Column by Mads Qvist Frederiksen, Director of Arctic Economic Council
The Arctic is a unique place to do business. The region spans from Alaska in the USA, over Canada, Greenland, Iceland, the northern parts of Scandinavia to the large parts of Russia. This enormous landmass is home to around four million people that both live in larger cities like Tromsø, Murmansk, and Rovaniemi and in more small and remote indigenous communities.
The recent UN Climate report stated that temperatures in the Arctic are rising at three times the world average. Yet, the reason for global warming does not originate from the region where very few heavy industries are located. Restraining from investments and economic development is not solving any problems.
The World needs Arctic
If one takes a closer look, one can see that the Arctic holds solutions to the challenges we are facing today as a planet.
The Arctic Ocean is one of the few places where fish stocks are in good health and sustainably managed. Fishing and aquaculture can feed a growing population that, as of today, gets less than 7 percent of its protein intake from seafood. The Food and Agriculture Organization (FAO) of the United Nations) estimates that 35 percent of the global harvest is wasted. Arctic innovations in bioeconomy are addressing this problem by developing commercially valuable products from what we traditionally considered as waste.
The Arctic has plenty of renewable energy to power new industries like hydrogen production and battery cell manufacturing. Here you will find some of the world’s most responsible mining of such metals like copper, iron as well as rare earth elements necessary for the high-tech production of electric vehicles, wind turbines, and mobile phones.
The megatrends of climate change, digitalisation, urbanization, and changing demographics are affecting the whole world. The Arctic holds the resources to solve some of these challenges, but increased investments are required in infrastructure to fully utilise the opportunities.
Arctic Investment Protocol
Over the years, the Arctic has gained international attention both because of the images of melting glaciers and geopolitics. In 2015, the Nordic Investment Bank also allocated 500 million Euros for an Arctic Lending Facility. However, this is just a start. Guggenheim Partners estimate that infrastructure requirements in the Arctic region alone are expected to reach nearly $1 trillion over the coming years.
At the Arctic Economic Council, we have been promoting investment opportunities in the Arctic region since our creation. As the only pan-Arctic independent business membership organisation, we represent the voice of people investing and calling for investments in the region.
In 2015, the World Economic Forum partnered with Guggenheim Investment Partners on developing a set of principles to guide investors wanting to engage in the Arctic. This process – chaired by the former Norwegian minister of Foreign Affairs Børge Brende – led to the six principles that formed the Arctic Investment Protocol (AIP).
Today, the Arctic Economic Council hosts the AIP, and we will soon publish a series of investment opportunities from across the region, some of which are previous investments like the 130-year-old LKAB iron mine in Kiruna in northern Sweden, while others are completely new opportunities. In our report, we include both small start-ups and large infrastructure projects. We have projects covering everything including the bioeconomy, the construction of highways in the Canadian Arctic, and the development of wind turbines in Murmansk. In Tromsø – where the AEC is headquartered – Troms Kraft is developing the new smart electricity system with the project Smart Senja.
Challenges to investment climate and possible solutions
We have observed three cross-cutting challenges for further attraction of investments in the Arctic region, such as the lack of political ambitions, economy of scale, and the lack of human resources.
Arctic infrastructures and investments must become a political priority with long-term planning and ambitions. Predictable and stable framework conditions are one important key if we want to attract investments. Secondly, the economy of scale is a challenge in a region with a large landmass and few people. However, this can be solved by bundling projects together, strengthening cross-border collaboration, and increasing the use of Public Private Partnerships. Furthermore, we need to continuously promote the region as a place of opportunities rather than a protected national park where only polar bears roam.
To ensure that any investment decisions are taken on the best possible basis, regional and national stakeholders must facilitate, promote and support the systematic and regular collection and dissemination of Arctic-specific data related to business and societal development within the region.
Lastly, we must create better support structures for the development of entrepreneurship education and train people in innovative business development, for example, through incubators. Our member companies continue telling us that the most important investment in the Arctic is the investment in people. We don’t always need to create jobs in the north; sometimes we just need to make sure that people come and work in the region. Of all the resources in the Arctic region the most important by far is its people.
Photo credit: pexels-pixabay
The article was originally published at the Nordic Investment Bank (NIB) website.