Denmark exercises control over the Kingdom’s foreign affairs, security, and defense policy, in consultation with Greenland and the Faroe Islands.
- Greenland is a self-governing region within the Kingdom of Denmark, and geographically a part of the North American continent. Along with Denmark, Greenland was an EU member from 1973; however, in 1985, Greenland left the EU. The Greenlandic government is actively working to attract investments to Greenland to diversify its economy and further integrate itself into the global economy.
- Two-thirds of Greenland lies within the Arctic Circle, and its northern tip is less than 500 miles from the North Pole. Its land area is over 50 times that of Denmark, but has the lowest population density in the world, with approximately 56,000 inhabitants (or 1/100th the population of mainland Denmark), and the ice sheet covers nearly 80 percent of Greenland. Greenland can be reached by air from Denmark or Iceland. There are currently no direct commercial flights to or from the United States. Transportation infrastructure in Greenland is focused on air and sea due to the climate and geography. Greenland has no railroads or roads to connect towns and settlements, and passengers and goods are transported between regions by sea or air only.
- Greenland’s status within the Kingdom of Denmark is outlined in the Self Rule Act (SRA) of 2009, which details the Greenlandic government’s right to assume a number of competencies from the Danish government, including the administration of justice, business and labor, aviation, immigration and border control, as well as financial regulation and supervision. Greenland has acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark retains authority over foreign, security, and defense policy, as well as border control issues, including immigration into Greenland. Greenland’s GDP was estimated at DKK 20.19 billion (USD 3.24 billion) in 2021. Denmark provides Greenland with an annual block grant of DKK 3.9 billion — roughly USD 511 million — which accounts for approximately 20 percent of Greenland’s GDP and more than half of the public budget.
- The Greenlandic government seeks to increase revenues by promoting economic diversification and greater development of the fisheries value chain, natural resources, tourism, and clean energy. Key initiatives include improving access to financing for new businesses and enhancing Greenland’s corporate tax competitiveness. The Greenlandic government announced in 2022 an invitation to dialogue with prospective investors for tendering and licensing procedures for the exploitation of hydropower for the production of electricity for industry or a commercial project. The hydropower potentials are located on the southwest coast of Greenland, between Kangerlussuaq and Nuuk.
- The capital city Nuuk, in the south, and Ilulissat in the north are Greenland’s primary tourist destinations and have seen extensive construction activity in recent years. The ongoing expansion of their respective airports, which currently accommodate only smaller aircraft, is expected to lead to further growth and facilitate expansion of tourism. Upon completion expected in late 2024 in Nuuk and in 2025 in Ilulissat, the expanded runways will support large passenger aircraft, and the airports will be able to manage 800 and 600 passengers per hour, respectively. South Greenland is also a popular destination for tourists and cruise ships, and a new airport in the region’s capital, Qaqortoq, should also open in 2025.
- The Greenlandic subsoil contains a variety of valuable minerals, including rare earth metals, precious metals, precious stones, coal, graphite, and uranium. The rare earth element resources are considered globally significant and would rank in the top five worldwide if developed. Greenland has tremendous mineral resources, but Greenland’s geography and climate have increased challenges to developing commercially viable mining operations. There are several mining companies with exploration and exploitation licenses. One company holds an exploitation license to re-launch a gold mine in South Greenland, while another company seeks to extract rare earth elements. A company involved in a separate rare earth element mining project in South Greenland has filed an arbitration claim against the Danish and Greenlandic governments.
The Faroe Islands
- The Faroe Islands is a self-governing region within the Kingdom of Denmark. The autonomy of the Faroe Islands was established by the Home Rule Act of 1948. The Faroe Islands have an open economy and multiple trade agreements with other countries.
- For more than two centuries, the Faroese economy has relied on fisheries and related industries. Fisheries (including agriculture, hunting, and forestry) account for 22 percent of domestic income in the Faroe Islands. About 92 percent of goods exports are fisheries products. Salmon alone accounts for 39 percent of exports. As a non-EU member, the Faroe Islands maintained open access to the Russian market despite Russia’s retaliatory trade embargo on certain food imports from the EU beginning in 2014, allowing the Faroese to sell increased quantities of salmon to the Russian market at prices higher than in the EU. However, following Russia’s February 24, 2022, further invasion of Ukraine, the Faroe Islands passed legislation to join with sanctions on Russia and salmon exporters stopped sales to Russia.
- The Faroe Islands exported DKK 12.5 billion (USD 1.79 billion) worth of goods in 2022, 92 percent of which were fish products, with the remainder being mainly marine vessels and aircraft resales. In recent years, construction, transportation, banking, and other financial services sectors have grown. While there has been interest in offshore oil and gas exploration, commercially viable finds have not been made. The majority of goods exported in 2021 went to Russia (23.2 percent), however this number significantly decreased in 2022 to 8 percent. In 2022, top export markets for Faroese goods included the United Kingdom (14 percent), Denmark (13.2 percent), and the United States (13 percent). Goods imports totaled DKK 12.1 billion (USD 1.74 billion) in 2022. Most imports came from Europe; 1.01 percent originated in the United States. Denmark provided 22.9 percent of imports, followed by the Netherlands (13.5 percent), Norway (12.4 percent), Germany (8.6 percent), and China (6.1 percent). Imports consist mainly of inputs to industry (28.6 percent), items for household consumption (16.3 percent), fuels (18.7 percent), and machinery and capital equipment (8.7 percent).
- The Faroe Islands’ small, open, but non-diversified economy makes it highly vulnerable to changes in international markets. The Faroe Islands have full autonomy to set tax rates and fees, and to set levels of spending on the services they provide. Denmark provides an annual block grant, which was DKK 642 million (USD 96 million) in 2022.
For more information about Greenland and the Faroe Islands, please go to the Investment Climate Statement website.