The fishing industry
The main industry of the Faroe Islands is the fishing industry which can be seen by the fact that the fishing industry accounts for more that 99% of the goods exported from the Faroe Islands. Another statistic that reveals this is that 25% of the GDP of the Faroes comes for this industry. They divide the fishing industry into ocean fishing, fish processing and fish farming.
This industry has a long history in the Faroe Islands stemming from the 19th century and the fishing fleet today consists of about 189 vessels with a total tonnage of 68,500 GRT (2002). They range from small wooden coastal vessels to sophisticated factory trawlers. These vessels mostly fish around the Faroes, but about 40% of the fish that the Faroese export comes from international or foreign waters.
The catch is either exported fresh to Scotland or Denmark or processed in factories on the Faroe Islands into fresh or frozen fillets and salt fish and exported. Production from the Faroese fish factories is exported mostly to the EU countries, but also to the American market.
The sea farming industry is a relatively new industry in the Faroe Islands. It started in the early 1980s. Production has been volatile over the years. In 2002, production was around 45,000 tonnes and the export value DKK 943m, which corresponds to 23% of the total export.
The outlook for the fish farming industry is depressed at the moment. After a period of relatively high growth, yet volatile prices, the industry has run into major problems as a result of infectious salmon anemia (ISA) and current expectations are greatly reduced. Prices for salmon as well have been below production costs.
In spite of the gloomy prospects, there is a note of positive expectation. There is a hope for a vaccine against ISA in the near future and prices for salmon might again rise as the supply on the world market will be significantly lower in the coming years.
The Faroe Islands also has many industries that are related to the fishing industry i.e. that supply the fishing industry both in the Faroes and abroad with equipment e.g. fishing gear.
In the waters around the Faroe Islands, specifically in the territorial seas of Norway and the United Kingdom, significant amounts of oil have been discovered over the past decades. In December 1992, the Danish Government agreed to transfer the rights to the subsoil mineral resources of the Faroe Islands to the Faroese Government. The exploration phase started in 1994 and since then many firms have been exploring the subsoil. In February 2000, the first licensing round was opened and seven licenses were awarded to 12 oil companies. Three consortia drilled their first wells in the summer of 2001. Although some oil was found, official announcements indicate that it was not of commercial quantities. The fourth group then started drilling in November 2001 and no oil and gas was found in significant volume. In the summer of 2003, another drilling took place, but it came up dry.
The outlook for this industry should be positive as the Norway and the United Kingdom have found oil in significant amounts, although there are some technical problems stemming from the basalt layers in the Faroese subsoil that remain to be solved.
For many years, efforts have been made to develop the tourism industry in order to diversify the Faroese economy (see: www.visitfaroeislands.com). It is unlikely though that tourism ever will become a major industry in the Faroe Islands. However, given the progress that has taken place to date and is anticipated in the future, tourism will slowly become a more reliable source of income for people throughout the islands.
Telecommunications & IT
As in other countries, the telecommunications market in the Faroe Islands is liberalized and now operates on a free market basis. Before this liberalization in the late 1990s, there was only one operator in the market and it was a public entity. Today, this company is a limited company (although still owned by the government) and another telcom operator has entered the market.
Efforts have also been made to develop the Faroese IT industry and to assist it to become more export orientated in order for the Faroese economy to be less dependent on the volatile fishing industries. These efforts include initiatives from the government and also private initiatives.
Financial Services Market
Four banks and one investment bank service the financial market in the Faroe Islands. The financial institutions are well consolidated. The economic upturn has largely limited losses and the reality lecture on healthy business practices offered by the depression in the early 1990s has so far yielded good results on the balance sheets.
Legislation affords the same conditions for Faroese financial institutions as for Danish financial institutions relative to Denmark’s National bank. This legislation thus enables the Faroese banks to participate in the international capital markets.
Another initiative being investigated by the Faroese Government is the possibility for genome research, as the Faroese society is well suited for this as the population is limited in size and essentially homogenous. In addition, biotechnology is an industry that the Faroese Government is trying to develop.