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Country Commercial Guides
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Chapter VII. Norway's Investment Climate
NORWAY'S FOREIGN INVESTMENT POLICY AND PRACTICES
------------------------------------------------OPENNESS TO FOREIGN INVESTMENT
------------------------------General Government Attitude
---------------------------In general, Norwegian authorities have a positive attitude toward foreign investment in the key offshore petroleum sector as well as in other sectors. Investment is welcomed on the mainland in high-tech and advanced areas that will improve competitiveness and management in industry, and in industrially underdeveloped areas such as Northern Norway. The European Economic Area (EEA) free trade accord (came into force in 1995) requires Norway to apply principles of national treatment in certain areas where foreign investment was prohibited or restricted in the past. The policy vis-a-vis third countries including the U.S. will likely continue to be governed by reciprocity, and by bilateral and international agreements. While the Norwegian government officially endorses a level playing field for foreign investors, existing regulations, standards and practices often marginally favor Norwegian, Scandinavian and EEA investors, in that order.
Laws/Rules/Practices Affecting Foreign Investment
-------------------------------------------------Being an EEA member, Norway continues to liberalize its foreign investment legislation along European Union (EU) lines. Current and proposed laws/rules follow.
Government monopolies: Foreign and domestic investors are lawfully barred from investing in industries monopolized by the government including postal services, railways, and the domestic production and retail sale of alcohol. Foreign investment in electricity production (limited to 20 percent of equity) may be granted by the government, but is rare. The GON has fully opened the electricity distribution system to foreign participation to become one of the most liberal markets in the world.
International: Foreign companies are required to obtain concessions for the acquisition of rights to own or use various kinds of real property including forests, mines, tilled land, and waterfalls. Foreign companies need not, however, seek concessions to rent real estate provided that the rental contract is made for a period not exceeding ten years. The two major laws governing concessions are the Act of December 14, 1917 and the Act of May 31, 1974.
The Petroleum sector: the Petroleum Act of November 1996 (superceding the 1985 Petroleum Act) contains the legal basis for the authorities' awards of blocks and follow-up activity. The act covers governmental control over exploration, production, and transportation of petroleum. Although production licenses awards are based on competitive bidding, Norwegian authorities continue to give preferential treatment to domestic oil companies and domestic suppliers in the awarding of blocks and maintenance/supply contracts. The Norwegian offshore concession system complies with EU directive 94/33/EU of May 30, 1994, which governs conditions for awards and hydrocarbon development. The government tightly controls Norway's pipelines which carry Norwegian gas to the European market with governmental approval. The pipeline consortia sell gas under "take or pay contracts" in which buyers guarantee to pay for delivery of specific quantities, whether or not the full quantity is used. At this point, the government does not contemplate opening gas distribution to trading.
Manufacturing Sector: In December 1994, the Norwegian parliament approved new investment legislation governing acquisitions in the manufacturing sector. The new legislation, which became effective on January 1, 1995, grants national treatment to foreign investors. According to the legislation, all Norwegian and foreign investors (i.e., EEA and Third-country) are obliged to report to the ministry proposed acquisitions exceeding certain thresholds (33 percent, 45 percent or 67 percent) of a company's ownership equity capital. This rule is mandatory for medium to large-scale acquisitions (firms with more than 50 employees), firms with an annual turnover exceeding NOK 50 million (USD 8.0 million), and firms receiving significant public research and development support. The report to the ministry should contain information about investor intentions, implications for employment and production and industrial development. If the proposed acquisition would contribute to the restructuring of a manufacturing industry, a series of hearings would be initiated before a decision is made. The legislation authorizes the GON to set conditions when an approval is granted. If the ministry does not respond within 30 days, the acquisition is automatically approved.
Financial and Other Services: According to current legislation, any investor--foreign or domestic--must obtain permission/concession from the Norwegian government to acquire more than 10 percent of the equity in an existing Norwegian financial institution. Effective January 1, 1995, there is no ceiling on foreign equity in a Norwegian financial institution given that a concession has been granted. Applications are sent on a round of hearings before the Finance Ministry makes its recommendation. The Norwegian Ministry of Finance has abolished remaining restrictions on the establishment of branches by foreign financial institutions including banks, mutual funds and other financial institutions. Under the liberalized regime, branches of U.S. and other foreign financial institutions are granted the same treatment as nationals in Norway.
In the media area, no individual party may own more than one-third of a national radio and/or television company without a concession. National treatment should be granted in line with Norway's obligations under the EEA accord.
Investment Screening Mechanism: Takeover applications are processed by the concerned ministries. The Ministry of Industry and Commerce, for example, handles cases which concern the acquisition of real property in Norway or of shares in Norwegian companies. The Ministry of Finance is involved when financial institutions are concerned, while the Ministry of Culture handles media cases. Decisions are normally taken at the ministerial level. However, in some cases that may have political interest, the minister(s) may ask the entire cabinet to make the decision. The time needed to process a takeover application depends on several factors but is normally from one to three months. Norwegian legislation authorizes the GON to set conditions when a concession is granted, and this is done in the majority of cases involving more than one-third foreign ownership. Concession agreements do not permit a company to engage in other business activities than those specified. In general, the government screens investment on a case-by-case basis, based on the "public interest principle." This principle is vague, and allows for broad discretion, which has been used to protect domestic business interests and preserve jobs.
Acquisition and takeovers: antitrust legislation (Price Control Act of 1953) empowers the authorities to break up any restrictive arrangement that may have a harmful impact on production, prices, and/or distribution. Norway has ratified principal international agreements governing arbitration of investment disputes including the New York Convention of June 10, 1985.
Investment Incentives: Norway offers no significant tax incentives for either domestic or foreign investors. One exception is investments in Northern Norway, where a reduced payroll tax schedule and other incentives apply. There are no free-trade zones, although taxes are minimal on Svalbard. A state industry and regional development fund provides support (e.g., Investment grants and financial assistance) for industrial development in areas with special employment difficulties or with low levels of economic activity.
Discriminatory/Preferential Exports/Imports Policies: Norway also has established an Export Council THAT assists export-oriented firms in international marketing. Norway has established an export credit institution (Eksportfinans) which provides export credits, and an export guarantee institution (GIEK). In 1995, Norway replaced quotas on farm product imports with variable tariffs in compliance with the WTO accord. While Sweden and other EU countries have complained that the tariffs are overly protective, Norway implemented moderate tariff cuts effective January 1, 1997. "Harmful" imports have in the past been restricted when deemed appropriate. (Norway restricted bicycles from Taiwan, for example, after it registered an import surge). Norway continues to grant trade-distorting subsidies to its shipbuilding industry, but these are expected to be eliminated in line with EU policy.
CONVERSION AND TRANSFER POLICIES
--------------------------------Norway abolished all major foreign exchange controls in the early 1990's. Dividends, profits, interest on loans, debentures, mortgages and repatriation of invested capital are freely and fully remittable subject to central bank reporting requirement. Ordinary payment from Norway to a foreign entity can normally be made without formalities through commercial banks.
EXPROPRIATION AND COMPENSATION
------------------------------There have been no cases of questionable expropriation in recent memory. Government acquisition of property is currently limited to non-discriminatory land and property condemnation for public purposes (road construction, etc.) The Embassy is unaware of any cases where compensation has not been prompt, adequate and effective.
DISPUTE SETTLEMENT
------------------No major investment disputes have occurred since 1990. As noted above, Norway has ratified the major international conventions governing arbitration and the settlement of investment disputes.
PERFORMANCE REQUIREMENTS/INCENTIVES
-----------------------------------There are no standard performance requirements imposed on foreign investors, although big investors may be required to maintain employment to avoid dislocation of labor. In the offshore petroleum sector, Norwegian authorities encourage the use of Norwegian goods and services. The Norwegian share of the total supply of goods and services to the offshore petroleum sector has been between 50 to 70 percent in the past decade.
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
--------------------------------------------Subject to the restrictions noted above, foreign and domestic entities are generally free to establish and own business enterprises and engage/disengage in all forms of legal remuneration activity. With the possible exception of the oil and gas sector in which the three Norwegian oil companies in the past have received preferential treatment, the Norwegian Government in theory treats private and public enterprises with equality when it comes to market access and other business operations. In the privatization of firms, foreign investors are permitted to participate subject to the restrictions mentioned above.
PROTECTION OF PROPERTY RIGHTS
-----------------------------Norway adheres to key international agreements on property rights (e.g., Paris Union Convention for the Protection of Industrial Property). The patent office (Styret for Det Industrial rettsvern) grants patents for a period of 20 years (Acts of June 8, 1979, and May 4, 1985). Provisions in the Act of May 21, 1961 protect copyrights. Provisions in the Act of March 3, 1961 protect trademarks. The above legislation also protects trade secrets and industrial designs.
TRANSPARENCY OF THE REGULATORY SYSTEM
-------------------------------------The transparency of Norway's regulatory system is generally at par with that of the EU's because Norway is obliged to adopt EU directives under the terms of the EEA accord. The government has adopted laws to foster competition in non-farm sectors. For example, the competition act of 1993 (the antitrust law) empowers the authorities to break up any arrangement that thwarts competition. While competition in the farm sector remains inadequate, existing laws and policies undergo reviews to curb misallocation of investment and red tape.
Efficient CAPITAL MARKET AND PORTFOLIO INVEST.
----------------------------------------------Norway has a highly computerized banking system that provides a full range of banking services. There are no significant impediments to the free market-determined flow of financial resources. In the fall of 1996, foreign banks--which in the past were required to do business through a subsidiary--were permitted to establish branches in Norway.
The private sector has access to a wide variety of credit instruments, and the regulatory system is transparent and consistent with international norms. A stock exchange is established to facilitate portfolio investment and--in general--securities transactions.
After the 1988-92 banking crisis, Norwegian banks have shown good gains, with all major banks now posting profits and reduced loan losses. The assets of the top-five commercial banks currently account for over 83 percent of total assets. Following bailouts during the banking crisis, the Norwegian State held controlling stakes in the country's top-three commercial banks. The State has subsequently reduced its stakes in the top-two banks and sold the entire stake in the third biggest bank to private investors. The Norwegian banking sector remains in a period of consolidation with mergers between big players expected. Foreign and domestic investors continue to have adequate access to capital.
There are no known "cross-holding" or other shareholder arrangements used by private firms to restrict foreign investment through mergers and acquisitions. Similarly, there are no laws and regulations authorizing private firms to adopt articles of incorporation/association which limit or prohibit foreign investment. The private sector and/or the government do not restrict foreign participation in industry standards setting consortia and organizations.
POLITICAL VIOLENCE
------------------Norway remains politically stable, with no politically motivated damage to projects/installations reported over the past few years. No changes are expected.
CORRUPTION
----------Corruption is not widespread in Norway and it is not an obstacle to foreign direct investment. A 1998 survey conducted by an international institute which monitors corrupt business practices worldwide (transparency INTERNATIONAL), ranked Norway as the EIGHT least corrupt country (the U.S. WAS SEVENTEENTH) out of a list of 85 countries surveyed. Norway's penal code (Act 10 of May 28, 1902 and its amendments) sets penalties for corruption and other illicit payments. Accepting a bribe is a criminal act which carries penalties (fines and/or jail up to six years for severe cases). Bribing foreign officials and private sector investors is a criminal act and bribes cannot be deducted from taxes.
BILATERAL INVESTMENT PROTECTION AGREEMENTS
------------------------------------------Norwegian authorities have concluded investment protection agreements with the following countries: Madagascar (1966), Malaysia (1984), Peoples Republic of China (1984), Indonesia (1969 and 1991), Sri Lanka (1985), Poland (1990), Hungary (1991), Romania (1991), Estonia (1992), Latvia (1992), Lithuania (1992), Chile (1993), the Czech republic (1993), SLOVAKIA (1993), Peru (1995) and Russia (1995). These agreements contain provisions for repatriation of capital, dispute settlement, and standards for expropriation and nationalization by the host country. Looking ahead, Norwegian authorities Plan to sign protection agreements with 30 additional countries including Turkey, Brazil, Egypt, India, Thailand and Vietnam.
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------------------------------------There is no specialized institution providing investment guarantees in Norway. However, the Norwegian Foreign Ministry has a guarantee division which oversees exports and investment guarantees. The Norwegian Export Credit Institute (GIEK) issues export credits and investment guarantees subject to Ministry approval. Norwegian firms investing in developing countries may apply for investment guarantees. Norway has an investment guarantee scheme for Eastern Europe. Norway is a member of Multilateral Investment Guarantee Agency (MIGA).
LABOR
-----While skilled and semi-skilled labor is usually available, strong mainland economic growth since 1992 has led to shortages of both skilled labor (medical doctors) and unskilled labor (construction workers). In 1998, the labor force totaled some 2.3 million persons of which 3.2 percent were (surveyed) unemployed.
The government has a record of imposing mandatory wage mediation should strikes threaten the economy. In 1998 for example, the GON ordered striking air traffic controllers and health workers back to work. Norway adheres to the ILO convention on protection of workers rights.
Despite wage restraint in recent years, Norwegian blue-collar hourly earnings remain high from a global perspective. On the other hand, top-level executives are generally paid considerably less than their U.S. counterparts.
High blue-collar wages contribute to the use of capital-intensive technologies in Norwegian industry.
FOREIGN TRADE ZONES
-------------------Norway has no foreign trade zones AND DOES NOT CONTEMPLATE ESTABLISHING ANY.
Foreign investment statistics
-----------------------------The following data is the latest available as of June 1998 from the Norwegian Central Bank. Figures on investment position refer to book-value. These figures are limited to companies in which a single foreign investor holds 10 percent or more of the equity capital and do not include foreign ownership interests via third party investment. Flow investment statistics is based on market value. FDI stands for Foreign Direct Investment
Note also that the NOK/USD exchange rates were as follows for the period in review:
1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- END-period 7.42 6.86 6.35 6.47 7.30 Period-Average 7.09 7.06 6.34 6.46 7.08 Table I:FDI Position in Norway By Country (NOK Bill) ---------------------------------------------------- ------------ ---- ---- ---- ---- ---- Country/Area 1993 1994 1995 1996 1997 ------------ ---- ---- ---- ---- ---- Total FDI 102.4 113.7 123.3 139.1 151.5 --------- ---- ---- ---- ---- ---- Of Which From: U.S. 24.1 28.0 30.8 43.7 42.6 Sweden 17.9 15.8 20.7 20.3 23.2 France 8.1 8.0 8.1 11.2 10.3 Netherlands 6.6 5.1 10.3 9.2 18.6 Switzerland 11.1 10.8 10.7 6.3 6.7 UK 5.5 14.6 8.2 10.8 13.4 Germany 3.8 4.1 4.6 4.8 4.8 Denmark 4.2 5.5 6.4 6.5 7.1 Finland 2.4 2.4 2.6 4.7 4.6 Japan 4.9 4.8 4.8 4.7 4.0 All EU 50.0 58.6 67.5 74.4 89.1 ----------------- ---- ---- ---- ---- ---- FDI/GDP (Percent) 12.4 13.1 13.3 13.7 13.9 ---------------- ---- ---- ---- ---- ---- Table II:FDI Pos. In Norway By Industry (NOK Bill) -------------------------------------------------- ------ ---- ---- ---- ---- ---- Sector 1993 1994 1995 1996 1997 ------ ---- ---- ---- ---- ---- Total FDI 102.4 113.7 123.3 139.1 151.1 --------- ---- ---- ---- ---- ---- Of Which In: Petroleum/Mining 34.8 46.1 48.9 52.1 52.7 Manufacturing 12.5 12.9 13.7 14.7 18.4 Bldg./Construction 2.9 3.0 3.3 12.1 14.5 Dom. Trade/Hotels 24.2 22.5 25.6 26.1 28.0 Transp./Commun. 2.9 1.8 2.0 3.2 5.3 Financial, Business Services/Property 23.0 25.3 27.9 28.2 28.7 Other Industry 2.1 2.1 1.9 2.7 3.9 Table III: Norw. Inv. Pos. Abroad By Country (NOK Bill) -------------------------------------------------- ------------ ---- ---- ---- ---- ---- Country/Area 1992 1993 1994 1995 1996 ------------ ---- ---- ---- ---- ---- Total Inv. Abroad 81.7 94.8 119.9 142.3 163.9 ----------------- ---- ---- ---- ---- ---- Of Which In: U.S. 12.5 13.7 16.7 20.2 23.4 Sweden 11.0 14.6 15.1 19.7 23.8 Denmark 12.8 14.8 26.7 29.7 27.9 UK 8.2 11.2 10.7 12.0 19.0 Netherlands 8.1 8.5 8.4 12.0 14.3 Germany 7.9 7.8 8.7 7.8 6.8 All EU 60.5 69.4 89.3 105.3 124.0 ------------------- --- ---- ---- ---- ---- Total/GDP (Pct) 10.4 11.5 13.8 15.3 16.1 ------------------- --- ---- ---- ---- ---- Table IV: Norw. Inv. Pos. Abroad By Industry (NOK Bill) --------------------------------------------------- ------ ---- ---- ---- ---- ---- Sector 1992 1993 1994 1995 1996 ------ ---- ---- ---- ---- ---- Total FDI 81.7 94.8 119.9 142.3 163.9 --------- ---- ---- ---- ---- ---- Of Which In: Petroleum/Mining 11.2 17.0 27.0 29.4 35.7 Manufacturing 49.3 54.9 63.3 75.6 84.2 Dom. Trade/Hotels 5.5 4.2 8.0 9.8 11.8 Transp./Commun. 6.0 7.5 8.3 8.4 9.8 Financial, Business Services/Property 7.9 9.2 11.7 17.3 20.1 Other Industry 1.8 2.0 1.6 1.8 2.3 Table V: Net FDI Flows To Norway (NOK Bill) -------------------------------------------- -------- ---- ---- ---- ---- ---- Category 1994 1995 1996 1997 1998 -------- ---- ---- ---- ---- ---- Total 15.1 9.3 13.7 19.5 22.7 ----- ---- ---- ---- ---- ---- Of Which From: U.S. 3.5 0.1 11.6 0.1 (2.5) SWEDEN (0.5) 4.3 2.5 0.2 1.7 EU (INCL. SWEDEN) 11.2 5.9 6.5 21.8 26.3 --------------- --- --- --- --- --- Tot./GDP (Pct.) 1.7 1.0 1.3 1.8 2.1 --------------- --- --- --- --- --- Table VI: Norw. Net FDI Flows Abroad (NOK Mill) ---------------------------------------------------- -------- ---- ---- ---- ---- ---- Category 1994 1995 1996 1997 1998 -------- ---- ---- ---- ---- ---- Total 11.8 14.9 31.7 30.1 13.7 ----- ---- ---- ---- ---- ---- Of Which To: U.S. 4.7 0.9 0.3 9.2 4.5 Sweden 0.8 6.2 8.1 5.9 2.5 EU (INCL.SWEDEN) 3.6 12.4 28.2 14.7 5.5 --------------- --- --- --- --- --- Tot./GDP (Pct.) 1.4 1.6 3.1 2.8 1.2 --------------- --- --- --- --- ---MAJOR FOREIGN INVESTORS
--------------------------According to Norwegian law, investment statistics collected by the Norwegian Central Bureau of Statistics cannot be released on a company-to-company or project-to-project basis.
In 1997, foreign and Norwegian oil companies invested about USD nine billion (measured at market value) in the Norwegian offshore petroleum sector. The major U.S. investors offshore were: Amerada Hess Corp., Amoco Norway, Conoco Petroleum Norge, Esso Norge, Mobil Norge, and Phillips Petroleum Corporation Norway. Other foreign oil companies were Norske Shell, BP Petroleum, Deminex Norge, Elf Petroleum Norge, Norsk Agip, and Total Norge.
On the Norwegian mainland, U.S. investors/suppliers include: Kraft General Foods, Abbot Norge, Amdahl Norge, American Express, Apple Computer, Avis Bilutleie, Black & Decker, Bristol-Meyers Squibb, Chemical Bank Norge, Citibank, Coca-Cola Norge, Colgate-Palmolive Norge,, DHL International, United Airlines, Dow Chemical Norway, Ernst & Young, General Electric, General Motors, Gillette Norge, Goodyear Norge, Hertz Bilutleie, IBM, Ingersoll-Rand, Kellogg Norge, Manpower, Motorola Norge, NCR Norge, Pepsi Cola Norge, Price Waterhouse, Tandy Grid, Texas instruments Norge, Vickers systems and Wrigley and Xerox Corporation.
In all, over 200 American firms have established branch offices or subsidiaries in Norway.
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NOTE ON SOURCES
---------------Information in this report was primarily obtained from various sources within the Ministries of Finance, Industry, Labor, and Foreign Affairs, as well as the Norwegian Central Bureau of Statistics and the Bank of Norway. The Price Waterhouse guide "Doing Business in Norway" and KMPG's "Investment in Norway" were useful for background information.
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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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