Minister}s Speech at the annual Meeting of the Iceland-German Chamber of Commerce
16 February 2001


Ladies and gentlemen

It is a great pleasure to have the opportunity to address this meeting of the Iceland-German Chamber of Commerce, particularly as I was present at the inaugural meeting of this chamber just over five years ago.

But the relationship between Iceland and Germany goes back much longer than five years. Indeed, German merchants were plying trade with Iceland as far back as the 15th century. From the 16th century Iceland come into the sphere of influence of the Hanseatic League. These days Germany is our second biggest export market and our biggest source of imports. In addition, Germans constitute the largest European group of tourists to Iceland, and are very welcome visitors. A good number of Icelanders also travel in the opposite direction, both as tourists to Germany, but also as students to benefit from Germany's excellent universities and colleges. It may interest you to know that German has a strong hold here in our school system as a foreign language. German is the most popular third language, that is, after English and Danish, which are compulsory. Some 5500 students took German in 1999 while 2500 took French.

These strong ties are certainly reinforced by the highly effective work of the Icelandic-German Chamber of Commerce. Co-operation between the Chamber, the Embassy of Iceland in Berlin and the Overseas Business Services Department of the Ministry for Foreign Affairs has also been excellent. The Chamber of Commerce has also forged a link to the "Deutscher Industrie- und Handelstag" giving it direct access to the world-wide computer net of German companies.

Ladies and Gentlemen,

I can say with confidence that Iceland is a good place to do business. Indeed, Iceland is ranked among the most business friendly countries in the world, alongside the USA and Japan. And I hope that our German colleagues find that Icelanders are good to do business with.

Ladies and Gentlemen

Before an audience including German colleagues, I hesitate to make the claim that Iceland has gone through a major transition in the last ten years or so. The revolutionary changes in Germany since 1989 are beyond compare.

Nevertheless, the Icelandic economy has undergone a remarkable period of growth - 25% since this chamber was established. At present, we have 83% labour participation and 2.7% unemployment. While we have undoubtedly benefited from the global boom, the Government has worked hard to ensure that Iceland has been in a position to make the most of the boom. We have put emphasis on consolidating public finances. We have sought to increase competition through liberalisation and privatisation. In line with developments in Europe, the telephone industry has been deregulated. Preparations are under way to deregulate power supplies and we are working on privatising the two remaining state owned banks.

Of course, booms are caused by explosions - and people can get hurt if the explosion is not controlled. Indeed, inflation has risen to about 5% and there are concerns about debt exposure in the private sector. That is why the Government is seeking to dampen growth to prevent overheating of the economy. We expect growth to reduce to about 1.6% this year. We are also aware that while low unemployment is a very positive situation to be in, shortage of manpower could put a brake on growth, and that we need to ensure for the future that a balance is found.

But the environment for long-term, sustained growth is good in Iceland. We have a highly motivated, highly educated work force, which has shown itself able to adapt rapidly to new circumstances. Our economy has a strong foundation in the fishing industry, which still accounts for 70% of our export of goods. But we have, in the last 5 to 10 years, demonstrated an ability to diversify successfully. Icelandic companies such as Marel have combined an expert knowledge of fish processing with computing skills to lead the way in high-tech fish processing equipment. This know-how is also being applied to other sectors of the food industry.

While on the subject of the food industry, I would just like to point out that Iceland is still primarily a food producing country. We are very proud of the quality of our produce, and are constantly seeking to assure this quality. We were therefore concerned recently when, due to the BSE crisis, Germany and then the EU banned the use of fishmeal in feed to ruminants. Germany still has a ban on fishmeal in all animal feed. Fishmeal has never been linked to BSE - indeed, it is the produce of the open ocean. We continue to urge the EU to take a scientific approach to these matters.

But diversification has succeeded beyond the fishing sector. One of our most successful companies is called Össur. It makes prosthetic equipment (that is, artificial limbs) and has recently acquired companies in Scandinavia and in the USA. It is one of the foremost companies in the field.

As to capital, the capital markets of Iceland have taken off in the past 10 years, and are now run on rules which match those of the EU and other major economies. The increasing freedom to move and invest capital anywhere in the world has given Icelanders more freedom to invest outwardly, a freedom which they have used increasingly both in the fisheries sector and elsewhere. It has also given Icelandic companies access to large sums of money to finance enterprises here - one good example is DeCode Genetics, which has attracted investment from Hoffmann La Roche, among others.

We have also been very active in international arenas. As members of the EU's internal market through the EEA Agreement we have aligned all our legislation with that of the EU. This has assisted us in creating a modern legal environment built on best practice and favourable to business.

We have worked hard in EFTA to establish free trade agreements with other trading partners, the most recent being with Mexico. We are close also to concluding a free trade agreement with Canada.

Ladies and Gentlemen,
I referred to the major internal changes which Germany has undergone in recent years. But the position of Germany has also changed in relation to the rest of the world. It is clear that Germany is now a key player, not only as a major world economy, but also as a leading political power, not least in the development of Europe. As one German politician put it recently, "Germany is no longer solely a consumer but primarily a producer of stability and security in Europe".

Finally, Ladies and Gentlemen,

I would like to recall one of the highlights of last year, the Hanover Expo 2000 hosted by Germany. The Icelandic pavilion was among other things a tribute to the energy of Icelandic and German co-operation, and it is very gratifying that the German and Icelandic Pavilions came in first and second in terms of number of visitors. Icelanders and Germans have much in common and this is evident from the longstanding and continuing mutual interest in our two cultures. This is important because good business rests on mutual trust, and trust rests on understanding. The Icelandic-German Chamber of Commerce is an important forum for strengthening this trust.