Euro crisis hits industry harder
March 4, 2013
Prime Minister Jens Stoltenberg has been issuing more warnings about the ill effects of the European economic crisis on Norwegian industry, and many companies are facing harder times this year. Others remain optimistic and have more faith in 2014.
Stoltenberg, who’s been warning of an economic downturn since the finance crisis first hit, made some new ominous predictions last week when speaking before officials of the large labour organization Fellesforbundet. He stressed that the news coming out of Europe was still bad, “and when things are bad in Europe, they buy fewer Norwegian goods and services. It’s that simple.”
After the EU lowered its growth predictions, raised its unemployment forecast and indicated the crisis will last even longer than expected, Stoltenberg said Norwegian businesses that rely on exports to European countries will feel the ill effects. “It’s ominous when they downgrade … for the second year in a row,” said Stoltenberg. “These are countries that buy Norwegian paper, Norwegian fish and Norwegian metal.”
His concerns also came after several cases of Norwegian firms losing orders even from large Norwegian firms such as Statoil. Offshore firms in Norway, for example, lost a huge contract to build the deck of a new Statoil oil platform when Daewoo of South Korea won the NOK 6.1 billion project. It was the latest job lost to overseas competition in recent months, and the trend is frightening. “This isn’t good,” Jan Skogseth, chief executive of rival bidder Aibel in Norway. The oil services company has a large yard in Haugesund, and prices in Norway couldn’t compete with those in South Korea.
Norway’s booming oil and gas industry has been relied on for keeping the economy on a roll, but state statistics bureau SSB reported earlier this month that wage costs within Norwegian industry are now 61 percent higher on average than in competing countries. Demand for workers has sent payroll costs up, and some think oil companies simply need to slow down on development, to ease pressure on the labour segment. Otherwise the high pay that oil services workers can now demand may be institutionalized.
Others, however, including the chief executive industrial giant GE, still have high regard for Norwegian industry and plan more growth. “Yes, the cost level is challenging,” GE boss Jeff Immelt told newspaper Dagens Næringsliv (DN) recently while on a visit to Oslo. “But the engineers here are smart and productive, therefore I think Norway can still compete with Asian countries. It’s about people. We want to invest heavily in Norway.”
Last week’s news of pending closure of a cellulose factory at Tofte south of Oslo, and news that the Japanese owner of a pharmaceutical plant in Elverum wants to move production abroad are warning signals that continue to worry Stoltenberg. He and his trade and industry minister Trond Giske claimed they would meet industry’s demands, to help offset a decline in Norway’s mainland (non-oil-related) economy as consumers buy fewer cars, appliances and electronic equipment. Giske said he would offer compensation for the higher costs of cuts in carbon emissions, for example, and make depreciation rules more competitive with Sweden and Germany.
Some industrial players remain optimistic despite the recent spate of bad news. Norway’s largest employers’ organization NHO reported higher expectations for employment in 2014 because they’re expecting better markets than this year. “We think this reflects international economic development,” Dag Aarnes of NHO told news bureau NTB. Some analysts agree, but warn of large differences in prospects for various businesses and regions.
Views and News from Norway/Nina Berglund
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