Economic planning

The report of the Tax and Welfare Commission

In 2009, the Government of Greenland set up the Tax and Welfare Commission (SVK) to act as an independent commission. The commission was mandated to analyse welfare and taxation, focusing on enhancing self-sufficiency, reducing income gaps and easing the administrative burden. Starting from the premise that “status quo is not an option”, the commission concluded its work in 2011 by submitting the report “Our wealth and welfare require action – now”.

According to the commission report, the Greenlandic society faces a dual challenge through an ageing population and an increasing number of young people without education. Even though Greenland receives a comprehensive block grant covering approximately one third of public expenditure, the grant alone cannot satisfy aspirations for welfare improvement. Imbalances are due to underlying social and economic inequality. 

The report presents a proposal for an overall reform package pursuing an active strategy building on three basic principles:

  • Early prevention: a good childhood and good education
  • Social balance and employment: safety net, job incentives and support
  • Robust financing: a transparent and comparable tax system that supports employment. Grants are to be reduced.

The basic principles of the report are supplemented by a number of general recommendations, which have formed the basis for the "Vision 2025" formulated by the Government of Greenland. Find the report at http://naalakkersuisut.gl/da.

Developing the municipality's revenue base

Recognising that the step towards independence involves discontinuation of the block grant, focus is on moving towards a more sustainable economy.

Qaasuitsup Municipality faces the challenge of a high rate of dependency. Providing for the many senior citizens in the municipality and the relatively high number of children of school age puts increasing pressure on public budgets.

However, oil and gas exploration activities offer grounds for renewed optimism and open new prospects. The analysis “Offshore onshore – selection of areas for offshore-related onshore activities in Qaasuitsup Municipality” assessed the direct and derived economic impacts of offshore activities on employment and public services. Since the present structure of local businesses does not always match new demands and as geographic conditions prevent commuting and relocation of businesses, even minor offshore activities may be critical to Qaasuitsup Municipality.

As oil and gas exploration off the coasts of Greenland is still at an early stage, it is not possible to project economic activity. A more permanent socio-economic impact requires that oil and gas exploration continue through all phases of exploration, expansion and production.

These years, oil and gas exploration drilling takes place in licensed areas in Disko West. In the coming years, exploration drillings will be extended to more fields and to Baffin Bay. The direct benefits to Qaasuitsup Municipality are still modest, since offshore activities are carried out by international energy groups from drilling rigs/ships that are accompanied by supply vessels.

Similarly, the long-term impact of offshore activities is still very uncertain. If it turns out that commercial exploitation is viable, plants for production of oil and possibly gas need to be constructed, and then the present, rather modest activities will be replaced by a more permanent and steadily growing activity level. What is certain is that activities will generate work for local businesses, which will translate into new jobs and an increasing tax base. See also the section on "Offshore onshore – Town plan addendum" under "Past planning".

Other means of increasing the municipal revenue base are related to the main professions of fishing, tourism and raw materials extraction.

Qaasuitsup Municipality – the transition towards a self-sustaining economy

In 2009, Qaasuitsup Municipality launched a study to analyse business development. The study undertaken by Greenland Venture outlines a number of structural challenges of the labour market in the municipality. These remain valid:

  • Relatively high unemployment rate in the region.
  • Large seasonal variations in the demand for labour affect the labour market in the region and lead to seasonal unemployment.
  • The public sector occupies a relatively large share of the workforce – agencies under the Government of Greenland, the municipal sector and public utility companies.
  • A relatively high share of the working population drops out of the labour market and lives on disability pensions.
  • There is a fairly large demand for outside labour, since the unemployed local workforce does not possess the required qualifications.
  • The labour market is very segmented in terms of professions and settlement. Due to lack of professional and geographic mobility, it is difficult to even out demand and supply of labour.
  • Society is small, but both public and private workplaces are required for almost all functions in order to cater to the citizens and to secure businesses supporting the primary trades. A low supply of labour renders it difficult or almost impossible to recruit the required specialists locally.

The report points out that more efforts should be channelled towards the export market – fishing, fish production, raw materials, tourism, experiences – and fewer efforts towards manufacturing businesses. To achieve this, the municipality needs to draw up a strategy focusing on:

  • exploiting natural resources and maximising the value added by them locally.
  • ensuring a flexible organisation of the public and private sectors and local service provision.
  • seeking general acceptance of differences in service levels across settlements.
  • combating great distances through information technology.
  • creating an adaptable society by providing a good framework for business and labour market mobility. Businesses and labour must move to where the demand is.
  • developing good cooperation with collaborators outside of the region, such as public authorities and publicly owned companies, external investors or other organisations and institutions.

The report introduces a model to differentiate the towns and settlements in the municipality into a pattern of settlement. The model distinguishes between 'centre' and 'periphery and 'inner' and 'outer'. This approach provides a more balanced picture of the pattern of settlement in the municipality and a proper overview of the relationship and the functional division between settlements which can feed into the town plan. As such, the report provides valuable input to determining objectives and the spatial framework for the future business development.

Qaasuitsup Kommunia · Postboks 1023 · 3952 Ilulissat · Grønland · www.qaasuitsup.gl · E-mail: plan@qaasuitsup.gl · Tlf.: +299 947800
Last edited 1-5-2014