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Nordic states innovate to attract global tech players

The Nordic region is already a hotbed for tech startups and has the ingredients to attract more investment from the established tech giants

Nordic governments are eager to use a combination of tax-friendly policies, tech-savvy labour pools and low-cost green energy to lure the world’s top tech firms.

For example, the governments of Denmark, Sweden and Finland have made it clear they want customised, fintech-focused tax policies that boost their capacity to attract leading international corporates.

Likewise, the region’s income and high living standards environment is playing an important role in persuading international tech corporations to investment in new and existing Nordic operations.

Global brands have routinely used the Nordic countries to pilot new products and services ahead of a broader-scale international launch, and this long-standing tradition continues. In October, Apple rolled out its Apple Pay mobile payment system across Denmark, Finland and Sweden in partnership with leading regional banks and financial services providers.

The three Nordic countries’ tax customisation strategies became clearer in September, when they were conspicuous by their absence from the European Union (EU) member states that backed a Franco-German plan to begin taxing digital giants such as Google, Amazon and Facebook at higher rates.

Denmark, Sweden and Finland remain outside the Franco-German initiative, which wants the European Commission to explore pan-EU tax compatibility options and consider setting an “equalisation tax” based on turnover rather than the declared profits generated in Europe by tech companies that operate in the digital domain.

The Franco-German plan is proving divisive in the EU. So far, it is supported by just 11 of the 28 member states, including Estonia, Italy, Spain, Romania, Bulgaria, Slovenia, Greece, Portugal and Austria.

“Taxation is an important tool for growth,” said Karsten Lauritzen, Denmark’s minister for taxation. “Denmark wants to become a hub for technology and innovation. Our tax policies play a part in why international companies come here.”

Government officials in Sweden and Finland share Lauritzen’s concern that the Franco-German tax plan could deter international corporations from investing in the EU area.

Denmark’s energy minister, Lars Lilleholt, said his country needs to build on its own strengths to attract floating global investment in the tech arena. “We have one of the world’s greatest energy systems, with large quantities of green energy, high security of supply, good fibre connections and competitive power prices,” he said.

Read more about Nordic datacentres

Nordic governments’ continuing efforts to build innovative, tax-friendly operating environments for the tech sector has not gone unnoticed. Google, Apple and Facebook are all increasing their presence in the region, particularly in the core area of datacentres.

The Nordic region’s green image, coupled with the abundant availability of low-cost renewable energy from hydro and wind parks to power data facilities, also creates a dynamic to drive investment by Google, Apple and Facebook in the region. Add favourable tax environments, skilled labour pools and universal competence in English to the mix and the region looks increasingly attractive to international tech groups looking to expand their data, social media and fintech offerings inside the EU.  

Denmark’s strategic push to calibrate its tax legislation, linked to its green energy policies, has given the country a marginal but important competitive edge over its Nordic neighbours Sweden and Finland. Denmark’s highly innovative approach to tech-focused inward investment surfaced again in May when it appointed career diplomat Casper Klynge as the country’s digital ambassador, the first country in the world to do so.

Silicon Valley-based Klynge has been tasked with building partnerships with tech firms and universities, shaping tech companies’ opinions of Denmark and identifying new tech trends.

“The reality today is that tech companies are not just wealthier, but are more powerful than many nation states,” said Klynge, who was previously Denmark’s ambassador to Indonesia. “Individually, certain companies are enormously influential in both positive and negative ways. These companies are also policy-shapers and foreign actors in their own right. There is a need for ‘techplomacy’.”

Denmark’s innovative lead in the increasingly digital tech industry space takes private-public sector networking and collaboration to a whole new level. This ground-breaking approach is driving the country’s emergence as a major Nordic and European technology hub for global players and has triggered a series of high-profile capital investments and projects.

Facebook is building a datacentre near Odense, and once it is operational in 2020, the facility will be the tech giant’s third owned and operated datacentre outside the US. The €100m facility will also be Facebook’s second datacentre project in the Nordic region to add to the datacentre it operates in Luleå, Sweden.

Renewable energy

The Odense facility will comprise two datacentre buildings, each about 90,000m2, as well as a 24,000m2 administrative building. All on-site facilities will be powered exclusively by renewable energy. Further cost savings are expected to be realised by optimising natural cold climate conditions to cool servers instead of relying on traditional, expensive-to-run air-conditioning systems.

And Facebook is not the only global company developing a datacentre platform in Denmark. IBM opened a datacentre in Copenhagen during the first half of 2017, and Apple is currently constructing a renewable energy-powered datacentre in Jutland, with an estimated cost of €810m, which is scheduled to open in 2019.

The Jutland facility will power Apple’s online services, including the iTunes Store, App Store, iMessage, Maps and Siri for customers across Europe. Apple’s first datacentre in Denmark, located near Viborg, is due to begin operations by the end of 2017.

Google, meanwhile, is accumulating a land bank in Jutland to meet its future datacentre capacity needs in Europe. Its latest land purchase, a 324-hectare site in the Jutland district of Aabenraa, is located close to Apple’s existing datacentre. Google also owns a 181-acre site at Fredericia, east Jutland, which it bought in June 2017.

Google also has a presence in Finland. To date, it has invested close to €1bn in a mega-size datacentre at Hamina on Finland’s south-east coast. As in Denmark and Sweden, the green factor is also present in this investment, with on-site power sourced mainly from local wind parks and hydro.

But it’s not just the North American giants that are being tempted by the Nordic region as a tax-friendly, low-cost, green-energy operating base within the EU. Yandex, Russia’s biggest search engine developer, has established a large-scale datacentre in Nokia’s backyard. Waste heat generated by Yandex’s facility at Mäntsälä, southern Finland, is used to heat about 5,000 homes in the area.

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