Hoppa yfir valmynd
Ministry of Finance and Economic Affairs

Rising from the Ruins 6

A land of opportunities, Part 6.

This series of articles entitled “Rising from the Ruins” has looked at the events leading up to and the causes of the collapse which occurred here in Iceland, the subsequent actions of the government, the success of these actions, the numerous tasks ahead, and Iceland's position in the international community. In my estimation, solid and statistically supported arguments have been presented showing that the government is well on the way to accomplishing the enormous tasks which it has faced. We are on the right track, even though there are plenty of steep hills ahead. The next step is to look to the future, and the fact that the opportunities that this country has, to rebuild and to offer us once more a standard of living among the best in the world, are practically limitless.

A wealth of natural resources

Notwithstanding the noisy disagreement which has generally prevailed on the utilisation and ownership of Iceland's resources, the truth is that there are few examples in this world of a nation of 320,000 people entrusted with a country as richly endowed with natural resources. Iceland's exclusive economic zone is enormous, and includes the richest fishing banks in the Atlantic. The country itself is rife with natural wonders, offering major future potential for agriculture and tourism. We have abundant hydro and geothermal energy stores, offering unique possibilities to develop sustainable energy production. Here there is fresh water aplenty and the country's location opens up a variety of opportunities as attention focuses increasingly on the Arctic region. We are a young nation in demographic terms and well educated, in a modern, developed society with strong infrastructure. All of these resources, and others, mean there is little cause for anxiety about the future in Iceland.


Following the collapse, the nation's fisheries have reaffirmed their status as the country's most important industrial sector. When the corporate cowboys were making the headlines, fisheries appeared to have gone out of fashion, but times have changed. Figures on the value of catches in 2009 total over ISK 115 billion, despite various setbacks, such as disease affecting herring and a partial failure of the capelin fishery. Catching and processing of mackerel gave a welcome bonus, as the value of the mackerel catch totalled almost ISK 5 billion in 2009. This helped to offset setbacks in other stocks. This year around 53% of the mackerel catch has been processed for human consumption, instead of 20% last year. Its total value is likely to be close to ISK 20 billion.


Icelandic agriculture offers unique, high quality products. In 2009 exports of agricultural products grew significantly, totalling over ISK 7 billion, thanks to growing demand and a favourable exchange rate. Agriculture is an export sector which is advancing rapidly and returns high net foreign exchange earnings. Water exports have also been growing and many people claim that water will soon be our most important resource, Iceland's oil.


In hydro and geothermal power, as well as other clean natural energy sources such as wind and tides, Iceland have renewable, long-term resources. Provided we avoid mistakes in utilisation agreements, they can return tens of billions in increased benefits in the decades to come. Not by harnessing everything that remains for a single power-intensive heavy industry. On the contrary, by seeking increased dividends through renewal of contracts for existing production. By focusing on small and medium-size purchasers, who on average pay a higher price that can be obtained in huge, wholesale agreements. Sustainable development of our own energy production, however, should be given priority and all proposals for exploitation should be assessed against the unwavering condition that their impact on the environment must be a minimum, that utilisation does not deplete the resource and that those water catchment areas and geothermal regions which need to be protected are not violated. It must be ensured that energy resources are publicly owned and that the rent they return goes to the nation itself. The energy companies need to emphasise concluding shorter energy sales contracts, with a larger and more varied group of clients. World energy prices are climbing steadily and there are few signs of any change in this trend. Server farms, greenhouse horticulture and silicon chip, carbon fibre and capacitor production are all examples of operations demanding moderate energy supplies and providing a relatively high number of jobs.

Pension funds

Icelanders have one of the best designed and funded pension systems in the world. Their per capita assets are estimated to be the equal of the Norwegians' petroleum fund. At year-end 2009, pension funds' net assets were equivalent to 119% of GDP. Iceland, the Netherlands and Switzerland are in a class by themselves in this regard, with pension funds' net assets of 120-130% of GDP. In Greece, by comparison, the figure is 0%. Major difficulties await many other nations who do not have fully funded pension systems and in addition have to deal with changing demographics.

Travel services and airline operations

The travel industry is the sector which has expanded most rapidly in recent decades. It brings in enormous net foreign currency earnings (gross earnings are similar to that of power-intensive industry while net earnings are considerably higher) in operations spread widely throughout society. The Eyjafjallajökull eruptions reminded us of the importance of the travel industry. With a successful joint marketing campaign, the dire prospects early this summer were reversed and many people now regard Iceland's tourism potential to be greater than ever before. Airline operations have long been a relatively large factor in the Icelandic economy. It is gratifying to see that all the Icelandic airline companies are now expanding their operations. Barring additional shocks, this author suspects that 2011 will prove to be a record year in airline operations and the travel industry.

A clear educational strategy for the future

Iceland has a strong educational system based on social solidarity. The nation's high educational level and universal access to good basic education provides a strong foundation upon which to build and reshape society. We are in the front ranks in research and instruction in geology and geothermal energy, fisheries and additional disciplines. The Icelandic software industry has drawn attention to itself in many areas of the world and Icelandic know-how and initiative are advancing, as are technology and knowledge sectors.

The government is determined to provide strong support for the educational system and a new, clear educational strategy has been mapped out, increasing the emphasis on critical thinking, democracy, equality, sustainability and creative effort. I will let this suffice for the moment, although plenty more possibilities and opportunities could be mentioned. It is not a coincidence, however, that I conclude with education, because this is where the foundation is laid.

A land of opportunities with a bright future

But what sort of society do we in fact want to build from the economic ruins, for ourselves and future generations? What values do we want to build on when we re-shape the social structure? What should our self-image look like? One thing is clear. None of us wants to see events of the sort that occurred in the autumn of 2008 repeat themselves. If anyone misses the spirit of 2007, this author at least is not among them. Let's leave the greedification, the excesses and the arrogant conceptions of ourselves and our imagined superiority behind on the rubbish tip of history. What we want is a human, honest and moderate welfare society, open and democratic, based on power-sharing and in harmony with nature and other peoples. That is the direction to head for as we rise from the ruins!

Steingrímur J. Sigfússon
The author is Minister of Finance in Iceland.


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