The World’s Most Deluxe Duchy

Luxembourg is at Western Europe’s geographic core and has long been a major player in the surrounding market.

Luxembourg, Europe’s landlocked fist of fortune, is small in size but large in value. While its borders extend a mere 1,000 square miles, the wealthy duchy of half a million people boasts the world’s second highest GDP per capita, according to a 2007 estimate by the U.S. Central Intelligence Agency. A Benelux trade member (along with Belgium and the Netherlands) and a founding member of the European Union and NATO, Luxembourg offers an open market, high-income economy with a history of entrepreneurial success.

Although finance and related business services account for an important share of Luxembourg’s wealth creation, there is substantial depth and variety in the economy. The Grand Duchy’s steel industry is now one of the most sophisticated on the planet, and home to the headquarters of one of the world’s prominent steel companies, ArcelorMittal. Twenty-five years ago, Luxembourg was quick to grasp the potential of satellite communications, spawning the company that became SES, which has its global headquarters and European satellite operations in the duchy. More recently, Skype used Luxembourg as a base for its revolutionary web telephony service that has taken the world by storm. Add a competitive and varied automotive sector into the mix, and Luxembourg’s economic output dwarfs those of much larger nations.

“Two of Luxembourg’s big advantages are linked,” says Luxembourg Minister of the Economy and Foreign Trade Jeannot Krecké. A central location at the heart of northwestern Europe encourages multilingualism, with English, French and German being widely spoken. Many other nationalities also are present, with the population expanding by nearly 1% per annum, resulting in more than 42% of the population being of foreign origin. This enables businesses to hire staff that can talk to partners and clients in their mother tongues. “The central location is important in terms of market access too,” remarks Minister Krecké, “with about half of the old EU15’s GDP lying in a banana shape stretching from the southern UK, through the Benelux, Germany and France to Northern Italy and Spain.”

Immigrants to Luxembourg tend to have either very high or quite low levels of educational achievement, depending on the type of work they are seeking. They also are attracted by the high quality of life, as the country is easy to get around in and largely rural while also providing excellent cultural opportunities. As well as the resident workforce, Luxembourg attracts commuters from neighboring countries. Around 150,000 non-residents, usually with an above-average educational profile, go to the Grand Duchy to work each day, representing 44% of the total workforce.

In regards to transportation infrastructure, Luxembourg has a thriving airport with a brand new terminal. A high-speed train takes just more than two hours to reach Paris, and the country is at the intersection of major motorway links.

The political climate is very stable, with all main parties agreeing on the importance of remaining economically competitive while maintaining a well-funded welfare state and peaceful industrial relations. Although salaries are generous enough to attract talented people, low employer charges mean that gross salary costs generally are below those of most western European countries. High salaries and low unemployment help grease the wheels of a mainly consensual industrial relations environment known for its low rate of strike action. Additionally, business taxes are competitive and the Luxembourgish government has pledged to cut them further. Infrastructure (e.g. for education, transport, telecommunications and industrial zones) also sees a fair share of government investment.

Lux Set to Build “Biobank”

In June 2008, the government of Luxembourg announced that it will be investing 140 million euro in health technologies research, specifically aiming to develop cutting-edge skills and expertise in molecular medicine.

Three prestigious American research institutions will be working with the University of Luxembourg and the three Public Research Centers—Gabriel Lippmann, Henri Tudor and Santé—to make strides in this area of expertise. The centerpiece of the overall project will be the creation of a Luxembourg “biobank,” which will be open to international researchers and initially will concentrate on collecting and analyzing biological samples in order to support lung and colon cancer research. Funding also will go towards establishing a center of excellence in systems biology, which will conduct research into genome sequencing and molecular fingerprinting of the body’s main organs. A third area to benefit from this investment is a pilot project aiming to advance research in personalized medicine by pursuing research projects focused on developing molecular diagnostics for specific diseases. The Luxembourgish project will focus on lung cancer, a disease where the therapeutic possibilities currently are limited, and where reliable early detection tools are needed urgently.

Molecular diagnosis is the cornerstone of personalized medicine, a relatively new approach that takes an individual’s genetic and biological make-up into consideration when providing health care. Ultimately, this is expected to result in great improvements in the ability to administer the right dosage of drugs at the right time.

Innovation and Research Committee Created

“Research and innovation are the motors that drive a country’s evolution, economy and society in its entirety,” said Minister for Research François Biltgen when announcing the creation of the Luxembourgish Higher Committee for Research and Innovation at the end of July 2008. The committee was formed to help develop a coherent and effective national policy and to advise the government on the implementation of this policy.

In particular, committee members will be aiming to define Luxembourg’s national research priorities and identify the steps and tools needed to achieve these goals. By setting up the committee, Luxembourg is confirming its commitment to making research and innovation a top priority of its national policy agenda and to helping them thrive in the Grand Duchy. The committee is composed of individuals selected from the scientific, business and civic communities. Part of the idea also is that outsiders sometimes have insights that insiders miss; committee members, by taking a constructive look at research and innovation, might see unexplored opportunities and point R&D in Luxembourg in new directions. “Luxembourg can only endure if it is quick, flexible and innovative,” says Minister Krecké, who presides over the committee along with Minister Biltgen.

The Biohealth Boom

Luxembourg’s Cluster of Health Sciences and Technologies was launched at the end of September 2008 with the aim to stimulate cross-fertilization and technological cooperation in the field of health sciences and technologies. It is the latest addition to the Grand Duchy’s “Clusters” program, which was initiated in 2002 by the Ministry of the Economy and Foreign Trade and animated by Luxinnovation with the aim to support and reinforce synergies and collaboration between the public and private sectors.

The BioHealth Cluster will contribute to improving scientific knowledge in the field of health sciences and technologies, boosting R&D and innovation and developing transnational and international collaboration, notably with other RDI centers of competence.

The cluster encompasses national expertise in health technologies in the fields of biodevices, bioinformatics, biomaterials, imaging and platforms. Research efforts in Luxembourg focus on fields such as allergology and toxicology, cardiovascular diseases, microbiology, neurodegenerative diseases and oncology. Participation in the BioHealth cluster allows companies and public research centers to address scientific and technological problems with the help of expert advice, identify potential scientific or technological partners, and generally remain informed of the scientific and technological skills available in the country.

Automotive Motivations

The increased commitment of the Luxembourgish state to invest in public research institutes also benefits the automotive components sector. A new department for Research in Equipment for the Automobile industry (REA) has been established at the Public Research Centre Gabriel Lippmann. Formed in 2007, REA’s objectives are the development of new products and production processes, as well as the improvement of the quality of products and production processes for automobile equipment manufacturers. REA’s partners include Accumalux, ELTH, IEE and Luxbat, among others.

“We concluded a framework agreement with the Public Research Centre Gabriel Lippmann three years ago to establish a unit to serve the automotive sector,” explains Paul Schockmel, president of the Association of Luxembourgish Automotive Suppliers. “The first projects have been completed and they are expanding their building to accommodate their work with us. We welcome this because it will bring know-how and specialized people to Luxembourg. It also is important for potential investors to know there is this wider research infrastructure in place.”

Luxembourg’s national agency for innovation and research, Luxinnovation, can be accessed online at


Q: What is your vision of Luxembourg in 2015?

A: I believe that the financial sector will be even stronger, with manufacturing staying at the same levels or decreasing. The growth of activity in services and R&D is likely, but dependent upon the attractiveness of Luxembourg as a place to live, and the government is working on that.

– Volker Neuber, Vice President, EMEA Husky Injection Molding Systems S.A.

A: My vision is quite optimistic, provided we can avoid the trap of becoming too bureaucratic and slow. After all, in the fast-changing world in which we live, it is no longer “the big ones that eat the small ones,” but “the fast ones that eat the slow ones.” Luxembourg can be small and fast.

– Jacques Lanners, Chairman of the Executive Board of Ceratizit