As a measure of the pro-active willingness to attract foreign investment, the GOL created two promotional agencies in 2008, LuxembourgforBusiness (attached to the Ministry of Economy) and LuxembourgforFinance (attached to the Ministry of Finance). The former concentrates on attracting industrial investments, whereas the latter is oriented toward banking and the investment fund industry.
In June 2008, Luxembourg announced a major investment initiative (USD 200 million from GOL over the first five years) in biomedical research in collaboration with cutting-edge U.S. biotech firms (TGen) and research institutions (the Institute for Systems Biology (ISB) and the Partnership for Personalized Medicine (PPM)), led by Nobel Prize-winning American scientists. The objective is to develop a center of expertise in the area of molecular medicine. Unique opportunities have thus been created for foreign private investment in technological excellence and scientific research toward preventive medicine, in particular cancer (with lung cancer as chosen lead project). This project is open and attractive to highly-skilled workers of all nationalities and serves as a strong export platform for incorporating U.S. products and services. Part of this project is to be located with the expanded University of Luxembourg at the new campus in Esch/Belval, a redeveloped industrial area south of the capital city. This new center of excellence for academia, research and technology offers diverse opportunities for investment and partnership.
The major laws affecting incoming foreign investment through acquisitions, mergers, takeovers, and "greenfield" (starting from nothing) investments are based on the Luxembourg company laws, which are regularly updated and in line with EU regulation. The Luxembourg judicial system upholds sanctity of contracts.
There is no overall economic or industrial strategy that has discriminatory effects on foreign investors. There are no limits on foreign ownership or control (for example, all the banks are wholly-owned subsidiaries of their parent entities). General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms. There are no major sectors/matters in Luxembourg in which foreign investors are denied national treatment (equivalent to domestic firms). Following a decision to prioritize the simplification of administrative procedures which had been a deterrent to the creation of small businesses and the spirit of entrepreneurship in Luxembourg, the Ministry of Middle Classes (small and medium-sized businesses), in cooperation with the Ministry of the Economy of GOL established a National Committee for administrative simplification (alleviating bureaucratic red-tape). This measure is intended not only to enhance the competitiveness of the Luxembourg economy but will also provide easier access to the Luxembourg market for all entrepreneurs, including Americans. This measure, directly related to the national plan for innovation and full employment, provides for a reduction of paperwork and a long-term commitment by the appropriate agencies to study the impact of future draft laws on the small business community. On average, a company can expect to be registered within six months of application, especially with the support of the Luxembourg Chamber of Commerce, which requires all commercial enterprises to become members (register).
Foreign investors are allowed to participate equally in ongoing privatization programs, and the bidding process is transparent with no barriers erected against foreign investors at the time of the initial investment or after the investment is made. Moreover, there are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control, and there are no other practices by private firms to force local ownership or restrict foreign investment, participation in, or control of domestic enterprises. Potential conflicts of interest (GOL officials sitting on boards of directors, for example) do not impact freedom of investment in the private sector.
As one of the most competitive countries in the world with favorable economic conditions, the government's proactive policies in attracting FDI contribute to consistent investment growth and continuing positive projections for future investment, despite the current global economic crisis. Many international firms find it convenient to locate European headquarters or holding companies in Luxembourg as a result of the country's openness to foreign cultures, the high quality of life and consumer purchasing power (currently USD 88,000 GDP per capita), as well as the highly-qualified workforce available. Approximately 55 percent of Luxembourg residents and over 60 percent of the workforce are composed of foreigners (non-Luxembourgers), mainly from EU countries (Italy, Portugal), and especially from neighboring countries (150,000 cross-border workers daily from Belgium, France and Germany).
The average delay period currently in effect for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties and management fees through normal, legal channels is quite brief, approximately 24 hours. Investors can remit through a legal parallel market including one utilizing cash and convertible negotiable instruments (such as dollar- denominated host government bonds issued in lieu of immediate payments in dollars). There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs.
There are arbitration possibilities available for domestic dispute settlements with the Luxembourg Chamber of Commerce and the Mediation Center and, on an international level, with the International Chamber of Commerce. There have been no known investment disputes over the past few years involving U.S. or other foreign investors or contractors in Luxembourg.
The government accepts binding international arbitration of investment disputes between foreign investors and the state, and the courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties, and there is indeed a domestic arbitration body within the host economy, the Centre de Mediation (Mediation Center).
Luxembourg maintains measures that are consistent with WTO trade related investment measures (TRIMs) requirements, and in general the country adheres to WTO regulations in conformity with internal EU market directives. Performance requirements and incentives are applied uniformly and systematically to both domestic and foreign investors.
Several other available incentives for industry or other sectors are not given in the context of taxation but rather as general business or financial incentives, mostly by the state-financing agency SNCI, such as: loans at reduced interest rates; government guarantees on loans; real estate development assistance in certain industrial sites and buildings; cash grants (for high-technology investments, reorganizations of economically justified sectors, research and development of innovative products, services or manufacturing processes); and financial incentives for audiovisual productions using production facilities and locations in Luxembourg, within the EU framework for co-production financing. Particularly now in R&D, government subsidies are important and highly open to foreign investors, under the condition that they create a local company.
Performance requirements are imposed on a case-by-case basis, for example with respect to employment, as a condition for establishing, maintaining or expanding the investment, or for access to tax and investment incentives. There is no requirement that investors purchase from local sources or export a certain percentage of output or only have access to foreign exchange in relation to their exports. In the case of foreign investments, there is no requirement that nationals own shares, that the share of foreign equity be reduced over time, or that technology be transferred on certain terms. The government does not impose "offset" requirements, whereby major procurements are approved only if the foreign supplier invests in manufacturing, R&D, or service facilities related to the items being procured.
The government uses incentives to favor investment in certain locations and specific geographic areas, for example, abandoned or vacant industrial sites such as in Esch-sur-Alzette, the second largest city in the country (the developing Esch/Belval high-tech zone for example, with the new University of Luxembourg campus and partner biotech R&D facilities). These incentives are dependent on the size of the operation and nature of the investment. There are no enforcement procedures for performance requirements; U.S. and other foreign firms are able to participate in government-financed and/or subsidized research and development programs on a national treatment basis. However, local companies must have local resident members on their board of directors.
According to World Markets Research Centre of London, Luxembourg is rated consistently high as one of the "least risky places to do business" in the world. The risk ratings were all noted "insignificant" for the following reasons: political risk (existence of institutional permanence, internal and external political consensus); economic risk (existence of forward planning, a diverse and resilient economy); legal risk (existence of innovative legislation, transparency, independence and experience); tax risk (coherent and fair taxation system, low "effective" corporate and personal income tax rates below EU average); and operational risk (supportive attitudes toward foreign investment, high quality of infrastructure, existence of "social peace" with Tripartite system of negotiation process involving labor, employers and government, low bureaucracy and corruption). 2b1af7f3a8