- Ministry of Finance of - Ministry Departementet for Finanser for - Departementet Naalakkersuisoqarfik Aningaasaqarnermut Political and Economic and Political 2019 Report
Political and Economic Report 2019 Aningaasaqarnikkut ingerlatsineq pillugu nalunaarut 2019 Politisk Økonomisk beretning 2019 Engelsk overskrift 2018
Suliarineqarnera naammassivoq Maj 2019 Redaktion sluttet i maj 2019 Editors ended in may 2019
Ungalua – Omslag – Cover.: Orla Dalager, N Offset, 3900 Nuuk Naqinneqarfia – Tryk - Print.: N Offset, Nuuk
Aningaasaqarnermut Naalakkersuisoqarfik Departementet for Finanser Ministry of Finance P.O. Box 1037 3900 Nuuk Oq./Tel.: +299 34 64 02 [email protected] www.naalakkersuisut.gl Ministry of Finance
Political and Economic Report 2019
Spring Session 2019 /10
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In accordance with Greenland Parliament Act no. 26 of 28 November 2016 on the Budgets and Accounts of the Municipalities and the Greenland Government Authorities, the Government of Greenland presents an annual report on the economy of Greenland, including trends in public expenditure and revenues at Parliament's Spring Sessions.
The annual report must include analyses of developments within the economy and activities within one or more key areas of expenditure and revenues.
The report will thus contribute to increasing information on the finances of the Greenland Government Authorities, and provide the basis for an informed debate on the financial performance of the Greenland Government Authorities and Greenland as a whole.
As such, the report covers many issues and takes a form that can be incorporated into the deliberations of the Government of Greenland and Parliament for economic development and priority-setting. The report highlights special problem areas and trends.
The Government of Greenland's present Political and Economic Report for 2019 should thus also be seen in the context of its work on the 2020 Budget Act Bill.
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1 Foreword The annual Political and Economic Report reviews a number of the most important initiatives that the Government of Greenland plans to launch within the year it covers, and in future years.
The 2019 report describes the current economic situation and challenges to be overcome to secure sustainable development, which have also been addressed in previous year's reports, in the Economic Council's annual reports, and in the Tax and Welfare Commission's recommendations.
The Report also contains a follow-up on the Sustainability and Growth Plan from 2016, with its four reform tracks.
The Sustainability and Growth Plan and follow-up in the form of reform measures, specific initiatives and targeted investment are intended to promote sustainability in public finances, and increased growth and employment in the private sector on a sustainable basis. As such, it is intended to contribute to achieving several objectives: • That the country's economy is healthy and stable, in a manner that is sustainable in the long- term and can gradually free Greenland from dependency on the block grant, and enable it to take over relevant responsibilities from the Danish State at an appropriate pace. This requires sustainable economic progress in which Greenland gradually steps up domestic production and reduces its exposure by developing more economy-sustaining trades and industries. • To focus on ongoing capacity-building, including through a general boost to the level of educational attainment and labour market participation in order thereby to enable the Greenland authorities to take over new responsibilities from the Danish State. • A more equitable development geographically and among municipalities in order to maintain an appropriate level of welfare throughout Greenland, generate real growth in the private sector in several locations and offer all citizens better and more consistent opportunities for bettering their lives. • Generate greater purchasing power for individuals and for families, including and especially providing a boost to low and middle income groups, to reduce the high level of social inequality.
Political Economic Report 2019 addresses these and other matters. The Report contains a special section on how the Government of Greenland can pave the way for better and more equal conditions for citizens through various proposals for specific initiatives. This applies in particular to reforms within the following key areas: • The education sector, where the focus is on removing bottlenecks in order to get more people through the education and training system. • The housing sector with a focus on improving the devolvement of rented housing to the municipalities and the forthcoming reform of the Tenancy Act in order to ensure increased sustainability in the housing sector. • Increased financial self-reliance, including reforms designed to increase the supply of labour. • Cross-sectoral early intervention initiatives for at-risk children and youth. • The drafting of a plan for gradual take-over of responsibilities from the Danish State.
The Report also contains updated goals and principles for economic policy, the status of follow-up on the SDGs and work on Sector Plans.
I wish you an enjoyable read and look forward to further debate going forward.
Vittus Qujaukitsoq, Minister of Finance and Nordic Cooperation
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Contents 1 Foreword ...... 3 2 Introduction ...... 6 2.1 The economic situation and structural problems ...... 8 2.1.1 Trends in the fisheries ...... 9 2.1.2 Partnership agreements with the EU ...... 13 2.1.3 Other trade and industry ...... 14 2.1.4 Exports of ice and water ...... 15 2.1.5 Tourism ...... 16 2.1.6 Hydrocarbon ...... 17 2.1.7 Mineral resources and minerals ...... 19 2.1.8 Employment and unemployment ...... 21 2.2 Treasury finances ...... 23 2.2.1 The Treasury's accounts for 2018 ...... 23 2.2.2 Relationship with municipal financial performance ...... 26 2.3 Taxes and duties ...... 27 2.4 Tax arrears ...... 29 2.5 Debt trends ...... 31 3 Greater autonomy and economic self-sustainability ...... 34 3.1 Goals and principles for the Government of Greenland's economic policy ...... 34 3.2 Deliberations on future take-over of responsibilities from the Danish State...... 35 4 Benchmarks and indicators ...... 39 4.1 The Budget and Accounting Act and financial governance ...... 39 4.2 Use of benchmarks and performance indicators ...... 39 4.2.1. Cross-cutting goals and indicators ...... 41 4.2.2. Goals and indicators for education ...... 44 4.2.3. Goals and indicators for growth and employment ...... 45 4.2.4. Goals and indicators for the public sector ...... 46 4.2.5. Goals and indicators for financial self-reliance ...... 47 4.2.6. Goals and indicators for infrastructure ...... 49 4.2.7. Goals and indicators for crime reduction ...... 49 4.3 Poverty measurement ...... 50 4.4 Measurement of sustainable development and the SDG 2030 agenda ...... 53 4.5 Sector planning ...... 55
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5 Follow-up on the Sustainability and Growth Plan ...... 58 5.1 Raise the level of education ...... 58 5.2 Promote growth and transition to a multi-faceted economy...... 61 5.2.1 Corporate taxation ...... 61 5.2.2 Development of the fisheries sector ...... 63 5.2.3 A new tourism strategy ...... 65 5.2.4 Attracting data centres ...... 66 5.2.5 New strategy for the hydrocarbon sector (2019-2023) ...... 66 5.3 Modernisation of the public sector ...... 67 5.3.1 Efficient public procurement ...... 67 5.3.2 Prevention and reduction of arrears owed to the public sector ...... 68 5.3.3 Digitalisation ...... 69 5.3.4 Mapping and geodata ...... 73 5.3.5 Early, preventive measures as the key principle ...... 76 5.3.6 Health care recruitment and retention...... 77 5.3.7 The environmental and waste management sector ...... 79 5.3.8 Customs strategy - Inussuk 2018-2023 ...... 80 5.4 Increased self-reliance via reform of welfare benefits, the tax system and the housing sector ...... 80 5.4.1 Increased financial self-reliance ...... 81 5.4.2 Housing and economic indicators for housing reform ...... 86 6 Policies informing the 2019 Budget Act and preparation of the 2020 Budget Act Bill ...... 91 6.1 Budgetary coordination related to the 2020 Budget Act ...... 91 6.2 Expenditure analyses ...... 92 6.2.1 Preliminary contributions to preparatory legislative works for the 2020 Budget Act Bill...... 94
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2 Introduction Broad political consensus prevails on the overarching goal of creating a more self-sustaining society in which decision-making powers for matters in Greenland, and responsibility for its development, are increasingly lodged with the Greenland authorities.
It is therefore a focal task for Parliament and the Government of Greenland to create sound and transparent frameworks within which the population has the means and abilities to assume responsibility for their own lives and make the most of the countless opportunities which Greenland holds. The more we raise the rate of employment, the stronger we will stand as a nation, a society and as individuals. Equally, our society must also offer coherent and timely assistance to those who need help to change their lives for the better.
We must therefore be painstaking and far-sighted in our planning, and systematically build capacity at all levels of society. This will be pursued on the one hand through education/training and ongoing capacity-building of citizens, enterprises and organisations, and on the other hand by establishing infrastructural frameworks that serve Greenland's needs and opportunities. We must become better at cross-sectoral partnering domestically, while we must also seek inspiration from and form alliances with other nations where this is relevant.
The envisaged progress and development will not be achieved organically, but require our proactive commitment and targeted efforts. Greenland's economic trends remain positive, and we must remain alert to making the most of them. • By achieving a surplus in the public finances, the economy will be well-bolstered against a future economic downturn. • By making wise investments in order to safeguard society for the future and achieve structural and long-term gains.
To that end, efforts must be made in alliance with municipal authorities to pave the way for handling the fact that in the coming years, there will be fewer people to provide for the growing proportion of elderly persons. This will be done by: • ensuring that an increasing proportion of school-leavers gain vocational qualifications. • more members of the potential workforce participating actively in the labour market through either permanent employment or gaining a better foothold on the labour market. • reversing the outlook for a dwindling population to retention of the population size and gradually increasing it. • early preventive measures and coherence in these becoming a standard principle in the public sector, including with a particular focus on children and young people. • more citizens taking responsibility for their own accommodation, whilst ensuring social housing needs are met.
The object of reducing reliance on the block grant from the Danish Government entails that we foster more key trade and industry sectors, and also better utilisation of our fishery resource. • This includes finalising the modernisation of the transport infrastructure serving both passengers and freight with easy and efficient domestic and international mobility. • Equally, we must make the most of the potentials of increased digitalisation to improve standards of service in a number of sectors, realise efficiency improvements and new business opportunities. This will be achieved partly through relevant investments in telecoms infrastructure and partly by creating a foundation for utilising these in the form of common master data, upskilling and organisational development, etc.
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Other efforts must be made to systematically improve Greenland's competitiveness, which can make it more attractive for domestic and foreign businesses to invest. This would, for example, entail a reform of corporation tax and implementation of a business and industry package in extension of the airport package agreement with the Danish State. The sustained increase in consumer spending in 2018 generated increased revenue from taxes and duties. This trend is expected to continue in 2019, but should also be seen in relation to the growing burden of expenditure.
The 2019 Budget Act projected an OI surplus for both 2019 and overall for the period 2019-2022. The increasing burden of expenditure in the coming years means that any non-allocated funds must be spent partly on realising pre-agreed cost-savings, and partly on priority growth-promotion, expenditure-dampening initiatives such as the new aviation infrastructure, and on reform initiatives to increase the supply of labour. This will form the Government of Greenland's basis for the upcoming Budget Act talks.
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2.1 The economic situation and structural problems The Economic Council's Chairmanship published its latest report in September 2018. The Report predicts that the real economic growth in 2016 will continue in 2017-2019. The growth is based on major construction projects raising the level of activity temporarily and healthy revenues from the fisheries. For 2019, the Economic Council anticipates an increase in GDP in the order of 3% over 2018. Actual figures and estimates for economic trends in the period 2012-2019 are compiled in Table 1.
Table 1. Supply balance, annual real growth as a percentage of GDP and gross investment in constant prices.1
Growth rate, per cent Share of GDP in 2017 2013 2014 2015 2016 2017 2018 2019 Private consumption 40.8 -1.3 0.6 0.2 1.2 2.4 1.9 2.6 Public consumption 47.2 4.1 -0.2 -0.6 1.5 3.5 0.6 0.6 Fixed gross investment 24.6 -22.2 -19.2 5.9 9.8 -8.4 5.2 18.9 - excl. inv. in minerals
exploration 23.1 -6.6 -8.6 -0.4 23.1 -5.5 32.3 19.0 Exports of goods and services 34.9 2.4 11.8 -9.9 16.9 -7.6 11.0 2.9 Totals, supply/final use 150.0 -3.4 -1.2 -1.1 6.7 -1.0 4.3 5.2 Imports of goods and services 50.0 -6.6 -11.5 1.7 8.2 -5.5 7.0 9.7 Gross Domestic Product 100.0 1.4 -1.3 4.7 -2.5 6.0 2.9 3.0 Amount, MDKK
Linked values (2010 prices) Total gross investment 4,361 3,404 3,752 4,102 3,984 4,220 Minerals and petroleum 1,040 492 711 378 239 315 exploration
Gross inv. excl. exploration 3,321 2,912 3,041 3,724 3,745 3,905
Gross investments in the minerals and mineral resources sector in 2017 were lower than in 2016 and have thus remained at a relatively low level.
Note: Figures for 2013-2015 are final, whilst those for 2016-2017 are provisional from Statistics Greenland. Figures for 2018 and 2019 are provisional estimates from the Economic Council. In connection with the publication of the national accounting figures in November 2018, the Economic Council produced new projections of estimates for 2018 and 2019. These were presented at the Council's seminar in January 2019 and vary slightly from the estimates published in the Council's September 2018 report. 1 The Greenland Government Authorities have revised their method of projecting GDP growth targets retrospectively to 2003. The linked values now used present a more realistic growth target. The new method gives better grounds for benchmarking between the countries, and conforms to international recommendations. An audit of the figures for private consumption and transportation such as sea and air has also been performed. The figures in Table 1 are thus not directly comparable with those for GDP in the Political and Economic Reports for 2016 and earlier. The National Accounts figures for 2015 have been reconciled and are thus regarded as final figures. The new estimates have resulted in an unexpectedly high GDP adjustment. Processing of the final figures for 2015 form the basis for new projections of the preliminary GDP figures for the years 2016-2017. Further information on this is available from: http://www.stat.gl/publ/da/NR/201701/pdf/2006-2015%20Nationalregnskab.pdf and http://www.stat.gl/publ/da/NR/201802/pdf/Produktionsbaseret%20nationalregnskab%202008-2017.pdf
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2.1.1 Trends in the fisheries The fisheries continue to be the most important export industry. Figure 1 shows the price trends for prawns, halibut and cod.
Figure 1: Index of average prices per kilo for fish and shellfish
240 220 200 180 160 140 Index, 2010=100 120 100 80 2010 3.kvt. 4.kvt. 1.kvt. 1.kvt. 1.kvt. 1.kvt. 1.kvt. 3. kvt. 1. kvt. 2. kvt. 3. kvt. 4. kvt. 1. kvt. 2. kvt. 3. kvt. 4. kvt. 1. kvt. 2. kvt. 2. kvt. 3. kvt. 4. kvt. 2. kvt. 3. kvt. 4. kvt. 2. kvt. 3. kvt. 4. kvt. 2. kvt. 3. kvt. 4. kvt. 2. kvt. 2011 2012 2013 2014 2015 2016 2017 2018 Cod,Torsk, total total Hellefisk,Halibut, total total Shrimp,Rejer, total total
Source: Statistics Greenland. Index: 2010=100
The figure shows a slight increase in halibut prices during 2018. Prices have generally sustained a constant high since early 2015, in spite of price dips in certain quarters in 2016 and 2017. The price of halibut in 2018 is thus still at a record-high level. The price level for cod was fairly constant over the period 2015-2017, but rose by approx. 22 per cent from Q4 in 2017 to Q3 in 2018; this being the highest price recorded since 2010. Prawn prices increased over 2017, but are approx. 20 per cent lower than their record-high in Q4 2015. Prawn prices in 2018 are slightly below those of 2017, but are still at a relatively high level.
Table 2 shows catches of the four most important species in Greenland's fisheries.
Table 2. Catches by fishermen and vessels on Greenlandic licences
Tonnes 2012 2013 2014 2015 2016 2017 2018 Mackerel, total 5,284 52,797 78,382 30,390 36,031 46,568 63,018 Cod, total 21,625 25,504 31,117 49,035 56,370 54,303 44,853 Cod, sea-going 11,010 11,976 12,619 23,668 21,747 22,329 21,874 Cod, inshore 10,616 13,528 18,497 25,366 34,623 31,975 22,980 Halibut, total 34,622 34,829 38,209 38,191 42,230 38,144 41,051 Halibut, sea-going 13,062 11,348 11,464 13,318 11,564 13,402 13,724 Halibut, inshore 21,560 23,482 26,745 24,873 30,666 24,742 27,327 Prawn, total 109,376 88,532 83,369 70,289 80,968 87,185 88,754 Prawn, sea-going 51,169 44,879 45,287 36,346 40,662 43,983 48,995 Prawn, inshore 58,206 43,654 38,082 33,944 40,306 43,202 39,758 Source: Greenland Fisheries and License Control (GFLK). Prawn exports accounted for around 40 per cent of the total value of goods exports in 2017, increasing to approx. 41.5 per cent in the first three quarters of 2018. In the period 2012-2015,
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prawn catches were falling, due to a decline in stocks. However, from 2015, prawn catches have been increasing owing to an increase in prawn stocks. In 2015, the prawn quota was 73,000 tonnes in Western Greenland, and has increased since then, bringing it to 105,000 tonnes in 2019. Of the total prawn quota in Western Greenland, Canada and the EU are allocated 4,417 tonnes. With continued relatively high prawn prices and a rising prawn quota, the 2019 outlook is again for a very robust economy in the prawn fishery.
As shown by Table 2, cod catches have been increasing heavily since 2012, although volumes declined in 2018, due primarily to lower inshore cod catches.
Halibut catches increased in the period 2012-2016, declined in 2017, but took an upturn in 2018 due to the higher volumes caught in the inshore fishery. The Greenlandic sea-going fishing fleet is undergoing modernisation, with the companies investing substantially in newbuild vessels. In 2019, 6 new vessels are expected to join the sea-going fishery for prawns, cod and halibut. The new vessels will replace existing vessels, which in some cases are more than 20 years old. Investments in new capacity are intended to reduce operating costs and boost total profits from the fisheries.
The inshore halibut fishery is of great significance for local communities and for Greenland as a whole. Over the period 2012-2018, more than 20,000 tonnes of halibut were fished inshore per annum.
Figure 2 illustrates the trend in the number of licences for inshore halibut fishing in the period 2013- 2018. As the figure shows, the number of licences in the period 2013-2017 increased appreciably (+57%). This entails a radical increase in capacity.
The largest increase was in the number of dinghy licences, while the number of in-board engine vessel licences increased steadily over the entire 2013-2018 period. The number of dinghy licences peaked for the time being in 2017, as 130 fewer dinghy licences were issued in 2018 relative to 2017. The upside of this is that fewer licences issued means labour freed up for other industries.
Figure 2. Number of licences for inshore halibut fishing, for vessels and dinghies, respectively, in the period 2013-2018.
2500
274 2000 267 278 1500 261 250 228 1000 1785 1947 1817 1478 1258 500 1043
0 2013 2014 2015 2016 2017 2018
DinghiesJoller FartøjerVessels
Source: Greenland Fisheries and License Control (GFLK). The Figure shows the number of licences issued, and thus does not necessarily represent the number of active fishermen.
Pelagic fisheries The Government of Greenland aims to place greater focus on exploitation of both new and existing species in new areas in alliance with the fishing industry. The new species primarily consist of pelagic
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stocks such as herring and mackerel. These stocks are migratory, periodically present in the waters of different countries and in international waters.
Greenland is the coastal state for mackerel in the North East Atlantic, and participates in consultations on management of stocks with the Faroe Islands, Norway, the EU, Iceland and Russia. However, stock management is sub-optimal at the present time, since, for a number of years, the fishing has far exceeded the scientific advice. This is due in part to the fact that the EU, Norway and the Faroe Islands have concluded a mackerel arrangement, from which they have chosen to exclude Iceland and Greenland.
In recent years, the mackerel fishery has helped to diversify the Greenlandic companies' revenue base. This reduces their exposure to fluctuations in quotas and prices for other species. Figure 3 shows the size of mackerel catches in the period 2013-18, by Greenlandic and foreign vessels.
Figure 3. Mackerel catches in Eastern Greenland 2013-2018, by Greenlandic and foreign vessels.
100.000
80.000
60.000 46.857 25.230 40.000 36.570 17.788 16.346 14.409 20.000 38.564 31.351 28.938 17.518 15.971 19.309 - 2013 2014 2015 2016 2017 2018
GrønlandskeGreenlandic vesselsfartøjer UdenlandskeForeign vessels fartøjer
Source: Greenland Fisheries and License Control (GFLK).
The mackerel take on the Greenlandic quota increased year on year in the period 2015-2018. From approx. 30,000 tonnes in 2015 to more than 63,000 tonnes in 2018.
While the total take of mackerel has increased, there has also been an increase in the proportion of the take deriving from Greenlandic vessels; from 32% in 2013 to in excess of 60% in 2017 and 2018. A higher take by Greenlandic vessels has a number of positive knock-on effects for the economy.
From 2017, Greenlandic vessels were permitted to fish a proportion of their quota in international waters. This helps to extend the fishing season, and maximise utilisation of Greenlandic capacity. In 2018, Greenland still did not have the necessary pelagic fishing capacity to exploit the Greenlandic mackerel quota.
Takes of mackerel by Greenlandic vessels reached their record high in 2018 with the total take exceeding 38,000 tonnes. The mackerel fishery remains a very unstable fishery, as mackerel are a migratory species. Therefore, prospectively speaking, there is no guarantee that large volumes of mackerel can be fished annually in Greenlandic waters going forward. This should be seen in the light of increased fishing, as a result of total quotas far exceeding the biological recommendations and the unpredictable mackerel migration pattern.
To further the development of its pelagic fisheries, Greenland has gained access to fishing a total of 13,500 tonnes of blue whiting and 3,200 tonnes of herring in the waters off the Faroe Islands via bilateral negotiations.
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In 2018, the Government of Greenland concluded negotiations on a new relative stability key for allocation of shared capelin stocks in East Greenland and the Icelandic EEZ. Based on factors such as biological surveys of capelin distribution in East Greenlandic waters, Greenland has succeeded in increasing its share of the total allowable catch (TAC) from 11 to 15%.
The capelin is a species with a very short lifecycle, and the capelin TAC varies considerably from year to year. There have been capelin TACs ranging from zero to 1 million tonnes. In recent years, the quota swung between 0 and 300,000 tonnes.
Revenue from resource rent taxation in the fisheries The fishing industry makes a considerable contribution to revenues from fishing duties (resource rent taxation). This is due partly to new, major revenue streams in recent years from record-high prawn and halibut prices, together with duties levied on the mackerel fishery.
On 1 January 2018, a new resource rent taxation model was introduced for the Greenlandic fisheries as a whole. The new resource rent taxation model comprises the inshore halibut and prawn fisheries, seagoing fisheries for prawns, halibut, cod, haddock, pollack and redfish, and the pelagic fisheries for mackerel, herring, capelin, blue whiting and Atlantic argentine. Other fish species are not currently subject to the duty.
The revenue generated by resource rent taxation has increased dramatically since 2007; from DKK 0.4m in 2007 to DKK 426m in 2018 (provisional figures) against a budgeted revenue level of DKK 384m.
While this makes the latest revenue a record high (see Figure 4), any reliance on deriving a large proportion of public-sector revenues from fisheries duty is risky, since experience indicates that the industry is exposed to extreme variations in catch volume. In the 2019 Budget Act, total fisheries resource-rent revenue is budgeted at DKK 392m.
Figure 4. Revenue from fisheries resource rent taxation, 2004-2018 in MDKK.
Source: Tax Agency. The figures for 2018 are provisional, but take adjustments, provisions and losses into account.
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Note: Duty levied on other species derives from duty on cod, redfish, haddock, pollack and scallop. The duty levied for scallop, was, however, abolished as of 1 January 2019. 2.1.2 Partnership agreements with the EU Greenland has a number of mutually dependent partnership agreements with the EU. The current term of the EU Partnership Agreement on the Education Sector expires at year-end 2020. At the time of writing, the EU had not yet decided on the frameworks for a possible partnership for the period 2021-2027. This applies both to a new association decision pending in 2019, and adoption of the EU budget for the period, which is pending in 2020. The expectation is, however, that the partnership will be continued in the period 2021-2027, and on that basis, preliminary talks have been initiated on the preparations for such a partnership. In the preceding 2007-2013 and 2014-2020 partnership periods, the pivotal factor for the partnership has been sectoral policy in the education sector. For a future agreement period, the EU has expressed its wish for the partnership to be extended to more sectors. On this basis, deliberations in 2019 will address which new partnership domains might be incorporated in the partnership in a new agreement term. To that end, the agreement on the 2019 Budget Act proposes that the healthcare and social services sectors might be relevant to bring under the Partnership Agreement, since extraordinary efforts in these sectors would serve to underpin efforts in the education sector, and promote improved interaction between these sectors. A new partnership sector is to be identified jointly between the European Commission and the Government of Greenland, and the European Commission has proposed that economic sectors, the environment and climate change, together with other sectors might be potential options in extending the EU-Greenland partnership. Thus, in 2019, clarification will be needed as to which sectors could platform a future partnership, which will enable such sectors to commence preparations for engaging in the partnership. The Fisheries Partnership Agreement between the EU and Greenland Greenland has had a Fisheries Partnership Agreement with the EU since 1985, and the current fisheries protocol expires at the end of 2020. Greenland and the EU agree annually on the size of fishing quotas the EU has access to in Greenland in the subsequent year. The EU then allocates these fishing quotas internally among the EU Member States or reallocates quotas to third countries such as Norway or the Faroe Islands. When Britain leaves the EU, it is uncertain how this will affect the EU's future internal distribution of fishing quotas.
The expectation is that negotiations between Greenland and the EU on a new Fisheries Partnership Agreement, to come into force upon expiry of the current agreement, will commence in 2019. Britain's exit from the EU is expected to have major implications for Greenland by way of several international fisheries agreements and negotiations, not least because the British Isles will constitute a new coastal state for a number of fish species.
Brexit – possible impact on Greenlandic exports to the UK Over the last two years, the UK has negotiated and prepared to leave the EU. At the time of writing, it is scheduled to leave the EU on 29 March 2019, but it is unclear whether this deadline will be met.
Once the UK is no longer an EU Member State, and if the UK also leaves the Single Market, the worst-case scenario for Greenland will be that its fisheries exports to the UK become subject to import duty and veterinary inspections. This may have adverse consequences for Greenland's fisheries exports to the UK, unless favourable agreements are concluded between the UK and the EU concerning Overseas Countries and Territories (OCTs). This aim has been communicated to the EU Brexit negotiators. If this can be achieved, there are two likely scenarios for Greenland to pursue:
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- to conclude a bilateral free-trade agreement with no or low customs with the UK so that Greenlandic fisheries products can remain competitively priced on the UK market, or - to conclude an agreement with the UK on new UK legislation not imposing import tax on Greenland.
The main export products from Greenlandic companies to the UK are boiled and peeled prawns, which are estimated as representing some 80-90 per cent of the export value. The majority of Greenlandic export products are shipped to Denmark and then forwarded to the UK, while some products are further processed in Denmark before forwarding to the UK.
According to the fishing industry, boiled and peeled prawn exported from Greenland to the UK account for 90 per cent of exports. For Greenland, the consequence of Brexit, will, in the worst-case scenario, be the loss of Greenland's tax-free prawn exports, worth in excess of DKK 0.5 billion out of total exports worth DKK 3.7 billion in 2017; see the figures from Statistics Greenland. This scenario is based on the UK levying the maximum import tariff under WTO rules of 20 per cent on boiled and peeled prawns. A maximum tariff would then, in isolation, levy a total tax in excess of DKK 100m on exports of boiled and peeled prawns, which would inevitably adversely affect demand. However, it is not possible to determine in advance what impact any increase in the price of prawns would have on consumer behaviour, and hence demand for boiled and peeled prawns.
The most promising scenario so far is that the UK government has published a list of temporary rates to be levied on goods in the event of a No Deal Brexit. However, Greenlandic prawn and cod products do not feature on the list. This is a welcome development, since if the list is approved by the British House of Commons in the event of a No Deal Brexit, no import tax will be levied on Greenlandic prawn and cod products in the first year post-Brexit, if the draft list is allowed to stand alone, and as published.
On the basis of its extensive sales network, the Greenland fisheries sector believes that it has good opportunities for redirecting its exports of Greenland fish products away from the UK to other markets, if demand for the product exists there. This is naturally subject to a good deal of uncertainty, including the unknown factor of whether the same prices could be achieved for the fish products in the event of a switch to other markets.
The ultimate economic impacts for Greenland of Brexit cannot be predicted at the current time, as the final Brexit scenario has not yet been fully determined.
2.1.3 Other trade and industry In recent years, the frameworks for trade and industry in Greenland have improved. The modernisation that has occurred in a number of areas is furthering future development, growth and welfare. A modernisation of the legislation has been initiated to attract foreign investors generally. More specifically, the industrial subsidies have been updated, and access to external financing has been eased in order thereby to facilitate improved framework conditions for Greenland's trade and industry. Finally, more liberal competition has been facilitated on the Greenlandic market, making it easier to operate a business enterprise, while improving consumer protection. Specific initiatives in 2017/2018 include an incubator scheme to create better conditions for entrepreneurs in the start-up phase in the form of business sparring and consulting. This scheme combines targeted business consulting, workshops and trade networks to give new entrepreneurs a more robust platform on which to launch a start-up. The results have included a series of courses and workshops in 12 towns, which attracted 48 entrepreneurs and 106 attendees, and directly resulted in six export sales.
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In addition, Greenland's trade and industry can apply for financial assistance through a number of export promotion schemes in the form of fully subsidised access to business consulting, product development or export aid, all of which are administered by Greenland Business. The export promotion schemes have undergone impact and performance ratings. These reveal that the schemes clearly incentivise employment. Greenland Business reported an increasing number of applications; a total of 253 enterprises in the period 2012-2017. The impact rating indicates that the general trade and industry promotion schemes have incentivised the creation of an additional some 400 jobs. The trade and industry promotion schemes geared to the tourism sector have served to increase the number of jobs by around 300. The overall effect on employment resulting from visits by international tourists in Greenland in 2017 amount to an estimated 620 jobs.
2.1.4 Exports of ice and water One trade sector which is expected to generate revenue for the Greenlandic economy going forward is ice and water exports. An updated Ice and Water Strategy for 2017-2018 describes the global demand for water resources and Greenland's unique ice and water resources, and explores the preconditions for the utilisation and export of ice and water. Together with recently produced comprehensive marketing materials consisting of legal, financial and technical publications, the Ice and Water Strategy paper forms part of a consolidated marketing effort launched in 2019. Initially, five licensing sites will be put out to tender in Western Greenland. Companies were formerly invited to conduct the exploration, site delimitation and quality-testing themselves to determine water outlets from the icesheet that would be viable for water production and export. With the new strategy, these arrangements are inverted. The Government of Greenland conducted field surveys on the west coast of Greenland in 2017 and 2018. On the basis of the surveys, 5 sites were selected for the following 3 characteristics: • The sites are readily accessible logistically • The water will run out in very large volumes for many years • Tests have confirmed the high potable quality of the water
The 5 sites have now been put out to tender in a public procurement together with comprehensive marketing materials, which also contain a description of how the revised Ice and Water Act that entered into force on 1 January 2019 provides for a lower taxation rate in order to put in place a number of more favourable framework conditions. The Strategy for Ice and Water Exports (2017-2018) sets out 21 recommendations along three main tracks: • The first track is a mapping of viable and relevant meltwater sources, which was produced in association with the Geological Survey of Denmark and Greenland (GEUS). • The second track is an adjustment of the tax and duty rate based on a benchmark analysis of the tax and duty tariffs in a number of countries. The analysis recommends a reduction in both the corporation and dividend tax rate in the ice and water sector to make Greenland more attractive as an exporter of water. • The third track concerns optimisation of other framework legislation. In early 2019, in order to attract applicants and raise awareness of the invitation to tender, a consolidated marketing drive was initiated based on the recommendations of the Ice and Water Strategy. The marketing programme is expected to elicit direct contact with potential players
15
(producers, distributors and investors). The Ministry of Industry, Labour, Trade and Energy is also planning to attend relevant trade fairs and to engage in bilateral talks with the relevant players. There will also be a focus on the potential for ice and water exports forming part of ministerial-level trade and industry promotion going forward in selected countries and regions such as China, India and the EU.
2.1.5 Tourism As may be seen from Figure 5, the period 2015-2018 brought an upward trend in the number of foreign air passengers. Figure 5. Number of air passengers travelling from Greenland.
100000
80000
60000
40000
20000
0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Flypassagerer,Number of passengers der rejsertravelling fra from Grønland Greenland HerafOf which, udenlandske foreign passengers flypassagerer
Source: Statistics Greenland As part of efforts to improve the tourism figures, Statistics Greenland began to count air passengers by country of residence from 2015. From 2015 to 2018, the number of foreign air passengers increased by 6,960 pax. This equates to a 13% rate of increase. The rate of increase for Greenlandic air passengers in the same period is 17%. The Government of Greenland reformed the cruise ship tax in 2015 to boost competitiveness in this sector. The reform made Greenland comparable with other North Atlantic destinations with regard to taxes. The number of cruise tourists is now substantially higher than in recent years, before the cruise ship tax was reduced.
Figure 6 and Figure 7 present Statistics Greenland's bednight and hotel guest statistics.
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Figure 6. Number of hotel bednights annually, 2010-2018.
300.000 250.000 200.000 150.000 100.000 50.000 Number of hotel bednights
Årlige hotelovernatninger Årlige 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 GreenlandersGrønlandske borgere ForeignersTurister
Source: Statistics Greenland, 2019 The number of hotel guests in the period 2014-2017 shows an appreciable increase, but with a small decline from 2017 to 2018. A similar trend is seen in the number of domestic hotel guests and the number of foreign hotel guests in the same period.
Figure 7. Number of hotel guests annually, 2010-2018.
120.000
100.000 80.000 60.000 40.000 Årlige hotelgæster hotelgæster Årlige Number of hotelguests 20.000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018
GrønlandskeGreenlanders hotelgæster UdenlandskeForeigners hotelgæster
Source: Statistics Greenland
It is estimated that foreign tourists in Greenland in 2017 contributed approx. DKK 340m in turnover for the Greenlandic business economy. Additionally, in 2017, foreign tourists created 620 jobs as a result of direct and derived employment effects. The tourism sector thus makes significant contributions to the total economy and society. As indicated by the figures for 2018, there is a need for continued focus on this sector in order to unlock its full potential; see Section 5.2.3.
2.1.6 Hydrocarbon The International Energy Agency (IEA) estimates that global demand for oil in 2019 is set to increase by 1.4m b/d, and predicts rising demand for oil up to 2040.2 The Organisation of
2 Oil Market Report 2018: https://www.iea.org/media/omrreports/fullissues/2018-12-13.pdf
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the Petroleum Exporting Countries (OPEC) sought, through a production agreement, to cut their total oil output by 1.2m b/d or one per cent of global demand. The expectation is consequently that the world is facing greater demand than supply of oil in the coming years, with oil prices likely to rise accordingly. At the same time, the IEA is expecting major new oil discoveries to be made in frontier regions the likes of Greenland. Greenland has some of the world's largest untapped hydrocarbon potentials. 15 offshore exploratory drillings have been carried out. None of these drillings have, however, resulted in commercial discoveries. Norway, for example, made 33 dry boreholes over the 1960s until a commercial discovery of hydrocarbons was made in the Ekofisk reservoir in the North Sea in 1969. The hydrocarbon sector could contribute to creating a more self-sustaining economy in Greenland, if Greenland succeeds in becoming an oil producing country. Oil exploration has been ongoing in Greenland since the 1970s, and many of the largest oil companies have been active in Greenland.
Status of licences granted Petroleum exploration in Greenland has suffered a marked decline within the last four years. At year-end 2018, there were three active licences. Greenland Gas and OIL PLC have submitted yet another application for a licence for Jameson Land. This was approved by the Government of Greenland in March 2019. In addition, Panoceanic, a subsidiary of Petroleum Geo-services (PGS), was granted a licence in August 2018 for an offshore field south of Nuuk under the open-door procedure (unsolicited initiative).
Panoceanic has also submitted a tender under a tender round in 2018 for the Davis Strait, Western Greenland, at the following locations (Figure 8):
Figure 8. Applications for petroleum exploration licences in the Davis Strait, 2018.
Source: Ministry of Mineral Resources and Labour
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Accordingly, in the latter half of 2018, the Government of Greenland received further new applications for petroleum exploration, which is indicative of a positive new trend of renewed interest in Greenland on the part of the companies. The Government of Greenland expects to present a new strategy for this sector in the first quarter of 2019; see also Section 5.2.5.
2.1.7 Mineral resources and minerals Economic growth in China after the turn of the millennium resulted in record-high increases in minerals prices and minerals exploration, but which then transitioned to several years of falling prices and investment in Greenland and globally after 2011 and 2012, respectively. Exploration activities increased again in 2017 as a result of rising metals and minerals prices in 2016.
Investment in mineral exploration in Greenland peaked in 2011 at DKK 705m, after which there was a steady decline down to DKK 130m in 2016, before the investment level rose to DKK 193m in 2017.3
There are as yet no figures for total investment in minerals exploration in Greenland in 2018. The Ministry of Mineral Resources and Labour is expecting continued growth due to an increase in the number of field projects relative to 2017, attributable partly to the increase in minerals prices in 20174. This results in increasing investment in ensuing years.
Table 3 below shows the most well-advanced minerals projects, which either already hold, or are in the process preceding an exploitation licence. It should be noted that there are currently two projects in operation (dotted line). In addition to the table's activities, exploration activities are anticipated for a number of minerals prospecting and exploration projects in 2019.
Table 3. The most well-advanced minerals projects. Project Status Workforce size Greenland Ruby A/S Operations phase 30-35 Aappaluttoq (exploitation licence: 2014) (rubies and pink sapphires) Hudson Greenland A/S Operations phase 20-25 Kangerlussuaq (exploitation licence: 2015) (anorthosite) Ironbark A/S Initial construction phase Construction phase: Up Citronen Fjord (exploitation licence: 2016) to 300* (Zn, Pb) Operations phase: Up to 475* London Mining Greenland A/S Various licence applications Construction phase: Isukasia are expected 1,500-3,300* (Fe) (exploitation licence: 2013) Operations phase: 680-810*
3 Exploration investments include 50% overheads. 4 World Exploration Trends, March 2018, page 2 (Indexed metals prices)
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Nalunaq A/S New exploration activities Napasorsuaq (exploitation licence: 2003) (Au) Greenland Minerals A/S Application for exploitation Construction phase: Up Kuannersuit (Kvanefjeldet) licence expected in 2019 to 1,170* (REE, U, Zn, Fluorite) Operations phase: 787* Tanbreez Mining Greenland A/S Revised application for Killavaat Alannguat (Kringlerne) exploitation licence (Zr, REE, Nb, Ta, Y) submitted in 2016 Dundas Titanium A/S Application for exploitation Construction phase: Northern Greenland licence expected in 2019 30-100* (Ti) Operations phase: 60-100* North American Nickel Inc. Exploration phase Western Greenland (Ni, Pt, Cu, Co) * Expected Source: The Mineral Licence and Safety Agency
The Greenland Ruby A/S ruby and pink sapphire project at Aappaluttoq is in production and has commenced sales of minerals mined during the exploitation phase.
The Hudson Greenland A/S anorthosite project at Kangerlussuaq completed the construction phase and commenced the exploitation phase in December 2018 and expects to make its first anorthosite export in 2019.
Ironbark A/S was granted an exploitation licence for its zinc and lead project at Citronen Fjord in December 2016 and completed preliminary small-scale construction activities in summer 2018.
The granting of an exploitation licence is not synonymous with the immediate start of construction and exploitation activities, due to such factors as financing being affected by trends in mineral resource prices.
To ensure continued interest from the mineral resources industry in investing in exploration and exploitation of Greenlandic minerals, continued efforts to ensure stable framework conditions, easy access to data and to promote the mineral resources potential of Greenland are essential. In addition, official procedures are subject to ongoing assessment in the interests of achieving efficiency improvements.
For Greenland's increased economic independence from Denmark, achieving an increase in mineral exploration activities with a view to increasing the scope and diversity of exploitation activities will be imperative.
China buys approx. 50% of the world's metals, and the country's transition to a less mineral- intensive economy may in future slow the increasing mineral demand.5 The ongoing trend in the minerals sector globally and in Greenland is positive, however, and the global
5 World Bank, Commodity Markets Outlook, October 2018, Chapter: The Changing of the Guard: Shifts in Industrial Commodity Demand
20
transition towards increasingly climate-friendly energy production and consumption is projected to boost demand for a number of minerals.6
The Ministry of Minerals and Labour is in the process of finalising a new Minerals Strategy due for publication in the first half of 2019. The Strategy will present the Government of Greenland's plans for development of the minerals sector over the next 5 years.
Increasing interest in small-scale mining Over the course of 2018, growing numbers of citizens availed themselves of the opportunity to acquire a small-scale licence for mineral prospecting. At the turn of the year 2017-2018, there were 44 active small-scale licences, while at the turn of the year 2018-2019, there were 55, representing an increase of 25 per cent.
Similarly, more small-scale licensees have made the most of the opportunity to have an impartial geological assessment conducted of their finds by the Department of Geology under the Ministry of Mineral Resources and Labour. The offer of an impartial geological assessment and advice is one of several political initiatives to incentivise small-scale mining.
The increase in small-scale activities is expected to increase in 2019.
2.1.8 Employment and unemployment Figure 9 shows the seasonal winter and summer unemployment trend for the last six years expressed as the number of registered job-seekers for the months of January and September, respectively in towns and settlements in the period 2013-2018.
In order to monitor the trend, Statistics Greenland publishes monthly totals of the number of registered job-seekers who have attended the municipal job centres. In a single month, an individual is counted as a job-seeker, regardless of whether they have been registered as such for the entire month or for only a single day; this means that the statistics do not provide absolute unemployment figures, but are indicative of trends.
Figure 9. Seasonal fluctuation in the number of registered job-seekers (2013-2018).
6000
5000
4000
3000
2000
1000
0 2013 2014 2015 2016 2017 2018
January September
Source: Statistics Greenland
6 The World Bank, The Growing Role of Minerals and Metals for a Low Carbon Future
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One reason for the appreciable seasonal fluctuation is that the fisheries, which are Greenland's primary industry, are seasonal, and many employees at the fish processing factories are paid by the hour.
Unemployment is generally highest in settlements and amongst young people. There is a disproportionately high number of unskilled workers amongst the unemployed.
In 2017, unskilled workers made up 84% of all unemployed persons, as compared with 53% of the total workforce. The youth unemployment problem is exacerbated by many school-leavers failing to pursue, or delaying, further education.
The generally low level of educational attainment and social problems mean that many people in this segment have unstable links to the labour market, and perhaps lack the necessary skills to gain steady, well-paid jobs. The structural social problems must be resolved by early intervention, to ensure that all youngsters have a genuine opportunity for, and incentive to, attend lower-secondary education, and are readied to pursue vocational training programmes immediately afterwards.
Figure 10 shows, not surprisingly, that unemployment is highest during the winter. The fluctuation between winter and summer unemployment rates is essentially the same, with an annual average of approximately 1,600 affected by seasonal unemployment. The winter unemployment rate fell by 33% from 4,954 job-seekers in 2014 to 3,308 in 2018.7 The winter unemployment rate fell by 47% from 3,360 job-seekers in 2014 to 1,797 job-seekers in 2018.8
Figure 10. Registered job-seekers by towns and settlements (2014-2018).
4500 4000 3500 3000 2500 2000 1500 1000 500 0 July July July July July May May May May May March March March March March January January January January January November November November November November September September September September September 2014 2015 2016 2017 2018
Towns Settlements
Source: Statistics Greenland
Another example of structural problems in the labour market can be seen in the immigration of unskilled workers coinciding with the relatively high unemployment rate in some parts of the country.
7 January. 8 July.
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The structural unemployment is attributable to three key factors: 1. Locations with high unemployment typically have few jobs and commercial activities. 2. The geographical and housing barrier to filling job vacancies in that potential workers and their families have to relocate to gain employment. 3. A mismatch between the skills required by employers and the skills actually available locally. The issue of the workforce's geographical and skills mobility is thus a key factor to resolve in the efforts to get as many people as possible into permanent employment.
The economic prospects for the next few years also depend on the commissioning of the planned infrastructure projects, and on mineral resources activities, tourism and other commercial activities rising, falling or staying at their current levels. Such activities can create the basis for new growth and higher employment. If activities are initiated within these areas, it is important for the local workforce to possess the qualifications that are in demand, and to pursue a proactive policy of increasing the supply of labour so as to avoid labour market bottlenecks.
2.2 Treasury finances Public sector finances are naturally affected by whether there is growth and employment in the country. High unemployment and/or high numbers of the population on benefits strain the Treasury and municipal finances.
2.2.1 The Treasury's accounts for 2018 The Treasury's accounts shown in Table 4 are based on the Greenland Government Authorities' accounting by account type, as the figures for 2018 are currently estimates.
Please note that negative figures in this chart are revenues/surpluses, whilst positive figures are expenditures/deficits.
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Table 4. Treasury accounts 2009–2018 in MDKK (2018 provisional figures).
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. Revenue -5,379 -5,716 -5,832 -5,952 -5,868 -5,947 -6,092 -6,344 -6,408 -6,698 71. Taxes, duties, mandatory contributions, fines -1,606 -1,886 -1,969 -2,030 -1,892 -1,980 -2,053 -2,319 -2,330 -2,521 73. Public benefits -3,774 -3,830 -3,864 -3,922 -3,976 -3,967 -4,039 -4,025 -4,079 -4.177 2. Operations and Subsidies 5,363 5,430 5,402 5,602 5,709 5,829 5,784 5,930 6,008 6,449 10. Salaries 1,451 1,499 1,533 1,541 1,610 1,635 1,685 1,744 1,819 1,868 21. Travel, personnel and consultants 93 86 79 69 72 78 80 91 95 92 22. Entertainment 3 3 3 4 3 2 3 2 2 2 23. Courses, etc. 39 40 33 42 35 35 35 34 38 36 24. Procurement of services 428 524 369 380 366 342 364 388 425 449 25. Client and student transport 170 156 156 164 171 173 187 191 191 195 26. Recruitment/severance and transfers 72 46 28 30 32 30 30 37 37 38 27. Services, procurement 211 150 117 127 116 117 117 113 131 133 31. Goods 266 275 278 279 300 296 301 299 314 325 32. Buildings, vehicles, boats, etc. 199 329 329 368 415 399 382 364 380 354 33. Procurements, IT, repairs and maintenance 241 155 122 131 132 162 139 154 152 159 50. Operating income -339 -435 -411 -397 -505 -645 -693 -691 -807 -803 61. Commercial subsidies 501 542 480 506 469 507 466 427 405 486 62. Subsidies for culture, leisure and education 449 447 494 470 584 598 622 679 717 679 63. Social subsidies 661 702 665 662 683 679 681 708 641 652 64. Other subsidies 45 21 27 32 37 38 27 28 26 35 65. Subsidies to municipalities 834 789 1,044 1,131 1,127 1,281 1,295 1,327 1,327 1,519 66. Amortisation/depreciation 12 109 20 68 65 55 70 29 87 218 69. Transfers between several financial years 29 -7 35 -5 -2 48 -8 7 27 13 3. Capital expenditure 215 350 563 287 190 384 375 440 486 297 81. Capital expenditure 215 350 563 287 190 384 375 440 486 297 4. Interest -207 -331 -263 -342 -434 -409 -318 -374 -347 -324 75. Dividends -60 -80 -68 -150 -238 -216 -146 -220 -190 -235 76. Return on capital, rental accommodation -60 -55 -53 -52 -53 -54 -49 -47 -49 -48 77. Interest, Royal Greenland 0 -13 -12 -9 -7 -2 - - - - 78. Interest, Nukissiorfiit -65 -78 -95 -109 -117 -116 -109 -100 -93 -85 79. Other interest, net -21 -105 -35 -22 -19 -20 -13 -7 -15 44 5. Lending 958 265 291 470 332 298 -62 136 57 159 91. Construction loans, housing (excl. BSU - 230 163 168 301 236 107 -7 15 34 114 h b f b d) 92. Nukissiorfiit 132 223 277 263 42 160 87 -168 63 18 93. Shares 285 12 -80 8 30 55 15 200 0 43 94. Municipalities, Loans 53 -18 -18 1 15 8 - -2 -37 - 96. Sikuki, Loan 0 0 0 0 110 0 - - - - 97. Royal Greenland, loan repayments 0 0 -50 -50 -50 - - - - - 98. Other lending 258 -116 -6 -53 -50 -32 -32 -91 -3 -16 OIL result 950 7 159 67 -71 154 -188 -211 -204 -117 OI result 515 -198 -51 -147 -78 222 -137 -51 -230 -135 Source : Finance & Human Resources Agency
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Provisional figures for the 2018 Financial Statements (Tables 4 and 5). However, there will still be items which could influence the result in both directions. The figures indicate that the Greenland Government Authorities' revenue from taxes and duties increased by DKK 191m in 2018.
The Greenland Government Authorities' operating expenditure and subsidies increased in 2018 by DKK 440m. This was due notably to a capital injection of DKK 190m in Kalaallit Airports A/S and an increase in the block subsidy paid to the municipalities in 2018 of DKK 192m over 2017. The block subsidy was increased by approx. DKK 25m as compensation to the municipalities in connection with the Mandatory Pension Scheme Act. In addition was a transfer of a total of DKK 125m in the building and construction sector for schools and preschools and from consolidating public-sector financing of private-sector residential construction under the municipalities.
The reduction in expenditure on construction investments of DKK 189m relative to 2017 is due largely to the devolvement of construction-related responsibilities to the municipalities.
Table 5. Overview of key figures from the national accounts and budgets for 2013-2022. Figures for the 2018 financial statements are provisional (MDKK). Negative figures are revenue/surpluses, whilst positive figures are expenditures/deficits.
2013 2014 2015 2016 2017 18 19 20 21 22 Accounts Accounts Accounts Accounts Accounts Accounts Budg. Budg. Budg. Budg. Act Est. Est. Est. Operations, subsidies & statutory 5,854 5,888 5,820 6,286 6,030 6,568 6,510 6,508 6,556 6,557 expenditure Revenue -6,524 -6,630 -6,596 -6,923 -6,945 -7,266 -7,087 -7,050 -7,037 -7,029
Capital 597 896 589 426 712 581 565 536 458 458 expenditure Of which investments excl. loans to 438 736 502 456 518 501 405 396 391 396 Nukissiorfiit OIL -71 154 -188 -211 -204 -117 -12 -7 -23 -14 OI -78 222 -137 -51 -230 -135 -7 3 -13 -4 * Provisional figures.
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Figure 11 below shows the trends in surplus/deficit for OI (operations and investments) at the Treasury since and up to the last budget estimate year.
Figure 11. OI result as % of total expenditure for 2012-2022. Figures for the 2018 financial statements are provisional.
4,00%
3,00%
2,00%
1,00%
0,00%
-1,00%
-2,00%
-3,00%
-4,00%
Explanatory notes. The provisional OI result for 2018 was obtained in relation to budgeted expenditures.
2.2.2 Relationship with municipal financial performance Public sector finances are closely integrated. Any underperformance in the Treasury will constrain the municipalities' financial scope and vice versa.
Higher revenues from direct taxes not only benefit the Treasury, but also the municipalities to an even greater degree. They receive around 70% of total revenues from PAYE, corporation tax and dividend tax via municipal and common municipal taxes.
Financial statements for 2018 (provisional figures) and 2019 budget Table 6 shows the provisional financial statements for the municipalities for 2018 and budgeted for 2019. Please note that the financial statements have not yet been audited and politically approved.
Table 6. Municipal finances, TDKK (positive figures represent expenditures) 2018 Financial Statements (provisional figures) Kujalleq Sermersooq Qeqqata Qeqertalik Avannaata Total Operation 537,679 1,684,840 651,420 488,000 758,792 4,120,731 Investment 37,603 256,663 97,003 26,800 84,899 502,968 Revenue -563,996 -1,940,221 -828853 -565,000 -875,994 -4,774,064 Result -11,286 1,252 -80,430 -50,200 -32,301 -172,965 2019 Budget Kujalleq Sermersooq Qeqqata Qeqertalik Avannaata Total Operation 539,829 1,558,351 668,336 490,760 786,336 4,043,612 Investment 53,935 300,376 127,950 75,112 82,110 639,483
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Revenue -608,133 -1,938.465 -804,453 -572,054 -887,409 -4,810,514 Result -14,369 -79,738 -8,167 -6,182 -18,963 -127,419 Source: Greenland's municipalities. Note: provisional figures; final figures may vary substantially from the above.
In 2017, only Qeqqata Municipality came out of the year with an accounting surplus. The other three municipalities filed negative accounting figures for 2017. Overall, the municipalities reported a total deficit of DKK 14.9m.
2018 was a far better year for the municipal sector, and at the time of writing (19/2/2019), although the accounts have not been finally closed, the expectation is of decent surpluses, with the exception of Semersooq Municipality, which is expecting a small deficit. This naturally reflects the consistent economic upturn with relatively low employment, buoyant fisheries exports prices and high construction activity. Overall, the municipalities are expecting a surplus in the order of DKK 170m.
In their budgets for 2019, the municipalities collectively forecast a result of DKK 127m, corresponding to approximately 2.6% of total revenue. The improvement compared to 2018 is attributable to a higher revenue projection in Kujalleq Municipality and falling operating expenditure in Sermersooq Municipality. The aggregate municipal operating expenditures are budgeted to decrease by 1.9% relative to 2018. The budgetary improvement will be realised in spite of the budgeted increase in capital expenditure owing to the significant 27.1% rise in building and construction sector spending relative to 2017.
Municipal borrowing The municipal leasing obligations and debt to external lenders at year-end 2018 were as follows: • Kujalleq Municipality redeemed its debt to the Treasury in 2018 as part of a municipal loans conversion. This municipality had an interest-bearing overdraft facility of approx. DKK 105m. At year-end 2018, the municipality's net interest-bearing debt amounted to approx. DKK 81m. • Sermersooq Municipality's debt totalled around DKK 11 million and it had no net interest- bearing liabilities. • Avannaata Municipality's debt totalled around DKK 10 million and it had no net interest- bearing liabilities. • The municipalities of Qeqertalik and Qeqqata had no debts or liabilities.
2.3 Taxes and duties The increase in indirect taxation effected in 2016 and 2017 continued in 2018. Revenues from indirect taxes and duties totalled around DKK 1,195m in 2018 compared with DKK 1,035m in 2017, which is around DKK 160m higher than in 2017. One of the indicators usually used for economic trends is the revenue from stamp duty. An increase in this revenue from DKK 35.5m in 2017 to approx. DKK 49.3m in 2018 was recorded, corresponding to a revenue increase of 38.8%. Another indicator of the upturn that occurred in 2018 was the import duty on motor vehicles. This revenue increased by 3.6 per cent from 2016 to 2017 to approx. DKK 49.8m. The increase was sustained in 2018, with total revenue recorded of approx. DKK 53.6m in 2018, corresponding to a 7.5 per cent increase. Overall, revenue from the import duty on motor vehicles amounted to DKK 502.9m in 2018 as against DKK 515.4m in 2017. Revenue from imports of tobacco products fell in 2018 by approx. DKK 6.3m. Revenue from import duty on alcoholic beverages fell by approx. DKK 9.9m in 2018 relative to 2017. Taxes from fish and prawns totalled DKK 425.6m in 2018 against DKK 273.1m in 2017. The increase was due primarily to the Act on Resource Rent Taxation of Greenlandic Fisheries which came into
27 effect on 1 January 2018. This Act enlarged the taxation base to comprise more species of fish, and also amended the model for calculating the rate of taxation. This revenue was also affected by quota sizes, quota utilisation, the product mix, export prices and exchange rates. Tax revenue from the fisheries accounted for 35.6% of total revenue from indirect taxation in 2018 as against 26.4% of total revenue from indirect taxation in 2017. As indicated by Figure 12, total revenue from indirect taxes has increased by approx. DKK 594m since 1996, in current prices. Figure 13 presents the same trend, but in constant prices.
Figure 12: Trend in duties, 1996 to 2018, in current prices.
Percentage distribution Percentage distribution Kr.
Figure 13: Trend in duties, 1996 to 2018, in constant prices. Percentage distribution Percentage distribution Kr.
Source: Tax Agency
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Note: The secondary vertical (right) axis is broken down by total import taxes and total taxes. The remaining duties are broken down into percentages on the primary (left) axis.
This figure indicates that the import-duty share constitutes a substantially smaller fraction of total taxes relative to previous years. This is attributable primarily to a fall in revenue from the import of alcoholic beverages and tobacco products, which formerly accounted for 80 to 87 per cent of total import duty revenue.
Imports of pure alcohol were down by approx. 22 per cent since 1996, and tobacco imports by just under 24 per cent relative to 1996. Although the tariffs were increased in this period, the total revenue generated by these two product categories decreased from approx. DKK 410m in 1996 to DKK 318m in 2018 in current prices, or DKK 201m in constant prices.
2.4 Tax arrears Arrears increased from approx. DKK 935m to DKK 959m in 2017. In 2018, they increased further, bringing the total arrears, including provisions for tax losses, to approx. DKK 988m at the start of 2019. This corresponds to a 3.07% increase relative to January 2018. The increase stems primarily from arrears in child maintenance payment and provisions for tax losses.
Table 7 presents an overview of trends in arrears during 2018.
Table 7: Trends in arrears in 2018 by type
January 2018 January 2019 Percentage change No. of Arrears in No. of Arrears in DKK No. of Arrears Group Arrears type cases DKK cases cases 1 Maintenance payments 78,822 372,776,473 80,206 383,604,969 1.76% 2.90% 2 Tax arrears 1,236 27,183,894 971 22,516,686 -21.44% -17.17% 3 ESU 74 40,045,632 68 38,253,030 -8.11% -4.48% 4 PAYE 2,860 20,869,352 2,618 18,701,730 -8.46% -10.39% 5 Corporation tax 83 306,361 79 240,443 -4.82% -21.52% 6 Rent 5,669 66,988,328 4,716 55,874,814 -16.81% -16.59% 7 Tax interest 1,810 2,382,538 1,217 1,707,483 -32.76% -28.33% 8 Misc. municipal back 20,562 44,015,335 19,448 42,564,737 -5.42% -3.30% taxes 9 Help with repayment 5,582 25,936,075 5,038 25,022,149 -9.75% -3.52% obligation 10 Student loans 1,135 15,460,808 976 14,312,027 -14.01% -7.43% 11 Day care 25,679 15,272,510 26,879 16,142,279 4.67% 5.69% 12 Refuse collection 108,654 33,541,965 114,052 36,903,534 4.97% 10.02% 13 Municipal business loans 85 744,037 76 675,748 -10.59% -9.18% 14 Misc. arrears 12,547 25,462,361 13,092 22,569,137 4.34% -11.36% 15 Housing benefit loan 345 16,348,205 314 17,259,759 -8.99% 5.58% 16 Self-build loans 307 4,334,523 281 3,831,169 -8.47% -11.61% 17 Utilities 12,510 4,652,746 7,981 3,036,467 -36.20% -34.74% 18 Parent’s contribution, 29,751 38,779,491 23,739 31,905,161 -20.21% -17.73% child in care 19 Nordic claims 939 11,591,657 846 11,329,288 -9.90% -2.26% 20 Other arrears 8,600 2,417,163 7,322 2,125,399 -14.86% -12.07% 21 Provisions for loss on 190,000,000 240,000,000 26.32% taxes Total 317, 250 959, 109, 454 309, 919 988, 576, 009 -2.31% 3.07%
Source: Tax Agency
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The item ‘Provisions for tax losses’ covers provisions for losses on PAYE, tax arrears, tax interest, corporation tax, dividend tax and so forth. The provisions have been determined by agreement with the external auditor of the Greenland Government Authorities. The older a debt is, the more difficult it becomes to collect, and a larger proportion is thus set-off for expected loss. As such, these are not losses incurred but expected losses on receivables for the Greenland Government Authorities. If the arrears are totalled without provisions for loss on taxes, aggregate arrears were down from DKK 769m in January 2018 to DKK 748m in January 2019; a decrease of approx. DKK 21m (2.7%). The number of arrears cases in the same period decreased from approx. 317,000 to approx. 310,000, corresponding to a decrease of approx. 2.3%. Of the aggregate approx. DKK 988m in arrears as at January 2019, approx. DKK 275m, representing approx. 66,000 arrears cases, were successfully recovered. The areas with the biggest deviations in arrears are shown in Table 8. The need for robust efforts to prevent and reduce arrears to the public sector remains great. This will be given higher priority in various ways as described below.
Table 8. Trend in arrears in per cent and DKK from 2018 to 2019 Arrears type Difference in % Difference in DKK 1,000s Maintenance payments 2.9 % 10,828 Rent -16.5 % -11,113 Utilities -34.7 % -1,616 Refuse collection 10.0 % 3,361 Provisions for loss on taxes 26.3 % 50,000 Source: Tax Agency
The trend in child maintenance payment arrears is not solely a Greenlandic phenomenon; a similar trend is also seen in Denmark. This area is relatively difficult to administer, and unless the legislation is amended, the prevailing trend is likely to continue. At present, the municipalities must disburse child maintenance for defaulting parents even where such parents are already in arrears. It is, however, gratifying to note that the trend in the rent category has been reversed since 2016.
The decrease in aggregate arrears on utilities (electricity and water) are attributable to reduced charges, which have resulted in timely payments, but also to the high activity level in the pilot project for debt counselling on both rent and utilities. A large proportion of housing sector arrears are owed by individuals/households with an income that should make their rent affordable, but where the willingness to pay rent is lacking.
The healthy economic trend over the last few years is believed to have primarily impacted revenues from fishing and its associated industries, as well as construction. Therefore, there are no guarantees that the income of other groups, and thus their ability to pay, will improve correspondingly through 2017 and 2018.
Even though the arrears within refuse collection are modest compared to the aggregate arrears, they represent more than one-third of all arrears cases. Regardless of the size of arrears, there are a number of rules and procedures that have to be followed. The entire collection system thus risks 'drowning' in the huge number of refuse collection cases to the detriment of other sectors. Not only is a great deal of time and effort expended on these cases, but they also drain time from other, perhaps more critical, cases.
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Around 39% of refuse collection cases concern residents of Avannaata Municipality, and 28% of refuse collection cases concern residents of Qeqertalik Municipality, according to an analysis compiled in January 2019.
It could still be worth considering whether this sector should continue to be financed directly by billing individuals or indirectly via tax.
Around 55,600 new cases were opened in 2018, totalling DKK 66 million in arrears. In addition to these, are the accounting-specific provisions.
In partnership with the municipalities and a number of other stakeholders, the Government of Greenland has launched an inquiry into the problems of widespread personal debt, in the interests of reducing this through targeted interventions.
2017 saw the launch of a two-year debt-counselling project in Kujalleq Municipality. The project entailed Ini A/S working in partnership with the municipality to set up a debt-counselling team that was able to engage in outreach to individuals and families in rent arrears in a far more direct and proactive manner. The counselling not only addresses the specific rent arrears of those concerned, but operates with a broad-based approach to these arrears. The aim was to find solutions in partnership with the local authority to ensure that individuals do not lose their home, and generally work themselves out of arrears with the aid of an intervention by the municipality or other body insofar as this is appropriate. In instances where they were able to pay, the aim was to encourage payment of rent to avoid eviction as far as possible.
Based on the positive outcomes of the pilot, funds have been earmarked for extension of the scheme to all municipalities in 2019. An appropriation of DKK 3,686m on the Budget Act's Main Account 30.14.32 is expected to be invested in contracts with INI A/S and Iserit A/S and the municipalities on an extension of the debt-counselling project with a broad-based approach to reducing citizens' arrears problems.
In connection with the transition to a new ERP system, an extensive project is in progress to audit registered receivables. This is expected to result in an extraordinarily higher number of debt collection closure proceedings by the Collection Agency, which the original creditors will have to write off in their accounts, if the claims have expired.
Please see also Section 5.3.2 on the Ilanngaassivik payment system designed to prevent debt accumulation.
2.5 Debt trends In the coming years, the limited companies owned by the Greenland Government Authorities will be facing a number of investments. Royal Arctic Line (RAL) is upgrading its fleet of container vessels and settlement vessels, and Royal Greenland is procuring new trawlers. Depending on the parliamentary resolutions, the establishment of new airports at Nuuk, Ilulissat and Qaqortoq will in the coming years take up capacity in the building and construction sector.
In December 2018, the Greenland Government Authorities repaid a loan with Nordic Investeringsbank with a residual debt of DKK 252m. This released the Authorities from a borrowing cap linking the interest-bearing net debt held by the Authorities and the wholly-owned limited companies.
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Under the auspices of the Nuuk City Development urban expansion project, Sermersooq Municipality expects to take up a long-term debt of DKK 1,245m, expiring 2023. The other municipalities do not currently have any substantial plans for borrowing by the municipally owned limited companies.
The adoption of Act No. 28 of 28 November 2018 on authorisation of municipally-owned enterprises' procurement, loan guarantees for, and leasing of certain properties and facilities set out the frameworks for the municipalities' obligations in connection with company formation. The law necessitates increased attention from the Greenland Government Authorities regarding the municipal companies' borrowing.
Table 9 presents an overview of debt in the period 2016-18, and estimates for 2019-22, covering the municipalities, the Greenland Government Authorities and the limited companies under their ownership, respectively.
Table 9. The historic and projected debt trends within the Greenland Government Authorities, the municipalities and public limited companies. Interest-bearing debt 2016 2017 2018 2019 2020 2021 2022 The Greenland Government 521 496 166 141 116 91 66 Government -owned limited 3,763 3,659 3,443 3,959 4,110 3,575 3,988 Municipal limited companies 3 3 - 165 553 890 1,163 Municipalities 166 147 143 83 71 59 49 Total 4,453 4,305 3,752 4,347 4,851 4,616 5,266 Net interest-bearing debt The Greenland Government -837 -1,319 -1,124 -1,079 -1,053 -1,046 -1,240 Government -owned limited 2,511 2,697 2,476 3,013 3,360 2,555 3,434 Municipal limited companies -7 -4 - 125 513 850 1,123 Municipalities -202 -168 -349 -206 -211 -179 -274 Total 1,465 1,206 1,004 1,854 2,610 2.180 3.044 Source: Ministry of Finance
Since last year's Political and Economic Report, the projected borrowing for Kalaallit Airports A/S (KAIR) has been reduced from DKK 1.5m to DKK 0.9m. Loan agreements are unlikely to be concluded under the auspices of KAIR until at a late stage in the construction phase. This is due to the ongoing injection of liquid funds into the Group. In addition, both Royal Arctic Line and Royal Greenland need to renew their fleets. To do so, they will be taking out loans. In the coming years, Illuut will also be taking out loans to build student halls of residence and housing for parliamentary members: see the remarks on this in the Budget Act. To that end, Illuut acts as a financing instrument for the Greenland Government Authorities. This allows the authorities to achieve mortgage loans for these projects.
Over the last couple of years, liquidity in the Treasury was aided by an economic upturn buoyed by high volume and prices in the fisheries and high-level construction activity. The Treasury's financial statements for 2018 have not yet been finalised, and there are as yet no provisional indications of the final OIL result. As part of the current airport investment plans, deliberations are currently ongoing concerning the Greenland Government Authorities' debt and liquidity management. The Greenland Government Authorities' interest-bearing debt totalled DKK 166.4m at year-end 2018, and liquidity in the Treasury at the same time was in excess of DKK 2.1bn.
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In terms of the governmental debt burden and its borrowing capacity, there is a sound basis for undertaking the major investments embodied by these plans and any entailed financing commitments. Provisional calculations by the Central Accounts Department indicate that, all things being equal, the Treasury's liquidity will exceed DKK 1bn at year-end in the period 2019-2022.
This assessment is based on three aspects of significance for the coming years' liquidity-decrease totalling DKK 700-800m over the period:
1. Surpluses from the Treasury's accounts from 2017 and 2018 totalling around DKK 415m are earmarked for investment in Kalaallit Airports A/S, in the remarks to the 2018 Budget Act, which authorises the financing of these investments.
2. Continued servicing of the Greenland Government Authorities' long-term debts by annual payments of just over DKK 25m in the coming years.
3. Reduction in funds held in the Construction and Refurbishment Fund, as a result of the previous resolution to devolve construction projects for the pre-school and lower-secondary school sector to the municipalities. The same is expected to be effected in extension of a forthcoming transfer of public rental accommodation from the Greenland Government Authorities to the municipal authorities.
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3 Greater autonomy and economic self-sustainability The foundation for the Government of Greenland's economic policy, as set out in the coalition agreement, is as follows: “It is the objective of the coalition parties for Greenland to be economically self-sustaining. The coalition parties find it important for the Government of Greenland to pursue a balanced fiscal policy, based on prudent spending informed by visions and objectives”.
3.1 Goals and principles for the Government of Greenland's economic policy The frameworks for the Government of Greenland's economic policy were laid down in connection with adoption of the 2019 Budget Act. The overarching goal for Greenland's economic policy is to create the frameworks for a self-sustainable economy. To that end, it is important to support the transition to a multi-faceted economy, as this reduces vulnerability to price fluctuations in, for example, fisheries products. The overarching goals and sub-goals are as follows:
Overarching goals for Greenland's economic policy
• A self-sustainable economy • Independence from the block grant from Denmark
• Short-term sub-goals – A liquidity reserve to guarantee capacity to fulfil guarantees and obligations – Budget Act to balance or record a surplus over a 4-year term
• Long-term sub-goals – The long-term sustainability of fiscal policy – Real economic growth – Transition to a multi-faceted economy
In order to create the preconditions for increased economic and political independence, Greenland will seek not only to secure the tenability of its economic policy under the prevailing conditions, but also create the economic scope for taking over more responsibilities from the Danish State. In practice, this entails generating a surplus in the Budget Act, and making the necessary investments conducive to long-term growth and progress. However, Greenland must also keep public spending at a level that guarantees economic sustainability, including managed inflation over both the short and the long term. Table 10 presents historical trends illustrated for different time series.
Table 10. Annual average growth in Treasury revenue and expenditure, respectively, inflation- adjusted for the period 1994-2017, and the period 2009-2017, respectively. From year Revenue Expenditure Inflation adj. Annual average growth, 1994-2017 2.9% 3.0% 2.1% Annual average growth, 2009-2017 3.0% 2.1% 1.8% Source: Ministry of Finance
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An improvement is apparent with respect to both lower expenditure growth and the inflation rate in the latter part of the period. This may be attributable to external factors, such as oil prices, the structuring of the economic policy, including more stringent financial governance. Naturally, only the last-named can be influenced, even if restructuring and investment over time would be instrumental in reducing the economy's exposure to external risks.
Against that background, it is imperative that Greenland's economic governance is founded on explicit goals and principles. A coherent and credible economic policy provides long-term peace of mind for citizens and enterprises, and is a significant element in attracting foreign business partners and investors, which can contribute to fulfilment of the overarching goals.
The Government of Greenland expects to adopt the following as the basis for its priorities in the forthcoming Budget Act Bill: • Public finances, expressed in the OI result, will, over the 4-year period, generate a surplus. • Motions for high-cost, but as yet unfinanced, initiatives from the Government of Greenland are to form part of the overarching and cross-cutting priorities in the Budget Act process. • The annual appropriations will the implications of demographic trends into account. • New initiatives are to be validated with reference both to the budget estimate years, and to long-term economic policy sustainability. • New expenditure requests must be financed, as far as possible, within the already allocated appropriations.
The public sector is subject to growing demands for effective performance of its core duties. Efficient utilisation of public resources will serve to create scope for political priority-setting, and possibilities for taking over responsibilities from the Danish State. The above-described goals and principles for Greenland's economic policy will be implemented by means of the Government of Greenland's annual budget act procedures, general political developments ensuing from execution of the Coalition Agreement and the following specific instruments: • Executive orders pursuant to the Budget and Accounting Act and possible amendments to that Act with a view to the compilation of an operational statement on budgetary status within the municipalities and the Greenland Government Authorities. • A liabilities and liquidity policy. • An update to the sustainability model so that changes in structural conditions, including the effects of raising the level of education and labour market participation, are more evident from the calculations. This work will be carried out in consultation with the Economic Council and is expected to continue through 2019 and 2020. • In extension of this, an updated economic sustainability and growth plan. 3.2 Deliberations on future take-over of responsibilities from the Danish State A report on the transfer of responsibilities from Denmark to Greenland was distributed at Parliament's 2018 Autumn Session. The report was prepared by the Chairman's Ministry based on materials gathered by the Danish Ministry of Finance.
Under the 2019 Budget Act Agreement, the efforts going forward to map the preparation of the take-over of relevant new responsibilities from the Danish State will enter into a new phase in which, for future Budget Acts, proposals will be drawn up for specific devolvement to Greenland in domains that will yield the greatest value-added for Greenland.
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As part of the mapping of devolvement of responsibilities from the Danish State, an internal consultation was conducted within the Government of Greenland's administration concerning what the individual ministries currently have available in the way of relevant analyses, reports or the like in relation to responsibilities that might be taken over from the Danish State; see the Appendices to the Act on the Greenland Government Authorities. Based on this, a method has been devised for analysing which responsibilities are expected to yield the highest value-added for Greenland.
Figure 14 is a flowchart for the work going forward to prepare and execute future take-over of responsibilities from the Danish State on a well-informed basis and prioritised according to transparent criteria.
Figure 14. Flowchart of the process in support of take-over of responsibilities from the Danish State.
Resolution 2015 Autumn Agreement on the 2019 Political and Economic Session/113 Analysis/Report From 2020/21/... Budget Budget Act Report 2019 Act Bills Report 2018 Autumn Analysis of likely Session Prioritisation of take- The Government of candidates and proposed Economic consequences Concerning the take-over overs based on projected Greenland’s deliberations plan of responsibilities from value-added concerning priorities + attendant legislation the Danish State
Source: Ministry of Finance
A method for prioritising responsibilities that could be taken over from the Danish State is based on two parameters: self-sustainability and drawbacks, each with three sub-parameters: • Self-sustainability is the sum of weighted assessments of the economic benefits, contribution to sovereignty and symbolic value. In the model, the economic benefits have the highest weighting (60%), sovereignty has a 30% weighting, and symbolic value a 10% weighting. o The economic benefits concern the potential national economic benefits. o Sovereignty means Greenland's decision-making powers. Limitations on this might, for example, consist of binding commitments concluded through affiliation with international organisations, signing up to conventions or the like which limit political freedom of action. o Symbolic value denotes the representative, but non-economic significance, of a given take-over.
• Drawbacks are the sum of weighted assessments of public expenses (weighted at 50%), risk (weighted at 30%) and complexity (weighted at 20%. o Public-sector expenditure concerns how costly the take-over of a responsibility would be for Greenland. o Risk would, for example be: the risk of losing money, the risk of prosecution, the risk of having sole responsibility for managing an environmental disaster. o Complexity concerns how complicated a given domain is, for example, in terms of the magnitude of effort on legislation, public administration and the like.
This method can only be utilised to provide indicators for use in inter-ministerial political decision- support and priority-setting. This is due to a number of factors:
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• Few analyses proper have been undertaken on candidate take-over responsibilities exist, and for the majority of sectors, such analyses present few viable economic calculations or elucidation of the administrative consequences. • Those expenses which Denmark incurs in fulfilling a given responsibility at present are not viable for actual budgeting of what it would cost Greenland to assume that responsibility with respect to initial and annual operating expenses in the Budget Act. • Some of the sub-parameters proposed are subjective in nature and hence associated with another type of uncertainty, since, by their very nature, they will be subject to differing opinions as to the weight they should be attributed.
However, with these limitations in mind, the method is deemed serviceable for achieving an initial selection and identification of a manageable number of candidate take-over responsibilities based on a transparent process, and for subsequently setting political priorities.
The two parameters (self-sustainability and drawbacks) will, on balance, provide a picture of which domains, that, with reference to the given criteria, would appear relevant to take over from the Danish State. These two sums can be plotted in a scatter chart. This is illustrated schematically in Figure 15, where a number of candidate take-over responsibilities have been plotted. Below, three areas (dots A, B and C) are highlighted to describe how the figure is to be interpreted.
Figure 15. A possible method for weighing up the benefits and drawbacks of taking over responsibilities from the Danish State. 100 90 A 80
70 60 B 50
sustainability 40 - 30
Self C 20 10 0 0 20 40 60 80 100 Drawbacks
Source: Ministry of Finance
• Dot A means that a take-over will contribute substantially to Self-Sustainability with relatively few drawbacks, making it pertinent to produce a report specifically on this domain with a view to possible take-over. • Dot B is ranged between the two. This would indicate a need for more information before a better score can be obtained on Self-Sustainability and Drawbacks of a take-over. • Dot C is far from drawbacks, which may indicate that a take-over would be cost-intensive, complex and offer few benefits.
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The take-over domains will, however, also be assessed in terms of their information level, with differentiation between: Low, Medium or High information level.
Currently, the level of information for the majority of domains is Low. Accordingly, in support of the next stages of the process, the Government of Greenland will be addressing which of the domains it wishes to prioritise a more detailed elucidation of.
This is necessary in order to be able to prepare a subsequent recommendation on decisions for Parliament concerning possible take-over of the responsibility from the Danish State on a well- informed basis; see also Figure 14.
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4 Benchmarks and indicators
4.1 The Budget and Accounting Act and financial governance The 2016 Budget and Accounting Act for the Greenland Government Authorities and Municipalities created a firm foundation for governance of public finances, and is also conducive to amassing funds for major strategic investments via the Fund for Long-term Investment, which is financed via extraordinary Treasury revenues. The aim of this is to ensure that these extraordinary revenues are used for investments that yield maximum returns and the best possible macroeconomic effects of the funds. The provisions of the Budget and Accounting Act are being phased in gradually. At present, the phase-in comprises executive orders pursuant to the Act, which are currently undergoing Parliamentary hearing with a view to their adoption this year. This will be effected following consultation with the municipalities, for example. In many cases, fulfilment of political goals entails cross-sectoral and coherent solutions for the public sector, in the interests of enabling achievement of sustainable financial performance in public-sector budgets and resolving underlying structural problems in the welfare, educational and employment sectors. A number of reform programmes and targeted initiatives will deal with the growing burden of expenditure ensuing from demographic disparities. With this in mind, it is imperative to incentivise more young people to gain vocational qualifications and subsequently join the labour market; see also Section 5.4.1 on increased self-reliance. In recent years, a number of reforms have been carried out in the pensions sector, taxation sector, including the increased fisheries resource rent tax. These have been instrumental in addressing the challenge of balancing expenditure and revenues in public-sector finances. This positive trend is, however, also aided by the economic upturn within the fisheries sector especially. The phasing in of the new Budget and Accounting Act will provide a clearer policy framework for public expenditure control, which will contribute to achieving the necessary expenditure-revenue balance. In practice, this will require more stringent prioritising of public spending and streamlining of the public sector. To that end, it will be imperative to identify tools to ensure that policy-based prioritisation is based on an overall assessment of cross-sectoral needs, insight into initiatives conducive to fulfilment of political goals and securing the necessary continuity across the public sector. The present Political and Economic Report thus presents an update on current status and slight adjustment of the principal performance benchmarks and associated indicators presented in the 2018 Economic Report in the interests of monitoring Greenland's economic development.
4.2 Use of benchmarks and performance indicators In order to monitor progress on fulfilment of overarching political goals vis-à-vis the Sustainability and Growth Plan, a number of goals and indicators were presented in the 2018 Economic Report. This was in the interests of ensuring continued focus on attainment of these goals and resolving underlying structural societal problems. The proposal is to continue these indicators, supplemented with two new indicators, No. 14 and No. 16, respectively; see the figure illustrating the two goals.
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The indicators below are both cross-cutting in nature, and serve as key indicators within the four reform tracks from the 2016 Sustainability and Growth Plan (Table 11). The indicators have been selected with a view to: • Their viability for measuring performance over the long term. • The relative ease of procuring the requisite data for them, primarily via Statistics Greenland. • Where possible, for their alignment with relevant UN Sustainable Development Goals (SDGs). • Where possible, for use in benchmarking with comparable countries and regions. • Their being readily communicable politically, administratively and to the general public.
Table 11. Indicators of progress on achieving overarching goals Indicator Reform track Title Data 1 Cross-cutting Self-sustaining economy Block grant's relative size in relation to GDP 2 Cross-cutting Increased production and growth Real growth in GDP 3 Cross-cutting Scale of the public sector Public sector share of GDP 4 Cross-cutting Indebtedness and economic freedom of Net debt relative to GDP action 5 Cross-cutting More to take up well-paid employment Proportion on minimum SIK-union wage 6 1 – Education and More citizens with vocational Proportion of 30-34-year-olds with training qualifications vocational qualifications 7 1 – Education and Higher proportion of school-leavers Proportion of school-leavers in further training progressing directly to further education education one year after lower- secondary education 8 2 – Growth More robust export trade Composition of exports by sector 9 2 – Growth Increased employment Trend in unemployment rate 10 3 – Public sector Scale of the public sector Public sector payroll costs 11 3 – Public sector Health for the whole nation – a longer Trend in life expectancy life 12 4 – Financial self- Greater equality and reduced social Reduction in the GINI coefficient reliance disparities 13 4 – Financial self- More joining the workforce Labour force proportion of the reliance population 14 4 – Financial self- More young people in education or 15-25-year-olds, neither in education reliance employment (new) nor employment 15 Infrastructure Sustainable energy production Share of renewables in Nukissiorfiit energy company 16 Crime Reduction in offences against the person Trend in reported offences (new)
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4.2.1. Cross-cutting goals and indicators Goal 1: A self-sustaining economy. Reduction of the size of the block grant relative to GDP
35 30 25 20,17
20
% 15 10 5 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Statistics Greenland
The block grant's relative share of GDP has slowly decreased and thus generally fulfils the political goal of reducing reliance on the block grant from the Danish State.
Goal 2. Increased production. Real growth in GDP in the period 2003 to 2017 relative to OECD benchmarks.
8
6
4
% 2
0
-2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-4
Annual real growth in GDP Annual real growth in GDP
Source: Statistics Greenland and OECD
The annual real growth in GDP has been consistently high, including in comparison with the OECD- country average. GDP growth in Greenland is prone to significant fluctuations attributable in part to the high reliance on the fisheries trade.
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Goal 3. Scale of the public sector. Public spending share of GDP. 60%
50%
40% 39%
30%
20%
10%
0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Statistics Greenland
The public-spending share of GDP has generally decreased since 2003, but with a slight increase from 2016 to 2017. Public spending is still relatively high in international terms. This is partly attributable to Greenland's geographical and population size.
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Goal 4. Indebtedness and economic freedom of action. Total net interest-bearing debt and projected borrowing as share of GDP, 2010-2022
16 14 12 10
% 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Historical Forecast (for GDP share)
Source: Ministry of Finance Total public-sector net debts are fairly modest. The figure includes the Greenland Government Authorities limited companies' debt and projected borrowing, but not the equivalent for municipal limited companies. The figure takes into account factors such as projected borrowing for coming infrastructure investments. Consideration of the size of the net debt must take into account Greenland's risk exposure. Given the current reliance exclusively on fisheries trade, Greenland's debt-servicing capacity is lower than if it had more key industries. Any increase in borrowing should therefore also be considered in the light of whether the associated investments will serve to diversify the industry structure, and are financially sound; see the stipulations to that effect in the Budget and Accounting Act. In the international context, Greenland's debt remains low.
Goal 5. More to take up well-paid employment. Proportion above and below the SIK-union minimum wage in 2006, 2016 and 2017
70%
60%
50%
40% 2007
30% 2016 2017 20%
10%
0% Above Below
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Source: Ministry of Finance A very large proportion of the workforce (age 18-64) has a relatively low income. The figure remained virtually unchanged overall from 2007 to 2017, but with a slight positive change from 2016 to 2017, presumably as a result of the upturn in the economy.
4.2.2. Goals and indicators for education Goal 6. More citizens with vocational qualifications. The number of individuals with vocational qualifications relative to the number of 30-34-year-olds. 60% 5500
55% 5000
50% 4500 34 years 45% 4000
40% 3500
35% 3000 Population aged 30 - aged Population 30% 2500
25% 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Vocational qualifications Population aged 30-34 years
Source: Statistics Greenland
The population count of 30-34-year-olds fell significantly in the period 2002 to 2010, but has subsequently risen slightly since 2010. The proportion of individuals with vocational qualifications increased by around 6 percentage points over the aggregate period from 2002 to 2017. In 2017, however, the proportion decreased from the peak in 2010.
Goal 7. Higher proportion of school-leavers progressing directly to further education. Proportion of school-leavers in further education one year after completing lower-secondary education.
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Source: Ministry of Education, Culture, Church and Foreign Affairs
The proportion of school-leavers progressing rapidly straight from lower-secondary school increased from 35% in 2013 to 45% in 2015. The figures include both day upper secondary schools and boarding schools.
4.2.3. Goals and indicators for growth and employment Goal 8. More robust export trade. Composition of goods exports.
100%
80%
60%
40%
20%
0%
Fish Other
Source: Statistics Greenland
Exports of fish and shellfish continue to account for a very high share of total goods exports. This makes the Greenlandic economy very vulnerable to fluctuations in the fisheries with regard to factors such as prices and quota sizes.
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Goal 9. Increased employment. Unemployment rate in towns and settlements, 2010-2017
20% 18% 16% 14% 12% 10%
8% 6% 4% Proportion 2% 0% 2010 2011 2012 2013 2014 2015 2016 2017
Towns Settlements
Source: Statistics Greenland
The number of registered job-seekers (representing the unemployment rate) has been decreasing since 2012 for towns, but has fluctuated for settlements. The number of registered unemployed persons is relatively higher in the settlements than in the towns. The figures only represent up to 2017, as no new figures are available for the size of the workforce. 4.2.4. Goals and indicators for the public sector Goal 10. Public sector (not incl. govt). Public sector payroll costs.
110% 108% 106% 104% 102% 100% 98% 96% 94% 92% 90% 88% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Municipalities The Greenland Government Authorities Public sector (central govt.)
Source: Statistics Greenland The total payroll costs of the Greenland Government Authorities and the municipalities were at the same level in 2016 as in 2009 (the year of the structural reform), when expressed in constant prices with the 2009 index set at 100. Total payroll costs within the Greenland Government Authorities have increased since 2013, while municipal payroll costs decreased in 2010 to 2016 and then showed a steep rise from 2016 to 2017.
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Goal 11. Health for the whole nation – a longer life. Trend in life expectancy.
85 Life expectancy 80 75
70
Age 65
60
55
50 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Men Greenland Women Greenland Men OECD Women OECD
Source: Statistics Greenland Life expectancy has generally been increasing. This has been especially evident since 1999 for both men and women. Life expectancy for women is generally higher than for men. Greenland is still lagging behind in relation to other OECD countries.
4.2.5. Goals and indicators for financial self-reliance Goal 12. Greater equality and reduced social disparities. GINI coefficient trends in a number of countries in the period 2005-2017.
Source: Statistics Greenland
The GINI coefficient, which is an internationally recognised metric of inequality, is relatively high in Greenland, especially compared with the Nordic countries. See also Section 4.3 on poverty measurement.
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Goal 13. More joining the workforce. Employment rates in a range of countries in 2010-17.
90% 85% 80% 75% 70% 65% 60% 55% 50% 2010 2011 2012 2013 2014 2015 2016 2017 Denmark Faroe Islands Greenland Iceland European union (EU28) Sweden Nunavut Canada
Source: Nordic Statistics (ages 15-64), Canada Statistics (age 15+) and EuroStat (ages 15-64)
Greenland has a high rate of employment compared with Nunavut and Canada, and is at the EU level. Compared with the Faroe Islands and Iceland, the employment rate is relatively low, however. The employment rate in Greenland has shown a slight increase since 2014. The level of the employment rate is highly significant for public sector finances on both the revenue and expenditure side.
Goal 14. More young people in education or employment. Number and proportion of 15-25-year- olds neither in education nor employment, 2010-2017.
4000 40% 3500 35%
3000 30%
2500 25% 2000 20%
1500 15% Proportion No. of persons of No. 1000 10% 500 5% 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 Not in education or employment Proportion not in education or employment
Source: Statistics Greenland
Both the number and proportion of young people in the 15-25 years age-group who are neither in education nor employment decreased generally in the period 2010-2017, with 2014 as the
48 exception. The relatively steep decrease from 2014 to 2017 was due primarily to a substantial increase in the number of young people in employment.
4.2.6. Goals and indicators for infrastructure Goal 15. Renewables share of energy company Nukissiorfiit's traded vol. [%] 2014 – 2017
80% 70% 60% 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
VedvarendeRenewables energi share m.m. of energy - andel company af Nukissiorfiits Nukissiorfiit afsatte ’mængders total production [pct.]
Source: Statistics Greenland and Nukissiorfiit
The share of renewable energy in the public energy utility has generally been increasing since 2008, but with slight fluctuation in some years, including from 2016 to 2017. The general increase derives especially from the investments in hydropower plants.
4.2.7. Goals and indicators for crime reduction Goal 16. Reduction in offences against the person. Trend in reported offences, 2006-2017.
1200
1000
800
600
400
200
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sexual offences in total Offences against life and limb in total
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Source: Statistics Greenland
The number of reported sexual offences and fatal and non-fatal non-sexual offences (assault and injury) decreased from 2006 to 2017, but with periodic fluctuations.
4.3 Poverty measurement Parliament's 2018 Autumn Session passed a motion for the Government of Greenland, in the 2019 Political and Economic Report and onwards, in a section on key goals and indicators, to be tasked with incorporating a special goal and indicators for the poverty rate in Greenland. The trend in respect of these indicators will be measured annually with reference to Statistics Greenland's annual reporting on persons who are economically disadvantaged ("De økonomisk udsatte").
The need to measure the poverty rate should also be seen in the context of the Coalition Agreement's goal of giving priority to improving living conditions among the population.
Methods Greenland Statistics defines someone as "economically disadvantaged" if their disposable income for three consecutive years was below a critical income threshold. In its calculations for this metric, Statistic Greenland presents results where the income threshold for being economically disadvantaged is set at 50 per cent and 60 per cent, respectively, of the median income.
The income assessments are based on the family-unit's disposable income (i.e. income after tax and incl. transfer income), and take into account the size and composition of the family (equivalised income). This takes into account the fact that a family unit is assumed to pool its income and that households benefit from economies in scale.
The disposable income is not fully representative of spending capacity. In small communities, the assumption is that citizens have a not-insignificant informal economy primarily in the form of fishing and hunting for own consumption. This factor means that a description of the poverty picture in the Greenlandic context is more complicated, and that financial self-reliance may be greater in small settlements especially, than indicated by Statistics Greenland.
In addition, the public sector offers a number of assistance schemes, which affect spending capacity, but which are not included as disposable income. These comprise, for example, free child day-care places and financial assistance for owner-occupied housing, which, unlike housing benefit for rental housing, are not included in calculations of disposable income. Non-standardised administration and recording practices in the public sector for child maintenance, for example, may also bias the results.
The survey of the rate of economic disadvantage comprises individuals who have been resident in Greenland for the entire 3-year survey period. In addition, a number of other groups of individuals exclude individuals enrolled in post-secondary education, or who are related to a mature student, children not residing at home, and individuals residing in an elder-care institution, nursing home or institution for persons with disabilities.
The statistics on economically disadvantaged persons are largely based on corresponding calculations for Denmark. In future, consideration will be given to the viability of using uniquely Greenlandic metrics so as to improve the equivalisation, which compares spending capacity between families of differing size and with differing composition.
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In addition, the Government of Greenland will address whether the income threshold upon which the figures are currently based, of 50% and 60%, respectively, of median income, should be supplemented or replaced by other, Greenland-specific income threshold values.
Results If the income threshold is set at 50% of the median income, the statistics reveal that a relative majority of economically disadvantaged persons reside in the settlements. Those districts with the relatively highest number of economically disadvantaged persons are Nanortalik, Kangaatsiaq, Upernavik, Qaanaaq and Tasiilaq; see Table 12.
Table 12. Number and proportion of economically disadvantaged persons with incomes under 50% of the median income, by district, 2013-2017
District ...... 2013 2014 2015 2016 2017 2017 Proportion (%) Total Nanortalik ...... 5 6 5 4 6 84 Qaqortoq ...... 3 3 3 3 3 81 Narsaq ...... 4 4 4 3 4 57 Paamiut ...... 1 2 2 2 3 33 Nuuk ...... 2 2 2 3 3 403 Maniitsoq ...... 2 3 3 3 3 77 Sisimiut ...... 3 2 2 2 2 94 Kangaatsiaq ...... 8 5 7 6 7 77 Aasiaat ...... 4 3 4 3 4 88 Qasigiannguit ...... 3 2 2 1 2 23 Ilulissat ...... 2 2 2 2 2 92 Qeqertarsuaq ...... 1 1 1 2 2 16 Uummannaq ...... 1 2 1 2 2 46 Upernavik ...... 7 8 9 9 10 243 Qaanaaq ...... 9 10 10 9 13 88 Tasiilaq ...... 10 11 11 11 11 277 Ittoqqortoormiit ..... 6 3 5 4 4 13 Total ...... 3 3 4 4 4 1,792 Note: Ivittuut statistics are included under Nuuk Source: Statistics Greenland, http://bank.stat.gl/SODOU02
The highest proportion of persons who may be defined as economically disadvantaged belong to the age-groups within early adulthood.
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The proportion of economically disadvantaged persons is greater than the average among single persons with no children and in single-parent families; see Table 13.
Table 13. Number and proportion of economically disadvantaged adults, by family composition, and number of children and adolescents in the household, 2013-2017
2013 2014 2015 2016 2017
Total
Single person with no children 739 752 822 849 938 Single parent with 1 child 121 115 113 125 136 Single parent with more than 75 62 79 64 75 one child Couple with no children 59 61 53 31 42 Couple with 1 child 25 33 28 20 37 Couple with more than one child 70 64 59 61 63 Total ...... 1,089 1,087 1,154 1,150 1,291
Proportion
Single person with no children 7 7 7 7 8 Single parent with 1 child 8 8 8 9 9 Single parent with more thanone 8 6 8 7 8 child Couple with no children 1 1 1 0 1 Couple with 1 child 1 1 1 1 1 Couple with more than one child 1 1 1 1 1 Total 3 3 4 4 4 Source: Statistics Greenland, http://bank.stat.gl/SODOU04
Other economic distribution metrics Statistics Greenland's income statistics comprise three internationally recognised metrics of income disparities. The three distribution metrics describe each their income distribution domain:
• The GINI coefficient is a metric applied to the distribution of all incomes.9 • The metric for relative poverty, termed the at-risk-of-poverty rate (ROP)10, focuses on the lowest incomes. • The S80/S20 ratio11 is a measure of the inequality of income distribution. Data for these metrics are presented in Statistics Greenland's annual income statistics publication. Unlike the statistics on economic disadvantage, these distribution measures are calculated on the basis of a single year's income and are based on household income, rather than family income. A Greenlandic household may comprise several families.
9 A GINI coefficient of 0 represents perfectly equal distribution, while a value of 100 represents perfectly unequal distribution. 10 ROP50 and ROP60 represent the proportion of the population residing in a household with an income lower than 50 per cent and 60 per cent, respectively of the median income. 11 The S80/S20 ratio is calculated as the ratio of total income received by the 20% of the population with the highest income to that received by the 20% of the population with the lowest income. A higher value for the S80/S20 ratio expresses greater inequality, while a lower value expresses greater equality.
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For Goal 12 in Section 4.2.5, the GINI coefficient for Greenland is benchmarked against that of other countries. Comparison with the EU average reveals that the Greenlandic incomes are generally more unequally distributed than in EU Member States. The relative poverty, however, is slightly below the EU average, regardless of whether a 50 per cent or 60 per cent median threshold is applied; see the income statistics for 2017 from Statistics Greenland. The third distribution metric, the S80/S20 ratio determined for households with children, is at between 4.2% and 5.1% for the entire 2002-2017 period; see Figure 16. Figure 16. Ratio of high to low income in households with children, 2002-2017
ProcentPercent 5,5
5,0
4,5
4,0
3,5
3,0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Note: The Figure shows the S80/S20 ratio, which is calculated as the ratio of total income received by the 20% of the population with the highest income to that received by the 20% of the population with the lowest income. A higher value for the S80/S20 ratio expresses greater inequality, while a lower value expresses greater equality. Source: Statistics Greenland
The figure was lowest in 2005, presumably in the wake of changes in tax legislation, which had just come into effect from 2005. The personal allowance was raised from DKK 40,000 to DKK 48,000, and the standard allowance from DKK 8,000 to DKK 10,000, while the income tax rate was raised by 2 percentage points. These changes resulted in reduced tax liability for low-income groups and higher tax liability for high-income groups, while total tax revenue remained virtually unchanged.
4.4 Measurement of sustainable development and the SDG 2030 agenda In 2015, all of the UN member states resolved to ratify an agreement on 17 new global goals for sustainable development towards 2030. The 2030 Agenda for Sustainable Development differs from earlier sustainable development goals in recognising that all nations must assume a progressive position to achieve sustainable development at the global level.
The UN Sustainable Development Goals are, due to the circumstances surrounding them, very broad and universal, but they still provide some fairly clear indications of what initiatives and priorities the global community wishes to place on the agenda. These comprise an end to poverty, reduced inequality, the rights of the child, education for all, peaceful communities and the rule of law, water, energy, the environment and climate, debt trends, sustainable inclusive growth, future sustainable resource utilisation – all of which are very relevant to Greenland.
The pursuit of long-term sustainability is nothing new in Greenland, where traditional hunting practices locally, for example, took account of the need to maintain stocks of species over time for future generations.
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Similarly, in recent times, there has been broad political consensus on large-scale investment in achieving the green transition from fossil fuels to hydropower in Greenland's power supply.
One new principle, however, is to incorporate sustainability fundamentally in policy reforms within and across all sectors. There are many advantages to incorporating the global goals in national policies and strategies for UN members and non-members alike. The 2030 SDG Agenda introduces a framework for efforts towards integrating sustainable development across all domains in order to ensure cohesiveness and commitment across nations, authorities, sectors and domains.
In follow-up to the launch of the UN's 17 global goals, the Nordic Council of Ministers resolved to undertake a large-scale survey of Nordic efforts towards universal sustainable development. Greenland has engaged actively in this process and contributed to the pan-Nordic follow-up to the 2030 SDG Agenda through participation in the Nordic Expert Group on Sustainable Development, seminars and more besides.
National mapping In support of the follow-up on an inquiry debate at the 2017 Autumn Session, the Government of Greenland is in the process of mapping Greenlandic initiatives in support of the 2030 Agenda for Sustainable Development. This project is currently based with the Ministry of Finance.
The mapping project will assess Greenland's current status in relation to the global goals for sustainable development, which requires insight into and coordination between ministries, agencies, organisations and institutions at both the national and international level. A mapping project of this nature will be far from exhaustive in describing Greenland's sustainability initiatives. It will, however, serve to identify whether the policies pursued are sustainable and will thereby serve to direct attention at sectors not yet addressing sustainability.
The national mapping project primarily describes ongoing initiatives, but will also be able to indicate areas warranting intensified actions.
One example of this is UN Goal 13 on Climate Action, which deals with adaptation, including the protection of vulnerable natural and inhabited areas against climate-related disasters and threats. Climate actions concerning research and goals for low-emissions are also comprised by the same global goal.
Interaction with municipalities, trade and industry and organisations Efforts towards sustainable development in Greenland cannot be driven by the Government of Greenland alone, but will be achieved in a cross-cutting partnership of authorities, trade and industry and organisations. One of the 17 SDGs specifically concerns partnerships, and the creation of new future alliances and partnerships both here in Greenland, but also across the Atlantic in new partnerships between Greenland, the Nordics, the EU and other countries, enterprises and organisations. The Government of Greenland and Parliament will define the frameworks within which trade and industry, organisations, municipalities and citizens can contribute to the development of Greenlandic society, which in both the short and the long term will benefit the country as a whole. It is exemplary that organisations such as the corporate social responsibility organisation, CSR Greenland, or municipalities such as Sermersooq, have engaged in initiatives to promote and raise awareness of the SDGs. At the level of national policy, we must consequently ensure that the best conditions are created for realising sustainable solutions in civil society. Funds have been allocated in the Budget Act for the purpose of promoting partnerships on fostering more sustainable development, for example, in the climate domain. An appropriation has been made to subsidise development projects addressing the impacts of climate change on Greenland.
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Development of goals and indicators The 17 SDGs were introduced with 169 targets and 244 indicators for operationalising the goals and ensuring continuous monitoring and progress. From the outset, the UN has emphasised that each country, as part of its national development, should consider the relevance of the global indicators for its national situation, and, where applicable, develop its own country-specific indicators. This task should be considered an element of sector planning, where sustainable development goals are assessed and created for a given sector, within which relevant indicators must then be defined. This means that the presentation of the necessary goals and indicators framed by sector planning, should, where deemed expedient, be linked, as far possible to relevant goals and indicators supporting the 2030 Agenda and SDGs. This would enable the process to align the overarching sustainability goal with the national policies and plans, which will foster a sense of ownership of the indicator project among the individual sectors. In the Danish 2019 Finance Act (the national budget), the Danish Government has earmarked DKK 1.0m annually in the period 2019-2022 for a partnership between Statistics Denmark and Statistics Greenland (and a corresponding partnership between the Faroe Islands and Denmark), with a view to monitoring progress towards the UN global goals. The Government of Greenland is working on the implementation of this. National Sector Plans and the SDG 2030 agenda The efforts to ensure sustainable development are natural to integrate in the ordinary strategy development. Efforts in support of the SDG 2030 agenda will consequently also be made in close coordination with the development of Greenland's Sector Plans. This is because Greenland's efforts in support of global sustainable development should not be regarded as an isolated mission for those with a particular interest in it, if the political goals for sustainability are to be translated into actions. The Greenland Government Authorities' individual ministries must therefore ensure that sustainable development is an integral element of the strategies and Sector Plans in their jurisdictions. The Ministry of Finance, which is currently responsible for physical and financial planning, serves a coordinatory function to that end. In future, every effort will be made to link coordination and information on efforts in support of the SDG 2030 agenda closely with inter-authority sector planning, and communicated via the new NunaGIS geodata portal, which will serve as a repository of statistical key figures and the latest climate data models. NunaGIS will thus serve to promote better coordination, cohesion and continuity between financial and physical planning so as to achieve enhanced decision-support and more stable framework conditions for investment. NunaGIS also underpins the Coalition Agreement's ambition for the people of Greenland to have a means of engaging more in socioeconomic development.
4.5 Sector planning Pursuant to the new Budget and Accounting Act for the Greenland Government Authorities and the Municipalities, the Government of Greenland is expected to lay down detailed rules for sector planning procedure. An executive order of this nature will also need to be aligned with the Planning Act, which in turn governs the preparation of Sector Plans.
The remarks to Section 13 of the Budget and Accounting Act state as follows: “ ... a Sector Plan describes the strategy in force within a given sector. As such, a Sector Plan sets out possible political options within a sector, and describes new projects that have already been politically decided. Sector Plans are rolling in the sense that they cover an extended period, and are updated annually.”
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The Act on Planning and Land Use also prescribes that the Government of Greenland shall: • “ensure that national planning coordinates municipal planning, • launch an awareness-raising drive with the purpose of spurring public debate on the objectives of national planning and its content, and • provide a nationwide, digital, geographical information system with a planning portal for use by the public and planners (NunaGIS).
Structured use of Sector Plans means that the Government of Greenland gains better instruments for: • coordinating physical and financial planning; • coordinating planning between sectors in order to avoid the silo mentality, • coordinating national planning with municipal planning, including for the purposes of devolving responsibilities between the parties, • achieving more cohesive, rolling and long-term planning for solving society's structural challenges and pursuing sustainable development, and • achieving greater transparency in the planning for the benefit of citizens from a democratic perspective and for companies in the interests of trade and industry promotion.”
Sector planning work status Table 14 provides an overview of the status of work on the national Sector Plans. The colour-coding in the table represents the following:
• Green highlights denote a politically-approved Sector Plan or Sector Strategy. • Yellow highlights denote that the work is at an advanced stage. • Red highlights indicate that no actual work has commenced, or that it is in a preliminary phase.
Table 14. An overview of the status of national Sector Planning, early 2019 Sector Construction Sector plan status and progress as at early 2019 Updated tourism strategy in preparation to replace the current tourism strategy in force. Public procurement for visitor centre in Ilulissat completed. Tourism Visitor centres Visitor centre established in Qaqortoq. Centres in other towns at planning stage. Draft Sector Plan for visitor centres has been prepared. New Sector Strategies for minerals and hydrocarbons, respectively, entering into effect in 2019, are currently in Mineral resources preparation to replace existing overall Sector Strategy for mineral resources. Due to commence as an offshoot of the Fisheries Fishing Commission's forthcoming work. Work on a Sector Plan not commenced. New Hunting Act in preparation. Work on a Sector Plan not Hunting commenced. Draft completed by consultants. Pending subsequent Agriculture administrative and political hearing. Good progress made in
the work. Aviation Airports Approval expected in 2019 based on the Airports Construction Act (ILU; NUU and QAQ airports). However, Heliports/airstrips contingent on Decisions on plans for any regional airports.
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Ports and port Approved 2017 construction plan – distributed in Ports facilities Parliament. Telecoms. systems & Due for completion in association with TELE Greenland Telecoms marine cables Group in 2019 The Greenland Government Authorities' urban Sector plans, effectively building surveys, were approved in 2017, and are Housing currently being updated. For 2019, the urban Sector Plans Housing will be aligned with municipal housing Sector Plans. The plan is to devolve the Greenland Government Authorities' rental housing to the municipalities. Dumps To be updated according to the targets that will Incineration plants be set out in municipal Sector Plans and coordination with a Refuse Reception facilities new national waste management solution in 2019.. Night time refuse collection facilities Modernisation of Currently being implemented pursuant to the Utilities Sector Energy power plants Plan of Nov. 2017. Investment plans in preparation. Currently being implemented pursuant to the Utilities Sector Drinking water Water supply plants Plan of Nov. 2017. Preschool sector Day care Municipal operation and investment. Primary and lower Run by municipalities, but financed by the Greenland secondary schools Government Authorities. Schools sector After school centres Education Plan II, but awaiting completion of agreement Boarding schools with municipalities for them to take over After-school clubs New educational structure may be incorporated. Upper-secondary Vocational training Education Plan II, but still lacking completion of surveying education, vocational programmes reports and the associated premises sector plan. training, higher 6th-form colleges & Reform of educational structure may be incorporated. education and Higher education Student halls of residence sector plan (Phase 1) due for continuing education political hearing in first half of 2019. Sports Sports facilities Surveyors' evaluation on sports halls completed. Sports facilities are a municipal responsibility. Culture, media, etc. Preliminary sector plan in progress. Facilities dimension yet Cultural institutions Church buildings to be addressed. Churches and chapels Surveyors' evaluation on churches completed. Hospitals Expected to be issued for consultation in 2019. Preliminary Health care Health centres work commenced. Patient hotels Surveying completed, quality assurance and reporting Elder care Nursing homes commenced. Day-care institutions Institutions for for socially at-risk children and young Needs analyses scheduled for completion in spring 2019 persons people Disability services Institutions for people Needs analysis commenced in spring 2019 sector with disabilities Source: Ministry of Finance
The plans will mean that infrastructure and housing, i.e. the majority of the construction grants made by the Greenland Government Authorities, will be covered. The Sector Plans and the surveyors' reports underpinning them are vitally important for either devolvement to the municipality or dialogue with the same, within the areas devolved.
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5 Follow-up on the Sustainability and Growth Plan The 2016 Political and Economic Report contained the previous Government of Greenland's proposals for a long-term Sustainability and Growth Plan, designed to support the overarching economic goal of a gradual reduction in reliance on the block grant from Denmark, sustainable public finances and the creation of growth and more employment in the private sector. The Plan gained broad support in parliament during debate at the 2016 Spring Session.
The plan is based on four reform tracks, reiterated in the Budget Act agreements for 2017-2019. The following sections review progress and plans for key reform actions and initiatives within each of the four reform tracks:
1. Raise the level of education. 2. Promote growth and transition to a multi-faceted economy. 3. Modernisation of the public sector. 4. Increased self-reliance via reform of welfare benefits, the tax system and the housing sector.
5.1 Raise the level of education Ensuring that far more school-leavers rapidly commence and complete a vocational training is focal in achieving a more self-reliant and sustainable society. To that end, the 2019 Budget Act gives priority to eliminating bottlenecks in the education system, by, for example: • facilitating smooth transitions between pre-school and lower secondary education, to upper-secondary education and vocational training programmes; • ensuring that a shortage of apprenticeships and internships does not prevent young people from starting a vocational training; and • ensuring coherent planning in the education sector, which will create cross-sectoral continuity, promote the establishment of excellent teaching centres and is founded on effective and cost-aware use of human and financial resources.
These goals are to be achieved by means of various specific development measures and initiatives, including: 1. A comprehensive education sector survey and development project to pave the way for a more cohesive and flexible education sector. 2. Improved student counselling and provision of apprenticeships and traineeships. 3. Enlargement of student accommodation and education capacity, and improved coherence between financing and productivity within the education system.
The education sector survey and development project At the end of 2017, based on a resolution by the former Government of Greenland, an education sector survey and development project was launched under the Ministry of Education, Culture, Church and Foreign Affairs. The purpose of the project was to explore the options for facilitating a more cohesive and flexible education sector. A system that would overcome three well-documented challenges in the existing system: standards in lower-secondary education; the shortage of school- leavers embarking on upper-secondary education, and the relatively high drop-out rate of students in upper-secondary education.
Figure 17 illustrates trends in the period 2012-2017. The period 2014-2017 showed a decrease in the youth target group. This was the result of a higher proportion of young people gaining employment, while the proportion in education showed a slight decrease over the period.
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Figure 17. The trend in young people aged between 16 and 25 years registered as being in employment, education or neither of the two (in the youth target group).
40% 35% 30% 25% 20% 15% 10% 5% 0% 2012 2013 2014 2015 2016 2017
In education In employment Youth target group
Source: Statistics Greenland
The goal for compulsory education is to boost level 1 (up to age 13-14) and for level 2 (up to age 16-17) in future to offer a wider range of options for students pursuing upper-secondary/vocational education. In addition to the option of enrolling in, and completing the existing sixth-form and vocational education programmes, students should also have the option of taking a series of modular courses, referred to as “Other forms of upper-secondary education”. Through a combination of general education subjects supplemented by elements from upper-secondary education and vocational training, the aim is to enable school leavers to gain qualifications to match the unskilled labour market for those who do not wish to progress to further education.
The aim is likewise for all school-age children in Greenland to receive education where they reside (including in all settlements) from age 6-7 to age 14-15, and for the last two years of lower- secondary education to be offered in all towns, and for education for ages 16-18 to be offered in all campus towns (towns with further education institutions).
The survey and development project was granted funding for two years, one of which has now been completed. With a view to initially allowing practice-based experience to inform proposals for changes to the education system, in early 2018 a working party established eight project groups. The project groups were composed of pupils, parents, teachers and principals from lower-secondary, upper-secondary and vocational education, the Majoriaq youth education and employment counselling centres, the Institute of Education, employers offering traineeships and the national Education Authority. To provide sparring for this project, a reference group was established, composed of representatives of unions and professional associations, trade and industry, relevant institutions, interest groups and other ministries.
Following two seminars and a series of meetings, these project groups have now submitted ideas and proposals for both the structure and content of a future cohesive and flexible education system. These ideas and proposals, together with experience gained from a pilot project in Nuuk and pre- existing research data, evaluations, reports and the like, will be incorporated in the next stages of the survey and development project.
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To ensure as high a degree of transparency and ownership as possible, over the course of 2019, the project will include a collaboration with representatives of the project groups, the reference group, the municipal school administrations, principals of the lower-secondary and upper-secondary schools and vocational colleges, Majoriaq education and employment counselling centres, trade and industry, other relevant organisations/institutions and other ministries. Through to the autumn, the project will enable these stakeholder groups to debate the challenges and opportunities of a future education system. Over the course of February/March 2019, the Working Group will communicate a plan for this work to those involved.
Following a final analysis and a concluding effort, a catalogue of proposals will be compiled and submitted to the political system.
This process will include a detailed projection of the budgetary and national economic effects of the recommendations in the catalogue of proposals, including a description of the need for the entailed increased capacity for student halls of residence and educational buildings. This will be necessary for the purposes of the future budgetary coordination and ordinary financial and physical planning.
Improved student/trainee counselling and provision of apprenticeships and traineeships. An effective and cohesive educational and careers counselling programme for children and young people is regarded as an important precondition for incentivising enrolment in, and completion of a vocational education or training. To that end, over the years, a number of counselling initiatives have been launched in support of this goal. A survey was conducted of the counselling programme in 2011, which resulted in the enactment of new legislation for this domain in 2013. There is now a need to follow-up on the programme and its implementation. In autumn 2018, the Government of Greenland applied for funding from the TA Fund (Technical Assistance - special EU funding under the EU-Greenland Partnership Agreement) for an evaluation of the education and employment counselling programme. The application has now been granted, and the funds will be spent on a comprehensive review of the overall counselling programme within the first half of 2019. The principal aim of this review is to describe and evaluate the quality of the counselling programme and offer recommendations for potential improvements to it. This will comprise the following: • An evaluation of the existing legislation and the organisation of the counselling programme. Is there any overlap, and is there ongoing follow-up on this based on continuous data collection? • A survey of the scope of the counselling. Description of the number of end users/participants involved in various types of counselling activities. • A survey of the quality of the counselling programme, including the end users'/participants' perspectives on the counselling activities. • A mapping of any potential challenges in implementing the legislation in practice, and if so, to offer recommendations for overcoming them.
In the vocational education domain, the shortage of apprenticeships and traineeships regrettably poses a problem for many young people seeking to pursue further education and training. Despite the economic upturn of recent years, a corresponding increase in the number of apprenticeships and traineeships has not transpired. Consequently, the vocational colleges report that a substantial number of qualified applicants are unable to start their education owing to the shortage of apprenticeships and traineeships.
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The Government of Greenland will seek to take further steps to remedy this problem in talks with the vocational colleges.
The Government of Greenland expects, among other things, to present a bill concerning the social responsibility of companies and public authorities to recruit apprentices and interns/trainees at Parliament's 2019 Autumn Session. The purpose of the bill will be to foster this social responsibility by offering permanent residents apprenticeships and internships/traineeships. It is also designed to promote employment and upskilling in Greenland through employing Greenlanders as apprentices and interns.
Passing the bill may also raise the need for a certain adjustment to the construction Sector Plan in relation to educational buildings and student halls of residence.
The drafting of this bill will be coordinated with other reform programmes and initiatives designed to improve financial self-reliance in the population; see Section 5.4.
Sector Plans for student accommodation and school buildings An updated needs-description and Sector Plan for student accommodation has been drafted for political approval in the first half of 2019. This addresses the immediate needs in the student accommodation domain and will be possible to implement immediately upon approval. The Budget Act thus authorises massive investment in increasing the stock of student accommodation over the next few years. Construction will be undertaken by Illuut A/S, which will build the halls of residence to the specifications of the Greenland Government Authorities for standard student accommodation, and will then lease them back to the Authorities based on a long-term lease agreement.
The forthcoming rolling Sector Plans will be re-evaluated in extension of the recommendations pending from the education sector survey and development project.
As a general principle, it is important to ensure that education-sector building stock meets demand for student housing, and that cost-effective capacity utilisation and capacity building are ensured for the education sector. Initiatives to increase the numbers completing their education will, however, reduce the need for an increase in housing stock. The Government of Greenland will consequently continue to develop and implement initiatives to ensure course completion.
5.2 Promote growth and transition to a multi-faceted economy. The economic upturn may, to some extent, mask the need for ongoing efforts to put in place good frameworks for sound, long-term trade and industry development. The Government of Greenland will pursue a sustained commitment to improving Greenland's competitiveness, both at a general level and through sector-specific initiatives.
5.2.1 Corporate taxation Greenland has maintained the level of corporate taxation, while our principal trading partners have tended in the direction of lower corporation tax. A gradual reduction in Greenland's reliance on the block grant from the Danish state, will, however require increased growth and job-creation in the private sector. A proportion of this growth is expected to be achievable through international investors. Foreign investors appear to be especially interested in the mineral resources sector. Other sectors, such as tourism, are also likely to attract international investment.
Attractive tax conditions, which are competitive in relation to Greenland's benchmarks and trading partners, constitute one of the instruments for increasing both domestic and international investment in Greenland and hence of improving the conditions for economic growth.
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PricewaterhouseCoopers (PwC) recently completed a benchmark survey of corporation and dividend tax for the Ministry of Finance. The benchmark survey comprised taxation within three 3 industries (retail, industry and building and construction) in Newfoundland, Denmark, Iceland, the UK, the Faroe Islands and Greenland.
The survey showed that the effective corporate taxation in Greenland was among the highest compared with the other survey countries. The Greenlandic rate was, however, slightly lower than Newfoundland's.
The Greenlandic dividend tax rate varies from that of the comparators in that a Greenlandic company is permitted to offset dividend payouts against its taxable revenue. This makes direct comparison with other countries difficult. For this reason, corporation and dividend tax are benchmarked as a whole. The comparison reveals that the general national corporate tax pressure in Greenland is lower than in Newfoundland, but higher than in the other countries.
Figure 18 compares corporation and dividend taxation for investors in a number of countries. The figure shows the percentages paid in corporation and dividend tax, and the residual percentage for a foreign (corporate) investor. The survey is based on a retail enterprise, where the foreign investor is a company with operations in Denmark, Texas (USA) or the UK.
Figure 18 Benchmarking of corporation and dividend taxation for investors in a range of countries.
Corporate investor in Denmark Corporation tax and tax at source, Denmark- Official corporation tax rate applied
Faroe Islands Iceland Denmark Greenland Newfoundland (Canada) Surplus to company (after tax) Dividend, tax at source Corporation tax
Corporate investor in the USA (Texas) Corporation tax and tax at source, USA (Texas)- Official corporation tax rate applied
Iceland Denmark Faroe Islands Greenland Newfoundland (Canada) Surplus to company (after tax) Dividend, tax at source Corporation tax
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Corporate investor in the UK Corporation tax and tax at source, UK- Official corporation tax rate applied
Iceland Denmark Faroe Islands Greenland Newfoundland (Canada) Surplus to company (after tax) Dividend, tax at source Corporation tax Source: PwC
The Figure shows, for example, that if a foreign company were to choose between investing in Greenland and one of the other comparator countries, for tax purposes, investing in a country such as Iceland would be more favourable.
It is also worth nothing that the requirement for ROI in Greenland is appreciably higher than in Iceland if the investor aims to achieve the same return after tax.
Based on this benchmarking survey, and the commitment to boosting Greenland's competitiveness, the Government of Greenland will seek to reduce the total tax burden on companies. This should also be addressed in the deliberations on the Budget Act Bill for 2020 and onwards. The goal of reducing corporation tax is inscribed in the agreement on the 2019 Budget Act.
Protective tax law instruments Corporate taxation faces a number of problems caused by accelerated integration of markets and international trade. With that in mind, at the 2018 Autumn Session, Parliament adopted a motion to amend the income tax legislation, which set out a new protective tax law measures, the purpose of which is to promote the principle that revenue generated in Greenland is taxed in Greenland.
These national instruments should also be considered in the light of the intense international focus prevailing in taxation and on reducing tax speculation. The instruments thus also set out more stringent documentation requirements for controlled transactions. This would mean, for example, transactions between companies with the same owner. The motion authorises the Government of Greenland to define the specifics of the required documentation. This authority is expected to be implemented in national rules in line with the OECD's recommendations regarding transfer-pricing documentation.
5.2.2 Development of the fisheries sector The aggregate export value of the Greenlandic fisheries in 2017 was DKK 3.5bn or 95 per cent of total goods exports. It is therefore imperative for Greenland's fisheries to be sustainable and capable of continuing to provide jobs and support the national economy. To that end, the Government of Greenland has accorded various initiatives in the fisheries high priority for the time ahead:
• New research vessel for the Greenland Institute of Natural Resources. • Value-chain analysis of the fishing industry. • Creation of a Fisheries Commission.
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New research vessel for the Greenland Institute of Natural Resources A total appropriation of up to DKK 220m is expected in the Budget Act for the period 2018-2021 for a new ocean-going research vessel that will enable the Greenland Institute of Natural Resources to fulfil its current and expected research and education mandate.
It is expected that a new research vessel for the Greenland Institute of Natural Resources will be a future-proofed solution that will contribute to the accuracy of fish stock surveying and data collection. Improved surveying and amassing of data series on fish stocks will greatly enhance the quality of the biological advice needed for a more reliable basis for a sustainable fishery. The research vessel is expected to contribute to ensuring the future value of the Greenlandic fisheries and support the best possible resource exploitation and Marine Stewardship Council certification.
Value-chain analysis of the fishing industry The Government of Greenland regards it as imperative to gain a better overview of the economic trend in the fisheries sector and to optimise diversified exploitation of the fisheries resource. This project is backed by a broad majority, with the 2019 Budget Act stating as follows:
“In addition, the Government of Greenland has commissioned a third-party value-chain analysis of the fishing industry, the purpose of which is to procure a data set reflecting the actual export value for Greenland of fish and shellfish products, and which will be indicative of the need for any changes to the framework conditions in the interests of increasing national revenue from exploitation of the fisheries resource. Reporting on this project will be carried out by an external and impartial consultant, with the report due in Q3 2019.”
The Ministry of Finance has initiated this project, and has been in talks with the OECD on the best methodology.
Fisheries Commission The Government of Greenland regards it as imperative to seek to achieve a greater monetary yield from the fisheries resource for the Greenlandic economy. Work on a new Fishing Act has been underway for some years. In accordance with the Coalition Agreement between the political parties Siumut, Atassut and Nunatta Qitornai of 2 October 2018, those parties will be making a concerted effort to finalise the Fisheries Act.
Commercial fishing is the primary industry in Greenland. This makes it crucial to continually develop and adapt the fishing industry. The forthcoming Fisheries Act is to constitute a long-term solution for the industry, which is why the Coalition parties, in cooperation with the sector's stakeholders, will be drawing up a national compromise to ensure the best possible benefit to all parts of society. To that end, the opportunities and necessary framework conditions for young fishermen must be transparent and fit for purpose.
The objective of the Coalition parties is for all of the allocated fishing quotas to be taken up, and exploited to the maximum, to which end the Coalition will seek to remove any needless administrative obstacles, in order to ensure fulfilment of that objective.
The 2019 Budget Act adopted by the Coalition parties with both the Demokraatit and Inuit Ataqatigiit parties enabled a majority-backed political agreement on the appointment of a Fisheries Commission in 2019, for which purpose a special appropriation was made in the Budget Act. The wording of the Budget Act will guide the work of the Fisheries Commission.
The work of the Fisheries Commission is principally to submit recommendations for a Fisheries Act with remarks regarding other relevant measures to boost the fisheries sector's development
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The Fisheries Commission's remit and results
Fisheries Commission will: • submit proposals for a revision of the Fisheries Act with remarks to form the legislative frameworks for that Act. The current National Assembly Act no. 18 of 31 October 1996 on Commercial Fishing has undergone 13 amendments since it came into force, which means that there is a need to create a clear, contemporary and user-friendly Act for the fishing industry, and • offer proposals for recommendations for a Fisheries Sector Plan to underpin the foregoing objectives.
In its work, the Commission will examine and evaluate the expedience of, and that being the case, consider implementation of one or more of the following possible instruments to aid achievement of the foregoing objectives:
• Greater yield from the resource to society and the economy • Governance of resource exploitation • Ownership and quota parameters and access to financing • Ensuring competition and diversification of ownership in the fisheries sector • Increased value-added from exploitation of the fisheries resource • Economic and administrative consequences of proposals considered by the Fisheries Commission
The Commission is not, however, limited to considering these measures, and is free to propose other pertinent measures.
In its work on proposals for revision of the Fisheries Act, the Commission shall ensure that it takes the legislation and administration of the legislation on resource rent taxation in the fisheries sector in order to ensure the sustained profitability of the fisheries so that future revenue from the resource duty is not exhausted.
The Fisheries Commission will conclude its work with a formal opinion, which, pursuant to the purposes and principles of its mandate for the development of the fisheries sector, sets out the budgetary and national economic, labour market, social and legal aspects and consequences of its recommendations.
5.2.3 A new tourism strategy The current tourism strategy “Tourism Promotion in Greenland – What will it take?” sets out recommendations for Greenland's tourism sector and identifies a number of initiatives to boost the sector. In recent years, the Greenlandic tourism sector has undergone extensive development, and a number of the recommendations from the existing Tourism Strategy have already been, or are in the process of being, implemented. Please see Figures 5-7 illustrating the trends, by key parameters. Expansion of the sector entails that there is a need to devise a new tourism strategy to further grow and boost the sector. The hope is consequently that a new locally-based tourism strategy can be presented in mid-2019.
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One of the more significant events in the tourism sector has been the announcement of tourism activity concessioning. The purpose of this is to incentivise private investment in quality tourism amenities in order thereby to develop Greenland's tourism sector. At present, 7 concessions have been offered for trophy hunting and 10 concessions for recreational fishing, all of which are based in Qeqqata Municipality. Another focal activity is to establish visitor centres in all regions of Greenland. The centres will be co- financed by external sponsors, under the National Budget and by municipal contributions. The Budget Act funds for establishing the visitor centres will be granted on an ongoing basis. This means that the centres will be established as they receive funds, and will thus be established in phases. The visitor centre that is closest to being established is Isfjordcenteret in Ilulissat. This is currently scheduled to open in 2021. One more recent project, which is planned for inclusion in the forthcoming tourism strategy, is the promotion of National Attractions. Each region of Greenland has its unique tourist sights and attractions. In line with a growing number of tourists visiting the regions' tourist sights and attractions, the need will increase to protect these against deterioration. The establishment of the right facilities such as walkways and barriers will serve to counteract this deterioration. In addition, the initiatives should also improve local communities' earnings potential from tourist visits such as in the form of ticket revenue or sales of audio guides etc. the hope is that the establishment of National Attractions will both safeguard the future existence of Greenland's sights and attractions, while boosting the economy. The future tourism strategy will thus both involve continued efforts on existing projects and contain new initiatives to boost the tourism sector.
5.2.4 Attracting data centres Greenland's ice sheet contains 10 per cent of the world's reserves of fresh water. As stated in the objectives of the Sector Plan for Energy and Water Supply, the Government of Greenland will seek to exploit potential water resources, and for that purpose has compiled comprehensive marketing materials. These are designed to promote the exploitation potential vis-à-vis the international market, in line with the strategy adopted for hydropower for industrial purposes, such as data centres for example. The material consists of a number of themed packages concerning applicable legislation, hydrological data, tax and duty benchmarking, electricity prices and data transmission, together with a general package entitled "Doing Business in Greenland". The Government of Greenland will commence its marketing of hydropower potentials for the data centre industry over the course of spring 2019, and will be targeting candidate companies by means of direct marketing.
As seen in other countries, in furtherance of the conclusion of any agreements on the siting of a data centre in Greenland, requests may be made regarding various arrangements in order to secure framework conditions. That being the case, there will be a need to evaluate such requests and include the outcomes in an economic analysis; see the provisions for this in the Budget and Accounting Act.
5.2.5 New strategy for the hydrocarbon sector (2019-2023) The primary objective of the forthcoming strategy is to achieve a high level of oil and gas exploration, as the hydrocarbon potential is expected to be of immense importance for future national revenue. The total economic revenue from hydrocarbon extraction consists of tax and duty revenue levied on the companies and derived tax revenue from the increase in employment.
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For the short and mid-term, the strategy will focus on onshore exploration, as this is believed to hold the best prospects for reversing the current trend and attracting the petroleum industry to Greenland. For the long-term, the focus will remain on offshore exploration. This focus will be reflected in an active concessions policy, geological readying and other projects. The tax conditions for the hydrocarbon sector significantly influence investment incentive, while the petroleum prices and costs also impact the overall project finances. It is consequently crucial for Greenland to be competitive on tax rules and cost levels in order to attract venture capital and exploration activities. In that context, it must be borne in mind that Greenland is widely regarded in the oil industry as being a high-risk country owing to its climate, infrastructure, travel distances and the fact that commercial volumes have not yet been discovered in the country. The strategy will also describe the merits of any proposals for changes to the tax and duty rates. Finally, due focus will be directed at marketing Greenland's oil potential. The marketing activities going forward will, among other drives, consist of direct marketing targeting selected companies. In addition, marketing and promotion will be conducted in selected countries that offer the best prospects for attracting exploration enterprises to Greenland. Moreover, the marketing activities will be tied in with attendance at selected international conferences combined with personal meetings with companies. At these events, ministerial attendance will serve to raise the profile of Greenland.
5.3 Modernisation of the public sector The size and structure of the public sector is to be brought into focus in the coming years. The sector performs a number of tasks, which it is assumed are best performed in partnership in order to ensure consistent and equitable public service. In addition, in the interests of freeing up resources for other sectors in the coming years, it will be increasingly necessary to carry out extensive adjustments to the public sector. • The demographic changes in the form of relatively more elderly persons in the health and care sector are expected in coming years to result in increased demand for resources and thereby a need for reprioritisation internally within the public sector. • The need to enlarge the public sector will result in increased demand for labour.
The following section describes a number of proposed initiatives for modernising the public sector to ensure that its services and organisation remain within its financial resources, and that it becomes more citizen-centred and performs its core tasks to a satisfactory standard.
5.3.1 Efficient public procurement The procurement of goods and services by the Greenland Government Authorities is regulated by Circular of 24 September 2010 on the Procurement of Goods and Services for the Greenland Government Authorities' Central Administration and Subordinate Institutions.
A motion for a resolution was submitted at the 2015 Spring Session on requiring the Government of Greenland to submit a bill for a Public Procurement Act. The motion adopted by parliament stated as follows:
“A motion for a resolution by Parliament that the Greenland Government Authorities shall submit a Public Procurement Act Bill laying down the legal, technical and commercial constraints for public procurements. The motion will ensure that suppliers receive equal treatment, that there are clear guidelines for choice of supplier for public procurements and that a complaints board is appointed for procurement by tender. Guidelines should also be incorporated as to how national economic factors should be embodied by the award criteria for choice of supplier.”
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At the 2018 Autumn Session, Parliament deliberated on a Procurement Act Bill to govern the procurement of goods and services by public authorities and institutions. The bill is expected to undergo final deliberations at the 2019 Spring Session. The bill has been submitted for consultation twice, including in the municipalities.
In the interests of ensuring knowledge-sharing and partnering across the public sector, a joint public procurements forum has also been set up.
For the purpose of ensuring transparency and competitiveness, in 2019, a joint public procurements website was created jointly with the municipalities. The forthcoming Procurements Act is expected to require all tenders to be published on this portal.
Once the Act has been adopted, the current Procurements Circular is expected to be updated. The principal aim of updating the circular is to increase cooperation and professionalise and streamline purchasing and procurements within the Greenland Government Authorities.
5.3.2 Prevention and reduction of arrears owed to the public sector As discussed in Section 2.4 on arrears, there is a need for a focused drive to prevent and reduce arrears to the public sector.
The Government of Greenland is prioritising the realisation of the Ilanngaassivik payment system, which is designed to prevent new arrears to the public sector. Similarly, the provision of debt counselling services in all of the municipalities will serve to reduce citizen arrears. The following section describes these two initiatives.
Ilanngaassivik payment system project The parties behind the Budget Act Agreement agreed that progress should be made in the Ilanngaassivik payment system project. The purpose of Ilanngaassivik is to introduce a more efficient payment system for municipal charges. If the payment system is made more efficient, this will contribute to preventing arrears arising in the first place.
Arrears arise when bills are not paid in time. Over time, a single unpaid bill amasses more of the same until citizens are faced with insurmountable personal debt. Part of the explanation for the accumulation of arrears in Greenland is the low income level of a segment of the population. However, the other explanation is the lack of willingness to pay or inappropriate prioritisation among individuals. According to a 2017 report on debt and debt-servicing in Greenland:
• Approx. 15 per cent of the arrears derive from persons with an annual income exceeding DKK 200,000. • Approx. 25 per cent of the arrears derive from persons with an annual income of between DKK 100,000-200,000.
By ensuring that those who are in a position to pay actually make regular and timely payment, the aggregate arrears will be reduced. This will result in fewer citizens ending up in a situation of insurmountable debt. Moreover, this will free up time and resources in the public sector, which can then be redirected to serve people with genuine problems in making ends meet.
Debt counselling service in all municipalities In 2017, in follow-up to “Report on Indebtedness and Debt-Servicing”, the decision was made to launch a pilot project in Kujalleq Municipality which would provide financial advice primarily to families with dependent children at home, with financial problems, including rent arrears, and at risk of foreclosure or eviction. In the pilot project, the debt counselling service was lodged with the housing administration company Ini A/S, since the service is not to be regarded as an authority service, although the service has been provided in close partnership with the local authority.
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The pilot has been a success, and the drive was intensified in 2018 with more focus areas and additional partners. This is illustrated by the figures reported by Ini A/S in September 2018, as presented in Table 15.
Table 15. Results achieved by the Kujalleq Municipality debt counselling pilot project, 2017-2018 Nanortalik Qaqortoq Narsaq Sub % No. of counselling sessions 13 189 78 280 100 Arrears paid immediately 0 91 8 99 35 Arrears due for subsequent payment 2 21 21 44 16 Arrears agreed for payment in instalments 2 36 14 52 19 Tenants unable to pay 0 8 10 18 6 Arrears paid by the municipality 6 33 25 64 23 Counselling session with no result 3 0 0 3 1 Source: Ini A/S
The Government of Greenland has agreed with the municipalities to pursue a continuation of the pilot, with an extension to all municipalities in 2019. The 2019 Budget Act follows up on this with a national programme concentrating on towns with a large number of tenants in social housing justifying the appointment of debt counsellors.
As in the case of the original Kujalleq Municipality pilot, small towns can be served by the nearest town service, meaning that financing is earmarked for frequent travel to towns not assigned an on- site financial adviser. The focus will not only be on housing arrears, but a broad approach to managing personal finances.
Ini A/S is following up on the pilot expansion in three of the four other municipalities with preparations to recruit debt counsellors, and in conjunction with the Social Services Agency, talks will be held with each of these municipalities with a view to a partnering programme on debt counselling modelled on the service established with Kujalleq Municipality. Similarly, the Ministry of Finance expects that a partnership will be established between Sermeersooq Municipality, Iserit A/S and the Social Services Agency for Sermeersooq Municipality (which comprises Nuuk, the capital of Greenland, and is naturally the most populous municipality).
5.3.3 Digitalisation National Digitalisation Strategy 2018-2021, "The Digital Community" The Government of Greenland's new digitalisation strategy, like its predecessor for 2014-2017, is based on the OECD's 12 principles supporting digital government strategies. Observance of the 12 principles will ensure that Greenland conforms to the same digitalisation standards as our European trading partners.
Much of the digitalisation strategy requires partnering across the public sector – between central and local authorities to put in place solutions that function coherently across public services. This is cost and labour efficient and makes the solution easier to develop for the benefit of all.
The strategy is based on the involvement of both private and public-sector stakeholders and breaks down into 6 themes:
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Theme 1 – The Digital Citizen This theme focuses on the use of digital solutions to facilitate digital servicing. Digital services must be accessible to everyone in Greenland, at any time.
Theme 2 – Security and privacy To ensure that citizens and companies feel secure in the face of increased digitalisation and the threat from cyberspace, the Personal Data Act will be followed up with a keener focus on data security and digital legislation.
Theme 3 — Digital literacy This focuses on enabling young people and adults to keep up with technological advances. There is a focus on incorporating IT in education and ensuring that citizens possess the digital literacy and technical skills for wise use of the internet.
Theme 4 – Digital innovation, entrepreneurship and industry To create opportunities and frameworks for digital entrepreneurship that ensures local platforming of IT skills.
Theme 5 – Common public-sector digital architecture A streamlined and secure public sector requires administration and planning of digital platforms based on principles defined through a common public-sector digital architecture
Theme 6 – A more digitalised health service Improved standards of care through the increased use of electronic medical records (EMR) promote patient safety and communication within the health service, including across national borders. Moreover, increased digitalisation promotes efficiency-improvements in the health service, including through the digital planning of duty rosters.
This strategy is lodged administratively with a cross-sectoral steering committee (FOIS). Projects have been launched within all 6 themes for the entire strategy period.
Feasibility studies and the status of digitalisation strategy projects. The digitalisation strategy comprises a number of platform projects and legislative initiatives which are contingent for realisation of the rest of the strategy and digitalisation initiatives in other sectors. The most significant of these are listed below, with a brief situation report on progress to date: . The Master Data Program . NemKonto - for payments from the public sector . Digital post . ERP and DMS . Pitu - data exchange platform . Cyber security
The Master Data Program Master data denotes electronically held information used repeatedly across public authorities and agencies. The Master Data Program consists of basic data on citizens (with a national ID number, the “CPR”); enterprises (with a VAT/business reg. no.), addresses or land use rights and buildings, and systems for distributing the data. The Master Data Program helps to enhance the quality of master data in certain linked registries, makes them available free of charge, and eliminates doubt about which data are valid (authoritative), and who is responsible for updating data, etc.
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As a result of this, it will now be possible to combine data sets in new contexts, and companies and organisations will to a greater extent be able to concentrate on their core activities rather than spend time on shadow register sets, which are not kept up to date and for which the quality of data remains uncertain. So far, the Master Data Program project has completed the following program tracks and brought the associated systems online: • CPR (personal ID registry) • CVR (registry of business enterprises) • Data distributor
This means that these subordinate programs are no longer part of the Master Data Program, but are in operation. Responsibility for CPR and the data distributor is lodged with the Agency for Digitalisation.
The other registries in the Master Data Program all have a geographical reference, and a joint platform has been created for these, based on ArcGIS, one of the most widely used technologies for processing geographic information. This offers a huge benefit in data exchange and operational cost- efficiency. The new Addresses Act was adopted by Parliament at the 2018 Autumn Session, and the first geographic registry, the address registry, is in service on the platform.
The remaining registries will be rolled out on an ongoing basis, including the registries of 1) sites/locations, 2) real property and 3) maps and geography. All master data registries with the attendant legislation are scheduled to implemented on the platform by the end of 2022. In the ensuing years, data cleaning at various authorities, including for local authorities, will be an ongoing project.
The ongoing work on the Master Data Program will result in a need for data cleaning, etc. within the data systems of the central and local authorities.
NemKonto – Public Bank Account The NemKonto Public Bank Account project will enable public authorities to deposit money in a bank account designated by the holder (individuals or businesses) as their public-service bank account. With the current legislation, Greenland is not able to achieve a special arrangement under the Danish Act on Public Payments. This entails a legal amendment in the Danish Act or an agreement on use of the Danish NemKonto system.
The project has not yet determined the final organisation and solution. The Agency for Digitalisation is in the process of producing decision-support materials for achieving this. At the time of writing, the expectation is that a bill on an Act for a Public Bank Account will be heard at the 2020 Spring Session. Progress in this matter must be stepped up, as both the Ilanngaassivik payment system project and administration of an employment allowance stand to benefit immensely from this legal instrument.
Digital post The Digital Post project will enable public authorities to send digital, non-print post to all individuals or businesses registered in Greenland or with a special relationship with Greenland.
The Government of Greenland expects a contract to be signed with e-Boks A/S, for the e-Boks digital mail solution used in Denmark. Citizens and enterprises in Denmark and Greenland will thus only have to access a single digital mailbox to read communications from public authorities.
The technical configuration will be finalised by the end of August 2019. The Tax Agency will be the first public authority in Greenland set up to send digital post to everyone who has signed up for e- Boks. Other public-sector senders will be enabled in the system on an ongoing basis. All public-sector senders are scheduled to be active in the system by year-end 2020.
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Mandatory receipt of digital post from the public sector for persons over the age of 15 years and for business enterprises is due to come into legal force with an Executive Order at the end of Q1 2020.
The digital post system will be incorporated in the ongoing work on the 2020 Budget Act Bill, partly in order to ensure evidence of the benefits, and partly to support a resolution on the financing of the actual operation of the digital post solution.
Pitu – data exchange platform The Pitu data exchange platform will make the nation's digital data available in a readily accessible and secure system for all legitimate users. The platform will allow decentralised entities to exchange data with each other. Any data published on the system will be viewable in a “directory”, allowing the user to view available data sets at a glance.
The Pitu platform has been established. Efforts are now underway to draw up standardised agreements for use of the platform and, via a public procurement, to conclude an agreement with a local service provider.
DMS The Greenland Government Authorities currently use a joint document management system (DMS), implemented for the majority of entities. The municipalities have recently opted to procure a joint DMS, the roll-out of which is currently being planned. The joint DMS system procured for all of the municipalities will be conducive to the forthcoming efforts to establish a joint public-sector digital architecture.
Cyber security A high standard of cyber security requires a significant effort. To achieve this high standard, it is necessary to work with a reliable and competent partner. To that end, contact has been made with relevant authorities with a view to putting in place the most secure legislative basis for cyber security for Greenland.
Overview of digitalisation projects Table 16 presents an overview of projects commenced in 2018 or earlier. The quarter in which a project is scheduled for completion is checked. The year in which the project commenced is shown in parentheses if it predates 2018.
Table 16. Overview of digitalisation projects launched in or pre-2018. 2018 Title Period Q1 Q2 Q3 Q4 Asana - joint public-sector project management and portfolio management X tool Associated registry X X X Directory of Greenland Government X X X X Authorities' databases and systems Atuarfik Digitaliusoq – digitalised secondary X X X X schools Digital Jagt – Digitalised hunting (2017 X X X X Document Management System – F2 Program Management/F2 System Ownership/F2-related projects and remits: X X X X Re-implementation/Revitalisation, version upgrade The Master Data Program (2013) X X X X
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Pitu – Pilot (2017) X X X Pitu – data exchange platform X National e-Learning Platform (2016) X Public Digital post X X X X Digital Relocation X X X X Joint Public Project Model (including survey X X of project maturity)
5.3.4 Mapping and geodata Detailed maps are essential in any modern society and a prerequisite for new growth and development within a large number of diverse national activities, ranging from urban planning, mineral resources exploration or mining, emergency preparedness, infrastructure expansion, utilities or power plants, climate adaptation, environmental stewardship and nature conservation, outdoor recreation, tourism, etc.
As follow-up on the 2014-2017 “New Mapping in Greenland” pilot, a master project will be undertaken in the coming years to produce state-of-the-art topographical mapping of the entire ice- free territory in Greenland.
The pilot project demonstrated the viability of satellite-based mapping for the large tracts of land to be mapped in Greenland. The Danish State and non-profit foundations such as A.P. Møller Fonden have granted DKK 60 million for the new mapping of the land zones, where a total area of 450,000 km2 is currently being mapped with the aid of satellite images. The new digital maps will be made freely available to everyone. The mapping project is scheduled for completion in 2022. The Greenland Government Authorities have allocated DKK 2m for the project in the 2019 Budget Act.
The new land maps and data are being produced by the Danish Agency for Data Supply and Efficiency in association with the Greenland Government Authorities, Asiaq (Greenland surveys), the Danish Ministry of Defence Acquisition and Logistics Organisation and the Danish foundation A.P. Møller Fonden.
Good maps are also a prerequisite for the Government of Greenland to develop its mineral resources administration and achieve precise registration of concession areas and rights, including to ensure increased security for the companies and public-sector right and obligations. Figure 19 below illustrates the enhancements from the old to the new map data.
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Figure 19. Illustration of the difference in level of detail (map scale) between the new and old maps.
Old map. Map scale 1:250,000
New map. Map scale 1:50,000
The new map will be distributed via Danish Map Supply and NunaGIS - Greenland's national platform for geographic information. The new maps resulting from the main project will serve to boost Greenland's competitiveness. Greenland is in stiff competition with other countries to attract foreign investors for mineral resources and petroleum exploration and exploitation. Up-to-date and detailed maps are an important competitive parameter in that arena. The maps are a basic criterion for the ability of investors to estimate costs, plan operations and establish the extensive local infrastructure which is necessary, for example, for operating a mine.
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NunaGIS The Government of Greenland's National Strategy for Geodata 2018-2021 sets out a vision for how localised information and geodata can help to promote a more sustainable economy. The strategy is informed by a survey of geo-data user needs and preferences, and its aim is to realise the high economic potential of geodata. The first steps towards realising the potentials of utilising geodata have been taken.
The new National Strategy for Geodata 2018-2021 will thus ensure the creation of a geographical infrastructure (NSDI). This is being achieved in practice by means of coordinated exchange of geodata in a coherent system that also works across national borders, institutions and authorities. The National Strategy for Geodata comprises the following: • A vision for geodata • 5 national strategic goals • 25 specific drives and initiatives • Examples of the socio-economic value of detailed geodata
The strategy sets out the national objectives for development, and also identifies a number of fundamental principles for how to maximise the technological advances in geodata – only by ensuring coherence in the geodata, fostering greater transparency surrounding geodata, and maintaining a focus on user-centrism will the potential be realised.
NunaGIS will play a key role as a geodata hub or portal. The NunaGIS site will allow visitors to search for and download basic maps and geodata in a new maps portal; look up information about physical planning and any land-use restrictions in a new planning portal; look up data on the national sector plans on a new sector plans portal; and consult climate data sets and time series on predicted climate change up to year 2100 on a climate data portal. In addition, a new learning portal will offer inspiration, with examples of novel use of geodata, while the land-use portal will facilitate applications for land-use allocations.
NunaGIS will present basic statistical and demographic key figures on maps in order thereby to provide a composite image of developments across authorities and organisations. The Settlement Profile tool, presented in the Government of Greenland's national land-use report, will contain information and statistical key figures on business resources, community resources and human resources for each settlement.
NunaGIS will create transparency in the physical planning process for Greenlandic citizens, the business community and the Greenlandic authorities across the entire public sector. The new NunaGIS portal, including not least its sector plan portal, will be of great interest to the general public and foster greater openness and transparency surrounding policy-making. NunaGIS will thus serve to promote better coordination, cohesion and continuity between financial and physical planning so as to achieve enhanced decision-support and more stable framework conditions for investment.
NunaGIS offers a valuable digital platform for modernisation and more sustainable socioeconomic development in the coming years. As such, the project underpins the goal for the people of Greenland to have a means of engaging more in socioeconomic development.
With the new NunaGIS, a necessary migration has been made to a new platform (ArcGIS). This project has delayed the new NunaGIS Hub. This will be launched in a beta-version in spring 2019.
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5.3.5 Early, preventive measures as the key principle Early, preventive measures hold social benefits, as opposed to dealing with problems once they have escalated and often become complicated to resolve.
From 2019, more funds have been allocated to sport and athletics with a view to reinforcing preventive measures in pursuance of the Coalition Agreement and the 2019 Budget Act Agreement.
There is also a need to operate with a cross-cutting and integrated perspective in the public sector, based on individual citizens, in relation to solving structural problems within, for example, the education, labour market, social services and healthcare sectors. Equally, there is a need for a cross- sectoral approach to achieving improvements in the environmental and waste management sector; see Section 5.3.7.
Better interaction and coordination of early, preventive measures Intensified action on lifestyle diseases The Government of Greenland, in partnership with Novo Nordisk Foundation has formed a partnership to benefit citizens with diabetes and related lifestyle disease nationwide. The partnership will also serve to intensify preventive measures in order to reduce the rising prevalence of lifestyle diseases.
At the time of writing, a vision statement has been prepared on the establishment of a Steno Diabetes Center in Greenland, and remarks have been incorporated in the Budget Act on the general distribution of responsibilities among the parties for realisation of this vision.
The desire to engage in this future partnership is spurred by the growing prevalence of diabetes and other lifestyle diseases in Greenland.
Prevention Although many factors remain to be addressed, some progress is evident from, for example, the trend in alcohol imports; see Figure 20.
Figure 20. Trend in alcohol consumption per person over the age of 14 years. 20
15
10
5
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 AlcoholLiter alkohol per pr.person person over over 14 14 years år [litres]
Source: Statistics Greenland
In 2018, 327,000 litres of pure alcohol in beverages were imported and produced, and compared with the previous year, imports of pure alcohol were down by 43,000 litres or 11.6 per cent.
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Compared with the figure in 1989, this represents a decrease of 395,000 litres. Imports and production of alcohol have thus decreased by 54.7 per cent over the last three decades. In 2018, Greenland imported and produced 327,000 litres of pure alcohol in beverages. This high decrease is difficult to account for in simple terms, but is presumably linked in part to the many years of preventive efforts.
The Inuuneritta II public health programme expires this year. Work on its successor, Inuuneritta III, is in progress. This programme will be centred around partnering with the municipalities and cross- sectoral cooperation.
In addition, work will be carried out on initiatives within structural prevention to promote public health.
Public health is a concern for everyone, and is not confined to the healthcare sector. Public health is linked to housing conditions, working conditions, labour market participation, education, social conditions and health conditions.
A healthy population is a precondition for children being ready to attend school when they start in year 1; for school-leavers being ready for further education; for elderly people enjoying more years free from diseases of old age; for reducing the expenditure burden on the health service; for more people being available for work, etc. There is therefore a need to direct focus at, and strengthen preventive efforts through better organisation and coherence in the initiatives.
In order to ensure effective preventive efforts, interdisciplinarity is essential for organising this domain. At present, preventive efforts are distributed across multiple ministries, agencies and sections, which results in uncoordinated initiatives, and failure to realise the full potential of prevention initiatives.
In the interests of promoting greater efficiency, improving the synergetic benefits and coordination, avoiding overlaps, the responsibility for managing the preventive work and developing its methodologies, which has been lodged with the Social Services Agency, the Health Service and Allorfik - National Centre for Addiction and Early Intervention, is planned to be merged into a single prevention unit under the Social Services Agency.
With a consolidated prevention unit, these secretariat will cover all aspects of lifestyle disease prevention efforts. The Social Services Agency already has a close partnership with municipalities and family centres, and serves as the secretariat for the Meeqqat 0-18 interministerial programme supervised jointly by representatives of the education sector, the healthcare sector and social services sector.
5.3.6 Health care recruitment and retention In recent years, the Greenlandic health service has faced major challenges in terms of the drain on budgets resulting from a generalised increase in demand for health services, caused by factors such as the increase in the number of elderly persons and the increased prevalence of lifestyle diseases. Equally, the health service is challenged by a more constrained recruitment situation. In 2018, the health service reported a significant increase in spending on medical and nursing locums; see Table 17. Denmark and the other Nordic countries also report increasing demand for doctors and nurses. The possibility of recruiting health workers from non-Nordic countries is under consideration. Recruitment from outside the Nordic countries would also present challenges to be taken into account, such as linguistic and cultural barriers.
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Developments in the specialisations of the health care disciplines means that Greenland is unable to recruit health workers to meet the country's needs. The trend in the rest of the world is in the direction of more specialised rather than generalist health workers. There may therefore be a need to consider recruiting health workers from outside the Nordic region. Continuous efforts are being made in relation to new initiatives within recruitment and retention, including greater visibility in social media, the creation of rotation/secondment schemes with the leading Danish hospitals, ensuring better induction of new health professionals, and improving recruitment processes. Table 17. Trend in expenditure on medical and nursing locums, 2015-2018
2015 2016 2017 2018 Total expenditure on locums in 32.0 33.9 33.4 58.1 MDKK Source: Ministry of Health
Capacity constraints Capacity at Greenland's national hospital, Dronning Ingrids Hospital, and the patient hotel is a limiting factor for treating more patients. The occupancy rate at the patient hotel and in the wards make it impossible to admit more patients for treatment, in spite of the increasing pressure to do so. Equally, there is no option of relocating treatment out of the capital, as the equipment and specialists are present only in the capital. The trend is in the direction of centralisation in the capital, Nuuk, for all the main therapeutic groups.
The occupancy rate at the patient hotel in the capital, Nuuk, has been extraordinarily high in recent years, and in some periods has made it necessary to use external, non clinical hotels for patients. With the future volume of patients referred to the national hospital in Nuuk, the building of a new patient hotel in Nuuk may be warranted financially.
The health service also reports an increase in the number of patients transferred to Denmark for treatment, a trend which is expected to continue in the years ahead as a result of the demographic trend with a growing population of infirm elderly. The high occupancy rate at the patient hotel in Denmark for patients from Greenland awaiting inpatient or outpatient treatment in Denmark is placing increasing pressure on its resources.
Implementation of an expenditure analysis and sector plan Pursuant to the Budget Act Agreement, an expenditure analysis for the health sector will be carried out in 2019. The analysis will focus on factors such as recruitment and retention, patient trajectories, transport services, prevention and lifestyle diseases, and the use of telemedicine and IT. The goal is efficiency improvements and a cap on health care spending in the short and long term. The analysis is to ensure coherence with the sector plan.
The sector plan will demonstrate a pressing need to safeguard the future of the health service in Greenland by improving conditions at the national hospital.
The project for a “new” national hospital is phased, with the first phase having been commenced. This phase involves the establishment of a new psychiatric care building. The aim of this is twofold: to accommodate a new wing for inpatients and to provide better conditions for psychiatric patients. The new psychiatric care building is scheduled to open in 2022, after which the next phase will be commenced.
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The sector plan will also comprise objectives for future improvements in public health work and health care. The goals will be achieved by reinforcing cross-sectoral cooperation with other ministerial domains and the municipalities.
5.3.7 The environmental and waste management sector The waste management sector and a national waste management solution Waste management is a municipal responsibility spanning refuse collection through to waste incineration. In the interests of human health and the environment it is now a pressing concern to transition from the current system of many small-scale local plants and instead establish a few, larger-scale waste incineration plants with sufficient storage capacity in order to ensure that the aggregate volume of waste from the country can be processed by fewer, but more modern and efficient incineration plants.
The Government of Greenland and the town mayors resolved in September 2018 to seek to establish a unified national waste management solution. This solution entails integration with the energy sector as regards optimal use of residual heat from both incineration plants and waste oil facilities. The creation of a joint municipal limited company was completed in early 2019.
A business case study is now being prepared to account for the future capital requirement for financing the construction costs and operation of the unified national waste management solution. The estimates are based on waste volumes, freight rates and energy prices. A unified national waste management solution will constitute a significant reform of the sector and positive environmental and health effects. At the time of writing there is a need for investment in maintaining and upgrading the existing incineration plants, but also to establish and operate a unified national waste management solution.
The Government of Greenland is currently preparing a new Executive Order on Waste Management, which will contribute to reducing waste volumes and ensure improved processing of waste. This will include prioritisation by waste type, as waste generation must be limited as far as possible, recycled, reused and incinerated to generate energy until only the absolute minimum needs to be dumped.
New waste management solutions will also create new jobs in settlements and small towns, where the personnel will collect, compress, pack, store and finally transport waste to ships. At the waste reception sites, more personnel may be needed to transport the waste from the port to the incineration plant.
New waste management plan and waste processing sector plan The Ministry of Nature and Environment is in the process of updating both the waste processing plan sector plan and the waste management plan. The Waste Management Plan and the Waste Processing Sector Plan thus platform the efforts of the authorities going forward in the waste management sector. They also lay down guidelines for future local waste processing by the municipalities. Financing of the execution of the plan is not yet in place.
This is something the Government of Greenland will seek to achieve by agreement with the municipalities. The forthcoming negotiations are expected to raise the issue of whether the Greenland Government Authorities should increase the annual appropriation to the waste management area. As such, one important matter is how the waste management sector is to be financed.
Act no. 9 of 27 November 2018 on the Environment Fund was adopted at Parliament's 2018 Autumn Session. The object of the Environment Fund is to contribute to strengthening sustainable economic progress with respect for people's living conditions and the conservation of animal and plant life,
79 within a number of specific areas. In 2019, the Government of Greenland will be supporting the joint municipal waste management company's detailed planning of incineration plants by up to DKK 6m from the Environment Fund. Any planning costs exceeding that amount will be covered by the municipalities.
5.3.8 Customs strategy - Inussuk 2018-2023 The administrative tasks within customs and excise are carried out by Greenland's Tax Agency.
Border control includes the inspection of goods. Effective border control entails close cooperation across ministerial domains, to which end a new customs and excise strategy has been prepared for 2018-2023.
Performance of customs and inspections in Greenland are made more difficult than in other countries by the size of the country, the distance between entry and exit points to the country and an infrastructure based on sea and air transport together with the high vessel traffic from the fishing and tourism industry. In addition, inspection duties within the fishing and tourism industry are comprehensive in themselves.
The influence of these factors on the planning of customs officers' attendance, response-time for suddenly arising inspection tasks and the time pressure on completing those tasks, add to the complexity of customs inspections.
The purpose of the customs and excise strategy is to lay down policies and guidelines for the structure and execution of customs control. The strategy's approach is operational, with its main aims geared to service, development, gathering and use of intelligence, and demonstration of effectiveness and results achieved. The Customs Strategy is based on prioritisation of financial and human resource deployment in performance of tasks.
5.4 Increased self-reliance via reform of welfare benefits, the tax system and the housing sector It is imperative to raise the level of financial self-reliance at many levels of society: • The major demographic changes coming in the future mean that fewer people of working age will have to provide for more, which intensifies the need for as many as possible in this age group to be integrated in the labour market and contribute to financing welfare through a higher rate of employment. • The goal of taking over new responsibilities and gradually reducing Greenland's reliance on the block grant from Denmark steps up the need to increase the ability of more citizens to provide for themselves and their families and increase their own income and national revenue. • It is important in achieving sustainable economic progress and preventing large parts of the population from becoming marginalised bystanders in the coming years' anticipated trade and industry growth, for as many citizens as possible to contribute to the economy so that growth is not achieved primarily by recruiting foreign labour. • The reallocation and targeting of public subsidies will free up funds in support of the above- mentioned goals.
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The following highlights reform instruments and initiatives to incentivise greater financial self- reliance in the population in the coming years.
5.4.1 Increased financial self-reliance The employment rate in Greenland is somewhat lower than that in the other West-Nordic countries. This challenges the welfare model in the long term, when fewer have to provide for more, and there are fewer to finance the welfare society.
There is therefore a political ambition to: - further incentivise and facilitate active labour market participation; - assist citizens who have lost their foothold on the labour market in re-engaging; - reinforce education efforts to upskill the nation in the interests of citizen's financial self- reliance, etc.;
The 2019 Budget Act agreement between the Siumut, Atassut, Nunatta Qitornai, Demokraatit and Inuit Ataqatigiit parties, states as follows:
"Increased financial self-reliance 2019 Budget Act goals: More citizens to participate in the labour market • Employment allowance and reform of welfare benefits • Incentivise delayed retirement
Prevention and reduction of debt owed to the public sector • Debt counselling service in all municipalities • Readying of the Ilanngaassivik payment system
Theme 4.1. More citizens to participate in the labour market
It is imperative to increase the rate of employment, which is significantly lower in Greenland than in Iceland and the Faroe Islands, for example. A substantial increase in the number of persons in private-sector employment will increase revenues and reduce expenditure and thus make a significant contribution to improving Greenland's economic scope and thereby its growth and development potential."
To that end, an evaluation and studies are in progress with a view to targeting, readying and coordinating relevant measures to increase the level of financial self-reliance across all sectors. The main domains involved are the education, taxation, labour market and welfare domains.
Background The relevant ministries have drawn up proposals for goals and initiatives and plans for realising them. The objective is for the Budget Act Agreement to support the plans and ensure that they are lodged with the appropriate ministries, while ensuring the necessary cross-cutting coordination of initiatives and expenditure. This is described in more detail below:
Key performance indicators for goal achievement • Support for the goal of a self-sustaining economy and gradual independence from the block grant. o Young people under the age of 26 should be in education or employment. o Increase the employment rate. o Increase job opportunities for citizens with reduced capacity for work.
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o More citizens of pensionable age to remain in the labour market. o Fewer citizens on public benefits. o Reduce structural unemployment. o More citizens in year-round employment. o Increase disposable income for citizens in the low- and middle-income segment.
To achieve these, the following projects and initiatives will be carried out: 1. Recipients of or applicants for early-retirement pension a. Evaluation of early-retirement pension – linked to initiative 3a. 2. Citizens with reduced capacity for work due to personal/social problems a. Analysis of public benefits (completed) b. Reform of welfare assistance – linked to initiatives 5b and 5c. c. Targeted schemes (recommendations from initiative 2a and forthcoming evaluations). d. Evaluation of the Majoriaq education and employment centre labour market performance, including employment rehabilitation and flexitime jobs – linked to initiatives 1a, 5b, 5c. 3. Citizens who are genuinely available to the labour market, but affected by unsteady employment, long-term unemployment or who are of pensionable age but have the commitment and ability to continue working. a. Evaluation of the Majoriaq education and employment centre labour market performance, including employment rehabilitation and flexitime jobs – linked to initiatives 1a, 2d, 5b, 5c. b. Further incentivise and enable active labour market participation; 4. School-leavers who fail to progress to further education or employment. a. Evaluation of the Majoriaq upskilling and counselling service performance. b. Evaluation of overall counselling system. c. Act on apprenticeships and traineeships. d. The education sector survey and development project. 5. Citizens who are ready for employment, but who fail to gain permanent employment due to structural factors. a. Updating of the employment plan. b. Employment allowance/tax credit. c. Reform of unemployment benefit/job-seeker allowance – linked to initiatives 2b and 5b. d. Reform of the reimbursements system – recommendations from initiative 2a. e. Optimisation of any income.
Cross-cutting surveys to ensure a common platform for decision-making and initiatives: • Progress and cohort studies of school-leavers for further education or labour market schemes. • Continuous labour market surveys and labour market balance surveys. • Skills gap at the national and regional level. • Screening of IT systems – documentation and joint system support.
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The task – target groups and associated initiatives within the parameters of the overall self-reliance project – is illustrated in Figure 21:
Figure 21. Illustration of target groups and associated initiatives in the self-reliance project
Early-retirement •Evaluation of an early- pension for persons retirement reform not genuinely available for work
Alternative schemes for •Analysis of public benefits persons not ready for •Reform of the public sector assistance system employment •Evaluation of the Majoriaq Job, Guidance and Education Centres •Instruments and schemes for the target group (Matches 2 and 3)
Part-time employment •Evaluation of occupational rehabilitation for persons with and flexitime jobs residual capacity for •Incentives for increased retiree work employment •Evaluation of the Majoriaq Job, Guidance and Education Centres •Evaluation of guidance Young people (school- •Act on Apprenticeships and Traineeships leavers and up to age •Cohesion & flexitime educ. & training 25) must not rely on system passive benefits •Education and training not passive support •Renewal of the employment plan •Employment allowance/tax It must be worth credit working for •Reform of the employment unemployment readiness benefits system •Reform of the reimbursement system •Current income
Interaction with stakeholders – municipalities and the social partners The National Labour Market Council will be involved in order to foster co-ownership, and promote quality assurance and access to municipal data and experts for qualitative surveys. Other external parties will also be involved where deemed relevant for driving the necessary progress.
Special remarks on the coming reform of the welfare benefits system There is a need to modernise and reform the rules governing welfare assistance, including, especially, a reform of the public benefits scheme.
The figures for recipients of public benefits indicate that far too many young people, who should be in employment or education, instead, lead a passive existence on public benefits. Equally, a very large segment has difficulty gaining a foothold on the labour market, and consequently ends up reliant on public benefits for years, even though the benefits are intended as a hardship allowance to tide them over.
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To counter this situation, in 2018, VIVE, the National Welfare Research and Analysis Centre, was commissioned to conduct a survey of the public benefits scheme. The survey was completed at the end of 2018 and contains a large number of conclusions and recommendations regarding the coming reform. This material will be incorporated in the efforts going forward to reform the public benefits scheme.
One recommendation of the survey report is that public benefits to provide income support should be a fixed and standardised taxable benefit. This would resolve many of the integration problems and ensure the transparency and comparability of labour market benefit and ordinary income from paid employment. One derived advantage of introducing a fixed and standardised benefit would be the substantial administrative savings, since the benefit would not have to be recalculated manually every month. The administrative resources thereby saved could be rechanneled into assisting citizens to re-engage in the labour market.
In addition, the report identifies the need for a strengthened and targeted initiative aimed at the many young people living on benefits in terms of providing educational counselling, assistance in gaining employment, help to overcome substance dependencies etc. To that end, the deliberations will consider the introduction of a special young-person's benefit to make young people better off in education than on passive benefits.
Similarly, there is a large segment of persons who are temporarily unfit for work owing to various social and/or health challenges that prevent them from holding down a job. For this segment, there is a need for the municipalities to provide more proactive support in enabling them to regain their capacity for work and quality of life through targeted social or health promotion schemes. Public benefits must not become a permanent welfare allowance, but should be temporary financial assistance, actively supplemented by efforts to help citizens improve their prospects.
One of the main themes for the forthcoming reform of welfare assistance will consequently be greater focus on active measures to assist citizens in progressing from passive support to labour market participation or gaining an education or training; see Figure 22.
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Figure 22. Flowchart for deliberations on reform of public-sector assistance. Employment/Full Permanent Temporary welfare or partial financial welfare benefits benefits self-reliance
Early- Ordinary retirement Public benefits employment pensions
Flexitime jobs/ Old age Labour market/job-seeker pensions Sheltered allowance employment
Education and training
At the same time, more focus should be placed on options for preventive measures targeting families, to prevent citizens being excluded from the labour market and ending up on passive support.
Follow-up on the early-retirement reform At the 2015 Autumn Assembly, Parliament passed a new Act on Early-Retirement Pensions. The Act came into effect on 1 July 2016.
The early-retirement pensions reform was informed by a political ambition for all citizens of Greenland to have an opportunity for contributing to the economy. The aim is to counteract the trend whereby an increasing number of citizens of working age end up on passive support, including early-retirement benefit and in that way become excluded from the labour market in spite of possessing both the will and the ability to contribute to the economy.
The early-retirement pension scheme has now been in operation for two years and is due to be fully rolled out by mid-2021. The reform has been followed-up on a continuous basis and the latest figures indicate that far too many early-retirees with considerable residual capacity for work remain on the highest-level early-retirement pension because they have not yet been offered a flexitime job, sheltered employment or a municipal work-for-benefits placement. There are indications that the municipalities face challenges in procuring employment for early retirees who are willing and able to get back to work.
An evaluation of the situation is consequently being undertaken jointly with the municipalities to survey how the reform is being implemented in practice, and the challenges encountered by local authorities in its implementation, including whether a need exists for special measures to promote opportunities for early retirees to engage in part-time employment or pursue adult education.
More citizens of pensionable age in the labour market Many citizens over the age of 66 are keen to remain on the labour market if this could be made more attractive than under the current rules. At present, the basic state pension is reduced in line with an increase in personal income. For many citizens, this renders the advantage of remaining on the labour market negligible. Senior citizens remain valuable labour market assets, who are capable of contributing to the economy. It therefore needs to be rewarding for older people to remain on the labour market.
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Increased economic growth in the private sector and thereby the creation of more jobs is the most effective and economically sustainable route both to increasing disposable incomes for low-income groups and to pursuing the objective of reducing Greenland's dependence on the block grant. It is therefore vital to create financial scope for investing in promoting private sector growth by creating frameworks conducive to job creation and increased employment with the ensuing rise in public- sector revenues over the longer term. To that end, mobilisation of the more senior workforce represents one means of raising the employment rate.
The 2019 Budget Act makes an appropriation for implementing adjustment of the rules regarding the downscaling rules. The Government of Greenland is currently drafting a bill to achieve this.
Preparation of an employment allowance There is now broad political consensus on introducing an employment allowance, as implemented in the 2019 Budget Act agreement between the Siumut, Atassut, Nunatta Qitornai, Demokraatit and Inuit Ataqatigiit parties. The Budget Act agreement states as follows:
"The parties to the Budget Act Agreement have agreed to hold political talks with a view to clarifying the policy principles for a forthcoming employment allowance, and the model for, and financing of, this. The assumption is also that in extension of the employment allowance, efforts will be made to realise a reform of welfare benefits in support of aims such as to improve the employment rate.
The assumption is based on the following: The amount will be means tested; based on the individual's income from employment, including self-employment. The amount will be tallied and disbursed in the year after the qualifying year, based on the annual tax statement. In this way, an allowance for the income year 2020 would thus be disbursed in 2021 and so forth. Ultimately, the aim is for the allowance to be disbursed over the course of the year where this is achievable technically and administratively."
An employment allowance is intended to raise the employment rate and contribute to countering coordination problems. The employment allowance should thus be seen in the context of a forthcoming reform of public benefits including unemployment benefit. Given that the employment allowance will need to be financed, there is a balance to be struck between the size of a prospective employment allowance and the number of beneficiaries.
The more that qualify for it, the smaller will be the amount disbursed to each recipient. Taking all factors into account, the instrument is assumed to have greater effect on the employment rate if it targets the lowest income segment. This is due to the fact that people who are able to achieve a high income from working already have a significant economic incentive to do so.
The Government of Greenland is in the process of drafting a bill based on the guiding principles of the 2019 Budget Act Agreement.
5.4.2 Housing and economic indicators for housing reform The Greenland Government Authorities own just under 6,000 housing units under their housing administration entities. A large proportion of this accommodation is dilapidated, and many of the units are organised in housing estates with weak finances. This means that only limited funds are available for keeping these homes in an acceptable state of maintenance.
Figure 23 contains a diagram illustrating the scale of the problem based on building surveys conducted in 2016-2017. A project is currently in progress to update the building surveys.
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Figure 23. The physical condition of rental accommodation. Number of dwellings in each building category, based on building surveys.
To be devolved
Demolition (0-5 years)
Short/long residual useful life (5-20 years)
Renovation/good condition (30+ years)
Source: Building Surveys from the Government of Greenland's sector plans from 2016 and 2017.
The Figure shows that around 1 in 5 dwellings is in such poor condition that it will not be fit for habitation within 5 years' time. More than 7 in 10 dwellings have a residual useful life of between 5 and 20 years.
Even if funds are allocated for renovation of dwellings in this category, the most that could be achieved would be to extend their useful life, rather than make them habitable over the long term. In addition, the rental housing stock contains a number of dwellings scheduled for demolition (the red fraction in the diagram). Conversely, a very small proportion are in such a good state that their useful life exceeds 30 years (the green fraction in the diagram). 4,416 dwellings only have a residual useful life of 5-20 years, and only if maintenance and renovation are carried out regularly.
The figures demonstrate the need for a strategic economic sector plan for rental housing to halt the accelerating dilapidation of the public-sector rental housing stock. The questions concerning the condition of public-sector rental units and the plans for newbuilds, replacement buildings and renovation are not only a concern for the Greenland Government Authorities. There is a need to address the situation of the central and local authorities' rental housing as one in the different settlements, and to bring them under inter-authority planning and priority-setting. This is also ties in with the efforts in progress to devolve responsibility for public rental accommodation from the Greenland Government Authorities to the municipal authorities; see the subsequent section on this below.
Heavy financing will be needed to make up for a large deficit, which will need to be sourced from either tax revenues or directly from the tenants. The underlying figures also indicate that the deficit is highest in the largest towns, especially in Nuuk, Sisimiut and Qaqortoq.
Table 18 shows that appropriations made in the Budget Act for renovation and demolition generally decreased slightly in the period 2015-2018. This masks the fact that funding for demolition was increased, while funding for renovation decreased slightly more in that period.
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Table 18. Appropriations for renovation and demolition in the 2015-2018 Budget Act [DKK].
2015 2016 2017 2018 Renovation, etc. 41,434,631 40,613,224 43,178,091 53,704,937 Demolition 25,694,36 31,922,497 20,441,489 7,829,424 Total 67,128,995 72,535,721 63,619,579 61,534,361
The current trend in the dilapidation of the Greenland Government Authorities' housing stock is multifaceted: 1. The more properties that are in such a dilapidated state as to warrant demolition, the more funds must be allocated for building new homes in order to ensure a stable supply of rental accommodation. The current trend is costly for the economy, as the deterioration of the accommodation is now accelerating. 2. In recent years, the Greenland Government Authorities have launched a diverse array of initiatives in the social services sector, schools sector and health care sector. If these initiatives are to have the intended effect, the housing situation will be pivotal. Maximising improvements in one sector is predicated on productive coordination with allied sectors. If homes are in poor condition, this will adversely impact the Government of Greenland's initiatives in the form of health risks, for example, resulting from rising damp or poor indoor air quality. These two health risk factors have been proven to directly impair student learning, and in that way will adversely affect the Government of Greenland's efforts in the education sector. The widespread dilapidation of dwellings also poses a risk of slummification of large neighbourhoods and the entailed need for extensive neighbourhood regeneration. 3. The rents for the Greenland Government Authorities' rental housing have not been raised in line with inflation for a number of years. This has gradually undermined the financial parameters for ensuring timely, periodic maintenance of housing association dwellings. 4. The occupants' motivation for taking better care of their rented accommodation is likely to increase if they experience that the landlord takes ongoing initiatives for ensuring that the condition of the housing is prioritised, including as regards maintenance and repairs and remediation of vandalism to the properties. The risk of vandalism and graffiti increases if the dwellings are in sub-standard condition. 5. Moreover, the composition of residents in a neighbourhood is adversely affected if maintenance of the housing is inadequate, since the more resourceful tenants will tend to move out of substandard housing to a better alternative, typically by buying their own home on the private housing market. This increases the risk of ghettoisation. 6. The increasing dilapidation of the rental dwellings also means that an increasing proportion of current renovation programmes are used for “fire-fighting” projects. At the present time, high investment is needed solely to reinforce balconies and galleries on the facade of a large number of multifamily housing in several towns to eliminate any hazard for the occupants. For many years, the concrete has been exposed to the elements without any regular maintenance. These cost-intensive renovations could have been avoided if periodic maintenance had been performed. 7. Given the current financial constraints, it is difficult to make long-term plans for the necessary demolition and renovation work owing to the frequent urgent remediation needed on an ad hoc basis. This suggests that any superficial savings from reducing allocations for renovation are short-lived and only aggravate the housing problems.
An upgrade of the current renovation programme is not just a question of securing more funds.
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The building and construction industry in Greenland is buoyant at present to the point that building capacity is nearing its maximum. There is currently an overheating of the building and construction market, which is set to raise the cost of construction projects. Moreover, there is a risk of an insufficient number of building contractors bidding for projects requiring urgent completion.
Reform initiatives in the housing sector The municipalities are in closest contact with citizens, and also better placed to take the pulse of the situation in the settlements they are responsible for. This means that the municipalities possess the local insights for processing loan applications to meet inhabitants' housing needs. Against that background, a number of legislative amendments have been introduced in recent years to grant the municipalities access to making local-level decisions on applications for: • Cooperative housing • Loans for tenant co-build housing • Home loans, including renovation loans
These reform initiatives in the housing sector take into account the housing location, and offer a means of catering to the needs of people in low- and middle-income segments in their efforts to secure their own home.
Allowance for geographical factors means that the more remote the location from growth centres (Nuuk, Ilulissat, Sisimiut, Aasiaat and Qaqortoq), the larger the loan that can be granted.
These initiatives improve the prospects of citizens gaining a home regardless of personal income, but also focus on establishing a sustainable housing sector, which: • Ensures simplified and more citizen-centred processing of loan applications • Increases the prospects of ensuring that everyone has modern housing • Ensures more appropriate and transparent financing
In continuation of the housing sector reform, the Government of Greenland is currently working to prepare: • Devolvement of the Greenland Government Authorities' rental housing to the municipalities • A new Tenancy Act • A new act on subsidies for subsidised housing.
Devolvement of rental housing to the municipalities A key element in the housing reform efforts involves the efforts in progress to devolve responsibility for public rental accommodation from the Greenland Government Authorities to the municipal authorities.
The municipal and central authorities have jointly, in Project description - survey of the housing policy strategy and sector plan, described a number of action areas for public-sector rental housing. The aim of these initiatives is, on the one hand, to facilitate the devolvement of rental housing from the Greenland Government Authorities to local authorities, and on the other hand, to ensure an up- to-date and future-proofed structure for public-sector rental housing in terms of type, location, quantity and maintenance.
The Ministry of Housing and Infrastructure has drawn up a Programme Plan for Housing, in which seven projects with clearly-defined work packages will ensure the progress of the process. The projects consist of: • An essential survey project on demographics, housing demand and economics which provides robust and well-informed decision support.
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• Ensuring targeted housing guarantees for citizens unable to find their own housing. • Incentives for more affluent citizens to buy their own homes. • Sustainable rents to cover the costs of periodic maintenance of buildings and dwellings. • Ensuring the Danish State's housing supply obligations, and resolving problems surrounding staff housing. • Devolvement of the Greenland Government Authorities' rental housing on a well-informed basis. • Expedient future organisation and administration of the public-sector rental housing stock.
With the realisation of these sub-projects, the Programme Plan for Housing will result in a substantial socioeconomic improvement in terms of both the national economy and public health and social conditions, in well-maintained, appropriate and modern housing.
The Programme Plan may thus be seen as an offshoot of a series of housing sector recommendations ensuing from, for example, the Structural Reform (2008), the Tax and Welfare Commission's recommendations, the Sustainability and Growth Plan (2016) and the ad hoc recommendations of the Economic Council.
Draft bill for a new Tenancy Act Based on the foregoing studies, the existing tenancy regulations will be subjected to comprehensive review.
The resulting revised regulation will embody adjustments that are warranted in order to bring the legislation up to date as regards the landlord-tenant relationship, and the anomalies identified in the existing tenancy regulations.
The revision of the Tenancy Act will also entail the need for adjustments to social services and tax legislation in order to raise the social profile of the reform as a whole.
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6 Policies informing the 2019 Budget Act and preparation of the 2020 Budget Act Bill
6.1 Budgetary coordination related to the 2020 Budget Act The preparation of the 2020 Budget Act Bill will take place at an economically fortuitous point in time, but economic development going forward is, of course, subject to uncertainty, including with regard to price trends and catch volumes over the next few years within the country's biggest export industry, commercial fishing.
The consequences are that projected revenues for taxes and duties for the 2020 Budget Act Bill will be at a high level. The preparation of the 2020 Budget Act Bill will also be affected by the 2019 Budget Act operating with a substantial revenue reserve, to be realised in the form of cost-savings.
Meanwhile, it has been decided that accounts are to be balanced over the period, as stipulated in the Budgeting and Accounting Act, and in the goals and principles adopted for Greenland's economic policy.
There is thus a need to be able to prioritise: • Scope for new initiatives such as the take-over of new responsibilities from the Danish State; • Implement specific measures for efficiency improvements across the public sector; • Initiatives with a view to creating conditions conducive to private sector growth.
Dealing with new requests for new duties Requests for additional funding are received continually from various sectors. It would be impossible to grant all of these in the 2020 Budget Act Bill whilst ensuring a balanced budget.
To ensure cross-budget coordination in relation to proposals for new legislation with economic consequences, the Government of Greenland has resolved to put in place standardised and common procedures. In practice, this will entail that all proposals with economic consequences must always be prioritised collectively in relation to the drafting of bills for new Budget Acts. This is expected to be incorporated into a future bill for revision of the budget regulations.
Consequently, the principle is also for any requests for additional expenditures within a ministerial domain to be offset by corresponding economies within that same ministerial jurisdiction. The Government of Greenland's forthcoming amendment bills for the second and third hearing of the 2020 Budget Act Bill must likewise be duly financed.
There is thus no scope for adopting unfinanced bills in the ongoing political debate on the Budget Act Bill and the associated negotiations with the political parties, just as bills to be heard at Parliament's spring and autumn sessions in 2019 that will incur costs must also be financed if adopted.
Incorporating such proposals in the negotiations on the Budget Act Bill is thus important, and they must not be permitted to side-track the customary, cross-party and national priority-setting to be reflected in the final Budget Act.
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This will be the starting point for the Government of Greenland's forthcoming talks with the parties, which it hopes will meet with broad political backing, including for the future collaboration with the Finance and Tax Committee and Budget Act Agreement on the 2020 Budget Act Bill.
Drafting of the 2020 Budget Act Bill The Budget Act Agreements for previous years, including the broad majority backing the 2019 act, provide a number of pointers for work on the 2020 Budget Act Bill. The objective is for the negotiations to result in written agreements with the parties on key themes, and for their outcomes to be incorporated into the necessary contexts of both national and sectoral policy goals and plans.
The Government of Greenland also aims to avoid having unallocated reserves for cost-saving measures within administration and operation incorporated into the 2020 Budget Act Bill to be presented in August 2019.
6.2 Expenditure analyses In line with increasing pressure on Greenland's public finances, the criteria will be more stringent for effective spending and achieving transparent, cross-cutting prioritisation of funds in the national and municipal budgets. Demographic disparities are expected to make it necessary to increase budgets within some sectors, and generally for priority-setting to be more stringent.
The main objective of the expenditure analyses is to improve efficiency and service within the public sector. The analyses will be able to free up resources for core duties and create scope for continuous improvement and innovation. They will also create an overview of financial governance.
The analyses also go hand in hand with greater focus on sound public financial governance within the central and local authorities. Sound financial governance takes into account the fact that responsibilities can be fulfilled in many different ways, and that the associated decisions related to disciplines and resources have different financial consequences and different tools for addressing diverse financial scenarios.
The analyses must be able to identify improvements and innovations, and foster a cost-efficient mindset beyond the proposals for specific improvement measures.
The most important issue for expenditure analyses will concern the balance between input and output, and proper courses of action. The relevant questions should thus be: What will it cost? What drives expenditure? What can we influence and how? How long will it take before an effect can be seen, and how great is that effect?
The individual entities are thus expected to be able to identify in this process: • Core services and what they cost, including joint costs and defining measurable targets. • The relationship of core services to capacity requirement and thereby to economic consumption. • The effects of core services, i.e. what can be expected of their application. • The data that will make it possible to document and follow up on the above. • How core responsibilities are the main focus for strategy, activities, budget and follow-up.
Pursuant to the 2019 Budget Act and the approved 2020 Budget Act Bill, expenditure analyses will be conducted in six different sectors.
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The 2019 Budget Act Agreement emphasises a "focused and efficient, citizen-centric public sector" and mentions that diseconomies of scale and a silo mentality spur a "need to take a critical view of the scale and structure of the public sector, including whether its tasks are performed cost-efficiently, and whether it might be undertaking tasks that could either be dispensed with altogether or fulfilled more effectively by the private sector."
The six analyses now in progress comprise the comprehensive audits of the Greenland Government Authorities' spending on health care and also IT and payrolling. Small-scale analyses have additionally been undertaken for the social services sector, education sector and the administration of small entities such as various party-official institutions, councils and Statistics Greenland.
The Greenland Government Authorities' payroll expenditure The audit of the Greenland Government Authorities' payroll expenditure was undertaken on the basis of increased payroll expenditure in recent years. The total payroll cost for the municipalities and the Greenland Government Authorities is around DKK 2.6 billion per annum, which makes salaries the biggest single item in the public budgets. For that reason alone, it is important to curb the level of pay increases in the public sector.
Pay trends in the public sector are also determinative for inflation and influence the price and pay adjustments that regulate the Budget Act Bill's annual appropriations in relation to the Budget Acts of recent years. Low wage increases and thereby a reduced inflation burden will be instrumental in reducing the costs of price and wage adjustments in the Budget Act, thereby increasing Greenland's national economic scope.
The public sector is the biggest employer in the country, and salary increases in this sector thus influence wages in the private labour market. By keeping salary increases in the public sector low, a knock-on effect can be achieved for the private labour market. This can help create more jobs, as national competitiveness is increased.
Efforts to stem salary increases in the public sector make it natural to maintain focus on staff turnover within the Greenland Government Authorities and municipalities, especially given that some sectors can be expected to need to increase their workforce as a result of demographic changes. This includes, especially, the care sector. Conversely, increased digitalisation may result in reduced staffing in other parts of the public sector. The Government of Greenland will consequently be seeking to create better ways of monitoring staff turnover in the public sector in consultation with Statistics Greenland and the municipalities for the purpose of financial planning.
The survey will also contain descriptions of any problems of double administration between the central and local authorities, and offer proposals for countering this situation.
IT sector The analysis of the Greenland Government Authorities' use of IT will provide an improved overview and more economical use of their total spending on IT operations, for individual projects and licenses and various websites.
The analysis will also offer a proposal for specific initiatives for digitalising manual processes in order thereby to free up resources for other tasks.
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Health sector The purpose of the health sector analysis is primarily to identify opportunities for freeing up resources for citizen-centred health services and whether early intervention programmes could be optimised. The expenditure analysis will contribute to the preparation of a sector plan proper, which involves political and administrative decision-making on the sector's success criteria, and how results may best be generated and most efficiently, together with the associated budget for the sector.
The analysis will focus on factors such as transport services, expenditure on medical and nursing locums, optimising patient trajectories via technologies such as telemedicine, the effects of introducing a deductible for health insurance, and the possibility of user-fees for health care.
Social services sector - residential care institutions A survey is in progress in the social services sector's independent residential care institutions. This will examine whether private-sector residential care institutions provide the same services at a price and to a standard matching that of equivalent public-sector institutions.
The survey will provide transparency in this domain, and identify potential cost reductions and a higher standard of quality and specialisation.
Education sector The survey of the education sector will contribute to improving both standards and efficiency in the sector.
The focus will be on creating better coherence between finances and output, and incentivising educational attainment though more effective performance-based financing of institutions and possibly user fees. In addition, consideration should be given to incentivising the municipalities to raise the standard of education and contribute to meeting the criteria of the Partnership Agreement with the EU, together with other objectives for the sector.
Shared services Finally, an analysis of the possibility of shared services will identify improvement potentials from pooling the administration of various councils and party-official institutions. The aim of this will be to reduce any diseconomies of scale in that domain.
6.2.1 Preliminary contributions to preparatory legislative works for the 2020 Budget Act Bill. The preparatory works for the 2020 Budget Act Bill comprise goals and initiatives contained in previous Budget Act Agreements and parliamentary motions, plus initiatives with regard to the municipalities.
The priorities for the 2020 Budget Act Bill are to ensure supporting measures within the following key areas: . The transport sector, where particular focus will be placed on the project to finance expansion of the airports, including, especially funds for injection of the requisite capital in Kalaallit Airports A/S; see the remarks to the 2019 Budget Act and the Construction Act on establishment of airports from the 2018 autumn session.
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. The housing sector, including the preparation of the possible devolvement to the municipalities and preparatory works concerning the entailed consequences for the block grant.
. Unallocated funds in the building and construction sector are to be prioritised according to these criteria: o The Government of Greenland's objectives for the airports segment, o Highest-priority projects in the current construction sector plans, including substantial, outstanding sector plans, should be completed as soon as possible. o A goal of creating sound regional balance in developments and ensure improved flow of allocated funds for investment in fixed assets.
. Any lump-sum revenue from companies, and the petroleum and minerals sector, together with extraordinary revenue deriving from tax and duty, and any increased dividends from companies shall be earmarked for infrastructure investments in airports especially, which will contribute to increasing the sustainability of Greenland's economic policy and create a more self-sustaining economy.
Status of construction and financing of the new main airport structure In the first and second quarters of 2019, Kalaallit Airports A/S will be putting the Ilulisat and Nuuk airport projects out to tender. The tender documents will also include an option for contracting firms to bid for an alternative time schedule for the construction works.
As in previous years, the 2019 Budget Act authorises the injection of additional capital into Kalaallit Airports A/S if the Treasury should receive extraordinary revenues from land grants, dividends, etc.; see the remarks to Main Account 10.13.11 in the 2019 Budget Act. Such a requirement is also likely to be applicable to the 2020 Budget Act.
Apart from the three airports above, the Government of Greenland is also working on the preparation of additional airport investment over the coming years; see the section below.
Regional landing strips The financial analysis work on regional landing strips in Uummannaq, Qasigiannguit, Kangaatsiaq, Qeqertarsuaq, Narsaq, Nanortalik, Ittoqqortoormiit and Tasiilaq are scheduled for completion in time for the political hearing in 2019. In addition, an analysis project is commencing on a regional landing strip in Uummannaq, based on the Coalition Agreement.
As in the case of the analysis project which informed adoption of the Construction Act concerning the construction of the airports in Ilulissat, Nuuk and Qaqortoq, the projects will be subject to socioeconomic impact assessments to form the basis for assessment of whether the projects meet the requirements of the National Assembly Act on Airports. This concerns whether the investment can accrue interest and be depreciated; whether operation of the airports might generate a positive contribution margin; whether construction or operation suppress other expenditures or generate new revenues; and whether the investment takes into account existing and prospective airline operators, and their choice of fleet (aircraft models, etc.).
Once the results become available, the Government of Greenland will assess them and on that basis make recommendations for the onward process to the relevant Parliamentary committees. The results of this analysis and the financial consequences of the project are expected to be incorporated in the 2020 Budget Act and future Budget Acts,
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Greenland Airports in the context of a new airports structure post-2023 The consequences of building and operating the new airports in Nuuk, Ilulissat and Qaqortoq via Kalaallit Airports A/S are described in a publication on the socioeconomic impact assessment of airport expansions in phase 2. The surplus-generating enterprise in the airports structure will thus be divested from Greenland Airports' undertaking. As a consequence of this divestment, a deficit has been estimated for Greenland Airports of between DKK 60m and 75m per annum.
Similarly, the above-mentioned socioeconomic impact assessment for the airports expansion phase II describes that public-sector economies ensuing from the new airports structure are expected to co-finance the forecasted Greenland Airports deficit. This will most likely be reflected in the 2023 Budget Estimate in future Budget Acts and in a reduced appropriation on the relevant main accounts, and a reduction in the municipal block grant. Concurrently with this process, a project is in progress to identify savings potentials and efficiency-improvement processes within Greenland Airports to counteract the forecasted deficit.
Greenland Airports – reinvestment in airport equipment Greenland Airports requires the injection of more funds in order to close the gap on a reinvestment requirement for airport equipment accumulated over a number of years. This will need to be financed either via the Budget Act or Greenland Airport's charges.
The sum of DKK 20m was already allocated in the 2019 Budget Act for reinvestments in Greenland Airports, while DKK 10m has been earmarked in the Budget Estimate years.
The Danish Transport, Construction and Housing Authority has notified the Ministry of Housing and Infrastructure and Greenland Airports that increased focus will be placed on air safety at Greenland's airports from 2019 onwards. The Authority deems that the funds allocated in the Budget Act for 2019 and onwards are insufficient to maintain a satisfactory level of air safety.
There is consequently a need for a renewed assessment of financing for the necessary reinvestments in Greenland Airports.
This has wide ramifications in the event of an equipment breakdown, as was witnessed in 2018 when Kangerlussuaq Airport suffered a severe shut down of activities with the resulting major disruption to landings and take-offs due to a radio equipment outage.
Greenland Airports – reinvestment in heliports Greenland Airports has compiled a report identifying the reinvestment requirement in the company's 43 heliports with a view to ensuring that the infrastructure can continue to meet the Transport, Construction and Housing Authority's air safety requirements. The report also contains an estimate for an upgrade to a number of heliports for potential future handling of large helicopters such as the Sikorsky S61 and S-92.
An upgrade to the heliports, and the entailed financing will need to be considered in the context of future service contracts for passenger transport.
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Aningaasaqarnikkut ingerlatsineq pillugu nalunaarut 2019 Politisk Økonomisk beretning 2019 Engelsk overskrift 2018
Suliarineqarnera naammassivoq Maj 2019 Redaktion sluttet i maj 2019 Editors ended in may 2019
Ungalua – Omslag – Cover.: Orla Dalager, N Offset, 3900 Nuuk Naqinneqarfia – Tryk - Print.: N Offset, Nuuk
Aningaasaqarnermut Naalakkersuisoqarfik Departementet for Finanser Ministry of Finance P.O. Box 1037 3900 Nuuk Oq./Tel.: +299 34 64 02 [email protected] www.naalakkersuisut.gl Politisk-Økonomisk Beretning 2019
Politisk-Økonomisk Beretning 2019
Aningaasaqarnermut Naalakkersuisoqarfik - Departementet for Finanser - Ministry of Finance