In January 2022, the Arctic Economic Council (AEC) members answered in a survey that the ambition to keep the Arctic untouched, geopolitical tensions, and lack of investments are some of the main challenges to ensure the region’s sustainable economic development.
The survey was sent out to all members of the AEC, and more than half replied. The AEC membership includes private companies, indigenous organisations, investors and native corporations. The smallest companies are entrepreneurs, start-ups, and SMEs, while the largest members are business organisations with more than 45.000 companies in total. The AEC members come from various sectors, including energy, infrastructure and the blue economy.
“Very few of our members marked the economy of scale or high environmental standards in the Arctic as a challenge. This is positive because it shows that the Arctic has a healthy business environment with some of the right framework conditions. It also shows that obstacles to economic development to some extent come from organisations and people based outside of the Arctic,” says AEC director Mads Qvist Frederiksen.
One of the AEC members in the survey echoed the challenges from outside to keep the Arctic untouched, stating that there is “broad-ranged opposition to any Arctic development, including in those areas designated for development.”
“Over the years, we have seen a “Disney-fication” of the Arctic, like it is a region with just polar bears and people living in igloos like a scene from Frozen. Such an approach hinders the true potential of Arctic development and limits the interest of international investors. The Arctic is not a small glass snowball. It is a region where people live, study, and work. We need to look at the bigger picture, and the solutions to the green transformation are located in the north,” says Mads Qvist Frederiksen.
The Arctic is rich in energy, raw materials, and sustainable food sources. The region is strategically located, connecting the major economies in the northern hemisphere. Over the years, the AEC has highlighted how new projects like small-scale solar parks and large-scale hydrogen projects are transforming the energy sectors both locally and abroad. Within the food industry, many companies are using state-of-the-art research and innovation to develop new products, improve circularity and limit waste.
Some AEC members mentioned that lack of investments is just one part of the challenges to sustainable development, but the ability of the Arctic communities to facilitate and receive investments is another side often overlooked. AEC is promoting investment opportunities in the region and sometimes experiences a lack of understanding of investors’ needs and ways of operation in some Arctic communities.
The second-largest challenge to the sustainable economic development of the Arctic, according to the survey, is geopolitical tensions. Many AEC members experience the influence of geopolitical conflicts outside of the region on business operations in the Arctic. It can have a more severe effect on smaller economies like those in the north.
Long-term and predictable framework conditions
“Companies want as much free trade as possible without barriers. Long-term and predictable framework conditions make businesses more attractive for investments. When outside forces, like the restrictions doing the corona pandemic, moves into the Arctic, it can have massive consequences,” says Mads Qvist Frederiksen.
Other challenges highlighted in the survey were climate change, lack of a competent workforce, and demographic changes. These are all issues that the AEC works on as the only pan-Arctic business organisation in the region.
AEC is an independent business membership organisation, advocating sustainable economic development in the Arctic. AEC has members from more than 10 different countries representing key economic sectors in the Arctic.
Proto Credit: Stefán Erlingsson