Download greenland benchmarking report 2016

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
GREENLAND BENCHMARKING REPORT 2016
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
1
GREENLAND BENCHMARKING
BENCHMARKING REPORT
REPORT 2016
2016
GREENLAND
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
2
GREENLAND BENCHMARKING REPORT 2016
3
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 conclusions 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.
GREENLAND BENCHMARKING
BENCHMARKING REPORT
REPORT 2016
2016
GREENLAND
1
MACROECONOMIC
ANALYSIS
4
GREENLAND BENCHMARKING REPORT 2016
5
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 Greenland 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, Mexico, 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 characterised 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
Finland
Greenland
Italy
0.0
-1.0
-1.1
-1.7
Explanation and justification
Gross Domestic Product (GDP) is one of the main
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.
Notes
Data for all countries and years was acquired from
the World Bank World Development Indicators
database, except for Greenland (data from Statistics Greenland).
Comments
Greenland had the second lowest GDP growth
(-1.1%) in 2012-2014 among the countries analysed - only Italy performed worse (-1.7%). The fall
in GDP was mostly a result of declining investment in exploration activities, a drop in fishing activity and a decline in the construction sector.
GREENLAND BENCHMARKING REPORT 2016
7
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
GDP per capita based on purchasing power parity
(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.
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 in Danish Krone was
converted to international dollars using the World
Bank's PPP conversion factor for Denmark).
Comments
In terms of GDP per capita, Greenland has a medium performance among the analysed countries.
It outperforms such countries as Russia, Turkey,
Mexico and Egypt, but falls behind more advanced 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
Denmark
1
28
22
Dominica
16
Egypt
14
Finland
3
France
2
Germany
1
15
69
46
27
71
19
79
69
14
7
75
24
Indonesia
69
14
47
Italy
2
23
Japan
1
26
Korea, Rep.
2
Mexico
3
74
73
59
34
62
38
11
Russian Federation
39
38
2
Philippines
60
31
4
57
36
60
St. Kitts and Nevis
1
25
73
Sweden
1
26
73
Turkey
Services
40
11
Iceland
Norway
Industry
76
30
Greenland
Agriculture
71
8
27
65
United Kingdom
1
21
78
United States
1
21
78
Explanation and justification
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.
Notes
Data for all countries is for year 2014 and was acquired from the World Bank World Development
Indicators database, except for: Canada (2010
data), Greenland (DI calculations based on Statistics Greenland data), Iceland (2013 data), Indonesia (2013 data), Japan (2013 data), United States
(2013 data).
Comments
Developed economies usually have a low share of
agriculture and a high share of services in their
GDP. For example, in the UK and the US, agriculture accounts for about 1%, industry - for 21%,
and services - for 78%. In Greenland, agriculture
accounts for a relatively larger share (11%), industry - for a slightly smaller share (14%), while the
share of services is comparable, mostly due to the
public sector (public administration, education,
social institutions). Other large service sectors in
Greenland are real estate and wholesale trade.
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
Total natural resources rents include oil, natural
gas, coal, mineral, and forest rents. Rents are the
difference between price and average cost of producing (extracting) a commodity. Rents as % of
GDP are an indicator of the reliance of economic
development on natural resource production.
Notes
Data for all countries is for year 2013 and acquired from the World Bank World Development
Indicators database. Data for Greenland and St.
Kitts and Nevis is not available.
Comments
Among analysed countries, Russia has the highest
level of rents from natural resources. Norway is
the leader among Nordic countries.
Even though data for Greenland is not available,
this and other indicators are included to be consistent with the reports that this publication is
based on (i.e., Global Benchmark Report, MENA
Benchmarking Report).
GREENLAND BENCHMARKING REPORT 2016
10
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
Egypt
15
13
Explanation and justification
Comments
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.
The share of investment in GDP in Greenland was
relatively low in 2014, but is projected to increase
in the near future due to increased activity in the
natural resources sector. Nevertheless, it was
above that of United Kingdom, Iceland and Italy
as well as Dominica and Egypt.
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), Japan (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
the World Bank are "the net inflows of investment
to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating 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.
Data for all countries is for year 2014 and was acquired from the World Bank World Development
Indicators database. Data for Greenland is not
available.
Comments
United States had the largest net FDI inflows
among the analysed countries, while Denmark
and Sweden - the lowest (due to reverse investment or disinvestment). Among Nordic countries,
Finland and Norway had the largest inflows of
FDI.
GREENLAND BENCHMARKING REPORT 2016
12
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
United States
15
13
Explanation and justification
Exports of goods and services measure the value
of goods and services provided to other countries. Exports are one of the components of GDP
calculation using the expenditure approach.
When measured as per cent 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.
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), Japan (2013 data), and United States (2013 data).
Comments
Exports of goods and services amounted to 33%
of GDP in Greenland in 2014, which is a medium
performance among the analysed countries. Exports of fish amount to about 90% of Greenland's
total exports; shrimp exports alone account for
more than 50% of total exports. Falling shrimp
quotas had a large negative impact on the country's export.
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
United States
Explanation and justification
Imports of goods and services measure the value
of goods and services received from other countries. Imports are subtracted from GDP when calculating it using the expenditure approach. Imports as per cent of GDP is an indicator of the reliance of the economy on foreign-produced
goods and services.
Notes
Data for all countries is for year 2014 and was acquired from the World Bank World Development
19
17
Indicators database, except for: Greenland (DI calculations based on Statistics Greenland data), Japan (2013 data), and United States (2013 data).
Comments
Greenland is the leader among analysed countries in terms of imports as per cent of GDP as it
has to acquire large amounts of goods and services from other countries. The major import categories in Greenland are mineral fuels, machinery
and transport equipment as well as food and livestock.
GREENLAND BENCHMARKING REPORT 2016
14
MACROECONOMIC ANALYSIS
Government finance
1.i. General government gross debt (% of GDP)
Greenland
Russian Federation
5
18
Indonesia
25
Norway
28
Turkey
34
Korea, Rep.
36
Philippines
36
Sweden
44
Denmark
45
Mexico
Finland
50
59
Germany
75
Dominica
76
St. Kitts and Nevis
80
Iceland
83
Canada
88
United Kingdom
89
Egypt
90
France
United States
Italy
96
105
132
Japan
246
Explanation and justification
Comments
General government gross debt includes all liabilities of the government that require payment.
Government debt as per cent of GDP is an indicator of government's indebtedness, financial stability and solvency.
Greenland's government has the lowest amount
of debt as per cent of GDP among the analysed
countries. In 2014, it amounted to about 5 per
cent of GDP. United States, Italy and Japan are the
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).
GREENLAND BENCHMARKING REPORT 2016
15
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
Egypt
-7.3
-13.6
Explanation and justification
Comments
Net lending/borrowing is a measure of government'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.
In 2014, Greenland was among the few analysed
countries that had a general government surplus.
The major revenue sources for the country's government are income taxes and transfers from
Denmark. Compensation of employees and government consumption are the main expenditure
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).
GREENLAND BENCHMARKING REPORT 2016
16
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 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.
The provided ratings are the latest available ratings published by Moody's. The agency does not
rate Dominica, Greenland and St. Kitts and Nevis.
Moody's database was accessed on February 2,
2016.
Comments
In general, advanced, developed economies have
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).
GREENLAND BENCHMARKING REPORT 2016
17
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
the World Bank is the amount of credit resources
provided to the private sector by financial corporations. On one hand, it shows the availability of
credit in the economy which is needed for the expansion of business services or other projects. On
the other hand, it is an indicator of the level of
indebtedness of the private sector.
Data for all countries is for year 2013 and acquired from the World Bank World Development
Indicators database, except for Canada (2008
data). Data for Greenland and Norway is not available.
Comments
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 companies (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 also relates to
the overall economic development because access to equity finance is an important growth factor for companies.
Data for all countries is for year 2012 and was acquired from the World Bank World Development
Indicators database, except for St. Kitts and Nevis
(2011 data). Data for Dominica and Greenland is
not available.
Comments
The UK and US financial markets are the most developed: market capitalization of companies
listed on these exchanges exceeds the GDP of respective countries. Italy, Egypt and Iceland have
the lowest market capitalizations among the analysed countries.
GREENLAND BENCHMARKING REPORT 2016
19
MACROECONOMIC ANALYSIS
Price level
1.n. Inflation, consumer prices (annual %)
Sweden
Italy
-0.2
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
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 preferred.
Annual inflation in Greenland was 1.4% in July
2015, which is within the band of optimal, preferred inflation rates. Sweden experienced deflation in 2014, while inflation in Egypt exceeded 10
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).
GREENLAND BENCHMARKING REPORT 2016
20
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
Greenland
-0.2
-0.4
Explanation and justification
Comments
Population growth is one of the main demographic 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.
While most of the analysed countries experienced
population growth in 2012-2014, Greenland and
Japan saw their populations decrease. In Greenland, birth rates exceed death rates, but emigration leads to the decline in population.
Notes
Data for all countries and years was acquired from
the World Bank World Development Indicators
database.
GREENLAND BENCHMARKING REPORT 2016
21
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
Population ages 15-64 as percentage 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, which has to rely on the support of others for their survival.
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).
Comments
Greenland has one of the largest working age
populations among the analysed countries: 71%
of its population is between the ages 15-64. Japan
had the lowest share of people aged 15-64 in
2014 (61%).
GREENLAND BENCHMARKING REPORT 2016
22
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
Canada
Philippines
Sweden
6.6
6.9
7.1
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 International 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.
Unemployment in Greenland exceeded 10 per
cent in 2013 and was one of the highest among
analysed countries, with only Italy and Egypt performing worse. The problem in Greenland is that
even though unemployment among the local
population is high, there is a large number of
skilled workers from abroad hired in the country.
This shows that local employees often lack the
skills required for high-skilled positions.
Notes
Data for all countries is for year 2014 and was acquired from the World Bank World Development
Indicators database, except for Greenland (Statistics Greenland data for 2013).
GREENLAND BENCHMARKING REPORT 2016
23
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
Japan
Germany
Norway
Mexico
N/A
6.5
7.6
8.4
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
Finland
Indonesia
Sweden
17.7
19.2
21.8
22.8
France
23.9
Egypt
42.0
Italy
44.1
Explanation and justification
Notes
Youth unemployment, as defined by the International 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. Unemployed 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.
Data for all countries is for year 2014 and was acquired from the World Bank World Development
Indicators database, except for Greenland (Statistics Greenland data for 2013 for the age group
20-24).
Comments
While youth unemployment in Greenland is
higher than the total unemployment level, it is not
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
as the share of the population ages 15 and older
that 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.
Total labour force participation rate in Greenland
and Iceland, at 74%, was the highest among analysed countries, indicating a healthy rate of economic activity. Turkey, Egypt and Italy had the
lowest labour participation rates.
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).
GREENLAND BENCHMARKING REPORT 2016
25
MACROECONOMIC ANALYSIS
Employment
1.t. Labour force participation rate, female (% of female population
ages 15+) (modeled ILO estimate)
Greenland
Iceland
72
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
Total labour force participation rate usually does
not reflect the major differences in participation
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.
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).
Comments
As with total labour force participation, female
participation in Greenland (72%) is above that of
other analysed countries. Egypt (24%) and Turkey
(29%) had very low participation rates of females
in the labour force.
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
Total labour force participation rate usually does
not reflect the major differences in participation
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.
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).
Comments
Male labour force participation in Greenland
(76%) only slightly exceeds the female participation rate (72%), indicating a high level of gender
equality. Male participation rates were the highest
in developing countries (Indonesia, Mexico and
Philippines), while Italy and France had the lowest
rates.
GREENLAND BENCHMARKING REPORT 2016
2
BUSINESS
ENVIRONMENT
ANALYSIS
27
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 successful 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 Entrepreneurship 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 Greenland 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, Greenland 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
Denmark
7
11
Canada
14
Japan
14
Germany
18
United States
18
France
25
Italy
25
United Kingdom
25
Korea, Rep.
Indonesia
29
50
Egypt
54
Turkey
54
Russian Federation
Mexico
Philippines
Explanation and justification
Security risk evaluates the safety of the physical
environment. It takes into account such issues as
the presence of armed conflicts, violent demonstrations, civil unrest, hostility to foreigners or private ownership, organised crime, etc.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
57
64
79
Comments
Security risk in Greenland is one of the lowest
among the analysed countries. The crime rate is
low and there are no armed conflicts or civil unrest taking place. The risk is much higher in Mexico and Philippines, for example, while Iceland has
practically no security issues.
GREENLAND BENCHMARKING REPORT 2016
30
BUSINESS ENVIRONMENT ANALYSIS
Political stability
2.b. Political stability risk (lower=better)
Norway
Canada
United States
0
5
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
Philippines
Russian Federation
Turkey
Explanation and justification
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.
45
55
65
70
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
Comments
Greenland ranks high when it comes to political
stability and no major political risks are foreseen.
The Self Rule Act of 2009 between Denmark and
Greenland specifies that Greenland can take control 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
Iceland
14
18
Denmark
21
Germany
21
United Kingdom
21
France
25
Japan
25
United States
Greenland
29
32
Italy
50
Korea, Rep.
50
Mexico
Philippines
Indonesia
57
61
64
Egypt
68
Turkey
68
Russian Federation
Explanation and justification
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.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
86
Comments
Greenland performs worse in terms of government effectiveness than in most other business
environment indicators. A 2012 report by Nordic
Consulting Group commissioned by Transparency International Greenland found that there is
high staff turnover in the public sector, a sometimes confusing system of legislation and a lack
of accountability that can lead to corruption.
Overall, Russia has the lowest government effectiveness while Norway – the highest.
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
Japan
Korea, Rep.
Italy
Mexico
Egypt
Turkey
Philippines
Indonesia
Russian Federation
Explanation and justification
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, and the risk of
foreign assets expropriation. It also takes into account 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.
20
25
35
38
40
45
48
55
62
70
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
Comments
Legal and regulatory risk in Greenland is low with
only Sweden and Finland performing better.
There is no significant risk of assets expropriation,
non-enforcement of contracts, etc. As with many
other indicators, the highest risk is observed in
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
Italy
50
60
Egypt
65
Russian Federation
65
Explanation and justification
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.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
Comments
The risk of macroeconomic instability in Greenland is low. Among analysed countries, only South
Korea and United States perform better. Italy,
Egypt and Russia have the highest risk of macroeconomic volatility.
GREENLAND BENCHMARKING REPORT 2016
34
BUSINESS ENVIRONMENT ANALYSIS
Foreign trade and payments issues
2.f. Foreign trade & payments risk (lower=better)
Finland
Greenland
4
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
Egypt
Russian Federation
Explanation and justification
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.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
43
54
61
Comments
Greenland takes the second place among analysed countries when it comes to foreign trade
and payments risk. As the country uses Danish
currency (Krone), there is minimal risk of foreign
exchange restrictions. Egypt and Russia are the
countries with the highest foreign trade risk.
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
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.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
Comments
Financial risk in Greenland is relatively low and is
on par with the risk in Canada, Finland and France,
and only slightly worse than that in Sweden. As
such, the possibility of a currency devaluation, a
systemic crisis, etc. is very low. Philippines, Russia
and Turkey are the worst performers in this indicator.
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
Egypt
Explanation and justification
Tax policy risk measures the clarity and predictability of the tax regime, the risk of discriminatory
taxes, the level of corporate tax rates and the risk
of retroactive taxation.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
50
56
Comments
Stability and transparency of the tax regime in
Greenland (together with Canada and United
Kingdom) is the best among the analysed countries. According to PwC, the corporate tax rate in
Greenland is 30% plus a surcharge of 6% (oil and
mineral license holders are exempt from the surcharge) which makes the effective tax rate 31.8%.
There is also no VAT in Greenland. Overall, Russia
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
Explanation and justification
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.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
61
Comments
Labour market is Greenland's relative weakness as
its performance in the labour market risk indicator is only average. There is a lack of highly-skilled
individuals and companies often hire foreign specialists. Nevertheless, Greenland still performs
better than such countries as South Korea, Iceland
or Turkey. Overall, United States is the best performer in the indicator while Indonesia – the
worst.
GREENLAND BENCHMARKING REPORT 2016
38
BUSINESS ENVIRONMENT ANALYSIS
Infrastructure
2.j. Infrastructure risk (lower=better)
France
Sweden
Germany
0
3
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
Egypt
44
47
Indonesia
59
Philippines
59
Explanation and justification
Infrastructure risk measures the probability that
major infrastructure facilities (ports, air transport,
ground transport, distribution networks, and
communication infrastructure) will be inadequate
for business use, the risk of power shortages and
the risk of poor IT infrastructure.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
Comments
Infrastructure is another relative weakness of
Greenland. Due to the country's environmental
conditions, the road and railway networks between towns are practically non-existent. Air and
water are the main means of transport, and ports
are well developed. Among the analysed countries, France is the best performer while Indonesia
and Philippines have the highest infrastructure
risk.
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
Germany
Japan
20
21
23
France
25
Iceland
25
Korea, Rep.
Italy
Mexico
Philippines
Indonesia
Turkey
Egypt
Russian Federation
Explanation and justification
The overall risk assessment is a simple average of
all ten risk indicators.
Notes
Data for all countries is the latest available
(2015/2016) operational risk assessment acquired
from the Economist Intelligence Unit.
31
35
44
49
50
51
54
59
Comments
When all ten risk factors are taken into account,
Arctic countries are the top performers. Canada,
Norway and Sweden have the lowest overall risk,
followed by Finland and Denmark. Greenland has
the sixth lowest overall risk among the analysed
countries. The most risky countries are Egypt and
Russia.
GREENLAND BENCHMARKING REPORT 2016
3 SPECIAL THEMES
40
FISHING
MINING
41
TOURISM
GREENLAND BENCHMARKING REPORT 2016
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 outcomes 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 BENCHMARKING REPORT 2016
MINING
SPECIAL THEME
43
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
Potential oil and gas reserves
2
Statistics Greenland
Source: Nordregio
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
22
17
17
16
5
6
6
6
No. of prospecting licences (Active)
No. of exploitation licences (Granted)
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 largescale 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 maintaining an attractive investment climate.
Figure 3. Distribution of future rare earth sources outside China as of 2012, % of total
Canada
50%
Greenland
Australia
United States
Other
20%
8%
8%
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, $/kg (in real 2010$)
9
8
7
6
5
4
3
2
1
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
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”
5
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 permafrost 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.
GREENLAND BENCHMARKING
BENCHMARKING REPORT
REPORT 2016
2016
GREENLAND
FISHING
SPECIAL THEME
51
GREENLAND
REPORT
2016
52
PHOTO
BY AIRBENCHMARKING
ZAFARI - MADS PIHL
- VISIT
GREENLAND
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
11
Statistics Greenland
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
50
0
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
Q4
2012
Q1
Q2
Q3
Q4
Q1
2013
Cod
Halibut
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
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”
Greenland Ministry of Finance (2015): “Political and Economic Report 2015”
14
Ibid.
13
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
Atlantic cod
2012
Greenland halibut
2013
2014
2015
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”
Government of Greenland: “Economy and Industry in Greenland”, Online, 2016
17
Greenland Ministry of Finance (2015): “Political and Economic Report 2015”
16
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
TOURISM
SPECIAL THEME
57
BY MADS PIHL
- VISIT
GREENLAND
GREENLAND PHOTO
BENCHMARKING
REPORT
2016
58
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
20
Lonely Planet, Online, 2016
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
APPENDICES
61
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 optimum 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
DIVERSIFICATION OF
ECONOMY
EMPLOYMENT
DEMOGRAPHICS
MACROECONOMIC
INDICATORS
INVESTMENT
INTERNATIONAL
TRADE
PRICE LEVEL
CAPITAL
MARKETS
GOVERNMENT
FINANCE
GREENLAND BENCHMARKING REPORT 2016
64
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 = ∑ 𝑉𝑖
3
𝑖=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
in 2012-2014)
Gross Domestic Product (GDP) is one of the main
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
$, thousands)
GDP per capita based on purchasing power parity
(PPP) is defined by the World Bank as "gross domestic product converted to international dollars
using purchasing power parity rates. An international dollar has the same purchasing power over
GDP as the U.S. dollar has in the United States".
When converted using PPP, GDP per capita is the
total value of goods and services produced in a
country divided by the country's population, measured in international dollars so that differences in
the purchasing power of currencies are eliminated.
This allows for an easy comparison of the level of
economic development of countries.
Page 7
Data sources: World Bank, Statistics Greenland
Diversification of Economy
1.c. Composition of GDP by sector (% of GDP)
Composition of GDP by sector shows the proportion of value added in agriculture, industry and service sectors of the economy. It provides an overview of the structure of the economy and the level
of its diversification.
Page 8
Data sources: World Bank, Statistics Greenland
1.d. Total natural resources rents (% of GDP)
Total natural resources rents include oil, natural
gas, coal, mineral, and forest rents. Rents are the
difference between price and average cost of producing (extracting) a commodity. Rents as % of
GDP are an indicator of the reliance of economic
development on natural resource production.
Page 9
Data sources: World Bank
GREENLAND BENCHMARKING REPORT 2016
Investment
1.e. Gross fixed capital formation (% of GDP)
66
Gross fixed capital formation is one of the components of GDP calculation using the expenditure approach. It measures the value of investments made
in the economy (acquisition of plants, equipment,
construction of infrastructure, etc.). This is an indicator of the contribution of investments to total
GDP.
Page 10
Data sources: World Bank, Statistics Greenland
1.f. Foreign direct investment, net inflows (BoP,
current US$, millions)
Foreign direct investment (FDI) data provided by
the World Bank are "the net inflows of investment
to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating 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. Exports 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 calculating 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)
Page 14
General government gross debt includes all liabilities of the government that require payment. Government debt as % of GDP is an indicator of government's indebtedness, financial stability and solvency.
Data sources: IMF, Danish National Bank
GREENLAND BENCHMARKING REPORT 2016
67
1.j. General government net lending (+)/borrowing (-), % of GDP
Net lending/borrowing is a measure of government'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 corporations. On one hand, it shows the availability of
credit in the economy which is needed for the expansion 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
(% of GDP)
Market capitalization is the market value of companies (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 %)
Page 19
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 preferred.
Data sources: World Bank, Statistics Greenland
GREENLAND BENCHMARKING REPORT 2016
Demographics
1.o. Population growth (average annual %
growth in 2012-2014)
68
Population growth is one of the main demographic
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
force) (modeled ILO estimate)
Total unemployment, as defined by the International 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 labour force ages 15-24) (modeled ILO estimate)
Youth unemployment, as defined by the International 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. Unemployed 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
total population ages 15+) (modeled ILO estimate)
Labour force participation rate is defined by ILO as
the share of the population ages 15 and older that
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.
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Data sources: World Bank, Statistics Greenland
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1.t. Labour force participation rate, female (% of
female population ages 15+) (modeled ILO estimate)
Total labour force participation rate usually does
not reflect the major differences in participation
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
male population ages 15+) (modeled ILO estimate)
Total labour force participation rate usually does
not reflect the major differences in participation
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
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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 demonstrations, 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.
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Data sources: Economist Intelligence Unit
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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 nontariff 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 predictability 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
Aarhus University’s Institute for Bioscience provides an overview
of Greenland’s mineral sector.
http://bios.au.dk/videnudveksling/til-myndigheder-ogsaerligt-interesserede/greenland/minedrift-og-miljoe/
Boersma, T., & Foley, K. (2014): “The Greenland Gold Rush:
Promise and Pitfalls of Greenland’s Energy and Mineral Resources” provides details about the development of Greenland’s
mining sector.
http://www.brookings.edu/~/media/research/files/reports/2014/09/24-greenland-energy-mineral-resources-boersmafoley/24-greenland-energy-mineral-resources-boersma-foley-pdf2.pdf
Danish National Bank’s “Monetary Review, 2nd Quarter, 2014”
contains an analysis of current trends in the Greenlandic economy.
www.nationalbanken.dk/en/publications/Documents/2014/06/Current%20Trends%20in%20the%20Gr
eenlandic%20Economy.pdf
Economist Intelligence Unit’s Risk Briefing evaluates the risk to
business profitability in 180 countries from 10 separate risk criteria
based on current conditions and expectations for the next two years.
http://viewswire.eiu.com/index.asp?layout=RKAllCountryVW3
Government of Greenland’s webpage “Economy and Industry in
Greenland” provides an overview of economic activities in Greenland.
http://naalakkersuisut.gl/en/Aboutgovernment-of-greenland/AboutGreenland/Economy-and-Industryin-Greenland
Government of Greenland’s Mineral Licence and Safety Authority provides a list of mineral and petroleum licences in Greenland.
https://www.govmin.gl/images/list_of_licences__20160216.pdf
Greenland Economic Council’s report “The Economy of Greenland 2014” provides an overview of the country’s economic climate
and current economic policy.
http://naalakkersuisut.gl/~/media/Nanoq/Files/Attached%20Files/
Finans/DK/Oekonomisk%20raad/
%C3%98konomisk%20R%C3%
A5d%202014_ENG.pdf
Greenland Ministry’s of Finance “Political and Economic Report
2015” analyses the development of the country’s economy and details the government’s policies and reforms.
http://naalakkersuisut.gl/~/media/Nanoq/Files/Attached%20Files/
Finans/ENG/POB_materie_2015_
ENG_FINAL.pdf
Hojem, P. (Nordic Council of Ministers) (2015): “Mining in the
Nordic Countries: A comparative review of legislation and taxation” reviews legislation and taxation of the mining industry in Nordic countries.
http://norden.diva-portal.org/smash/get/diva2:842595/FU
LLTEXT01.pdf
Information’s ”Den grønlandske turisme har plads til forbedring” is an article that investigates the challenges and opportunities
faced by the Greenlandic tourism industry.
http://www.information.dk/468139
International Monetary Fund’s (IMF) World Economic Outlook
(WEO) database contains macroeconomic data, IMF staff's analysis
and forecasts for the majority of the world’s countries.
www.imf.org/external/ns/cs.aspx?id
=28
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Lonely Planet’s “Best in Travel 2016” is a top 10 list of holiday destinations to visit for 2016 and why.
http://www.lonelyplanet.com/bestin-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
and economic analysis and financial risk management.
www.moodys.com
Nordic Centre for Spatial Development (NORDREGIO) is a leading
Nordic research institute focusing on regional development and urban planning.
http://www.nordregio.se/
Nordic Consulting Group’s “Integrity Study of The Public Sector
in Greenland, 2012” provides an analysis of transparency, accountability and integrity in Greenland’s society. The study was commissioned by Transparency International Greenland.
http://transparency.gl/wp-content/uploads/Integrity-public-sectorGreenland.doc
NunaGIS provides digital maps of Greenland.
http://nunagis.gl/en/
PwC’s report “Worldwide Tax Summaries: Corporate Taxes
2015/16” contains information about corporate tax systems in 155
countries.
www.pwc.com/gx/en/tax/corporate-tax/worldwide-tax-summaries/assets/pwc-worldwide-tax-summaries-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
U.S. Geological Survey, Mineral Commodity Summaries, January
2016 provides an overview of the rare earth metal markets.
http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/mcs-2016-raree.pdf
US State Department’s “Investment Climate Statement 2014”
provides information about the economy of Greenland, its business
and investment laws, taxes, labour market, and other business information.
http://greenland.usvpp.gov/visas3.html
World Bank’s World Development Indicators (WDI) is a collection
of internationally-comparable global development data compiled by
the World Bank – an international bank focused on fighting poverty
and promoting economic growth by providing financial and technical
assistance to countries.
http://data.worldbank.org/products/wdi
GREENLAND BENCHMARKING REPORT 2016
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@ACRM_DK
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Visit us at
ACRM.DK
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