New industrial initiative needed in Nordland

By CEO Arve Ulriksen, Mo Industripark AS

Have we managed, here in Norway, to understand the significance of the major debate taking place within the EU concerning the massive need for new industry, new jobs and securing of strategically important industries within the EU? Reindustrialisation is a vital concept in this debate. How is this relevant to us here in Nordland, and what does the concept actually involve?

I have been wondering for some time why there is such lukewarm interest in discussing industrial policy here in Norway. I think the political debate in Norway barely reflects what is happening in industry in Europe and the USA. It may seem politically incorrect to reflect on the trends which are currently appearing to crystallise among our most important trading partners. Whether this is related in any way to high levels of resistance in Norway against participation in transnational alliances, or whether we believe, in all our wealth, that we are invulnerable to recessions and high levels of unemployment is uncertain. In the newspapers, most of what I see is polemic, as is also highlighted by political comments in connection with the election of a new EU Parliament. At the same time, I note the inward-facing attitude in connection with the agricultural negotiations taking place between the EU and Norway. As I see it, the picture painted by the Norwegian media of these issues is quickly oversimplified, and the subsequent political analysis is one-sided and narrow. Nevertheless, the things happening in Europe may affect us to a significant extent in the medium term. But to what extent? That is something which is actually up to ourselves.

Reshoring

In our neighbouring country of Sweden, major Swedish groups are doing the same thing as a number of major American concerns; reshoring production which was previously offshored. What we in Norway, the rest of Europe and the USA have previously perceived as a clear pattern, with companies moving their production to low-cost countries at an ever-increasing pace, now appears to be going into reverse. Major groups such as Husqvarna and Atlas Copco in Sweden, Danfoss in Denmark and Caterpillar, Apple and General Electric in the USA are now reshoring.

Trade statistics in these countries are not entirely clear on this. Even so, it is still interesting to note what these individual companies have done, and we can ask ourselves precisely why they have opted to do these things. The responses to these questions can be found in the macroanalysis and in the power of the ongoing wave of globalisation.

In the USA, much of the reshoring taking place is coming about as a result of the fact that both the price of energy and payroll expenses are now low, in relative terms. The recession has slowed the development of payroll expenses, and the price of energy is dropping on account of the boom in shale gas. Even so, this does not explain everything. In general, investments in production have become considerably more capital-intensive over the past few years, even in countries viewed as low-cost countries. This is because such investments are driven by technological development, automation and robotics. Manual work has also been reduced to a significant extent, and low-cost countries have also realised the need for stricter environmental requirements. Not least, they have realised that there is a need to overcome with destructive corruption. Further, it is clear that traditional low-cost countries have seen a significant improvement in the standard of living, resulting in the emergence of a middle class with the power to demand better terms of trade between work and benefits. Some companies are also being forced to confront their business ethics in the wake of their foreign establishments, and many have been subjected to significant pressure from the media and the associated adverse publicity.

Major concerns in the EU

Major countries in Europe were massively affected by the recession and the subsequent Euro crisis. At the same time, just a few countries have managed to survive these reasonably well. Unemployment in the EU is sky high, and in many countries important elements of trade and industry have been placed on the back burner.

Regardless of standpoint, all European countries are expressing major concerns in respect of opportunities for new growth in the economy, and of the high levels of unemployment that have emerged, particularly among young people.

In connection with this, it was announced early this year that the EU is launching a new vision for industry. At the start of the year, the European Parliament presented a report on the reindustrialisation of Europe. Massive offshoring combined with the effects of the recession have resulted in high levels of unemployment. These new signals for industry are eagerly awaited in an overall European trade union movement. The report emphasises how important it is to have collective social and environmental standards, and also points out that these standards have at the same time weakened European competitiveness. The report lamented the absence of action from the EU Commission with a view to tackling this restructuring, which many people feel is needed.

A trade agreement between the EU and the USA is currently being negotiated as well. Any such contract may exert severe pressure on our exports to Europe. As we all know but many people appear to ignore, the EU is our most important export market.

Risk of “digging our own grave”

In the Nordic region, a slightly hierarchical management model and our partnership model, referred to as the tripartite system, guaranteed employment for far more people than in other countries, as well as increasing wealth over a number of years. In the private sector, this has helped to bring about good partnership and a low threshold for improvement work and streamlining as involvement seems natural to us. On the other hand, Norway is an economy lubricated with oil, an economy which contributes to higher wages and prosperity compared with the majority of countries with which we compare ourselves. On the one hand, this is very good for most of us.

But on the other, it makes particularly stringent demands of productivity growth so that we can continue to maintain our prosperity model. To achieve this, we need to be able to restructure quickly. However, in the public sector and protected sectors in Norway the willingness to restructure is relatively low, and this is creating concern for our collective ability to achieve this kind of restructuring pace. The Norwegian welfare system is difficult to finance, and sectors with a low level of willingness to restructure are further increasing costs to society.

If we combine this reduced willingness to restructure with an oil industry which will decline in the medium term, resulting in a fall in income for the state, we may soon paint ourselves into a corner.

If we then choose to pass on more of these costs to taxpayers and industry in order to maintain current levels of welfare, there is a risk that we will do ourselves a disservice by allowing the conditions for maintaining industrial jobs in Norway to become even more demanding. The likelihood of more people then finding themselves out of a job is enormous, leading to a further increase in public expenditure.

On top of all this, we will also struggle in relation to the EU, which is already annoyed about our demand for full market access while at the same time maintaining our protectionist attitude, particularly in respect of agriculture, combined with obstinacy in negotiations.

We may quickly find ourselves sidelined, particularly if the EU and the USA agree on a trade agreement. The EU and the USA have long struggled to come to an agreement. The likelihood of the negotiations having a successful outcome this time has increased since both parties now face the same major challenge – to create jobs and secure economic growth.

The risk of destructive internal conflicts in many European countries, and in the USA as well, is greater than many people are willing to             admit. Presenting a few key words here is probably a good idea: work = dignity, and high unemployment = riots. Traditional arrogance between parties will then have to give way quickly to common sense.

An alliance of this kind, viewed from a European and American perspective, will also provide an important counterbalance to the dominance which China is appearing to garner globally. However, in this regard there is a risk of Norwegian interests becoming even more marginalised, resulting in protected industries in Norway coming under combined pressure with a strength they have never before encountered.

Long-term and equal competition

Sensible, long-term framework conditions for industry are the answer to all this, as is achieving broad consensus in Norway with regard to how distribution policy and the duty and tax regime ought to work. Norway clearly needs to resolve the dilemma by guaranteeing the necessary income for financing welfare, while at the same time ensuring a reasonable level of taxation on industry. The latter is absolutely necessary to prevent further offshoring, and taxes and duties must be demanded as efficiently as possible, while at the same time the money must not be squandered on inefficient public bureaucracy. Broad political consensus must be achieved on this so that industry is subject to long-term and equal competition. Without this, it will be impossible to make major investments in production facilities with a service life of 20-25 years.

In addition, we have to confront specific Norwegian taxes which make us less attractive as a location for new industry. These specific Norwegian framework conditions hinder streamlining and new development, not least in respect of environmental technology. Norway is a world leader in the process industry, and downsizing this industry in Norway would have severe consequences for the global environment.

New industrial initiative – in Nordland and Norway as a whole

This is the backdrop to the fact that we have to start discussing reindustrialisation here in Norway so that political foot-dragging does not immediately lead to deadlock as we fight to guarantee continued levels of high employment and income for our country. Why should we risk high levels of unemployment before we take action? A public sector in Norway will not be able to supply the necessary welfare to all, but we will guarantee good conditions for land-based industry. This is particularly important now that the oil industry is in decline. It will be difficult – if not impossible – to replace this income and the productivity represented by this industry in the national accounts unless we start considering reindustrialisation right now.

Nordland is strong when it comes to mainland industry, and is in fact one of the strongest counties in the country. We export as much electricity out of the county as is currently used by industry. This is a resource which we should exploit far more effectively in Nordland.

In Nordland, we are also very lucky to have plenty of ores and minerals, as well as water. These are major, important resources which are not available to much of the world. We can produce electricity from water, and we can also use water for industrial purposes; as cooling water, process water and drinking water.

We also have a major resource in the shape of human resources. We have an industrial tradition going back more than a century, and a strong professional environment.

When a decision was made to site Norsk Jernverk in Mo i Rana in 1946, ore, water and people were actually the three most important reasons behind the decision to locate it here.

Nowadays water, minerals/ore and expertise are three key factors for future investment in industry in Nordland.

Industry is the most effective way of generating lots of jobs, on account of what we refer to as the scale effect. Each job in industry can generate up to ten other jobs due to ripple effects. Few other trades can do this.

In this country, we have everything we need to create healthy industry which can produce its goods in efficient and green ways. We have the industrial skills, we have world-class knowledge institutions in industry, we have plenty of green energy, and our raw materials await in our mountains and sea and on the sea bed.

A new industrial report is now needed. The last one was issued 17 years ago. By all means, let us not weaken further anything on which we can continue to build, the things we will make our living from in the future, and let us start work with a new industrial report.

Industry is the most effective way of generating lots of jobs, on account of what we refer to as the scale effect, according to CEO Arve Ulriksen.

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