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Country Commercial Guides
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CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
NARRATIVE: Major U.S. exports to Norway of commodities and services have traditionally been within the high-tech sectors, ranging from aircraft, EDP hardware and software, industrial process controls, scientific instruments, etc.. U.S. suppliers are dominating some of the market sectors. Below are the best U.S. export prospects as seen from the commercial section of the American Embassy in Oslo, -listed in its relative order of importance:
Non-agricultural sectors:
1. - Offshore oil/gas exploration/exploitation
Equipment (OGM) -(including pipeline equipment and services)
2. - Telecommunications equipment(TEL)
3. - Defense industry equipment (DFN)
4. - Aircraft & parts (AIR)
5. - Environmental technology (POL)
6. - Computers/peripherals (CPT)
7. - Computer software (CSF)
8. - Medical equipment, drugs & pharmaceuticals, dental equipment (MED/DRG/DNT)
9. - Franchising (FAG)
10. - Travel & tourism services (TRA)Agricultural sectors:
Farm/food policy, trends and narrative information
- soybeans
- wheat
- pet foods
- rice
Rank of sector: 1Name of sector: Offshore Oil and Gas Exploration and Exploitation Equipment (including Pipeline Services & Equipment)
Sector code: (OGM)
Narrative:
Overall offshore oil investments in 1998/9 were somewhat sluggish, due to a combination of low oil prices and sizable cost overruns. 1999 and 2000 investment was expected to decline by about 16 percent. At time of writing, however, oil prices have increased back up to $19 dollars per barrel, which has boosted optimism in the sector. Production on the Norwegian Continental Shelf is expensive, and is not profitable when prices sink below $11 per barrel, but at current price levels there are rumors that exploration and investment may pick up again. Regardless of what happens, this sector is so important to the Norwegian economy that it will continue to represent a major opportunity for American companies. As cost overruns are of major concern right now, any US firms providing cost effective solutions to exploration and production in the market will have a good chance of success.
Several new pipeline projects of significant size and investment are currently underway. Alone, the two additional pipelines to the European continent will demand an investment capital in the region of $ 3.5 billion. Norway continuously seeks new and proven technology to be used in deep and remote northern waters. The most promising subsector for U.S. suppliers continues to be drilling and well completion technology which had an estimated market size of more than $ 350 million (incl. services) in 1998.
The oil and gas industry sector in Norway is only offshore. There is no onshore production.
(In $ millions) 1997 1998 1999 (Est) (proj) A. Total market size: 1,738 1,470 1,306 B. Domestic production: 1,240 910 800 C. Total exports: 222 150 205 D. Total imports: 720 710 711 E. Imports U.S.: 390 460 430 Exchange rate: 7.10 7.50 7.80Due to the complexity of products utilized in the offshore industry sector, and the lack of sufficient import and production statistics, the above statistics are unofficial estimates based on a percentage of total Norwegian oil and gas exploitation and exploration investments. It also includes pipeline equipment and services.
Rank of sector: 2
Name of sector: Telecommunications
Sector code: TEL
Narrative:
The Norwegian state monopoly on telecommunication services is history, -- the market was fully opened in 1998. Norway has a total population of 4.4 million people, and 2.9 million regular telephones, plus 1.5 million mobile phones. Norway's telecommunication services market is estimated at $ 3 billion annually, of which $ 2.5 billion is accounted for by the regular and cellular telecommunication services. Norway also has a very high telecommunications penetration level with a rate of 57 main lines per 100 inhabitants. Only Sweden, Switzerland and Denmark have higher penetration in Europe. Ninety-two percent of lines in Norway are digital, which is also well over the average for Europe. Moreover Norway has the highest mobile teledensity after Finland. Consequently, the country has a very well established telecommunications infrastructure, which supports and carries access to the Internet out to some of the remotest parts of Europe.
Several telecommunication services companies are currently positioning themselves to gain market share in Norway. Some of the new competitors are international telecommunication giants with considerably more financial resources than Telenor. Four consortiums have so far been certified, 12 more are awaiting certification. To meet the threat from overseas Telenor and Telia (the Swedish carrier) are merging. This merger has recently been approved by the EU Commission and should be complete by year end.
Norway's telecommunications equipment market remains limited to a few very large end-users. The most important consumer of telecommunication equipment and components is Telenor (Norwegian Telecommunications Administration), and its marketing and sales subsidiaries. Some international corporations with production plants in Norway, as well as the military communications sector also are important end-users of U.S. telecom technology, and U.S. suppliers of equipment and services may find Norway, with one of the world's highest standards of living, a very good market for future business.
(In $ millions) 1997 1998 1999 (Proj) A. Total market size: 2,430 2,830 2,885 B. Domestic production: 1,465 1,465 1,520 C. Total exports: 350 820 835 D. Total imports: 1,315 2,185 2,200 E. Imports from the u.s.: 320 350 355 (Avg. Nok/US $ rate): 7.10 7.50 7.80Rank of sector: 3
Name of sector: Defense Industry Equipment
Sector code: DFN
Narrative:
Norway's defense budget plan emphasizes modernization of existing, and acquisition of new modern defense technology. The Norwegian goal is to have more than one third of future defense budgets earmarked for material purchases which would result in a real increase in defense acquisitions.
Norway is currently in the process of updating/replacing a significant part of its major defense systems including naval vessels, fighter aircraft, helicopters, transport aircraft, armored vehicles and missile systems. Some of these projects have been awarded, and u.s. suppliers already have secured important contracts.
The procurement of new escort vessels and combat aircraft are likely to dominate the armed forces' investment program over the coming five to seven years. These projects cannot be implemented at the expense of all other defense investments, and during the period 1999-2002 the total investment required will amount to approximately $ 3.3 billion in order to maintain a balanced defense.
(In $ millions) 1996 1997 1998 (Proj) A. Total market size: 887 1,012 1,220 B. Domestic production: 392 520 560 C. Total exports: 205 190 200 D. Total imports: 700 682 710 E. Imports from the u.s.: 210 310 410 (The above statistics are unofficial estimates) Exchange rate used (Avg. Nok/US $ rate): 6.50 7.10 7.50Rank of sector: 4
Name of sector: Environmental Technology and Services
Sector code: POL
Narrative:
A demand for cleaner and healthier water has emerged from both industry and consumers, as well as from local Norwegian government authorities and European Union (EU) regulations. The bulk of investments will to a great extent be for the removal of nitrogen in municipal sewerage treatment plants. However, drinking water quality also is affected by pollution problems such as humus impurities and low PH values. While Swedish, French, Danish and British suppliers are very active in this market, U.S. companies have so far made limited effort to investigate this market potential.
New official offices dealing with implementation, control and technological advice, particularly within the area of hazardous waste handling and soil remediation have been established, together with the introduction of a new solid waste clean-up program.
The most promising subsectors for U.S. suppliers are air/water pollution monitoring instruments, solid-/hazardous-waste treatment, and soil-remedation technology and, to a certain extent, wastewater-treatment systems, equipment and technology the following statistics are unofficial estimates and do not include construction/building activities and services:
(In $ millions) 1997 1998 1999 (est) (est) (proj) A. Total market size: 521 517 525 B. Domestic production: 77 76 77 C. Total exports: 58 66 60 D. Total imports: 502 507 508 E. Imports from the u.s.: 46 48 48 Exchange rate used (Avg. Nok/US $ rate): 7.10 7.50 7.80A. Rank of sector: 5
B. Name of sector: Aircraft & Parts
C. Sector code: AIR
Narrative:
Aircraft is one of the major U.S. export commodities to Norway. In addition to recent military aircraft sales, and expected purchases, there is also an active interest in U.S.passenger aircraft among the Norwegian airline companies: Braathens, Norway's second largest airline, recently decided to purchase six new Boeing 737-700, valued at $ 250 million. The company is now ranked as Scandinavia's major operator of Boeing aircraft. Color line, one of Norway's major shipping line operators, has established a new domestic airline company in Norway.
Also, SAS is still looking at Boeing 777 and Airbus A-340 as the most possible aircraft replacements for their long distance routes. SAS is in need of 12 long distance aircraft to be operational from spring of 2002.
There also are plans for the replacement of Norway's aircraft fighter fleet, new helicopters and transport aircraft, -this sector will be important to U.S. suppliers in many years to come. The Ministry of defense is expected to make a decision about whether to purchase 20 F-16 fighters or 20 Eurofighters during the course of 1999/2000.
(In $ millions) 1997 1998 1999 (Est) (proj) A. Total market size: 502 483 499 B. Domestic production: 142 124 130 C. Total exports: 16 38 30 D. Total imports: 360 397 399 E. Imports from the u.s.: 220 260 280 I. Exchange rate used (Avg. Nok/us$ rate): 7.10 7.50 7.80Rank of sector: 6
Name of sector: Computers/Peripherals
Sector code: CPT
Narrative:
Per Capita expenditure on ICT is very high in Norway, at USD 1,484, which is approaching US per capita spending levels (USD 1,628). The average for Western Europe is USD 966. $240 million worth of computer equipment and about 500,000 PCs are sold each year. The corporate market takes a lead with 400,000 PC purchases, while the home market is a growing sector. There are several reasons, or at least theories, for the PC sales record. Norway's economy has for some time been very healthy, -the industry and trade is currently booming, and people have more money to spend on relatively expensive consumer goods. There is also a rapid growth in the number of Internet subscribers, and not least, -several Norwegian corporations have recently made considerable contributions to the sales bonanza by buying PC's for their employees. This has become a trend in the Norwegian industry and business society, and this new way of training employees is expected to continue.
The U.S. share of the Norwegian market is not accurately reflected in official statistics. This is due to the fact that a considerable part of the American brand name computer equipment is supplied from European subsidiaries of U.S. companies. There is a general opinion in Norway that more than 80 percent of the computer hardware is supplied by U.S. companies. However some successful Norwegian companies specializing in local assembly, combined with widespread sales and support activities, have produced growing competition for some well-known brand names. The following statistical table also includes sales of LAN/WAN equipment and parts.
(In $ millions) 1997 1998 1999 (Proj) A. Total market size: 1,568 1,666 1,715 B. Domestic production: 260 285 305 C. Total exports: 384 392 395 D. Total imports: 1,692 1,773 1,805 E. Imports from the u.s.: 413 532 560 Exchange rate used (Avg. Nok/us$ rate): 7.10 7.50 7.80Rank of sector: 7
Name of sector: Computer Software
Sector code: CSF
Narrative:
Computer software continues to be one of Norway's fastest-growing product sectors, both in the low- and high-end market. Several trends and factors have vitalized the demand for advanced software systems and packages, and adequate network solutions are becoming the most important issue in most of the administrative sectors of the Norwegian business society.
There is no single program or program sector with a clear lead in the high-end market. Since PCs have become an increasingly important part of computing, the most popular software products are said to be those available for multiple platforms. There is now a growing demand/sales created by the extensive use of open systems, particularly for technical software packages and some communications software. Extensive use of home computers with internet connection also has stimulated sales of communication software as well as PC based games. Encryption software is in ever greater demand as e-commerce begins to take off.
Sales and import figures are based on official import/export statistics and estimates provided by the trade. The import figures do not incorporate suppliers' royalty agreements, and sales figures include value-added modifications.
(In $ million) 1997 1998 1999 (Proj) A. Total market size: 712 627 700 B. Domestic production: 582 520 560 C. Total exports: 43 98 80 D. Total imports: 173 205 220 E. Imports from the u.s.: 122 126 130 Exchange rate used (Avg. Nok/us$ rate): 7.10 7.50 7.80Rank of sector: 8
Name of sector: Medical Equipment, Drugs & Pharmaceuticals, Dental Equipment
Sector code: MED/DRG/DNT
Narrative:
The building of a new state hospital (Rikshospital) has opened a lot of opportunities for sales in this sector. Total investment budget for equipment is reported at $ 325 million. The U.S. potential is estimated at $ 50 million within the sectors of surgical instruments, medical disposables and orthopedic equipment. The GON also has announced a comprehensive plan to modernize old equipment currently being used in many major hospitals in Norway. The total investment figure is well above $ 2 billion, spread over a five-year period.
U.s. suppliers traditionally have a good hold in market niches such as pharmaceuticals, orthopedic equipment, medical disposables, surgical equipment, monitoring instruments, and dental equipment and supplies.
(In $ million) 1997 1998 1999 (Est) (proj) A. Total market size: 469 469 467 B. Domestic production/sales: 211 198 195 C. Total exports: 48 58 58 D. Total imports: 352 329 330 E. Imports from the U.S.: 102 112 113 (Some of the above statistics are unofficial estimates) Exchange rate used Avg. Nok/US $ rate): 7.10 7.50 7.8Rank of sector: 9
Name of sector: Franchising
Sector code: FRA
Narrative:
There is very little franchising information available in the Nordic countries. However, franchising continues to be a promising and growing business concept in Norway. Conditions are improving, including more private capital spending, accelerated industry deregulation, as well as an increased demand for goods and services. The total number of franchisers exceeds 184, of which 44 franchise across the border. The number of franchisees in Norway is estimated at 7,252. Franchising operations handle about 18 percent of Norway's domestic retail volume.
The most promising subsectors are retail outlets, hotels, restaurants and services.
The U.S. franchisers are very active in the hotel, as well as the fast food restaurant sectors. Best Western, McDonalds, Burger King, Pizza Hut and others are well established throughout the country.
Total annual turnover in the franchising sectors is estimated at $ 9.5 billion.
As a rule there are no general restrictions in Norway regarding the equity participation for foreign franchising investors. A foreign investor may, as a consequence, own up to 100% of the share capital of a Norwegian company.
Payments to a franchiser are fully deductible according to Norwegian tax laws. Royalties from a franchising operation may be transferred out of Norway to any country in the world, tax-free. Also, Norway has an extensive net of tax treaties, and is in the process of negotiating new treaties, particularly with east European countries, and could therefore be used as a flow through country for royalties from these countries.
Rank of Sector: 10
Name of Sector: Travel & Tourism
Sector Code: TRA
Narrative:
The United States is the main long-haul vacation destination for Norwegians. In 1998 there were a total of 142,000 Norwegians departing for the United States, up 1.52 percent from 1997.
The Norwegian economy is currently very healthy and Norwegians receive at least 4-5 weeks vacation each year. Average Norwegian income is among the highest in the world
Recently, Norwegians have been venturing further into the "heartland of America." Previously, Norwegians stayed mostly with "sun" and "coastal" destinations in the 50 states. Interest in fly-drive vacations has been growing steadily, as well as the more "offbeat" destinations. As more Norwegians travel more frequently to the United States, we expect this inclination to "discover new parts of America" to continue for many more years. For most Norwegians holiday season includes one or two travels to foreign destinations.
Official travel statistics reveal that Norwegian visitors to the U.S. are increasing:
1996: 124,078
1997: 140,446
1998 142,583Farm and food policy
Norwegian agricultural policy has been the focus for rather widespread discussions during the past years. Farming has for many years been highly subsidized and protected. The results have been surpluses of many products, especially milk products at costs far above international levels. Norwegian agriculture has also been protected from international competition by quantitative restrictions on imports of various products as well as outright bans on imports of products for which Norway aimed at self-sufficiency. Rural development, self-sufficiency and the discouragement of an excessive migration into urban areas have been the principal factors behind such official government policies. However, in 1992 the Norwegian parliament agreed on a new structure in Norwegian agricultural policy dealing with the new challenges, which has occurred in connection with WTO and EEA, and can be summarized in six points:
* simplify the agricultural model by reducing detailed control of agriculture, and listen to the market signals.
* adjust the production to the demand, by letting the prices regulate the balance between the supply and demand. This should result in disappearance of costly export or dumping.
* there is a wish to reduce the costs in agriculture by allowing larger farms, particularly for grain production.
* the restructuring of the grain and feed policy (reduced prices to farmers) will continue, which will make the grain production more efficient and reduce the feed costs to the farmers.
* there will be more use of direct support to priority "goals," but the support will be independent of the size of production.
* agriculture will still have the responsibility for the settlement in the districts. This means that farming requiring larger labor force in the district, will have priority as to direct farming subsidies.
The Norwegian import regime.
When Norway became a WTO member, from January 1995, their import regime had to change from quantity restrictions and ban, to tariffs. However, to days customs protections has resulted in a market very difficult to penetrate. Specially is this the case for competitive products to Norwegian production. Although Norway implemented the bound rate of duty, the duty is so high that no products will be imported when Norwegian production is available. Further Norway are using administrative tariffs, which means that they are opening and closing the market with only four days notice as to need. Exporters from U.S. has been hit by this practice several times, and Norwegian importers do not wish to make long term contracts, and are covering their need in the EU spot market.
Trade trends:
Norway is a net importer of agricultural products, having imported approximately $2,646 million in 1997 while exporting roughly $880 million. About half of Norway's imports of agricultural products consist of "consumer- oriented high value products." most of the latter come from the horticultural and tropical products "group" and comprise fresh fruits (oranges, bananas, apples and grapes), dry edible nuts, fruit and vegetable juices, fresh vegetables, snacks, chocolate and chocolate products, wines, pet food, live plants, cut flowers and foliage. The top ten suppliers of this group of products are the Netherlands, Denmark, Sweden, Spain, Germany, United States, Italy, France, Israel and Switzerland.
The U.S. share of Norway's agricultural trade in CY 1997 stood at $ 138.5 million (5.2 percent (imports)) and $ 40.5 million (4.6 percent (exports)). the bulk of U.S. exports to Norway consists of wheat, leaf tobacco, cotton, grains, fruit and nuts, while U.S. imports from Norway include cheeses, fats and oils. The best market prospects in Norway appear to be rice, tropical products, fresh vegetables and a full range of consumer-oriented high value products such as snack foods, processed fruit and vegetables, fruit and vegetable juice, tree nuts, wine and beer and pet foods.
Distribution systems - consumer-ready food products:
Norway's retail grocery trade is highly diversified, and includes independent grocers, consumer cooperatives, and chains, some of which are operated by wholesalers. In 1997, Norway had 5,125 grocery stores with a turnover of NOK 84.5 billion ($ 12.0 billion). Generally, grocery stores account for 75 percent of retail food sales including fresh, frozen, and canned goods as well as non-alcoholic beverages and non-food items. Specialty stores such as bakeries, meat stores and candy stores, gas stations together with state wine and liquor stores' account for the remaining 25 percent. In 1997 about 50 percent of Norwegian food distribution to retailers was handled by four large wholesale enterprises.
Norway's retail grocery trade is highly diversified, and includes independent grocers, consumer cooperatives, and chains, some of which are operated by wholesalers. In 1997, Norway had 5,125 grocery stores with a turnover of nok 84.5 billion ($ 12.0 billion). Generally, grocery stores account for 75 percent of retail food sales including fresh, frozen, and canned goods as well as non-alcoholic beverages and non-food items. Specialty stores such as bakeries, meat stores and candy stores, gas stations together with state wine and liquor stores' account for the remaining 25 percent. In 1997 about 50 percent of Norwegian food distribution to retailers was handled by four large wholesale enterprises.
In 1997, three of the largest retail chains, covering 86.1 percent of the retail grocery market, introduced bonus cards to the consumers, the idea was to make the consumers more faithful in their buying pattern. The three retail chains are today competing for about 2.8 million customers.
Best prospects for agricultural sector
Name of sector: Soybeans
Tariff code: 1201Narrative: traditionally, DENOFA has imported about 50 to 60 percent of soybeans from U.S. every year. In 1995 this market share grew to more than 80 percent, and it was expected that DENOFA would contract even more in 1996. Sales in 1996 did not materialize primarily due to the fact that consumer organizations and the country's principal retail food chains forced DENOFA to sources its import requirements from other than U.S. sources. This was entirely a reaction to the U.S. introduction in 1996 of the first roundup ready (GMO) soybeans; which local Norwegian groups insisted to be segregated and labeled, and option economically not viable for DENOFA. The consequence was that DENOFA at the moment is sourcing their import from Canada and Brazil. In 1997 Norway bought 185,000 tons from Brazil and 89,000 tons from Canada. Unless us suppliers are willing to segregate their GMO soybeans, denofa will most likely continue to sources its soybean requirements from non-us suppliers and we expect no U.S. import in 1998. For 1998 we expect most of the soybean import to come from Brazil. However, if the GMO subject is solved, we expect soybean import from U.S. at a value of $ 45 mill. DENOFA has decided to increase their crushing capacity to 375,000 tons in the coming years.
1996 1997 1998 A. Total market size in '000 tons: 325 300 350 B. Total local production in'000 tons: 0 0 0 C. Total imports in '000 tons: 325 287 350 D. Total imports from U.S.: 173 0 0 E. Total value of import $ million: 97 83 100 F. Exchange rate: (Avg. Nok/$ rate): 6.46 7.50 7.50Name of sector: Wheat
Tariff code: 1001Narrative: the total market size includes feed wheat as well as food wheat. Of total wheat imported in 1997, about 160,000 tons were food wheat. From January 1, 1995, Norway has abolished a state-controlled import monopoly on grain and feed to adjust to wto regulations. However, the new government trading company Statkorn a/s, has a very strong position in the market after having invested strongly in both the food and feed industry. This company covers about 60 percent of the feed market, and is the owner of about 70 percent of the milling market. U.S. has a supplier of food wheat to Norway for year, but in 1997 the import from U.S. was only 10,000 tons compared with 128,000 tons in 1996. Especially the competition from EU is hard and Statkorn, no longer a monopoly company, has to compete on price and logistics solutions.
1996 1997 1998 A. Total market size in '000 tons: 523 471 520 B. Total local production in'000 tons: 295 258 300 C. Total imports in '000 tons: 228 213 220 D. Total imports from U.S.: 128 9 50 E. Total value of import us$ million: 35 34 39 F. Exchange rate: (Avg. Nok/$ rate): 6.46 7.50 7.50
Name of sector: Dog & Cat Food
Tariff code: 2309.10Narratives: U.S. exporters/suppliers made a record export to the Norwegian market in 1996 and held this volume in 1997. Today U.S. is the fourth largest exporter to this market. The major supplying countries to this market were France, Germany and Britain. However, Britain in 1996 reduced their export with as much as 30 percent, which might be caused by the bad publicity around the bse case. We expect the total dog/cat feed market will continue to increase, as this is one of the few areas import duty has decreased as a result of the WTO agreement.
1996 1997 1998 A. Total market size in '000 tons: 44 43 47 B. Total local production in'000 tons: 2 2 2 C. Total imports in '000 tons: 42 41 45 D. Total imports from U.S.: 5 5 7 E. Total value of import $ million: 42 36 40 F. Exchange rate: (Avg. Nok/$ rate): 6.46 7.50 7.50Name of sector: Rice
Tariff code: 1006, 1904.9020Narratives: total import of milled rice to Norway in 1997 was 19,070 tons, of which 4,268 tons came from U.S., which is about the same as last year. The largest competitor to U.S. is Thailand, but of the parboiled rice market U.S. cover more than 95 percent. The market in 1996 was the largest ever, and the import figures for 1997 is about the same as last year. This might be caused by the reduction of import duty under the WTO from 30 to 9 percent on parboiled rice from U.S. we expect this market to increase slightly in the coming years.
1996 1997 1998 A. Total market size in '000 tons: 19 19 20 B. Total local production in'000 tons: 0 0 0 C. Total imports in '000 tons: 19 19 20 D. Total imports from U.S.: 5 4 6 E. Total value of import $ million: 14 14 16 F. Exchange rate: (Avg. Nok/us$ rate): 6.46 7.50 7.50Norwegian agriculture in figures
Cultivated land - 1.04 million hectares
Productive forests - 7.03 million hectaresNumber of farms - 81,600
Average size of farms:
Cultivated land - 12.7 hectares
Forests - 56 hectaresAmount of work:
Farming - 89,300 man-years
Forestry - 8,000 man-years
Reindeer husbandry - 1,200 man-yearsUse of farmland:
Grass - 620,000 hectares
Cereals - 330,000 hectares
Potatoes - 19,000 hectares
Vegetables - 47,000 hectares
Other - 10,000 hectares
Grain yield: - 3.48 tons per hectare
Domestic animals:
Cows - 349,000
Steers and heifers - 678,000
Sheep - 1,143,000
Goats - 58,600
Pigs - 695,300
Hens - 2,916,000Food processing industry:
Total employment - 38,000 persons
Slaughtering
and meat processing- 11,900 persons
bakeries - 8,200 persons
Milk processing - 7,100 persons
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.
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