In the last post, German investment in Iceland (Central Bank FDI figures) raised some question marks on this side. Digging a bit deeper raised even more. As of December 2011, Germany with a population of 82 million invested 86 billion (all monetary figures in ISK; EUR/ISK right now is around 165) in Iceland, or 1,049 per capita. Iceland, on the other hand, invested 19,378 billion in Germany, which is the equivalent of 60,556,250 per capita. And that with a good portion of the nation basically scraping the barrel of the bucket to feed itself. The balance is -19,292 or -22,432.6%. German stock hasn’t fared all that great and neither has the euro itself, so what’s the game plan here?
When looking at the FDI figures, only one country stands out: Switzerland. Our good friends and Toblerone makers have invested 10,704 more here than we have invested over there, with a margin of 36.7%. We are not talking about small figures here, either. In 2011, Switzerland invested 29,155 billion in Iceland whereas we invested 18,451 billion in Switzerland. While Iceland is in talks with the EU regarding membership, Switzerland is the ONLY country that maintains a positive balance here as far as direct investments are concerned and is not even IN the EU. I seriously doubt they are investing in our chocolate or cheese factories. Interestingly enough, Switzerland maintained a positive balance in 2008 as well, just before out economy crashed, and at that time, the margin was 79.9%. Luxembourg had a positive FDI balance in 2007 of 175,686 billion, or 57.4%, but seems to stay clear of investing here this time around.
All in all, Iceland invested 1,419,421 billion in 2011 while only managing to attract 128,138 billion in investments, resulting in an FDI margin of -1,007.7%. This is rather bizarre given the strategic location of Iceland, its strong infrastructure, high educational levels, and other factors that should make investors jump in with guns blazing since there’s a bargain basement sale in progress. The market is perhaps small, but it packs serious power. My bet is that once the two banks owned by foreign investors – among them Deutsche Bank – are sold (my old turf Islandsbanki and Arion), we’ll see another boom. Whether that will be good or bad remains to be seen.