17 May Riding the trend: Iceland’s rise to prominence
Pétur Þ. Óskarsson, CEO, Business Iceland, pinpoints key sectors that will drive economic regrowth and place Iceland on the global stage
What kind of services does Business Iceland provide?
Business Iceland is set up to serve three main roles that are commonly separate agencies in other countries. We are a destination marketing office in that we manage marketing and branding for Iceland as a destination. We are also a trade promotion office in that we work closely with Icelandic companies interested in gaining access to foreign markets. Last, we are an investment promotion agency in that we facilitate foreign direct investment into Iceland. We work closely with international investors who are interested in entering the Icelandic market by setting meetings with appropriate ministries and liaising potential stakeholders with potential partners.
What impact has the Covid-19 pandemic had on Iceland’s economy?
Iceland was hit hard because of the importance of the tourism sector in our economy and our export revenues. In 2021, export revenue from flight and tourism amounted to about $1.45 billion, whereas it was around $3.64 billion prior to the pandemic. However, other industries showed great resilience during this period.
For example, our seafood sector—which is very important for our revenue earnings—was able to develop new markets and distribution channels for their products when restaurants closed all over the world. Energy-intensive industries involving production of aluminum and other raw materials saw prices increase drastically, positively affecting our export revenues for 2021. The local intellectual property industries grew steadily and are an increasingly important contributor to our export portfolio.
The tourism industry is now picking up fast. The outlook for the summer and the rest of 2022 looks good. We expect tourism to bounce back strongly now that the Covid-19 pandemic is subsiding. Many stakeholders are saying we will reach 80-100 percent of 2019 levels.
What sectors will be key in rebuilding Iceland’s economy?
Business Iceland has defined six focus sectors. First is energy and green solutions. In this area Iceland has a unique story to tell, with 85 percent of all our energy consumption and 100 percent of our electricity coming from renewable energy sources. Other sectors are intellectual property, technology, art and creative industries, seafood, tourism and food and natural produce. These industries have the potential to grow, and the outlook is bright across the board. We are in an enviable situation coming out of the pandemic.
What makes Iceland an attractive place to do business?
We are a modern society that is very open to business. Iceland is part of the European single market and has all the modern infrastructure one would expect from a Western democratic country. There are essentially no hindrances or impediments for international investors. For those considering moving to Iceland, the quality of life is a strong selling point. The nation is an ideal place to live and raise a family for the following reasons: it is safe, community is important and there are strong education and healthcare systems.
We have recently implemented key measures to attract investments to Iceland. First, we have substantially increased incentives and support for research and development, which now amount to 35% of the research and development costs for small and medium-sized companies. We have also put in place incentives for green investments. Companies investing in machinery, equipment, vehicles or vessels are rewarded with an extra depreciation on top of the actual investment if they invest in green solutions. Additionally, foreign specialists moving to Iceland to work in their field can now enjoy a 25 percent discount on their income tax for their first three years in Iceland.
We are identifying and preparing sites for circular economy developments or eco-industrial parks to offer investors well-defined value propositions based on sustainable solutions. The government recently appointed a new high-level coordinating body with key government institutions to streamline the business environment and facilitate the development of larger green investment projects.
What is Iceland doing to leverage its know-how in green energy in foreign markets?
Iceland is among the leaders in the world when it comes to sustainability, whether in regard to the economy, the environment or society. We established a cooperative platform between Icelandic businesses and the government called Green by Iceland to identify opportunities for green solutions from Iceland abroad. Our nation has a lot of know-how to offer in the geothermal field. Icelandic solutions are currently used in more than 50 countries on all continents, and we believe it is an opportunity we can build on. We are already seeing stress put on the energy transition and green energy in the U.S. under the Biden administration. We feel strongly that Icelandic companies can contribute and excel in this essential field.