Chinese and Russian companies are investing more and more money in Europe and Norway. Usually, companies in other countries invest to grow bigger and make money. With it only profit China and Russia want? Or is it something else that is the goal?
- What is a foreign investment?
- Why is it important to us?
- What is the risk?
- And what can we do?
Foreign investment is when a company buys another company in another country. It is simply money that moves across national borders. One of the advantages of such investments is therefore that you get money – capital – that you would not otherwise have access to. You can also get access to new technology, new knowledge and new markets to sell your products in.
An example of these advantages is the industrialization of Norway in the early 20th century. Norwegians then had visions of producing electric power and developing new industries, such as the production of fertilizers and metals such as aluminum. The challenge was that Norway did not have enough money to invest in these good ideas. So when companies like Norsk Hydro and Elkem were built up, the industry pioneers Sam Eyde and Kristian Birkeland were dependent on foreign money to make it happen.
Therefore, the financing of Norway’s industrialization came mostly from abroad.
The same applied to the build-up of the Norwegian oil business. When we found oil, we needed money, knowledge, and technology from abroad to get the oil up from the ocean floor.
Many will therefore say that foreign investment is crucial for our welfare here in Norway.
Here are some big numbers: In 2019, the value of foreign investments in Norway was approximately NOK 1.4 trillion (ie NOK 1,400 billion). Conversely, the portfolio of Norwegian investments abroad is now approximately NOK 1.8 trillion. Mutuality is a point here: Foreign investors can invest in Norway, and Norway can invest abroad.
2: Investment and security
In these examples from Norwegian history, we received investments from countries such as Sweden, France, Germany and the United States. And this is what has been common: The vast majority of foreign investment moved from rich to other rich countries, or from rich countries to low-income countries. Such investments have been desired and have to a small extent been met with some form of skepticism.
Only in the last decade have we seen large flows of investment coming from countries such as China, Russia and the Arab Gulf states. It has caused many to raise their eyebrows. What is the big difference?
An important difference is that these are countries with which Norway cannot cooperate on our security. Norway is in an alliance with the United States, we have military exercises with allies, exchange information and intelligence with many countries, and we have the Organization for Security and Co-operation in Europe (OSCE). With China and Russia, we have none of this.
The other big difference is that it is normally taken for granted that those who invest from abroad are private companies that only want to make money. Therefore, foreign investment is poorly regulated in the global economy.
International trade, on the other hand, is fairly regulated. We have rules for customs, there are free trade agreements, and the World Trade Organization (WTO) was established in 1995 to regulate trade between countries. There is nothing similar for investments – here there is a lot of freedom.
But when it comes to China and Russia, for example, we see that if we dig a little deeper into who is really investing, and who will ultimately be the new owner of the business being bought, then it could be the Chinese or the Russian state .
States may have other goals than just making money. This may be driven by strong national interests and a desire to become more powerful.
So in the middle of this free and unregulated area, state actors suddenly jump in. Many people think this is a security challenge. Why?
3: Risk of foreign investments
One can imagine three types of risks with foreign investments:
- One can become dependent on foreign companies, or states, for completely critical things in society. Especially during the coronary pandemic, we see how dependent we are on hospital equipment, bandages, medicines and vaccines. But it can also be goods and services that the military depends on, or electricity supply and infrastructure.
- Technology and knowledge can be transferred to foreign companies that can be controlled by other states. These states can use this technology against our interests.
- Investments can increase another state’s ability to infiltrate, monitor, spy on, and even sabotagegoods and services and functions that are critical to our society, our economy, and our defense.
According to agooddir, these are possible risks. But that does not mean that it is necessarily dangerous to let companies from China or Russia invest in Norway. This is a new thing one must include in the calculation, although it is unlikely.