The OECD has officially announced that a fresh period of economic expansion has begun in Iceland and has projected it to exceed 5% per annum by 2005, as work on the major aluminium-related investment projects gathers momentum. The greenfield investment by Alcoa of $1.1 billion is accompanied by a hydroelectric investment of the same amount. Furthermore, Columbia Ventures Corporation is expected to enlarge its Nordural aluminium smelter in 2004-2005 with estimated cost of about US$ 580 million, including needed energy investment. The new Alcoa smelter is scheduled to start up in 2007 and Columbia Ventures’ expansion to come in operation in 2006. Total labour force needed for the energy construction projects only is estimated to be about 4,200 man-years and 2,200 man-years for the Alcoa aluminium smelter.

The Icelandic company Prokaria has signed a research agreement with the Nestlé Research Center in Lausanne, Switzerland. Under terms of the agreement the partners will commence a screening program to locate new natural components for food applications. Dr. Jakob Kristjánsson, Prokaria President and CEO, says in a company statement, “This strategic move brings together opportunities for discovery in one of the world's most diverse, extreme ecosystems, involving the world's largest food company. Nestlé has established its position as world leader in the innovative development of food products. We are very excited about working with them on this project and see it as another great step forward for Prokaria in developing its GENEMININGTM discovery services for our corporate customers." Established and based in Reykjavik, Iceland, Prokaria ehf. is a pioneering company in sequence-based discovery and in screening through the natural diversity of extreme environments, using proprietary methods which enable rapid, exceptionally cost-effective prospecting and development. A combination of proprietary ecological enrichment methods and bioinformatics tools gives Prokaria access to over 90% of the rare and uncultivated organisms not exploited by conventional procedures. The company focuses on several multibillion-dollar markets including lab & diagnostics, food & feed, technical enzymes, and chiral synthesis, and has a large number of promising candidates. Prokaria  website

deCODE Genetics, operating in Iceland, has identified the first gene ever linked to common forms of stroke, called the PDE4D gene, and is applying its findings to the development of new drugs and diagnostics. The deCODE team, working with doctors and researchers at Iceland's National University Hospital and the Icelandic Heart Association, pinpointed the PDE4D gene and significant haplotypes by analyzing detailed genotypic data from some 1800 patients and unaffected relatives participating across Iceland in deCODE's stroke program. Dr. Kári Stefánsson, CEO of deCODE Genetics, states that the PDE4D gene produces an enzyme suitable as a target for drugs. He says that Roche pharmaceutical company in Switzerland is already testing several such drugs on laboratory rats. deCODE and Roche co-operate in converting their landmark gene discovery into revolutionary treatments for common diseases. deCODE’s study shows that people with a particular version of PDE4D have three to five times greater risk of stroke - as great or greater than for known environmental factors such as high blood pressure, high cholesterol and smoking. deCODE’s study demonstrates that variations in the PDE4D gene associate significantly with ischemic stroke. Within this gene, the deCODE team identified haplotypes, or specific sets of genetic markers, corresponding either to significantly increased risk of stroke or to significantly decreased risk. The expression and functional analyses of the gene strongly suggest that PDE4D plays an important role in atherosclerosis, most likely by influencing the proliferation and migration of smooth muscle cells within arteries that is central to the biology of ischemic stroke. A drug that could inhibit PDE4D or one of its specific isoforms might therefore well be useful in counteracting atherosclerosis and thereby  reducing the risk of stroke. deCODE and its partner in this program, Roche, have initiated chemical work on medical compounds they have identified as active against targets in the PDE4D pathway. Also, deCODE is developing a DNA-based diagnostic test based upon the haplotypes considered at-risk or protective within the PDE4D gene. deCODE’s website

The first DaimlerChrysler buses using hydrogen fuel cells have arrived in Reykjavik, five years after the idea of hydrogen buses was first mentioned as an Icelandic delegation visited DaimlerChrysler. The hydrogen buses are already running quietly on the streets of Reykjavík, operated by the local bus company Strætó bs, and Iceland has thus taken global lead in the field of hydrogen production. The ECTOS project in Iceland aims to test three buses using hydrogen as fuel. In addition, a Shell hydrogen station will be operated to produce hydrogen for refuelling. Similar projects are being launched in ten other cities, nine in Europe and one in Australia. The ECTOS project generates a turnover of USD 13 million for energy-related research and development in Iceland. An Icelandic company founded to promote advances in hydrogen technology, Icelandic New Energy, has received one thousand foreign guests during the last twelve months, showing the immense interest the hydrogen project provokes. Icelandic New Energy website

Nickelodeon Television Company and Lazytown have agreed on producing the children's series Lazytown in Iceland. The contract involves producing forty 30-minute episodes for the series, which will be released through Nickelodeon next year. Nickelodeon is the most popular children's television network in the United States, viewed in 86 million homes.  The series as a whole involves approximately one hundred people, with a US$15 million budget and will be produced in Icelandic studios. This demonstrates the wealth of talent available in Iceland, as well as competitive production costs, making it possible to almost double US$ screen value to actual cost.  The main scriptwriter of Rutgrat, Nickelodeon's most popular programme, will cooperate in the production, along with former staff of the Jim Henson Company and the producers will fly in talents from US and Canada as needed. Both Icelandic and American actors will star in Lazytown and the music will be by Icelandic artists. Production will start in November and is expected to be finished by next June. Through production in Iceland, the TV programme can benefit from the 12% refund package and therefore receive a refund of that amount on all production costs incurred in Iceland or even in EU countries. Lazytown is based on a children’s fiction book by the Icelander Magnus Scheving, President and co-founder of Lazytown Entertainment. Lazytown’s philosophy is to inspire children to live a healthier lifestyle without actually lecturing to them. www.lazytown.com

Iceland ranks eighth in the world for economic competitiveness. Last year the country was twelfth, according to Global Competitiveness Report 2003-2004, published by the World Economic Forum. The Report provides a reliable, thorough evaluation of the comparative strengths and weaknesses of 102 countries and ranks them accordingly. Finland now comes in first, the USA second and Sweden third. All the Nordic countries belong among the top ten. According to the Report, Iceland shows excellent performance in information and communication technology (ICT) and in the quality of public institutions. Improved economic conditions are the main reasons for Iceland’s rise in competitiveness. On the other hand, Iceland is less competitive in innovation.  Taiwan and Singapore perform best among Asia’s countries, ranking fifth and sixth respectively. In Latin America, Chile is the highest-ranking economy, at 28th. Botswana is Africa’s best performing country, placing 36th.

Corporate income tax is lower in Iceland than in the other Nordic countries where it ranges from 28% to 30% comparing to 18% in Iceland. Similarly, the capital income tax is higher in the other Nordic countries, 28-30% in Norway and Sweden and 28-43% in Denmark, compared to a 10% tax in Iceland. The table below indicates what becomes of companies income after corporate income tax and withholding tax has been levied. In Iceland, corporate income tax is 18%, which means that 82% of the original income is left. If all the profit is paid out after corporate income tax, a 10% capital income tax is levied on what remains, corresponding to 8.2% of the original profit. In total, the tax is 26.2%, which means that the shareholder receives 73.8% compared to 71% in Finland, 72% in Norway and 50.4% in Denmark and Sweden.

Iceland ranks second in the Human Development Report 2003, commissioned by the United Nations Development Programme. The Report ranks 173 countries according to their level of human development by measuring achievements in terms of life expectancy, educational attainment and adjusted real income.

Kögun, an Icelandic IT company, and Microsoft Corporation have signed an agreement for the acquisition of all shares in Kögun’s subsidiary, Navision Ísland ehf. by the latter. The sold shares have a par value of ISK 500,000 (USD 6,519), which will be acquired at an acquisition value of ISK 176,220,000 (USD 2,297,523). However, the final acquisition price is not determined at the signing of the agreement as the agreement stipulates that the acquisition price will be adjusted by an amount equal to the difference between current assets less short-term liabilities and the amount of ISK 14,690,000 (USD 191,525) when an audited balance sheet dated June 30, is available. The final settlement is expected to be completed within 45 days from the signing. Kögun hf. will gain a significant profit from the sales, which will be stated in company’s accounts in the third quarter of this year. Further to the acquisition agreement, Kögun hf. signed a contract to supply Navision Ísland ehf. with various operating services for a non-specified amount of time. Microsoft initiated the agreement by makin Kögun hf. an offer to purchase the aforementioned shares following discussions between the parties. The offer was followed by negotiations, which resulted in an increase of the proposed offer. Kögun’s board of directors is satisfied with the price that was paid for Navision Ísland ehf.

Alcoa's representatives; B. Michael Baltzell and Alain J.P. Belda, and the Minister of Industry and Commerce; Valgerdur Sverrisdóttir, sign the contracts. Alcoa Inc., the world’s leading producer of aluminium, has finalized agreements with the Government of Iceland and Landsvirkjun (the National Power Company) to build the 322,000-metric-tonnes-per- year Fjardaal aluminium facility in Reydarfjördur, Eastern Iceland. The facility will be designed as the most environmentally friendly aluminium production facility in the world. The cost of the Fjardaal aluminium facility will be approximately $1.1 billion over the next four years. The agreements were signed at a festive reception in the town of Reydarfjördur. The Minister of Industry and Commerce, Valgerdur Sverrisdóttir, and Minister of Finance, Geir H. Haarde, signed the agreements on behalf of the Icelandic government, and Chairman and CEO Alain J.P. Belda and B. Michael Baltzell, Director of Alcoa in Iceland and President – Primary Development, on behalf of Alcoa. Production scheduled in 2007 Construction of the aluminium plant will begin in 2005 and it is scheduled to start production in early 2007. The aluminium project will create 750 new jobs, thereof 300 positions in related industries. These new jobs will help strengthen and diversify the economy of East Iceland which has experienced declining employment and out-migration as traditional jobs in fisheries and farming have declined. GDP will increase by 1% and export by 10-14% when production has started. Karahnjukar power station Karahnjukar power station, which is being constructed by Landsvirkjun, will supply Fjardaal with electricity for the next 20-40 years. The hydropower station will have an installed capacity of 630 MW and estimated construction cost is $1.2 billion. “We look forward to working closely with the Icelanders for years to come” Alain Belda, Chairman and CEO of Alcoa Inc. is pleased with the speed of work Alcoa has experienced during the process of deciding about taking their smelter to Iceland and feels that setting up in Iceland will prove beneficial. “Negotiations have proceeded quickly and well, and the present agreements will be profitable for each of the parties to the contracts. The energy and the positivity which have characterized the process of negotiations have proved inspiring for Alcoans; therefore, we look forward to working closely with the Icelanders for years to come.”  “Fjardaal will make use of the cleanest energy that is to be had”

The expansion of the Nordural aluminium smelter at Grundartangi is expected to start within the next six months. Nordural, owned by the U.S. company Columbia Ventures Corporation, began operation of a 60,000- tonne- per- year smelter at Grundartangi in June 1998. In July 2001, the production capacity was increased to 90,000- tonnes- per- year and another expansion will take place over the next three years, increasing the production capacity to 180,000 ton per year. Currently, there are 200 employees working at the Nordural smelter, and the expansion is expected to create up to 150 new jobs.

Shell Hydrogen has opened the first hydrogen station under its brand in Reykjavík, Iceland. The station will be used to refuel three DaimlerChrysler fuel- cell buses that will be operated commercially on the streets of Reykjavík by Strætó bs., the local bus company. Private hydrogen vehicles are expected to travel the streets of Iceland in the future. Icelandic authorities have already issued all necessary permits for the station to operate on a commercial basis. The Icelandic government is promoting utilization of renewable energy resources in harmony with the environment, such as hydrogen as a fuel. All of Iceland’s electricity is already generated renewably from hydroelectric and geothermal sources. Norsk Hydro supplied the machinery for the station to produce hydrogen from water by electrolysis. Shell Hydrogen and Norsk Hydro are partners in Icelandic New Energy Ltd, a company established in 1999 to pursue this vision. The hydrogen station is a part of ECTOS (ecological city transport system), a project supported by the European Union to research the socio-economic and environmental implications of changing the energy base of a modern society.

Invest in Iceland Agency was in Canada as a part of an Icelandic business delegation led by Ms. Valgerdur Sverrisdóttir, Minister of Industry and Commerce. The objective was to strengthen economic cooperation and improve transport between Iceland and Canada.  Slide presentation (2 Mb)

Invest in Iceland Agency participated as an exhibitor at the 2003 Business Continuity & Infrastructure Security Show and Conference in New York last week. The main purpose was to introduce Iceland as a cost-competitive location for Internet Data Centers. Iceland was presented as a good off shore location and the answer to companies need for a geographical diversity when securing data. Visitors found the concept very interesting and the Icelandic stand attracted a lot of attention.

deCODE genetics and IBM have announced a strategic alliance to deliver a set of integrated applications, technologies and services for analysing, managing and storing genetic, genealogical and clinical data. Under the three-year agreement, deCODE genetics and IBM will jointly market and sell deCODE's Clinical Genome Miner (CGM) Discovery" system running on IBM hardware and software.  The deCODE and IBM solution will be available globally to pharmaceutical biotechnology firms, government-sponsored research organizations, research hospitals and medical care facilities beginning midyear. The CGM Discovery - system is a proven, statistically-based application for isolating and analyzing genes and gene variations associated with particular diseases.  It is the same application that deCODE has used in its population genetics research in Iceland to isolate key genes and drug targets in nine common diseases. Headquartered in Reykjavik, Iceland, deCODE is using its unique population resources to identify the genetic causes of more than 50 common diseases. deCODE is applying its discoveries to develop new drugs and DNA-based diagnostics that target the underlying biology of disease, not just the signs and symptoms.  deCODE Genetics employees are around 500. More information at: www.decode.com

Iceland ranks fifth in information technology use according to the Global Information Technology Report 2002-2003: Readiness for the Networked World. The report, published by World Economic Forum, is the most comprehensive assessment of networked readiness, covering eighty-two of the leading economies of the world. The report provides a global panorama of how information and communication technologies are being used around the world. Iceland ranking (68 Kb) Networked Readiness Index rankings (78 Kb)

Iceland has a leading position within the OECD countries regarding contributions to research and development work according to estimates by the Research Council of Iceland for 2001. Iceland contributes over 3% of its GDP to R&D, which is among the highest within the OECD countries. The European Union decided in Lisbon in 2000 that all member countries should contribute 3% of GDP to research and development and that two- thirds of those contributions should come from private companies. This is meant to increase the importance of science and technology. Iceland was the third European Economic Area country to reach this target. In Iceland, new companies have been established in emerging areas such as biotechnology, information technology, health technology and pharmaceutical. Those companies have contributed to the expenditures leading to this share along with increased governmental contribution to R&D. Icelandic companies and institutions are working on research projects and trials with partners as Roche, Pharmacia, Merck, Novartis, AstraZeneca, Applied Biosystems, Affymetrix, Genmab, Bespak plc. and many more. Foreign companies have increasingly been funding research and investing in companies, both within the software development and bio-science field.

Alcoa Board of Directors has approved plans for the construction of a 322,000-metric ton aluminum facility in Eastern Iceland. Alcoa's Fjardaál aluminum facility is part of the most extensive single investment in the history of Iceland, and is scheduled to begin production in 2007. The facility is being designed to be the most environmentally friendly aluminum production facility in the world. The cost of the Fjardaaál aluminum facility will be approximately $1.1 billion over the next four years. Alcoa's Fjardaál aluminum operations -- Fjardaál means "Aluminum of the Fjords" in Icelandic and derives from the local municipality, Fjardarbyggð, or "Municipality of the Fjords" -- will provide approximately 450 jobs and generate approximately 300 additional full-time equivalent positions in service-related industries, for a total of 750 new jobs. Construction of the aluminum plant in East Iceland is part of an overall economic plan by the government of Iceland to improve living standards from health care to infrastructure to communications -- not just for the region, but also for all of Iceland. Those new jobs will help strengthen and diversify the economy of East Iceland, which has seen declining employment and out-migration as traditional jobs in fisheries and farming have declined. The project will create hundreds of construction jobs in the region, helping fuel economic growth. Smelter construction is scheduled to begin in early 2005. The project will comply with all air and water quality standards of Iceland and the European Union directives scheduled to take effect in 2005 and 2010. In some areas, designed performance of the Alcoa plant goes beyond compliance. Carbon dioxide (CO2) emissions will be 25% below the earlier plan, and PFC emissions (another greenhouse gas) will be 40% less. Emissions of nitrogen oxide (NOX) will also be 80% less. Alcoa is committed to working closely with East Iceland communities to minimize disturbance during the construction and operating phases.