Arctic Connections: Scotland's Arctic policy framework

Sustainable Economic Development

Responsible, transparent and inclusive economic development is fundamental to securing a sustainable future for the Arctic region. Scotland was one of the first countries to sign up to the United Nations Sustainable Development Goals. Together with Iceland, the Scottish Government is also a founding member of the Wellbeing Economy Governments (WEGo) group, which seeks to apply the principles of economic wellbeing to practical and scalable policy approaches. By working with Arctic countries, peoples and organisations, we can devise solutions that are ecologically accountable and combine increased prosperity with greater equality.

The rapid changes affecting the Arctic have not only environmental but also economic consequences that reverberate globally. The region spans eight of the world's largest economies with which Scotland has strong trade and investment links. The Arctic is a new frontier of global commerce and holds a substantial share of the world's food, natural resources and energy. Estimates indicate that pan-Arctic economic activity already exceeds US $500 billion annually^[25] and is set to increase. Supported by the Scottish Government and its enterprise agencies, Scottish businesses have the potential to deliver significant increases in their commercial relationships with the Arctic, strengthening Scotland's overall economic partnership with the region.

Trade and investment links

Arctic countries are major trade partners for Scotland, accounting for around 27.5% of our total exports and five of our top 20 export destinations^[26] in 2017. They are also the origin of about half of all foreign direct investments in Scotland,^[27] strengthening our status as the leading UK location for global investment outside of London.

We are committed to building on these results and making our trade and investment partnerships with Arctic countries even more successful. In our export growth plan "A Trading Nation",^[28] we set an ambitious target of increasing international exports from 20% to 25% of GDP over the next 10 years. The United States, Norway, Denmark, Sweden and Canada are among the top export markets showing the strongest near-term growth potential for Scotland.

To support the delivery of this target, we are investing £20 million over three years in addition to our annual £300 million business support budget. In partnership with Scottish Development International (SDI), we will also increase the number of Trade Envoy positions and expand our GlobalScot network, a worldwide group of business leaders dedicated to supporting Scotland's exports, from 600 to 2,000 people.

Foreign-owned enterprises by country of ownership with total Scottish employment and turnover (2018)

Country	Number of enterprises	Number of local units	Total Scottish employment	Turnover
United States	590	2,320	107,750	31,403
Norway	110	220	5,870	2,233
Sweden	80	180	6,360	1,033
Denmark	70	370	7,540	1,788
Canada	50	110	5,860	2,053
Finland	15	25	730	212
Iceland	5	60	N/A	N/A
Russia	0	0	N/A	N/A

Food and drink products, often originating from rural areas, are one of our largest exports, reaching a record high of £6.3 billion in 2018. The United States, Norway, Denmark, Finland, Sweden and Canada were identified as Top Prospect markets in the Scotland Food & Drink Export Plan^[29] launched in June 2019. However, the variety of Scottish exports to Arctic countries is much wider, including engineering and advanced manufacturing, financial and business services as well as technology, digital and media.

Shipping and ports

Shipping operations in the Arctic are on the rise, with transport volumes expected to reach 100 million tonnes by 2025^[30] and growing international attention to the opening up of new water routes. In line with our declaration of a global climate emergency, we support efforts at ensuring Arctic shipping traffic grows in the full respect of the principles of safety and sustainability.

Sitting at the crossroads between the Arctic ocean and central Europe and being ideally located on the Europe-North America axis, Scotland has strong credentials to serve as a near-Arctic marine transport and logistics hub. Orkney's Scapa Flow is one of the largest natural harbours in the world, a tidal stream free area of just under 325 square kilometres that has established itself as northern Europe's preferred location for ship-to-ship transfer operations.

The Scottish Government is committed to supporting the establishment of an ultra-deep water port that can accommodate the largest heavy lift vessels currently in operation in the North Sea. Work to date has included commissioning a feasibility study that has highlighted Dales Voe in Shetland as the most cost-effective location to have an ultra-deep water port in the UK.

Ports are key parts of the Arctic and near-Arctic regions' ecosystems. Collaboration between Scottish harbours and their Arctic counterparts is already underway. The High North Atlantic Business Alliance (HiNABA) network, for instance, consists of ports and economic development organisations in the North Atlantic, including the north of Norway, Iceland, Greenland, the Faroe Islands, Maine, Atlantic Canada and Scotland. The group seeks to increase sustainable trade and investment and explore opportunities for wider business to business cooperation.

Oil and gas

Oil and gas is estimated to have been worth £16.2 billion in Gross Value Added to the Scottish economy in 2018, representing 9.1% of Scottish GDP. The industry supports a total of 110,000 jobs in Scotland when including direct, indirect and induced employment. A strong domestic oil and gas industry can play a positive role in supporting the low carbon transition, in terms of transferable skills and infrastructure. The centre of excellence for deep-water technologies in Montrose is among the most advanced in the world. Boasting state-of-the-art manufacturing processes, the centre produces equipment that improves productivity while lowering the carbon footprint of oil and gas operations in demanding environments.

Safe and environmentally-balanced decommissioning is an integral part of the design and lifecycle of offshore facilities. We want to ensure that decommissioning is undertaken in line with the principles of the circular economy, promoting the reutilisation of material over recycling and disposal whenever possible. The University of Aberdeen's National Decommissioning Centre has world-leading expertise in this sector, with particular focus on innovative solutions that can reduce costs and extend field life.

Scottish ports are also active in the decommissioning sector, winning a significant number of contracts internationally. Thanks to the ongoing establishment of an ultra-deep water port and continuous investment in infrastructure, Scotland can develop exportable expertise in a market that is forecast to reach £15 billion to 2025.

Sea fisheries

Both Scotland and Arctic countries have major fishing interests, with many commercial and policy links between us. Scotland engages with a number of Arctic nations in various fisheries negotiations that set catch levels and management measures for stocks that cross international boundaries. Indeed, Scotland's sea area is larger than the entire land mass of Germany and our waters extend 320 kilometres into the Norwegian Sea and similarly into the north-east Atlantic.

Scottish waters provide rich fishing: on average, around four tonnes of fish are taken annually from each square nautical mile compared to the EU's average of one tonne. Provisional statistics^[31] show that in 2018 the 2,087 active Scottish-registered fishing vessels landed 445,000 tonnes of sea fish and shellfish with a value of £572 million. Our waters are therefore very attractive to a number of other countries that already fish here, including several Arctic nations.

The nature, format and dynamic of Scotland's future international engagement on fisheries is inextricably linked to the UK's departure from the EU, which will lead to adjustments to the fisheries governance framework in the north-east Atlantic. However, we remain committed to a sustainable approach to fisheries management, not only in the way we will participate in international negotiations but also in how we will engage with the formal and informal networks that are vital to conducting successful business. Other fishing nations with whom we have long-standing relationships, including Arctic countries, will see us remain a responsible, fair and open negotiating partner.

Aquaculture

Aquaculture affords one of the most matured economic links between the Arctic region and Scotland, contributing around £220 million in gross value to our economy and employing directly more than 2,000 people. While Scotland's offer is varied - ranging from trout to mussels and oysters - our aquaculture sector is mainly renowned for farmed salmon, of which we are the world's third largest producer behind Norway and Chile.

Norwegian-owned companies have made significant investments in the Scottish salmon industry, introducing important technological developments that have helped our product attain a global reputation for quality and provenance.

With the world's demand for food increasing, it is crucial that we work together to ensure that the aquaculture sector can help meet this demand while remaining sustainable. Scotland is already working with Arctic countries to develop best practices and exchange regulatory expertise. The Scottish Aquaculture Innovation Centre (SAIC) at the University of Stirling produces ground-breaking research that is shared internationally. Thanks to a Memorandum of Understanding signed in 2015, the Scottish Government is working with Norway, Canada and Chile to enhance sustainable aquaculture growth.

International connectivity and datacentres

Fast, stable broadband and mobile connectivity is vital for realising the full economic benefits of the digital economy. While Scotland possesses many world-class developers of digital technologies, it is still building world-class infrastructure to support them. Concurrently, we do not have adequate and commercially viable international fibre cable links, particularly in terms of robust direct connections to North America and Western Europe. International fibre connectivity, datacentres and internet exchanges are all vital to stimulate innovation and promote the digital technology industry.

The Scottish Government, through the Scottish Futures Trust, is currently exploring opportunities to link Scotland to existing or new transatlantic fibre crossing. The scale, complexity and costs of laying fibre-optic cabling calls for joint cooperation with our Arctic neighbours, which are often grappling with similar issues.^[32]

Space industry

Currently, the Arctic region experiences inadequate satellite coverage, with negative effects on both private communications and commercial opportunities. Satellite technologies can contribute to closing the Arctic broadband communications gap while facilitating rescue operations and improving the provision of digital healthcare. Space Norway's recent investments in this infrastructure confirms the viability of satellite-based solutions to poor connectivity in remote areas of the Arctic.

Scotland is establishing itself as a leading space nation, with Glasgow building more small satellites than any other place in Europe and companies based in the city being recognised as world-class innovators. In July 2018, the UK Space Agency and Highlands and Islands Enterprise announced their financial support for a Space Hub in Sutherland, which will see the launch of a new generation of small rockets and earth-observation satellites. Work is also continuing at pace to develop horizontal launch capabilities at Glasgow Prestwick Airport, backed by an £80million package of investments via the Ayrshire Growth Deal. Other vertical launch projects are Comhairle Eilean Siar's (the Western Isles Council) plans for Spaceport 1 and Shetland Space Centre's (SSC) plans for a launch site and ground station on Unst, Scotland's most northerly island whose latitude facilitates datalinks to existing satellites. SSC has entered a partnership with the Faroe Islands, offering specialist advice for the establishment of a Faroese ground station while Føroya Tele will provide technical and commercial support for data download and storage in Unst.

Land and marine planning

The reduction in sea ice is contributing to the increased accessibility of the Arctic for industrial activity. As a result, the Arctic has witnessed a progressive acceleration in infrastructure development. Roads, airports, railways and harbours are being built alongside exploration facilities while hundreds of other projects are being considered by both public and private actors. This exponential growth in infrastructure requires careful planning in order to ensure it remains environmentally sustainable and socially inclusive.

Scotland has a long tradition of spatial and marine planning that enables good quality development. The Scottish Government is internationally respected for its progressive approach to implementing strategic environmental assessments with our experience shared internationally through engagement with the European Commission and participation in professional networks.

Case study

The North Sea is one of the busiest areas for maritime industries in the world. Offshore energy, in particular, plays a major part in generating economic value and employment in the North Sea, but faces a number of international challenges connected, for instance, to the offshore grid infrastructure.

Marine Scotland (MS) is a leading partner in the EU-funded NorthSEE project consortium, which aims at facilitating greater transnational marine planning coherence in the North Sea Region in relation to environmental protection, shipping routes and energy infrastructure. Among other countries, NorthSEE includes partners from Denmark, Norway and Sweden. MS has taken a leading role in the project and acts as the Work Package Leader for offshore energy activities. In this capacity, MS is carrying out deep analysis on the spatial implications of offshore wind farms, devising solutions that support the sustainable development of the offshore wind sector. These studies are producing important recommendations for marine planners.

The National Planning Framework (NPF) is our long-term spatial plan for development and infrastructure for Scotland over the next 20 to 30 years. Engagement leading to the publication of our NPFs is open and collaborative, involving members of the public as well as the planning profession, local authorities and development interests. Our National Marine Plan provides a comprehensive framework for all marine activity in our waters. It enables sustainable development and a use of our marine area that protects biodiversity and enhances the marine environment, whilst promoting both existing and emerging industries. Thanks to the ongoing development of a Regional Marine Plan for each of our 11 designated marine regions, we are also allowing for more local ownership and decision-making within each area.

While we have already benefited from sharing professional expertise with Arctic countries, there is much more we can learn from each other in relation to spatial, marine and digital planning. In particular, the preparation of our new NPF will benefit from collaboration and learning on long-term planning for climate change mitigation and adaptation, infrastructure investment and international connectivity.

Going forward, we will:

• Promote Scotland's credentials as a key near-Arctic marine transport and logistics partner, scoping opportunities to build a world-class hub.
• Under 'A Trading Nation', look for opportunities to increase our trade and investment links with Arctic countries through greater deployment of trade envoys and Global Scots.
• Strengthen Scotland's connections with the Arctic region as world leaders in environmentally safe decommissioning.
• Support bilateral and multilateral information sharing on marine planning not least so as to improve the protection of species and habitats and facilitate the sustainable development of a burgeoning marine energy sector.
• Share the lessons stemming from our participation in the Wellbeing Economy Governments group.