Interview with Peder Lundquist, CEO of the Export and Investment Fund of Denmark

Interview with Peder Lundquist, CEO of the Export and Investment Fund of Denmark


BF: Denmark’s economy experienced one of the lowest declines during the COVID-19 pandemic and achieved 3.8% growth in 2022. In August, the country lifted its economic forecast for 2023 due to a significant boost in pharmaceutical exports and employment. What are some key reasons for Denmark’s economic resiliency over the past decade?

Peder Lundquist: To understand the current strengths of the Danish economy, you have to go back some decades, maybe to the early 1980s, when we had huge troubles with our economic independence and we took some key decisions to stabilize our economy, both in terms of having sound fiscal policies and in terms of conducting labor market reforms that made as large a part of the population as possible active in the labor market.

This meant that we reached a situation where we overperformed economically, so we had some surpluses in our fiscal budgets and were able to bring down our debt levels significantly over time. At the same time, we improved our credit ratings, so we could finance our debt more cheaply. As a result, the assessments of and confidence in Danish economic policy increased. That also meant we entered the crop of AAA countries and we have remained in this group for around 30 years to date. Therefore, whatever crisis we meet, our starting point is extremely robust and we have huge resilience because people trust what we do in economic terms.

It was the same situation with the COVID-19 pandemic. The starting point for us was very good: we had the benefit of decades of sound fiscal policy and a sound way of conducting business in our society. On top of that, we managed to implement COVID measures in a very efficient way. So, when we made decisions that we should isolate people and stay away from public activities, people followed these principles and they had a very rapid effect. We didn’t have to wait several months for an effect because some people wouldn’t follow this or that principle. In these situations, if people all follow the same guidelines, then you can change the situation faster.

The reason for that is probably the way Danish society is composed. It’s a relatively small society of roughly six million people. It’s a very homogeneous society and there is a huge amount of trust between people. In these situations where you have to stand together and move in the same direction, we are a good country to manage, and we are very good at following that discipline, because trust means that we follow and implement whatever agreement has been made.


BF: In the summer of last year, the Danish government decided to merge several entities into the Export and Investment Fund (EIFO). It was one of the largest mergers in 2023, with a portfolio created that equaled around $18.7 billion. In the first half of 2023, the company made significant investments, including in its first power-to-x business, a 765-kilometre transmission line and establishing the Ukraine Fund. Can you give our readers an overview of how the EIFO was established and its new responsibilities?

Peder Lundquist: As a society, Denmark has benefited quite a lot from globalization. At the same time, we have managed to reap these benefits without suffering domestic inequalities, because we have some world market leaders but also small and medium-sized enterprises are a very large and active part of our domestic economy.

EIFO was organized in such a way that we had one fund focused on our world market leaders and international business, and then one fund more focused on domestic business. Then came the recent changes in the global economy and politics. Insecurities increased, stability decreased and we saw globalization changing its character; we didn’t believe that we could continue to work in the same way that we had for the past 20-25 years.

Therefore, the government decided it was the right time to join forces: if we put it all under one roof, then we could increase the resilience of our fund in the times when we have more instability, more challenges to meet, maybe the need for more capital in certain situations and also even the need to create better coherence between our large industrial players and our domestic businesses. How could these two things support each other so we remain at the forefront of global markets and, at the same time, keep our national economy intact and make sure that there are decent jobs for everybody in the entire country? It was a reflection of the fact that the world changed, instability increased, challenges increased and we wanted to keep our resilience. The government decided that the best way to do that was to merge the funds and create one unit.


BF: EIFO is also responsible for supporting companies in their export capabilities. Denmark’s major exports include foodstuffs, machinery and pharmaceuticals. Traditionally, the country’s largest export partners have been Germany, the US and the UK. How have Denmark’s key exports changed over the last decade in terms of international destinations and products? What is EIFO doing to support these changes and help businesses take advantage of new opportunities in trade?

Peder Lundquist: Fundamentally, our economic strength is built on three basic pillars; two foreign and one domestic. Internationally, we have the security guarantee we get from the US via our membership of NATO; that means that we are a safe area, so we can concentrate on creating wealth. Then we have access to the European single market and can trade freely throughout the European continent. And then, we have a very sound domestic economic policy, which means that we have the funds to invest in education, research and increasing the skills of our labor force.

Taken together, we have managed to use our access to the international market and the economic strengths that we have in a very direct way. Almost all our companies are SMEs and they are domestically oriented, but our large companies are very present in the world’s markets. To some extent, we have our own version of the African safari Big Five, with five, six or seven large companies like the Novos, Maersks and Carlsbergs that were all founded by very skilled entrepreneurs a century ago and are still thriving and doing extremely well. They are the ones creating an enormous amount of wealth that we can recycle back into the economy. They have managed to adapt to the recent changing global environment and have keep their market positions, some of them even increasing them. That’s an example of old-school entrepreneurship — using that to create large companies and then constantly adapting to situations, which is extremely beneficial for a country like ours.

At the same time, we have been able to develop a few new industries and maybe been a bit more politically active in promoting these industries. The most visible of them is the wind industry. As a fund, we have played a major role, both in terms of fostering innovation in smaller companies and in bringing the larger companies, Vestas in particular and Siemens Gamesa, which produces in Denmark, to the world market.

Today, wind businesses are by far the biggest segment for our company. They represent 70% of our entire activity, more than $10 billion. We did our first project in wind back in 1998 in Turkey with an onshore wind farm and we now cover all major areas of the world with our wind industry.

So, we benefit from a combination of two handfuls of very skilled, traditional companies, and some foresight in developing new companies into something that meets the demand of the future. That has been our claim to fame in keeping our position as one of the world’s richest countries. It’s a combination of skills and luck.


BF: In 2019, SMEs represented 98.7% of all local enterprises and 39.1% of all full-time employees in Denmark. Although funding for these companies experienced a dip between 2019 and 2020, it has come back in full force, including an investment of €30.9 million from the European Union’s European Investment Fund. How would you assess the amount of support received by Denmark’s SMEs and startups. What are EIFO and the government currently doing to ensure entrepreneurs continue to innovate?

Peder Lundquist: We are an SME country, with a few very big global leaders. We have a relatively large part of our labor force employed in SMEs and then we have a lot of value creation in the big companies. That’s the combination of our country’s economy. These two things fit very well together, because it means you have coherence in society and that there’s good labor for everybody.

Then you have the venture space or the startup space. Going back to 2015-2016, this was lacking in the Danish economy. However, we managed with some precise and targeted innovative measures that were enacted by us, together with partners from the US, to create a venture space and startup ecosystem in Denmark, which is not nearly as big a part of the economy as it is in the US, but which is relatively significant in European terms. We did a lot of things to foster and promote this ecosystem taking shape, via our investment together with our partners; it was a public-private partnership.

This very positive development was to a large extent fueled by cheap money. We had a huge increase in activity and also in employment between 2019 and 2021. Then suddenly, everything changed. COVID was part of it in terms of producing companies, but in the digital space, it was changes in interest rates; money became more expensive and funding became more difficult to raise.

That’s where we are now with our portfolio and with our partners as well. We are trying to see if we can use our ability to come up with funding for our companies. Going back a few years, the private market had enough of an appetite for funding themselves, but they maybe wanted our assistance in areas where it was a bit trickier to operate. Whereas now there is a huge demand for us to be there simply because it is difficult to raise funding from the private sector. We find ourselves in very high demand, both in terms of giving loans to SMEs, but also in terms of making investments in the early phase startup space.

Therefore, our role has gone from building an ecosystem and enjoying the fruits of that system being extremely vivid and successful, to maybe going a bit back to our original role: being the ones that have to keep the system afloat and being a bit more active in cooperating with the private sector to carry them through a difficult phase. So, what we prioritize and what we do is very different now in comparison to what it was just a few years ago.


BF: Denmark passed the Danish Climate Act in 2020 that targets a 70% reduction in greenhouse gas emissions by 2030 and becoming net zero for carbon by 2050. What is EIFO doing to help with the government’s national net-zero goal? How is the local private sector taking advantage of Denmark’s image as a world leader in sustainability?

Peder Lundquist: What we are doing is two-fold. We are working very actively with our domestic market in terms of developing technologies and also trying to scale the technologies that we need to decarbonize our domestic sectors. The key sectors we’re working with are agriculture, energy and transportation. We need to produce food and some of that can be done without producing meat. That is something that we will be able to do on a large scale 10 years from now and we invest significantly in this.

At the same time, we work a lot with our existing agricultural partners, trying to see if we can help them transform their way of producing into more carbon-neutral practices in a way that also has a smaller negative impact on the environment. For that we use specific types of beneficial loans and investments. We try to combine energy production with the needs of agricultural producers, so they can get a carbon-free energy input into their production and have less pollution correlated with their production. That’s something we do with our SME partners in a very direct and active way. Regular banks are not there in the full sense for this, because it’s not necessarily a good economic case. It is an area where you need to make an initial investment that might pay off in 10 years. We use our balance sheet and the fact that we are owned by the state, so we can take on additional risk compared to a normal bank that has to meet the demands of shareholders.

Also at the same time, we work a lot with our established big energy companies to see if we can use the position we have in wind as a platform to create a similar position in new green technologies. That particularly relates to green hydrogen, ammonia and all the things you need for future economic activity in transportation and production if you don’t want to use fossil fuels. If you want to be carbon neutral, you can use green ammonia in agriculture or transportation. You need, at some stage, green fuels for airplanes, you need to foster electric cars and you need hydrogen for industrial production. On this, we work extremely actively with our companies to see if we can develop products at scale. Some of the projects we’re working with are in the US and very big. There, we try to coordinate with our Danish companies and then bring their technology and their knowledge about financial structures into projects in the US for cross-country cooperation. We have projects in various US states and expect most of them to deliver.


BF: What would you consider the most important US states for green technologies?

Peder Lundquist: It would be areas where you have very good conditions for producing renewable energy combined with green hydrogen. Areas where you also have available land. Texas is an obvious example. It’s going to become a major global hub for the production of renewable energy, which is quite remarkable considering it is a fossil fuel hub as well. It illustrates that you can build on the strengths you have and move them into different areas.

Denmark is not moving from the fossil industry to renewables, but we’d like to move from renewables to other kinds of renewables — diversifying and then using the strengths that we have and building on them to move to the next commercial space. I’m not surprised that an economy like Texas can use the infrastructure it has in financing and business as a steppingstone. It makes sense to me as Denmark is working in a similar way, going from renewables to the new types of green technology.


BF: Given that exports account for around 60% of Denmark’s gross domestic product, its largest trading partners play a significant role in the country’s stable economy. How significant is the US market in terms of exports for Denmark? How is EIFO working to bridge any gaps between the two markets and helping local businesses take advantage of the close relationship between the two countries?

Peder Lundquist: Historically, Germany has been our biggest export market, but for the last couple of years it has been the US. If you look into the future, there’s no going back from that; our US market will increase hopefully, to become even more dominant. It’s a huge market, we have very good access to it and very good cooperation with all our partners in the US, which we are extremely pleased about.

That’s also reflected in our balance sheet and the way we do business. We see more and more projects that relate to the US and, for that simple reason, we will become more active in the US. Some of the key industries in Denmark that are huge in the US, such as the medical sector, can do without the help of EIFO to some extent. They can finance their factories themselves through regular commercial banks. For everything else that has to do with larger investments with a longer-term perspective, we come into the picture as a key partner, and cooperating with American banks and bringing them in as partners in the financing of some of our activities. We can play a significant role in that because we have very good levels of cooperation with international banks, including American ones.

10 years from now, we are quite convinced that, particularly in renewable energy and some areas of industrial production, we will have hopefully become a very significant partner for Danish companies in the US and in consortiums, merging with American partners in different types of business structures.


BF: You stepped up officially as CEO of EIFO in September of last year and have successfully led the entity in its mission to promote and sustain businesses. What vision do you have for the country over the next decade and what needs to happen for this to be achieved?

Peder Lundquist: My top priority for the Danish economy is that we keep our economic strengths and our economic wellbeing from the simple fact that we are successful in export markets. We need to sell things with high productivity and a high value to retain the lifestyle we have and to be able to redistribute the revenues internally in our country.

I see us retaining or even increasing our position in export markets and I see Denmark’s big companies keeping their positions or maybe even increasing them. I see us playing an even larger role in the renewable business, which if we want to meet the global climate change targets, needs to become a huge industry. Some of the key markets I see us doing that in are the US, Australia and Asia.

I also see us keeping our own house in order, which means keeping our economic policy sound and healthy, and retaining our AAA rating. Sometimes Danes don’t understand how important that rating is, but it impacts everything from mortgages, all the way up to when the state lends to big corporations. We need to keep that in place. And then we need to keep on investing in increasing our workforce. We cannot sustain the need for the Novos and Maersks to keep their market positions without being able to supply them with enough skilled people. They can import people from outside and they do that quite a lot. But if we don’t have Danes with high skills, then at some stage they might consider being somewhere else. We need to be at the forefront of educating our people so we have enough skilled people to be able to supply our major world-leading companies with good people.

These are the three priorities: keep our position in the export business, keep our own house in order in terms of our economy and have a population that has the necessary high-quality skills. That will allow us to continue taking care of ourselves and contributing positively to the development of the world.


BF: Is there any concluding message you would like to give to the readers of USA Today?

Peder Lundquist: We hope that Americans keep liking us as much as we like them. That’s important — it’s a mutually beneficial relationship. And think about Denmark when you are looking for partners in some of the key industries that you would like to promote.

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