You wouldn’t be wrong if you thought Iceland was having a bit of a moment right now. In the past few years, we’ve seen this tiny nation in the North Atlantic consistently making itself known on the world’s stage.
We’ve seen Icelanders become the Viking-clapping underdog heroes of the World Cup. We’ve all grown jealous of Instagram feeds from friends who snuck off for a cheeky weekend to Reykjavík. We’ve watched in awe recently as a new volcano revealed itself to the world, and this time didn’t cancel air traffic for months.
Iceland is well and truly having a moment. It’s a great place to visit, an exceptional place to live in, but it’s also got a thriving economy that is open to investment.
So why should you invest in Iceland? What is the Icelandic economy like? How do you invest in Icelandic industries? Read on to find out more.
Why Should You Invest in Iceland?
For an investor, Iceland is a country that perfectly marries low corporate taxes with significant incentives for research and development.
It is a country that straddles the Eurasian and North American tectonic plates and has become a stopover hub for many business people within the trans-Atlantic community.
Iceland is only a 5-hour flight from the east coast of America. About 3 hours from Paris, Frankfurt, London and the capitals of the other Nordic countries, making it ideally situated for an entrance into a global market.
It’s also an exciting time to invest in the Icelandic economy; in recent years, the government has made advances in the frameworks for starting a company. The goal is to make it easier for those in the domestic market to attract investors and gain better profits.
Because of the globally thinking nature of Icelandic businesses, local investors are also used to co-investing with foreigners which can strengthen ties and lessen risk.
When some think of Iceland and finance, they might immediately be reminded of the Global Financial Crisis (GFC) of 2007/08. After all, the country was devastated in the fallout of this, and the government was forced to make the difficult decision to let the banks fail.
What you might not know is that an incredible positive came out of this situation. The nation basically had to rebuild its banking system from the ground up. This enabled Iceland to fortify and innovate its economy and financial systems in a way that very few nations get the chance to do.
Iceland’s economy prides itself on aiming to lead industries like life sciences and health, genetics, fintech and software, food sciences, renewable energy and much more.
An Overview of Iceland’s International Treaties & Collaborations
Iceland is a trading nation at its core. Icelanders have relied on trade with other nations since the first settlers arrived over a thousand years ago. The little island country that could has become one of the most prosperous nations in the world as a result of trade.
Iceland has an extensive range of trade agreements with over 70 other nations. To put that in perspective, Iceland has trade agreements with countries that are home to 37% of the world’s population.
You might not know this, but Iceland was actually the first European country to negotiate a free trade agreement with the People’s Republic of China in 2013.
The USA is by far Iceland’s largest single trading partner. Iceland and America have been close allies for decades. The USA was the first country to officially recognise Iceland’s independence from Denmark in 1944.
Iceland also has strong trade relations with the UK. Both the UK and Icelandic governments are currently working on post-Brexit trade deals to maintain their historically strong trade links.
Iceland is also a part of the European Union’s market through the EEA agreement. This is a particular treaty that allows a few countries that are not actual members of the EU some of the liberties and freedom of movement that EU member states have. Simply put, it means that you can view the EU plus Iceland, Norway and Liechtenstein as one economic area.
So how do these agreements benefit businesses? It means that there is free movement of goods, services, capital and workers across a market of over 500 million consumers.
Generally, for economic purposes, the border between Iceland and the EU is pretty irrelevant; the major exceptions to this are the trade of fish and agricultural goods.
Source: Wikimedia. CC. Danlacock
The overall legal framework for Iceland’s economic activity is in line with European standards; for example, Icelandic businesses must respect EU competition and state aid rules and public procurement rules.
The General Data Protection Regulation GDPR that many are familiar with in Europe is upheld in Iceland. Hence, the rules regarding the collection, transmission and storage of data are the same in Iceland as they are in the rest of the EU.
Iceland’s Economy
On the international stage, Iceland should be viewed as a stable democratic economy, midway between Europe and the US.
Although Iceland was hit hard by the Global Financial Crisis of 2007/08, the country is in excellent financial shape today. The Iceland of today has a very healthy bank balance and a sensible debt ratio in both the public and private sectors.
Iceland is also in a solid net international asset position and has an efficient, well-capitalised banking system that is continuously improving.
Typically you could view the Icelandic economy as incredibly flexible due to a high level of importance being placed on innovation.
Iceland is a high-income nation. The per capita income of Iceland places it in the top 10 countries in the world. It has a free-market economy and uses the Nordic model of state welfare.
Iceland’s workforce is quite skilled due to its strong education system. A majority of Icelanders have a relatively high degree of economic freedom. Icelanders have high regard for things like equality, and they tend to lean towards the attitude of working smarter, not harder. Iceland also has a thriving gig economy.
Icelandic society is generally quite highly educated; most Icelanders are multilingual. It is sporadic that you will meet an Icelander under the age of 50 who doesn’t have a decent grasp of English. In most cases, in a room of Icelanders, you will likely find that they speak at least 5 languages between them.
Iceland also does very well in several indexes like gender equality, happiness and competitiveness.
What Are Iceland’s Main Exports?
The main exports of Iceland are aluminium, fish products and tourism. In 2017 aluminium and fish products account for an equal 17% each of the total exported products and services, and tourism accounted for 42%.
What Are Iceland’s Main Sectors?
Iceland’s business sectors are varied and are also expanding exponentially with the advent of innovation and technologies. There are three main sectors you might wish to look into if you are wanting to invest in Iceland. They are; tourism, fisheries and startups.
Invest in Icelandic Tourism
Tourism is undoubtedly one of the major players in the Icelandic industry; in the last decade, the tourism industry has boomed. Iceland has become a hugely popular holiday destination for travellers worldwide, and the possibilities for an investor into the Icelandic tourism industry are endless.
The traditional investment options like tour companies, travel agencies and accommodation are all fruitful ventures for many, but Iceland is also a country that supports new and creative ways to cash in on the tourist dollar.
One great example of this is FlyOver Iceland. This interactive experience was the result of a partnership between an Icelandic startup and a foreign investor. The result was a tourism experience that was equally enjoyed by locals and filled a gap in the tourism market in Reykjavík.
The success of FlyOver also resulted in another venture in the form of the Sky Lagoon.
Invest in Icelandic Fisheries
Fishing culture is an intrinsic part of Iceland. The people here relied on fishing in the past for sustenance, security and export. Long before tourism, the marine industry is what kept Iceland alive.
Fishing is so important that even children in Iceland know of the ‘Cod Wars.’ This was basically a dispute Iceland had with the British over who was allowed to fish in Icelandic waters.
It was a war in the sense that tactical actions were taken on both sides, but no lives were lost, and an agreement was eventually made. Today it’s still a historical event that every Icelander knows about, and very few Brits do; a true signifier of the importance of fishing in Iceland.
Photo: Marel.com
Icelandic fisheries are leaders in food technology. There are companies like Marel that use advanced robotics to help with sorting processes. There are also businesses like Valka that have implemented technologies that use water to cut fish in order to eliminate food waste and maximise profits.
Investing in the Icelandic fisheries means entering a strong, established market with a view to enhancing profits through innovation.
Invest in Icelandic Startups
Iceland has been known for producing some incredible artists in film, music and visual art, but in recent years we have seen some of that creativity being directed towards startups.
Innovation and tech startups have become even more robust drivers of the Icelandic economy. This is probably in part due to the global way of thinking that most successful business people need in Iceland.
The domestic market is small, so startups tend to think globally from day one, which gives them a resourcefulness, drive and edge that you might not see in larger markets. They have also been utilising remote work long before the pandemic.
The geographical location of Iceland also plays a role in the business culture of startups. Icelanders are familiar with the cultural influences of both Europe and America. They are able to take the best parts of each to create an unstoppable force.
Particular startup sectors of interest in Iceland include; fintech, biotech, software and gaming.
The gaming industry is often overlooked by investors, but those who do some homework can make some decent profits from sound investments here. In 2020 global gaming revenue topped $150bn.
Iceland has had some massive successes in the gaming industry in the past decade; one example is EVE Online. This was created by the Icelandic company CCP Games, which was reportedly sold to Korean company Pearl Abyss for $425 million in 2018. Icelandic game founders know how to make a successful product and are constantly looking for the next big thing.
Can Foreign Investors Invest in Iceland?
Not only can foreigners invest in Iceland, but Icelandic companies are also actively looking for foreign investment. But what are Icelandic companies looking for in an investor?
Obviously, deep pockets are always a bonus, but Icelandic companies aren’t just about fulfilling a financial quota. Many companies and startups in Iceland want to gain investors that can bring access to a specific geographical market or industry to secure their future success on a global scale.
What Services Do You Need to Invest in Iceland?
There are some networks in Iceland that connect investors with potential leads.
You could also join a venture fund like Crowberry Capital that invests at seed and early-stage in businesses for technology advancement.
It can also be wise when investing or entering a business agreement in Iceland to engage the services of an Employer of Record (EOR). An EOR can take care of onboarding, HR, payroll, compliance and logistics to enable a smooth transition when bringing your business to the Icelandic market.
How the Iceland Stock Exchange / Nasdaq Iceland is Structured
Photo:NASDAQ-OMX Group Logo
The NASDAQ operates in about 28 global markets, a third of which are European. Within NASDAQ Europe, there is currently 1 commodities exchange, 7 equities exchanges, 1 Central Securities Depository covering 4 countries and 1 clearinghouse.
NASDAQ Iceland operates closely with the other Nordic NASDAQ exchanges. It shares a common infrastructure with the NASDAQ exchanges in Stockholm, Helsinki and Copenhagen. This infrastructure includes; the same trading systems, shared market data distribution, and identical rules and regulations.
When dealing with the Icelandic stock exchange, it’s imperative to view it within the context of the transition it has made since the Global Financial Crisis. What you can see since that difficult time in 2007/08 is that the Icelandic economy is incredibly resilient. This has also been prevalent throughout the COVID 19 pandemic.
How to Invest in Icelandic Stocks & NASDAQ Iceland
To invest in the NASDAQ OMX Iceland exchange, you first need to pick your broker and open a trading account with them.
You will then have access to their investment platforms to send purchase and sale orders. You can then choose the kind of financial asset to invest in; sovereign bonds, shares or corporate bonds.
A complete list of Listed Companies in Iceland can be found here.
Conclusion
There’s an often-quoted joke told around the pub sometimes in Iceland when talking about the economy.
‘Most Icelanders’ Great Grandparents were born in a mud hut and died in a Mercedes.’
This passing quip is a perfect illustration of how the economic landscape in Iceland underwent a massive change.
Iceland went from what many would consider to be a developing nation to one of the most innovative, forward-thinking, highly paid and educated societies on the planet in under a century.
The Icelandic market is definitely one to watch out for. Now is a great time to get involved and plant some seeds to gain returns in a future that certainly looks as bright as the Northern Lights.