How to strenghten the ties between Norway and China?

Innlegg ved statssekretær Dilek Ayhan på Norsk-Kinesisk Handelskammer, Oslo 27.mars 2014

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[Foil 1: Introfoil]

Ladies and gentlemen,

Dear friends,

Good evening everyone.

Allow me first of all to say thank you to the Norwegian-Chinese Chamber of Commerce, for the invitation and for the opportunity to say a few words.

 

[Foil 2: Year of the horse]

In February, we entered the year of the horse.

This year is said to be a year of fast victories, unexpected adventure, and an excellent year for travel.

And when it comes to Sino-Norwegian relations we all hope for fast victories and unexpected adventures.

China is an important trade partner for Norway and the most important in Asia.

There is a lot to say about the prospects and potential for future cooperation between our countries.

On the other hand the present situation in the political bilateral relationship between Norway and China is regrettable.

As we lack a framework to regulate the trade between our countries, we are concerned that opportunities may be lost.

Luckily, a new year brings new times.

A saying, which I believe is Chinese, goes:”When the winds of change blow, some people build walls and other build windmills”.

Let there be no doubt that there is a wind of change blowing. Soon after taking office, the new Norwegian government made it clear: A good dialogue and close cooperation with China is one of its top priorities.

Now it is up to us to build these windmills and strengthening the ties between our countries to harvest from the opportunities created.

A new Norwegian government marks new policies in many areas – not only in foreign policies – but also in other important areas such as industry and trade.

 

[Foil 3: The Economist on the world economy]

Norway is a small country with an open economy – this means that the situation in the world economy strongly affects us.

Here you can see how The Economist illustrates the outlook for 2014: The world economy will have a bumpy year – but we expect growth.

In the fourth quarter of last year the GDP in both Germany and France grew.

2013 was also a significantly better year for the Swedish economy.

And in Japan there are reports of recovery.

This is good news for Norwegian industries.

But on the other hand; as we expect less growth in some emerging economies, this may affect the demand for raw materials.

It is also a good reason to pay attention on what consequences the improved shale gas technology in the U.S will have on petroleum prices. This may affect the prices on oil and gas, which again reduces the growth of investments in the Norwegian offshore sector.

The industry in Norway has an outward focus and is largely built around natural resources. This is why the development in the world economy is of great importance to our business community.

 

[Foil 4: Key features of the Norwegian economy in 2014]

When it comes to the development in our economy, The Federation of Norwegian Industries presented their economic report for 2014 this February - with several interesting findings:

  • It is expected that 2014 will be a normal year – on the contrary to many forecasts.
  • The decoupling of the economy – meaning the oil and gas industry on one side, and the mainland industry on the other – will not be further increased.
  •  And finally, the depreciated Norwegian currency will provide a ketchup effect. This means that the positive effect for our export industries will be small in the beginning, but will in time get a significantly stronger effect. Just as the old ketchup bottle – where everything eventually comes out at once.

What the Federation of Norwegian Industries also points out is that we have a cost challenge for our industries.

This is particularly relevant for our offshore industry, but also for our mainland industries. This is a challenge we must take seriously.

Norwegian salaries are on average 55 percent higher than in competing countries and even higher if we compare them globally.

This means that the fundamental goal of our industrial policy is to have businesses that can compete in global markets by strengthening our competitiveness.

 

We usually cannot offer the cheapest services and products – this means that we have to offer the best services and products.

[Foil 5: Knowledge: Our most important resource]

One of the main goals this government has set itself is to be one of the most innovative countries in Europe.

It's a big ambition, but we believe that Norway has the best conditions for achieving this goal.

Innovation is all about bringing ideas from the drawing board - into production halls - and on the world market.

And we must strive to be better than our competitors.

This is crucially important. It is not our petroleum assets that will keep the wheels turning in the future – it is what is in our heads and hands – our knowledge and competence.

An obvious prerequisite for innovation is knowledge.

As Prime Minister Erna Solberg puts it: “Knowledge is the new oil”.

 

[Foil 6: Policies for increased competitiveness: Knowledge]

That is why we have increased funding to research.

That is why we will strengthen the competence of our teachers, especially in science.

But we also want the companies, especially the small and medium sized ones to do more research.

That is why we have strengthened programs such as the User-Driven Research-Based Innovation program (BIA), Skattefunn, a tax credit scheme designed to stimulate business and R&D spending and established a new cluster program, called Global Centres of Expertise.

 

[Klikk for nytt punkt: Growth enhancing tax cuts]

Besides knowledge and competence an important task for this government is to facilitate for good framework conditions for our businesses.

We have made good progress in introducing growth enhancing tax cuts:

  • First of all, we have reduced the capital tax.

We are not doing this because we want to be nice to rich people. The capital tax makes it less profitable to invest in own businesses.

To reduce it is good for individual companies – and our competitiveness. 

  • Second is the removal of the inheritance tax.

More than two-thirds of all companies in Norway are family businesses.

These are companies with stable and long-term ownership, and are often cornerstones in their local communities.

We want to have more family owned businesses – and removing the inheritance tax is the best measure to achieve this.

 

[Klikk for nytt punkt:An effective public sector]

The third issue is to simplify, innovate and improve the public sector:

  • Simplifying is about giving individuals more freedom, more choices and to improve public sector;
  • Innovation is about working smarter, interacting and using available technologies;
  • Improving is about quality. We must make the public sector more competent and applying the expertise where it’s most needed.

Our goal is to reduce the cost of red tape for businesses by 15 billion Norwegian kroner by the end of 2017.

Important focus areas are:

  • It shall be easier to start a business
  • It shall be easier to run a business
  • Enhance the digitalisation process
  • Improve the service attitude in the public sector
  • Control that no new unnecessary burdens are put on businesses

We want businesses to spend more of their precious time on being productive and retaining more of the value they create.

[Klikk for nytt punkt: Infrastructure]

 

And finally, our policy for transport and infrastructure is important to all sectors in the Norwegian economy, and a more efficient transportation network will benefit exporters, commuters and business owners alike:

  • We have increased the funding to roads and railway in this year’s national budget;
  • Within five years we will have established a fund for the building and improvement of infrastructure;
  • And, we will introduce a new company for road building, so that building of roads will be done more efficiently.

 

So, ladies and gentlemen. 

As you all can see our policies for increased competitiveness rests on four pillars:

  • Knowledge
  • Growth enhancing tax cuts
  • A more effective public sector
  • And, an improved infrastructure.

But this only covers how we can and will compete in existing and future markets. Another crucial element is gaining access to these markets.

[Foil 7: Trade agreements]

 

Better conditions for our private sector are also about stable and predictable relations in markets we sell our products and services to.

Norway has together with the other EFTA countries signed 25 Free Trade Agreements with 35 countries. There are also ongoing negotiations with Vietnam, Indonesia, Malaysia, Thailand and India.

The economic centre of activity is shifting to the east – and Norway must prioritize trade agreements where there is most potential. 

[Foil 8: Strengthening the ties to China.]

 

China has long been the driving force for this economic shift to the east.

According to the World Bank, an impressive GDP growth averaging about 10 percent a year has lifted more than 600 million people out of poverty.

Though the growth has normalized the recent years, China is still the main driving force for this economic shift to the east.

Just to compare:

  • the IMF expects the global GDP to grow 3,7 % this year;
  • Norway’s economy is expected to grow 2,3 %;
  • While the Euro Area is only at 1 %.

The Chinese GDP on the other hand is forecasted to be an impressive 7,5 % in 2014.

During this long period of growth, since market reforms were initiated in 1978, China has become one of Norway’s most important trading partners.

In 2013 the value of our total trade with China accounted for 6 % of Norway’s total trade in goods with a value of 64 billion Norwegian kroner. China is our third most important export market for traditional goods, after the EU and the US. And Norway imported goods from China for over 48 billion kroner last year.

In answering the question on how to strengthen the ties to China, I believe it’s important to look ahead to what may characterize our future relations.

I believe China’s manufacturing industry will continue to be a large market for Norwegian exports, and we will continue to import products such as electronics, computers and textiles.

At the same time, this tremendous economic growth we see in China will surely turn the country into being a consumer-driven economy.

This transformation will increase the demand for Norwegian services and technologies – and this opens a window of opportunity for Norwegian businesses.

Some sectors have special potential for future cooperation, such as shipping, energy, seafood and tourism.

  • China and Norway are both leading maritime nations. This gives us the best opportunities for a continued constructive business cooperation.

According to UNCTAD–statistics, China and Norway control the third and the ninth largest merchant fleets in the world.

As of today Norwegian shipping companies are building 34 vessels and more than 4 rigs at Chinese shipyards. Examples of areas for future cooperation are LNG as fuel on vessel and shipping in Arctic.

These are areas where Norway has world leading competence; by 2014 Norway will have around 90 LNG-fuelled vessels.

  • Norway is the second largest exporter of seafood in the world – after China, while China is the third largest importer.

China is an important market for whitefish and pelagic fish from Norway. The whitefish is mainly for use in the Chinese processing industry. The seafood industry wishes to sell more salmon to the Chinese market - and believe there is a strong demand for salmon - though the market shares the recent years have dropped.

  • Tourism is another sector we look upon with great interest and I believe there is a great potential for increased tourism both ways.

Spectacular historical and architectural sights, such as the Great Wall and the Huangshan Mountain, are among the reasons why Norwegians increasingly choose China as a holiday destination.

Similarly, Northern lights, The Midnight Sun and fjords increasingly attract Chinese tourists to Norway.

According to Innovation Norway, China is one of the three biggest potential markets for the Norwegian tourism sector.

 

Strengthening the relations between our countries is a priority for the Norwegian government.

We support Norwegian businesses in their efforts towards the Chinese market, and we also welcome Chinese companies into the Norwegian market.

Our wishes for our future relations are many.

One thing worth mentioning is the hope that we may continue the negotiations on a Bilateral Trade Agreement with China, as Iceland and Switzerland has negotiated theirs.

[Foil 9: Avslutningsfoil]

 

Dear friends!

Let my conclude by summing up some of the key issues mentioned.

Norway is a small and open economy – that is why we need to have a strong focus on our competitiveness.

As we have an export oriented economy, it is crucial that we take part in markets with the largest output and potential.

Such a market is without a doubt the Chinese and we find a clear positive link between a strong Chinese economy and Norwegian prosperity and employment.

At the same time, we believe that Norwegian companies have the products, services and competence to contribute to the continued Chinese growth into a prosperous future.

I can assure you that the government puts great efforts in restoring the bilateral political relationship, so that Norway can play this part.

On a final note, I wish to extend my sincere appreciation to the Norwegian Chinese Chamber of Commerce for promoting business opportunities between our countries.

Hopefully, China and Norway will take advantage of the great potential for cooperation in the years ahead.

Thank you for your attention!