2013 Investment Climate Statement
Bureau of Economic and Business Affairs
April 2013
Report

Denmark is characterized by political, economic and regulatory stability. It is a member of the European Union (EU), and Danish legislation and regulations conform to EU standards on almost all issues. Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro. Denmark is a social welfare state with a thoroughly modern market economy reliant on free trade in both goods and services. It is a net exporter of food and energy, but depends on raw material imports for its manufacturing sector. Within the EU, Denmark is among the strongest supporters of liberal trade policy. Denmark is still suffering from the after-effects of the 2008 financial crisis from over-investment in commercial and private real estate and agriculture, and from personal over-leveraging by Danish consumers. GDP contracted by 5.7% in 2009, and expanded by 1.6% in 2010 and 1.1% in 2011. Danish GDP has contracted in four of the last eight quarters (up to Q3 2012) and has yet to return to pre-crisis levels. GDP is estimated to contract by -0.4% in 2012 and return to growth with 1.2% in 2013 and 1.6% in 2014, according to the government’s December 2012 estimates. Unemployment is forecast to increase slightly in the first half of 2013 from its current level of 6.4% and to improve somewhat in the second half. The underlying macroeconomic conditions are relatively sound, and the investment climate is favorable. Denmark is situated strategically, linking continental Europe with the Nordic and Baltic countries. The transport and communications infrastructures are efficient. Denmark is among the world's leaders in industries such as information technology, life sciences, clean energy technologies, and shipping. Exchange rate conversions throughout this document are based on the 2012 average exchange Danish Kroner (DKK) 5.797= 1 USD.

Openness To, and Restrictions Upon, Foreign Investment

Denmark is a small country with an open economy. Denmark is highly dependent on foreign trade, with exports being the largest component of GDP, and international cooperation. Danish trade and investment policies are liberal and encourage foreign investment.

In general, investment policies are forward-looking and aimed at fostering and developing businesses, especially in high-growth sectors. A 2012 business environment survey from the Economist Intelligence Unit (EIU) for the period 2012–2016 ranked Denmark eighth globally and third regionally as the most attractive nation for foreign investment. The EIU characterizes Denmark's business environment as among the most attractive in the world, reflecting a sound macroeconomic framework, excellent infrastructure and a highly flexible labor market. Main concerns relate to the ability to deal with a shrinking labor supply and the prospects for macroeconomic instability, stemming from possible contagion from the Euro Area's sovereign debt crisis. Several factors are included in the survey, and Denmark scores top marks in various categories such as the political and institutional environment, macroeconomic stability, policy towards private enterprise, foreign investment policy, financing and infrastructure. The EIU Global Dynamism Index 2012 (GDI) ranks the Nordics as the most dynamic region in the world. As of October 2012, the EIU rates Denmark as an A country on its Country Risk Service with a stable outlook, with sovereign risk at AA and political risk at AAA. Denmark ranked twelfth on the Global Competitiveness Report 2012-2013 from the World Economic Forum, fifth on the World Bank’s Doing Business 2012 ranking, and third on the EIU Democracy Index 2011.

According to the Danish central bank, the total stock of foreign direct investment into Denmark in 2011 was DKK 767.6 billion (current prices, exclusive of pass-through investments; equivalent to approximately USD132 billion), corresponding to 43% of GDP. U.S. investments of DKK 56.5 billion (USD 9.7 billion) in Denmark accounted for 7.4% of total FDI stock in 2011. The United States is the fourth largest foreign investor in Denmark, surpassed by Sweden (DKK 185.2 billion) Luxembourg (DKK 85 billion) and the Netherlands (DKK 81.7 billion).

The government agency "Invest in Denmark" is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is www.investindk.com. The Greenland Government's trade promotion agency, Greenland Expo, also has information for potential investors in Greenland. The website for the agency is www.greenlandexpo.com. “Invest in the Faroes” is the unit in the Faroese government concerned with promoting Faroese trade; the website is www.invest.fo/

The Danish central and regional governments encourage foreign investment on a national-treatment basis. There is no mandatory screening of foreign investment. From 2010 onwards there has been an increased focus on the tax compliance of multinationals as part of the national political debate. The government allocated funds in the 2012 national budget for intensified supervision and enforcement of taxation for multinationals, to ensure their compliance with the Danish tax regime. In December 2012 corporate tax records of all companies operating in Denmark were made public. The records will be updated annually.

According to the Danish Competition Act, the Competition Authorities require notification of mergers and takeovers if the combined turnover of the participating companies exceeds DKK 50 million (approx. USD 8.6 million). However, notification is not required if one of the participating companies has turnover of less than DKK 10 million (approx. USD 1.8 million). If the combined turnover of the merging companies exceed DKK 900 million (approx. USD 155 million) and at least two of the merging companies each have turnover exceeding DKK 100 million (approx. USD 17.3 million) or if one of the merging companies has domestic annual turnover exceeding DKK 3.8 billion (approx. USD 655 million) and at least one of the merging companies has global annual turnover exceeding DKK 3.8 billion (approx USD 655 million), the merger or takeover is subject to approval by the Competition Authorities. The EU Commission’s approval must also be obtained for large scale mergers.

There are certain restrictions on the acquisition of real estate in Denmark by foreigners. EU citizens and companies from EU member states can purchase any type of real estate except vacation properties without prior authorization from the authorities. Companies and individuals from non-EU countries that have been present/resident in Denmark for at least five years in total and are currently resident in Denmark can also purchase real estate except vacation properties without prior authorization. Non-EU companies or individuals that do not meet these requirements can only purchase real estate with the permission of the Danish Ministry of Justice. Permission is freely given to people with a Danish residency permit, except with regard to purchases of vacation properties. Purchases of designated vacation properties are restricted to citizens of Denmark. See section regarding limits on foreign ownership and control in certain sectors for further information.

Ranking in Indices:

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Index/Ranking

TI Corruption Index

2012

Score 90 - Rank 1st (2nd in 2011)

Heritage Economic Freedom

2012

Score 76.2 - Rank 11th (8th in 2011)

World Bank Doing Business

2013

Rank 5th – unchanged

IMD - The World Competitiveness Scoreboard

2012

Rank 13th (12th in 2011)

World Economic Forum - Global Competitiveness Report

2012 - 2013

Rank 12th (8th in 2011 – 2012)

EIU Democracy Index

2011

Rank 3rd

Goldman Sachs – Mapping the Wealth of Nations

2012

Rank 1st

Denmark is a major international development assistance donor, contributing DKK 15.73 billion (USD 2.7 billion) or 0.85 of GDI to development assistance in 2011. The Millennium Challenge Corporation (MCC) and the Ministry of Foreign Affairs signed a Memorandum of Understanding in 2008 to increase cooperation.

Conversion and Transfer Policies

Denmark has not introduced the Euro currency. Although it previously met the EU's economic criteria for membership, the government's response to the global economic crisis has pushed the annual budget deficit past the EU’s allowed threshold of 3% of GDP in 2012; it is projected to return below that level in 2013. The Danish reservation concerning Euro participation can only be abolished by referendum, and Danish voters twice (in 1992 and 2000) turned down the introduction of the Euro via national referendum. The government has stated it will not hold another referendum on the Euro before the next national election (slated for 2015). Regular polling on this issue shows an increasing majority of public opinion in favor of keeping the Krone – 69.8% against joining the Euro versus 28% in favor, according to a December 2012 Danske Bank poll.

Denmark conducts a fixed exchange rate policy with the Danish Krone linked closely to the Euro within the framework of ERM II. The Danish Krone (DKK; plural: Kroner) has a fluctuation band of +/- 2.25% of the central rate of DKK 746.038 per 100 Euro.

There are no restrictions on converting or transferring funds associated with an investment into or out of Denmark. Policies in place are intended to facilitate the free flow of capital and to support the flow of resources in the product and services markets.

Foreign investors can obtain credit in the local market at normal market terms, and a wide range of credit instruments is available.

Expropriation and Compensation

By law, private property can only be expropriated for public purposes, in a non-discriminatory manner, with reasonable compensation, and in accordance with established principles of international law. There have been no recent expropriations of significance in Denmark and there is no reason to expect significant expropriations in the near future.

Dispute Settlement

There have been no major disputes over investment in Denmark in recent years. The judicial system is extremely well-regarded and considered fair. The legal system is independent of the legislative branch of the government and is based on a centuries-old legal tradition. It includes written and consistently applied commercial and bankruptcy laws, and secured interests in property are recognized and enforced. The World Economic Forum's 2012-2013 Global Competitiveness Report, which ranks Denmark as the world's twelfth most competitive economy and eighth among the EU27, characterizes it as having among the best-functioning and most transparent institutions in the world. In addition, Denmark ranks high among the evaluated countries on indices related to ethical behavior of firms (ranked 4), irregular payments and bribes (ranked 4), judicial independence (ranked 13), intellectual property protection (ranked 21), and efficiency of legal framework in settling disputes (ranked 13).

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors' claims against a bankruptcy in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims.

Denmark is a member of the International Center for the Settlement of Investment Disputes (ICSID) and is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Subsequent Danish legislation makes international arbitration of investment disputes binding in Denmark. In addition, Denmark is a party to the 1961 European Convention on International Commercial Arbitration and to the 1962 agreement relating to the application of this Convention.

Performance Requirements and Incentives

Denmark adheres to the WTO Agreement on Trade-related Investment Measures (TRIMs). Performance requirements are applied only in connection with investment in hydrocarbon exploration, where concession terms normally require a fixed work program, including seismic surveys, and in some cases exploratory drilling, consistent with applicable EU directives. Performance requirements are mostly designed to protect the environment, mainly through encouraging reduced use of energy and water. Several environmental and energy requirements are systematically imposed on households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. However, there are certain reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding Danish competitiveness.

Performance incentives are available to both foreign and domestic investors. For instance, foreign and domestic investors in designated regional development areas may take advantage of certain grants and access to preferential financing. Investments in Greenland may be eligible for incentives as well.

Denmark does not offer favored treatment to foreign investors. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Right to Private Ownership and Establishment

A foreign or domestic private entity may freely establish, own, and dispose of a business enterprise in Denmark. The capital requirement for establishing a corporation (A/S) is DKK 500,000 (approx. USD 86,250) and for establishing a private limited liability company (ApS) DKK 80,000 (approx. USD 13,800). No requirements apply as to the residency of directors and managers of A/S or ApS.

Since October 2004, a private entity may found a European public limited company (SE company). The legal framework of the SE company is to a large degree subject to national company law, but it is possible to change the nationality of the company without liquidation and re-founding. An SE company must be registered at the Danish Business Authority if the official address of the company is in Denmark. The minimum capital requirement is 120,000 Euros (approx. USD 156,000).

Like most other countries, Denmark imposes restrictions on establishing companies providing professional services (e.g., legal, accounting, auditing, and medical services). Danish professional certification and/or local Danish experience is required to practice in Denmark. In some instances, Denmark may accept an equivalent professional certification from other EU or Nordic countries on a reciprocal basis.

Establishment of new, large department stores outside city centers is on a non-discriminatory economic needs-test basis and must be approved by the local authorities. The maximum size of a store may not exceed 3,500 square meters without explicit permission.

Ownership restrictions are applied in the following sectors:

- Hydrocarbon exploration: Requires 20% Danish government participation, but on a "non-carried interest" basis.

- Defense materials: The law governing foreign ownership of defense companies (L538 of May 26, 2010) stipulates that the Minister of Justice has to approve foreign ownership of more than 40% of the equity or more than 20% of the voting rights, or if foreign interests gain a controlling interest in a defense company doing business in Denmark. The approval will be granted unless there are foreign policy considerations or security issues weighing against approval.

- Aircraft: Unless a waiver is granted, non-EU physical and legal persons may not directly own or exercise control over aircraft registered in Denmark.

- Ships registered in the Danish International Ships Register (DIS) must, as a general rule, be Danish-owned. Ships owned by Danish citizens, Danish partnerships or Danish limited liability companies are eligible for registration. Ships owned by EU or European Economic Area (EEA) entities with a genuine link to Denmark are eligible for registration. Also, foreign companies with a major Danish influence can register a ship in the DIS.

Protection of Property Rights

Property rights in Denmark are well protected by law and in practice. Intellectual property protections in Denmark are particularly well-regarded. Denmark adheres to key international conventions and treaties concerning protection of property rights. Denmark has ratified the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The WIPO (World Intellectual Property Organization) internet treaties, the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), have been signed, ratified, and are in force.

Real estate is for the most part financed through the well-established Danish mortgage bond credit system, the security of which compares to that of government bonds. To comply with the covered bond definition in the EU Capital Requirements Directive (CRD), the Danish mortgage banking regulation was amended effective July 1, 2007. The new Basel III framework for capital requirements (particularly CRD IV) may present a challenge to the Danish mortgage bond credit system, though final regulation is not in place yet.

With the amended Danish mortgage banking regulation, commercial banks now have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are able to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests.

Transparency of the Regulatory System

Danish laws and policies granting national treatment to foreign investments are designed to support the Danish goal of increasing FDI in Denmark. Denmark applies high standards with regard to health, environment, safety, and labor laws. These policies are universally applied and are not used to impede foreign investment. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory and accounting systems are relatively transparent and in accordance with international standards. Bureaucratic procedures are streamlined and transparent, and proposed laws and regulations are published in draft form for public comment.

In June 2007, the Danish Parliament enacted a major bill on Controlled Foreign Company (CFC) taxation and private equity funds. The bill reduced the corporate tax rate from 28% to 25%. The bill also limited tax speculation for private equity funds. Additionally, the bill capped deductibility of net financing costs and changed taxation of dividend and liquidation distributions. Furthermore, the bill included amendments to the taxation of CFCs indirectly forced upon the Danish government by a European Court of Justice (ECJ) ruling in the British "Cadbury-Schweppes" case, when the ECJ allowed multinationals to take advantage of low tax regimes abroad, as long as the subsidiary is not "wholly artificial". The Danish rules now include specific criteria for when CFC taxation will be triggered, such as the relative size of financial assets and CFC income.

As of December 19, 2012 the Ministry of Taxation made all companies’ corporate tax records public and will update and publicize them annually. The publication is intended to increase transparency and public scrutiny of corporate tax payments. Greenland and the Faroe Islands retain autonomy with regards to tax policy.

Efficient Capital Markets and Portfolio Investment

Denmark has fully liberalized foreign exchange flows, including those for direct and portfolio investment purposes. Credit is allocated on market terms and is freely available. The Danish banking system is under the regulatory oversight of the Financial Supervisory Authority. Like banks in many other countries, Danish banks experienced significant turbulence in 2008 - 2009. In October 2008, the Danish Parliament passed legislation that calls for all private banks and the Danish government to finance jointly a "safety net" program that provides unlimited guarantees for bank deposits and certain classes of bank creditors through September 2010. Both Danish and foreign deposits were covered by the legislation. A total of 133 banks joined this so-called "Bank Package." In spite of this legislation, some local businesses reportedly complain of tight lending practices and difficulty in obtaining bank financing. When the “Bank Package” expired in September 2010, the Government had a profit from the agreement. In January 2009 a second initiative was passed, "Bank Package 2," which provided government lending to financial institutions in need of capital to uphold their solvency requirements. Only Danish banks were eligible for inclusion in the second initiative. A total of 43 applicants received DKK 46 billion (approximately USD 7.9 billion) through this initiative. A government-run Financial Stability Company was initiated to take over failed banks. By the end of 2010, ten banks had been taken over or divided and sold by the Financial Stability Company. A third package was enacted in July 2010 without a set expiration date, which ensures the orderly management of failed banks through the Financial Stability Company in the period after September 30, 2010 when Bank Package I expired. The package guarantees all deposits up to DKK 750,000 (approx. USD 130,000).

The third Bank Package received much national and international criticism for making Denmark one of the EU's toughest jurisdictions in terms of dealing with banks in distress. The package includes provisions stipulating that senior debt holders will shoulder losses in the event of a bank failure. The failure of Amagerbanken, the tenth largest Danish bank, in February 2011 resulted in some ripple effects for smaller Danish banks, which experienced difficulty in accessing international credit markets, and intensified scrutiny of the financial sector by the rating agencies. A fourth Bank Package was passed in August 2011 which will identify systemically important financial institutions (which had yet to happen by the beginning of 2013), ensure the liquidity of banks which assume control of a troubled bank, support banks acquiring troubled banks by allowing them to write off obligations of the troubled bank to the government, and change the funding mechanism for the sector-funded guarantee fund to a premium-based, pay-as-you-go system. According to the Danish Government, Bank Package 4 provides mechanisms for a sector solution to troubled banks without senior debt holder losses, but does not supersede Bank Package 3. Senior debt holder losses are still a possibility in the event of a bank failure. A fifth bank package was passed in March 2012, the “development” package, designed to strengthen growth and export financing and to ease the access to credit of particularly SMEs and the agricultural sector by enabling banks to free up capital to provide new lending. The Danish system of troubled financial institution resolution mechanisms is expected to be revised when the EU Commission presents rules in connection with the EU Banking Union and the single supervisory mechanism (SSM). The national payment system, Nets, is jointly owned by Danish banks. The assets of the three largest Danish banks -- Danske Bank, Nordea Bank Danmark, and Jyske Bank -- constitute approximately 75% of the total assets in the Danish banking sector.

The major Danish banks are rated by international agencies, and their creditworthiness is high by international standards. Following the failures of two Danish banks in 2011 that were resolved through the above mentioned Bank Package 3 resolution mechanism, the larger banks and mortgage issuers were downgraded by the international rating agencies, though their ratings remain at a relatively high level. The major Danish banks all passed European and national stress tests with a considerable margin.

Differentiated voting rights - A and B stocks - are used to some extent and several Danish companies are controlled by foundations, which can restrict potential hostile takeovers including foreign takeovers.

The Danish stock market functions efficiently. In 2005, the Copenhagen Stock Exchange became part of the integrated Nordic and Baltic market place, OMX Exchanges, headquartered in Stockholm. Besides Stockholm and Copenhagen, OMX also includes the stock exchanges in Helsinki, Tallinn, Riga and Vilnius. In order to increase the access to capital for primarily small companies, the OMX in December 2005 opened a Nordic alternative marketplace -- "First North" –- in Denmark. In February 2008 the exchanges were acquired by the Nasdaq OMX Group.

Competition from State-Owned Enterprises (SOEs)

SOEs hold dominant positions in rail, energy utility and broadcast media in Denmark. Large scale public procurement must go through public tender in accordance with EU legislation. Competition from SOEs is not considered a barrier to foreign investment in Denmark. The World Economic Forum's 2011-2012 Global Competitiveness Report ranks Denmark as thirteenth when it comes to lack of favoritism in government officials' decisions and finds that Denmark has among the best functioning and most transparent institutions in the world.

Corporate Social Responsibility (CSR)

A survey from 2000 found the Danish population to be the most willing among the European countries to pay more for products and services which are socially or environmentally responsible. Surveys from the international business school IMD in Switzerland rank Denmark at the top when it comes to corporations' social, environmental, and ethical conduct. A recent survey by the London Business School and Harvard Business School concludes that management is considered the most trustworthy in Denmark, Finland and Singapore. All major companies in Denmark have a CSR strategy. The Danish Business Authority publishes action plans to advance CSR in Denmark and recommends following the principles of the UN Global Compact, UN PRI and OECD guidelines for multinational enterprises. The most recent plan is from 2012 and covers the 2012 – 2015 period, focusing on business-driven CSR and contains 42 initiatives.

Political Violence

Denmark is a politically stable country. Incidents involving politically-motivated damage to projects or installations are very rare in Denmark.

Corruption

According to the 2012 Corruption Perceptions Index by Transparency International, Denmark is the least corrupt country in the world along with Finland and New Zealand. Transparency International has local representation in Denmark.

Corruption is covered under the Danish Penal Code, and the Ministry of Justice is responsible for combating corruption. Penalties for violations range from fines to imprisonment of up to four years for a private individual's involvement and up to six years for a public employee's involvement. Since 1998, Danish businesses cannot claim a tax deduction for the cost of bribes paid to officials abroad. Denmark is a signatory of the OECD Convention on Combating Bribery and the UN Anticorruption Convention.

Bilateral Investment Agreements

Denmark has concluded investment protection agreements with the following 45 countries and Hong Kong: Algeria, Albania, Argentina, Belarus, Bolivia, Bulgaria, Czech Republic, Chile, China, Croatia, Egypt, Ethiopia, Estonia, Ghana, Hungary, India, Indonesia, Kuwait, Latvia, Lithuania, Malaysia, Mexico, Mongolia, Mozambique, Nicaragua, North Korea, Pakistan, Peru, the Philippines, Poland, Romania, Russia, Slovakia, Slovenia, South Korea, Sri Lanka, South Africa, Tanzania, Tunisia, Turkey, Uganda, Ukraine, Venezuela, Vietnam, and Zimbabwe. Further, Denmark has signed investment protection agreements with Bangladesh, Bosnia Herzegovina, Brazil, Cuba, Laos, Montenegro, Morocco and Serbia, but these agreements await ratification. There has been no change to the status of the investment protection agreements since the enactment of the European Union’s Lisbon Treaty.

The U.S.-Danish Bilateral Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was concluded in 1999 and came into force on March 31, 2000. In May 2006, a protocol was signed to amend the existing tax treaty between Denmark and the United States. The most important aspect of the protocol relates to the elimination of withholding tax on cross-border dividend payments. On November 19, 2012, the governments of the United States of America and Kingdom of Denmark signed an Intergovernmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA).

OPIC and Other Investment Insurance Programs

OPIC programs are not applicable to U.S. investments in Denmark, but may be used by at least 95%-U.S.-owned subsidiaries in Denmark to support their investments in qualifying countries.

Denmark is a member of the Multilateral Investment Guarantee Agency (MIGA).

Labor

The Danish labor force is generally stable, well-educated and efficient. Language skills are good, and English is considered a natural second language among a very high proportion of Danes. Furthermore, the Danish labor market is flexible. Danish rules on the hiring and firing of employees are not burdensome, which enables employers to adjust the workforce quickly to changing market conditions. The World Economic Forum Global Competitiveness Report 2012 – 2013 finds that Denmark continues to distinguish itself as having one of the most efficient labor markets in the world (ranked eight), with more flexibility in setting wages, firing, and therefore hiring workers than in the other Nordic states and in most European countries more generally. The report ranks Denmark first with respect to redundancy costs and third with respect to cooperation in labor-employer relations.

The Danish labor force amounted to approximately 2.63 million persons in Q3 2012. Denmark's OECD-harmonized unemployment rate was 7.7% in October 2012, which was relatively low compared to the EU (10.7%) and OECD (8.0%) averages. Based on October 2012 figures, unemployment was projected to be about 7.8% by the end of 2012, which is still relatively low compared to EU and OECD averages. Unemployment is expected to increase slightly in the first half of 2013 and then subside to the 2012 level.

The public sector in Denmark is large and accounts for approximately 28% of the employment at full-time equivalence. The labor force participation rate for women is among the highest in the world. In 2011, 71.5% of working-age women participated in the labor force and the employment rate was 69.5%. The male labor force participation rate and employment rate were 75.7% and 72.8% respectively.

The Danish labor force is highly organized, with approximately 75% belonging to a union. Labor disputes and strikes occur only sporadically. As a general rule, labor/management relations are excellent, based on dialogue and consensus rather than confrontation. Working conditions are laid down in a rather complex system of legislation and organizational agreements. Most aspects of wage and working conditions are determined through collective bargaining rather than legislation.

The contractual workweek for most wage earners is 37 1/2 hours. By law, employees are entitled to five weeks of paid annual leave. However, the majority of the labor force has the right to six weeks of paid annual leave through labor market agreements.

Denmark has well-functioning unemployment insurance and sick-pay schemes that are not financed by employers. Maternity leave in Denmark is 52 weeks to be divided between the parents as they see fit, though 18 weeks are earmarked for the mother and 2 weeks for the father. Employers are obliged to pay salary for at least 14 weeks, while the government supports the remainder of the leave.

Danish wages are high by international standards and have contributed to the use of capital-intensive technologies. The average wage level is seen as detrimental to Danish competitiveness. However, employer contributions to social security (including health care) are very low. As a result, total employee costs for employers are lower in Denmark than in many other industrialized countries. Real wages have been declining since 2010 due to the economic crisis and restraint shown by the unions on wage increase demands.

In general, work permits are not difficult to obtain for foreign managerial staff. However, permits for non-managerial workers from countries outside the EU (citizens of EU countries do not require work permits) and the Nordic countries are granted only if substantial professional or labor-related conditions warrant it.

Special rules, detailed in the so-called Positive List Scheme, apply to certain professional fields experiencing a shortage of qualified manpower. The list is updated twice annually. Foreigners who have been hired in the designated fields will be immediately eligible for residence and work permits. In 2012, professions covered by the Positive List Scheme include engineers, scientists, doctors, nurses, IT specialists, marine biologists, lawyers, accountants and a wide range of other Master's or Bachelor's degree positions. The Pay Limit Scheme extends to positions with an annual pay of no less than DKK 375,000 (approximately USD 64,700) annually, regardless of the field or specific nature of the job. Persons who have been offered a highly paid job have particularly easy access to the Danish labor market through the Pay Limit Scheme.

Denmark also introduced a Green Card scheme to issue three-year residence permits to foreign nationals, allowing them to seek employment in Denmark. The residence permit can be extended for one year without special authorization, followed by a four-year extension if authorized. Permits are issued based on an individual evaluation using a point system. However, a residence permit issued under the Green Card scheme is not a work permit. If offered a job, the applicant must apply for a work permit. A work permit is only granted for research and specialist positions, as well as positions covered by the above-mentioned Positive List scheme.

Generally, personal income tax rates in Denmark are among the highest in the world. However, foreign key employees and researchers may choose to be subject to a favorable 26% gross tax rate in the first five years of working in Denmark. Some conditions must be fulfilled in order for key employees to be eligible for the 26% tax scheme: for example, in 2012 wages had to total at least DKK 69,300 (approx. USD 12,000) per month before the deduction of labor market contributions and after Danish labor market supplementary pension contributions. There are also limits based on an individual’s previous work history in Danish labor market. Compared with the general Danish progressive income tax system, this is an attractive incentive. Further information can be obtained from the Danish embassies or from the Danish Immigration Service (www.nyidanmark.dk).

Denmark adheres to the ILO conventions protecting worker rights.

Foreign Trade Zones/Free Ports

The only free port in Denmark is the Copenhagen Free Port operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmo (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise-ship ports; it occupies a key position in the Baltic Sea Region for the distribution of cars and transit of oil. The facilities in the free port are mostly used for tax-free warehousing of goods imported, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. Also, the processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with the permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Other Areas of the Kingdom of Denmark

Greenland

Greenland’s Self-Rule status within the Kingdom outlines that the Greenlandic government can decide to acquire a number of new responsibilities including the administration of justice, business and labor, aviation, immigration and border control, as well as financial regulation and supervision. It has already acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark continues to exercise control of Greenland's foreign affairs, security, and defense in consultation with Greenland's Self-Rule Government. Denmark also retains authority for border control issues, including immigration to Greenland. Greenland is not a part of the EU or Schengen Area; special rules apply for foreigners coming from a Schengen country.

Greenland’s wealth in natural resources offers opportunities in the mining, minerals, and hydrocarbon sectors, among others. Greenland exported USD 381 million in 2010, close to 90% of which was fish products, with the remainder being metals and machinery. Exports went primarily to Denmark (65%), followed by Japan (12%), and China (6%). Imports came from Denmark (58%), Sweden (19%), and the UK (10%), among others. Foreign Direct Investment into Greenland from Denmark totaled 1.2 billion kroner (USD 207 million) in 2011. (More comprehensive statistics are not available) Due its vast expanse, Greenland’s physical and telecommunications infrastructure is less interconnected and developed than in other parts of the Kingdom of Denmark. The labor force comprises about 40,000 people. The Greenland Government's trade promotion agency, Greenland Expo, also has information for potential investors in Greenland. The website for the agency is www.nanoq.gl

The U.S. Ambassador has made several visits to Greenland to strengthen ties and develop opportunities for U.S. investment. Greenland has been an active participant in the Embassy’s Green Partnerships for Growth Initiative, which creates networks among U.S. and Danish businesses, uncovers opportunities for information sharing, and develops partnerships in technology and business solutions that promote renewable energy and energy efficiency technologies.

Greenland passed legislation in December 2012 which provides for companies to use foreign labor during the construction phase of development when project costs exceed five billion Danish kroner (USD 870 million) and workforce requirements exceed the local labor supply. Known as the Large Scale Act, it is intended for potential mining or infrastructure projects in Greenland. It lays out the framework for politically-negotiated Impact Benefit Agreements (IBA) for the Government of Greenland and the company to agree on the exact conditions of employment for foreign labor. The Act allows workers from outside Greenland to operate under a foreign collective bargaining agreement, but these agreements cannot violate Greenland’s laws or Denmark’s international obligations. The scale of Greenlandic labor utilized will be negotiated for each project and will vary depending on local capacity and the negotiated agreement for each project.

Before this law can be implemented, action by the Danish Parliament is required regarding immigration to Greenland; requirements for the use of foreign labor under the Large Scale Act differ from the Danish Aliens Act.

Faroe Islands

The Faroe Islands retain control over most internal affairs including the conservation and management of living marine resources within the 200 nautical mile fisheries zone, natural resources, financial regulation and supervision, and transport. Denmark continues to exercise control of foreign affairs, security, and defense in consultation with the Faroese Government.

A majority of the Faroese population is bilingual or multilingual, with Danish and English being widely spoken. The labor force comprises about 27,000 people. In many areas, the Faroese labor market model resembles that of the other Nordic countries with high standards of living, well-established welfare schemes and independent labor unions. The islands boast a well-developed physical and telecommunications infrastructure and have well-established political, legal, and social structures. The Faroe Islands opened its own exchange in 2000 for securities; active trading of shares followed in 2005. The exchange is a collaboration with the VMF Icelandic exchange on the Nasdaq OMX Nordic Exchange Iceland.

The Islands exported DKK 5.4 billion (USD 932 million) worth of goods in 2011, close to 90% of which were fish products, with the remainder being vessels and aircraft. In recent years, the construction, transportation, banking, and other financial services sectors have grown, and offshore oil & gas exploration is developing. The majority of exports went to the UK (13.5%), followed by Nigeria (9.6%), the U.S. (9.2%), Germany (8.4%), Russia (7.7%) and Denmark (7.4%). More than 85% of imports came from Europe, 1% originated in the U.S. Imports consist of items for household consumption (24%) e.g. food, tobacco and beverages (10%); also fuels (21%); input to industry (18%) and vessels and aircrafts (14%).

Foreign Direct Investment into the Faroe Islands totaled 1.6 billion kroner (USD 276 million) in 2010, about half of which was from Denmark. The Faroese Government has indicated interest in further attracting foreign investment. The U.S. Ambassador has traveled several times to the Faroe Islands to further develop opportunities for U.S. trade. The Ministry of Trade has been eager to engage U.S. business interests both for trade and investment. The Faroe Islands has been an active participant in the Embassy’s Green Partnerships for Growth Initiative, which creates networks among U.S. and Danish businesses, uncovers opportunities for information sharing, and develops partnerships in technology and business solutions that promote renewable energy and energy efficiency technologies. “Invest in the Faroes” is the unit in the Faroese government concerned with promoting Faroese trade and the website is www.invest.fo/.

Foreign Direct Investment and Foreign Portfolio Investment Statistics

The total stock of FDI inbound to Denmark in 2011 corresponded to 43% of GDP (current prices, exclusive of pass-through investments). Danish outbound direct investment corresponded to 67% of GDP in 2011. The largest foreign investor in Denmark in 2011 is Sweden, followed by Luxembourg, the Netherlands, the U.S, United Kingdom, and Norway. U.S. investment accounted for 7.4% of the total 2011 FDI stock in Denmark, up from 7.1% in 2010.

Major U.S. direct investment in Denmark is in telecommunications, information technology, biotechnology, oil exploration, financial services and facility services. During recent years, several U.S.-based private equity funds have invested in Danish firms such as ISS, the Legoland Parks, and TDC. Over 400 U.S. companies have subsidiaries in Denmark, of which several are regional headquarters.

The main destinations for Danish FDI are Sweden (19.8%), the United States (10.5%), United Kingdom (9.1%), Germany (8.9%) and Norway (5.5%). EU countries held 58.3% of the stock in 2011.

The following are tables for foreign direct investment at current prices. Pass-through investments are not included since they have no or very little real-economic significance for the pass-through country. The source of data is the Danish Central Bank, www.nationalbanken.dk, based on average exchange rates of DKK 5.355 = 1 USD in 2009, DKK 5.626 = 1 USD in 2010, DKK 5.362 = 1 USD in 2011 and DKK 5.797 = 1 USD in 2012.

Foreign Direct Investment in Denmark

Table 1: Danish FDI Inbound, STOCK

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2009

2010

2011

Total DKK, billions

711.1

724.1

767.7

Total USD, billions

132.7

128.7

143.1

% of GDP

42%

41%

43%

Table 2: Danish FDI Inbound, Stock, % of Total, Origin

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2009

2010

2011

USA

7%

7%

7%

EU

76%

75%

71%

Sweden

26%

28%

24%

Luxembourg

9%

9%

11%

Netherlands

13%

12%

11%

United Kingdom

9%

8%

7%

Germany

7%

8%

7%

Origin: Norway

6%

7%

7%

Table 3: Danish FDI Inbound, Stock, % of Total, Sector

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2009

2010

2011

Agriculture, Fisheries, Raw Materials

3%

3%

3%

Manufacturing

17%

21%

21%

Energy and Water Supply, and Construction

2%

2%

2%

Trade & Transport, etc.

19%

16%

16%

Information & Communication

6%

9%

9%

Financial Intermediation

40%

38%

39%

Business Service, Insurance

8%

7%

6%

Real Estate Commercial and Non-Commercial

4%

3%

3%

Table 4: Danish FDI Outbound, Stock

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2009

2010

2011

Total DKK, billions

973.7

1098.6

1197.7

Total USD, billions

179.7

195.3

223.4

% of GDP

58%

62%

66.9%

Table 5: Danish FDI Outbound, Stock, % of Total, Destination

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2009

2010

2011

USA

10%

11%

10%

EU

59%

57%

58%

Sweden

21%

21%

20%

France

4%

4%

4%

Netherlands

4%

4%

5%

United Kingdom

6%

8%

9%

Germany

8%

8%

9%

Norway

7%

6%

5%

Table 6: Danish FDI Outbound, Stock, % of Total, Sector

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2009

2010

2011

Agriculture, Fisheries, Raw Materials

6%

6%

6%

Manufacturing

30%

33%

31%

Energy and Water Supply, and Construction

4%

4%

4%

Trade & Transport, etc.

17%

17%

17%

Information & Communication

3%

2%

2%

Financial Intermediation

26%

27%

28%

Business Service, Insurance

10%

8%

8%

Real Estate Commercial and Non-Commercial

3%

2%

2%


Table 7: Major FDI in Denmark by U.S. companies

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Microsoft

IT

IBM

IT

HP/Compaq

IT

Intel

IT

Computer Sciences Corp., USA

IT

ADC Telecommunications Inc.

IT

Motorola

Telecom

Texaco

Energy

Amerada Hess

Hydrocarbon exploration

Ashland

Road Construction

Masco

Furniture and Sanitary Fittings

York Holding Corp.

Refrigerating Equipment

Tenneco Inc.

Automotive

3M

Tapes, Health Care and Pharmaceuticals

Pfizer

Pharmaceuticals

Merck, Sharp & Dohme

Pharmaceuticals

Eli Lilly

Pharmaceuticals

Sauer Inc.

Fluid Power

CP Kelco

Hydrocolloids

Doane Pet Care Co.

Pet Food

GE Capital

Financial Services

Biogen IDEC

Biotechnology


Among the largest U.S. corporate takeovers in Denmark are:

- DuPont’s acquisition of the Danish enzyme and ingredient producer Danisco in May 2011. DuPont’s final bid for DKK 700 per share (approximately DKK 37.9 billion (USD 6.5 billion) total) gave DuPont complete control of the company.

- Microsoft's acquisition of the Danish software company Navision in 2002 (USD 1.2 billion) and IBM's acquisition of Maersk Data in 2004 (estimated USD 400 million).

- Ameritech purchase of 34% of the Danish telecommunication provider incumbent Tele Danmark in 1997 for DKK 21 billion (USD 3.2 billion, 1997 exchange rate). Ameritech was later acquired by SBC Communications that gained an additional 8% of Tele Danmark stock and sold off its position in 2004 for DKK 14 billion (USD 2.3 billion, 2004 exchange rate).

- In May 2007, the Greenland Home Rule Government and Alcoa signed a memorandum of understanding to study the feasibility of the construction of an aluminum smelter and associated hydropower generation and transmission facilities in Greenland. It is estimated that upon completion, the Alcoa investment would be worth approximately USD 2.5 billion, the largest ever greenfield U.S. direct investment in the Kingdom of Denmark. U.S. companies ExxonMobil and Chevron own approximately 48% of a partnership that, in October 2007, was awarded licenses for the exploration and exploitation of hydrocarbons off the western coast of Greenland. In 2010, Greenland announced the award of exploration licenses for seven blocks in Baffin Bay off Greenland's west coast. ConocoPhillips was among the seven awardees. The list of companies with licenses for oil/gas exploration in Greenland also includes: Exxon, Chevron, Husky and EnCana among others.

Other FDIs in Denmark mostly come from Denmark's neighboring countries or other nearby countries, including Sweden, Iceland, Norway, Finland, Germany, and the United Kingdom. Most of those nations' major companies, and numerous smaller ones, have a presence in Denmark, either as regional headquarters, sales/marketing offices, or in production. Some foreign companies with large investments in Denmark are Statoil (Norway); L.M. Ericsson (Sweden); Nordea (Sweden); Vattenfall (Sweden), APV (United Kingdom); Bayer (Germany), and Q8 Oil (Kuwait).

Several Danish companies have a presence in the U.S., both to get closer to the market and to gain access to American Recovery and Reinvestment Act (ARRA) funds, some of which have been allotted to, among others, Vestas Wind Systems and Novozymes.

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