Interview with Ole Erik Almlid CEO, the Confederation of Norwegian Enterprise (NHO)

22 Mar Interview with Ole Erik Almlid CEO, the Confederation of Norwegian Enterprise (NHO)

Business Focus (BF): The NHO is Norway’s largest organization for employers and the country’s leading business lobby. What is your vision for the organization?

Ole Erik Almlid: The NHO represents all of Norway’s economic sectors, promoting a strong business community. With a focus on collaboration between the Norwegian government and businesses, we facilitate global operations for Norwegian companies, including within the EU framework. As we mark our 30th anniversary for the formalized Norway-EU cooperation, our partnership aims to enhance business prospects globally. Through collective bargaining and the management of 250 tariff agreements, we ensure a conducive business environment. Our objective is to foster a high quality of life for all involved in Norwegian business, promoting Norway as an attractive investment destination, and emphasizing long-term profitability in Norwegian ventures.

BF: Considering the challenging macroeconomic and geopolitical backdrop, what is your outlook for the Norwegian economy in the short to mid-term and how do you see this impacting Norwegian companies?

Ole Erik Almlid: By year-end, we hope to see inflation recede and interest rates drop, both of which are crucial for the stabilization of the economy. Much of our business community, particularly construction and retail, are driven by household demand, which has been down. Despite this, Norway’s economy remains robust, among other things due to energy and seafood exports, bolstered by favorable exchange rates that have boosted export revenue. Curbing inflation is our top priority, followed by accelerating the green and digital transitions. We’re heavily invested in industry, particularly energy, aiming to integrate seamlessly into the European energy system. In a decade, I envision Norway being recognized as among Europe’s leading renewable energy exporters.

It’s important to understand that Norway is closely economically aligned with Europe through the single market, which accounts for 70-80% of our export revenues. Our economy, primarily fueled by oil and gas, reflects European trends across all sectors. Since 2022, Norway’s role as a reliable supplier of natural gas to Europe has become increasingly important. Current levels of production are sustainable for many years to come, with the potential to continue for as long as there is demand from our European partners.

In 2023, we experienced 0.5% GDP growth, consistent with many European nations. We anticipate around 0.8% this year. Our economy consists of the traditional mainland sector and the offshore sector. Over the next two years our mainland GDP growth is projected to average 1% per year, which is similar to the rest of Europe. Long-term growth estimates range from 1.5-2% for the mainland economy. However, we anticipate a decline in oil and gas investments in the coming years due to the maturation of our fields. Despite this, we hope 2024 will be a prosperous year for Norway.

BF: What are your views on Norway’s national budget for 2024?

Ole Erik Almlid: Overall, we are content with this year’s national budget, despite some ongoing disagreements with the government, particularly regarding tax levels. Over the past two years, taxes have increased, primarily affecting private ownership. We advocate for lower taxes to attract both domestic and international investment. At the moment, we are on par with countries like Denmark, Sweden, and France, with a tax level around 45. However, a significant issue for us is the wealth tax.

Unlike our Scandinavian neighbors, Norway benefits from oil revenues, notably through the Oil Fund, which provides a permanent expected return of 3% in real terms, financing more than 20% of public expenditure. This surplus, however, has resulted in a public spending level of 62% of mainland GDP, the highest among OECD countries. And despite this surplus, our tax level remains similar to that of neighboring countries.

While Norway enjoys ample public income, there are concerns about the sustainability of maintaining such a large public sector in the long term without raising taxes. This structural issue poses challenges, particularly regarding the effectiveness of public spending and vulnerabilities derived from fluctuations in the sovereign wealth fund’s value. While policymakers in Norway benefit from abundant resources, the NHO has highlighted the need to address the sustainability of the public sector to avoid potential tax increases.

There is also competition over our small labor force. Demand for labor from the private sector puts it in direct competition with the public sector. This competition is driving innovation and modernization in the private sector, contrasting with the less competitive environment in the public sector, which has been the subject of debate. However, this is a long-term issue, projected to impact the Norwegian economy in the years to come.

As we know from past experience, navigating the digital and green transitions while maintaining economic growth will require enhanced collaboration with the government in the coming decades.

BF: What disruptions are currently affecting the Norwegian economy and how are businesses adapting to them?

Ole Erik Almlid: We urgently need to transition away from oil and gas to accelerate the green transition, with carbon capture and storage (CCS) playing a vital role. The oil and gas sector in Norway is proactively anticipating forthcoming changes, particularly in CCS and offshore wind, as the country diversifies away from oil dependency. Norwegian businesses aspire to participate in the global shift towards offshore wind projects, battery manufacturing, hydrogen production, and digitization. And the need to increase renewable energy production presents an opportunity with respect to the European market, and one that aligns with broader European objectives.

As a small, open economy, Norway has continuously adapted to changing global conditions. The transition from offshore oil and gas to renewables is underway, with much of the economy already running on renewable energy. Despite challenges such as the 2014 fall in oil prices, which led to significant job losses across the energy sector, Norway managed the transition well, aided by its substantial oil fund.

Our largest companies have long been globally focused and have demonstrated adaptability and resilience over the years. Even those with a century-long legacy have shown remarkable capacity for change, facilitated by our open economy and international outlook.

However, it is essential to acknowledge the imminent transformation facing the oil and gas sector. Over the next 50 years oil demand will decline, with natural gas and hydrogen gaining prominence. And while it is true that Norwegian industries have historically navigated change adeptly, there’s a pressing need to accelerate digitalization, especially for small businesses.

BF: What steps is the NHO taking to support Norwegian enterprises throughout this process?

Ole Erik Almlid: We are deeply engaged in shaping political frameworks, both domestically and internationally. Our focus now includes optimizing the tax system to incentivize investments. This year’s annual NHO conference convened government officials and industry leaders to accelerate digitalization, which is a priority for us. Additionally, our commitment to collective bargaining ensures competitiveness in salaries, benefiting both businesses and employees alike.

BF: What challenges does Norway’s domestic energy industry face?

Ole Erik Almlid: In the past two years, electricity prices have surged, partly due to elevated gas prices. There are also regional disparities in prices, with the western and southern coast encountering considerably higher rates. But our energy industry is very competitive and we intend to maintain that competitiveness in the future. Additionally, we’re actively pursuing the expansion of wind power in Norway. Our plan includes investments in both onshore and offshore wind projects over the next few years, which can significantly increase Norway’s energy production capacity.

BF: What sets Norway apart from its European counterparts, and in what areas is it most competitive?

Ole Erik Almlid: Energy, particularly renewable energy, holds immense importance for both global climate mitigation efforts and Norway’s future. With a stable political system and cooperation between international businesses, Norwegian know-how and standards are trusted globally. Norway operates on a foundation of trust, evident in the cooperative relationships between the government, employers, and employee organizations.

Additionally, the recent government approval for deep-sea mining reflects Norway’s commitment to securing critical rare earth minerals, such as phosphate, essential to battery industry development and reducing Europe’s reliance on Chinese exports. Although it is controversial, Norway is adamant about exploring deep-sea mineral resources that can make a big difference to the security of Europe as a whole.

The nation’s adaptable economy and consensus-driven culture, characterized by high levels of mutual trust, enable efficient governance and facilitate necessary reforms. The Norwegian sovereign wealth fund’s premise rests on trust in future generations to responsibly utilize its assets without discrimination. My European colleagues find it perplexing that Norway prioritizes saving for future generations rather than using funds to address immediate problems. But this approach exemplifies our trust-based economy. Since Norway has a small domestic market, most of what we produce must be sold globally, fostering an innovative, cooperative culture, particularly in export-oriented industries.

BF: In what parts of the Norwegian economy do you think US companies can add the most value and why?

Ole Erik Almlid: Norway is an excellent investment destination with a stable political system, crucial for long-term investments. Key sectors like seafood and energy – particularly new energy technologies including CCS and wind power – offer promising opportunities. Norwegian businesses have a track record of collaboration with investors worldwide. I invite US investors to come and invest in Norway and partner with the NHO for support and guidance.We primarily assist international investors to adapt to tax and regulatory frameworks. Additionally, the NHO branch for the finance sector includes investment firms and banks, which can provide valuable support for investments in Norway.

BF: What advice would you give to foreign business owners who are considering investing in Norway?

Ole Erik Almlid: Norway offers stability and long-term investment prospects within the European system, which is known for its ability to adapt very quickly. The country boasts a favorable environment for employees, with a diverse workforce motivated by an appealing work culture and lifestyle opportunities. The Norwegian system encourages personal and professional growth through its education and employment integration. With a highly educated workforce and cost-effective, skilled labor, industrial relations in Norwegian companies are good, thanks to the prevailing trust in the system. Norway is at the forefront of the green shift, leading the development of low-emission technologies. For those seeking to be part of a modern, sustainable system, Norway is the destination of choice.