10 individual indicators for Green- land and 19 other countries (the same countries as in the Macroeconomic Analysis chapter, except for Dominica and St. Kitts and Nevis as they are not rated by the EIU). EIU assigns each country a score from 0 (very little risk) to 100 (very high risk). The overall risk assessment is a simple average of the countries’ scores in each of the indicators.

In general, Greenland performs very well and is in the Top 5 among the countries analysed in most of the indicators. Greenland has particularly strong performance in terms of security risk, legal and regulatory risk, macroeconomic risk, foreign trade and payments risk as well as tax policy. Its relative weaknesses are government effectiveness, labour market and infrastructure. Overall, Green- land is the sixth best country among the analysed ones in terms of total risk.

GREENLAND BENCHMARKING REPORT 2016 29

BUSINESS ENVIRONMENT ANALYSIS Security

2.a. Security risk (lower=better)

Iceland 0 Finland 4 Greenland 4 Norway 4 Sweden 7 Denmark 11 Canada 14 Japan 14 Germany 18 United States 18 France 25 Italy 25 United Kingdom 25 Korea, Rep. 29 Indonesia 50 Egypt 54 Turkey 54 Russian Federation 57 Mexico 64 Philippines 79

Explanation and justification Comments Security risk evaluates the safety of the physical Security risk in Greenland is one of the lowest environment. It takes into account such issues as among the analysed countries. The crime rate is the presence of armed conflicts, violent demon- low and there are no armed conflicts or civil un- strations, civil unrest, hostility to foreigners or pri- rest taking place. The risk is much higher in Mex- vate ownership, organised crime, etc. ico and Philippines, for example, while Iceland has practically no security issues. Notes Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 30

BUSINESS ENVIRONMENT ANALYSIS Political stability

2.b. Political stability risk (lower=better)

Norway 0 Canada 5 United States 10 Greenland 15 Japan 15 Sweden 15 United Kingdom 15 Denmark 20 Germany 20 Iceland 20 Finland 30 France 35 Italy 35 Indonesia 40 Korea, Rep. 40 Mexico 40 Egypt 45 Philippines 55 Russian Federation 65 Turkey 70

Explanation and justification Notes Political stability risk measures the ability of polit- Data for all countries is the latest available ical institutions to continually support the needs (2015/2016) operational risk assessment acquired of businesses. It reflects the risk of social unrest, from the Economist Intelligence Unit. the mechanisms of transfer of power from one government to another, the probability that op- Comments position will gain power and bring about a wors- Greenland ranks high when it comes to political ening of business conditions, the level of concen- stability and no major political risks are foreseen. tration of excessive power as well as the probabil- The Self Rule Act of 2009 between Denmark and ity that international tensions will have a negative Greenland specifies that Greenland can take con- effect on the economy or policy. trol of its judicial system, financial regulation, border control, etc. Among the analysed countries, Turkey and Russia have the highest risk of political instability, Norway – the lowest.

GREENLAND BENCHMARKING REPORT 2016 31

BUSINESS ENVIRONMENT ANALYSIS Government effectiveness

2.c. Government effectiveness risk (lower=better)

Norway 7 Finland 11 Sweden 11 Canada 14 Iceland 18 Denmark 21 Germany 21 United Kingdom 21 France 25 Japan 25 United States 29 Greenland 32 Italy 50 Korea, Rep. 50 Mexico 57 Philippines 61 Indonesia 64 Egypt 68 Turkey 68 Russian Federation 86

Explanation and justification Comments Government effectiveness risk takes into account Greenland performs worse in terms of govern- the likelihood that the government will implement effectiveness than in most other business ment policies that support businesses; the level of environment indicators. A 2012 report by Nordic bureaucracy; competences, morale and compen- Consulting Group commissioned by Transpar- sation of officials; the degree of vested interests; ency International Greenland found that there is the level of corruption; accountability of officials high staff turnover in the public sector, a some- and the probability that the country can be ac- times confusing system of legislation and a lack cused of human rights violations. of accountability that can lead to corruption. Overall, Russia has the lowest government effec- Notes tiveness while Norway – the highest. Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 32

BUSINESS ENVIRONMENT ANALYSIS Legal and regulatory environment

2.d. Legal & regulatory risk (lower=better)

Sweden 5 Finland 10 Greenland 10 United Kingdom 10 United States 10 Canada 12 Denmark 12 Norway 12 France 18 Germany 18 Iceland 20 Japan 25 Korea, Rep. 35 Italy 38 Mexico 40 Egypt 45 Turkey 48 Philippines 55 Indonesia 62 Russian Federation 70

Explanation and justification Notes Legal & regulatory risk evaluates the degree to Data for all countries is the latest available which the legal process can serve certain inter- (2015/2016) operational risk assessment acquired ests, the risk that contracts are not enforced, the from the Economist Intelligence Unit. efficiency of the judicial process, favouritism of domestic over foreign companies, and the risk of Comments foreign assets expropriation. It also takes into ac- Legal and regulatory risk in Greenland is low with count the government's stance on promoting only Sweden and Finland performing better. competition, the level of intellectual property and There is no significant risk of assets expropriation, private property protection, the risk of unreliable non-enforcement of contracts, etc. As with many financial statements as well as the probability that other indicators, the highest risk is observed in price controls will be introduced. Russia.

GREENLAND BENCHMARKING REPORT 2016 33

BUSINESS ENVIRONMENT ANALYSIS Macroeconomic environment

2.e. Macroeconomic risk (lower=better)

Korea, Rep. 25 United States 25 Greenland 30 Iceland 30 Philippines 30 Indonesia 35 Canada 40 Denmark 40 Norway 40 Sweden 40 Finland 45 France 45 Germany 45 Japan 45 Mexico 45 United Kingdom 45 Turkey 50 Italy 60 Egypt 65 Russian Federation 65

Explanation and justification Comments Macroeconomic risk takes into account exchange The risk of macroeconomic instability in Green- rate volatility, the risk of recession and price in- land is low. Among analysed countries, only South stability in the next two years, the ratio of domes- Korea and United States perform better. Italy, tic public debt to M2 (a measure of money sup- Egypt and Russia have the highest risk of macro- ply) as well as the risk of interest rate volatility. economic volatility.

Notes Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 34

BUSINESS ENVIRONMENT ANALYSIS Foreign trade and payments issues

2.f. Foreign trade & payments risk (lower=better)

Finland 4 Greenland 7 Canada 11 Denmark 11 Germany 11 Italy 11 Sweden 11 France 18 Japan 18 United Kingdom 18 Korea, Rep. 21 Norway 21 United States 21 Mexico 25 Iceland 32 Philippines 32 Turkey 32 Indonesia 43 Egypt 54 Russian Federation 61

Explanation and justification Comments Foreign trade & payments risk measures the Greenland takes the second place among ana- probability that the country will be subject to a lysed countries when it comes to foreign trade trade embargo, the risk that access to foreign ex- and payments risk. As the country uses Danish change will be restricted, the possibility of the in- currency (Krone), there is minimal risk of foreign troduction of discriminatory tariffs and other tariff exchange restrictions. Egypt and Russia are the and non-tariff measures, the ease of moving countries with the highest foreign trade risk. money out of the country as well as the risk of capital controls.

Notes Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 35

BUSINESS ENVIRONMENT ANALYSIS Financial markets

2.g. Financial risk (lower=better)

Sweden 4 Canada 8 Finland 8 France 8 Greenland 8 Japan 12 Norway 12 United Kingdom 12 United States 12 Denmark 21 Germany 21 Italy 25 Korea, Rep. 25 Mexico 42 Egypt 46 Iceland 46 Indonesia 46 Philippines 50 Russian Federation 50 Turkey 50

Explanation and justification Comments Financial risk takes into account the risk of a major Financial risk in Greenland is relatively low and is currency devaluation, the availability of financing on par with the risk in Canada, Finland and France, in the local financial market, the existence of a liq- and only slightly worse than that in Sweden. As uid local bond market in freely traded debt, the such, the possibility of a currency devaluation, a risk of a systemic financial crisis as well as the li- systemic crisis, etc. is very low. Philippines, Russia quidity of the local stock market. and Turkey are the worst performers in this indicator. Notes Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 36

BUSINESS ENVIRONMENT ANALYSIS Tax policy

2.h. Tax policy risk (lower=better)

Canada 6 Greenland 6 United Kingdom 6 Denmark 12 Finland 12 Norway 12 Germany 19 Iceland 25 Korea, Rep. 25 Mexico 25 Japan 31 Sweden 31 Italy 38 Philippines 38 Turkey 38 United States 38 France 44 Indonesia 44 Russian Federation 50 Egypt 56

Explanation and justification Comments Tax policy risk measures the clarity and predicta- Stability and transparency of the tax regime in bility of the tax regime, the risk of discriminatory Greenland (together with Canada and United taxes, the level of corporate tax rates and the risk Kingdom) is the best among the analysed coun- of retroactive taxation. tries. According to PwC, the corporate tax rate in Greenland is 30% plus a surcharge of 6% (oil and Notes mineral license holders are exempt from the sur- Data for all countries is the latest available charge) which makes the effective tax rate 31.8%. (2015/2016) operational risk assessment acquired There is also no VAT in Greenland. Overall, Russia from the Economist Intelligence Unit. and Egypt have the highest tax policy risk.

GREENLAND BENCHMARKING REPORT 2016 37

BUSINESS ENVIRONMENT ANALYSIS Labour market

2.i. Labour market risk (lower=better)

United States 18 Canada 25 Denmark 25 Finland 25 Japan 25 Sweden 25 Germany 29 Philippines 29 United Kingdom 29 Norway 32 France 36 Italy 36 Greenland 43 Korea, Rep. 46 Russian Federation 46 Iceland 54 Egypt 57 Mexico 57 Turkey 57 Indonesia 61

Explanation and justification Comments Labour market risk evaluates the power of trade Labour market is Greenland's relative weakness as unions, the frequency of labour strikes, the re- its performance in the labour market risk indica- strictions placed by labour laws, the ease of find- tor is only average. There is a lack of highly-skilled ing skilled and specialised labour, the extent to individuals and companies often hire foreign spe- which increases in wages are related to produc- cialists. Nevertheless, Greenland still performs tivity improvements as well as the risk that collec- better than such countries as South Korea, Iceland tive bargaining and freedom of association rights or Turkey. Overall, United States is the best per- will not be respected. former in the indicator while Indonesia – the worst. Notes Data for all countries is the latest available (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit. GREENLAND BENCHMARKING REPORT 2016 38

BUSINESS ENVIRONMENT ANALYSIS Infrastructure

2.j. Infrastructure risk (lower=better)

France 0 Sweden 3 Germany 6 Denmark 9 Iceland 9 Norway 9 Canada 12 United States 12 Finland 16 Japan 16 Korea, Rep. 19 United Kingdom 19 Greenland 38 Italy 38 Russian Federation 41 Turkey 41 Mexico 44 Egypt 47 Indonesia 59 Philippines 59

Explanation and justification Comments Infrastructure risk measures the probability that Infrastructure is another relative weakness of major infrastructure facilities (ports, air transport, Greenland. Due to the country's environmental ground transport, distribution networks, and conditions, the road and railway networks be- communication infrastructure) will be inadequate tween towns are practically non-existent. Air and for business use, the risk of power shortages and water are the main means of transport, and ports the risk of poor IT infrastructure. are well developed. Among the analysed countries, France is the best performer while Indonesia Notes and Philippines have the highest infrastructure Data for all countries is the latest available risk. (2015/2016) operational risk assessment acquired from the Economist Intelligence Unit.

GREENLAND BENCHMARKING REPORT 2016 39

BUSINESS ENVIRONMENT ANALYSIS Overall results

Overall risk (lower=better)

Canada 15 Norway 15 Sweden 15 Finland 16 Denmark 18 Greenland 19 United States 19 United Kingdom 20 Germany 21 Japan 23 France 25 Iceland 25 Korea, Rep. 31 Italy 35 Mexico 44 Philippines 49 Indonesia 50 Turkey 51 Egypt 54 Russian Federation 59

Explanation and justification Comments The overall risk assessment is a simple average of When all ten risk factors are taken into account, all ten risk indicators. Arctic countries are the top performers. Canada, Norway and Sweden have the lowest overall risk, Notes followed by Finland and Denmark. Greenland has Data for all countries is the latest available the sixth lowest overall risk among the analysed (2015/2016) operational risk assessment acquired countries. The most risky countries are Egypt and from the Economist Intelligence Unit. Russia.

GREENLAND BENCHMARKING REPORT 2016 40

3 SPECIAL THEMES

GREENGREENLANDLAND BENCHMARKING REPORT 2016 41

MINING

FISHING

TOURISM

GREENLAND BENCHMARKING REPORT 2016 42

INTRODUCTION Special themes

This chapter describes the three industries of significant importance to the Greenlandic economy: mining, fishing and tourism. Together, these three industries are Greenland’s key sources of income today and are likely to be at least as important in the future.

The mining industry has significant potential as a future growth driver. According to multiple external observers and leading Greenlandic political voices, the mining sector will take on a principal position in Greenland’s future economy. Thus, assessing the drivers, challenges and potential out- comes of such a scenario will help to determine whether the mining industry can realise these expectations.

Fishing is another key industry. Historically, it has played a vital role in the country’s economy, and today it amounts to no less than 90 per cent of Greenland’s exports. Fishing, especially of shrimp, is a major source of income for Greenland’s government through the taxes levied on fisheries. No other industry has a similar impact on the stability and welfare of the Greenlandic society.

Finally, the tourism and experience economy has a great potential in Greenland. The country offers extraordinary nature, wildlife, and a rich indigenous history. As opposed to the mining industry, developing the tourism sector does not to the same extent require large capital investments. In recent years, Greenland has grown popular as a cruise ship destination, and the country is well connected by air services to Copenhagen and Keflavik, which offers one-stop flights to most of the world’s major airports. As the demand for more exotic holiday destinations increases, Greenland could very well become a key tourism destination of tomorrow. GREENLAND BENCHMARBENCHMARKINGKING REPORT 2016 43

MINING SPECIAL THEME

GREENLAND BENCHMARKING REPORT 2016 44

GREENLAND BENCHMARKING REPORT 2016 45

MINING

Greenland’s extractive industry Greenland’s mineral-rich underground offers a wide range of potential business opportunities. The extractive industry has been a part of the island’s economy since the 1850s, with mining of cryolite, lead, olivine, and gold1. Because of the increased global demand for rare earth metals and minerals, Greenland has received a significant attention from international exploration companies and investors. Consequently, Greenland’s extractive industry has the potential to be a great mining jurisdiction and greatly push forward societal development in Greenland, provide economic benefits, and increase wealth. Moreover, the effects of global climate change are a dual sword in Greenland. They challenge the traditional hunting and fisheries as the ice is diminishing and at the same time the diminishing ice allows for more exploration as inaccessible areas of Greenland are opening up for development.

Figure 1. Locations of hydrocarbon and mineral exploration and exploitation licenses in Greenland

Land

Ice

Hydrocarbon exploration and exploitation licenses

Mineral exploration licenses

Mineral exploitation licenses

Applications for licenses

Applications for renewal

Source: nunagis.gl

1 Aarhus University, Institute for Bioscience, Online, 2016 GREENLAND BENCHMARKING REPORT 2016 46

Despite the heightened awareness in the recent decade among the international business community, environmental organisations and policymakers, the extractive industry is responsible for only a modest part of Greenland’s economy today. In 2013, the latest available figures, the industry employed 128 full time workers, or 0.5% of the entire Greenlandic workforce, and total exports amounted only to 3.6 million DKK.2 This figure reflects the global downturn in financial capital in the industry and thus lack of investment in frontier markets such as Greenland. It also does not cover the recent developments in the country with the opening of a ruby and sapphire mine south of Nuuk by True North Gems. As the figure below shows, there is significant potential for mining in Greenland as mines follow cross-border geological formations in the Arctic and there is a lot of activity in neighbouring countries.

Figure 2. Mining and oil activities in the Arctic

Oil and gas production

Largest mining areas

Primary mining areas Source: Nordregio

Potential oil and gas reserves

2 Statistics Greenland GREENLAND BENCHMARKING REPORT 2016 47

Table 1. Key mineral exploration statistics in Greenland 2013 2014 2015 2016

No. of exploration licences (Granted) 76 67 70 61

Exploration Expenses in DKK Millions 305.7 235.8 N/A N/A

No. of prospecting licences (Active) 22 17 17 16

No. of exploitation licences (Granted) 5 6 6 6

Source: Government of Greenland3

Greenland’s underground holds abundant amounts of iron ore, copper, zinc, gold, uranium, light and heavy rare earth elements. The government has in its latest strategy identified five new large- scale mineral resource projects as its target by 2018. Based on global demand and market value, the government has also decided to focus on the development of iron ore, copper and zinc, gemstones, uranium, gold and rare earth element potential. However, little infrastructure exists and the harsh environment makes for challenging and costly operations. As a result, prospectors will encounter the need for large infrastructure investments. Additionally, environmental organisations and research institutions have voiced concerns that Greenland’s fragile environment and wildlife could suffer from increased mining activity. The Greenlandic policymakers seem very aware of the many interests and concerns in the mining industry and have to a certain degree found a careful balance that safeguards and protects the environment, while simultaneously main- taining an attractive investment climate.

Figure 3. Distribution of future rare earth sources outside China as of 2012, % of total

Canada 50%

Greenland 20%

Australia 8%

United States 8%

Other 14%

Source: Statista

Considering how price levels for metals and rare earth minerals developed a decade ago, it is easily understandable that the government saw great potential in the extractive industry. Today, some minerals are still performing well. The figure below also shows price developments of aluminium, copper and zinc that are commercially interesting. Also, while the price of aluminium in

3 Mineral Licence and Safety Authority: List of mineral and petroleum licenses in Greenland GREENLAND BENCHMARKING REPORT 2016 48

real terms (corrected for inflation) has remained rather stable since 2000, the price of zinc saw a large increase in value and the price of almost tripled. However, the development of zinc or copper do not provide a complete picture of today’s mineral prices. The price of iron ore, for example, has dropped from about 154 $/dmt (real 2010$) in 2011 to 91 $/dmt in 2014.4 Rare earth mineral prices have also slumped recently: for example, the price for cerium oxide fell from about 40-45 $/kg in 2011 to around 2 $/kg in 2015, the price for terbium oxide – from 2800 $/kg to about 490 $/kg.5

Figure 4. Price development of selected metals, $/kg (in real 2010$)

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Aluminium Copper Zinc

Source: World Bank

Infrastructure and policy issues The long-term prospects for Greenland’s extractive industry are promising. Policy-wise, Greenland has come a far way by implementing legislation that is both investor-friendly and environmentally responsible. Although much has been done in order to establish a good business climate, when compared to more matured mining countries, the limited infrastructure and natural environment conditions mean that potential investors will encounter large costs before any breaking of rock can commence. According to a report published by Brookings, the extractive industry requires large capital expenditures in order to flourish, and the mining companies will likely need to bear these investments as many of the current prospects in Greenland are far from existing infrastructure.6 The US-based Investment Company Guggenheim Partners have estimated that overall more than 1,000 billion USD is needed in infrastructure investments in the Arctic in the next 15 years. In the case of Greenland, which has several ports, airports and several hydro-power plants, the

4 World Bank data 5 U.S. Geological Survey, Mineral Commodity Summaries, January 2016 6 Boersma, T., & Foley, K. (2014): “The Greenland Gold Rush: Promise and Pitfalls of Greenland’s Energy and Mineral Resources” GREENLAND BENCHMARKING REPORT 2016 49

Brookings report concludes that a lack of power is the main challenge since it is only available in close proximity to the major cities. Lack of port infrastructure, roads, and storage space for machinery are subsequently mentioned as challenges.

The Greenlandic government is proactive towards the extractive industry and the sector is key in diversifying the economy, securing new revenue streams and driving forward other sectors of the economy. The mining sector has stirred up much political debate in Greenland, but a clear majority of the population is still in favour of the industry. It is the government who is the sole authority in Greenland when granting licenses and negotiating Impact Benefit Agreements. Even though local politicians have made ambitious plans for the future of Greenland’s resources, many have voiced concerns over the relatively small government’s ability to keep the multinational mining companies in check. A major concern is the fact that most foreign investors will likely import labour, both in order to mediate any lack of competencies among the Greenlandic workforce, but also to keep costs down.

Environmental concerns Mining activities have an impact on the surrounding environment. According to the University of Aarhus, the breaking and processing of minerals necessarily entails the disturbance of Greenland’s wildlife habitat.7 Transport, deposing of waste rock, sewage discharge, and noise are causes for concern. Especially the deposing of waste rock that may contain active minerals and chemical waste, which can contaminate the environment, requires careful handling.

In recent years, Greenland’s Parliament has implemented modern legislation, which requires mining companies to operate in accordance with proper and secure consideration to the environment. In recognising the harmful effects of mining operations in the past on a global scale, potential projects in Greenland are scrutinised and their potential environmental effects are examined in environmental impact assessment and other requirements stipulated in the Greenlandic Mineral Resources Act. As mines become depleted and operations halt, the mining company is also required to clean up and reconstruct the area of operation, reviving the previous state of environment. Prospectors are also required to use hydropower where possible. However, due to the per- mafrost this is only possible in southern and western Greenland. Recently, the government has lifted its zero tolerance on mining uranium and an agreement with the Danish state on how to regulate exports of uranium has been agreed upon.

Legislation and taxation of the industry The Mineral Resources Act contains a number of important provisions for potential investors in the industry. It describes the regulations on granting prospecting, exploration and exploitation licenses, environmental protection provisions, export and import regulations, rules on the acqui-

7 Aarhus University, Institute for Bioscience, Online, 2016 GREENLAND BENCHMARKING REPORT 2016 50

sition of property, etc. One of the provisions of the act allows a company owned by the government to join activities covered by an existing license. The Large Scale Project Act, which came into force in 2014, allows companies to use foreign labour on international terms for new mining projects with more than 5 billion DKK in capital expenditure, and it also contains other labour-related provisions.8

The standard royalty rate on the sale of minerals is 2.5% of the sale value. The rate for uranium and rare earth elements is 5%; it is 5.5% for gemstones with an additional royalty of 15% if gross profit exceeds 40%.9 In addition to royalty rates, the government has a corporate tax rate of 30% plus a surcharge of 6% (oil and mineral license holders are exempt from the surcharge) which makes the effective tax rate 31.8%. In general, the government take in Greenland is quite competitive.

8 Hojem, P. (Nordic Council of Ministers) (2015): “Mining in the Nordic Countries: A comparative review of legislation and taxation” 9 Ibid. GREENLANDGREENLAND BENCHMARKINGBENCHMARKING REPORTREPORT 20162016 51

FISHING SPECIAL THEME

PHOTOGREENLAND BY AIR BENCHMARKING ZAFARI - MADS PIHLREPORT - VISIT 2016 GREENLAND 52

GREENLAND BENCHMARKING REPORT 2016 53

FISHING

Recent developments in the fishing industry Fishing is one of the key industries in Greenland. In 2014, fishing, hunting & agriculture was the second largest sector of employment after public administration, and it accounted for about 15% of total employment.10 The two largest companies in the fishing industry are Polar Seafood and Royal Greenland. Polar Seafood is the largest privately-owned fishing company and owns two factories in Greenland, while Royal Greenland is 100% government-owned and operates about 20 factories and warehouses in the country. The overall fishing fleet in Greenland is estimated at about 850 vessels and 5,000 smaller boats.11

Figure 5. Main fishing locations in Greenland Arctic char

Arctic char (net fishing)

Greenland Hallibut - adult

Greenland Hallibut - redd

Greenland Hallibut - juvenile

Great scallop

Source: nunagis.gl

10 Statistics Greenland 11 Government of Greenland: “Economy and Industry in Greenland”, Online, 2016 GREENLAND BENCHMARKING REPORT 2016 54

Fish and shellfish exports also account for the majority of Greenland’s total exports: in 2013, fish and shellfish made up more than 90 per cent of the total value of exports.12 Fishing exports were also positively affected by the growing prices of major fish products, as the figure below shows. Shrimps, which account for more than a half of total exports, saw the largest price increase.

Figure 6. Index of average quarterly prices/kg of selected fish products (2010 = 100)

250

200

150

100

0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2012 2013 2014 2015

Cod Halibut Shrimp

Source: Statistics Greenland

Despite the growing shrimp prices, the volumes of shrimps caught have been declining steadily in the recent years due to smaller fishing quotas: Canada, Greenland and the EU are each allocated a share of the total shrimp quota in western Greenland. The total quota in 2014 was 85 thousand tonnes while in 2015 it amounted to 73 thousand.13 Falling shrimp export volumes also present a challenge to public finances, which receive large amounts of income from the shrimp levy. The catches of Atlantic cod, on the other hand, have grown substantially in the last five years and reached the levels of prawns in 2015. Coupled with growing prices, this has led to a rise in the value of cod exports. Volumes of halibut catches have also experienced a small increase, as the graph below demonstrates. The Ministry of Finance also projects that mackerel fishing will expand in the future and lead to growth in the sector. More than 50 thousand tonnes of mackerel were caught in 2013 and more than 78 thousand – in 2014.14 Taxes on mackerel will also contribute positively to government income.

12 Danish National Bank (2014): “Monetary Review, 2nd Quarter, 2014” 13 Greenland Ministry of Finance (2015): “Political and Economic Report 2015” 14 Ibid. GREENLAND BENCHMARKING REPORT 2016 55

Figure 7. Total landings (catch that is brought to land) of fish and shellfish in Greenland, tonnes

60,000

50,000

40,000

30,000

20,000

10,000

- 2010 2011 2012 2013 2014 2015

Atlantic cod Greenland halibut Northern prawn

Source: Statistics Greenland

As the potential for significant growth in the fishing sector is low due to falling shrimp quotas and rising global fish supply from aquaculture, the Economic Council of Greenland views the extraction of raw materials and tourism as the key focus areas for potential future growth.15

Government policy

Fishing is currently the main industry in Greenland and it receives a large degree of attention from the government. The sector is well-regulated: fishing quotas and licenses are assigned based on biological considerations so that natural resources are not depleted. For example, based on advice from the Greenland Institute of Natural Resources, the Northwest Atlantic Fisheries Organization, the North East Atlantic Fisheries Commission and ICES, Total Allowable Catch (TAC) is set for Greenlandic waters by the government.16 International agreements dictate that shrimp quotas are shared among Greenland, Canada and the EU. Sharing of quotas with Canada was a requirement of MSC certification for Greenland’s shrimp fishery in 2013, while quota allocation to the EU is a result of the Fishery Partnership Agreement.17

Greenland’s government aims to create a framework for the industry that would guarantee employment and provide a steady source of income for both fish exporters and the government itself. One of the government’s initiatives is to survey the areas where fish is not currently caught with a particular focus on mackerel fishing. The allocation of new quotas must take into account both existing industry players and potential entrants. The government also wants to introduce

15 Greenland Economic Council (2014): “The Economy of Greenland 2014” 16 Government of Greenland: “Economy and Industry in Greenland”, Online, 2016 17 Greenland Ministry of Finance (2015): “Political and Economic Report 2015” GREENLAND BENCHMARKING REPORT 2016 56

legislation that would demand fishing license holders to undertake activities that benefit local communities, similarly to the Impact Benefit Agreements (IBAs) in the mineral resources sector. This would focus on securing local jobs, building local expertise and undertaking experimental fishery.18

In addition to the above policies, the government also plans to update the current fisheries tax system. Until 2016, only the production of halibut, mackerel and shrimps for direct export was taxed. From 2016, pelagic fishery is also going to be taxed and the plan is to have a tax on all fish species in 2017.

18 Greenland Ministry of Finance (2015): “Political and Economic Report 2015” GREENLAND BENCHMARKING REPORT 2016 57

TOURISM SPECIAL THEME

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GREENLAND BENCHMARKING REPORT 2016 59

TOURISM

Great potential for the experience economy

Voted in as a top-ten travel destination for 2016 by Lonely Planet19, Greenland holds plenty of potential as a holiday destination. According to the popular travel guide, Greenland offers an alternative to the typical hectic and crowded holiday destinations. With its magnificent glaciers, icebergs, and wide-open tundra, Greenland is unlike anything else.

Greenland is only a four-hour flight from Copenhagen, which together with recently added seasonal flights to Iceland makes for one-stop connections to the world’s major airports. However, as operators are still limited and travellers few in numbers, flights are relatively expensive.20 To some extent, Greenland is still regarded as an exclusive holiday destination that caters to travellers seeking an extraordinary experience. The country has much to offer in terms of adventure. Visitors can enjoy hiking, sailing trips, sightseeing, heli-skiing, and riding dog sledges. In addition, cities like Ilulissat have surprisingly much to offer in terms of fine dining and nightlife. However, tourists uninterested in the wilderness’ adventures will also find that Greenland has something for them. Leisure guests visit to experience the spectacular fjords and icy landscape. In light of the increased focus on climate change, Greenland has experienced more cruise ship visitors, wishing to see icebergs, northern lights and whales from the seaside. Tourists looking to relax will also take a liking to Greenland’s hot springs in the southern part of the country.

Greenland also offers a rich history and strong cultural heritage. With more than 4,500 years of history to showcase, visitors can experience traditional Norse and Greenlandic life from its past to present-day society. Many of Greenland’s larger cities are home to museums documenting the many aspects of the rich civilisation.

Recent developments in the tourism industry

After experiencing stable growth in 2000-2008, the tourism industry in Greenland has gone through a period of falling activity in recent years, but the data for 2015 shows that activity is starting to pick up again. In 2010, the number of cruise passengers reached its highest point of more than 30,000 people, but has since fallen back to 20,000. Tourism activity started to pick up in 2015 and the number of cruise passengers grew to 22,000. A similar trend can be observed in the number of international airline passengers. After reaching a maximum of 76,000 in 2008, the number fell to 69,000 in 2013, but it almost recovered back to its maximum value in 2015. The only indicator that experienced a fall in 2015 was the number of overnight stays in hotels, which fell to approximately its level in 2010 (see the figure below).

19 Lonely Planet, Online, 2016 20 Information, Online, 2013 GREENLAND BENCHMARKING REPORT 2016 60

Figure 8. Number of overnight stays in hotels, international airline passengers and cruise passengers in Greenland

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Overnight stays International air passengers Cruise passengers

Source: Statistics Greenland

Government policy

One of the problems with tourism in Greenland is that it is associated with high expenses. As part of an effort to reduce the costs for tourists, the cruise passenger tax (which is payable by cruise operators) was discontinued in June 2015. The government was also preparing a new tourism strategy in 2015 to promote growth in the sector. Among the planned initiatives is the development of runways that will allow larger aircrafts to land in various regions of the country, investments into quayside facilities to improve conditions for cruise passengers as well as establishing regional visitor centres.21

21 Greenland Ministry of Finance (2015): “Political and Economic Report 2015” GREENLAND BENCHMARKING REPORT 2016 61

APPENDICES

GREENLAND BENCHMARKING REPORT 2016 62

DESCRIPTION OF TERMS

Arctic countries are the nations that have territories in the Arctic region. The countries are: Canada, Denmark (Greenland and The Faroe Islands), Finland, Iceland, Norway, Sweden, Russia, and United States.

DI is an acronym for The Confederation of Danish Industry. It is a trade organisation and an employers' association, which acts to ensure that the Danish business community has the opti- mum basis for competing, developing and manufacturing in Denmark and internationally.

G8 is the group of the world’s eight major economies: Canada, France, Germany, Italy, Japan, Russia, United Kingdom and United States, as well as the European Union.

GREENLAND BENCHMARKING REPORT 2016 63

METHODOLOGY

Macroeconomic Analysis

Choice of data and sources Macroeconomic data presented in the report was selected to provide a detailed overall picture of the countries’ economic and demographic conditions. The data comes from internationally recognized sources, mostly the World Bank and International Monetary Fund; it is internationally comparable; and it is based on the latest available data (2013 or 2014 for most of the countries; when these values are not available, the last known value is used). All the data sources and the full list of indicators are provided in the end of this report.

Structure of the analysis Individual macroeconomic indicators are grouped together into 9 categories based on what they measure. The categories are shown in the scheme below.

GDP AND GDP GROWTH

DIVERSIFICA- EMPLOYMENT TION OF ECONOMY

DEMO- INVESTMENT GRAPHICS MACRO- ECONOMIC INDICATORS

PRICE LEVEL INTERNATIONAL TRADE

CAPITAL GOVERNMENT MARKETS FINANCE

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No aggregate scores are computed for the categories: each macroeconomic indicator is presented separately. Values presented for the indicators are original values from the initial data sources.

Calculation of averages For two of the macroeconomic indicators (GDP growth and Population growth), average annual % growth in the last 3 years is used instead of the data for one year only in order to better reflect recent trends. A simple average is calculated using the arithmetic mean formula: 3 1 Average value = ∑ 푉 3 푖 푖=1 where: i = the year of the data value (1 to 3),

Vi = data value for year i.

Business Environment Analysis

Choice of data and sources Similarly to macroeconomic data, the data for the Business Environment Analysis comes from an internationally recognized source – The Economist Intelligence Unit (EIU). The data used is the latest available information from the EIU Risk Briefing. The full list of indicators is provided in the end of this report.

Structure of the analysis EIU’s risk ratings evaluate the risk to business profitability from 10 separate risk criteria based on current conditions and expectations for the next two years. EIU assigns each country a score from 0 (very little risk) to 100 (very high risk). Values presented for the indicators in this report are original EIU values. The overall risk assessment is a simple average of the countries’ scores in each of the indicators.

GREENLAND BENCHMARKING REPORT 2016 65

LIST OF MACROECONOMIC INDICATORS

GDP and GDP Growth 1.a. Real GDP growth (average annual % growth Gross Domestic Product (GDP) is one of the main in 2012-2014) economic indicators. It measures the total value of goods and services produced in a country over a certain period of time. Real GDP growth is an indicator of economic growth calculated at constant prices (eliminating the effect of price changes in the country). In order to better reflect the recent economic trends, average annual percentage growth of Real GDP in the last three years is used instead of analysing one year only. Page 6 Data sources: World Bank, Statistics Greenland

1.b. GDP per capita, PPP (current international GDP per capita based on purchasing power parity $, thousands) (PPP) is defined by the World Bank as "gross domestic product converted to international dollars using purchasing power parity rates. An international dollar has the same purchasing power over GDP as the U.S. dollar has in the United States". When converted using PPP, GDP per capita is the total value of goods and services produced in a country divided by the country's population, measured in international dollars so that differences in the purchasing power of currencies are eliminated. This allows for an easy comparison of the level of economic development of countries. Page 7 Data sources: World Bank, Statistics Greenland

Diversification of Economy 1.c. Composition of GDP by sector (% of GDP) Composition of GDP by sector shows the proportion of value added in agriculture, industry and service sectors of the economy. It provides an overview of the structure of the economy and the level of its diversification. Page 8 Data sources: World Bank, Statistics Greenland

1.d. Total natural resources rents (% of GDP) Total natural resources rents include oil, natural gas, coal, mineral, and forest rents. Rents are the difference between price and average cost of pro- ducing (extracting) a commodity. Rents as % of GDP are an indicator of the reliance of economic development on natural resource production. Page 9 Data sources: World Bank

GREENLAND BENCHMARKING REPORT 2016 66

Investment 1.e. Gross fixed capital formation (% of GDP) Gross fixed capital formation is one of the components of GDP calculation using the expenditure approach. It measures the value of investments made in the economy (acquisition of plants, equipment, construction of infrastructure, etc.). This is an indicator of the contribution of investments to total GDP. Page 10 Data sources: World Bank, Statistics Greenland

1.f. Foreign direct investment, net inflows (BoP, Foreign direct investment (FDI) data provided by current US$, millions) the World Bank are "the net inflows of investment to acquire a lasting management interest (10 per- cent or more of voting stock) in an enterprise op- erating in an economy other than that of the investor". Net inflows are new investments less disinvestment, expressed in current U.S. dollars. This indicator shows how attractive the country is to foreign investors due to its openness, quality of workforce, economic and business conditions, etc. Page 11 Data sources: World Bank

International Trade 1.g. Exports of goods and services (% of GDP) Exports of goods and services measure the value of goods and services provided to other countries. Ex- ports are one of the components of GDP calculation using the expenditure approach. When measured as % of GDP, it indicates the contribution of exports to total value of goods and services produced and sold in a country. Share of exports in GDP is also an indicator of the competitiveness of locally produced products and services abroad. Page 12 Data sources: World Bank, Statistics Greenland

1.h. Imports of goods and services (% of GDP) Imports of goods and services measure the value of goods and services received from other countries. Imports are subtracted from GDP when calcu- lating it using the expenditure approach. Imports as % of GDP is an indicator of the reliance of the economy on foreign-produced goods and services. Page 13 Data sources: World Bank, Statistics Greenland

Government Finance 1.i. General government gross debt (% of GDP) General government gross debt includes all liabili- ties of the government that require payment. Gov- ernment debt as % of GDP is an indicator of government's indebtedness, financial stability and solvency. Page 14 Data sources: IMF, Danish National Bank

GREENLAND BENCHMARKING REPORT 2016 67

1.j. General government net lending (+)/bor- Net lending/borrowing is a measure of govern- rowing (-), % of GDP ment's fiscal balance, calculated as total government revenue minus total expenditure. Deficits have to be financed either by using existing reserves or by undertaking additional borrowing. This is thus an indicator of government's financial stability. Page 15 Data sources: IMF, Statistics Greenland

1.k. Long term sovereign debt rating Sovereign debt is used as a mechanism of funding by governments. Moody's assessment of sovereign debt risk is based on four factors: economic strength, institutional strength, fiscal strength, and susceptibility to event risk. Sovereign debt ratings are relative rankings of credit risk which act as indicators of a country's default probability and expected losses in the case of default. Page 16 Data sources: Moody’s

Capital Markets 1.l. Domestic credit to private sector (% of GDP) Domestic credit to private sector as measured by the World Bank is the amount of credit resources provided to the private sector by financial corpora- tions. On one hand, it shows the availability of credit in the economy which is needed for the ex- pansion of business services or other projects. On the other hand, it is an indicator of the level of indebtedness of the private sector. Page 17 Data sources: World Bank

1.m. Market capitalization of listed companies Market capitalization is the market value of com- (% of GDP) panies (share price times the number of shares outstanding). Listed companies are the companies listed on the country's stock exchanges. This indicator shows the level of development of the country's financial markets which is also related to the overall economic development because access to equity finance is an important growth factor for companies. Page 18 Data sources: World Bank

Price Level 1.n. Inflation, consumer prices (annual %) Consumer price inflation measures the change in the cost of acquiring a specified basket of goods and services. This is an indicator of price stability. Low positive values of inflation are generally pre- ferred. Page 19 Data sources: World Bank, Statistics Greenland

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Demographics 1.o. Population growth (average annual % Population growth is one of the main demographic growth in 2012-2014) indicators. It shows how fast the country's population is expanding/declining. In order to better reflect recent trends, average annual percentage growth of population in the last three years is used instead of analysing one year only. Page 20 Data sources: World Bank

1.p. Population ages 15-64 (% of total) Population ages 15-64 as % of total population is an indicator of the percentage share of working age population which can potentially contribute to the economic development of the country. The larger the working age population is, the lower is the share of population below age 15 and above age 64 that has to rely on the support of others for their survival. Page 21 Data sources: World Bank, Statistics Greenland

Employment 1.q. Unemployment, total (% of total labour Total unemployment, as defined by the Interna- force) (modeled ILO estimate) tional Labour Organization (ILO), is the share of the labour force which is without work but seeking employment. This is an indicator of economic activity in the country. High unemployment shows that there is a misbalance between demand for and supply of labour. Page 22 Data sources: World Bank, Statistics Greenland

1.r. Unemployment, youth total (% of total la- Youth unemployment, as defined by the Interna- bour force ages 15-24) (modeled ILO estimate) tional Labour Organization (ILO), is the share of the labour force ages 15-24 which is without work but seeking employment. High youth unemployment is an indicator of the inability of the labour market to accommodate less experienced workers. Unem- ployed youth cannot contribute to economic growth. High youth unemployment can also result in less innovation and may lead to a loss of competitive advantages of a country. Page 23 Data sources: World Bank, Statistics Greenland

1.s. Labour force participation rate, total (% of Labour force participation rate is defined by ILO as total population ages 15+) (modeled ILO esti- the share of the population ages 15 and older that mate) is economically active, that is all people who supply labour for the production of goods and services. Similarly to unemployment, this is an indicator of economic activity. Page 24 Data sources: World Bank, Statistics Greenland

GREENLAND BENCHMARKING REPORT 2016 69

1.t. Labour force participation rate, female (% of Total labour force participation rate usually does female population ages 15+) (modeled ILO esti- not reflect the major differences in participation mate) rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore important to analyse gender differences in employment. Page 25 Data sources: World Bank, Statistics Greenland

1.u. Labour force participation rate, male (% of Total labour force participation rate usually does male population ages 15+) (modeled ILO esti- not reflect the major differences in participation mate) rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore important to analyse gender differences in employment. Page 26 Data sources: World Bank, Statistics Greenland

GREENLAND BENCHMARKING REPORT 2016 70

LIST OF BUSINESS ENVIRONMENT INDICATORS

Business Environment Indicators 2.a. Security risk Security risk evaluates the safety of the physical environment. It takes into account such issues as the presence of armed conflicts, violent demonstra- tions, civil unrest, hostility to foreigners or private ownership, organised crime, etc. Page 29 Data sources: Economist Intelligence Unit

2.b. Political stability risk Political stability risk measures the ability of political institutions to continually support the needs of businesses. It reflects the risk of social unrest, the mechanisms of transfer of power from one government to another, the probability that opposition will gain power and bring about a worsening of business conditions, the level of concentration of excessive power as well as the probability that international tensions will have a negative effect on the economy or policy. Page 30 Data sources: Economist Intelligence Unit

2.c. Government effectiveness risk Government effectiveness risk takes into account the likelihood that the government will implement policies that support businesses; the level of bureaucracy; competences, morale and compensation of officials; the degree of vested interests; the level of corruption; accountability of officials and the probability that the country can be accused of human rights violations. Page 31 Data sources: Economist Intelligence Unit

2.d. Legal & regulatory risk Legal & regulatory risk evaluates the degree to which the legal process can serve certain interests, the risk that contracts are not enforced, the efficiency of the judicial process, favouritism of domestic over foreign companies, the risk of foreign assets expropriation, the government's stance on promoting competition, the level of intellectual property and private property protection, the risk of unreliable financial statements as well as the probability that price controls will be introduced. Page 32 Data sources: Economist Intelligence Unit

2.e. Macroeconomic risk Macroeconomic risk takes into account exchange rate volatility, the risk of recession and price instability in the next two years, the ratio of domestic public debt to M2 (a measure of money supply) as well as the risk of interest rate volatility. Page 33 Data sources: Economist Intelligence Unit GREENLAND BENCHMARKING REPORT 2016 71

2.f. Foreign trade & payments risk Foreign trade & payments risk measures the probability that the country will be subject to a trade embargo, the risk that access to foreign exchange will be restricted, the possibility of the introduction of discriminatory tariffs and other tariff and non- tariff measures, the ease of moving money out of the country as well as the risk of capital controls. Page 34 Data sources: Economist Intelligence Unit

2.g. Financial risk Financial risk takes into account the risk of a major currency devaluation, the availability of financing in the local financial market, the existence of a liquid local bond market in freely-traded debt, the risk of a systemic financial crisis as well as the liquidity of the local stock market. Page 35 Data sources: Economist Intelligence Unit

2.h. Tax policy risk Tax policy risk measures the clarity and predictabil- ity of the tax regime, the risk of discriminatory taxes, the level of corporate tax rates and the risk of retroactive taxation. Page 36 Data sources: Economist Intelligence Unit

2.i. Labour market risk Labour market risk evaluates the power of trade unions, the frequency of labour strikes, the restrictions placed by labour laws, the ease of finding skilled and specialised labour, the extent to which increases in wages are related to productivity improvements as well as the risk that collective bargaining and freedom of association rights will not be respected. Page 37 Data sources: Economist Intelligence Unit

2.j. Infrastructure risk Infrastructure risk measures the probability that major infrastructure facilities (ports, air transport, ground transport, distribution networks, communication infrastructure) will be inadequate for business use, the risk of power shortages and the risk of poor IT infrastructure. Page 38 Data sources: Economist Intelligence Unit

Overall risk The overall risk assessment is a simple average of all ten risk indicators. Page 39 Data sources: Economist Intelligence Unit

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DESCRIPTION OF SOURCES

http://bios.au.dk/vi- Aarhus University’s Institute for Bioscience provides an overview denudveksling/til-myndigheder-og- of Greenland’s mineral sector. saerligt-interesserede/greenland/minedrift-og-miljoe/ http://www.brookings.edu/~/me- dia/research/files/re- Boersma, T., & Foley, K. (2014): “The Greenland Gold Rush: ports/2014/09/24-greenland-en- Promise and Pitfalls of Greenland’s Energy and Mineral Re- ergy-mineral-resources-boersma- sources” provides details about the development of Greenland’s foley/24-greenland-energy-min- mining sector. eral-resources-boersma-foley-pdf- 2.pdf www.nationalbanken.dk/en/publi- Danish National Bank’s “Monetary Review, 2nd Quarter, 2014” cations/Documents/2014/06/Cur- contains an analysis of current trends in the Greenlandic economy. rent%20Trends%20in%20the%20Gr eenlandic%20Economy.pdf Economist Intelligence Unit’s Risk Briefing evaluates the risk to http://viewswire.eiu.com/in- business profitability in 180 countries from 10 separate risk criteria dex.asp?layout=RKAllCountryVW3 based on current conditions and expectations for the next two years. http://naalakkersuisut.gl/en/About- Government of Greenland’s webpage “Economy and Industry in government-of-greenland/About- Greenland” provides an overview of economic activities in Green- Greenland/Economy-and-Industry- land. in-Greenland Government of Greenland’s Mineral Licence and Safety Author- https://www.govmin.gl/im- ity provides a list of mineral and petroleum licences in Greenland. ages/list_of_licences__20160216.pdf http://naalakkersuisut.gl/~/me- Greenland Economic Council’s report “The Economy of Green- dia/Nanoq/Files/Attached%20Files/ land 2014” provides an overview of the country’s economic climate Finans/DK/Oekonomisk%20raad/ and current economic policy. %C3%98konomisk%20R%C3% A5d%202014_ENG.pdf http://naalakkersuisut.gl/~/me- Greenland Ministry’s of Finance “Political and Economic Report dia/Nanoq/Files/Attached%20Files/ 2015” analyses the development of the country’s economy and de- Finans/ENG/POB_materie_2015_ tails the government’s policies and reforms. ENG_FINAL.pdf Hojem, P. (Nordic Council of Ministers) (2015): “Mining in the http://norden.diva-por- Nordic Countries: A comparative review of legislation and taxa- tal.org/smash/get/diva2:842595/FU tion” reviews legislation and taxation of the mining industry in Nor- LLTEXT01.pdf dic countries. Information’s ”Den grønlandske turisme har plads til forbed- ring” is an article that investigates the challenges and opportunities http://www.information.dk/468139 faced by the Greenlandic tourism industry. International Monetary Fund’s (IMF) World Economic Outlook www.imf.org/external/ns/cs.aspx?id (WEO) database contains macroeconomic data, IMF staff's analysis =28 and forecasts for the majority of the world’s countries. GREENLAND BENCHMARKING REPORT 2016 73

Lonely Planet’s “Best in Travel 2016” is a top 10 list of holiday des- http://www.lonelyplanet.com/best- tinations to visit for 2016 and why. in-travel/countries/9 Moody’s is a corporation which provides credit ratings and research covering debt instruments and securities, as well as tools for credit www.moodys.com and economic analysis and financial risk management. Nordic Centre for Spatial Development (NORDREGIO) is a leading Nordic research institute focusing on regional development and ur- http://www.nordregio.se/ ban planning. Nordic Consulting Group’s “Integrity Study of The Public Sector http://transparency.gl/wp-con- in Greenland, 2012” provides an analysis of transparency, account- tent/uploads/Integrity-public-sec- ability and integrity in Greenland’s society. The study was commis- torGreenland.doc sioned by Transparency International Greenland. NunaGIS provides digital maps of Greenland. http://nunagis.gl/en/ www.pwc.com/gx/en/tax/corpo- PwC’s report “Worldwide Tax Summaries: Corporate Taxes rate-tax/worldwide-tax-summar- 2015/16” contains information about corporate tax systems in 155 ies/assets/pwc-worldwide-tax-sum- countries. maries-corporate-2015-16.pdf Statista is one of the world’s largest statistics databases. www.statista.com Statistics Greenland is the national statistical office of Greenland. www.stat.gl/default.asp?lang=en http://minerals.usgs.gov/miner- U.S. Geological Survey, Mineral Commodity Summaries, January als/pubs/commod- 2016 provides an overview of the rare earth metal markets. ity/rare_earths/mcs-2016-raree.pdf US State Department’s “Investment Climate Statement 2014” provides information about the economy of Greenland, its business http://greenland.usvpp.gov/vi- and investment laws, taxes, labour market, and other business infor- sas3.html mation. World Bank’s World Development Indicators (WDI) is a collection of internationally-comparable global development data compiled by http://data.worldbank.org/prod- the World Bank – an international bank focused on fighting poverty ucts/wdi and promoting economic growth by providing financial and technical assistance to countries.

GREENLAND BENCHMARKING REPORT 2016 74

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