Norway - Defense Industry

The defense industry in Norway is known for its niche product spectrum. Larger systems, vessels and vehicles are usually purchased from foreign companies through industrial cooperation agreements. Most Norwegian defense companies are relatively small compared to international defense companies. According to the EU definition of sizable companies, only three Norwegian defense companies can be considered large, and these are Kongsberg Defense and Aerospace, Nammo and AIM Norway.

The defense industry supplies material, systems and expertise that are essential to the Armed Forces' combat power and defense capabilities. Exports of defense materials also help to strengthen the defense capabilities of our NATO Allies and other partners, and thus also to the security and security of the nation and the population. In addition, industry contributes significantly to value creation, technology development, growth and jobs in many local communities. "Spin-off" from the defense industry creates products and systems with widespread use in civil society and which also make significant contributions to national value creation.

Export is a prerequisite for a defense industry in Norway. The amount acquired to the Armed Forces is insufficient to ensure a reasonable return on investments in development and production facilities. Moreover, for a long time (20-40 years), each time the Armed Forces acquire a type of material or system, it is possible to maintain national technological competence communities that support the Armed Forces without these forces being strengthened and further developed through export and / or participation in multinational cooperation projects. In addition, export customers will fund further development and upgrades of materials developed for the Armed Forces. This benefits the Armed Forces when it is time to upgrade the equipment used in Norway.

In 2016, Norway exported arms and military equipment for around NOK 3.6 billion. This is an increase of 10 % from 2015. Exports of arms and munitions accounted for around NOK 2.9 billion of this amount, and other defence-related products for NOK 650 million.In addition, there were exports of dual-use items, in other words civilian products with military uses, with a total value of aroundNOK 300 million. A total of 34 applications for licences to export defence-related products were refused in 2016, according to the white paper on exports of defence-related products, which Minister of Foreign Affairs Ine Eriksen Søreide presented 27 October 2017. Other NATO and Nordic countries are still the main importers of these products.

The Norwegian government has selected eight focus areas for cooperation between the defense industry and the Norwegian Armed Forces:

1. Command, Control, Information Systems
2. System Integration
3. Autonomous Systems
4. Missile Technology
5. Underwater Sensors
6. Ammunition, Target Technology, Remote Controlled Weapon System and Military Explosives
7. Material Technology
8. Life Support for Military Land, Air and Naval Operation Systems

Activities in the defense sector touch on many important aspects of economic policy - the Armed Forces' procurement of goods and services and our extensive programme of investment. In total this is annual payments approaching NOK 20 billion to a range of Norwegian and foreign contractors. Defence acquisition policy is based on the principal premise of open and free competition.

This government follows an economic policy that stimulates the development of an innovative, knowledge-based and environmentally friendly economy. Where it is cost-effective and compatible with the requirements of the defence sector, the Government will use these procurement projects actively in, for example, furthering the development of industrial competence in Norway. In this way we can ensure that employment and exports also benefit. Exports of Norwegian military materiel have experienced strong growth in recent years. There can be little doubt that this is a manifestation of the success achieved by the Government in strengthening the partnership between the Armed Forces and industry. It is also reassuring to know that this growth is taking place within the clear guidelines set by one of the world's strictest export control regimes.

Industrial collaboration associated with the acquisition of materiel for the Armed Forces is important in this context. Offset purchasing is a central element and a powerful tool in our procurement policy. As a result of offset agreements Norwegian companies receive orders worth in the region of NOK 2 billion annually from foreign contractors. Either in the form of purchases of products and services or as contributions to research and development activity, or as industrial collaboration projects between Norwegian and foreign companies. Compared with other support arrangements, the income accruing through offset arrangements represents the most important source of economic support for the defence and security related sectors of industry in Norway.

The offset agreements contribute to the strengthening of national industrial competence, the development of new technology and market opportunities. In doing so, they also benefit other non-military areas of industry. The development of military high technology often leads to products and activities that can be exploited by other technology-based industrial enterprises. Military technology can contribute to industrial innovation and the creating of added value for Norway in the future, while also providing a basis for new start-ups. Defence procurement can, in other words, act as an important catalyst for civil enterprises in Norway in a broad range of areas.

The acquisition of new combat aircraft serves as a good example. The Ministry of Defence lays down strict requirements for the industrial plan to be submitted by the aircraft manufacturer. A close collaboration with the Ministry of Trade and Industry works actively to ensure that this industrial plan will include long-term, concrete and realistic opportunities for Norwegian industry. A strong and robust national defence industry is of major importance to the Norwegian Armed Forces themselves.