1. Life Sciences Industry Workshop
Cluster Theory and Strategy Development
January 18th, 2017
Deloitte Consulting LLP

2. Contents
Methodology and Context 3 Where to Play 9 Determining Strengths 13 Target Segments 23 How to Win 27 Developing Capabilities 32 Summary and Next Steps 41

3. Methodology and Context

4. Cluster Theory
A cluster development strategy leverages an area’s unique competitive advantages by aligning an appropriate industry segment with a specific component of the value chain
Clusters are concentrations of similar businesses, suppliers, and associated institutions located within the same geographic region. Cluster development strategies most commonly focus on industry presence, but other aspects are critical as well.
An often overlooked -- yet very important -- dynamic to developing a successful cluster strategy is the focus on appropriate aspects of the corporate value chain. Even within a specific industry or company, the needs of a manufacturing operation may differ significantly from those of a headquarters, R&D center, or back office function.
Successful clusters represent a concentration of attributes (industry segments, value chain components, educational infrastructure, enabling environment, etc.) that beneficially leverage the operational environment (operating conditions and/or costs) of a specific geography. Many mature clusters are the result of historical coincidence, however clusters can be nurtured.
Many effective clusters share common characteristics, such as:
Focus on specific industry segments and value chain components
Alignment of various resource types
Cohesive
Collaborative
Sustainable
Flexible
Distinct brand
Long-term investment

5. Workshop Methodology
The framework below is the roadmap for Promote Iceland and Deloitte to develop a cluster strategy for the life sciences’ ecosystem in Iceland
Deloitte’s proprietary Cascading Choices Framework will enable Promote Iceland to rapidly focus on and develop answers to each key questions while shaping strategic priorities
How will we win?
What are the
priority
initiatives?
What are our goals and aspirations?
What capabilities must be in place to win?
Where will we play?
Which life sciences segment and where in the value chain can Iceland support successful clusters?
How can Promote Iceland effectively target and build specific clusters?
What capabilities, incentives, and operating model are required?
Where to start?

6. Project Overview
Project Background
Promote Iceland has engaged Deloitte to conduct a one-day workshop on location strategy and cluster development to help inform Iceland’s future life sciences ecosystem strategy. Deloitte’s cluster development strategy aligns an area’s attributes with the appropriate industry segments and value chain functions, and is implemented in a manner which leverages an area’s unique competitive advantages to support the targeted cluster
Workshop
Purpose
Discuss critical factors and important issues for site selection
Identify key drivers per segment of the value chain in life sciences
Summarize strengths, weaknesses, and potential opportunities for Iceland and its assets relative to the life sciences industry
Discuss capabilities needed to form and support effective clusters
Goals
Identify industry segments and value chain components to target
Determine best practices to effectively support targeted cluster(s)
Determine what capabilities exists and which need to be developed to support successful clusters
Prioritize clusters and corresponding initiatives to begin implementation of cluster strategy

7. Preliminary Map of Current State – To Be Completed
Iceland’s current life sciences’ ecosystem is heavily focused on devices and IT in the early stages of innovation and development
Pharma / Generics
Biologics / Biosims. / Cellular Therapies
Medical Devices / Medical Equipment
Molecular
Diagnostics
Nano-tech
HIT
Telemed. / Remote Health / Medical Tourism
BioAg/ Nutrition / Food Additives
Regen.
Medicine
Cosmetics
Innovation
Medilync
Kine
Össur
deCode / Amgen
RMS
Health-Guide
Kvikna
GoodLifeMe
Somnify
Expeda
Mentis Cura
Oxymap
Marinox
Clinical Trials
Manfg. / Production
Alvogen
Actavis / Allergan (closing mid-2017)
Alvotech
Nox Medical
Distribution
Enabling Functions
Current players in life sciences ecosystem

8. Challenges and Opportunities
Iceland faces a number of unique challenges and opportunities due to its distinctive geography, labor force, and regulations
Challenges
Opportunities
Diversification of economy
Barrier to entrepreneurship
Administrative burden
Complexity of regulatory procedures
Regulatory protection of incumbents
Geographic Location
Incomplete liberalization of capital controls
Small population and low unemployment
Increasing visibility
Increased access (more direct flights)
Centralization of tech transfer into one office
Highly educated workforce
High percentage of population speaks English
Experienced with cold-chain distribution

9. Where to Play

10. Determining Ideal Segments to Target
In order to determine where to play, Promote Iceland will need to identify the country’s strengths, development areas, and limitations
How will we win?
What are the
priority
initiatives?
What are our goals and aspirations?
What capabilities must be in place to win?
Where will we play?
Which life sciences segment and where in the value chain can Iceland support successful clusters?
How can Promote Iceland effectively target and build specific clusters?
What capabilities, incentives, and operating model are required?
Where to start?

11. Understanding the Strengths and Weakness of a Location
Deloitte utilizes the conditions / costs below to plot the overall favorability of locations; a successful cluster strategy will focus on the costs / conditions relevant to the targeted industry and value chain segment
Operating Conditions Assessment
Real Estate/Utility Infrastructure
Labor Quality & Availability
Access
Regulatory Environment
Business/
Operating Environment
Character of Life %
High Level Operating Costs
X Axis Aggregate Score
Venture Capital $
Desired mix of low costs and preferred operating conditions
Low cost but less desirable operating conditions
Capital Costs $
Y Axis Aggregate Cost
Operating
Costs $
High Level Operating Costs
Logistics $
High cost and less desirable operating conditions
High cost but preferred operating conditions
Taxes $
Incentives $
Operating Conditions

12. Key Attributes of the Life Sciences’ Value Chain
The below costs and conditions are critical to each aspect of the value chain and the development of successful life sciences clusters
Costs
Accessibility of Venture Capital
Capital Costs
Operating Costs
Incentives
Capital Costs
Operating Costs (taxes and labor)
Incentives
Capital Costs
Operating Costs (taxes and labor)
Incentives
Operating costs (taxes and logistics)
Incentives
Innovation
Manufacturing / Production
Distribution
Shared Services / Customer Support
R&D Presence
Availability of Resources
Regulatory Environment
IP Protection and Ease of Commercialization
Accessibility
Character of Life
Availability of Talent
Availability of Medical Facilities and Networks
Appropriate Population for Testing
Regulatory Environment
Availability of Skilled Labor
Availability of Infrastructure
Regulatory Environment
Business Disruption Risk
Accessibility
Character of Life (cost of living)
Availability of Labor
Regulatory Environment
Proximity to Markets/Customers
Business Disruption Risk
Character of Life (cost of living)
Language Capabilities
Conditions
Conditions

13. Determining Strength

14. Real Estate and Utilities
Iceland’s access to geothermal energy is a strength due to energy intensives manufacturing and data center processes and a trend towards utilizing renewable energy, while limited real estate near population centers is a factor
Key Considerations
Benchmarking
Assessment
Energy Supply Per Capita (toe)
Iceland
OECD Country Avg.
16.8
4.2
Strengths:
High per capita energy supply
Nearly 100% of energy generated is from renewables, which is favorable for manufacturing and companies concerned about optics
Space for horticulture and agro bio with energy to support it
Steam that replaces LNG (might require educational efforts to make this strength known)
% Renewables
Renewables
Iceland
OECD Country Avg.
89% 9%
Weaknesses:
Limited large commercial real estate opportunities to support new operations, primarily near Reykjavik
Less developed infrastructure in areas farther from capital
Sources: OECD

15. Labor Quality, Availability, and Cost
Iceland’s labor force has a high number of tertiary degrees completed, indicating a skilled, but small labor force
Key Considerations
Benchmarking
Assessment
Country
Density (pop./km2)
Germany
230
Ireland 68
Norway 16
Iceland 3
Strengths:
Skilled labor force
High number of students learning a second language
Comparatively lower wages for upper management due to compression of wages
Small downside to entrepreneurial risk
% Completions Secondary School
Weaknesses:
Small labor force
Low unemployment rate potentially limits companies abilities to find
High secondary dropout rate (statistics may be misleading due to definition of drop-out)
Language
% of upper secondary
Students*
Any Foreign Language
72%
English
61%
Danish
30%
German
17%
OECD Economic Survey Iceland (compares Iceland to 25 member countries), Page 2
overview.pdf
Further Detail: OECD Workshop on lower secondary education attainment
*Students can take more than one second language, so % do not sum to 100%
Sources: Statistics Iceland, Wikipedia Population Density by Country, Wikipedia Iceland Municipalities

16. Access and Logistics
Iceland’s unique geographic location is advantageous to accessing two of the world’s largest markets, but also isolates the country from both markets
Key Considerations
Benchmarking
Assessment
USA
$17,947
Billion
Strengths:
Located between two of the largest markets (US and Europe)
Time zone overlaps with business day in U.S. and Europe
Increasing traffic and flights
Highly developed infrastructure
Temperature controlled shipping experience
High amount of scientific collaboration
Sample Ranking of Infrastructure
Iceland EU
$16,220
Billion
Weaknesses:
Geographically isolated
Sources: Statistics Iceland, Statista Infrastructure

17. Regulatory Environment and Taxes
There is greater uncertainty in the regulatory environment in Iceland compared to other countries due to capital controls
Key Considerations
Benchmarking
Assessment
World Bank:
Ease of Doing Business Ranking
New Zealand 1
United Kingdom 7
Australian 15
Iceland 20
Netherland 28
Japan 34
Italy 50
Strengths:
High overall ease of doing business ranking
Lower corporate tax rate than other industrialized countries and average tax rate overall
Overall agreement politically on reduction of capital controls
Creation of one office to manage tech transfers
Capital Controls:
In place since 2008; were supposed to be lifted after 6 months, but many still in place
Expected complete easing in 2017
Limits foreign investment and the ability of domestic companies to expand abroad, but all new investment exempted from capital controls since 2009
Corporate Income Tax 2015
USA
40%
Germany
29.58%
Norway
27%
Ireland %
Netherland
20-25% UK
20%
Iceland
Intellectual Property Rights
Regional Ranking
Protection of IP Rights
14 of 19
Patent Protection
18 of 19
Copyright Protection
Weaknesses:
Capital controls still in place
Lower ranking for IP protection
Sources: International Property Rights Index 2016, World Bank Ease of Doing Business Report, PWC Doing Business in Iceland

18. Character of Life
Iceland ranks highly across almost all key measures of character of life, except for overall income and wealth
Key Considerations
Benchmarking
Assessment
Iceland OECD Score
(1=worst, 10=best)
Life Satisfaction
9.6
Jobs
9.7
Community
8.8
Environment
Education
7.5
Civic Engagement
5.2
Income
4.6
Comparing Iceland to OECD Average
Strengths:
Mild climate
Scenic geography
Strong healthcare system
Weaknesses:
Homogenous
Isolated
Sources: OECD

19. Risk
Iceland scores favorably on security and political risk ratings, but less favorably for financial risk as it continues to navigate a post-crash economy and monetary policy
Key Considerations
Benchmarking
Assessment
Operating Risk
(lower score=lower risk)
Canada 14
Finland 15
Norway 16
USA 19
Germany 20
Iceland 25 UK 26
Spain 27
Italy 35
Strengths:
Robust infrastructure that has withstood geological phenomena
Strong rule of law
Absence of violence/terrorism
Overall low-risk country for political and economic stability
Risk
Economist Intelligence Unit Risk Scores
Security
Government Effectiveness
Tax Policy
Foreign Trade
Financial
Labor Market
Weaknesses:
Perceived risk of financial instability due to lifting of capital controls
More geologically active country, though this risk is generally overstated
Perceived political uncertainty, and therefore some risk, due to formation of a new government
INFORM Natural Hazard Risk
(lower score=lower risk)
Iceland
1.3
Norway
0.2
United States
1.0
Switzerland
6.9
Sources: The Economist Business Intelligence Unit, INFORM Risk Index

20. Current Investment and Life Science Ecosystem
Venture capital and investment interest is increasing as capital controls are lifted, but the overall life sciences ecosystem appears to be nascent despite a developed health care system
Key Considerations
Benchmarking
Assessment
MRI/1,000
% GDP on Healthcare
Iceland
74.2
9.3%
U.K.
n/a
9.6%
Norway
9.4%
Germany
95.2
11.6%
Venture Capital Fast Facts:
5 scale-ups / 100,000 people in (highest in European countries analyzed)
$200M Raised
4 M&A Deals
Strengths:
Strong independent healthcare system
Advanced medical facilities
Growing expenditures on R&D
Weaknesses:
No systematic tracking of venture capital investments in life sciences
Lack of coordination between potential supporting institutions
Lack of venture capital, seed funding, and angle investments
Sources: Statistics Iceland, Common Wealth Fund Profiles of Health Care Systems

21. Incentives
Iceland has a variety of incentives programs that lower the tax burden, but incentives are capped at 15-35% of the investment
Key Considerations
Benchmarking
Assessment
Country
Incentive Programs
Iceland
Variances by municipality
Case-by-case basis, general ceiling of 15-35% of initial investment cost
R&D Tax Credit
United States
Programs vary by state and local municipality. Southeastern states typical have the must robust programs.
Leading jurisdictions typically offer subsidized real estate and infrastructure.
Discretionary grants are available but are utilized on a project-by-project basis and primarily as deal closers
Statutory incentives are widely available and typically are rebate or credit schemes for income, payroll, or sales and use taxes.
Local property tax abatement schemes are common.
Subsidized training is widely available with leading programs being customizable.
Subsidized power is also common.
Switzerland
Limited assistance available beyond R&D tax credits and CIT reduction is selected geographic areas.
Singapore
Free/subsidized land and infrastructure is offered to selected projects.
Up to a year of subsidized training is available for selected projects.
China
Property tax abatement in selected zones.
Strengths:
Lowers tax burden
Strong focus on innovation and R&D
Weaknesses:
Less flexible than other countries
Lower ceiling for maximum amount of incentives
Sources: Deloitte Experience

22. Critical Location Factor
Overall Strengths
Critical Location Factor
Overall Strength
Key Observations
Real Estate and Utilities
Highly developed infrastructure and inexpensive energy makes this a key strength
Labor Quality, Availability, and Cost
The availability of labor may be low due to low unemployment, which could be a concern to companies. Conversely, the cost of upper management and skilled workers is comparatively lower than in Europe and US
Access and Logistics
Expertise in temperature controlled shipping and increased visibility and access is improving Iceland’s reputation as a strategic location, though it cannot change it’s relatively isolated location
Regulatory Environment and Taxes
Important progress in tech transfer and IP protection are a strength if followed through on, but the corporate tax rate may not be as competitive in the near future
Character of Life
Ranks highly amongst all countries for character of life
Risk
Strong rule of law and absence of violence are key strengths. Perceived financial and geological risks may be overstated, requiring educational / marketing efforts to refute
Current Investment and Life Sciences Ecosystem
Growing expenditure on R&D and some coordination amongst organizations and companies, but no systematic tracking or centralized organization that actively manages Life Sciences development in Iceland
Incentives
Companies look to incentives to minimize risk; Iceland’s incentives cap at 15-35% of capital investment and appear to be less flexible
Key strength
Strength with some limits
Improvement needed to be competitive
Limiting weakness

23. Target Segments and Value Chain Functions

24. Selecting Where to Play
Based on identified strengths, Iceland can select segments within life sciences to focus resources on and become competitive internationally
Cluster
Target?
Reasoning
Pharmaceuticals/Generics
Research -
Low growth
Development
Secondary
Reactive to other markets
Clinical trials
The management of clinical trials exists, but unlikely that Iceland would be a hub for the actual location of trials
Bulk manufacturing
Tertiary
Over supply in segment, current major player in Iceland closing plant
Fill/finish/formulation
Less competitive tax climate
Distribution
Location is less optimal than others that are closer to large markets
Shared & customer services
Primary
Aligned with local infrastructure, talent, and language skills
Biologics/Biosimilars
Evolution to smaller scale production could fit area attributes and for biosimliars it is possible to leverage existing generics/pharma expertise and cold-chain experience for distribution

25. Selecting Where to Play
Based on identified strengths, Iceland can select segments within life sciences to focus resources on and become competitive internationally
Cluster
Target?
Reasoning
Medical Device / Medical Equipment
Innovation
Primary
Class III primary market; builds on existing expertise and experience with orthopedics and
Manufacturing
Management of manufacturing process, even when manufacturing is off-shore is a space that Iceland is equipped to be competitive in
Distribution
Secondary
Location is less optimal than others that are closer to large markets, but linked to manufacturing
Shared and Customer Services
Aligned with local infrastructure, talent, and language skills
Molecular Diagnostics
Current player in the space
Manufacturing done in small lots, scale appropriate for Iceland
Location is less optimal than others that are closer to large markets
Nanotechnology
Emerging market; could develop competencies, but would require greater upfront investment

26. Selecting Where to Play
Based on identified strengths, Iceland can select segments within life sciences to focus resources on and become competitive internationally
Cluster
Target?
Reasoning
Health Information Technology
Data Storage
Primary
Expertise with constructing and operating data center, availability of cheap power, and natural cooling
Analyzing Data
Availability of cheap power and highly skilled labor force
Managing Data
Secondary
International companies better positioned to be competitive and consumer facing
Telemedicine / Digital Health
Telemedicine - Operations
Tertiary
Developing capability, but still emerging market. Monitory progression of science and determine if resources should be concentrated in this field
Digital Health – Wearables
Digital Health – Software
Regenerative
Innovation
Manufacturing
Distribution
Shared and Customer Services

27. Selecting Where to Play
Based on identified strengths, Iceland can select segments within life sciences to focus resources on and become competitive internationally
Cluster
Target?
Reasoning
BioAg / Nutraceuticals / Food Additives
Innovation
Primary
High value and expertise with greenhouses
Manufacturing
Already producing algae with ability to expand expertise
Distribution
Access to European and US markets with cold chain distribution
Shared and Customer Services
Western labor force with applicable language skills
Cosmetics
Growing market that is globally competitive due to unique natural resources and current trends in beauty and cosmetics
Medical Tourism
Dermatology
Blue Lagoon and other spas

28. Correlation of Strengths to Target Segments
Focusing resources towards industries that are already developing supports current industries while providing a strong base for expansion
Pharma / Generics
Biologics / Biosims. / Cellular Therapies
Medical Devices / Medical Equipment
Molecular
Diagnostics
Nanotech
BioAg/ Nutrition / Food Additives
Regenerative
Medicine
Innovation
Medilync
Kine
Össur
deCode / Amgen
Marinox
Clinical Trials
Manufacturing / Production
Alvogen
Actavis / Allergan (closing mid-2017)
Alvotech
Nox Medical
Distribution
Enabling Functions
Primary Opportunity
Secondary Opportunity
Tertiary Opportunity

29. Correlation of Strengths to Target Segments Cont.
Focusing resources towards industries that are already developing supports current industries while providing a strong base for expansion
Telemedicine /
Digital Health
Telemedicine - Operations
Digital Health – Wearables
Digital Health – Software
Health Information Technology
Data Storage
Analyzing Data
RMS
Health-Guide
Kvikna
GoodLifeMe
Somnify
Expeda
Mentis Cura
Oxymap
Managing Data
Cosmetics
Dermatology
Primary Opportunity
Secondary Opportunity
Tertiary Opportunity

30. How to Win

31. Strategy for Effectively Developing Clusters
Successful clusters share many similar characteristics, key among them is alignment of actors to create a cohesive collaborative environment
How will we win?
What are the
priority
initiatives?
What are our goals and aspirations?
What capabilities must be in place to win?
Where will we play?
Which life sciences segment and where in the value chain can Iceland support successful clusters?
How can Promote Iceland effectively target and build specific clusters?
What capabilities, incentives, and operating model are required?
Where to start?

32. Characteristics of Successful Clusters
In order to develop successful life science clusters, Iceland should foster an environment that supports the following characteristics
Focus on specific industry segments/value chain components/therapeutic areas;
Alignment of various resource types (industry, government, educational, etc.)
Cohesive
Collaborative
Sustainable
Labor force
Infrastructure
Flexible
Contingent strategies
Distinct brand
Long-term investment
Incentives
Training

33. Coordination is Key
Promote Iceland can foster coordination between investors, private researchers, teaching hospitals, educational institutions, and companies
Promote Iceland
Ministry of Industries and Innovation
University of Iceland
Enterprise Investment Fund
RANNÍS
Innovation Center Iceland

34. Cluster Development Initiatives
Promote Iceland will need buy-in and support from a number of actors in order to foster new life science clusters
Enabling Organization
Function
Role
Promote Iceland
Coordinator
Determine who could take ownership and begin tracking life sciences in Iceland
University of Iceland
Educator / Research
Encourage education that is relevant to burgeoning clusters and continue to support research and the transfer of research into a commercially viable structure
RANNÍS (Icelandic Research Fund)
Funder / Policy
Strategically fund and advocate for policies that support clusters
Innovation Center Iceland
Consulting / Support
Provide consulting support to developing companies and companies entering Iceland
Enterprise Investment Fund
Funder / Support
Strategically fund companies that are part of or support a cluster
Ministry of Industries and Innovation
Government Support
Put forward policies that support cluster development
Federation of Icelandic Industries
Support Network
Networking body that provides resources and support

35. Capabilities to Develop: Incentives, Branding

36. Capabilities to Develop
Process for developing a cluster strategy to promote the life sciences’ ecosystem in Iceland
How will we win?
What are the
priority
initiatives?
What are our goals and aspirations?
What capabilities must be in place to win?
Where will we play?
Which life sciences segment and where in the value chain can Iceland support successful clusters?
How can Promote Iceland effectively target and build specific clusters?
What capabilities, incentives, and operating model are required?
Where to start?

37. Develop a Compelling Brand and Build Eminence
A compelling brand will build awareness of the life sciences ecosystem and help align partners on the same messaging
Create a pull model rather than push – be proactive
Potential Branding and Marketing Messages
Develop a strong brand and message
Based on area attributes
Relevant to industry sector
Positioned relative to competitors
Cohesive
Build a balanced program – leverage all available channels
Industry trade publications
Business publications
Airline magazines
Websites
Hosting industry symposiums
Familiarization tours
Selected trade shows
Targeted trade missions
Measure marketing results
To Be Completed by Promote Iceland

38. Develop a Flexible Organization with Appropriate Funding
A flexible organization is better equipped to adequately support businesses looking to start or move to Iceland
Organize to serve multiple clients
Potential Organizational Changes
Provide a single face to the client
Document how you can help potential investors in their journey to your region
Define your role relative to other players in the region
Align all stakeholders – agree where and how each player contributes
Promote strong ties between industry and local educational institutions
Demonstrate a strong degree of partnership and coordination across administrative levels
Operate in close collaboration with other regions
Involve the community in the economic development process
To Be Completed by Promote Iceland

39. Matrix organizational structures offer flexibility and continuity for delivering support
ECONOMIC DEVELOPMENT DIVISION
DIRECTOR
LEGISLATIVE / REG
POLICY COORD.
OPERATIONS
OPS. MANAGER
EXPANSION & RETENSION
MANAGING DIR.
ATTRACTION
PROGRAMS
ACCOUNT MANAGER
LARGE METRO (2)
PROGRAM SPEC.
INFRAST & TRANS
OPS/ADMIN
SUPPORT (6)
INDUSTRY SPECIALIST
FSI, SS/BO
MARKETING/ COMMUNICATION
MID-TIER (2)
AG/FOOD PROC, WOOD
SMALL COMMUNITY (2)
LIFE SCIENCES
SFTWR, ELC/COMP, TEL
AEROSPACE
FINANCE/TAX & REG
RESEARCH
(2)
WORFORCE DEV
TECHNOLOGY
TRIBAL AFFAIRS
TOURISM & FILM
LOGISTICS.
MARKETING/ RESEARCH
CAPACITY BUILDING
EDUCATION & TRAINING
CONSULTING
ACCOUNTABILITY & PERF. MEAS.
A&PM MANAGER
CONTRACT MANAGEMENT (8)
PERFORMANCE MEASUREMENT
OFFICE OF
ACCOUNTABILITY
& PERF MEAS
EXISTING BUSINESS
BUSINESS
RESOURCES
Illustrative

40. Potential Incentives Programs
Incentive Programs
Develop specific and targeted incentives program to address key segments
Incentives tailored to address key issues of target segments and value chain
Potential Incentives Programs
Examples:
R&D
Access to venture capital
Provision of facilities – especially labs
Relocation assistance
Recruiting and training assistance
Manufacturing & Distribution
Favorable state tax structure
Capital cost subsidization/deferral
Flexible local tax structure (property taxes)
Recruiting assistance
Industry specific training assistance
Fast track permitting
Access to capital
To Be Completed by Promote Iceland

41. Incentives
While “hard” incentives deliver monetary benefit, “soft” incentives save time / improve conditions; both are vital to competitiveness
One-Time $
Ongoing $
Cash grants: capex, job creation
Real estate: free/subsidized site, site preparation costs, training center construction
Infrastructure: utility infrastructure, waiver of utility tap fees and connections
Loans: forgivable loans
Tax: sales/use tax exemptions
Tax: tax increment financing (TIF), property tax abatements, income tax credits, withholding tax abatements/refunds, reduced property assessments/valuation
Free Trade Zone: designation of site as FTZ
Utilities: reduced utility rates
Real estate: temporary space
Infrastructure: road improvements, power reliability improvements
Permitting / zoning / planning: planning and covenant variations, expedited permitting / approvals
Other: relocation assistance
Loans: low interest loans/financing
Recruitment and training: hiring assistance
Other: daycare assistance, employee support
Hard $
Soft $

42. Leading Practices in Global Incentives (1 of 2)
These practices are drawn from Deloitte’s experience acting for clients during incentives negotiations around the world
Current Leading Practices
LAND &
REAL ESTATE
Land plot: free / discounted / subsidized land sale, or land leased at a token or peppercorn rent
Site preparation: site clearing, backfilling, flattening, etc., in preparation for the investor commencing site works
Office space: provision of low cost temporary office premises during implementation phase
GRANTS
Capex: value offered depends on the value of the overall program of incentives offered to the investor. Typically, % of eligible expenses ranges from a 10% (minimum) to 25% (leading practice). Definition of eligible expenses should be wide-ranging and flexible, and might include an allowance for capitalization of wages and unsold inventory for the duration of pre-production (i.e. until the plant is fully licensed for commercial production)
Job creation: value offered also depends on the value of the overall program of incentives offered to the investor. A typical range could be $20K to $200K per job created
Localization: provision of reimbursements on products purchased by the investor in the local jurisdiction (rationale being that this generates local sales tax revenues); a value up to ~$200K would be considered an appropriate sum
INFRASTRUCTURE & UTILITIES
Extensions: robust financial support towards utility extensions and upgrades (roads, rail, power lines, substations, redundant power, waste water treatment on site, etc.)
Utilities tariffs: beneficial / subsidized utilities costs, for power in particular (as the largest utility cost)
MACHINERY & EQUIPMENT
Sale and lease back of M&E: provincial government takes ownership (as collateral) of machinery and equipment used in the plant and leases it back to the investor, effectively off balance sheet
(AND/OR FORGIVABLE LOANS)

43. Leading Practices in Global Incentives (2 of 2)
These practices are drawn from Deloitte’s experience acting for clients during incentives negotiations around the world
Current Leading Practices
TAX
Property (1): no property taxes, real or personal, should be paid until the plant is fully licensed for commercial production. Once the plant becomes fully operational, a property tax abatement for 10 years is considered leading practice
Property (2): property tax rates should be calculated preferentially using the most beneficial determination (e.g. piping in the factory should be categorized as real or personal property depending on which tax rate is most preferential to the investor)
Corporate income tax (CIT): a leading practice in the US is to apportion state CIT based on single sales factor, i.e. only on sales made in state, and excluding payroll and capex; applicability to Canada would need to be evaluated
R&D: manufacturing process improvements should be made eligible to R&D tax credits
Payroll tax: if applicable, payroll tax should be rebated. An alternative approach is temporarily to place the employees hired by the investor on to the provincial government payroll
Sales tax: sales taxes on utilities and equipment should be waived
OTHER WORKFORCE
Training: flexible subsidization of training programs during and post start up. Ideally, this includes, inter alia, travel costs (including overseas) for instructors and employees, and contributions to salary costs for instructors (minimum) and employees while training (leading practice). Provision of space in which to conduct training is also beneficial (e.g. at the local university)
Recruiting: contributions towards recruitment costs, job advertisements and marketing; provision of space in which to conduct candidate interviews is also preferable
OTHER
Construction permits: support with expediting construction permits
Visas/work permits: support with expediting visa and work permits for expatriates

44. Summary and Next Steps

45. Summary
The workshop methodology provides the basis for determining what the key priorities and next steps should be
What are our goals and aspirations?
Build sustainable life sciences clusters that leverages Iceland’s unique strengths and capabilities with a focus on specific industries and segment of the value chain within life science
Where will we play?
Primary opportunities are areas with the support and investment Iceland has a strong opportunity to competitively compete and grow on existing capabilities to develop a cluster
Secondary opportunities are also developing but do not merit the same support or investment as they either need to be monitored due to their emerging status or may not offer as strong a return on investment
How will we win?
Coordination and storytelling are key
Illustrating how Iceland can reduce the risk of operations and support industry in long-term partnerships provide the foundation for building clusters
What Capabilities must be in place?
A mechanism for coordinating support across stakeholders and aligning investment with opportunities that strategically support cluster development
This requires flexibility, a brand, and adequate funding
What are the priority initiatives?
Biosimliars, Class III Medical Devices, and Molecular Nutraceuticals are just a few of the primary opportunities that could be leverage; matching initiatives with available opportunities is the first step MATCH WITH FINAL RESULTS

46. Next Steps
In order to develop a life science cluster Promote Iceland can take the following next steps 1
Start Tracking
Track life science industries in order to understand what clusters are developing and how they can be supported
Build the Network
Build a network of organizations that work collaboratively to support, provide financing, create policy, and build expertise in life sciences industries 2
Build the Brand
Create a clear story and business case for “why Iceland” 3
Refine Support
Develop specific funding, financing, and incentives that mitigate the risk of life science companies in Iceland 4
Repeat
Remain competitive by continuing these activities on an ongoing basis 5