Woluwedal 22 B-1932 Sint-StevensWoluwe Belgium

IBM Global Business Services

October, 2008

AmCham Denmark

Investment Trend Report - Denmark

Submitted to:

American Chamber of Commerce Copenhagen, Denmark

Submitted by:

Plant Location International IBM Global Business Services

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Table of Contents Section

Page

Executive Summary

3

Introduction

4

About GILD

4

Global Investment Trends

5

European Investment Trends

9

Danish Investment Trends

12

Analysis of Key Sectors

14

Final Observations

23

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Executive Summary The world economy is becoming truly global in its reach. As competition forces companies to explore new locations in their search for markets, talent, and greater efficiency, the prospect of growth and prosperity is extended to more people than ever before. Hence, notwithstanding a cyclical decline in overall global investment activity, the geographic expansion of investment continues as companies persist in their efforts to identify new opportunities, resulting in a constantly changing international economic landscape. In this context, Denmark has had a good year for foreign investment in 2007, with the country experiencing 10% growth in jobs created from inward investment compared to 2006. What is particularly encouraging was the substantial increase and improved international position in life sciences, a key target sector for the Danish economy. Taking a longer term perspective, it is clear that ICT is also a dominant sector for inward investment to Denmark, suggesting that the country has particular strengths in this area. Nevertheless, it is worth noting that the country experienced a slight reduction in the number of jobs created in the ICT sector in 2007 compared to 2006. The considerable investment in life sciences and ICT indicates a development for Denmark towards a greater concentration on knowledge driven sectors. Indeed, it appears as if Denmark has benefited from targeting life sciences and ICT as key sectors and clusters in recent years, and the concerted efforts to develop a favourable environment for companies in these sectors. However, while the renewables sector represents one of the fastest growing sectors for foreign investment globally, Denmark is not benefiting from this increased investment. Accordingly, it does not yet appear as if the country has managed to position itself as a key location for renewables, with the possible exception of wind energy. More worryingly, the country is currently experiencing a considerable tightening of the labour market, with companies struggling to hire and retain the required skilled labour. This represents a major threat to future investment and success in sectors such as ICT and life sciences, which are very much ‘skills driven’. Consequently, if Denmark is to maintain and improve its success in its key sectors, the skills issue needs to be urgently addressed. Indeed, as companies continue to reassess and modify their global footprint, and more locations are emerging as potential candidates for different types of investment, Denmark must constantly improve its business environment if it is to maintain or improve its position in the increasingly competitive economic landscape. This should include tailored improvements for the target sectors in key areas such as skills and R&D.

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Introduction The current report provides an outline of key investment trends globally and in Europe for 2007. In addition, the report contains more detailed analysis of investment trends in Denmark for the period 2003-2007, with a particular focus on three sectors: Life sciences, ICT and Renewables. The analysis is based on analysis of data from IBM’s proprietary Global Investment Locations Database (GILD). GILD records investment project announcements around the world on an ongoing basis. With currently information for over 70,000 investment projects recorded since 2003, GILD provides unrivalled insight into global trends in corporate location decision making. The GILD database is maintained by IBM-Plant Location International (IBM-PLI), a specialized service within IBM Global Business Services, Strategy & Change consulting. IBM-PLI is a global market leader in providing advice to companies on their location strategies, covering all sectors and types of business function. Moreover, drawing on our extensive expertise and knowledge of what shapes corporate investment decisions, IBMPLI works with economic development organizations and investment promotion agencies in their efforts to improve and market their locations as attractive business environments for present and new investors.

About GILD GILD is a leading corporate investment tracking database, registering investment projects around the world. Our focus is on so-called ‘mobile’ projects, which means that for these investments a wider choice among different locations can be assumed. As such GILD allows representative and up-to-date location trend analysis on a global scale. GILD is a dynamic database updated on a daily basis, with multiple media (newspapers, newsletters, websites, etc.) in the most important global languages screened for investment project announcements, which are then registered in GILD. Additional investment project data are received from many investment promotion agencies and other economic development organizations. GILD monitors corporate investments at the project level. It records announcements and openings of new (greenfield) and expansion projects by companies. For each project announcement, details are registered on the investor, origin, location of investment, sector and cluster, activity and type of investment, as well as estimated jobs, capital invested, locations considered, and so on as available. Announcements of large labor intensive investment projects are validated directly with corporate sources, and corrected or excluded where appropriate to avoid overestimating projected job creations. Investments through business mergers and acquisitions are not included in GILD since these investments are unrelated to attractiveness of individual locations. GILD aims at

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analyzing location decision trends, and as such it is the best possible information source for measuring countries’ and regions’ success in attracting new businesses. Since GILD is a dynamic database, data for previous years are constantly updated and extended. As more and better investment project data become available for countries and regions around the world, results for previous years are continuously updated to best reflect historical trends.

Global Investment Trends Substantial but reduced level of overall foreign investment activity … 2007 was a mixed year for foreign investment. While the global economy generated a considerable amount of international investment activity, 2007 saw a decrease in the number of projects and jobs created compared to 2006. After a period of several years of sustained growth in international investment activity, with 2006 being a record year during which approximately 1.5 million jobs were created from foreign investment projects, there were approximately 10,000 foreign investment projects announced in 2007 that created a little over 1.2 million jobs around the world: a 20% decrease. This is perhaps unsurprising, as the global economic optimism of 2006 gave way to a slightly more cautious outlook during 2007, resulting in a reduced appetite for investing abroad. The forces of globalization, of which foreign investment is a fundamental embodiment, thus proved themselves subject to the volatility and cyclical trends that have shaped domestic economies and investment for previous decades.

… and continued widening of investment activity … While the overall investment activity slowed down in 2007 compared to the record levels of 2006, this was by no means a uniform trend across continents and countries. Jobs created by foreign investment decreased in Asia and North America, increased (considerably) in Africa and Latin America, and remained fairly stable in Europe. After years of Asian dominance of the market for foreign investment, Africa and Latin America are now emerging as important geographic regions, together receiving approximately 17% of the global jobs created from foreign greenfield and expansion projects in 2007, compared to 13% in 2006. Despite the slowdown of investment in Asia, China and India continue to be the two top locations for foreign investment measured by jobs created. However, both countries saw a decrease in jobs created from foreign investment in 2007 compared to 2006, with India experiencing an almost 50% reduction. Furthermore, Vietnam received from foreign investment in 2007 less than one-third of the jobs it received from that investment in 2006, though the 2006 figures were due largely to a handful of very large projects. In

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contrast, countries such as Thailand and Mexico experienced increases in jobs created from foreign investment in 2007. Figure 1. Top ranking destination countries by estimated jobs – 2007 (06) 2007 (06) 1 (1) 2 (2) 3 (3) 4 (4) 5 (6) 6 (7) 7 (10) 8 (5) 9 (14) 10 (12) 11 (8) 12 (15) 13 (19) 14 (11) 15 (5) 16 (10) 17 (16) 18 (17) 19 (20) 20 (-) 55

India China United States Thailand Mexico United Malaysia Russia Hungary Philippines Poland Romania Brazil France Vietnam Czech Morocco Germany Canada Spain Denmark 0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Moreover, within the different geographic regions, new countries are emerging as serious contenders for investment. For example, in Europe, Serbia and the Balkans more generally have become new major recipients of investment, as these locations are increasingly seen as alternatives to traditional Eastern European “hot spots” that are experiencing tighter labor markets and increased competition for skills. This is particularly evident when looking at jobs created from foreign investment compared to population size, where Bulgaria, Romania, and Serbia are all ranked in the top 10 globally, and Macedonia is in the global top 20. Denmark is ranked 33rd globally on this measure.

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Figure 2. Top ranking destination countries* by estimated jobs, per 100,000 inhabitants – 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 33

Hungary Singapore Bulgaria Czech Republic Slovakia Malaysia Serbia Romania Thailand Ireland Nicaragua Costa Rica United Kingdom Poland Macedonia Belgium Finland United Arab Mexico Chile Denmark 0

50

100

150

200

250

300

350

400

* Countries with less than 1 million inhabitants not included

The widening of investment activity noted above is also evident in a gradually lower concentration of job creation among the top recipient countries, with the top 15 recipient countries now receiving less than 70% of global jobs created, compared to 73% in 2006 and 85% in 2005. Hence, while the findings last year might have suggested that it was a rising tide of investment that lifted a number of new countries into contention for investment this year’s findings indicate that the widening of investment activity is the result more of structural shifts in the global economy. Even in the absence of growing global economic activity, companies are thus expanding their geographic scope. Thus the emergence of the global enterprise is not a cyclical but a structural phenomenon, manifesting itself in companies continually seeking opportunities in new places across the world. Companies are becoming truly global in their reach for opportunities offered by different locations around the world. As companies extend their search for markets, talents, and cost efficiency to new regions and countries of the world, concomitant opportunities arise for a range of locations that were previously ‘off the map’ for investors, while the competitive pressures on countries that have benefited from considerable investment activity in recent years are intensified.

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… from a broadening source of investment We are seeing a considerable shift in the structure of the emerging global economic architecture, with China and India no longer confined to roles of recipients of investment. Rather, Chinese and Indian companies are now firmly established as key investors around the world, with companies from both countries increasing their job creation abroad compared to 2006. In total, companies from India and China created approximately 80,000 jobs abroad in 2007. Though much media attention is paid to Indian and Chinese acquisitions of foreign companies, our findings indicate that they are also actively expanding through greenfield and expansion investments around the world. In contrast, US companies have cut back their overseas investment activities in 2007 compared to 2006, creating a little over 300,000 jobs abroad last year compared to almost half a million in 2006. This drop can be viewed as one of the key reasons for the overall reduction in global investment activity in 2007, and is most likely explained by the worsening economic outlook and reduced optimism of US companies setting in during the latter half of 2007. The increased investment from other countries (particularly Germany and France) has been insufficient to offset the reductions in US investment, illustrating the still heavy reliance of the world economy on the US as a major source of job creating investment activity. However, this is likely to change as China, India, and other emerging nations increase such investment. Figure 3. Top ranking origin countries by estimated jobs – 2007 (06) 2007 (06) 1 (1) 2 (2) 3 (3) 4 (7) 5 (4) 6 (5) 7 (10) 8 (8) 9 (17) 10 (6) 11 (11) 12 (14) 13 (13) 14 (15) 15 (9) 16 (12) 17 (19) 18 (18) 19 (16) 20 (20)

United States Japan Germany France United Kingdom Taiwan India South Korea China Canada Switzerland Italy Netherlands Sweden Spain Singapore Denmark Austria Finland Australia 0

100,000

200,000

300,000

400,000

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Interestingly, the previous choices in outward investment from the various source countries are now less distinct. For example, while German companies have placed a large proportion of their outward investment in Eastern Europe in recent years, they now appear to be looking more widely for opportunities, with China, India, Mexico, and Malaysia among the main recipients of German investment in 2007. This is further evidence that companies across the world feel compelled to look beyond the more established locations for opportunities to recruit the best talent, optimize their supply chains, and take advantage of lower operating costs. Sectoral trends The sectoral composition of investment has remained fairly stable globally, with electronics, transport equipment, and the Information and Communications Technology (ICT) sector continuing to dominate. However, trends have by no means been uniform across sectors. For example, business services experience a notable decrease in investment activity. This is not surprising, as business services investment tends to be more sensitive to market fluctuations and thus more cyclical than other sectors. Hence, the drop in business services investment is linked to the recent decrease in outward US investment (traditionally a major source of business services investment) and partly explains the drop in inward investment to India (a major recipient of business services investment). In contrast, the chemicals and energy sectors saw considerable growth. The increase of the latter is due in part to growing activity in new sub-sectors in renewable energy that are starting to generate significant foreign investment as these sub-sectors mature. Notably, the solar energy sub-sector is quickly developing into a very powerful engine for economic development in multiple regions around the world, with almost 15,000 jobs created from the foreign projects announced during 2007.

European Investment Trends In Europe, the widening of the global economy manifested itself in increasing investment activity outside the European Union, with countries in South-East Europe (such as Serbia) emerging as locations for investment. While the UK is the greatest recipient of jobs from foreign investment in Europe, followed by a handful of Eastern European countries, these developments continue the trend towards South-East Europe, which was identified last year (when Romania and Bulgaria were both major new recipients of investment). For a growing number of companies, we already recognize a widening of their investment activity beyond South-East Europe to the Middle East and North Africa as locations to serve European markets. This is largely explained by the rapid tightening of labor markets and rising cost levels in new EU member states, resulting in companies looking for opportunities elsewhere. As cost levels rise and the hiring and retaining of staff becomes more difficult, companies are increasingly willing to look at locations that were before perceived as too risky.

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Figure 4. Top ranking destination countries in Europe by estimated jobs – 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 24

United Kingdom Russia Hungary Poland Romania France Czech Republic Germany Spain Serbia Bulgaria Ukraine Slovakia Belgium Netherlands Turkey Ireland Sweden Finland Italy Denmark 0

10,000

20,000

30,000

40,000

50,000

60,000

When taking population size into account, the dominance of Eastern Europe is further highlighted, with the six top European locations being Eastern European countries. Ireland and the UK, followed by Belgium and Finland, are the top locations in Western Europe by this measure. Denmark is ranked 18th in Europe on this indicator. Figure 5. Top ranking destination countries* in Europe by estimated jobs, per 100,000 inhabitants – 2007 2007

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Hungary Bulgaria Czech Republic Slovakia Serbia Romania Ireland United Kingdom Poland Macedonia Belgium Finland Latvia Bosnia and Herzegovina Sweden Moldova France Denmark Spain Netherlands 0

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Furthermore, far from being merely the manufacturing hub of Europe, some locations in Eastern Europe are emerging as serious competitors for services investment. For example, a significant proportion of Romania’s and Hungary’s inward investment is now in service activities. Indeed, a large part of the growth in investment for these two countries has been in services rather than production. This suggests that the widening scope and competition for investment is extending into services functions that were previously focused on Western European locations. Hence, while the functional distribution of inward investment for Europe as a whole is broadly similar to the global pattern, there are marked differences between individual European countries, with the UK the clear service center of Europe, attracting considerable numbers of headquarters and shared services operations. Similarly, investment into Denmark is more heavily focused on services than the European average. In contrast, countries such as the Czech Republic are heavily concentrated on production activities. Figure 6. Functional composition of investment in Europe and European countries 2007 100% 90% 80% 70%

Other R&D Services Production

60% 50% 40% 30% 20% 10%

l ba G lo

e ro p Eu

K U

ce Fr an

ar y un g H

ar k en m D

om R

C

ze ch

Re p

ub

an

ia

lic

0%

Sectorally, the distribution of investment in Europe is focused on transport equipment, electronics, and ICT, but again there are marked differences between the individual countries. For example, while more than 70% of the jobs created from foreign investment into the Czech Republic are in transport technologies and electronics, approximately half of Denmark’s inward investment is in life sciences and ICT. In Germany by contrast, and as one would expect given the size and scope of its economy, inward investment is distributed far more evenly across a wide range of sectors.

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Figure 7. Top ranking sectors by estimated jobs in Europe 2007 2007 1

Transport equipment

2

Electronics

3

ICT

4

Chemicals

5

Business services

6

Energy, Utilities, Waste management

7

Industrial equipment and machinery

8

Food, Beverages, Tobacco

9

Financial services

10

Metals and products 0

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Danish Investment Trends Denmark had a relatively strong year for foreign investment in 2007, with more than 2200 jobs created from 71 recorded projects, compared to approximately 2000 jobs created from greenfield and expansion foreign investment projects in 2006. Notwithstanding a decline in global investment activity, Denmark thus managed to increase its job creation from foreign investment. The main investors into Denmark in 2007 were US, Norwegian and UK firms, with companies from these three countries accounting for more than 70% of the jobs created. The important role of US companies as a source for job creation in Denmark is further illustrated when looking at the period 2003-2006, with US companies accounting for 36% of jobs created.

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Figure 8. Origin countries into Denmark 2007 France Austria Switzerland Other 0.3% 1% 3% 1% Germany 4% China 5% United States 36%

Netherlands 5% Sweden 7%

United Kingdom 15% Norway 23%

Figure 9. Origin countries into Denmark 2003-2006 Other 16% Finland 3% United States 35%

Canada 3% Japan 4% Sweden 4% United Kingdom 5% Norway 5% France 6%

China 6%

Germany 13%

Sectoral compostion of Danish investment Life sciences and ICT dominated in 2007, with the two sectors accounting for approximately half of total jobs created from foreign investment in Denmark. During the entire period 2003-2007, the dominance of ICT is more evident, while life sciences and electronics are ranked 2nd and 3rd. While business services has traditionally been a source of significant investment to Denmark, the global decline in investment activity in this sector has also affected Denmark, with the sector generating less than 4% of jobs in 2007.

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Figures 10. Top ranking sectors of investment into Denmark 2003-2007 1

ICT

2

Life Sciences

3

Electronics

4

Business services

5

Energy, Utilities, Waste management

6

Logistics

7

Industrial equipment and machinery

8

Financial services

9

Metals and products

10

Food, Beverages, Tobacco 0

500

1,000

1,500

2,000

2,500

3,000

3,500

Analysis of Key Sectors Information and Communications Technology (ICT) Globally, foreign investment in the ICT sector created approximately 190,000 jobs in 2007. While India remains the top location for the ICT sector, China has increased its share considerably, and the Philippines has emerged as a new key recipient of investment in terms of absolute job numbers. Similarly, Ukraine now appears in the top 10, again highlighting that companies are looking further afield for opportunities to invest. Measured by absolute number of jobs created, Denmark is ranked 38th with less than 500 jobs, which is a slight reduction compared to 2006. When taking population size into account, the picture is radically different, with Ireland and Singapore topping the global ranking and Denmark in 14th position. Measured by number of projects, the UK is the top location, followed by India and France. Denmark is ranked 28th globally.

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Figure 11. Top ranking countries for jobs in ICT – 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 38

India China Philippines United States United Kingdom Canada Romania Spain Ukraine Mexico Vietnam France South Africa Poland Hungary Argentina Morocco Brazil Thailand Egypt Denmark 0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Figure 12. Top ranking countries for jobs/population in ICT - 2007 2007

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Ireland Singapore Costa Rica Hungary Jamaica Slovakia United Kingdom Romania Philippines Canada Netherlands Latvia Czech Republic Denmark Spain United Arab Emirates Poland Australia Sweden Ukraine 0

5

10

15

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25

30

35

40

US companies are by far the largest source of investment in the sector, while other important origin countries are India, France and Japan.

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ICT in Denmark During the period 2003-2007, Denmark received 107 foreign investment projects in the ICT sector, creating more than 3,000 jobs. US companies are particularly important as a source for ICT investment in Denmark, with Chinese companies ranked second. Accordingly, for the period 2003-2007 US investors created more than half of the jobs created in the ICT sector from foreign investment in Denmark. Figures 13. Investment to Denmark by origin country (jobs) 2003-2007 1

United States

2

China

3

Sweden

4

France

5

Germany

6

United Kingdom

7

India

8

Taiwan

9

Jamaica

10

Finland 0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

In the ICT sector, Denmark has been particularly successful in attracting headquarters and other service operations, but less R&D and production. However, 2007 saw a marked increase in the number of jobs created from R&D projects compared to previous years. Figure 14. Functional composition of ICT investment Denmark 100% 90% 80% 70% 60%

Other R&D

50%

Services Production

40% 30% 20% 10% 0%

2003-2006

2007

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Life sciences The global market for foreign investment in life sciences created more than 37,000 jobs from 481 foreign investment projects in 2007. The US is by far the greatest recipient of investment, followed by China, India and the UK. Similarly, when measured by number of projects, it’s the same four countries that top the list, although here the UK is the top recipient with 73 projects. Denmark received 10 projects creating an estimated 662 jobs. When taking population into account, Denmark is ranked 4th globally, while Ireland tops the list in 2007. Figure 15. Top ranking countries for jobs in life sciences – 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

United States China India United Kingdom Ireland Hungary Singapore Mexico Spain Brazil Malaysia Germany Belgium Canada France Romania Denmark Costa Rica Puerto Rico Egypt 0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Figure 16. Top ranking countries for jobs/population in life sciences - 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Ireland Singapore Hungary Denmark Belgium Costa Rica Puerto Rico Malaysia United Kingdom Austria Romania Israel Spain Canada Portugal Lithuania United States Finland Sweden Netherlands 0

5

10

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35

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45

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Furthermore, Denmark is a key source for investment abroad, with Danish companies accounting for 6% of global jobs created from foreign investment in 2007. The US was the biggest source of investment globally. Life sciences in Denmark In total, Denmark received 42 investment projects in the life sciences sector during the period 2003-2007, creating more than 1,400 jobs. The vast majority of the jobs created from foreign investment in the life sciences sector in Denmark originate from US companies. Other important sources of investment are Germany, Norway and Switzerland. Figure 17. Investment to Denmark by origin country (jobs) 2003-2007 1

United States

2

Norway

3

Germany

4

Switzerland

5

Japan

6

France

7

India

8

Russia

9

Belgium

10

United Kingdom 0

100

200

300

400

500

600

700

800

900

Functionally, production dominates the inward investment to Denmark in the life sciences sector, while R&D and services are also important. It is worth noting, however, that measured by number of projects, R&D and headquarters are the dominant functions, while production represents a limited share of overall investment activity. These findings are perhaps unsurprising, as production projects are often large, while R&D and HQ projects are often smaller in scope.

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Figure 18. Functional composition of life sciences investment in Denmark 100%

80%

60%

Other R&D Services Production

40%

20%

0%

2007

2003-2006

Renewable energy Globally, more than 32,000 jobs were created from 202 foreign investment projects in the renewables sector in 2007, highlighting that the sector is becoming a significant source of foreign investment, notably in the two sub-sectors solar and biofuels. Brazil and Malaysia were the top two recipients, with each country receiving a little over 3,500 jobs. Denmark received approximately 100 jobs during 2007. When taking population size into account, Singapore is the world’s top destination in 2007 and Denmark is ranked 18th. Measured by number of projects, the US is the world’s top location, followed by France, Spain and Germany.

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Figure 19. Top ranking countries for jobs in renewables – 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 33

Brazil Malaysia Singapore US Philippines Hungary Spain Germany Indonesia United India Kenya France China Serbia Poland Ukraine Peru Netherlands Romania Denmark 0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Figure 20. Top ranking countries for jobs/population in renewables - 2007 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Singapore Hungary Malaysia Serbia Spain Panama Netherlands Bulgaria Kenya Philippines Moldova Sweden Bosnia and Herzegovina United Kingdom Brazil Belgium Germany Denmark Romania Peru 0

10

20

30

40

50

60

70

80

The US, Norway and Germany were the largest sources of investment in 2007, with the three countries accounting for more than half of the jobs created in the sector.

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Renewables in Denmark Over the entire period 2003-2007, Denmark received 7 projects creating 629 jobs in the renewables sector. Hence, while renewables is a growing sector globally, there is only limited investment going to Denmark. The renewables investment into Denmark is predominantly in wind energy, which is largely explained by the considerable domestic sector and market for wind energy in Denmark, with investments in production facilities in this sector being largely market driven. However, Denmark is receiving no investment in solar energy projects, which is the main sub-sector of renewables investment globally. Similarly, Denmark’s share of the considerable market for investment in biofuels is negligible. This suggests that Denmark may have niche strengths in wind energy projects, but that there is no broader strength in environmental technologies as such. Looking at the entire period 2003-2007, Germany is by far the greatest source of investment for renewables. Figure 21. Investment to Denmark by origin country (jobs) 2003-2007 India 4%

Spain 4%

Other 1%

Norway 16%

Germany 75%

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Figure 22. Sub-sector composition of renewables investment in Denmark 2003-2007 Biodiesel 16%

Wind 84%

Figure 23. Functional composition of renewables investment in Denmark 2003-2007 R&D Services 4% 1%

Production 95%

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Final Observations While tempered by the decline in overall activity, the global economy, of which foreign direct investment is a pillar, is continuing to widen its reach as companies extend their search for markets, talents, and cost efficiency to new corners of the world. Globalization is thus becoming truly global in its reach, bringing jobs, growth, and opportunities to new parts of the world. These trends have brought unprecedented levels of investment to the African continent, with North African countries emerging as some of the new preferred locations for investment. These are particularly encouraging findings, as Africa has often been seen as the neglected continent with respect to foreign investment and other global economic activity, receiving only a negligible share of the world’s overall foreign investment activity. Furthermore, within continents, new countries are emerging as preferred locations, with, for example, Serbia among the major recipient countries in Europe. For companies, the emergence of more countries as potential locations for investment brings unprecedented opportunities for availing resources across the globe in order to enhance competitiveness. However, these developments also result in greater pressure to review and adapt the global footprint of activities such as to take advantage of new opportunities. In other words, companies will have to innovate constantly in their global footprint, in the same way that companies innovate in other areas of their operation. This results in radically and constantly altered corporate global footprints, with accompanying challenges of successful integration and coordination. Shying away from unusual or “remote” investments in your global footprint will result in a weakened competitive position, as competitors are exploiting their first-mover advantage in new locations. Crossing the ‘mental borders’ about what constitutes a potential location is thus as important as crossing physical borders when setting out your company’s location strategy, in order to take full advantage of the opportunities offered by the global economy. In this context, Denmark has had a good year for foreign investment in 2007, with the country experiencing 10% growth in jobs created from inward investment compared to 2006. What is particularly encouraging was the substantial increase and improved international position in life sciences, a key target sector for the Danish economy. Taking a longer term perspective, it is clear that ICT is also a dominant sector for inward investment to Denmark, suggesting that the country has particular strengths in this area. Nevertheless, it is worth noting that the country experienced a slight reduction in the number of jobs created in the ICT sector in 2007 compared to 2006. The considerable investment in life sciences and ICT indicates a development for Denmark towards a greater concentration on knowledge driven sectors. Indeed, it appears as if Denmark has benefited from targeting life sciences and ICT as key sectors and

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clusters in recent years, and the concerted efforts to develop a favourable environment for companies in these sectors. However, while the renewables sector represents one of the fastest growing sectors for foreign investment globally, Denmark is not benefiting from this increased investment. Accordingly, it does not yet appear as if the country has managed to position itself as a key location for renewables, with the possible exception of wind energy. More worryingly, the country is currently experiencing a considerable tightening of the labour market, with companies struggling to hire and retain the required skilled labour. This represents a major threat to future investment and success in sectors such as ICT and life sciences, which are very much ‘skills driven’. Consequently, if Denmark is to maintain and improve its success in its key sectors, the skills issue needs to be urgently addressed. Indeed, as companies continue to reassess and modify their global footprint, and more locations are emerging as potential candidates for different types of investment, Denmark must constantly improve its business environment if it is to maintain or improve its position in the increasingly competitive economic landscape. Furthermore, this calls for a balanced inward investment strategy which combines a focus on sectors where competitive strengths exist (life sciences and ICT) with a realistic assessment of the potential that new upcoming sectors (e.g. renewables) offer for Denmark.

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