Breakfast meeting, Iceland Chamber of Commerce, Dutch trade delegation
H.E. Mr. Halldór Ásgrímsson, Minister for Foreign Affairs, Iceland
Reykjavik, June 5, 1998
Honourable business leaders, ladies and gentlemen.
It is my pleasure to address you this morning. Allow me first to congratulate you, the group A 37 on your fifth anniversary. I have been told that the group was established in connection with the project of building the four lane autobahn A 37, which connects very important areas of north-eastern Holland and as well areas in Northern Germany, such as Bremerhaven. It is therefore more than likely that this autobahn has already facilitated greater flow of trade between Iceland and Northern Europe.
The relationship between Iceland and Holland has always been very friendly and based on mutual respect. There are primarily two aspects that characterise the trade between these two countries. One is the increasing role the Rotterdam Port plays in exports from Iceland but most of the Icelandic commodities are unloaded there. The other one is the good air transportation connection between the countries. Icelandic airlines began to fly to Amsterdam in the early 1980}s and today there are six flights every week between Amsterdam and Keflavík.
One cannot talk about trade and business relationship today without referring to the historical context in which such relationship has developed. The trade relationship between Iceland and Holland is based on an old practice which dates back to the 16th century, when Dutch fishermen in Icelandic waters started to trade with the inhabitants along the coastline. During part of the 17th century the Dutch were virtually the only foreign traders doing business in Iceland, a situation based on a special licence granted to them by the Danish King. The Dutch sold the Icelanders all the necessary goods which the people needed at that time and purchased in stead fish- and wool products.
The Dutch harbours have therefore for a long time played an important role in the trading relations between Iceland and Continental Europe. At some time the Dutch harbours were also Iceland's gateway to Denmark. Well known is the story in our late Nobel laureate, Halldór Laxness novel, "The Bell of Iceland", were Jón Hreggviðssson, a notorious delinquent, sentenced to death for killing one of the King's men, managed to escape and sail to Rotterdam with Dutch fishermen in order to get to Denmark, where he intended to plea for mercy by the King.
When the Dutch traders first began to conduct business in Iceland, the Icelandic economy was very simple and primitive, but it was open and there were few restrictions. Restriction came later and business became highly regulated by the authorities. During most part of this century government intervention through strict regulation of the economy was the way of life. Imports were restricted and regulated and export duties were imposed on our most important product, the fish.
Currency restrictions, high interest rates, sky rocketing inflation and strong barriers to foreign investment were in force. The financial market was underdeveloped and regulated. High consumer and income taxes were imposed and regular devaluation of the currency was the main economic tool governments used to correct its course. Not surprisingly, this was not an attractive situation for foreigners, considering investing and trading in Iceland.
Slowly the overall economic arrangement in Iceland started to change and if you compare the Icelandic economy today with the one in existence forty year ago and even ten to fifteen years ago, you could not imagine the vast changes that have occurred throughout the economy and the impact these changes have had on the Icelander's every-day-life. The main reasons for these changes are due to a combination of several factors of which I would like to mention a few.
Firstly, a new generation of politicians, business managers, civil servants and people in general, a post World War II generation has emerged. This generation of more open minded and better educated people, realised that the old measures used to combat economic problems were useless in the long run. This generation understood that by liberalising the economy, and although it would cost some painful sacrifices, the traditional method of government interference in the economy was no longer needed on the same scale as before.
Secondly, a complete restructuring of the most important industry in Iceland, the fishing industry. Starting in 1983 by imposing a quota system on fisheries, the whole industry has undergone important reorganisation. The fishing companies are now larger entities compared with much smaller companies in the earlier days, managed in a very modern and efficient way. The largest companies are also now publicly traded corporations as they are listed on the Icelandic stock market with many thousand shareholders, where shares are traded daily.
Thirdly, distance has become relative due to innovation in computer software and technology, communications and transport. Distance is therefore not the same obstacle in business as before.
Lastly, Iceland membership in multilateral trade organisations, without doubt forced us to change the old way of running the economy. Iceland became a member of the GATT in 1968, a member of EFTA in 1970, a member to the EFTA-EU Agreement on the European Economic Area in 1994 and a member of the World Trade Organisation when it was established in 1995.
Iceland has a very good relations both with Europe and North America. Iceland is closely associated with all three pillars of the European Union. Most of the issues that fall under the first pillar are covered by the EEA Agreement and through that agreement Iceland is part of the internal market. Matters of foreign policy and security in the second pillar are not only dealt with in the EEA political dialogue but as a member of NATO and associate of the Western European Union we maintain very close political ties with individual member states of the European Union. In 1996 we concluded a co-operation agreement with the Schengen countries that we confidently expect to become the basis for our co-operation with the European Union on third pillar issues. In all three pillars we have the possibility to maintain and develop very close relations with the EU.
These weeks the EFTA States, Iceland, Liechtenstein, Norway and Switzerland are beginning negotiations with Canada on a free trade agreement. If we succeed in completing this agreement it will be the first Trans-Atlantic free trade agreement. Businesses on both sides of the Atlantic Ocean are very exited over this issue and when the agreement will be in force, hopefully next year, it will create a new challenges and opportunities for European and North American businesses.
The general condition of the Icelandic economy is very good at the moment and it is running close to full capacity. This can be attributed to the transformation during the last years. Inflation has been brought under control. During the last years Icelanders have enjoyed one of the lowest inflation among the OECD countries. Financial markets have been deregulated and the government budget balanced. The interest rates are decreasing and becoming comparable with the rates of most industrialised nations. A relatively ripe stock market has been build up. The fish stocks are now well managed and unexpected fluctuations in catch is happening more seldom. Last but not least the Icelandic economy now fulfils all the requirements of the European Monetary Union, except to become a member.
We have begun to diversify our businesses in an effort to become less dependent on one industry, the fishing industry, A new chapter in the development of Icelandic businesses has just begun. It started off with more globalisation of the fishing industry. Many companies in that sector have invested heavily abroad in the last few years. What has been followed is globalisation of companies producing by-products for the fisheries as well as in other sectors like software to name an example. Icelandic high tech companies now sell their know how and products, both hardware and software in all continents of the world. This know how is among others generated by our experience in the fishing industry. New and traditionally foreign and distant markets for us have been entered such as Russia, Roman America, South-East Asia, South Africa, Australia and New Zealand.
Iceland is now an attractive alternative for foreign investors and during the last few years foreign investment has surged in this country. Iceland can offer enough and inexpensive energy, favourable economic and political conditions, relatively low land and premises cost and well educated work force. It is an alternative which is very well worth the effort to look at.
Apart from celebrating your anniversary here in Iceland, I understand that you are here for establishing business contacts with Icelandic companies. I welcome that initiative and I hope you will be successful in that respect. I would like to wish you a fruitful stay in Iceland and that it may contribute for a continuing positive development between Iceland and Holland.
Breakfast meeting, Iceland Chamber of Commerce, Dutch trade delegation