Science & Technology in Norway - March 2005

1.1) NORWAY'S INTERNATIONAL POSITION
1.2) SOME GENERAL CHARACTERISTICS
1.3) KEY SECTORS

• Oil & gas
• ICT
• Maritime industries (including shipbuilding, aquaculture and marine biotechnology)
• Light metals and material technologies
• Environmental and renewable energy (including alternative sources, particularly hydrogen)

2.1) GOOD FINANCES
2.2) ACCESS TO NATURAL RESOURCES AND CHEAP ENERGY
2.3) GOVERNMENT'S COMMITMENT TO STRENGTHEN SCIENCE AND TECHNOLOGY

3.1) INCREASE R&D SPENDING
3.2) WIDEN SOURCES OF INNOVATION
3.3) LEVERAGE PRIVATE R&D FUNDING
3.4) STRENGTHEN INNOVATION

4.1) AREAS OF POTENTIAL COLLABORATION
4.2) EXAMPLES OF EXISTING OR RECENT NORWEGIAN-CANADIAN COLLABORATION

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1. Overview

1.1 Norway's international position

According to the United Nations Human Development Index (HDI), Norway is one of the wealthiest countries in the world with arguably the highest quality of life worldwide. Norway's top standard of living, life expectancy, overall health, housing standards, high level of employment and low level of unemployment support the country's top position.

The high level of material wealth is partly due to the recent discovery of petroleum on which the country heavily depends. Norway's consistent budget surpluses come from the revenues of base industries such as hydropower, light metals (the world's largest magnesium producer is established in Norway), fisheries, agriculture, but mostly from petroleum and gas deposits.

In spite of the heavy reliance on resource-based industries, Norway is acquiring strengths in S&T. Norway remains one of the world's leading ship nations, and shows leadership in ICT, particularly in wireless technologies and technologies relating to the oil and gas sector. The country also shows leadership in solar energy and aquaculture. Norway ranks as the sixth most competitive country in the world, well ahead of many large countries such as Canada, Germany, the United Kingdom, etc. (World Economic Forum).

Compared with other Nordic countries, Norway has a lower level of R&D expenditure. The government has stated its intention to increase investment in R&D to meet the OECD average by 2005. The Research Council of Norway has launched a North American Research Strategy to strengthen ties with Canada and the USA, and has funding linked to the program accessible by North American and Norwegian researchers alike.

In terms of trade, Norway is Canada's most important trading partner in the Nordics, and by far Canada's largest source of investment from the Nordic countries. In addition to a considerable FDI stock which places Norway as the 6^th largest European investor in Canada (9^th globally) a further $ 1 billion is invested on the Toronto Stock Exchange through the Norwegian Petroleum Fund.

1.2 Some general characteristics

The Norwegian economy has a relatively uniform industrial structure which depends heavily on revenues coming from the exports from its petroleum industry and related technologies. Due to this important source of revenue, Norway has succeeded in becoming one of the richest countries in the world. In Europe for the year 2003, only Luxembourg with a GDP per capita of $US 50,900,¹ had a higher GDP per capita than Norway ($US 36,100).

In terms of GDP growth for 2002-2003, Norway with 0.3 per cent was under the OECD average of 0.5 per cent, and the EU-15 average of 2.1 per cent. In 2004, its GDP growth is estimated at 3.4 per cent². For the period 1993-2003, Norway (with 3.2 per cent) succeeded in achieving a higher GDP growth than the OECD (2.6 per cent) and the EU-15 (2.1 per cent).

Norway opted to stay out of the European Union during a referendum in 1972, and again in November 1994. However, the country participates in the EU's single market via the European Economic Area (EEA) agreement together with Iceland, Liechtenstein and Switzerland. Through this agreement, Norway is able to participate in FP6 programs³ and access EU programs on the same terms as other EU nations. Numerous collaborations between Canada and Norway in EU programs have been undertaken. Indeed, 12 of the 75 FP5 projects in which Canada participated in were partnerships with Norway.

In terms of structure, the Norwegian business community is dominated by small & medium-sized enterprises concentrated in generally lower R&D intensive industries. The lower national R&D investment might partly be caused by this industrial structure. These are often companies that innovate by other means such as incremental improvement of existing products, processes and services, marketing, branding, design, etc. However, larger companies do invest in R&D. In a recent survey of innovation by TBL (Federation of Norwegian Manufacturing Industries), the 20 largest companies were seen to invest 6.75 per cent of turnover in R&D, whereas technology companies invested 4.5 per cent in R&D, an increase for the second year running.

1.3 Key sectors

Norway features a solid research and industrial capability as well as a strong presence in trade of the following S&T sectors.

Oil & gas

Oil and gas deposits in the North Sea have made Norway one of the world's leading oil and gas exporters, and brought it correspondingly high revenues. There is a considerable petrochemical industry, as well as for other activities in the processing, and service industries. According to the International Energy Agency (IEA), Norway is the world's third largest oil exporter.

ICT

Information and communication technology (ICT) is a large and rapidly growing sector that is becoming increasingly important to the Norwegian economy. In 2003, exports of ICT goods amounted to six per cent of the exports of traditional commodities. In the period 1996 to 2001, exports and imports of ICT goods increased by 10.5 and 8.9 per cent respectively, while for the same period the exports and imports of traditional commodities increased by 7 and 5.4 per cent. The telecommunications industry, with 36.8 per cent of the entire export of ICT goods for 2003, represents the bulk of the Norwegian ICT industry.

Maritime industries (including shipbuilding, aquaculture and marine biotechnology)

The shipbuilding industry, which mostly builds small and medium sized ships, is an important part of Norway's cluster of Maritime Industries. The rich fish resources provided by the long Norwegian coast along with aquaculture place Norway as one of the world's leading salmon exporters. Marine biotechnology has become an important part of the biotech sector. Norway has many research institutes in this sector. A list of relevant Norwegian Institutes can be found in Appendix 1.

Light metals and material technologies

Norway is rich in mineral deposits. Mining and metals, with aluminum production making up the largest part of this industry, is one of Norway's largest export sectors. In fact, Norway produces the largest amount of primary aluminum in Western Europe, and Hydro ASA is the world's largest producer of magnesium. The country also generates an important part of the world's production of ferrosilicon and silicon-metal. Norway's foundries produce different end-products and components (e.g.: automotive parts, components for ship building, manhole covers, etc.) for various mechanical-engineering industries.

Environmental and renewable energy (including alternative sources, particularly hydrogen)

Around 99.6 per cent of the total electricity production in Norway is generated through a clean energy source. Only Iceland can compare to Norway. The landscape with many waterfalls laid the foundation for the hydropower industry. Norway has one of the most inexpensive prices for electricity. Norway has also a long tradition of producing and using hydrogen. From the late 1920s to the 1980s, hydrogen was produced in Norway through electrolysis for the production of ammonia. Numerous new hydrogen projects are under development. Wind power is growing, and the first tidal project has been granted a license. It is also worth noting that Norway ranks 6th in the world in terms of number of installed solar panel systems per capita.

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2. Key strengths

2.1 Good finances

Norway is a rich country with extremely strong finances: zero external debt and consistent budget surpluses.

Although current petroleum reserves ensure good revenues and fiscal surpluses for several years to come, many Norwegians worry about that time in the next two decades when the oil and gas begin to run out. For that reason, Norway has been saving its oil-inflated budget surpluses in a Government Petroleum Fund, which is invested abroad. It was valued at $US 158 billion at the end of the third quarter of 2004. Of this, over $ 1 billion is invested in Canada

2.2 Access to natural resources and cheap energy

Norway holds a strong competitive advantage in terms of natural resources and topography. Vast expanses of forests, fish, water resources, minerals, and now petroleum, all have contributed to the generation of wealth for Norway. Furthermore, the rich topography plays a role in Norway's natural endowment: more than 70 per cent of the country is mountain plateau, 25 per cent forest and woodland, and 4 per cent suitable for agriculture.

The abundant supply of hydropower, from which 99 per cent of the electricity produced in Norway, serves to produce metals, chemicals and wood products.

The 2740 km of coast line (not counting the fjords and thousands of islands), perfect for marine and aquaculture, is another asset of Norway. The rich resources found along the entire Norwegian coast have formed the basis for the fish-processing and fish farming industries.

Last but not least, the rich oil and gas deposits in the North Sea have made Norway a major player in the world petroleum industry.

2.3 Government's commitment to strengthen science and technology

Compared to other Nordic countries, Norway does not invest a high proportion of GDP in R&D.

Aware of Norwegian's poor figures in R&D, the Government has taken steps to make the country one of the most innovative in the world. The Government aims to raise Norwegian research expenditures (in terms of percentage of GDP) to a level that at least equal the OECD average by 2005. Among other central objectives, the innovation policies intend to 1) reinforce cooperation between policy makers, industry and education and research environments; 2) enhance commercialization of research results from universities and colleges; and 3) improve the quality of higher education and research. It is reasonable to say that the Government has reached many of its R&D and innovation policy objectives. First, public R&D investment has significantly increased. From 1999 to 2001, R&D expenditures grew annually at ten percent in real terms in the industrial sector, and two percent in the institute sector. There was no real growth in the higher education sector. Norway has also designated four priority research sectors: 1) marine research, 2) ICT, 3) medical & health care research and 4) environment & renewable energy, all of which will receive the greatest increase in funding.

In order to facilitate technology transfer to industry, like in Denmark, the Government has created new legislation which makes technology transfer to industry an explicit mission of universities. Furthermore, the rules governing the ownership of intellectual property (IP) was reformed on 1 January 2003. The amendment grants research institutions the right to exploit inventions. Though no doubt controversial in the domestic research community, the change facilitates the commercialization of R&D and resulting inventions.

Another measure implemented was the introduction in 2001 of the FUNN scheme, which gave public financial support to companies buying research and development from universities, colleges and research institutes. Then in 2002, the FUNN system was replaced by the SkatteFUNN, which gives small and medium-sized companies tax deductions for investments in R&D projects. Now all companies have access to this tax deduction scheme.

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3. Future challenges

Norway has good strengths in the S&T sector. But to reinforce its S&T profile, the country needs to address the following weaknesses:

3.1 Increase R&D spending

A central challenge for Norway in the coming years is to increase its R&D spending both in the private and public sectors. In nominal terms, R&D expenditures accounted to 1.67 per cent of Norwegian GDP in 2002, well below other Scandinavian countries and OECD and EU averages, which stand at 2.26 per cent and 1.93 per cent respectively. However, Norwegian R&D spending per capita of $US 594 for 2002, was above OECD and EU15 averages ($US 567 and $US 502).

In Norway, 11 out of 1000 workers (including part-time) work in the R&D sector. This is the lowest proportion in the Nordic countries and it is lower than in several large countries in the EU. When it comes to proportions carried out by personnel with a higher degree, only the Nordic countries come higher than Norway.

3.2 Widen sources of innovation

One of Norway's major long-term challenges is to diversity its sources of innovation. Norway's strong economic position depends heavily on the revenues coming from the oil and gas industry. Although the oil and gas reserves are not expected to run out before 50 to 100 years, they are still considered finite resources that will be eventually depleted.

Furthermore, the heavy dependence on the petroleum industry has reduced the investment in industries other than oil. Consequently, some sectors have slowly fallen behind in terms of competitiveness.

In response to this problem, many R&D projects in oil and gas have focused on sub-sea development and increased oil and gas recovery, now at 70 per cent in some Norwegian fields. Efforts in this direction need to be increased.

3.3 Leverage private R&D funding

Norway needs to become more attractive to private research funding. Indeed, there is little private research funding in the country. The government represents a decreasing share of R&D financing in most OECD countries. In order to achieve a better balance between public and private R&D expenditures, the Norwegian Government has implemented tax incentives to increase the focus on R&D within the Norwegian industrial sectors. This initiative directly seeks to promote private R&D investments. State funds to promote innovation are also being developed.

3.4) Strengthen innovation

Innovation is of crucial importance to Norwegian competitiveness. Around 29 per cent of the Norwegian enterprises introduced new or significantly improved products or processes between 1995-1999, and again in 1999 and 2001. This statistic is somewhat lower than in other Nordic countries. Overall, the proportion of innovative enterprises is lower in Norway than in most other EEA-countries, although not significantly lower.

Challenges such as organizational rigidity, large economic risk, lack of venture capital, lack of qualified staff, high innovation costs, etc. were mentioned as factors undermining innovation.

It should be noted, however, that this low level of innovation might be caused by the industrial structure which is dominated by small companies in industries with low R&D intensity. Norway lacks large high-tech industrial locomotives. Innovation intensity depends significantly on the size of the enterprises. Generally, larger enterprises are more innovative, and can easily transfer their research into commercial applications.

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4. Collaborative Opportunities

Sweden is Norway's largest and most important trading partner. Germany comes second (where Norway has a trade deficit) and the UK third (where Norway has a trade surplus).

In recent years, research and education cooperation with other European countries has gained momentum. While in the past, many students and researchers embarked on studies and training in the United States, the tendency of late is to go to European countries, and other parts of the world.

Based on the recommendations of a steering group comprised of representatives of 11 ministries, the Research Council of Norway, Innovation Norway and the institutions in the R&D sector, a new strategy has been launched to strengthen Norway's scientific and technological cooperation with Canada and the United States. The three primary objectives of this strategy are 1) to increase R&D collaboration with Canada and the United States, 2) to enhance the quality of Norwegian research and 3) to gain knowledge-based economic development through more R&D collaboration with Canada and the United States. Finally, the strategy also looks at encouraging Norwegian researchers to look at studies in Canada and the USA, and provides a mobility program offering funding accessible to Norwegian and North American students alike.

4.1 Areas of potential collaboration

• Oil & gas
• ICT
• Maritime industry (including shipbuilding, aquaculture and marine biotechnology)
• Environmental and renewable energy (including alternative sources)
• Polar and climate research
• Light metals and material technologies

4.2 Examples of existing or recent Norwegian-Canadian collaboration

• The Genomics Research on Atlantic Salmon Project (GRASP)
• A Memorandum of Understanding exists between AquaNet, the Canadian network for centres of excellence in aquaculture research, and the Norwegian Institute of Fisheries and Aquaculture research.
• The Canadian Space Agency collaborates with Norway in Ocean Technology, using RADARSAT.
• In late 2003, Stuart Energy Systems Corporation (Mississauga, Ontario) ratified a joint co-operation agreement with Statkraft SF and Corporacion Energia Hidroelectrica de Navarra S.A. (Spain) to evaluate, innovate and present a model that demonstrates renewable energy based on hydrogen production and distribution solutions. Stuart Energy will share its knowledge of multipurpose hydrogen infrastructure products that use electricity and water to generate and store hydrogen energy.
• MOU between SINTEF, University of Regina, University of Melbourne and University of Austin, Texas on CO2 sequestration
• Researcher exchange between Queen's University and SINTEF in the field of hydrogen and fuel cells.
• 12 of the 75 EU FP5 projects that Canada participated in involved Norwegian partners

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Bibliography

European Commission, European Trend Chart on Innovation - Annual Innovation Policy Report for Norway, September 2003- August 2004

Global Competitiveness Report 2004-2005, World Economic Forum
http://www.weforum.org/

International Energy Agency: Key World Energy Statistics 2004 (based on 2003 figures)
www.iea.org

Ministry of Trade and Industry, http://odin.dep.no/nhd/engelsk
Business and industry in Norway --> the structure of the Norwegian economy
Business and industry in Norway --> industrial policy challenges

Nordic International (London), Working Paper Commissioned by Canadian Embassy in Denmark: "Science and technology in the Nordics"

Nortrade - The Official Norwegian Trade Portal
http://www.nortrade.com/

Norway: the official site in Canada, www.emb-norway.ca

Norwegian institute for higher education and research (NIFU), http://english.nifustep.no/ 'Science and Technology Indicators, 2004

OECD in Figures, Statistics on the member countries, 2004 Edition, www.oecd.org

Statistics Norway, http://www.ssb.no/english/

The Canadian Trade Commissioner Service, Norway - Science and Technology Profile, August 2003

The Research Council of Norway
http://www.forskningsradet.no/english

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Appendix 1: List of Relevant Norwegian Institutes

Institute of Aquaculture Research (AKVAFORSK)
AKVAFORSK is one of the world's leading research institutions for aquaculture and has specialized in breeding and genetics, product quality and marine species. In addition, the Institute also conducts research related to fish health, environment and operational optimalization. AKVAFORSKs objectives are to acquire and publish aquaculture expertise, thereby contributing to a strong and profitable industry with social benefit.

Functional Genomics in Norway (FUGE)
FUGE is a national plan for research in functional genomics. It entails both a considerable expansion of Norwegian biotechnology research and a nationally coordinated restructuring of the research establishment as a whole. The objectives of FUGE are: 1) basic biological research, 2) medical research and 3) marine research to be accomplished through regional cooperation, industrial development and cooperation with top researchers abroad.

Norwegian Polar Institute
The Norwegian Polar Institute is Norway's central institution for research, environmental monitoring and mapping of the polar regions. The Institute is the Norwegian authorities' consultant and supplier of knowledge, and contributes to the administration of Norwegian polar areas. Through active participation in national and international bodies, the Polar Institute is central to protecting national interests in matters of research and the environment.

Norwegian Institute of Fisheries and Aquaculture Research (Fiskeriforskning)
Fiskeriforskning strives for three main objectives; 1) to performs research and development for the fisheries and aquaculture industry in Norway, 2) to promote and distribute research results and knowledge to the industry and the general public and 3) to advise the authorities on different fisheries related aspects.

Institute of Marine Research
IMR is one of the world's largest research institutions with over 500 employees and focuses on: marine resources, marine environment, and aquaculture. It is an international leader in several areas of marine research, and is the research branch of the Ministry of Fisheries.

Norwegian Veterinary Institute of Norway (Norge verterinærhøgskole)
The institute provides higher education based on the most advanced research knowledge and experience and promotes research and development within the in profession of veterinary science.

Norwegian Institute for Air Research
The institute conducts environmental research with emphasis on the sources of airborne pollution, atmospheric transport, transformation and deposition and is also involved in the assessment of the effects of pollution on ecosystems, human health and materials.

Norwegian Institute for Water Research (NIVA)
NIVA is Norway's leading multidisciplinary research institute as regards to the use and protection of water bodies and water quality. NIVA performs research and development, monitoring and feasibility studies, and conveys information about water related issues to interested parties.

Norwegian Space Centre
The centre guides ESA contracts strategically. Public funding is to support the development of Norwegian industry and for development and demonstration of space applications, and to optimize conditions for national space research.

Norwegian Hydrogen Forum
Norwegian Hydrogen Forum, NHF, is a not-for-profit organization to promote the environmental benefits of using hydrogen as an energy carrier.

Norwegian University of Science and Technology
The Norwegian University of Science and Technology (NTNU) is the centre for technological education and research in Norway, with a solid foundation in the natural sciences.

Norwegian Defence Research Establishment (FFI)
The mission of FFI is to conduct research and development on behalf of the Norwegian Armed Forces and provides expert advice to defence political and military leaders regarding the fields of science and military technology.

Norwegian Institute for Studies in Research & Higher Education
The Institute has gained considerable expertise in issues related to research and higher education nationally and internationally. The Institute is a key actor in delivering statistics, studies and research in these areas.

MARINTEK
MARINTEK, the Norwegian Marine Technology Research Institute, conducts research and development in the maritime sector for industry and the public sector. The Institute develops and verifies technological solutions for the shipping and maritime equipment industries and for offshore petroleum production.

Rogaland Research / Rogalandsforskning (RF)
The foundation is an independent research institute with research and research related activities within Petroleum, Aquatic Environment, Social Science and Business Development.

SINTEF
The SINTEF Group, the largest research institute in the Nordics, survives by finding intelligent, profitable solutions for its clients - solutions based on research and development in technology, the natural sciences, medicine and the social sciences. It consists of eight research institutes, four research companies and one investment company, Sinvent AS. The SINTEF research institutes include; 1) applied chemistry, 2) applied mathematics, 3) civil & environmental engineering, 4) electronics & cybernetics, 5) industrial management, 6) materials technology and 7) telecom & informatics. The four SINTEF research companies include; 1) energy research, 2) fisheries & aquaculture, 3) petroleum research and 4) Norwegian Marine Technology Research Institute (MARINTEK).

Institute for Energy Technology (IFE)
IFE is the largest hydrogen/fuel cells research centre in the Nordics. Only 10 per cent of its funding comes from the government. There are now 30 researchers employed at IFE's new hydrogen research centre, and over 45 MSc students are included. IFE's research and development activities are directed at profitable and environmentally acceptable technologies for oil and gas production, power generation and supply and energy use, maintaining and strengthening national expertise in reactor safety, radiation protection and isotope and irradiation technology. Studies are ongoing in other energy forms, with a particular focus towards hydrogen and fuel cell technology.

GRID Arendal
GRID-Arendal provides environmental information, communications and capacity building services for information management and assessment. Established to strengthen the United Nations through its Environmental Programme (UNEP), their focus is to make credible, science-based knowledge understandable to the public and to decision-making for sustainable development.

Nansen Environmental and Remote Sensing Centre
NERSC is an independent non-profit research institute affiliated with the University of Bergen, Norway. The Nansen Center conducts basic and applied environmental research funded by national and international governmental agencies, research councils and industry.

Green Network Development AS
The Environmental Innovation Centre works to establish networks between municipalities, business, R&D organizations and financing institutions to encourage R&D in the environmental sector.

Norsk Regnesentral
NR carries out contract research and development in the areas of computing and quantitative methods for a broad range of industrial, commercial and public service organizations in the national as well as the international market.

Norut Information Technology Ltd.
Norut IT is focused on applied information technology and telematics applications in a multi-disciplinary environment such as social sciences, medical research, marine biology and structural engineering. Their primary research objectives are; 1) environmental and resources monitoring based on satellite remote sensing, 2) image processing, 3) geographical information systems (GIS), 4) distributed multimedia applications and high speed data communications and 5) electronic data interchange (EDI).

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Key contacts

Canadian Embassy in Oslo
Wergelandsveien 7,
N-0244 Oslo, Norway
Tel.: + 47 22.99.53.00
Fax.: +47 22.99.54.01
http://www.canada.no/

Department of International Trade
125 Sussex Drive
Ottawa, On
K1A OG2, Canada
1-800-267-8376 (toll-free in Canada)
(613) 944-4000 (in the National Capital Region and outside Canada)
www.itcan-cican.gc.ca

Industry Canada
Enquiry Services
Communications and Marketing Branch
Second Floor, West Tower
C.D. Howe Building
235 Queen Street
Ottawa, Ontario
K1A OH5, Canada
Tel.: (613) 947-7466
Fax.: (613) 954-6436
http://www.ic.gc.ca

National Research Council Canada
NRC Corporate Communications
1200 Montreal Road, Bldg, M-58
Ottawa, Ontario
Canada, K1A 0R6
Tel.: (613) 993-9101 or toll-free 1-877-672-2672
TTY number: (613) 952-9907
E-mail: info@nrc-cnrc.gc.ca
http://www.nrc-cnrc.gc.ca

Norwegian Embassy in Ottawa
90 Sparks Street, Suite 532
Ottawa, Ontario
K1P 5B4
Tel.: (613) 238-6571
Fax.: (613) 238-2765
emb.ottawa@mfa.no
www.emb-norway.ca

The Industrial Research Assistance Program
Building M55, Montreal Road
Ottawa, Ontario
K1A OR6
Phone: (613) 993-5326
Fax: (613) 952-1086
Public Inquiries e-mail: publicinquiries.irap-pari@nrc-cnrc.gc.ca
http://irap-pari.nrc-cnrc.gc.ca

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¹ Using current prices and current PPPs

² Nordea, Economic Outlook, February 2005

³ FP6 is the European Community Framework Programme for Research, Technological Development and Demonstration. It is a collection of the actions at EU level to fund and promote research. The FP6 Framework Programme aims to strengthen the scientific and technological bases of industry and encourage its international competitiveness while promoting research activities in support of other EU policies (European Commission, www.europa.eu.int).