Subchapters:
- Business Relationships
- Foreign direct investment
- FTAs and Treaties
- Development Cooperation
- Prospective fields of study (MOP)
Business relations
Trade relations with the Czech Republic
The slight increase in exports from the Czech Republic to Luxembourg is a long-term trend, the automotive industry is the main commodity, followed by raw materials (especially iron/steel and raw rubber), fertilizers. Despite the general decrease in exports due to the pandemic in 2020, exports of machinery and means of transport to Luxembourg increased slightly even during the pandemic.
- Allcountrylist: Overview of major industries in Luxembourg, including mining, construction, transportation, tourism, and foreign trade.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the Czech Republic (billion CZK) | 4.8 | 5.8 | 6.3 | 7 | ON |
| Imports to the Czech Republic (billion CZK) | 5.4 | 5.2 | 3.4 | 3.3 | ON |
| Balance with the Czech Republic (billion CZK) | 0.6 | -0.6 | -2.9 | -3.7 | ON |
Source: CZSO
Trade relations with countries outside the EU
Luxembourg’s mutual trade balance increased significantly in 2020, when mutual trade ended with a high positive balance of 66million, however, there was a significant decrease in imports into the country mainly due to Brexit and subsequently the COVID-19 pandemic. Luxembourg’s main trading partners are mainly the neighboring countries – Germany, France, Belgium, as well as the Netherlands and Italy.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from countries outside the EU (million EUR) | 2 172.7 | 2,640.20 | 2,950.70 | 2,377.50 | 2,702.80 |
| Imports to countries outside the EU (million EUR) | 2,865.4 | 2,818.7 | 2,550.4 | 1,332.1 | ON |
| Balance with non-EU countries (million EUR) | -692.7 | -111.7 | -287.7 | 663.8 | ON |
Source: EIU, Eurostat
Foreign direct investment
Luxembourg offers a favorable business environment for foreign investments and a very attractive tax system. According to the UN agency UNCTAD’s 2021 World Investment Report, foreign direct investment inflows reached US$6billion in 2020, up US$1billion from a year earlier, despite the global economic crisis triggered by the Covid-19 pandemic. 19. This is a sharp increase that has made the country the sixth largest recipient of foreign direct investment in the world, moving up 19 places from last year. By 2020, the total volume of foreign direct investment was 627 billion USD. According to OECD data, half of foreign direct investment in Luxembourg comes from EU countries, but the largest investors are Bermuda (13.5%), followed by the United Kingdom (13.1%), Ireland (12.1%) and the Netherlands (9.3%). ). In terms of industry, finance and insurance activities attract more than four-fifths of all investment (81.6%), with industry accounting for only 2.8%. Luxembourg is also the second largest investor in the world, including the Czech Republic, where it also ranks second.
Luxembourg ranks second in the amount of direct foreign investment from the Czech Republic, which is a shift of a few places compared to previous years. The field of finance and insurance is particularly attractive. In addition to the insurance sector, Luxembourg attracts investors in modern technologies, the circular economy and space technologies.
FTAs and treaties
Treaties with the EU
Luxembourg’s trade relations with other EU member states are regulated within the framework of the internal market (including collective regulation of relations with 3rd countries, based on the common customs tariff or the Union’s trade policy)
Contracts with the Czech Republic
The bilateral contractual basis is very broad and corresponds to the quality, duration and development of mutual relations.
Treaty between the Czech Republic and the Grand Duchy of Luxembourg on the prevention of double taxation and the prevention of tax evasion in the field of income and property taxes and the Protocol; Security Agreement between the Government of the Czech Republic and the Government of the Grand Duchy of Luxembourg on the mutual exchange and protection of classified information; Agreement between the Czech Republic and the Grand Duchy of Luxembourg on social security; Agreement between the government of the Czech Republic and the government of the Grand Duchy of Luxembourg on the acceptance of interns; Administrative agreement on the conditions of implementation of the Treaty between the Czech Republic and the Grand Duchy of Luxembourg on social security; Agreement between the Government of the Czechoslovak Socialist Republic and the Government of the Grand Duchy of Luxembourg on the International Carriage of Goods by Road; Implementing Protocol to the Agreement between the Government of the Czechoslovak Socialist Republic and the Government of the Grand Duchy of Luxembourg on the International Carriage of Goods by Road; Agreement between the Czechoslovak Republic, of the one part, and Belgium and the Grand Duchy of Luxembourg, of the other part, on compensation for certain Belgian and Luxembourg interests in Czechoslovakia and Additional Protocol; Addendum to the Agreement between the Czechoslovak Republic, of the one part, and Belgium and the Grand Duchy of Luxembourg, of the other part, on compensation for certain Belgian and Luxembourg interests in Czechoslovakia and to the Supplementary Protocol of September 30, 1952; Air Transport Agreement between the Czechoslovak Socialist Republic and the Grand Duchy of Luxembourg; Convention on conciliation, arbitration and judicial proceedings between the Czechoslovak Republic and the Grand Duchy of Luxembourg;
Developmental cooperation
Luxembourg is one of the leading providers of development cooperation. The total amount provided in 2021 was between 455 and 461 million euros, with Luxembourg aiming to keep it at 1% of gross domestic income in the long term. Luxembourg is thus among the world’s leading providers of development aid. Development aid is directed mainly to the African continent to the countries of the Sahel region. Development aid focuses on strengthening security, human rights and responding to climate change. With regard to other priority countries, there is not adequate space for Czech entities for joint projects.
Prospective fields of study (MOP)
Civil aviation industry: Luxembourg has been intensively supporting long-term research and development in the field of technology in space under the umbrella of the Luxembourg Space Agency (LSA) and in cooperation with the Institute for Science and Technology LIST.
Healthcare and pharmaceutical industry: New trends in medicine as well as research and development in biotechnology are among the priorities. Due to the focus on modern and innovative technologies, there is also room for the field of nanotechnology.
ICT: Luxembourg has long been a supporter of modern ICT and digitization. Opportunities are offered in specific areas, especially artificial intelligence and digitization of the financial sphere, as well as cyber security.
Transport industry and infrastructure: Dependent on workers from neighboring countries, Luxembourg faces a high rate of passenger car traffic, especially the southern part of the country and the capital city of Luxembourg. This is currently preparing a significant change in how transport works and has opened a public debate on a mobility plan for the capital and connections to the immediate surroundings.
Water and waste industry: Luxembourg strongly supports sustainable development projects, achieving carbon neutrality and circular economy. Part of the government’s policy is also the operation of the LuxembourgCircularBusiness Hub, through which companies can get involved in this sector.
Perspective field 1
Luxembourg is oriented towards satellite and space technologies. There are a number of specialized companies investing in the so-called “mining of minerals from space” (asteroid mining) and the so-called “new, ultra-light materials”. Through an initiative managed by the Luxembourg Space Agency (LSA), SpaceResources.lu, Luxembourg is positioning itself as a European hub for global space resources. Under this program, Luxembourg offers incentives to private sector companies seeking to develop space mining opportunities.
Perspective field 2
Biotechnology and health sciences are a key element in the diversification strategy of Luxembourg’s economy, and the country wants to become a center of excellence in the field of molecular diagnostics, a mainstay of personalized medicine. Nanotechnologies focused on the field of medicine and health can also gain attention and space.
Perspective field 3
The ICT market with services and technologies is largely saturated, however, with regard to state support in the field of modern technologies and innovations: cyber security, fintech, big data, high-performance computing, artificial intelligence, blockchain, etc.
Perspective field 4
A drastic improvement of the disproportionately burdened transport infrastructure (especially in the capital and in the south of the country) cannot be assumed in the short term, but the investment plan does include new transport arteries (especially north-south), expansion of highways (another lane for shared rides, buses, electric cars), collection parking lots (on the outskirts of larger cities) and the development of public transport.
Perspective field 5
The LuxembourgCircular Business hub’s primary goal is to attract suitable investors and modern technological projects and thus create an incubator of the circular economy from Luxembourg, which would stimulate further development and opportunities in the framework of sustainable development projects and cross-border cooperation. Many sustainable development projects are being created in a number of localities that were the center of heavy industry and steelmaking until the end of the 20th century.
