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Successfully investing in Norway

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last updated on 16 June 2023 | reading time approx. 5 minutes


 

 

How do you assess the current economic situation in Norway?

Norway's economic freedom score is 76.9. Making it the 12th freest according to 2023 Index. Norway is ranked 9th out of 44 countries in the Europe region, well above the world and regional averages.

According to a summary of comments from Statistics Norway and other sources the following main economic indicators are found:
  • 2022 was characterized by high inflation and recovery of economic activity due to the pandemic. Since the second quarter of last year, the Norwegian economy has grown at a moderate pace.
  • Inflation (according to the Consumer Price Index/CPI) has risen to relatively high levels. The CPI rose 7 percent on latest yearly basis. This is a result of the exceptionally high price growth abroad, which has influenced on Norwegian prices. 
  • Interest rate peak at 3,25 percent and expected to rise moderately.
  • Unemployment has fallen to relatively low levels for a longer period.
  • The economy is probably facing a turning point. Inflation is expected to decline sharply throughout the year. Unemployment should rise slightly from present low level. 
  • A general prediction that it will slowly head towards more normal times in the Norwegian economy. However, Norway is heavily dependent upon the international economic market which is relatively unstable for the moment.


How would you describe the investment climate in Norway? Which sectors offer the largest potential?

Norway is considered a safe and predictable place for business. It is ranked 9 out of 190 countries in the World Bank's 2019 Doing Business Index, and 7 out of 180 on Transparency International's 2019 Corruption Percep­tions Index. The political system is stable with an effective legal system, hereunder strong property rights pro­tec­tion.

Norway has special advantages regarding natural resources like oil, gas, fish, waterfalls and minerals. This has brought up highly advanced industries within these fields. Norway is a leading developer of new green tech­nolo­gies for floating wind, green shipping, carbon capture and utilization and storage. The major industries are supported by a strong professional services industry (finance, ICT, legal) There are emerging opportunities in fintech, cleantech, medtech, and biotechnology.

Norway has a solid financial platform, including fiscal reserves of a trillion-dollar sovereign wealth fund and high monetary policy manoeuvrability. This enables the government to finance necessary “support packages” to counteract negative economic impact on employment and businesses.

Foreign investment is generally welcomed by the business life and the government. There are some restrictions particularly on foreign ownership, use of natural resources, agriculture and infrastructure. The government is a major owner in the Norwegian economy and retains monopolies on a few activities, hereunder sale of alcohol.

Foreign direct investment in Norway peaked at 160 billion US dollars at the end of 2021. Approximately 8,100 foreign-owned companies are established in Norway, with an employment staff of more than 58,000 people.

Norway is not a member of the European Union (EU), but a member of the European Economic Area (EEA) giving access to the EU single market’s movement of persons, goods, services, and capital. This gives a solid law and business framework well known to the member states.

What challenges do German companies face in their business engagements in Norway?

There should be no challenges that are particular for German companies to do business in Norway compared to other foreign investors. It may be more relevant to point at opportunities for German companies. 

Ten percent of Norway's mainland exports goes to Germany. Germany has the largest group of foreign tourists visiting Norway. The size and the economic, political and cultural weight of this fact, makes Germany inter­esting for many Norwegian companies and vice versa.

German Federal Minister Robert Habeck visited Norway in January 2023 for political talks, and focus was put on the establishment of climate-neutral energy supply. In particular regarding the production and supply of hydrogen and the decarbonization of energy-intensive industrial sectors. The parties carry out talks on a hy­dro­gen pipeline from Norway to Germany. Due to the Ukraine war and energy crisis, Germany now considers Norway as its most important energy supplier. Therefore, Germany and Norway intend to intensify and expand their cooperation on energy. A Joint Declaration on the issues has been signed.

Selected special features of investments and business activities by German companies in Norway

It is only possible to give a few examples on country specific questions. A specific case regarding investments and doing business for German companies in Norway, will have to be individually assessed and handled. This presentation is under no circumstances intended to be complete or exhaustive. 

As addressed above Norway is a member of the EEA agreement which brings together the 27 EU member states and the three EEA EFTA states Norway, Iceland and Liechtenstein in the internal market, governed by the same basic rules. It guarantees the EU Single Market's four freedoms, as well as non-discrimination and equal rules of competition throughout the EEA area.

Despite EEA membership, Norway has several sets of legal rules that are specific and in force for both Norwe­gian and foreign companies and individuals. The EEA Agreement does not cover the EU common agriculture and fisheries policies, the customs union, the common trade policy, the common foreign and security policy, justice and home affairs or the monetary union. Norway as EEA state participates in many EU programmes and agencies and cooperates closely with EU on foreign and security policy issues. EEA states are members of the Schengen cooperation, which limits border controls between members. 

Norway is not part of the EU value added tax (VAT) regime. Reference is made to Norwegian VAT Act of 2009. However, Norwegian VAT law is in accordance with many of the same principles of the rules implemented by the EU VAT Directive. 

Special rules and registration procedures have to be followed in the event of foreign private individuals being board members or chief executive officers in Norwegian companies. 

Norwegian labour law (Working Environment Act/WEA) generally refers to the rules and regulations governing individual and collective relationships between employers and employees. WEA is a mandatory and relatively employee-friendly law regime compared to similar rules in many European countries. Important matters regu­lated by the WEA are;employment, whistle-blowing, work environment, working hours, rights to leave, protec­tion against discrimination, termination of employment, rights of employees in case of a transfer by undertaking and rules regarding disputes concerning termination of employment. 

The rules of WEA cannot be waived, to the disadvantage of the employee, by agreement in advance. The WEA covers all employees including employees in leading and managerial positions. With some exceptions, the WEA cannot be deviated from for employees working in Norway for foreign employers. Self-employed workers are not regulated by the WEA.

It is now a lot of public discussions on the current Norwegian tax regime, hereunder taxation of larger assets. This has led to a kind of emigration of rich Norwegian citizens to other countries with lower tax on assets, par­ticularly Switzerland. The only thing for sure is that the tax regime will constantly be changing. Currently the tax on assets may be an opportunity for foreign investors to invest in Norway but not necessarily move to Norway. 


In your opinion, how will Norway develop?

The comments in this presentation must necessarily be of very general and time limited character. As earlier pointed at Norway has many advantages but is heavily dependent upon the economic and financial situation in the world market. 

However, Norway should – in foreseeable future - remain among top leading countries that have all possibilities to remain prosperous and stable in the long run.

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