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The Faroe Islands

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The Faroe Islands Information Memorandum The Faroe Islands November 2005 INFORMATION MEMORANDUM 2005 3 The following presentation about the Faroe Islands has been prepared by the 1. FACT SHEET 4 Landsbanki Føroya on behalf of the Government of the Faroe Islands. 2. RECENT DEVELOPMENTS 2004 – 2005 6 3. GEOGRAPHY AND POPULATION 9 4. THE POLITICAL SYSTEM 9 4.1 THE GOVERNMENT AND ADMINISTRATION 9 4.2 THE PARLIAMENT AND GOVERNMENT 10 4.3 FOREIGN RELATIONS 12 5. THE ECONOMY 13 5.1 THE ECONOMY IN GENERAL 13 5.2 INDUSTRIES 14 5.3 LABOUR MARKET 19 5.4 FOREIGN TRADE 20 6. THE FINANCIAL SYSTEM 22 6.1 THE FINANCIAL MARKET 22 6.2 CURRENCY 23 7. THE PUBLIC SECTOR 24 7.1 PUBLIC INCOME 24 7.2 PUBLIC EXPENDITURE 24 7.3 THE PUBLIC FINANCIAL SYSTEM 25 7.4 THE CURRENT PUBLIC BUDGET STATUS 25 7.5 PAYMENTS FROM DENMARK 26 7.6 FOREIGN GOVERNMENT DEBT 26 7.7 THE MUNICIPALITIES’ DEBT 27 8. SUMMARY & OUTLOOK 28 8.1 SUMMARY 28 8.2 OUTLOOK 28 4 INFORMATION MEMORANDUM 2005 1. FACT SHEET THE FAROE ISLANDS Location and Greenland remained under the sovereignty of The Faroe Islands is located in the North Atlantic the Danish Monarch. (62˚N 7˚W), approximately 430 kilometers south- east of Iceland, 600 kilometers west of Norway and Due to the large geographical distance to Norway 300 kilometers northwest of Scotland. The Faroes is and Denmark, the Faroese always maintained a spe- comprised of 18 islands, separated by narrow sounds cial jurisdiction along with their distinct language or fjords. and culture. Land Area The Political System 1400 square kilometers; 545 square miles Together with Denmark and Greenland, the Faroe Islands constitutes the Kingdom of Denmark, which Population (1 Jan 2005) is a constitutional monarchy. 48,371 Since 1948, the Faroe Islands has had an extensive Main population centers (1 Jan 2005) Home Rule – where so-called Joint Affairs are under Tórshavn (capital): 19,348 Danish State authority, while Faroese affairs are un- Klaksvík: 4,914 der Faroese Home Rule administration and legisla- tion. Language The written and spoken language is Faroese. The The Faroe Islands has, for example, its own inde- Faroese language is a North Germanic language pendent area regarding customs and excise, taxation closely related to Icelandic and to the dialects of and administration. western Norway. Nordic languages and English are understood and spoken by most Faroese. Judicial, defense and foreign affairs are among those affairs that cannot be taken over by the Faroese Religion Government according to the Home Rule Act. Approximately distributed as follows: Evangelical Lutheran Church: 85% The Faroese Parliament (Løgting) is the legislative Christian Brethren: 10 % assembly for Faroese affairs, and also appoints the Other: 5% Prime Minister (Løgmaður), who - along with his cabinet ministers - constitutes the Faroese Govern- History ment (Landsstýri). The Faroe Islands is believed to have been discov- ered and inhabited in the 8th century or earlier by The Løgting has at most 32 MPs elected from seven Irish settlers. The Norwegian colonization began constituencies. In addition to the elections to the about hundred years later and developed throughout Løgting, the Faroese people elect two representa- the Viking Age. The settlers established their own tives to the Danish Parliament. parliament on Tinganes in Tórshavn. The Faroese Parliament is believed to be the oldest in Europe. Head of State The Prime Minister, Jóannes Eidesgaard (Social Norway and Denmark joined in a double monarchy Democrat), since 3 February 2004. in the late 14th century. When Norway in 1814 was cessioned to the King of Sweden, the Faroe Islands INFORMATION MEMORANDUM 2005 5 FACT SHEET THE FAROE ISLANDS Present Government Labor force (2004) The Faroese Government (Landsstýri) consists of at Approximately 27,000 least two Cabinet ministers led by the Prime Minis- ter. The present cabinet number is seven, including Labor force divided by industries (approximated) the Prime Minister. Fishing, fish processing and manufacturing: 1/3 The Faroese Government coalition is currently made Construction and private services: 1/3 up of representatives from the Social Democrats, the Public services: 1/3 Unionist Party and the People’s Party. Education Currency Mandatory from 7 to 16 years of age. Primary The Faroes is part of the Danish currency area. The school is compulsory up to the ninth class, after Faroese currency unit, the króna, has the same value which education can be continued in a High School, as the Danish krone. Business, Technical, Industrial Fishing, or Mariners 1 Euro = 7.44 DKK school. 1 US$ = 5.47 DKK1 There are also colleges for Marine Engineering, Nautical, Teacher, Business and Nurses training. Main industries There is one University in the Faroe Islands – Fishing, fish processing and fish farming. Fróðskaparsetur Føroya. GNP (Nominal GNP at market price) Transportation 9,699 mill. DKK (2003). The transportation of people and goods to and from The estimated GNP for 2004 is 9,987 mill. DKK and the Faroe Islands is by both air and sea. Regular 10,176 mill. DKK for 2005. flights and car and cargo ferries are available all year round to Denmark, Iceland, Norway and Great Export of Goods (2004) Britain. The flight time to Copenhagen (Denmark) is 3,668 mill. DKK 2 hours and 15 min. Main export product groups (2004) The Faroe Islands has a modern infrastructure with Fish and fish products: 94.2% good roads and tunnels. The roads are mainly as- Ships: 5.2% phalted, dual-track carriageways. A bridge connects Other: 0.6% the two largest islands and a subsea tunnel connects two islands while another subsea tunnel is under Import of Goods (2004) way. 3,738 mill. DKK 1 31-12-2004 6 RECENT DEVELOPMENTS 2. RECENT DEVELOPMENTS 2004 – 2005 Below are the recent developments since the latest 2.1.4 Economy publication of Information Memorandum. In 2002, the growth was 4.0% in the nominal GNP (at market price), but the growth rever- 2.1.1 Population sed in 2003 and became negative at -2.75%. The population of the Faroe Islands totaled 48,371 In 2004, the growth is estimated to have been in January 2005. 3%, while the estimated growth for 2005 is 1.9%. 2.1.2 Political The outlook for 2006 is approximately 1% The last election was held on 20 January 2004 and growth. the outcome is discussed below. Despite contractual wage increases of 4% in 2004, In February 2004, the Social Democrats (Jav- total wages and salaries paid in 2004 increased by naðarflokkurin), the Conservatives (Fólkaflokku- only 0.9%. For the first three quarters in 2005, rin) and the Unionists (Sambandsflokkurin) compared to the same quarters in 2004, wages formed a coalition government. The present Cabi- increased by 2.2%. net number was reduced to seven, including the Prime Minister.. The former Government planned 2.1.5 Industries to make the Faroe Islands an independent country, Fishery but the Government is pursuing a new course. The In 2004, there was a drop in the value of the catch plan is to take over some special matters, and to by 13%, which can be attributed mainly to falling pass a new and more flexible Home Rule Act. volumes. Especially the total catch of cod (Gadus morhua) and haddock (Gadus aeglefinus) was sig- 2.1.3 International relations nificantly lower in 2004. The declining trend for the value of the catch slowed significantly in the A new and more flexible Home Rule Act was rati- first half year of 2005; the value of the catch is fied by Parliament in 2005. The new act will make down approximately 1% compared with the same it easier for the Faroese Government to take over period in 2004. special matters. Aquaculture The Parliament also ratified another important The Faroese aquaculture industry experienced a new treaty with Denmark regarding foreign rela- record year in 2003, if one considers only the har- tions. The new act will allow the Faroese Gov- vest (salmon and trout) and not the prices. ernment on its own to negotiate and become sig- In 2001, the harvest was 46,000 tons, in 2002, natory to certain bilateral and multilateral agree- 45,000 tons and in 2003, 58,000 tons. In 2004, the ments, if these only concern special matters for harvest fell to around 37,000 tons. which the Faroese Government has full responsi- For 2005 and 2006, the estimates are down to bility. 16,000 tons and 14,000 tons, respectively. In 2007, the harvest is expected to grow again, as the aquaculture industry is recovering and preparing for the coming years. The harvest in 2007 is ex- pected to be around 19,000 tons and in 2008 around 24,000 tons. For the industry, future price developments are of the utmost importance. Prices have increased during the first half of 2005 and are approximately 25% higher than when they reached their lowest point in 2003. INFORMATION MEMORANDUM 2005 7 Construction Unskilled workers had their wages settled in May. Although the level of activity is still high, the Wages increased by 0% in 2005 and 0% in 2006, growth appears to have peeked in 2004, when the while the pension payment increased by 1% in growth in wages and salaries was 10.5%, com- 2005 and 2% in 2006. The main public sector pared to 2003. agreement was settled in October 2005, and re- sulted in a 1-year agreement, and an increase in In the first three quarters of 2005, the wages and wages of 0.9% in 2005. In addition to the in- salaries paid have declined with -2%, if compared creased wages, the agreement was improved in to the same quarters in 2004.
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