Sample Research Paper on Economic Investment in Norway

Economic Investment in Norway

Norway is a small, modern, and vastly industrialized nation, with an extensive array of opportunities and ranked amongst the biggest worldwide, in terms of the success of a variety of economic sectors. It has an excellent economic framework and a steady political environment that make it a good spot for long-term investment. This paper looks into a summary of facts about Norway, its economic potential, its position globally, comparative advantages, regulations, and other factors that make it a favorable place for investment.

Summary

Norway has an incredibly strong economy with a GDP per capita that is ranked second highest among the European countries. The forecast by economy experts shows that there will be continuous growth through 2015 to the futuristic times. The government of Norway possesses the largest investment fund worldwide, with about six hundred billion Euros. The strong economy makes Norway an essential market despite its market scope.

The success of the Norwegian economy is largely based upon the utilization of the extensive natural resources it possesses. For this reason, Norway depends on the regulation by the government in order to strike a balance between economical and environmental interests. The nation is endowed with natural resources, which include oil and gas, fish products, hydroelectric power, forestry, and a number of minerals. The start of the twentieth century saw the development of the hydroelectric energy sector that triggered industrial growth, while the discovery of extensive oil and gas reserves during the late 1960s, boosted the economy.

In spite of being a relatively small country that hosts approximately five million individuals, Norway falls in the global top ten rankings in a variety of economic sectors. For instance, it is positioned second place globally in the export of fish and seafood products, the third biggest exporter of natural gas, the fourth biggest maritime country, the fifth-biggest oil exporter, and also the sixth biggest hydropower producer.

The Norwegian nation has developed fruitful cooperation amongst the government, the research and development institutions, and the industrial sector, together with other sectors that have helped in the development of technologically advanced industries, which have a cluster of companies that cater to a wide range of sectors.

Norway is a party to the European Economic Area (EEA) accord, and therefore an integral component of Europe’s internal market. Like other European countries, Norway is committed to the promotion of trade, open to foreign investment, and upholding a framework that is business-friendly. The United Nation’s Human Development Index (2013) ranks Norway as one of the richest nations in terms of per capita, making it a destination with the best standard of living, high-quality education, and high life expectancy. It has well-developed welfare and exercises a high sense of social security. In accordance with the World Competitiveness Scoreboard (2013), Norway is placed in the 6th position as the most competitive nation worldwide.

The country is renowned for a vibrant judicial system that promotes the well-functioning of markets and is among the top ten ranking of the World Bank’s Ease of Doing Business. It also has a successful monetary policy that maintains stable inflation and exchange rates. The country embraces the utilization of the globe’s latest technology and an unparalleled focus on quality – factors that aid in the maintenance of its competitive edge. Generally, Norway presents investors with low risk and a long-term investment opportunity, an idea that is backed by solid fundamentals and predictions from analysts that show continuous economic growth in the prospective years.

Comparative Advantage

Norway is technologically advanced compared to many other countries of its caliber through investments in the education, research and development, and innovation sectors. The values depicted by the work-life of the people encourage productivity and innovation, such as hierarchy, open communication, and collaboration. There is a high level of trust between employers and their workers and all the individuals have a sense of empowerment.

Norway has a highly educated workforce, with a good representation of women in all the sectors of the economy. Gender equality is highly encouraged in the country and is one of the nations with the highest number of women in work life. The universities and the colleges are properly funded and conform to the standards of the European Union, thus ensuring that its students are internationally competitive.

Norway has a very stable and accountable political environment, which ensures that there is a conventional and apparent business environment characterized by almost zero corruption, respect of the judicial system, and an optimally functioning market. Norway continues to remain as one of the globe’s least corrupt nations due to the firm anti-corruption measures that reinforce a cultural emphasis on the integrity of the government. Transparency is a fundamental institutional asset, which is displayed through the autonomy of the judicial system that works fairly at the local and national levels. The judicial system also ensures that private property rights are protected and that business contracts are consistently enforced.

Norway possesses a population with a high purchasing power given the strength of its economy, the high standards of living, favorable trade rates, which make it a striking market for export commodities.

The government of Norway ensures responsible resource management of the available oil and gas reserves through fiscal expenditure and investment of the surpluses by way of the Government Pension Fund, which is the nation’s sovereign wealth fund. The government has also enacted prudent financial regulations that ensure a strong financial and banking system.

Norway has technologically advanced environmental solutions that are sustained by the developing environmental industry. It has enacted prudent rules and environmental regulations that ensure that the industries make the environment their first priority, while also allowing the environmental industry to thrive.

Norway is endowed with vast, untouched natural surroundings that present a rewarding cultural experience for nature lovers. For instance, the Fjords, waterfalls, glaciers, and northern lights, coupled with a wide range of culturally related materials make the nation an ideal destination for tourists and a perfect export market. Due to the established balance between the people’s profession and private life, there is also an opportunity to take advantage of nature.

Due to its topography and small population, Norway has managed to build an excellent network of infrastructure in terms of roads and airports throughout the country. For instance, more than fifty airports have standard traffic.

Key Industries

Renewable Energy

Through the combined efforts of innovative companies, a strong foundation in hydroelectric production, first-class facilities, and overwhelming public sector support, Norway has managed to be one of the global leaders in producing renewable energy (International Business Publications 33). The arrangement is made such that the hydropower-generated energy is utilized domestically, while the oil and gas are exported. Norway has also invested in hydropower generation in other countries like the Philippines. The capital investments and business interests of the Norwegian government coupled with a political commitment to ensure that the nation remains at the forefront of renewable technologies.

The Maritime Industry

Norway is endowed with a huge maritime convoy comprised of conventional shipping and offshore containers, in addition to an established maritime industry. The industry and other companies are responsible for ship management, classification society, financing, maritime law, and shipbuilding as well as supplying a wide range of goods and services to the international fleet.

The Offshore Industry

Norway is a large exporter of oil and gas and it carries out these functions through the offshore industry that links up to the world’s energy markets. The nation is an essential contributor to the global exploration and production business and a substantial exporter of petroleum allied goods and services, with a particular interest in subsea technology. The regulations posed by the government through resource management, environmental protection and health, and safety policies, ensure that the production activities are carried out in a sustainable manner.

The Seafood Industry

Norway is renowned globally amongst chefs and consumers for its seafood in terms of the salmon and spring cod delicacies. The nation is also renowned as one of the globe’s biggest aquaculture destinations, with industries that manufacture a wide range of fishery facilities.

The Information Communication and Technology Industry

Norway has a first class ICT industry comprised of a myriad of high-tech companies, which develop telecommunications, hardware and software, and high-tech electronic products. The companies also offer high-end consultancy services overseas.

Openness and Restrictions towards Foreign Investment

The attitude of the Norwegian Government

The Norwegian government agrees to foreign investment as an issue of policy and normally gives state consideration to foreign investors. The authorities encourage foreign investment, specifically in the key offshore petroleum sector, in the mainland industry, and in the regions that are underdeveloped, such as the northern parts of the country. The European Economic Area (EEA) is a free trade agreement that was enacted in 1995 and needs the nation to use principles of national treatment in order to avert some decisions about foreign investments that had been previously restricted or prohibited.

The ideologies of the investment regime of the nation are founded on the basis of equal treatment principles but restrictions are still upheld in the fishing and maritime transport sectors. In accordance with the OECD’s (Organization for Economic Cooperation and Development) 2012 FDI Regulatory Restrictiveness Index, the nation is placed close to the OECD mean (OECD 90). The ownership of companies by the government is a measure to ensure that Norway’s domination is over the firms.

Laws, Regulations, and Practices Impacting Foreign Investment

Government Monopolies: Norway has conventionally prevented foreign and domestic investors from taking a share of the monopolized industries by the government, which include the postal services, railways, and the domesticated production and sale of alcoholic drinks. However, in the wake of 2004, the nation relaxed the regulations and allowed foreign investor companies to place bids on the provision of some postal services, like air express services between countries and railway cargo services (The Economist Intelligence Unit n.p.). The government may grant twenty percent equity on foreign investment in hydropower but has completely opened the distribution system of electricity to the foreign involvement – an issue that makes Norway a country with a more liberal energy sector investment organization worldwide.

Ownership of Real Property: Real property may generally be owned by foreign investors, even though the possession of certain kinds of real assets. Any foreign company is obliged to obtain a concession in order to get rights for ownership or the utilization of any real property, which includes forestry, mines, plowed terrain, waterfalls, and so on. However, the foreign companies do not need to seek concessions in order to rent any real estate, as long as the rental contract is made for a period of ten years or less.

Investment Screening Mechanisms: All the investment applications are reviewed by the ministries of the government concerned; for instance, the Ministry of Trade and Industry caters for applications that seek acquisition of real property in the country when permission is mandatory. The decisions are usually made at the ministerial level but other cases with considerable political overtones may require the consensus of the entire cabinet.

The time taken for the processing of the application documents depends on so many factors, but tale a maximum of three months. The Norwegian authority might place conditions upon granting a concession, majorly in circumstances that involve more than one-third foreign possession (Reitan et al. 134). The concession agreements restrict the company’s involvement in extra business operations other than the ones agreed upon. Generally, the authorities screen all the investments in a case-by-case mechanism carried out through public interest and indiscretion.

Finances and Other Services: Norway has relaxed the limitations on the acquisitions of equity in the nation’s financial institutions, with the delegation of the responsibility to the Norwegian Financial Supervisory Authority on loans that exceed a definite threshold level. The authority investigates and determines the acquisitions to ascertain that the prospective buyers are financially capable and also ensures that the acquisition does not unduly restrict competition (Reitan et al. 129).

The Ministry of Finance has withdrawn restrictions on the establishment of branches of financial bodies by the foreign owners, which includes banks and mutual financial services. The liberalized regime endeavors to eliminate discrimination in the dispensation of these services by awarding the same treatment towards the foreign financial bodies as it does to the domestic financial bodies.

Risks and Other Considerations

The robust economy presented by Norway provides international investors with an opportunity to diversify their portfolios. With the profound exposure to the oil and gas industry, the investors should be keen and consider the possibility of a downturn in crude oil prices or the levels of production that may consequently trouble the economy of Norway.

The Middle East style oil together with the Nordic massive benefits is throttling the economy of Norway, which in turn is endangering the economic success of Western Europe (The Economist Intelligence Unit n.p.). At length, various nations around the world have been envious of the success of Norway. This is because the growth has already been strong with a high per capita GDP and nation cash reserve. However, the problem is that due to the excess wealth, people are working less hours and having too much time for their leisure time and family time. This problem has not been solved by even having immigrants work for the country. The immigrants cannot fill the gap in the workforce and therefore, productivity has been stagnating, affecting the wages and products pricing by the firms. Most of Norwegians find it not necessary to work because they are wealthy and they end up cutting their work hours to have more free time (The Economist Intelligence Unit n.p.). This has made the government call for people to increase working hours by ten percent, to avoid eating into the nation’s savings. According to the World Bank, people are encouraged to leave the labor market because of the current welfare model. Over time, from 1974, full-time workers’ labor hours have reduced by two hundred and seventy hours, which increasingly threatens Norway’s economy.

Norway’s inflows fell to $2.2 bn in 2001 after peaking in 1999 with $8.1 bn and continued to drop the year after to $1.9 bn. It has been noted that the nation does not attract a lot of inflows of investments from outside the offshore oil and gas sector and as compared to standards of other nations in Western Europe, its inflows of foreign direct investment remain small. Inflows of foreign direct investment ratio of Norway to its GDP have been marked lower as compared to that of Sweden (The Economist Intelligence Unit n.p.). In addition, Norway has a small net exporter of its direct investment capital, and its stock of outward is exceeded by its inward stock.

Having other more profitable oil fields in the world has made Norway’s application for licenses for exploration and petroleum disappointing because of the high competition from the other nations. This has made the nation a striking appeal outside the offshore oil and gas sector remain limited. In addition, Norway has a high labor cost and a very tedious tax system. The slow pace of privatizing state assets and the nation’s restrictiveness on legislation especially in the financial sector is likely to inhibit direct investments and affect the economy of Norway.

Conclusion

The close cooperation between the research and development institutions and the industries is one of the reasons that make Norway a country of choice for investment and a highly suited area for R&D activities as well as investment. The nation offers hubs for global knowledge the development of global industries, government support plans, open and excellent systems that foster research and innovation. The cash required to set up R&D activities is internationally competitive, and there is also a superb system that protects intellectual property rights. Additionally, the nation is fully involved in all the research programs and activities undertaken by the European Union.

The productivity of Norway is much higher compared to the average productivity of the European Union due to the utilization of advanced technology, the continued focus on productivity because of the high labor costs as well as the extra value from the energy sector. The invariable trust and open communication in the workplaces continue to play an essential role in enhancing innovation.

Norway is a safe and relatively easy destination for doing business, according to the publication on the Ease of Doing Business (2014) by the IFC and the World Bank. The nation is ranked ninth out of a hundred and eighty-nine nations listed. The population is small but highly rich, which implies that the market, in reality, is equivalent to nations with a much bigger size

Works Cited

Developments in Individual OECD Countries: Norway. Paris: Organisation for Economic Cooperation and Development (OECD), 1995. ProQuest. Web. 24 Mar. 2014.

International Business Publications, USA. Norway Investment and Trade Laws and Regulations Handbook. Int’l Business Publications, 2008.

Norway Economy: Investment Prospects. New York: The Economist Intelligence Unit, 2003. ProQuest. Web. 24 Mar. 2014.

Norway: 2004. Paris: OECD, 2004. Print.

Reitan, Bjornar, and Roger Sorheim. “The informal venture capital market in Norway? investor characteristics, behavior and investment preferences.”Venture Capital: An international journal of entrepreneurial finance 2.2 (2000): 129-141.

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