Doing business in Norway

Transcription

1 Doing business in Norway Business Lunch Hyvinkää, 25. January 2018 Markus Laakkonen Finnvera Plc.

2 Contact Team Finland Norge

3 Ulkomaankauppa maittain 2016 Kokonaiskauppavaihdon mukaan suuruusjärjestyksessä Lähde: Tulli

4 Norway s Performance in the Global Competitiveness Index Macroeconomic Environment 1 Business sophistication 10 Institutions 6 Health and primary education 11 Higher education and training 7 Innovation 12 Technological readiness 7 Goods market efficiency 21 Labor market efficiency 9 Infrastructure 34 Financial market development 9

5 Facts Norway ranks sixth in the World Bank s Ease of Doing Business Ranking GDP approx. 370 billion USD (Finland 240 billion USD) Normal growth approx. 2.5% /estimate % Recent years 1 2% Strongest growth in north Population approx. 5,2 million an increase of 736,000 since 2000 State budget approx. 160 billion USD Oilfund approx billion USD Unemployment rate approx. 4.5% Petroleum industry has for several decades been a key driver for economic growth Challenge to create new profitabe jobs in private sector exposed to international competition Norway was one of the very few markets within Europe which did not suffered seriously from the global economic crisis 2008 fast recovery of oil price Drop in oil price since 2014 has had bigger effect from 120 USD/barrel to 44 USD/barrel Price is not ecpected to reach the top level

6 Facts Growing economy also after 2014 The recent fall in petroleum investments and a fall in exports have been tackled by higher investments in construction and an expansive fiscal policy. Lower demand from the petroleum industry is expected to be a lasting phenomeon Need for additional growth drivers Need for structural changes to improve business environment Central government revenues from the GPFG have now outpaced inflows from petroleum activities Oil price uncertainty has thereby become gradually less important, whilst uncertainty as to market value of the Fund s investments i of greater signifigance Recent development Capasity utilisation is rising Firms anticipate much stronger investment growth Exports growing Weakened krone (tourism, aquaculture) Higher growt in world economy Business lending accelerating Declining unemployment Also new petroleum investments Oil sector reviveing Due the structural adjustmets the petroleum industry is now delivering profits at much lower oil price Fiscal policy normalisation 2018 Petroleum revenue spending 2.9% of GPFG Focus on infrastructure, research and innovation Importance of improving the value of money in public spending [pvm]

7 Government Pension Fund Two Funds; Global Fund/trillion USD Established 1996 In order to balance the budget, the government is taking money out of fund Managed by Norwegian Central Bank The State s net cash flow (estimated 2018 approx 18 billion eur) is transferred in full to fund; Oil profits, new lisencies Cumulative transfers 340 billion EUR Cumulative return 312 billion EUR Average annual return % Domestic Fund/ 28 billion USD Established 1967 Managed by Folketrygdfondet Investments only in Norway and Scandinavia 35% of the value of Oslo Stock Exchange

8 GPFG Equities 62.5% equities/return 8.7% Approx companies/77 countries North America 42% Europe 36% Asia 16% Divested in tobacco and coal industry Oil Fund aims to decrease it s ownership in oil and gas companies (Shell, Conoco Phillips, BP, Gazprom, Lukoil)

9 Investments in Finland 3,5 billion USD/55 companies/%-share % Oil Fund investments in Finland 25% 20% 15% 10% 5% 0% Total Basic Materials Total Consumer Goods Total Consumer Services Total Financials Total Health Care Total Industrials Total Oil & Gas Total Technology Total Telecom Total Utilities

10 GPFG Real-Estate 3.2% real-estate investments Mainly unlisted office (50%), retail (10%) and logistics (18%), properties Share of market value US 50% UK 22.9% France 14.8% Switzerland 4.5% Germany 3.3% New York, Washington, San Francisco, Boston, Zurich, Paris and London Return 0.8%

11 Challengies Norway scores around the mean in education, indutry innovations and research and developement The portion of start-ups is low Norway has long suffered a shortage of engineers and skilled workers Employment is high, average working hours are low Hourly labour cost Norway 50 eur/h Finland 33 eur/h Low complexity of export goods Aging population House prices adjusting downwards especially Oslo Increased supply and tighter financial regulation OECD; be prepared to respond to hard landing in the housing and debt markets Danske Bank; there is little risk of a crash as long as unemployment is falling and interest rates remain low. But prices will need to come down 12 15% from the peak level

12 Productivity Productivity growth has slowed down High productivity growth until 2004/ approx 3% and after that 0.8% Especially Norwegian manufacturing industry, which are more exposed to international markets suffered a major decline in profitability Productivity growth in mainland economy is essential Needs to facilitate structural adjustments and innovation that channels manpower and capital into new industries Lower transport costs Higher labour mobility Technology adaption from abroad (foreign trade, human mobility, foreign ownership) Improve public sector efficiency

13 Focus/state Norway invests in research and education Also infrastructure for example new life sciences building at the University of Oslo Norway invests in health care New hospitals; Nordmore, Romsdal, Drammen, Norwegian Radium Hospital Expansion and modernisation; Haugesund Ageing population there is a considerable growth potential in the health sector Working population declining More public spending for health care and pensions Norway invests heavily in transports infrastucture 1.8%/GDP Road projects initated worth approx. 9 billion eur Budget -18 approx. 6,5 billion eur For the next ten years 5,5 8 billion per year OECD; strenghten the influence of cost-benefit analysis in project selection

14 Export Norway the 30th largest exporter 2016 Export 89,5 billion USD ( billion USD) Almost two thirds of Norway s total exports are directly or indirectly linked to oil and gas sector Oil and gas directly 50%, manufacturing 30% and services 20% Petroleum and gas 46,5 billion USD Fish 10,5 billion USD: +23% y/y due the increased price Machinery 5 billion USD Aluminium 3,2 billion USD Electrical machinery 2,5 billion USD Optical, technical medical 1,7 billion USD Ships and boats 1,6 billion USD Iron and steel 1,1 billion USD Organic chemiocals 1 billion USD Import 72,5 billion USD GDP approx. 370 billion USD Eports/gdp 24% Trade; 80% EU GDP/sector Agriculture 1.8% Industry 34.7% Services 63.3% Petroleum industry 12% of GDP (-12 / 22%) Direct employment about 1 percent Indirect employment about 5,7 percent

15 Norway exports to Finland

16 Finland exports to Norway

17 Manufacturing The Norwegian manufacturing industries employs about 9%/ of the total employment Food and beverage industry consists of companies and approx employees and accounts for 20 percent of industrial production in Norway Domestic brand are dominating in the 3 main retail chains Production of machinery A worldwide leading sector for ships and offshore installations; engines, turbines, pumps, propulsion, drilling equipment, lifts ans cranes Process industry Metallurgical industry, pulp and paper, fertilizers, chemicals and pharmaceutical industry stands for half of the export from Norway (not including oil and gas). Most of the process industry is today owned by global companies, and many of these have located their research and development centers in Norway. Aluminium finished products Due to the Norway s position in primary aluminum production, manufacturing capacity of aluminum finished products have been developed to be in the international forefront

18 Offshore Drop in oil price 2014 Break even was 80 USD/barrel now 35 USD/barrel Redundancies, cost efficiency Oil investments 2017 approx. 15 billion eur mostly replacements No new investments since /17 Johan Castberg (Barents Sea) 5 billion eur new investment (Statoil, Eni, Petoro) Published deals; Aker Solutions, Sembcorp Marine Rigs & Floaters

19 Maritime High costs tecnological innovation plays a vital role high value added 6.7%/GDP Second largest value of export Future substitute for oil and gas industry But largely depended on gas and oil activity Was hitted heavily in 2015 How to adapt to low oil price environment Fishing vessels, fish-carrying vessels and cruise ships (less value added than offshore vessels) Ship repair Government has allocated funds for upgrading and maintenance of government vessels

20 Maritime Industry/ employees Ship owners (45.000) Sixth biggest fleet of merchant vessels Second biggest fleet of offshore vessels out of 600 vessels were not in use Shipbuilders (10.000) 75 yards small and medium sized in European standards Offshore, fishing, passenger and specialised coastal vessels Largest ships /Ålesund a size about 135 m SIMEK, Kleven, Ulstein, Fiskerstrand, Vard Maritime equipment (26.000) Good growth potential TechnipFMC, Rolls-Royce Marine, National Oilwell Varco, Framo, Baker Hughes, Kongsberg Maritime, Halliburton, Schlumberger, Aker Solutions, Weatherford, Oceaneering Service providers (28.000) Classification, designing, financing, insurance, education, consulting

21 Fish World s second largest fish product exporter (biggest salmon producer) Value of exports 10.5 billion USD Approx employees Big companies; Marine Harvest, Skretting, Austevoll Seafood (Leroy), EWOS Fish farms 1,3 million tonnes of farmed salmon/year Approx 60% of the total production Five times as much by 2050 World s first offshore fish farm 2017 Norway s first land-based fish farm 2017

22 Fish Traditional fishing Fishing vessels approx Many of those quite old but technically modern Fishing licenses approx Number of fishermen approx Fishery harbors approx 670 Bigger trawlers producing fish on board and less production of fish fillet in Norway Over the last 15 years, the number of registered vessels and fishermen has fallen steadily Fish processing Fish processing plants approx 280

23 Construction Volume Companies: Employees: Total value estimation: NOK 445 bn, 12% of GDP The recent fall in petroleum investments and a fall in exports have been tackled by higher investments in construction and an expansive fiscal policy. low growth in Norwegian economy as a whole, but strong performance in construction The large companies account for a smaller share of the construction output in Norway that in many other countries.

24 Construction It is estimated that some new homes were in construction construction is experiencing growth, there will be more supply to meet the demand in when supply and demand are more stable, housing prices are expected to fall in Oslo. Despite the oil-recession, there has been surprisingly high investment in commercial building. The road, railway, maritime (ports & docks) infrastructure investments are currently in a boom. after moderate growth in 2015, growth in this sector is expected to be 30% in the period

25 Infrastructure Policy makers goal of altering Norway s growth model will require that more resources be shifted into non-oil tradable sectors or exports of oil-related goods and services. The government is increasing spending in infrastructure especially the road and railway related infrastructure Vegvesen and Nye Veier Challenges The average increase of cost estimates in the planning period is approx. 50% Highway development in Norway is approx. 110% more expensive than in Sweden The construction stage in Norwegian highways projects takes twice as long as in Sweden

26 Energy/Cleantech The Norwegian renewable energy sector comprises approx companies, employees Norway s electricity generation is 97% renewable Nearly all electric energy generated in Norway derives from hydroelectric power. By 2030 Norway aims to reduce emissions of greenhouses gases by 40 percent, compared to level in Electric cars and public transport huge potential in wind energy resources both on land and offshore solar energy sector has seen considerable growth over the last 20 years Saga Energy recently (October 2017) signed a 2,5 billion deal to build solar power plants in Iran.

27 Electric cars Large part of Norway's CO2 emissions comes from traffic. Strong support for electric vehicles; lower taxation reduced road tolls free parking free charging permission to use bus lanes Strong growth in EV sales. There are approximately EV s in traffic Market share of sales is currently 19% The percentage of EV's is currently 4% of all cars over charging stations in Norway, and the number is increasing every year.

28 Retail Consumer confidence started to shake The price of oil started decreasing in 2014 and 2015 Norwegian krone has lost significant value Unemployment has increased Signs that things start to get more stable again retailing sector grew by 4% in 2016 Online sales in Norway accounted for 7% of total retailing value sales in 2016 In apparel and footwear 17% Grocery retailers continued to occupy the top three positions in retailing in Norway (Norgesgruppen, Coop Norge Handel and Reitangruppen) Restrictions on foreign food products Only 6% of the population uses cash on a daily basis

29 Health sector Norway is set to remodel the health care system and continue reducing the number of hospitals. Smaller hospitals are being closed down and the bigger hospitals are being modernized/build. Large hospital projects, both new hospitals and renovation of old ones as their roles change. New investments 1 1,5 billion /year 5 Health regions Joint services Syggehusbygg National ICT Purchase service

30 Recognized facts Traditionally SME companies have done projects for larger Finnish export companies 30 Business environment has radically changed Huge need for direct export of SMEs The growth happens on SME sector not in large companies Most productive SMEs are exporting Especially SMEs face big problems in providing their products or services to larger projects abroad. Credibility is not sufficient enough There is a big need to understand the local supply chains abroad Thank You!