Estonian entrepreneurs should keep their eyes on Norway even in times of crisis
Ryte Venckuviene, who is the Export Adviser of Enterprise Estonia in Norway, writes about the current situation in Norway, how the crisis has affected the exchange rate of the Norwegian krone, how the government has responded, and what export options are available.
Today’s situation in Norway is similar to that of many other Nordic countries. According to the latest information, more than 6,200 people have contracted the coronavirus and over 100 people have died. All public events have been cancelled until at least Easter and all schools are closed. From 20 April, it is planned to ease the measures, meaning that kindergartens and some schools will be opened. However, various rules will be introduced there as well. Enterprises operate remotely to the extent possible. All people who have been abroad must stay in home quarantine and, essentially, it can be said that Norway has been locked down. Only citizens and foreigners with a residence permit are allowed to enter the country.
The value of the Norwegian krone reached an unprecedented level in mid-March, meaning that the Euro exchange rate was 13 kroner. For comparison, at the end of last year it was 9.8 and currently 11.3. The weak krone, in turn, makes the purchase of imported products (and travelling abroad in the future) unreasonably expensive for ordinary Norwegian consumers, which is why it will certainly affect Estonian exporters as well. Although the Norwegian Central Bank spends 2 billion Norwegian kroner a day in April to boost its currency, the real impact can only be assessed after the crisis.
The Norwegian government has developed a number of aid packages to alleviate the crisis, including lowering VAT on certain services and making changes to tax and excise policies. In order to support the cluster activities and boost innovation support, 150 million Norwegian kroner will be allocated, and as much as one billion Norwegian kroner will be invested in the infrastructure. For the success of major road works, the Norwegian Road Administration has, for the first time, announced negotiated public procurements to openly communicate with road construction enterprises of the impact of COVID-19 on prices and contract terms and to reduce unforeseen risks for both contractual parties.
Given the sparsely populated areas in Norway, it is frustrating for employers there that many employees have to be quarantined in their home areas and that traffic between some areas is severely restricted. In addition, Norway’s dependence on foreign labour has come to the fore – major construction projects rest on valuable workers from Poland and Lithuania who are currently back in their home country, waiting for the situation to calm down. Upon returning to Norway, they must undergo a mandatory 14-day quarantine before starting work, which may, in turn, further delay the deadlines.
However, a few exceptions have been made in case of some major projects. For example, an exception has been made for the construction of the Tana Bridge, meaning that the construction site has been declared a quarantine zone and foreign workers can also work there during their 14-day quarantine.
The number of unemployed people in Norway is growing at a record rate. Since 12 March, more than 400,000 people in need have applied for unemployment benefits in this oil-rich country, where every citizen is theoretically a millionaire thanks to sovereign wealth funds. The number of redundancies and unemployed in Norway has risen to its highest level since World War II, accounting for almost 15% of the working age population. The confusing situation of oil prices on the world market does not simplify the situation either, as the income of the Norwegian state largely depends on oil exports.
Hundreds of Norwegian enterprises have gone bankrupt due to the deteriorating economic situation caused by the coronavirus. The clear priority of the local tax office is the prevention of bankruptcies, so there is a tendency to postpone tax arrears and consider exceptions, and the collection of contractual penalties has also been temporarily suspended.
Future trends and options
The digitalisation of business has already been on the agenda in Norway before, however, the current events have forced Norwegian enterprises to reorganise their operations earlier than planned. It is not just a question of teleworking, but a new way of resetting is required by almost all industries, where dependence on raw materials or migrant workers from distant lands has become a millstone for enterprises in the midst of the constraints established due to the virus. This will certainly lead to a rethinking of existing supply chains, and here, thanks to their positive reputation as an excellent cooperation partner, Estonian enterprises may have the opportunity to get their foot in the door.
The Norwegian government’s plan to increase investment in the development of environmental technologies and to accelerate projects related to carbon capture and storage that contribute to Norway’s climate goals can also be considered important for Estonian entrepreneurs. This will create business opportunities for enterprises operating in the field of environmental technology and will hopefully give more wind to the wings of Estonian wooden house manufacturers for whom Norway is one of the most important export markets.
The task of the Norwegian representative of Enterprise Estonia is to help Estonian entrepreneurs identify those possible market niches where it would be possible to achieve success even in the post-crisis period. To be successful in the Norwegian market, a product or service must be distinctive, sustainable, and environmentally friendly. Although Norway’s economic situation is currently in a rather poor state, it is not to be expected that Norwegians are willing to make a discount on demand. Norwegians value high quality above all and they are rarely guided by a more favourable price. Thorough preliminary work is vital in conquering the Norwegian market. To this end, in addition to the representative of Enterprise Estonia, it is worth contacting other enterprises operating in the local market, where potential cooperation partners could be seen instead of competitors. It should not be forgotten that Norway is not a member of the European Union, so there are many peculiarities here in terms of contracts, legal frameworks, and business communications.
Ryte Venckuviene ([email protected])
Export Adviser in Norway