Norway-Asia Business Review 2016-01 by Thai-Norwegian Chamber of Commerce

ISSUE 1 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

NORWAY ASIA BUSINESS REVIEW The Magazine of the Norwegian Business Associations in South and Southeast Asia

Norway Maritime Conference, Cebu LNG as an Alternative to other Forms of Energy Norwegian Seafood Success in Southeast Asia Nordic House Opens in Yangon S P E C I A L

R E V I E W

Norway-Asia Business Summit 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

NORWAY ASIA

BUSINESS REVIEW The Magazine of the Norwegian Business Associations in South and Southeast Asia

Norway Maritime Conference, Cebu LNG as an Alternative to other Forms of Energy Norwegian Seafood Success in Southeast Asia Nordic House Opens in Yangon S P E C I A L

R E V I E W

Norway-Asia Business Summit 2016

Cover Story

Hilde M. Nafstad, President of Norwegian Business Association (Singapore) and H.E. Ambassador Tormod C. Endresen welcome delegates to the biggest annual gathering of Norwegian industry, policymakers and thinkers on the continent. Now in its sixth edition, the summit takes place in Singapore on 12-14 April at the iconic Fullerton Hotel. Pages 6-10 Editor: Axel Blom Journalists: Eric Baker, Anton Bentzon, Sofie Lisby, Henri Viiralt Operational Management: Thitikul K. Opdal Director of Sales: Anders Magnusson Art Director: Pansak Chintanapakdee Production: Graphics-Related Co., Ltd. Concept Design: Spaulding & Associates

ISSUE 1 2016

5 FOREWORD

NBAS President Hilde M. Nafstad welcomes readers to the Norway-Asia Business Summit 2016 in Singapore

6 SPECIAL REVIEW NORWAY-ASIA BUSINESS SUMMIT 2016

9 An Apex Summit The Norway-Asia Business Summit: Previous triumphs have allowed this year’s summit to feature perhaps the most dynamic list of speakers yet

14 FEATURES

Norwegian Seafood in Asia: a Success Story

12 ARTICLES

Clear as Mud: Upbeat about prospects for the region, even as Chinese growth retrenches 16 An Ocean of Food: Snorre Food is one of Asia’s leading seafood suppliers

Published by: Thai-Norwegian Chamber of Commerce in co-operation with Norwegian Business Association (Singapore) and other Norwegian Business Associations in Asia

20 The Canary in the Coal Mine: LNG as Alternative to other Forms of Energy

Editorial & Advertising: Norway-Asia Business Review, Thai-Norwegian Chamber of Commerce Mahatun Plaza, 14th Fl., 888/142 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330, Thailand

22 Thor’s Thunder: Volvo is breaking the mould with the brand new 2016 SUV XC90

Norway-Asia Business Review reaches Norwegian-related business executives and decision makers throughout the region including the diplomatic missions as well as government ministries in Norway and Norwegian sector-based organisations. Business Review is a quarterly business magazine and the contents reflects this. Each magazine has a main theme and the articles are centred around this theme. The magazine focuses on Norwegian-related stories from the region and issues that have impact or interest for Norwegian related businesses. Business Review is available in print as well as digital form through Issuu and Pressreader. Copyright © Thai-Norwegian Chamber of Commerce

NORWAY ASIA BUSINESS REVIEW ISSUE 1

2016

24 Common Ground: The Nordic countries share more than a roof 29 The Haze of Asia: Some issues stand in the way for AEC integration

CONTENTS

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31 The Value of Principles: The importance of maintaining company values 32 All Hands on Deck to combat piracy in Southeast Asian waters 35 Blue Ocean Rethink: Prof. Reve recommends to redirect investments to emphasise knowledge and innovation

38 Stand Your Ground: Building strength in numbers to beat bribery 41 Faring Quite Well: The Norwegian Training Centre Manila introduces state-of-the art simulators 44 The Best of Both: BI-Fudan MBA is one of the highest ranked 46 Bits and Bytes: Sri Lanka becomes top pick for IT outsourcing

48 Starting to Unravel: Thailand’s garment industry find its key to survival

24 SNAPSHOTS

The 2016 Seafood Dinner in Singapore 26 Open House at the Nordic Embassies in Yangon

42 The Norway Maritime Conference in Cebu 50 Seafood under the Stars in Bangkok

51 STATISTICS Norway and Asia

52 DIRECTORY Norway in Asia

NO RWAY MA R ITIME CO N F E R ENCE

The highly successful Norway Maritime Conference concluded on 29 January 2016 in Cebu, Philippines, leaving more than 200 delegates, amongst them several leaders in the maritime industry, with valuable insights on the future of the industry. Pages 12-13 and 31-43

NORWAY-ASIA BUSINESS REVIEW

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ISSUE 1 2016

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NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

FOREWORD

ISSUE 1 2016

Welcome to Norway-Asia Business Summit 2016 in Singapore

PHOTO: NORWEGIAN BUSINESS ASSOCIATION (SINGAPORE)

ear readers, as the president of the Norwegian D Business Association Singapore (NBAS), I am very happy for the opportunity to write in this first

issue of the all-Asian Norway-Asia Business Review.

Let me first extend my sincere thanks to Axel Blom who with his seemingly infinite energy has made this excellent initiative a reality. It is obvious that a joint effort from the many Norwegian communities will make a much stronger impact in the vast Asian markets than everyone going it alone. We have developed several pan-Asian initiatives over the years, such as the excellent Norwegian Seafood Dinner that takes place in many Asian capitals, providing us all with a great and unique event where Norwegian businesses can connect with customers and other stakeholders across Asia. Such joint lifting is also what the Norway-Asia Business Summit is about. The various Norwegian Business Associations and Chambers of Commerce in Asia take turns hosting this yearly event, and this year Singapore has been chosen as the host country. Planning this event has been at the top of the agenda for NBAS for almost a year now. I feel many things have gone our way – from securing the beautiful, historic Fullerton hotel as a venue, to getting a great variety of knowledgeable and important speakers to commit. Our speaker list includes Norway’s Prime Minister Erna Solberg, Singapore’s Minister of Trade and Industry Lim Hng Kiang, and Indonesia’s Minister of Energy Sudirman Said.

We also have a long list of executives, organisational leaders, and representatives from academia who I believe will provide deep insights and interesting discussions around our chosen topics: the maritime, offshore and energy sectors, and what it takes to succeed in Asia. These themes may be more important than ever in the current business environment, where we see most markets are rather depressed and many businesses are struggling. But as I see it, this is the time when we not only need to trim our organisations in terms of cost-cutting and improved efficiency, but also build our strength for the future so we can take out the maximum potential of stronger markets when they return. Crucial to these efforts is network-building and strengthening our knowledge of our business environments. My sincere belief is the summit will provide all participants with valuable take-aways – in terms of new insights on Asian business, markets and political developments, as well as new or fortified connections. I wish all readers a very warm welcome to Singapore 12-14 April! Hilde Merete Nafstad President Norwegian Business Association (Singapore)

SPECIAL REVIEW

NORWAY-ASIA BUSINESS REVIEW

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NORWAY-ASIA BUSI n this issue we look forward to the Norway-Asia Business Summit, the country’s largest annual event to Iaffect gather business leaders, government officials, academia and media for a discussion on how Norway can and will be influenced by the world’s biggest continent. ERIC BAKER

This will be my third summit and I’m most looking forward to the exchange of ideas at the summit. Even though I’m not Norwegian, my biggest takeaway from previous summits is how all three groups of participants earnestly consider plans of action based on the presentations. It takes a lot of courage and money to invest in a different direction than an industry

has traditionally followed. But if my several years of covering Norwegian businesses has taught me anything, it is that the country is at its best when investing in education, skills and innovation. Indeed, it is expected in Norway. The topics this year are maritime, offshore and energy, and they couldn’t be more appropriate given economic indicators.

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S P E ICSISAUL E R 1E V2 I0E1W6

INESS SUMMIT 2016

SINGAPORE 12-14 APRIL 2016

While there will always be demand for energy of some sort, a few analysts were rubbing their brow in worry over sea changes in shipping and the oil and gas industries. Yet here come the cheerful Norwegians, unafraid of change and even welcoming it as a path toward more sustainable business. Singapore has the largest number of Norwegian enterprises in Asia, so the summit represents a magnificent opportunity to expand your network of contacts as healthy attendance is expected.

The roster of speakers at this edition of the summit is power-packed, as each year the host countryâ&#x20AC;&#x2122;s committee endeavours to outdo the previous summit. Participants can expect to come away from the summit motivated, perhaps enlightened and hopefully equipped with lots of new contacts to facilitate your work.

PHOTO: SHUTTERSTOCK

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

SPECIAL REVIEW

NORWAY-ASIA BUSINESS REVIEW

The Norway-Asia Business Summit is right around the corner and previous triumphs have allowed this year to feature perhaps the most dynamic list of speakers yet.

An Apex Summit

y this point in time, readers should be gearing up for the 2016 B Norway-Asia Business Summit, the biggest annual gathering of Norwegian industry, policymakers and thinkers on the continent. ERIC BAKER

Now in its sixth edition, the summit takes place in Singapore this year on 12-14 April.

The main topics for this year’s summit are shipping, offshore and energy, which makes Singapore an appropriate setting. The city was recently recognised as the world’s most important maritime centre, followed by Oslo in third place. Singapore also holds a strong position in the offshore oil and gas industry and as an entry to important growth markets in the region. In addition to the reasons listed above, Singapore’s lack of tolerance for corruption and relative ease in doing business has led to its claim of the biggest concentration of Norwegian businesses in Asia by a wide margin. The summit will also give attention to successful entrepreneurship in Asia, and to the ASEAN region, especially on how Norwegian businesses can benefit from Norway’s new partnership with ASEAN. Underlining the importance the business community attaches to the summit, Norwegian prime minister Erna Solberg will be attending this year. She will be joined by a slew of innovative thoughtmakers in commerce and government, including Kishore Mahbubani, dean and professor at the Lee Kuan Yew School; Kristin Skogen Lund, director-general of the Confederation of Norwegian Enterprise;

Michael Chia, managing director (marine and technology) for Keppel Offshore & Marine Ltd.; Oliver Tonby, managing partner of McKinsey & Company in Southeast Asia; Jon Gravråk, executive vice-president and chief digital officer for Telenor Group; Sturla Henriksen, chief executive of the Norwegian Shipowners’ Association; Torbjørn Kjus, analyst with DNB Markets; Mary Boyd, director at the Economist Corporate Network Shanghai for The Economist Group; and William Klippgen, founder of Tigris Capital, an early-stage tech investor based in Singapore. Ms Skogen Lund will be attending her third NABS in a row and for her the choice was easy. “Each year, I have returned home from the summit feeling both inspired and updated as it has given me new perspectives and fresh impulses,” she said. “The fact that business leaders again and again take time out of their busy schedules to attend NABS is a testimony to the success of the concept.” “NABS is an excellent opportunity to update the Norwegian business community in Asia on developments back home. Perhaps we should make even more of that opportunity. “The summit’s subject matter

ISSUE 1 2016

PHOTO: SHUTTERSTOCK

should be close to the businesses and reflect their core interests. From NHO’s own annual conference, I know that the businesses appreciate issues that they may relate to and perspectives that are relevant to their daily work. What we learn should be possible to apply in practice. “I believe NABS may benefit from having an even stronger emphasis on exchange of experience. On a practical level, the organisers may facilitate business-to-business dialogue during the event. A contact point to help setting up meetings would be good. Perhaps it even should be possible to sign up for B2B meetings with specific companies or in specific sectors when registering. It would also be good to have a leaflet with short bios on participants. “Increased media attention may definitely raise the profile of the event. The same applies to social media, publishing video clips, etc. “It may be a good idea to have an event in Norway leading up to the summit, in order to attract attention and raise awareness at home. I believe the fact that NABS takes place in Asia itself is actually one of the main strengths of the concept. I believe we can learn from the ability of Asian economies to build on their strengths. In Norway, we actually need to acknowledge our own strengths. “We have excellent opportunities to attract global talent and create innovation hubs in Norway. Not only do we have transparent laws and regulations, but also a competitive infrastructure. When I meet with international experts in Norway, they praise the work-life balance they may enjoy in Norway, the fresh air and the beautiful nature. These are strengths we easily forget. “In particular, we should learn from Singapore in gathering a critical mass of talent that in turn attracts talent globally.

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S P EICS ISAUL E R1E V2 I0E1W 6

PHOTO: SHUTTERSTOCK

Singapore’s innovation hubs, like the famous Block 71, commonly referred to as the world’s most tightly packed entrepreneurial ecosystem, may serve as a model and inspiration.” Mr Klippgen, a Norwegian, has invested in over 25 digital start-ups, including PropertyGuru.com and iXiGO. com. The Norway-Asia Business Review was able to ask him why Asia is important to Norway as it looks for other sectors to take the fore with energy slumping. “Norway is one of the early adopters of internet and mobile technologies, and it puts us in a very privileged position in emerging and fast-growing markets like Asia,” said Mr Klippgen. “However, except for larger companies like Schibsted and Telenor, I find that small and mid-sized Norwegian tech companies have not taken much advantage of selling to the Asian growth markets, but focused almost exclusively on buying.” One focus of the summit is going to be if there can be more nimble innovation and tech development companies in Asia funded by Norwegian capital, socalled gazelle companies. A gazelle is a high-growth company that increases its revenues by at least 20% annually for four years or more, starting from a revenue base of at least USD 1 million. This growth pace means the company effectively doubles its revenues over a four-year period. He is convinced Asia is a good location for start-ups. “Norwegian start-ups can profit from two aspects of the Asian markets: cheap resources with fast-growing markets and easy access to funding,” said Mr Klippgen. “Outsourcing in Asia has become easier, although more expensive over the last decade, but there is still a large price differential. Market demand is still growing fast, and by establishing a strong partnership or a local presence in hubs like Singapore or Hong Kong,

Norwegian start-ups will be able to efficiently do business across multiple countries.” “The last, often overlooked, fact is that it is getting relative easy to raise Series A and B funding in Asia, in particular in the major cities like Singapore, Hong Kong, Mumbai or Shanghai. Establishing Asian subsidiaries can be a smart way to get access to this funding.” He may be understating this last point, especially for Southeast Asia. While Asia leads the world in technology investment growth, shrugging off sluggish numbers in most other parts of the world, Southeast Asia struck USD 1.61 billion worth of tech start-up deals last year, 43% year-on-year growth. While China and India still lead the way, the recent successes of Lazada, Zalora and PropertyGuru.com in Southeast Asia have many in the sector expecting greater growth. Networking has always been one of the prime attractions at the summit because of the rare collection of high-level industry and government representatives along with journalists and academics. Ample coffee breaks along with an opening dinner and an embassy “speed dating” round will provide plenty of time for participants to get to know one another. In addition to shipping, offshore and energy, the summit programme is going to feature panels on “Is ASEAN the new growth engine?”, “New Blue: Technology and change in the ocean industries”, “How does Asia influence the transformation of the Norwegian economy?”, “Digitalisation in Asia”, “Close cooperation opportunities for Norwegian and Asian industry”, and “What does it take to be a successful entrepreneur in Asia?”. The summit is expected to appeal to Norwegian businesses in Asia or those looking to invest here, Norwegian government officials looking at how

Norway can influence Asia and vice versa, Asian government representatives that are stakeholders in Norwegian industries, stakeholders interested in how they can assist overseas Norwegian companies become more competitive, and Norwegian schools in Asia as well as Norwegian business media. The summit takes place at the regal Fullerton Hotel, a newly gazetted National Monument. The hotel is a waterfront landmark and often described as “one of the most iconic colonial buildings” that has defined Singapore’s skyline since the 1920s. The stunning Fullerton building is seated at the mouth of Singapore River and well-positioned in the heart of the Central Business District. To learn more about the summit, including registration and payment information, a programme and a full roster of speakers, visit www.norway-asia. com.

Facts

Norway-Asia Business Summit is in its sixth edition since 2010. Previous summits have been held in Shanghai (2010), Singapore (2011), Jakarta (2013), Bangkok (2014) and New Delhi (2015). The summit is the biggest annual gathering of Norwegian industry, policymakers and thinkers on the continent with more than 200 participants expected to attend this year. High-level participation from official Norway is becoming more prominent; this year’s summit features opening remarks by H.E. Norwegian Prime Minister Erna Solberg The main topics for this year’s summit are shipping, offshore and energy. The summit also looks at how Norwegian businesses can benefit from Norway’s new partnership with ASEAN.

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NORWAY-ASIA BUSINESS REVIEW

The Head of Asia for DNB Bank is upbeat about prospects for the region in the near future, even as Chinese growth retrenches and oil prices remain down.

Clear as Mud

s Vidar Andersen, head of Asia for DNB Bank, looks into his crystal A ball for the continent, he sees a mixed bag. Events tend to accelerate quickly in this region, making uncertainty the only certainty. ERIC BAKER

Having lived in China for a decade, Mr Andersen has heard a procession of rumblings about the coming collapse of that country’s economy: shadow banking, a real estate bubble and now a stock market implosion were all going to bring down China’s impressive growth streak.

Speaking at the Norway Maritime Conference in the Philippines, he said he understands the scrutiny China is subjected to as economists in other countries look at it as a bellwether for the region. “The performance of the Chinese stock market shouldn’t have such an impact globally based on its value, but it does because of psychology,” said Mr Andersen. “Five years ago everyone said headline growth needs to decrease and shift toward domestic consumption. Chinese officials did not agree, as growth was based on government infrastructure spending, the Go West initiative within China and various other efforts to build up the country.” “Now officials are moving towards that prescription, with more of the Chinese economy focused on financial services, education, tourism and health care. I think China wants the 7% growth days to be over as spending on transportation, housing and infrastructure have peaked. “Chinese population growth has peaked too, which is bound to affect government priorities. Currency reform remains very uncertain in China. To some extent, China wants to export

its economic model by shifting focus from its Go West initiative, moving development inland towards some of the country’s poorer areas, to the One Belt, One Road scheme.” The scheme is an effort for China to expand its reach in trade and global affairs. The belt is a reimagined landbased Silk Road while the road is actually a maritime route from the South China Sea through the South Pacific Ocean and Indian Ocean to North Africa. Though much of China’s new focus on services will not affect the maritime industry, its One Road scheme could help out that struggling sector, he said. “Anyone that has done business in China knows there are a lot of memorandums of understanding that are signed promising really big numbers,” said Mr Andersen. “The headline figures that are being thrown around for the One Belt, One Road initiative will not be realised, but there will be substantial investments in the maritime industry, which will create jobs and new trade routes.” India has returned to the spotlight as many economists predict that country’s GDP growth to reach 7% this year. While Mr Andersen praised the

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progress the country has made, he said its growth cannot take up the slack if China dips because India’s economic base is only one-quarter that of the former. “In India, you only meet great optimists or great pessimists. While there is incredible potential for investment there in infrastructure and education, you need to be a little bit of an optimist for it to make a huge difference in the regional economy,” said Mr Andersen. “It is as hard to rule India as one country as it is to control ASEAN as one economy,” he said, referring to the ASEAN Economic Community (AEC) that came into effect this year. “The AEC is not really driving the headlines this year, but two years ago ASEAN overtook China in foreign direct investment, which is quite a substantial achievement. DNB Bank is more optimistic about growth in ASEAN than in India. “Initiatives in India, ASEAN and the One Belt, One Road scheme involve a lot of plans for infrastructure building, but the cumulative efforts will not rival China’s infrastructure push over the last decade. There is great hope with all these initiatives, but these countries will not be able to execute on the level China did because China’s political system allowed it to do what it wanted.” Oil prices figure greatly in the maritime industry and DNB Bank projects prices to increase by year-end from around USD 30 per barrel in late 2015, reaching USD 70 by 2018. “It is not about getting the number right on oil price projections, but setting a direction for oil and gas exploration,” said Mr Andersen. “On the other hand, China is restocking its oil supply because prices are so low. We foresee transportation demand for oil to remain high, and the tanker industry is thriving as demand remains high, something the low oil prices also contribute to.”

NORWAY-ASIA BUSINESS REVIEW

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PHOTO: ISTOCKPHOTO

Though uncertainty is the buzzword for the day, he said it is important for countries and companies not to lose of their priorities. “I think it’s important to look at the long-term challenges, not to get blindsided by short-term strategies,” said Mr Andersen. “Maritime transport remains one of the most efficient ways

to move goods in the world. The industry needs to continue to bridge together its hard assets and new technology. “Economic theory says higher oil prices helped support growth in several countries. Now lower oil prices are helping importer countries, but with high levels of debt in both corporations and sovereign states around the world,

we haven’t seen this level of volatility and uncertainty in some time. Mr Andersen said: “Trade happens in two sectors — goods and services — and it could be that trade in goods dramatically changes in the future as services become more important”.

Cool headed Warm hearted Banking the Norwegian way

FEATURE

NORWAY-ASIA BUSINESS REVIEW

PHOTO: NORWEGIAN SEAFOOD COUNCIL

A growing middle class, clever marketing, high quality products and perfect timing is the recipe for the success for Norwegian seafood exports to Asia.

Norwegian Seafood in Asia: a Success Story N

SOFIE LISBY

orway exported more than 2,6 million tonnes of seafood in 2015, worth some 74 billion NOK, making seafood the second largest export commodity for the country. Exports have more than doubled in the past 10 years and while two-thirds of exports go to countries in the EU, Asian exports have seen significant growth as well. To promote Norwegian seafood interests abroad is Norwegian Seafood Council (NSC), a government owned company established in 1991 under the Ministry of Trade, Industry and Fisheries to support and drive growth of Norwegian seafood exports. The council is financed through an export fee, which means the companies exporting Norwegian seafood pay a small percentage of the export value, which is then used by the NSC to increase the value of Norwegian seafood resources. With 13 offices around the world, the council’s main areas of responsibility are market insights, market development, market risk management and reputation risk management. “In Southeast Asia our main focus is salmon,” explains Jon Erik Steenslid, regional director for the NSC’s Southeast Asia office. Located in Singapore, the office is one of two Asian offices and looks after Thailand, Malaysia, Singapore, Indonesia and Taiwan. “Norwegian seafood is more than just salmon – we see an increase in the import of trout as well, and we know that there is quite a lot of mackerel coming into this market as well – but the volume and value is strongly dominated by salmon. In this region we

have a lot of emphasis on this particular species because it is very popular. In all of the capitals of these countries salmon has become the most sold fresh fish product in supermarkets and especially Japanese restaurants.” The reasons for the popularity of salmon are manifold, Jon Erik Steenslid says, with the reputation of Norwegian seafood as safe and clean being a major factor. “Food safety is quite a big issue throughout Asia and through out extensive market research, we know that consumers in Southeast see Norway as a clean country and a reliable country with high quality products. We market the origin of the seafood first of all so we work with restaurants and supermarkets to develop what we call point of sales materials highlighting the Norwegian origin. We want consumers to know where the fish is coming from, we want them to now it is fresh and that is has been air flown into the market in order to give them confidence in the product.” “We also do a lot of education. Salmon is a different type of fish from what is traditionally consumed in Asian countries, it is a fatty fish and it is a cold water fish, which requires different handling and use to get the best results

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compared to local fish. In order to preserve the quality of the fish, and in order to be able to provide consumers with the best quality of salmon coming all the way from Norway, it is very important that the market players know how to handle the fish every step of the way. So we do a lot of training with supermarkets and restaurants in order to ensure quality. “We place a lot of emphasis on the freshness of the salmon because people trust a fresh product and associate fresh salmon with high quality salmon. Traditionally, a lot of salmon was bought frozen because the quality of the fish and the logistics were often not good enough for fresh consumption. Still to this day, some people find it hard to believe that the salmon is actually fresh when it enters the market, because while they may not know much about Norway, they know it is far from here.” Changing lifestyles and restaurant trends also drive sales of Norwegian salmon in the region, explains Jon Erik Steenslid. “It has to do with indulgence – people are becoming richer, they can afford to buy more luxurious food. Fish has always been an important part of the diet in this region but there is a growing appreciation for high quality imported products such as salmon. Also, salmon is considered healthy, especially because of its high omega 3 content. Then there is the increasing popularity of Japanese cuisine, especially raw consumption such as sushi and sashimi. I don’t think consumers will consider having sushi or sashimi without having salmon basically. Those are some of the trends that are giving us a positive push in terms of consumption of salmon. Consumers want to be trendy as well as eating a healthy, balanced diet.” Norwegian salmon is by no means the only fresh salmon being sold in supermarkets and restaurants throughout Asia but it is market leading, and Jon Erik Steenslid highlights some of the strengths of Norwegian salmon: “Norway was the country that invented industrial farming of salmon. We have what is by many considered to be the world’s strictest regulatory framework for farming, ensuring high quality products and food safety; all norwegian salmon is traceable form egg all the way to the market. We are also the world’s biggest producer of farmed salmon, supplying about 60 percent of all farmed Atlantic salmon in the world. Lastly, we are more or less the only country in the world that can provide a stable and steady supply of fresh salmon to Southeast Asia 365 days a year.” It is these factors that drive the growth of Norwegian salmon in Southeast Asia, believes Jon Erik Steenslid. NSC recorded a 16 percent increase from 2014 to 2015 in the volume of Norwegian salmonids

NORWAY-ASIA BUSINESS REVIEW

being exported to the region, now at 45,000 tonnes annually, and a 20 percent increase in value, now at 2 billion NOK. Fresh airflown salmon was up close to 30 percent year on year. The last five years have seen a 140 percent increase in volume. However, while regional growth is strong, some countries stand out. “This is not a uniform region,” notes Jon Erik Steenslid. “There are a lot of differences between the countries in terms of ethnicity, religion and food culture. Whereas Singapore is a melting

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I S S U FE E 1A T2U0 R1 E 6

pot with many different cultures, we see that countries like Indonesia and Malaysia have a lower consumption of salmon and this could be due to religious and ethnic factors. Thailand is becoming a very interesting market for us; from 2014 to 2015 the export of fresh salmonids from Norway to Thailand increased by 77 percent, which is a huge increase. Exports of salmon to Thailand has always been quite good but mainly because Thailand is a country for

reprocessing so a lot of the salmon going into Thailand is reprocessed and then re-exported to other markets. Those products were mainly frozen but now we see that fresh salmon is taking up a bigger proportion of the market, a strong indication that the consumption of fresh salmon in Thailand is going up.”

Facts

Seafood is the second largest export commodity from Norway. Large areas of Norway’s coast are part of the Arctic region. This has resulted in ideal conditions for a wide range of seafood products that grow slowly in the cold and clear waters of Norway to produce the finest seafood. Salmon is the most popular of these species. Norway has experience of salmon farming dating back to the 1970s, with strong growth in production. Since 2001, Norway has tripled its salmon production from 435,000 tonnes to 1,300,000 tonnes. Norway exported seafood to 143 countries in 2015. The largest individual markets are Poland and Denmark, where a large share of the exports goes to processing and redistribution to the European market. Atlantic salmon is the most important species in Norwegian aquaculture and accounts for roughly 94 percent of the value of all farmed fish in the country.

. . .

PHOTO: NORWEGIAN SEAFOOD COUNCIL

Above: Jon Erik Steenslid, NSC Regional Director, Southeast Asia Left: Singaporeans celebrate Chinese New Year with ‘Yu Sheng’, a golden delicacy of fresh Norwegian raw salmon.

NORWEGIAN SEAFOOD EXPORTS 2015

TAIWAN

MALAYSIA @Seafood_Norway

The largest ever salmon training for chefs in Malaysia was held in Penang in December 2015

#sjømattall

Norway exported seafood to 143 countries in 2015. The largest individual markets are Poland and Denmark, where a large share of the exports goes to processing and redistribution to the European market.

SINGAPORE

The industry's increased focus on quality, targeted marketing and a favourable exchange rate for the Norwegian krone have also led to records for clipfish and fresh codfish products. Norway exported clipfish worth NOK 4 billion and fresh codfish products worth NOK 2.8 billion.

Norwegian fresh raw salmon is the most popular seafood ingredient in the traditional Chinese New Year dish Yu Sheng

Never before has the aquaculture industry exported seafood worth NOK 50 billion.

Two thirds of all Norwegian seafood exports find its way to our most important market, the EU. Norway sold seafood worth NOK 50 billion to the EU in 2015.

MEALS EVERY DAY

74.5 +5.8 BN (+8%)

Despite trade restrictions in several markets, a weak Norwegian krone, combined with strong demand for fresh products in particular, contributed to a new export record. Seafood exports have more than doubled in 10 years. Norway exported seafood worth NOK 74.5 billion in 2015, which is a new record.

BN NOK

Fresh Norwegian salmon is catching ground, and is now available as far away as Bali

Sources: Norwegian Seafood Council exports statistics and Seafood Consumer Insight (SCI)

SELECTED EXPORT MARKETS

SALMON AND TROUT 50

POLAND

6.9

+8%

194,529

+3%

DENMARK

6.4

+27%

410,976

+12%

FRANCE

6.2

+9%

141,577

+1%

UNITED KINGDOM

5.1

+25%

140,854

+8%

JAPAN

3.2

+8%

111,782

-11%

SOUTHEAST ASIA

2.3

+20%

65,105

+17%

SALMONIDS IN SOUTHEAST ASIA

+8%

CODFISH 13

+8%

CURED PRODUCTS 5.8

+12%

SE ASIA (TOTAL)

2,016

+20%

44,927

+16%

1,536

+34%

32,618

+29% +32%

61.5 60

53.8

53.4

SOUTHEAST ASIA

44.6 36.8

38.7

TAIWAN

625

+37%

13,068

SINGAPORE

381

+21%

8,044

+16%

THAILAND

303

+77%

6,469

+70%

MALAYSIA

118

+21%

2,633

+24%

INDONESIA

-4%

2,141

-3%

35.5

10 0 2006

2007

2008

FISHERIES: 33% 24.4 BN

2009

2010

2011

2012

-7%

1.5 +52%

FRESH AIRFLOWN

52.1

6.9

SHRIMP AND SHELLFISH

74.5 68.8

-58 000 TONNES (-2.2%)

INDONESIA

PELAGIC SPECIES

EXPORT OF SEAFOOD 2006 - 2015 80

2.6

THAILAND Almost double growth of fresh salmon YoY fuelled by the more the 2000 Japanese restaurants in Thailand

13 billion worth of codfish! A historically strong year.

36 MILLION

Unlike other markets in Southeast Asia, the Taiwanese prefer the salmon to be as big as possible. Big is beautiful.

2013

2014

2015

FISH FARMING: 67% 50.1 BN

ILLUSTRATION: NORWEGIAN SEAFOOD COUNCIL

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

PHOTO: SNORRE FOOD

Importing more than 4,000 tonnes of premium cold water seafood, Frank Arne Næsheim’s Singapore-based Snorre Food is one of Asia’s leading suppliers.

An Ocean of Food

here is no doubt in Frank Næsheim’s mind about the reasons for T his company’s continued success in Asia. His background as a chef has given him thorough knowledge and understanding of the needs SOFIE LISBY

and inner workings of Singapore and wider Asia’s food industry, as well as the ability to follow trends. “I started a Scandinavian seafood restaurant, Vikings, in Singapore in 1987 with a partner,” recalls Frank Næsheim. “We quickly found that if we wanted to get the same quality of seafood that we were used to in Norway, we would have to import it ourselves. After a while we started to get enquiries from other chefs in Singapore who wanted to know if they could buy the products and soon the hotels followed. After that we started to get calls from Hong Kong, Jakarta and Bangkok and that’s how we started to export to other countries and I began to spend more time travelling around selling and promoting our products. “I guess it was a combination of a few things but being able to connect with the chefs and offering products of a superior quality than what chefs were used to definitely gave us an advantage in the beginning. There was unmet demand in the market, Norwegian seafood was popular and we were able to give them a solution and a package that worked. The restaurant has since closed but Snorre Food has grown to become one of Asia’s leading suppliers of cold water seafood. The company has a small retail outlet at their headquarters in Singapore and supplies a select group of retail stores

but the vast majority of trade is business to business. Importing more than 4000 tonnes of fresh and frozen seafood every year, Frank Næsheim’s clients include all the major regional airlines, including Singapore Airlines, Thai Airways, Cathay Pacific and Korean Air, as well as high profile gourmet restaurants in Singapore, such as Andre, Burnt Ends and Iggy’s. “We have a regular shipment infrastructure in place,” explains Frank Næsheim. “We have three shipments per week of seafood from Denmark, Scotland, Japan and New Zealand, anywhere that has cold water, basically. We have stock in Singapore so we are able to offer our clients a total solution. Being based in Singapore, where the infrastructure and transport networks work so well, means we can respond very fast. If our clients want frozen products we can deliver with one day’s notice, and if they want it fresh, we have certain stock here in Singapore and every two days we have new stock coming in. If it makes more sense, we can even bring the products directly from Norway to Bangkok or other cities in Asia. “In addition, we have five chefs working in the company, including myself, who travel around to do

promotion and write menus. We make life easier for the chefs; they want to be the hero in their organisation and their countries, and we make them look like heroes. We supply the seafood, we supply the recipe and we can even go and cook it for them. Some chefs like that solution.” While Frank Næsheim’s background as a chef may have helped him, outside factors have played their part too. “Asia has become more sophisticated,” says Frank Næsheim. “The region is more developed and dining trends have changed – there is growing demand and we can meet that demand all year so we take away some of the seasonality that has in the past limited the supply of high quality seafood. We have good infrastructure. Then of course there is the demographics of Asia, there is a huge population with a preference for seafood and we supply a healthy and sustainable product. Big parts of the world have problems with their fish populations while in Norway we have responsible and well managed fisheries. Sustainability has become really important so Norwegian seafood enjoys a really strong position in the market with people and chefs recognising the quality. It’s a combination of all these factors that make Norwegian seafood a success story.” Snorre Food works with the Norwegian Seafood Council to promote Norway as a premier seafood producing country. Part of that is highlighting the qualities of Norwegian seafood and educating customers about its origin. “We regard ourselves as a cold water seafood specialist,” explains Frank Næsheim. “Sixty percent of our products come from Norway and part of our marketing strategy is to highlight the cold, clear waters of the country and the impact the water has on the quality of the fish. Also, we have one of the most advanced and well managed fish farming industries in

PHOTO: SNORRE FOOD

NORWAY-ASIA BUSINESS REVIEW

the world, giving us economy of scale and allowing us to cut cost.” Snorre Food recently hosted its annual seafood dinner in Singapore. Held annually for almost two decades, the dinner has become one of the highlights on the social calendar and the 1000 tickets sell out in just one day. Apart from being a monumental logistical feat, the dinner is also an opportunity for Snorre Food to showcase its products. “The seafood dinner has grown to become a big sell out dinner,” says Frank Næsheim. “We have also done similar dinners in Kuala Lumpur, Jakarta and Bangkok but the one in Singapore is the biggest and most prestigious for us because we are on home ground and we can do technically difficult things. We are using almost two tonnes of Norwegian seafood on one buffet. I don’t think there is a buffet anywhere in the world with this scale of seafood. We have 100 seafood dishes on that buffet, we have the whole range of products on offer. “The purpose with these dinners is to prove that Norwegian seafood can be

used in any kind of cuisine in the world. We basically want to tell people, “We have the best seafood in the world but Asia has the most interesting and exciting cuisine and if you merge two, you get fantastic dishes.” That’s the message we want to send – to the chefs to the public.” Celebrating 30 years of business next year, Frank Næsheim is bullish about the future. “We are located in the right place at the right time,” he says. “The demographics are right for us; more people in this region can afford our product so overall the market is good. Demand for fresh seafood is increasing and the supply of wild catch in this part of the world will not be able to keep up. So you have to import it. Also, we are in a place with political stability and the infrastructure is good. “Part of our strategy going forward is to provide more value adding services. We’re not keen to go into main stream retail, we want to develop and improve where we are already strong and where we have an advantage and where our competitors will have a hard time to

ISSUE 1 2016

follow. Twenty-nine years of contacts and networking with the industry is tough to imitate. Everybody can fight on price but not everybody can click with the chefs like we do. That’s the backbone of our service.”

. . .

Facts

Snorre Food imports around 4,000 tonnes of seafood into Singapore every year. The majority of that is Norwegian farmed salmon, 35 percent of which is fresh, 65 percent frozen. The second largest import in volume is saba mackerel, which is mainly frozen. Snorre Food is certified as HACCP (Hazard Analyses Critical Control Point) and ISO 22000 compliant, which are strict international standards of hygiene and freshness. Snorre Food headquarters are located in Singapore’s Jurong district, comprising FISK, a specialty seafood showroom and distribution facility, as well as a HACCP and ISO 22000 certified production facility.

PHOTO: NORWEGIAN BUSINESS ASSOCIATION (SINGAPORE)

Above: Chef Team at the Seafood Dinner in Singapore on 4 March 2016. The team of Chefs including Frank Næsheim, Eyvind Hellstrøm, Gunnar Jensen, Erik Teo, Damian Tan and Robert Stirrup. Left: From FISK, Snorre Food’s premium seafood outlet in Singapore. Above left: Snorre Food CEO, Frank Næsheim.

SNAPSHOTS

NORWAY-ASIA BUSINESS REVIEW

Now in its 20th year, the event is arguably the most popular and populous Norwegian food event in Singapore which features a jaw-dropping seafood buffet spread with some 100 courses.

The Seafood Dinner

he Norwegian Business Association (Singapore) and The Royal T Norwegian Embassy co-hosted the annual Norwegian Seafood Dinner at the Fairmont Ballroom, Raffles City Convention Centre on 4 March. More than 1,000 guests attendedcomprising members of the Norwegian community and their invited guests. All the seafood was specially flown in from Norway and skilfully prepared by acclaimed Norwegian and Singaporean chefs.

ISSUE 1 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

I SSSNUAEP 1S H2 O0 T1 S 6

11 1. Eric Teo preparing Norwegian Salmon on cold Silken Tofu 5. NBAS President Hilde M. Nafstad holds her opening speech 7. H.E. Ambassador Tormod C. Endresen with NBAS Award winner Arve Johan Kalleklev from DNV-GL 8. Chefs Gregory Paul, Gunnar Jensen with banquet staff from Fairmont Hotel 11. Celebrity chef Eyvind HellstrĂ¸m with Kyoko Teratani

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

PHOTO: ISTOCKPHOTO

Natural gas suppliers are betting big on Asia, hoping they can persuade the region’s leaders to switch from coal.

The Canary in the Coal Mine

he global energy landscape has changed considerably over the last T decade with energy security more prevalent in the wake of several crises that have affected global supply chains. Liquefied natural gas HENRI VIIRALT AND ANTON BENTZON

(LNG) has become increasingly attractive because of extensive supply, technological advancements and government incentives to use cleaner energy in mitigating climate change.

The International Energy Association (IEA) estimates buried beneath the ground are gas reserves to meet the energy needs of the entire planet for more than 200 years. Natural gas is half as polluting as coal for power generation and therefore a practical solution for limiting global temperature increases by replacing more carbon-intensive fuels that are still widely used. World LNG Report 2015 by the IEA states natural gas accounts for approximately one-quarter of global energy demand, of which LNG comprises only 10%, up from 4% in 1990, making it the fastest-growing source of gas. Asia represents over 70% of worldwide demand for LNG, with Japan, South Korea and Taiwan being the leading importers in the region, relying heavily on LNG to meet their gas demand. China and India started importing in 2005, and Southeast Asia followed suit in 2011. The report argues the key supply

and demand challenges in Asia are high prices (although these dropped significantly as of late thanks to the decline in oil prices, to which LNG prices are pegged), little regional storage capacity and limited intraregional exchange, which hikes the cost of maintaining supply security. For gas to become competitive against other fuels relies mainly upon affordability, especially for the poorer ASEAN countries. “Current gas prices are more palatable for Asian countries. However, coal prices remain low and oil has also dropped, hence a comparative view needs to be made. Moreover, renewables are becoming more economical, so we may see more growth with this in remote populations,” said James Brown, regional LNG and gas consulting manager at DNV-GL in Singapore. Although gas prices have dropped, competition with other forms of energy in Asia remains fierce. In 2015, an

annual report by energy consultancy Wood Mackenzie revealed the demand for shipments of LNG from Asian economies dropped in 2015, including a first-ever decline in China, dipping more than 2% after years of double-digit growth. Analysts at the IEA noted many Chinese factories that use LNG can also run on liquefied petroleum gas (LPG) — a commodity that has become notably cheaper than LNG of late. A report by Gas Strategies indicates that in Japan and Korea, LNG use by the power utilities is forecast to decrease as more nuclear power units are brought back into operation in both countries. This comes at a time when the gas industry is aiming to increase export capacity by more than 40% by 2020, with 90% of the additions coming from Australia and the US. Australia is poised to challenge the US with six new LNG terminals by 2020, including the USD 54 billion Gorgon project from Chevron, the world’s most expensive natural gas facility, which came online in early March 2016. “It’s actually quite disruptive what’s going on in Asia at the moment. LNG used to be distributed via very large liquefaction centres and large maritime vessels to high-paying customers in Japan and South Korea, utility customers that could sign agreements for 20 years. As new liquefaction projects come online and demand is slowing, there is an oversupply of LNG and as a result there is a switch from a seller’s market to a buyer’s market,” said Alexander Dodge, a PhD student at the Norwegian University of Science and Technology. At the end of 2015, India’s largest gas importer Petronet LNG renegotiated the terms to its 25-year contract with Qatar’s Rasgas. Under the new contract Petronet will buy LNG from Rasgas at almost half the original price, saving USD 605 million per year, as it aims to substitute costly supplies from Qatar with cheaper spot shipments. These “spot imports”, which are agreements of less than two years, counterbalance demand fluctuations. In 2000 spot shipments made up less than 5% of all LNG trade, rising to 27% by 2014. “Some portfolio suppliers are looking to enter the market in Southeast Asia. Many traditional buyers are sourcing LNG from various locations on long-term contracts and selling it on spot markets,” said Mr Dodge. Demand for particular energy types often takes decades to change, meaning if LNG is more widely accepted, it would only eat into part of coal’s popularity. The Asian Development Bank expects energy consumption in the region to double the next two decades, with coal accounting for 83% of electricity production in AsiaPacific by 2035. So while coal remains king in China, India and quite a few other Asian

NORWAY-ASIA BUSINESS REVIEW

countries, small-scale LNG is gaining traction in the Philippines, Vietnam, Malaysia, Singapore, Indonesia, and parts of India and China. The main reasons for this are a determination to diversify the energy mix for supply security, the continued growth of energy demand, a number of undeveloped gas resources in the region, and a desire to reduce greenhouse gas emissions to meet international pacts. As part of its advisory role, DNV-GL believes LNG holds particular promise for Thailand and Myanmar. Specifically, there have been fierce protests against coal-fired power plants by the locals in both countries in the intended locations for the plants. Thailand has a long history of village opposition to coal-related businesses, including the murder of one of its leading anti-coal environmentalists in 2011, which only served to stiffen the protesters’ resolve. Plans for coal-fired power plants in Krabi and Songkhla in Thailand have led to continued protests, while Myanmar plans to add 41 new power plants over the next 15 years in its headlong rush into development. Authorities still favour coal in both countries for power, mainly because it is cheap, but some industry analysts believe environmental concerns, the ability to establish LNG power plants quicker than coal-fired facilities, the

cost competitiveness of LNG and local opposition to coal provide a window of opportunity for LNG industry. Myanmar’s ambitious energy expansion plans call for production of electric power to increase from five gigawatts this year to 29 GW in 2030, raising the number of households with power from 30% to 100%. The country already faces power shortages and DNVGL estimates the energy demand-supply gap will widen over the next five years. Myanmar will be desperate to get its hands on any power supplies it can find. “Obviously the environmental agenda is a major reason for the push for LNG as an alternative to coal. LNG could replace coal as a base load, or may serve as a peak shaver for combined combustion plants,” said Mr Dodge. “Transporting coal is a more streamlined process, requires less infrastructure, and is shipped in bulk cargos. If LNG is to serve as an alternative for coal, there needs to be investment in infrastructure such as receiving jetties or terminals, either onshore or offshore, a means of distribution and point of supply. A value chain needs to be developed to create demand so that LNG can compete against coal.” LMG Marin, a Norwegian maritime engineering company, has pitched a plan to the Myanmar

ISSUE 1 2016

government to co-locate LNG power plants next to terminals close to either the shore or riverbank. The proposal, using Gravifloat terminal technology, would deal with infrastructure demands in Myanmar and is scalable as needed. LNG power plants can also be built and ready for production in 30 months, faster than coal-fired plants. The Thai government has been banging the drum for clean coal, trying to assuage protesters. The problem is clean coal technology and sequestration has never been proven to work on an industrial scale. The processes requires a lot of energy, forcing power plants to burn 25% more coal for the process to produce the same amount of electricity. More vexing is the question of how to transport and bury all the high-pressure CO2, notes Popular Mechanics, not to mention the uncertainty of whether the gas will stay buried. Even if it were possible, the cost alone to develop the infrastructure for the processes would be enough to dissuade most ASEAN nations. Of course, the best choice for the environment would be renewable energies, but their capacity cannot meet demand in many of these Asian countries, and until technology and economies of scale reduce their prices, LNG offers an affordable, less-polluting energy source, advises DNV-GL.

LNG carriers are tank ships designed for transporting LNG. As the LNG market grows rapidly, the fleet of LNG carriers continue to experience growth strengthening the case for networks of LNG terminals and connected power plants.

PHOTO: ISTOCKPHOTO

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

PHOTO: VOLVO CAR THAILAND

Classically conservative Volvo is breaking the mould and treading new terrains with its brand-new luxury 2016 SUV XC90

Thor’s Thunder

nce the icon of Scandinavian design, the future of Swedish automaker O Volvo was somewhat uncertain when it changed hands from Ford to Chinese Zhejiang Geely Holding Group back in 2010. In recent years, the HENRI VIIRALT

brand has made a remarkable turnaround and posted solid sales, fuelled by Geely’s injection of USD 11 billion into product development, the culmination of which is the 2016 Volvo XC90 flagship 7-seater SUV.

“We’re very excited to roll out the brand-new 2016 XC90. It sits very well within our portfolio and I would say it’s an entirely different beast in comparison with the old XC90,” said Anette Andersson, Managing Director of Volvo Car Thailand. “It’s catering to affluent people with active lifestyles, to people who care about other people and it’s the first SUV for us to address the competition head on and I’m confident in saying that in no aspect are we coming short or shying away from it.” In terms of design, the 2016 Volvo XC90 looks distinctly Scandinavian albeit sporting more aggressive lines than the brand’s traditional offerings have been. It’s the first car to carry the company’s new, more prominent iron mark with the iconic arrow elegantly aligned with the diagonal slash across the grill. Along with the T-shaped DRL lights, aptly entitled ‘Thor’s Hammer’, the iron mark encapsulates a bolder, updated face for Volvo’s forthcoming generation of cars. The XC90’s positioning as a luxury SUV is evident in the interior, which according to the brand is the most luxurious to have been designed for a Volvo. It combines the finest Nappa

leather and wood with handcrafted details, including a gear lever made of crystal glass from the famed Swedish glassmaker Orrefors, on top of diamond cut controls for the start/stop button and volume control. Other highlights include a tablet-based control system that is virtually button free, forming a sleek, modern looking interior architecture. “We have packed a lot of technology in this car because we realise that it’s an integral part of people’s lives nowadays and we try to facilitative those needs as soon as they sit in the car. We believe that everything should be intuitive, so we’ve kept it simple according to Scandinavian design principles while removing redundancies,” Andersson said. To further emphasise the owners’ distinctive individual personalities, Volvo has introduced a new trim level strategy with the highly competitive Momentum and for the upper echelons, the Inscription package is designed for customers favouring luxury and elevated comfort. “Our founders said 89 years ago, that “cars are driven by people and therefore everything we do at Volvo, is and must remain, safety”. We’ve always been renowned for our safety innovations.

We carry the human in focus to protect people and what is important to people – our 2020 vision states that by then, no one should be seriously injured or killed in a new Volvo car,” Andersson said. It’s little surprise then that the 2016 XC90 offers the most comprehensive and technologically sophisticated standard safety package available today in the automotive industry, the two world first safety technologies being a run-off road protection package and auto brake at intersection capability. In case of a run-off scenario, the XC90 detects what is happening and tightens the front safety belts to keep the driver and passenger in position. In order to prevent spine injuries, energy absorbing functionality cushions the vertical forces between the seat and seat frame if the car encounters a hard landing in the terrain. The XC90 is also the first automobile in the world to utilise automatic breaking in case the driver turns in front of an incoming car, an all too common scenario at busy city crossing and highways with high speed limits. Dubbed ‘City Safety’, the auto brake functions, which are standard equipment in the XC90, can detect vehicles, cyclists and pedestrians in front of the car, be it day or night. While the new XC90 offers a range of powertrains, the uncontested king of the hill is theXC90 T8, a plug-in hybrid powertrain running on a new 2.0 litre four-cylinder engine using a turbocharger and supercharger combination in sequence to crank out a total system output peaking at 407hp. Normal driving utilises the default hybrid mode while a push of a button switches to quiet and emission-free city driving on pure electric power, with an impressive range of over 40 kilometres. The combined maximum torque is 640 Nm, helping the XC90 make the century sprint in 5.9 seconds. “I fully expect the hybrid version to do well in Asian markets even though environment conservation isn’t as highly developed here as it is in the west. The Thai government has recently introduced new legislation that places hybrids in a lower tax bracket and we’ve seen in many markets that when monetary incentives are offered it drives change quicker. Hybrids are definitely a big area of focus and Volvo will definitely be rolling out more of them in the future,” Andersson said. The success of the current XC90 started with the previous model. For active Norwegians the Volvo brand, and the XC90 in particular, has always been a good fit. Volvo Cars had 1,927 units available of a fully loaded specification first-edition car sold only online in September 2014. The 1,927 units holds reference to the start of the company in 1927. Volvo Cars Norway managed to sell 166 of these XC90 First Edition cars, which made Norway the fourth biggest

NORWAY-ASIA BUSINESS REVIEW

market world wide, just short of USA, China and Sweden. “In Norway, we sold 1,000 XC90 prior to launch, and some 2,000 XC90 so far, whereas the previous XC90 sold only around 3-400 cars” says Andersson. Since 1 January 2016 the Norwegian Government reduced the effect component in the tax system for cars, and with that reduction, Volvo could lower the retail price for the T8 with around NOK 100,000. Today the T8 represents some 40% of the total XC90 sales, and the waiting time for that specific model was 12 months. The media has shown great interest in the XC90 with more than 4,000 media articles covering just the XC90 in 2015; a big success in Norway. As impressive as the new XC90 is, Andersson says it’s only the first model in an equally impressive portfolio that Volvo is about to roll out. Since the handover to Geely, the products have been coming out faster than before and there’s a strong emphasis on restoring the brand to its former glory and beyond. This is part of a recent global branding revamp, with a lot of training provided to the dealership network in sales and aftersales services to ensure a smooth and similar customer experience around the world.

Since last year, the company has divided the world in three: The Americas, run out of New Jersey, EMEA that is headquartered out of Gothenburg, and APAC with head offices in Shanghai, built as a replica of the Gothenburg one, running its own manufacturing, R&D, Purchase and design centre. “I would say that Geely has been a good owner to us and their investment into product development has helped us shape a new future for the brand,” said Anette Andersson. “Chairman Li has said on numerous times that he didn’t buy Volvo to make it Chinese. He wants to retain the Scandinavian heritage, but with certain Asian lifestyle elements for the Asian markets.” Meanwhile, the brand remains focused on rolling out new models, altering their corporate identity and marketing to attract both new and existing customers who Andersson hopes will see Volvo as something dynamic and innovative. The V40 model has done an excellent job in attracting young executives to the brand. She expects Volvo to address that issue with new models in the future. “We’ve had a great journey over the past three years. There’s a lot of

Volvo Car Thailand launch the all-new 2016 XC90 at Central World on 9 March 2016.

ISSUE 1 2016

interesting things happening with the brand and it takes time to fully transform it, but we’re certain we’re on the right path and are very proud of the new portfolio of cars that we’re beginning to introduce now,” Andersson said.

Facts

Volvo offers three distinct all new 2016 XC90 models in Thailand: - The D5 AWD Momentum - The T8 Twin Engine Momentum - The T8 Twin Engine Inscription Volvo is present in 101 countries and represented by 2,300 dealers around the globe. China is Volvo’s biggest single market. In Thailand Volvo has has 13 dealers; seven in Bangkok and six up-country. Volvo Cars globally passed a sales record in 2015, 503,127 cars sold, first time Volvo passed 500,000. The success was largely due to the XC90, but it only counted for about 8% of the production since production only started last year. As of now, the demand for the XC90 is still higher than production capacity.

. .. . . .

PHOTO: VOLVO CAR THAILAND

NORWAY-ASIA BUSINESS REVIEW

The four Nordic countries share far more than one roof in Yangon

ISSUE 1 2016

PHOTO: ROYAL NORWEGIAN EMBASSY

Common Grounds 011 marked a turning point for Myanmar, a country that had for 2 many decades remained in political and economic isolation, when President Thein Sein’s administration brought much needed reforms in HENRI VIIRALT

politics, economy and foreign policy to open up the country again.

As the military began to loosen its grip on key industries such as energy, healthcare, finance and telecoms, foreign powers started gradually re-establishing ties to Myanmar, dropping economic sanctions along the way. Among them were the four Nordic countries that have been laying groundwork for the democratisation process in Myanmar for decades by supporting the civil society and its various organisations, and the independent media. When the borders opened up again, all of them were searching for good office space to set up their respective diplomatic missions in Yangon. Thanks to their close ties, relatively closely linked languages and mutual understanding, the decision to join forces under a single roof came naturally. “We finally found a house and the Danes and the Norwegians moved in together and the others soon followed,” said H.E. Ann Ollestad, Ambassador of Norway to Myanmar. “What started out as an exercise purely in pragmatism, turned into an innovative pilot project for Nordic cooperation on a global level.“ Ollestad points out that the Nordic countries have a long history of working closely together, chief among

them was the establishment of the Nordic Council of Ministers, a regional intergovernmental organisation, which was set up in the early 1970s to discuss common challenges within foreign policy in the Nordic region. While Nordic embassies nowadays share office space in cities such as Berlin, Dhaka and Kabul, The Nordic House in Yangon goes a step further by also sharing administrative staff between all four countries, a move that Ollestad considers helping countries work closely on “matters of substance”. The mission of the Nordic countries in Myanmar is focused on areas like poverty reduction, improving access to education and health, strengthening the civil society and independent media, environmental sustainability, job creation and gender equality. She thinks the private sector will play a very important role in long term development of the country, but there are many roadblocks along the way, like the so called ‘black areas’ where the government has either limited on no control. The biggest hurdle in Myanmar’s path toward democracy is the longstanding ethnic conflict, with many states remaining prone to continued skirmishes between the army and local

armed groups. Minority groups comprise up to 40% of Myanmar’s population, so ending the multiple conflicts could prove the key to enabling future economic prosperity. Although outgoing President Thein Sein penned a nationwide ceasefire with eight ethnic groups in October 2015 after several years of negotiations, it still fell short of forming a consensus among all 16 participating rebel groups. However, many of the conflict areas voted strongly in favour of the National League for Democracy (NLD) in last November’s election so there is hope in uniting the country under the new government, although this will likely be a lengthy process. This hasn’t slowed down investment pouring into the country since Myanmar represents a rare opportunity as one of the last closed markets in Asia, offering a chance to come in at ground level and build infrastructure across the land. Reuters reports that last year, FDI into Myanmar stood over USD 8 billion, beating expectations by more than USD 3 billion, with energy, manufacturing and telecoms sectors taking priority. “In recent years, the Nordic countries have established a significant presence in Myanmar, and I think it’s right to say we’ve taken a leading role in key sectors; Norway in telecom and

“The Nordic House pilot project is a comprehensive platform on how we can support the development of a country, and it provides great efficiency gains in a world where foreign service has to react to changes very quickly. Although there will be challenges, we are learning a great deal from the process and hopefully already paving the way for future collaborations. I really do believe this is a way foreign service will move forward in some countries,”

Ambassador Ann Ollestad

PHOTO: ROYAL NORWEGIAN EMBASSY

NORWAY-ASIA BUSINESS REVIEW

energy, Swedes in textile, Danes in shipping, beverage and food products,” Ollestad said. All of the Nordic countries work together on assisting the private sector set up operations within the country and facilitate dialogue with the local government when the need arises. Ollestad says another key issue to the development of the country will be taxation and transparency – how to bring a lot of foreign investment into a very poor country and to make sure it ends up where it should – and that companies wanting to succeed in Myanmar must adopt a long term vision, built on what she calls a “sustainable business culture”. “I think Myanmar is strategically placed between China and India, and will be able to leverage on trading with these massive economies in a big way in the coming years. It’s a country with vast natural resources and huge potential, but of course it’s going to be very challenging because we have an ongoing peace process and a need for huge economic reform. All of the Nordic countries are dedicated to being part of the solution

ISSUE 1 2016

and already most of our big companies have entered the market, and we have a lot of SMEs coming in as well, a lot of who are headquartered in Singapore. My message to them is that you really have to be on the ground in such a complex political situation in order to succeed,” Ollestad said. While the road to rebuilding the country and ensuring the success of the democratisation process will undoubtedly be a long one, Ollestad believes that The Nordic House and the close collaboration of the four countries will play a crucial part in supporting the civil society and in implementing sustainable business practices and corporate social responsibility. “I’m quite proud to be the ambassador here and to be part of the Nordic House pilot project. It’s a comprehensive platform on how we can support the development of a country, and it provides great efficiency gains in a world where foreign service has to react to changes very quickly. I think this is a way how foreign service will move forward in some countries,” Ollestad concludes.

Facts

The Nordic House comprises: - The Embassy of Denmark, - The Diplomatic Mission of Finland, - The Royal Norwegian Embassy - The Embassy of Sweden, Section Office Cooperation began in 2012 Common Nordic values / collaborate closely to offer a comprehensive platform of support to the people of Myanmar Has now developed into an innovative pilot project for Nordic cooperation globally Moved to No.3 Pyay Road in September 2015 50 employees respectively – share common office space  Norway has 11 staff incl. ambassador - Denmark has 13 staff incl. ambassador - Sweden has 7 staff incl. head of office - Finland has 5 staff incl. chargé d’affaires - Shared Admin staff 17 incl. finance, service staff, drivers The office has a range of Scandinavian design represented in the common areas

. . . . . .

PHOTO: HEGE MERETE JØRSTAD/ROYAL NORWEGIAN EMBASSY

Above: Nordic House, 3 Pyay Road, Yangon, Myanmar. Left: H.E. Ann Ollestad, Ambassador of Norway to Myanmar. Above left: Nordic House opening event, 3 March 2016. From left to right: H.E. Ambassador Peter Lysholt Hansen, Ambassador of Denmark to Myanmar, Finnish Development Counsellor Maria Suokko, H.E. Ambassador Staffan Herrström, Ambassador of Sweden to Thailand and Myanmar, Swedish Charges d’Affaires Johan Hallenborg and H.E. Ambassador Ann Ollestad, Ambassador of Norway to Myanmar.

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The Nordic embassies in Myanmar had the pleasure of hosting an Open House on 3 March to celebrate their new premises at No. 3 Pyay Road in Yangon and the collaboration efforts so far.

Open House

fter weeks of joint planning and coordination, the Norwegian, A Swedish, Danish and Finnish missions were pleased to see approximately 500 friends and guests at the event. Since the move-in

September 2015, the diplomatic pilot project has been spearheaded by Norway, with Norwegian legislation as the basis for the administrative aspects of operating the foreign mission. The aim of the Nordic House is to establish a practical and cost efficient model for future Nordic collaborations.

ISSUE 1 2016

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

I SSSNUAEP 1S H2 O0 T1 S 6

Swedish Charges dâ&#x20AC;&#x2122;Affaires Mr. Johan Hallenborg and H.E. Ambassador Staffan HerrstrĂśm, Ambassador of Sweden to Myanmar with U Shane Thu Aung, Vicechairman and Co-founder of Redlink and Mr. Jan Wassenius, Managing Director of Ericsson Myanmar

A happy Danish Ambassador to Myanmar, H.E. Peter Lysholt Hansen flanked by Finnish Development Counsellor, Maria Suokko and H.E. Ann Ollestad, Ambassador of Norway to Myanmar.

Ambassador Ollestad greets Telenor Chief Representative for Myanmar, Mr. Per Erik Hylland and Mrs. Valborg Hylland.

Gender equality and job opportunities for women is one of the cornerstones of Nordic values; here a selection of the administrative staff at Nordic House

6-11. Various activities on the ground at Nordic House on 3 March 2016. The guests seemed to enjoy the company, food and the activities at the many stands of Nordic companies, NGOs and civic society.

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ISSUE 1 2016

Huge cost

With the AEC now in place, Southeast Asia is set for increased regional integration. But some issues stand in the way for optimal economic integration; the recent haze from Indonesia is one of them.

PHOTO: ISTOCKPHOTO

The Haze of Asia

ffecting millions of people primarily in Indonesia but also in A Malaysia, Singapore and Thailand, the recent haze made headlines around the world. SOFIE LISBY

Sutopo Puro Nugroho, the spokesperson for the Indonesian Meteorology, Climatology and Geophysics Agency (BMKG) called it a “crime against humanity” as 43 million people on the islands of Sumatra and Kalimantan inhaled toxic fumes for months. At its worst, levels of the Pollutant Standard Index (PSI) pushed towards 2,000. Anything above 300 is considered hazardous. In the beginning of September 2015, the Indonesian National Board for Disaster Management (BNPB) declared a state of emergency in six provinces as schools closed and thousands of people were forced to leave. The haze has been contributed to extensive deforestation, which in turn has been blamed on Indonesia’s reliance on palm oil. Indonesia is the world’s largest producer, churning out 33 million tonnes of the stuff in 2014. Palm oil plantations cover almost 11 million hectares of land – a number which is expected to increase significantly towards 2020 – and the industry employs millions of people. As much as five percent of Indonesia’s GDP come from palm oil production and the industry accounts for as much as seven percent of total exports, according to conservative estimates. Rising global demand drives palm oil production in Indonesia, who responds by clearing valuable forest areas for more plantations. The most common – and cheapest and fastest – way to clear forest land is by using slashand-burn techniques, which can easily run out of control and spread. Paper and pulp production are also culprits.

Regional issue

Indonesia has struggled to contain its forest fires for years and it is a reoccurring issue that oftentimes strain relations between ASEAN member states. In September 2014, following increased international pressure and calls for greater accountability, Indonesia ratified the ASEAN Agreement on Transboundary Haze Pollution, the last country to do so, more than a decade after the agreement was first signed. The agreement calls on ASEAN member states to cooperate in the development and implementation of measures to prevent, monitor and mitigate transboundary haze pollution but so far little has been done. The haze is also affecting neighbouring ASEAN countries including Malaysia, Brunei, Singapore and Thailand. The southern part of Thailand, home to several of the most popular tourist destinations, was badly affected with flights being cancelled and people complaining about respiratory issues. Halem Jemarican, head of Songkhla province’s Environment Office called the situation a crisis, saying it was the worst in 10 years, according to the AFP. “The key factor is the wind. It’s strong at the hot spot origins but when it reaches Thailand the winds weaken so the haze stays around for longer,” he said. The news agency reported that Thai officials said air quality was at unhealthy levels in seven southern provinces. A number of planes headed for Koh Samui’s International Airport were cancelled.

It is not just the tourism industry that is affected. By its own calculations, the fires have cost the Indonesian government more than USD 30 billion, taking into account the loss of crops, commodities and environmental goods, increased health costs and other disruptions. And other countries are claiming costs as well. Singapore’s minister for the environment and water resources said: “This is not a natural disaster. Haze is a man-made problem that should not be tolerated. It has caused major impact on the health, society and economy of our region.” Singapore passed a law in 2014 allowing it to prosecute people and firms that contribute to the haze. With the AEC now in place, some hope for better regional cooperation on common issues like the haze. But with a focus on economic integration rather than, say, political, solving the underlying issues of the haze may prove difficult. In the last few months we have seen some good examples of why cooperation should span wider than just the economy. The Rohingya crisis in April and May is a typical example of an issue that should be addressed regionally. It involves a number of ASEAN member states. The smog from the burning of forests in Indonesia is definitely a very serious regional problem, which is best addressed regionally.” Norway and Singapore have extensive trade relations and Singapore has the largest concentration of Norwegian companies and FDI in Asia. In 2010, as part of the United Nationsanctioned Reducing Emissions from Deforestation and Forest Degradation (REDD+) program, Norway pledged to provide Indonesia USD 1 billion to help make a transition to sustainable forestry and agriculture but progress has been slow. It is clear that the haze issue is an international problem that requires an international solution. What exactly that solution may be remains to be seen.

Facts

USD 30 billion – the cost of the haze on the government of Indonesia, according to government estimates. This does not take into account the cost borne by neighbouring countries. >500.000 – number of acute respiratory tract infections reported on Sumatra and Kalimantan since July 2015. 22,000 – number of troops deployed by Indonesian President Joko Widolo to fight fires on the ground. 2020 – the year by which the European Union has pledged to stop buying palm oil resulting from deforestation. 33,000,000 – the amount of tonnes of palm oil produced in Indonesia in 2014.

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ISSUE 1 2016

PHOTO: NORWEGIAN MARITIME CONFERENCE 2016

In addressing changes to the maritime industry, Elisabeth Grieg emphasised the importance of maintaining company values, calling on politicians to keep their values at a time when there are echoes back to one of Europe’s darker periods.

The Value of Principles

he current operating environment is quite difficult for maritime T and the stress can make companies forget what they stand for, specifically their values. But it is exactly times like these when shippers ERIC BAKER

need to stand up for their principles, says Elisabeth Grieg, chair of Grieg Star.

“Looking back in history we see there were turning points that represented seismic shifts in the world economy, and I believe this will be one of those eras,” she said at the Norway Maritime Conference in Cebu. “Since the 2008 financial crisis, shipping companies have been in turmoil as the speed of financial impacts seems to have accelerated.” “I don’t have to convince any of you here about the massive threats presented by climate change; we already know this. This was underlined by 188 countries signing a climate accord in Paris recently, but this is only the start. Continued efforts to deal with climate change will affect our business in more ways than we can possibly imagine. “This month in Davos several government and business leaders discussed how a fourth Industrial Revolution would take place in light of climate change and the profound shifts in the political sphere as well as breathtaking technological advances in a globalised economy. The world is changing in ways we may not yet be able to understand. “Charles Schwab, chief executive of the World Economic Forum, host of the annual Davos meeting, described it thusly, ‘The speed of change taking

place is affecting almost every industry in every country. And the breadth and depth of those changes herald an entirely new system of professions and business management.’ “Globalisation has led to many great advances in several countries, but we must remember sustainability and corporate social responsibility must be business instincts in this new economy. This new era presents us with some profound challenges and it would be a mistake to surrender to circumstances. “You cannot cede responsibility on these issues to politicians as they will just go back to business as usual. I was inspired by the senator from the Philippines who remarked at the Paris climate accord, ‘We may be vulnerable, but we are not incapable.’ She is so very right. “Businesses can create wealth, but they also help to pay for welfare programmes and research and development that leads to innovation. Of course global action matters. Of course we should be part of the solution. “I can’t predict the future, except to say it will be full of uncertainty, but I do have some personal values that help guide my decisions no matter the situation. First, no business can be

detached from society so long as it is in this for the long run. “The greatest challenges to humanity and civilisation can only be solved when the private sector comes together to work for better solutions. Healthy business depends on a healthy society. The consequences of failure in terms of climate change, poverty or any of the other major challenges we face will be shared around the globe. “Second, one of my favourite quotes is ‘I do business with my heart as much as I do with my head.’ Frankly, those companies that dismiss citizenship as a necessary evil don’t get my time, my attention, or my business. “How do our company values have a bearing on our daily operations? Our values work as a muscle: the more we use them they strengthen us and motivate us as a group. We share the belief that action matters. “And third, we need to foster a spirit for innovation and knowledge. Our company should be a place where ideas and talent unite, where we learn from each other, where differences in backgrounds and competencies, personalities and skills strengthen and complement one another. So we make major efforts to build up our corporate culture and knowledge-sharing. “Diversity is an asset, now more than ever as the world keeps getting more complex. There are some disturbing signs in Europe these days, more present now than for a long time, signs for defection and protection. “There is public outcry for higher barriers, for the concept of a world divided between us and them. Our response should be clear: we are in this together. Our challenges are shared challenges, across countries and political divides, across languages and religions. We have to marshal our resources and act together because that’s the only way forward. “You can’t dare to breach your ethical guidelines just because the market is bad. I know I could not look my partners in the eye if I did. “In times like these shipping companies have to balance the need to make money to stay afloat and taking a long-term view in terms of value creation. But I think most people here would agree that your company’s integrity is key to that value creation. “Ideally, a company will have built up enough liquidity to withstand the tough times. Remember you can cut costs but shouldn’t do so with competence. “Companies facing problems need to be open with their bank and use it as a partner. But most probably you will see a lot of consolidation in the industry in the next few years. “Those that emerge from this downturn need to remember not to abandon their long-term view once the economy becomes more favourable.”

NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016 1801 CARY MAP OF THE EAST INDIES AND SOUTHEAST ASIA. © WIKIMEDIA COMMONS

In lieu of a concerted international effort to combat piracy, Norwegian ships should prepare for increased attacks in Southeast Asian waters with a slew of countermeasures.

All Hands on Deck

orwegian-flagged ships that travel to Asia face an increasing risk of N piracy, a danger that is exacerbated by the South China Sea conflict, where several countries have competing territorial claims over a vast ERIC BAKER

swath of open ocean.

Though piracy in Somalia received most of the recent headlines, including a Hollywood movie about hijacking a ship, the maritime industry and several militaries took countermeasures that reduced reported piracy there to almost zero. In contrast, the International Maritime Bureau reports since 2010, attacks on ships in Southeast Asian waters have more than doubled, from 70 to 141, and in 2014 they accounted for nearly 75% of all sea crimes worldwide. Piracy tends to happen at choke points, narrow sea lanes that shippers must use, reported marketwatch.com. Criminals take advantage of these points to strike. Roughly one-third of global trade passes through Southeast Asia’s shipping lanes. Singapore and the Strait of Malacca are key maritime hubs in this region, including for Norwegian vessels. Nearly half of the world’s oil and many of the energy products bound for China and Japan go through these waters. Pirates are usually after these energy products, specifically oil, with Oceans

Beyond Piracy estimating the value of stolen oil in 2015 at USD 5 million. While pirates in the Indian Ocean often hijacked ships and wanted to ransom the crew and vessels, in Southeast Asia they mainly go after fuel and then leave ships quickly, smashing communication devices before they can be caught, said marketwatch.com. The oil can be sold quickly on the black market for a high return on investment, potentially making millions of dollars, instead of waiting for a long period of time for a ransom, said Matt Walje of Oceans Beyond Piracy. Part of the problem is tactics that worked in the Gulf of Aden don’t work in East Asia because of complicated territorial claims. With Somali pirates, governments and multilateral organisations mustered naval forces and patrol boats to blanket the area while shipowners used barbed wire, water cannons and armed guards to deter criminals. Complicated or overlapping territorial claims in Asia, including in the South China Sea, allow pirates to

board a ship in one country’s waters and move it to another’s territory, slowing the response from authorities, said Mr Walje. Another burden is armed guards are not allowed to operate in territorial waters, said Arild Nodland, founder of Bergen Risk Solutions, a Norwegian intelligence firm that assists ships through high-risk waters. The International Law of the Sea allows ships to travel freely in open waters, but many of Asia’s shipping lanes cross through waters claimed by countries. Not only does a highly tense, fractious environment in the South China Sea make shipping slower, but pirates can take advantage of the ban on use of armed guards to attack at choke points. Yet armed guards have been described as a critical success factor in halting piracy by Mr Nodland. To fight against this criminal activity in Asia, a Regional Cooperation Agreement on Combating Piracy and Armed Robbery (ReCAAP) was formed in 2006. Some 20 countries including Norway are signatories, and the goal is sharing information and intelligence, promoting regional cooperation and convening groups to discuss regional tactics. Unfortunately, Indonesia and Malaysia, two of the hotspots for piracy in the region, have not joined ReCAAP and the organisation lacks a clear line of communication, said marketwatch.com. The Norwegian Maritime Authority as well as the United Kingdom Marine Trade Operations have direct reporting centres that can respond to an attack and these have proven useful in the Gulf of Aden. In July 2015 the navies of ASEAN agreed to band together to fight piracy in the Malacca Strait, the first agreement of its kind in Southeast Asia. The key to reducing sea crimes in the region is governments working together on direct responses, prosecution and imprisonment of pirates, said marketwatch.com. The South China Sea dispute has been called intractable by Stein Tønnesson, a Norwegian professor at the Peace Research Institute Oslo. China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei all claim sovereignty to some portion of the islands or sea in this large area, mainly because economic benefits. The area comprises a large area for fishing and there are suspected oil and natural gas deposits under the sea. The most hotly contested areas include the Spratly Islands and the Paracel Islands, and Chinese building in the area is considered sabre-rattling by many of its neighbours. In fact, China has built man-made islands near the Spratly Islands and conducted sea and air patrols around them. And the country built a fuel filling station in the Paracels to enable larger civilian control.

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Vietnam and the Philippines continue to send their ships in this area to stake their claim, and their clashes with Chinese vessels have gotten testy. In order to avoid war, protect the environment and help fishing areas avoid depletion, Mr Tønnesson called for a joint management regime where the states all worked together to harvest the area’s resources as well as combat piracy. But he admitted this requires the countries to overlook their sovereignty claims, something none of them, especially China, is likely to do. For vessels to protect themselves, in addition to barbed wire, water cannons and armed guards, Bergen Risk Solutions recommends loud alarms, increased speed, physically hardening the ship, lasers that confuse pirates, coordinated naval forces, building “safe rooms” inside the hull to wait out attacks and rerouting to avoid choke points. Physically safeguarding a ship usually costs USD 5,000 to 15,000, said Mr Nodland. Region-specific training for crew can also help reduce risk, he said. Insurance costs have also skyrocketed for the region, with Lloyd’s of London designating the Strait of Malacca a “war-zone risk” because of piracy in 2005.

The Norwegian Shipowners’ Association responded to increased violent piracy by allowing its members to hire armed guards, citing a 2007 Norwegian law that allows shipmasters to “protect his ship by any means”. Norway’s Ministry of Trade and Industry followed this up with a regulation in 2011 that clarifies the types of arms and conditions for engaging in conflict, which must be based on a concrete risk assessment, reported nortrade.com. Norwegian vessels can apply for a six-month permit to use armed guards with Norwegian police based on a risk assessment of the planned voyage. There are roughly 170 private security companies operating in Northern Europe. In the event pirates actually are apprehended, a whole new game begins regarding which state should prosecute the offenders. A vessel could be registered in one country, owned by a corporation in another, operated by a crew comprised of nationals from several different countries, transporting cargo from a different country, attacked by pirates from yet another country. Any country may assert jurisdiction for a universal crime committed on the open seas and they

ISSUE 1 2016

may have special reasons for doing so. The great expense and logistical and legal burdens of transporting a suspect to a Western country make it an unpopular option. The World Policy Institute (WPI) called instead for either regional or global cooperation to build capacity in fighting piracy. While ReCAAP has floundered, the US proposed the creation of an international maritime operational threat response plan to serve as a communications network connecting shipping states, regional partners and major maritime powers. “States should be able to coordinate issues more quickly regarding on-scene interdiction of vessels hijacked by pirates or the seizure of pirates themselves, hostage rescue, as well as more deliberative questions regarding the disposition and logistics related to victims and witnesses and the detention and prosecution of suspected pirates,” reported the WPI. Shipowners or crew that want to find out recent information about piracy or report an incident can go to the norwegian maritime authority website and look for updates on piracy information.

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ISSUE 1 2016

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NORWAY-ASIA BUSINESS REVIEW

ISSUE 1 2016

PHOTO: NORWEGIAN MARITME CONFERENCE 2016

BI Norwegian Business School professor Torger Reve recommends the maritime sector to redirect its investment and effort into novel fields with an emphasis on knowledge and innovation.

Blue Ocean Rethink

aritime has been a mainstay for the Norwegian economy for M decades. But with oil prices predicted for a long-term slump and shipping companies reporting big losses and cutting back on fleets, how ERIC BAKER

can Norway compete in this environment? Torger Reve, a professor at the BI Norwegian Business School, called for the industry to once again restructure itself, urging a critical rethink of where funding for research and innovation should be directed. Speaking at the Norway Maritime Conference in Cebu, the Philippines, Prof. Reve said shipping companies should invest in new ocean markets now because they’re not getting returns anywhere else. Using a creative approach that has made him an in-demand presenter at Norwegian seminars across Asia, Prof. Reve suggested an overhaul based on education, technology and innovation, the recipe it used in the 1970s to help avoid “the curse of oil”. “We need to move from shipping tonnage to technology and finance. Ocean space technology is going to be the space programme for this century. Norway needs to focus more on aquaculture and marketing as salmon and seafood clusters have the best market growth prospects,” he said. Prof. Reve listed a wide swath of ocean industries for Norway to investigate, especially as many of them are new so there are few competitors. The country should look into ocean renewable energies such as wind, wave and tidal, ocean mining, bioprospecting, carbon capture and storage offshore, aquaculture, coastal fisheries, ocean tourism, ocean insurance, and short sea and deep sea shipping.

Norway has a West Coast Technology Cluster and he urged funding for pilot studies on several of these ocean industries. The government has already tasked Statoil with conducting a feasibility study on carbon capture and storage (CCS) for NOK 35 million on the country’s continental shelf following the Paris Climate Conference in December. Norway wants at least one full-scale CCS demonstration project by 2020. In addition, the Norwegian University of Science and Technology in Trondheim needs to be a critical partner in developing some of these industries, said Prof. Reve. Even fields that already appear to be mature such as climate, the Arctics, defence, personnel and safety can have ocean facets that add value. “The market for most of these ocean industries is Asia. Norway must keep a cordial relationship with Asian countries, which we do with the exception of China. A particular focus needs to be Asean,” he said. “The future of the world food supply is in the ocean. Only 2% of the world’s food comes from the ocean now, meaning 98% comes from land. We need to change that ratio to 50:50. “The OECD just published a new report noting the huge potential to feed both humans and animals from oceanbased industries. And including food, 90% of the world’s productive mass is in the oceans, so it would be foolish for us to ignore the sector.

“You could have the size of a ship out at sea producing food and no carbon dioxide, such as with seaweed farming. You already have a natural market for seaweed right here in Asia. “Norway’s Salmar and Nordlaks, both global leaders in farmed seafood, are already experimenting with different ocean farming techniques.” Though ocean bioprospecting, the discovery and commercialisation of products based on biological resources in the sea, and ocean mining still require years of study, other fields are primed for investment now, said Prof. Reve. “Success in new ocean industries requires three ingredients: 1) deep industrial knowledge; 2) strong industrial actors — a lack of these is why fish farming in Asia did not work before; and 3) a steady stream of entrepreneurs,” he said. “Norway already built a solid base in finance, information technology and knowledge-intensive industries. Just as government investment in oil and gas technology and innovation back in the 1970s helped Norway get ahead of the game, so too must we invest now and put our expertise in seafood, maritime and offshore and gas to use in developing new sectors.” To its credit, Norway does have a Blue Maritime Cluster. But Prof. Reve said it is geared too much toward drilling and traditional maritime fields. Major layoffs and decreases in investments and outlays have shown these sectors are not the future, he said. The other countries with a strong maritime sector comprise Germany, Singapore, South Korea, China and Japan, while Vietnam and the Philippines are emerging. But few of them are specialising in knowledge industries related to the ocean yet, said Prof. Reve. France is leading the way on ocean mining, and Norway would do well to learn from its example, he said. “Every nation is engaged in a competition to attract companies and other nations to invest in them,” said Prof. Reve. “Shanghai and Singapore are already taking the lead for maritime. We need to shift to knowledge and research and development, the hallmarks of our recent success. “The Economist put Norway on the cover in 2013, asking if the Nordic way was the next economic supermodel. While the focus of the article was on practical, efficient government, we Norwegians like to think of knowledge as the key to our competitiveness. “I grew up on the coast of Norway, spending the first 30 years of my life there. Oil and gas was the key to our livelihood then, and I still have a deep affinity for the sea. I hope Norway continues to find ways to incorporate the oceans into our economy.” Said Prof. Reve.

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Building strength in numbers through an effective coalition has the Maritime Anti-Corruption Network upbeat about its chances of beating back bribery in the industry.

Stand Your Ground

orruption is notoriously difficult to stamp out in any industry, but C maritime has a long history with the old foe. Fortunately, the antibribery movement is gathering pace and the Maritime Anti-Corruption ERIC BAKER

Network (MACN) is affecting some genuine change in dealing with compliance in the industry.

Kristian Vandermeer, director of Ben Line Agencies and steering committee member for the MACN, said change at the government level is usually more difficult to achieve than at the company tier. He gave a speech at the Norway Maritime Conference in Cebu about where things stand in the industry now. “Transparency International just released its Corruption Perceptions Index for 2015. If you look at Asia, all the countries there along the coast are red except Japan and Malaysia, meaning there is a high level of corruption,” said Mr Vandermeer. “Shipowners deal with so many countries, even as touch points, that corruption is a truly global consideration.” “But this index shows people working together can succeed in the battle against corruption. In 2015 there were more countries that improved their scores on the index than those that declined. “In fact, José Ugaz, the chair of Transparency International, said ‘to stamp out the abuse of power, bribery, and shed light on secret deals, citizens must together tell their governments they have had enough.’ “Countries at the bottom of the list need to adopt radical anti-corruption measures in favour of their people, whilst countries at the top of the index must

make sure they don’t export corrupt practices to underdeveloped countries.” Ben Line Agencies is a Far East shipping company and Mr Vandermeer is responsible for implementing the company’s anti-bribery and compliance programme in the 16 countries in Asia in which it operates. Ben Line joined MACN in 2013 and he joined the steering committee in 2015. “We just heard quite a bit from Dag Schjerven in the previous presentation about what Wilhelmsen is going through in terms of anti-corruption, and that aligns closely with what our members are experiencing,” said Mr Vandermeer. “One key to progress is our members are subject to increasingly stringent corruption laws that are global in their application and reach. The UK Anti-Bribery Act of 2010 was a bit of a game-changer for our industry but also for anti-bribery legislation around the world. It is the most stringent of any of the anti-bribery laws. “Before that we had the US Foreign Corrupt Practices Act of 1977, which really set the standards for having a global reach and holding companies responsible for their actions outside of their home countries.” When MACN was established in 2011, it was initially a small group of Scandinavian shipowners. The network

ISSUE 1 2016

PHOTO: ISTOCKPHOTO

has grown from 19 the first year to 68 members at the end of 2015, comprised of mainly vessel-owning companies but also cargo companies and service providers to the maritime industry. “I remember my first MACN meeting where I was one of only two agents there, and owners were pointing the finger at agents as being responsible for corruption,” he said. “We’ve grown from there and now are able to include a greater breadth of participants in the MACN.

“Having companies and staff stand their ground requires countries have clear and effectively implemented anticorruption policies. Constant monitoring and review as well as strength in numbers by standing together to say ‘We will not allow this’ is what MACN is here for.”

Kristian Vandermeer

“We can diversify into the service and offshore sectors of our industry. And we’ve identified training and education as critical segments for inclusion in what we’re trying to do at MACN. “From an internal point of view, we want to strengthen our own anticorruption management practices and programmes. Externally, we want to contribute to improvements in the operating environment, the maritime value chain. That is where our collective action programmes are so important. Membership in MACN requires adherence to a very clear set of seven principles: a compliance programme; training and communications; monitoring and internal controls; due diligence; risk assessment; proportionate procedures; reporting, discipline and incentives. There are also regular selfassessments so that members can all understand their internal progress.

NORWAY-ASIA BUSINESS REVIEW

“Our core activities include best practice sharing so that members have access to resources to support internal risk management. Members learn and share their experiences in implementing anti-corruption programmes,” said Mr Vandermeer. “The MACN logo is quite a powerful tool in signalling a company’s commitment to the principles we adhere to. In fact, one of the sponsors of this conference has the logo on its promotional materials here.” The network has biannual webinars on best practices that are relevant to the network members and large group meetings twice a year. It also has an online platform, password-protected for members, with a wide range of tools and resources. “On the external side collective action programmes are key. Our focus here is all down to members’ incident reporting, which is how we determine risk areas,” he said. “Our five pilot projects for collective action have all been qualified successes. They took place in Argentina, Egypt (the Suez Canal), Nigeria, Indonesia and India. We found Egypt particularly difficult in terms of non-responsiveness from the government, but six of our members there have followed up with

a programme that had some degree of success. “Argentina is related to vessel clearance, and we are seeking some legal changes there, working with various local NGOs [non-governmental organisations]. Though the change in government there scuppered some of the momentum we had. “In India we have a ‘Say No’ campaign in two of the container ports — Chennai and Mumbai — and both government authorities and the locals were quite upbeat about these actions. “Indonesia was the first collective action programme for which we received funding, from the UK Foreign & Commonwealth Office, and it focused on customs clearance processes in Tanjung Priok. “In Nigeria, 70 internal risk assessors have been trained and certified, which we consider a success in this programme. “We are considering China, Ukraine, Thailand and the Philippines for the next stage of the collective action programmes.” Both private enterprise and NGOs are cooperating to work on these programmes. “In summary, the maritime industry is starting to stand its ground

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PHOTO: ERIC BAKER

when dealing with corrupt practices,” said Mr Vandermeer. “Having companies and staff stand their ground requires countries have clear and effectively implemented anti-corruption policies. Constant monitoring and review as well as strength in numbers by standing together to say ‘We will not allow this’ is what MACN is here for.”

PHOTO: PANSAK

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The law firm connecting Norway and Asia Wikborg Rein is an international law firm with over 200 lawyers in Oslo, Bergen, London, Singapore, Shanghai and Kobe. Our unique and long-standing presence overseas helps us understand and advise clients on the international aspects of their business www.wr.no

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The introduction of a group of state-of-the-art simulators is poised to make the Norwegian Training Center-Manila the jewel in the crown of maritime schools.

Faring Quite Well

he Norwegian Training Center-Manila (NTC-M) already operates one T of the highest quality schools for maritime labour in Asia. Starting in April, it will be the envy of the world as it unveils its USD-5-million new ERIC BAKER

facility featuring 30 simulators that are interconnected and flexible.

Norway has had a friendly working relationship with the Philippines for decades, as have most nations that value shipping. The reason is the Philippines provides one-third of all seafarers in the world. There are a variety of reasons for this, including the labour cost and lack of employment in their home country, but also the nation’s history of seafaring, skills and good behaviour, said Erlend Grimstad, managing director of NTC-M. Norwegian shipowners realised early on they needed well-trained crew to be able to continue their operations. The result was the establishment of the NTC-M by the Norwegian Shipowners’ Association in 1990. “The whole idea is to ensure quality education and training as well as assessments,” said Mr Grimstad. “Our sponsors want competence they can rely on from graduates.” The new simulators will certainly provide peace of mind for manning agents and shipowners, as state-of-theart simulators for full mission bridges and cranes are the most advanced on the market, set up with the assistance of Kongsberg, he said. “We expect to launch everything on April 25, as the simulators just have to be configured now,” said Mr Grimstad. “The realism and flexibility to connect multiple simulators is unparalleled. This will provide great training opportunities.”

“If you have training in competence first, you will decrease the risk of damage to humans and the environment. For those concerned about the cost, we always refer to the old shippers’ saying ‘If you’re worried about the cost of training, try dealing with the cost of an accident.’ “Our simulators will let you train on real equipment in a real-world environment, but without the risk of expensive damage.” He wanted to emphasise the centre still offers the most competent training in the field for Electro cadet, food preparation and welding programmes, which will not change despite the flashy new simulator additions. The NTC-M also coordinates on a cadet programme with four schools in the Philippines — three branches of the University of Cebu — to ensure that enrol have the skills they need. The Philippines has a wide range of maritime training schools, with a breadth of quality as well. One estimate at the Norway Maritime Conference in January was of 91 schools, some with no accreditation. “Those that do not focus on quality are undermining the market,” said Mr Grimstad. “The European maritime authority is looking into training in the Philippines, partnering with the local Maritime Industry Authority here to try and sweep away some of the poor actors.”

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PHOTO: NORWEGIAN TRAINING CENTER-MANILA (NTC-M)

While some might consider it a risk to launch a massive simulator upgrade when the maritime industry is slumping, the centre anticipates huge demand. “This makeover is a common effort with our 19 sponsors who are part of the maritime cluster in Norway,” he said. “They would like to see this progress, even during tough times in the sector. “Our school stands for excellence, not only in the Philippines but around the world. Our cadets should be among the very best provided to the industry. We can state with certainty that they are because we measure them twice a year, benchmarking our students against other schools. We consistently beat the competition.” Some of the impetus for the makeover is concern in the industry about the level of competency of Filipino seafarers, who number 25,000 at any one time on Norwegian-owned or operated vessels. Norwegian shipowners feel they have an advantage with highly skilled crew and can meet the high expectations of their stakeholders, said Mr Grimstad. The centre provides certification in up to 14 different courses of study. Visit www.ntcmanila.com for more information.

PHOTO: REGJERINGEN.NO

Top: The Norwegian Training CenterManila (NTC-M) has just taken delivery of another state-of-the-art simulator. Above: NTC-M Managing Director Erlend Grimstad.

SNAPSHOTS

NORWAY-ASIA BUSINESS REVIEW

Norway Maritime Conference concluded on 29 January 2016 in Cebu, Philippines, leaving more than 200 delegates, amongst them several leaders in the maritime industry, with valuable insights on the future of the industry.

Norway Maritime Conference

orway Maritime Conference was a unique opportunity to gather N high-level industry practitioners to dig deeper into the increasingly complex maritime challenges while sharing knowledge and assisting in developing strategies to address them.

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I SSSNUAEP 1S H2 O0 T1 S 6

11 1. Mr. Vidar Andersen, Head of Asia, DNB, with Ms. Nisha Pillai (far left photo) 3. Ms. Nisha Pillai encouraging the participants to come forward with questions 4. Mr. Sturla Henriksen, CEO of Norwegian Shipowners’ Association 7

5. Ms. Birgit Marie Liodden, Director of NOR Shipping 7. The organisers left to right: Mr. Jan André Heggem, Managing Director of SMSGlobal Ltd and Director of the Board of Philippines Norway Business Council; Ms. Cathrin Fikserstrand - Senior Administrative Officer of Royal Norwegian Embassy; Ms. Jannicke Steen - Vice President and General Manager of Grieg Star Philippines and Vice President of Philippines Norway Business Council with H.E. Ambassador Erik Førner and Moderator Ms. Nish Pillai 8. Mr. Dag Schjerven, President and CEO of Wilhelmsen Maritime Services 9. Dr. Maximo Mejia Jr., Administrator of Maritime Industry Authority 10. Mr. Gerardo Borromeo, CEO of Philippine Transmarine Carriers

11. Ms. Cecilie Holm Nielsen, Vice President of Gard

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20 years after its establishment, the BI-Fudan MBA programme in Shanghai is one of the highest ranked in the world, combining the best of Western and Eastern education traditions.

The Best of Both

stablished in 1943, BI Norwegian Business School is one of E Europe’s largest business schools with around 20,000 students and 340 permanent faculty staff. In the middle of the 1990s, as many SOFIE LISBY

Asian countries were experiencing rapid economic growth as a result of widespread reforms, the BI Centre for European and Asian Studies wanted to establish a research centre in the region.

“The BI-Fudan MBA programme in Shanghai came about as a result of a collaboration between BI Norwegian Business School and the University of Oslo,” explains Dan Bjørke, head of BI Liason Office, Shanghai, BI Norwegian Business School. “Various economic and social reforms were taking place around Asia and the collaboration committee between the two institutions wanted to increase knowledge about the region.” The founding committee initially looked at Southeast Asia and Thailand’s Chulalongkorn and Thammasat universities as potential partners but a proposal from the president of Fudan University, professor Yang, felt more in line with the mandate of the committee and in 1995 the Nordic Research Centre was set up at Fudan University in Shanghai. “We met at Canton, the most authentic Chinese restaurant in Oslo at that time, and President Yang asked if we could find some funding for a Nordic Centre at Fudan University,” recalls professor Kjell Eliassen, BI Norwegian Business School and chair and founding member of the joint University of Oslo– BI Cooperation Committee . “He said that his years in Copenhagen as a young student and researcher at the Niels Bohr Institute had made him very fascinated

by the Nordic Model. As president of Fudan he would like to present this model for China as an alternative model to the American system. “During my previous years as researcher and professor at different universities, I had visited several Norwegian and Nordic University Centers around the world. All of them experienced the general problem of having too little funding for basic activities and the day-to-day running of the Centre. It turned out to be rather easy to obtain funding for special events from the member institutions or sponsors at home or in the country where the Centre was located. It was more difficult – often impossible – to find external support for the daily running of the Centre. My idea was therefore to use an executive master program in business administration as a continuous activity in the Centre to facilitate part of the basic funding and to create activities in the Centre most of the year.” According to Kjell Eliassen, the aim of the Nordic Centre has always been to promote academic and educational aspects, as well as culture and business relations between China and the Nordic countries. The Centre has also worked for the better understanding and increased knowledge of the Nordic countries in

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PHOTO: BI NORWEGIAN BUSINESS SCHOOL

China and for better knowledge and understanding of China in the Nordic countries. In terms of the MBA program, that means following trends and staying up to date on what happens in the world of business. “The BI-Fudan MBA programme started out as a school with a focus on change management – our first program was a Master in Management in Change Management,” says Dan Bjørke. “The aim was to present the essentials of management in an international business perspective and, at the same time, give an introduction of modern project management from a Sino-Nordic perspective. The school taught IT, tech leadership, innovation, entrepreneurship. Over the years, the course has developed in line with the economy, what the students need in today’s business environment and the general demands of the market. It is more important than ever to develop innovation skills and master how to work with ideas, how to manage new wealth and how to steer innovation processes. This is a great focus of the program today.” One of the strengths of the BIFudan MBA programme is the ability to combine Norwegian and Chinese business culture in a dynamic learning environment, says Dan Bjørke. “The phrase “the best of both” very well describes the BI-Fudan MBA programme. What we do is we take what is best from Norwegian business culture and apply it to our Asian surroundings. There are some significant differences in the way Norwegian and Chinese companies do business. For example, a Chinese company would see every customer as an individual customer, while a Norwegian company most commonly regard customers in abstracts i.e customers want things but they want the same things. The Chinese approach is more adoptable and responsive to

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individual needs. “On the other hand, the Nordic management culture is more transparent and egalitarian. There is a flat organisational structure and an open door policy, which can sometimes facilitate faster innovation, and ideas can flow freely around the organisation – they are not hindered by hierarchy. If students can navigate and master the combination of these cultural differences they have a very strong skill set.” The BI-Fudan Master of Management programme was the first master programme in China to receive acceptance from the Chinese Ministry of Education that a foreign university could give a recognised degree in China. “In the early years, most of the private sector participants came from Nordic joint ventures located in Shanghai,” explains Kjell Eliassen. “Gradually, however, other international companies and big Chinese companies sent their managers. The participants were mostly mid-level managers. One of the main attractions of the program, in addition to awarding an international business master degree, was to be able at the same time to get a degree recognised by Chinese authorities as relevant for advancement in the Chinese hierarchy. “Chinese law did not allow double degrees with foreign institutions at the time and it is not legal today either. They

could, however, allow foreign universities to give a degree in China which they recognised, and at the same time allow the Chinese partner institution to issue a certificate indicating that this degree was taken at this institution and thus accepted as a “Fudan” degree for climbing in the Chinese system. This was important because the number of master students allowed to enter a Chinese university was, and is today, extremely limited. The foreign degree with a certificate was a way to circumvent this restriction – it was seen as being a student inside the restricted number of Chinese students recruited to Chinese programmes.” Today, the student body comprises professionals from all over the world, with 75 percent of the faculty being international. 90 percent of students work in marketing, sales or business development for multinational companies that wish to prepare their employees for an international career. “The majority of our students take the MBA program because they want a larger, more holistic perspective. Maybe they have worked in sales or marketing for years and they have taken on a new position with more responsibilities,” explains Dan Bjørke. The BI-Fudan MBA programme recently implemented The Nordic Hub, an initiative to forge strong relationships with Nordic companies in Shanghai.

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By inviting Nordic companies to the school, offering student placements in Nordic companies and inviting students to write theses for relevant companies, The Nordic Hub initiative aims to increase students’ impact on business practices in Shanghai and beyond.

Facts

The BI-Fudan MBA programme is a collaboration between BI Norwegian Business School, a self-owned, not-for-profit foundation, established in Oslo in 1943, and Fudan University in Shanghai, established in 1905. BI Norwegian Business School is Europe’s second largest business school with more than 20 000 students and EQUIS, AACSB and AMBA accreditations. Fudan University is one of Asia’s leading business schools cultivating large numbers of outstanding management talent for China’s more prosperous economic development in the future. The BI-Fudan MBA programme is a parttime programme taught completely in English and consisting of 15 modules of four days. Students are on average 34 years old, have 11 years of working experience and 90% work in multinational companies. The Financial Times 2015 EMBA ranked the BI-Fudan MBA programme 6th in the world for part-time global MBA programmes.

. . . .

PHOTO: BI NORWEGIAN BUSINESS SCHOOL

NORWAY-ASIA BUSINESS REVIEW

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PHOTO: EXILESOFT CORPORATION

Amidst nationwide reforms and developments, Sri Lanka becomes top pick for global IT outsourcing

Bits and Bytes

ike a phoenix from the ashes, so has Sri Lanka emerged from the L civil war that ravaged the country for 25 years to become one of the world’s leading outsource destinations for IT and business process HENRI VIIRALT

management (BPM).

Sri Lanka’s strategic geographical position – perched at the southern tip of India and at the crossroads connecting South Asia, Far East and the Pacific with Europe and the Americas – has helped fuel phenomenal growth after the war in its efforts toward becoming a middle income emerging market. According to data released by the Central Bank of Sri Lanka in 2015, economic growth in the country has been among the fastest in South Asia in recent years. Growth averaged 6.3% between 2002 and 2013, with GDP/capita rising from USD 859 in 2000 to USD 3,256 in 2013. Preliminary indications are that GDP further increased by 7.8% in 2014. The key driver behind this growth is the booming IT/Business Process Management (BPM) industry that has soared at an incredible rate over the past five years. The Sri Lankan IT/ BPM Industry 2014 Review by Sri Lanka Association of Software and Service Companies (SLASSCOM) reveals that export revenue grew from USD 213 million in 2007 to an estimated USD 720 million in 2013 (238% increase). Total

employment grew from 33,700 in 2007 to an estimated 75,100 employees in 2013 (123% increase), and the number of companies in the industry grew from 170 in 2007 to over 220 in 2013. Finn Worm-Petersen, an industry veteran and Group CEO of Exilesoft Corporation, has for the past 15 years been building professional engineering services for IP owners at Exilesoft’s main development centre in Colombo and seen the massive changes in the country first hand. “Since 2009, there has been significant progress made in the industry nationwide. Sri Lanka has always had very high literacy rates, and that means a well educated talent pool. Post-war we have had a lot of international universities coming in, increasing both the volume and quality of IT workforce, which in turn has attracted a lot of foreign businesses to the country, recognising Sri Lanka as a great outsourcing environment,” WormPetersen says. The number certainly seem to back him up. According to data by the National ICT Workforce Survey in 2013, 63% of

the workforce held graduate or postgraduate level qualifications. Bachelor’s degree has become the standard entry level qualification for recruitment in many job categories, and nearly 50% of students who have finished their higher education are trained in technical and business disciplines. SLASSCOM has recently announced a target to achieve 75% IT literacy in 2016 through a national programme of public and private investment in ICT education and training. Speaking volumes about the talent in IT is the fact that University of Moratuwa, the country’s leading institute for higher education in technological studies, has ranked number one in Google Summer of Code for nine consecutive years for the highest number of students from a single university in the world. What grew out of a strong background in back office applications for banking, insurance and stock exchange systems has since grown to leverage the trend towards mobile, social, cloud-based apps, opening more opportunities by smaller providers like Exilesoft instead of universal packages controlled by multinationals. Nowadays, the country’s IT/Business Process Outsourcing (BPO) client portfolio includes the London Stock Exchange, Microsoft, Emirates, Qatar Airways, Lenovo, JP Morgan and Google among others, and companies like HSBC, IFS, Intel, Motorola, Pearsons and Accenture have set up shop in Sri Lanka. Sri Lanka’s competitive advantage in IT/BPM is built around agility, cost, a niche talent base, ethics, cultural adoptability and a pro-business environment. Since the 1970s Sri Lanka has worked toward creating conditions favourable to foreign investment. 100% foreign ownership is permitted across most areas of the economy with no restrictions on repatriation of earnings, fees, capital with safety of foreign investment guaranteed by the constitution. Tax holidays for corporate and tax incentives for individuals are in place to attract high value investments in priority sectors, including IT/BPM sector. “When I first started in outsourcing, I came from Norway and moved a project to Mumbai, because that was the outsourcing destination at the time. The situation we were met with there was a very talented pool of people but it was very Americanised, meaning the focus was on large corporations instead of SMEs, so your supplier was 5-10 times your size and that’s not really a good match,” Worm-Petersen recalls. “Many of us chose Sri Lanka because the stakes were much lower – you don’t have to invest millions and they are more willing to adapt to your business culture, not to mention the dialect is much easier to understand.”

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While there are certainly a lot of upsides to outsourcing from Sri Lanka, Worm-Petersen notes that the initial phase of setting up business may be quite costly because infrastructure is still expensive. It’s still difficult to find good office space with proper facilities in Colombo and putting in fibre connection comes with a hefty price tag. But that is likely to change over the next few years as the government has set aggressive growth targets, which it intends to achieve by proposing a five year half tax holiday for new partnerships or firms engaging in international services in the field of accountancy, commerce, finance, law, IT, engineering and architecture. Personal income tax is capped to a maximum of 16% for IT, and telecommunication levy has been dropped from 20% to 10% while strictly regulating the implementation of minimum broadband speeds. By 2022, Sri Lanka’s IT/BPM industry in concert with industry stakeholders, government and academia has envisioned to achieve USD 5 billion in exports while generating 200,000 jobs and creating 1,000 start-ups in the process. This will mean a lot of investment in creating a mature startup ecosystem, complete with initiatives for skills development and talent management, but also fostering and bringing in foreign venture capitalists and incubation programs. For the last part, SLASSCOM has already made steps towards this goal by initiating a national level incubation program, Global Startup Labs, in

partnership with MIT Startup Labs for entrepreneurship instructor capacity and funding from Brandix for next five years. “We see there are a lot more expats coming to Sri Lanka these days and there’s a lot more integration with foreign markets. It’s a very vibrant tech community, there’s something going on every week, be it technical training, knowledge sharing sessions and conferences. I think it’s a big surprise for international companies coming in to see how well things are progressing,” Worm-Petersen says. Indeed, the country seems to be on a fast growth track with international recognition to boot. ATKearney ranked Sri Lanka among the top 25 destinations in their global ranking several times. Gartner ranked Sri Lanka among its top 30 global locations. IBM, Tholons and several others ranked Sri Lanka at the top of their respective leader boards. The recent “Outsourcing Destination of the Year” award in UK by the National Outsourcing Association (NOA) was a true validation of the tremendous progress that has been made. Despite the lofty ambitions of the industry, a near term goal that needs to be addressed for these plans to be sustainable is to build the passion for entrepreneurship and dedication in the workforce. “The talent pool is growing rapidly because IT is the number one industry in terms of salary, so if you’re a young person looking for financial freedom in your future then you want to get into IT. This means we have people with

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different motivations in the industry and it becomes a great effort to find passionate people that are in it for the right reasons. A lot of good people, but perhaps lacking the necessary motivation you’re looking for. Good hiring process is crucial to ensure success here,” WormPetersen says.

Facts

Exilesoft is a Norwegian owned global software services provider with offices in Scandinavia, Asia and Australia and development centres located in Colombo, Sri Lanka and in Ho Chi Minh City, Vietnam. The company has 150 employees with a budgeted turnover of NOK 50 million for 2016. Being Norwegian, the company focuses on employees’ well-being and career development. With a high percentage female professionals, staff are regular contributors and speakers at a large number of conferences and professional events around the globe every year. Over the past eight years, Exilesoft has developed an effective Agile outsourcing strategy resulting in an effective growth model for its customers. The company prides itself in chasing new technologies and techniques, providing clients with innovative software engineering and development practices. Exilesoft’s goal is simply to deliver the smartest, fastest and best quality code to their client’s products.

. . . . . .

Above: Colombo is becoming a modern Asian city. Above Left: Finn Worm-Petersen, CEO of Exilesoft joining his staff members, Guhan and Kanchana, in celebrating their wedding.

PHOTO: ISTOCKPHOTO

NORWAY-ASIA BUSINESS REVIEW

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PHOTO: ISTOCKPHOTO

As more Thai garment and textile producers move production elsewhere in Asia, collaboration and a linked production chain is likely the key to survival.

Starting to Unravel

he story of Thailand’s garment and textile industry is usually told as T a race to the bottom, one where producers moved manufacturing to neighbouring countries to take advantage of lower costs, namely labour. ERIC BAKER

While there is some truth to that narrative, the industry continues to comprise a major part of the economy and employment as it struggles to redefine itself in the era of globalisation.

Garments and textiles have traditionally made up a large portion of the Thai economy, but changes to the industry and export markets in addition to a labour shortage have forced local manufacturers to focus on value-added, branded products as well as collaborating with regional partners. Slower demand from the US and EU for Thai textile and garment exports has been balanced by increasing exports to ASEAN and China, combining to make up almost 40% of shipments. “In order to maintain its position in the global apparel industry, Thailand must cooperate with ASEAN countries for sustainability,” Somsak Srisuponvanit, chairman of the National Federation of Thai Textile Industries, told www.juststyle.com. “Thailand’s younger generation is reluctant to enter labour-intensive industries; they wish to work in the hospitality, entertainment and tourism sectors the government is supporting and promoting to the world.” Yuttana Silpsarnvitch, secretarygeneral of the Thai Garment Manufacturers Association, agreed that “minimum wage is not the key problem;

the shortage of workers is.” “Workers who are 40 years old will soon retire, but the younger generation is not keen to enter this industry,” he told www.just-style.com. “As a consequence, about 30 of Thailand’s biggest garment manufacturers have moved part of their operations to Myanmar and Cambodia, and to a lesser extent Laos, Indonesia and Vietnam. Garment operations surviving in Thailand must upgrade their quality, product design and innovation in order to survive.” To help the textile and garment industry cope with the changing times, an Overseas Trade & Investment Centre (OTIC) was established in September 2012 to support manufacturers in setting up off-shore operations, and to help original equipment manufacturers move to become original design manufacturers and original brand manufacturers. Thailand’s textile and garment industry reported revenue of USD 8.8 billion in 2015, with garment exports flat year-on-year at USD 3.0 billion. More of Thailand’s garment manufacturers are establishing factories in other ASEAN countries to take advantage of trade privileges allowed

by the ASEAN Economic Community, trade agreements these nations have with the US and EU, and lower wages in those economies. A steady stream of Southeast Asia’s textile investment has shifted to Vietnam, and with the Trans-Pacific Partnership signed, that country’s share of the market is predicted to skyrocket as trade tariffs for certain products disappear. Laos, Cambodia, Myanmar and Vietnam charge factories no taxes, giving producers an advantage over those in China that must pay a 15% tariff. In addition, the industry believes foreign buyers will shift their orders from China to Thailand because of delivery problems and increased costs in the former as the Chinese government cancelled tax incentives for exporters and expanded labour and welfare laws. Thailand still has the second-largest retail apparel market in Southeast Asia, surpassing USD 55 billion in 2015. The country uses expos such as the Bangkok International Fashion Fair to highlight both local and international fashion brands here. The decade-old Designers’ Room project supports and nurtures new Thai designers and helps the fashion industry increase value by teaming up with designers and consultants around the globe, reported www.just-style.com. The industry is fully integrated, meaning it has an upstream sector (synthetic fibre and yarn manufacturing), an intermediate sector (manufacturing fabric, spinning, weaving, knitting, bleaching and dyeing) and a downstream sector (apparel manufacturing). Apparel is the largest sector in terms of production, export value and employment. Textiles and apparel is considered the second-most important industrial segment for employment, as over 4,300 firms employ more than 1.05 million workers or 2.8% of the industrial labor force in 2008. Apparel owns the overwhelming majority of that number, but employment gradually decreased in 2009 because of the invention of an innovative textile machine. The garment and weaving sectors are considered labor intensive while spinning, man-made fibers and dyeing and finishing sectors are considered capital intensive. Thailand still imports most of the cotton, yarn and fabric it uses for apparel and textile production, limiting its return on exports. Cotton growing is curbed by a government ban on commercialisation of all transgenic plants, and sugar cane and cassava are more lucrative because Thailand does not subsidise cotton prices, leaving little incentive for farmers to grow the crop. Thailand is a major global producer of fabric, though much of it is low-to-medium quality and used locally. Apparel producers use most of the fabric, with upholstery, bedding and furniture sectors making up the remainder. Most high-end apparel produced for export

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uses higher quality fabric from Japan, Taiwan and South Korea. The primary reason for using Asian fabric may be the texture is more suitable for a tropical climate as well as lower transportation costs than that produced in Europe. Fabric imports are levied a 10% duty for wool and cotton, and 20% for woven man-made fibres, in addition to the value-added tax of 7%. The Thai government recognised the industry needs to improve the quality of its fabric, design, patterns and dyeing. Following the removal of quotas in 2005, the sector’s master plan vowed to increase competitiveness by: • Improving productivity through the use of the latest technologies, including machinery; • Improving labour skills and competency, and by using modern management techniques; • Moving toward value-added products; • Switching to a quick response system to address orders; • Upgrading product quality and standards; • Promoting foreign investment; • Encouraging Thai textile businesses to invest abroad; • Promoting international environmental, welfare and energy conservation standards to meet Western expectations; • Establishing relations between textile

entrepreneurs to foster information exchange and technical knowledge sharing; • Moving the industry, especially smaller enterprises, to rural areas; • Utilising a more aggressive marketing strategy intended to promote Thailand as the fashion centre of ASEAN. International buyers now want “full service” from the first designer sketch to stock delivery to their warehouses. They believe this shortens lead time, putting products on their shelves quicker. “Speed to market is the most important thing in the global fashion industry at the moment as fashion changes quickly with new designs coming out every one to two weeks. Price is not the first priority anymore,” said Phongsak Assakul, chairman emeritus of the ASEAN Federation of Textile Industries, to the South East Asia Textile Business Review. The industry has several strengths that should protect it during turbulent times. These include entrepreneurs with a lifetime of experience in a fully integrated industry, a convenient geographic location suitable for making it a hub for ASEAN textiles, and cooperation between producers and the vertical supply chain to enable production and trade. In addition, wage levels in

Strengths:

Weaknesses:

• Experienced entrepreneurs in a fully integrated industry with an appealing geographic location

• Lack of skilled workers with experience in technology, fashion and management

• Cheaper wages than South Korea, Hong Kong, China and Taiwan, but its workers are more skilled than its low-cost neighbours

• Dependent on imports for cotton, fabric and chemicals

• ‘Made in Siam’ trademark should bolster value-added exports

• Large SME base means it often cannot invest in technology due to lack of funds • Few research and development activities

Opportunities:

Threats:

• Tariff eliminations between ASEAN nations and ASEAN trade pacts with China and Japan offer the possibility of plant relocations, more market access and the ability to attract foreign investment

• Economies of traditional Western markets stagnant

• Domestic market of 70 million willing to pay more for quality design and fashion • ASEAN could be next big market • Technical textiles burgeoning

• Fierce competition from Vietnam, China, India and Bangladesh • Textile prices likely to stay depressed • Increasing international trade barriers • Oil price and exchange rate fluctuations

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Thailand are still more attractive than its more developed competitors such as South Korea, Hong Kong, China and Taiwan, while its workforce is more efficient at skilled labour than its lowercost neighbors. The country is just on the cusp of developing its “made in Siam” trademark, which should bolster its value-added trade. Holding the industry back is a lack of skilled workers with experience in technology, fashion and management, which limits product variety and quality. And even though the industry is fully integrated, it still requires cotton, fabric and chemical imports, depressing the amount the country nets on each sale. The textile industry has a fragmented structure because of the prevalence of small and medium-sized entrepreneurs, meaning they often lack the resources to enhance technology or invest in high-end engineering. Another weakness is very few research and development activities and a lack of testing facilities for basic quality control in factories, which is crucial if the country wants to increase its value-added offerings. Trade pacts within ASEAN and between ASEAN and China and ASEAN and Japan offer enhanced market access, the ability to attract more foreign investment and the potential for production relocation. The Thailand Textile Institute believes ASEAN will soon replace the US, Europe and Japan as the major importer because of increased purchasing power. Another opportunity lies with technical textiles, as consumption has increased recently worldwide. Higher chemical and cotton import prices almost guarantee textile producers place a greater emphasis on this market. The days of export-led manufacturing for mid-sized countries are likely over as Western markets retrench and competition from cheaper countries increases. For Thailand’s garment industry, much of that competition is coming from Vietnam, China, India and Bangladesh. Textile exports are commodities subject to fierce competition which depresses prices, creating a very real threat at a time when weakened economies are likely to increase international trade barriers. One possible solution is a pilot programme from the US Agency for International Development called the ASEAN Competitiveness Enhancement project that attempts to create an integrated supply chain within the region. Each member country of ASEAN concentrates on what it specialises in so when an order comes in, they can quickly pitch in to help the product get to market faster.

SNAPSHOTS

NORWAY-ASIA BUSINESS REVIEW

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This year Seafood under the Stars in Thailand was sold out with more than 260 guests attending the beautiful seafood dinner in H.E. Ambassador Kjetil Paulsen’s garden

Seafood under the Stars 2016

eafood under the Stars has been arranged almost every year S since the Thai-Norwegian Chamber of Commerce was founded in 1996. Every year the number of guests has increased. This year, with

the generous help of Norwegian Seafood Council, Chef Markus Dybwad from Snorre Food in Singapore, flew in to demonstrate his superb cooking skills to transform fresh airflown salmon from into small culinary works of art.

7 1. H.E. Ambassador Kjetil Paulsen and his wife Ms. Pia Gjermundsen, Managing Director of Jotun, Mr. Michael Shum and his wife Ms. Bernadeth Nah Chai Teng with Thai-Norwegian Chamber of Commerce President Ms. Vibeke Lyssand Leirvåg 2. The participants at this year’s Scandinavian Tourist Board Workshop led by Mr. Per Holte of Innovation Norway (far right) graced the event with representatives from the Thai tourism industry. Mr. Michael How (centre) from Snorre Food in Singapore was on hand to greet the arriving guests.

6. Chef Markus Dybwad at work presenting Norwegian salmon dishes

7. Wallenius Wilhelmsen Vice President, Head of South East Asia Mr. Trond Tønjum had invited company guests and senior staff to the event. Here with Khun Phadcharaphorn and Khun Sirapon.

NORWAY-ASIA BUSINESS REVIEW

The Graphs In order to give the readers an understanding of where the Asian countries are in their development, we have assembled an overview of various indicators for Norway, USA and the most important South and Southeast Asian markets. The graphs in the two right columns are the result. Countries are listed by their two-letter ISO 3166-1 code. The data has been assembled from a number of sources. See below for a full list.

Basic Figures Norway (2015) Export Growth 2015 2.3% Export Growth 2016 projected 2.4% Trade Balance NOK 233.7 bill Current Account Balance NOK 55.0 bill International Reserves NOK 520.4 bill Unemployment 4.3% Corporate Income Tax 28% Value Added Tax 25%

Norway’s Top 10 Exports 2015 %/value NOK bill Petroleum 29.1% 246,410 Gas 28.5% 241,538 Engineering products 13.2% 111,711 Seafood 8.5% 72,035 Chemicals 6.1% 51,727 Non-ferrous metals 5.1% 43,449 Scientific instruments 1.9% 16,163 Raw materials 1.9% 15,896 Iron and steel 1.5% 12,832 Others 4.2% 35,982 Total (-5.6% vs 2014) 847,744

Geography Geographic Area: 385,199 sq. km Highest peak: Galdhøpiggen 2,469 m Inland water areas: 16,360 sq. km Coastline: 25,148 km

Demographics Population Norway: 5.0 mill Population Oslo: 875,000 Life expectancy M/F NO: 80/84 Inhabitants per sq. km land area: 17 Population Growth: 1.1%

Sources: GDP/Capita: Wikipedia/IMF; GDP Growth: Wikipedia/CIA Factbook; Global Competitiveness: World Economic Forum; Inflation 2015: CIA; Ease of Doing Business and Days to Start a Business: World Bank; Corruption: Transparency International; Democracy Index: Economist Intelligence Unit; Mobile Telephone Penetration: World Bank; Electric Consumption: International Energy Agency Norway Trade: Statistics Norway. Data has been downloaded from sources on 18 March 2016

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STATISTICS

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NORWAY-ASIA BUSINESS REVIEW

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Norwegian Chambers of Commerce and Business Associations are established in most major Asian countries. The organisations work to create venues and channels for exchanging and sharing information, to improve local business conditions and opportunities for Norwegian companies and to increase trade between their respective host countries and Norway.

Norway in Asia Indonesia Norway Business Council

Norwegian Business Association (India)

Norwegian Chamber of Commerce, Japan

C/O Royal Norwegian Embassy Menara Rajawali 20th Floor Jl. DR Ide Anak Agung Gde Agung Lot #5.1 Kawasan Mega Kuningan Jakarta 12950, Indonesia W: www.inbc.web.id E: execsec@inbc.web.id T: +62 2157 63343

c/o Innovation Norway 92, Golf Links New Delhi 110 003 India W: http://www.nbai.in E: nbai@nbai.in T: +91 1149 099200

c/o Innovation Norway in Tokyo, 5-12-2 Minami Azabu, Minato-ku, Tokyo, Japan 106-0047 W: www.nccj.or.jp E: michal.berg@nccj.or.jp T: +81 3344 09935

Norwegian Business Association (NBA), Korea

Philippines Norway Business Council

Royal Norwegian Embassy 13th fl. Jeong-dong Building 21-15 Jeongdong-gil Jung-gu Seoul 100-784, South Korea W: http://www.norway.or.kr E: yky@mfa.no T: +82 0272 77157

c/o The Royal Norwegian Embassy 12th Floor, DelRosarioLaw Centre 21st Drive corner 20th Drive Bonifacio Global City, 1630 Taguig City, Metro Manila Philippines W: http://www.pnbc.ph E: info@pnbc.ph T: +63 2317 2700

Malaysia Norway Business Council c/o Royal Norwegian Embassy, P.O. Box 10332, 50710 Kuala Lumpur, Malaysia W: www.mnbc.com.my E: malaysianorwaybc@gmail.com T: +60 3217 10000

Myanmar-Norway Business Council c/o Royal Norwegian Embassy Nordic House No. 3, Pyay Road, 6 Miles Hlaing Township Yangon, Myanmar W: www.myanamr-norway.com E: contact@myanmar-norway.com

Nordic Chamber of Commerce and Industry c/o Maersk Bangladesh Ltd. 4th Floor, Plot 76/A, Road 11 Block M, Banani, Dhaka 1213 Bangladesh W: http://nccib.com E: info@nccib.com T: +88 0171 5991907

Nordic Chamber of Commerce Vietnam Petroland Tower, 17th Floor No. 12 Tan Trao Street, Tan Phu Ward, District 7 Ho Chi Minh City, Vietnam W: http://nordcham.com E: contact@nordcham.com T: +84 85 416 0922

Norwegian Business Association Shanghai Royal Norwegian Consulate General Rm. 1701, Bund Center, No. 222 East Yanâ&#x20AC;&#x2122;an Road, Huangpu District, Shanghai 200002, China W: http://www.nbash.com E: nbash@nbash.com

Norwegian Business Association (Singapore) c/o The Royal Norwegian Embassy 16 Raffles Quay #44-01 Hong Leong Building Singapore 048581 W: http://nbas.org.sg E: admin@nbas.org.sg T: +65 6622 9100

Norwegian Business Forum, Beijing (NBF) Rm. 1701, Bund Center, No. 222 East Yanâ&#x20AC;&#x2122;an Road, Huangpu District, Shanghai 200002, China W: http://norbachina.com E: secretary@norbachina.com T: +86 1305 1611164

Norwegian Chamber of Commerce, Hong Kong Rooms 1510-1512, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Central, Hong Kong. W: http://www.ncchk.org.hk E: info@ncchk.org.hk T: +85 2254 69881

Thai-Norwegian Chamber of Commerce 14th Fl., Mahatun Plaza 888/142 Ploenchit Road Bangkok 10330, Thailand W: www.norcham.com E: contact@norcham.com T: +66 2650 8444

NORWAY-ASIA BUSINESS REVIEW

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NORWAY-ASIA BUSINESS REVIEW

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