Many Hands Make Light Work (Margt smátt gerir eitt stórt
Ladies and Gentlemen,
I should like to begin by saying how grateful I am for having been invited to be here and how pleased I am that the Iceland Chamber of Commerce has chosen to focus the attention of the community on the importance of small and medium-sized enterprises for the business sector and the economy.
The way out of the current recession and employment crisis will take us, I believe, not so much via big solutions that cure all our ills at a stroke; rather, we must address the problem by taking measures to improve the environment for the large number of enterprises that will be able to generate greater value in the years to come.
The problems we face affect all business enterprises, from the largest companies down to self-employed individuals. On top of the financial crisis, we have a currency crisis which is having serious economic consequences for both enterprises and households. The value of our currency, the króna, is being shored up both by means of extensive exchange controls and also high interest rates. Under these circumstances, it is difficult to resort to traditional means of dealing with a financial crisis, such as rapid cuts in interest rates and additional public spending.
The Central Bank’s Monetary Policy Committee says it is adopting extreme caution when addressing the need to reduce interest rates for fear of a further weakening of the króna and so as to be able to begin relaxing controls at the earliest opportunity.
It is simply a matter of life and death for us to reduce our debts while simultaneously laying the foundations for greater exchange-rate stability and a quicker reduction of the policy rate. There are no magic solutions or instant remedies for righting the national accounts.
One of our tasks is to bring the Treasury deficit under control as soon as possible. This is vital, and is independent of the economic programme drawn up in collaboration with the International Monetary Fund. By adopting a programme of fiscal prudence we are creating the premises for a quicker lowering of the policy rate and more stable exchange rates, and consequently for the first moves to lift exchange controls.
We are working with the IMF according to this programme, negotiating with foreign creditors and distinguishing sharply between the identity of the old and the new banks according to rigorous criteria; our aim here is to revive an open economic system. Icelandic enterprises need access to the best possible conditions for growth and competitiveness. Unfettered international trade and access to foreign credit markets are key instruments for creating these conditions. Short-term solutions, with the inherent danger that we will become ensnared in a system of restrictions and rationing, could prove to be a poverty trap in the long term.
One of my priorities is that we must succeed in attracting further foreign investment over and above the projects that are already well advanced. This would be a powerful driving force for the economy as a whole, with benefits for the overall corporate operating environment.
The participation by two large oil-prospecting companies in the recent tender for studies of the Dragon Region gives us hope that the development of the necessary services and research facilities can begin in the near future. Our aim is that in addition to a service centre, knowledge and skills in this field should also be built up in Iceland.
It is also clear that, notwithstanding the present situation, there is still a high level of interest abroad in the power-intensive industrial sector in Iceland and development based on renewable energy resources in our country. Many of the projects now being examined in the Ministry of Industry would, if put into practice, result both in a broader range of export products and in the import of new skills.
The government must play its part in enabling such projects to be launched in the near future. For example, it is vital that we offer a certain stability in the operational and tax environment, not least in the light of the financial collapse that has taken place.
In my opinion, the time has long been ripe for taking a definite step to clarify the concessions that we are able to offer in a legal framework rather than in individual tailor-made investment contracts. Framework legislation of this type would not only make it easier to promote Iceland as an investment opportunity abroad but would also simplify all the work involved in preparing projects and enable investors to assess the opportunities on offer.
Following a detailed report by a task force examining the net advantages of applying concessions, I have proposed that we should now take the next step and prepare draft framework legislation before the end of this year.
While we are trying to create more favourable economic conditions, work is also going ahead on a number of fronts to create jobs and stimulate the creation of value. I should like to mention a few examples.
Since last October, the Innovation Centre Iceland has stepped up the support services it offers and opened five new support programmes for entrepreneurs in collaboration with public bodies and enterprises.
There has been a surge in demand for free guidance in developing commercial ideas and product design.
At the instigation of the Ministry of Industry and the Innovation Centre Iceland, the Ministry of Social Affairs and the Directorate of Labour launched the Starfsorka project, by which enterprises can apply for assistance from the Unemployment Insurance Fund to involve job-seekers in new ventures and developmental projects. Already, nearly 50 start-up companies have made use of this scheme, resulting in the creation of about 100 jobs.
The Trade Council of Iceland and the Iceland Design Centre have brought designers and SMEs together to stimulate the design of products and services for export. The result of this will be unveiled in the coming weeks in connection with a conference on the commercial aspects of design work.
A task force is currently working to develop proposals on the reimbursement of part of design costs in connection with research and development, this to take the form either of direct payment or tax rebates. Final proposals should be ready in the next few weeks. Attention is also being given to the competitive environment as a whole, including the question of how to attract investors to back innovative companies.
Last summer, the European Commission published ten goals including measures to remove obstacles and improve the competitive position of SMEs.
Ladies and Gentlemen,
I should like to end by mentioning one issue that is of great significance for the resuscitation of our economy: application for membership of the European Union and the adoption of the euro. The challenge we face is to regain trust and attract foreign investment. Consequently we can no longer dodge the issue of where we are heading with our monetary policy. Financial markets are driven by expectations, so a clear statement by the Althingi of the political will to engage in membership negotiations with the EU and to adopt the euro could have an immediate effect.
In itself, an application for membership would not be a magic solution or an instant remedy for all our problems. Together with other measures, however, an application could increase exchange-rate stability, cut our interest burden on international markets and promote conditions for lifting currency restrictions and reducing interest rates more quickly. To my mind, therefore, it is a matter of great concern for both enterprises and households that we should achieve a broad consensus in the Althingi in the coming weeks on setting membership negotiations in progress.
It is up to us politicians to understand the position and needs of the business sector. For SMEs, it is vital that we succeed in creating the conditions for a more rapid lowering of the policy rate and ensuring that the financial system be rebuilt in such a way as to guarantee them access to capital.
We, the politicians, will not create the jobs that are needed. But we will work quickly to create the conditions necessary for you to take over, since economic recovery can only be based on the wealth generated by business enterprises.