How to boost growth as oil price falls – Transformation and reform of the Norwegian economy

Speech at Norwegian Shipowners’ Association Annual Conference

"Local, private ownership is essential to a versatile Norwegian business environment. It is therefore important to both lower the corporate tax and reduce the wealth tax – especially for business owners – to strengthen the private Norwegian ownership" said Minister of Finance, Siv Jensen.

Check against delivery

 

Ladies and Gentlemen, distinguished guest,

What a pleasure it is seeing you all here at the Annual Conference of The Norwegian Shipowners’ Association.

The maritime industry has a special role in the Norwegian society. It has a very long and proud history in our country, but also a bright future. Today the maritime industry is one of the most innovative and modern sectors of our economy.

For 1 000 years, Norway has been a major power at sea.

In the late 1700s, Norway had one of the world's largest fleets of sailing ships. Norwegian ships and sailors were present worldwide.

The transition to steamships represented a challenge for Norwegian shipowners but they proved able to navigate in a shifting economic climate.

Soon we were among the key players in passenger traffic by steamships, and before World War II, we had one of the world's most modern tanker fleets.

The development after the war is also a story about transformation and change. It was innovation that helped us to extract oil, and to build up a knowledge-based oil and gas industry that our welfare system rests on today. 

Today – when we experience declining oil prices and slower growth in in the global economy – Norwegian shipowners again have to adapt.

You have proven capable before. And you will prove capable again.

When Norwegian shipowners in the 1970s contracted their first offshore ships, they could build on extensive experience in other shipping segments.

Transformation and innovation are keys to success also in today’s challenging business environment

Norwegian shipyards have already delivered ships that will conduct services in offshore wind power. And several Norwegian shipping companies have successfully won contracts to build offshore wind projects. Even though the oil industry will not provide the same growth stimulus to the rest of the Norwegian economy as before, I am confident that the future will bring new opportunities.

Last week The Shipowners’ Association presented its thorough analysis of the shipping markets in the annual Maritime Outlook.  You expect weaker demand and profitability. We take this outlook seriously.

The low oil price is a challenge for the Norwegian economy. In particular, the maritime industry, and especially offshore companies, is directly impacted.

So far, we have mainly seen increasing unemployment in regions of Norway with close ties to the oil industry. In other regions, the unemployment rate has indeed decreased or remained stable  

The situation is serious for those affected – families as well as businesses.

The Norwegian government has a proactive approach in order to limit the negative impact of the drop in the oil price. We need to   improve our competitiveness and to facilitate new, safe jobs in the private sector.

In the short term, we stimulate activity in the Norwegian economy with an expansionary fiscal policy, especially targeting the regions mostly affected by declining demand from the oil sector.

But, short-term measures alone will not be sufficient. We need to facilitate long-term readjustment and improved competitiveness.

First and foremost, we will promote the long-term transition of the Norwegian economy through predictability, competition between sectors on an equal footing.

Our currency has depreciated by 15-20 per cent against our main trading partners over the past couple of years.

A weaker krone is the strongest remedy to improve our international competiveness and facilitate new jobs in the private sector.

The Government also need to provide the business sector with the right framework conditions to meet future challenges and facilitate growth.

Let me highlight three measures essential to a healthy maritime industry in particular.

First, ensure competitive flag registers and strengthening the competitive advantage of Norwegian seafarers and maritime companies operating in tough international competition.

Second, continue to develop the maritime cluster based on innovation and knowledge.

Third, improve the tax system in order to further strengthen competitiveness.

Today, the Norwegian maritime industries consist of a wide range of industrial branches that mutually benefit from activities onshore or offshore

To preserve a strong maritime cluster, it is important for Norway to have competitive shipping registers facilitating a large l fleet under the Norwegian flag.

This gives Norway recognition and influence internationally, partly in development of legislation on maritime safety, the environment and labour conditions.

Therefore, the government has relaxed regulations on existing trade area restrictions for vessels registered in the Norwegian International Ship Register (NIS), increased support for Norwegian sailors and strengthened the net wage scheme in order for shipowners using Norwegian crew to benefit from it.

Tens of ships have already been flagged home. This is good news in difficult times.

The second and perhaps most important characteristic of the maritime cluster is high level of expertise and knowledge.

This is an advantage, especially in light of ambitious international requirements on environmental standards and energy efficiency. That is why green growth is one the main areas of the Government's maritime strategy. We will stimulate eco-friendly ships and production through research and development.

Equally important is education. Continuous development of new and relevant skills and access to competence is therefore vital to maintaining and developing competitiveness and value creation.

In the Shipowners’ Association Maritime Outlook, you also point out other conditions that are important to both shipping and private ownership. Tax is essential.

For the maritime industry, continuation of the current tonnage tax is obviously important for all segments of the industry – from short sea and deep sea, to offshore and subsea.

To ensure predictability the Government have already determined that we will continue the current tax regime.

As for other businesses, competitive taxation is crucial to readjustment in the maritime industry.

The Norwegian corporate tax of 25 percent is high compared our neighbouring countries. The Government has committed to a lower tax level in order to close some of the gap between Norway and neighbouring countries – thereby making us a more attractive destination for foreign investments.

But for the maritime cluster, competitive ownership taxation – including wealth tax – is even more crucial than just lowering corporate taxes. We have one of the most attractive maritime clusters. Many foreign companies have invested both capital and expertise in Norway. They both cooperate and compete with local businesses and help growing the sector.

But I am also convinced that we need local ownership to ensure long-term commitment and development of the sector. Without local commitment to this sector, I also think it will be more difficult to sustain foreign interest and investments in the Norwegian maritime sector.

Therefore it is a paradox that we have in place a wealth tax only applied to Norwegian owners. 

Local, private ownership is essential to a versatile Norwegian business environment. It is therefore important to both lower the corporate tax and reduce the wealth tax – especially for business owners – to strengthen the private Norwegian ownership.

Much more competitive ownership taxation can reinforce several of our leading industries – such as maritime industry. And will provide Norwegian owners in the shipping industry the incentives and abilities to invest in new technology, new products and new value chains, and with that create jobs in the entire maritime industry.

To conclude, the maritime industry is among our proudest and most important.

The last couple of years I've meet many of you. I have visited shipyards in Rogaland, the maritime cluster at Møre, talked to suppliers and partners of the maritime industry along the coast. I have met leaders and workers, both before and after, the challenging time faced us.

You seem all to be optimistic and see a bright future for this sector even if the waters currently are rough. I concur with your positive outlook. We have many advantages in this sector if we are able to navigate correctly.

The government will be an active supporter, and we believe we have a good recipe to increase the competitiveness of our unique maritime community and secure Norwegian jobs.

Thank you for the great cooperation, and your attention!