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7. State-Owned Enterprises

State-owned enterprises (SOEs) generally compete under the same terms and conditions as private enterprises, except in the energy production and distribution sector. SOEs are also most active in the banking, energy, and health sectors, and the state has a monopoly on retail alcohol sales. Private enterprises have the same access to financing as SOEs through the banking system. Notable SOEs include ATVR, the only company allowed to sell alcohol to the general public, Islandsbanki and Landsbankinn, two of three commercial banks in Iceland, and RUV, the Icelandic National Broadcasting Service.

As an OECD member, Iceland adheres to the OECD Guidelines on Corporate Governance. However, the Icelandic government has not implemented any standard guidance to embellish implementation and in some cases politicians sit on SOEs’ directorial boards. The Chamber of Commerce in Iceland and NASDAQ OMX have issued a set of guidelines that mirror the OECD Guidelines on Corporate Governance. The State Auditor has also issued a less comprehensive set of guidelines.

The line of command can become blurred between a Minister, the board of the SOE, and the head of the SOE when the head of an SOE is appointed or engaged by the Minister with purview over the sector in which the SOE operates. Often these positions are filled by political appointees who are sometimes former politicians. For SOEs operating amongst the private sector in a competitive environment, the general guideline from the Icelandic government is that all decisions of the board of the SOE should ensure a level playing field and spur competition in the market.

In the midst of the banking crisis, the state, through the Financial Supervisory Authority (FME), took over Iceland’s three largest commercial banks, which collapsed in October 2008, and subsequently took over several savings banks to allow for uninterrupted banking services in the country. In late 2009, the creditors of two of the three largest failed banks acquired the majority of shares in two of the newly re-established commercial banks, one of which in 2016 transferred shares back to the Icelandic state as part of the stability payment necessary to qualify for capital control exemptions. The Icelandic government owns 98 percent of the third re-established commercial bank, Landsbanki, and most of the government’s cost associated with recapitalizing the banking system lies within this bank. The government has stated its intention to privatize Landsbanki and Islandsbanki, but a timeline for privatization has not been announced. The Bank Shares Management Company, established by the state in 2009, manages state-owned shares in financial companies.

The government of Iceland has acquired a considerable stake in many companies through its shares in the banks; however, it is the policy of the government not to interfere with internal or day-to-day management decisions of these companies. Instead, in 2009, the state established the Bank Shares Management Company to manage the state-owned shares in financial companies. The board of this entity, consisting of individuals appointed by the Minister of Finance, appoints a selection committee, which in turn chooses the State representative to sit on the boards of the various companies.

While most energy producers are either owned by the state or municipalities, there is free competition in the energy market. That said, potential foreign investment in critical sectors like energy is likely to be met by demands for Icelandic ownership, either formally or from the public. For example, a Canadian company, Magma Energy, acquired a 95 percent stake in the energy production company H.S Orka in 2010, but later sold a 33.4 percent stake to the Icelandic pension funds in the face of intense public pressure.

Iceland’s universal healthcare system is mainly state-operated. However, few legal restrictions to private medical practice exist; private clinics are required to maintain an agreement regarding payment for services with the Icelandic state, a foreign state, or an insurance company.

The State Alcohol and Tobacco Company of Iceland (ATVR), has exclusive rights for the retail sale of all alcoholic beverages. Importers and wholesale companies are privately run.

There has been public criticism of SOEs like ISAVIA (which runs the Keflavik International Airport) and how they have tendered retail space within the airport. Media discussion has focused on accusations of opacity in the tendering process. Companies that lost their space at the airport in 2015 are suing ISAVIA for the documents related to the last tender of retail space. The results are still pending.

Iceland is party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).

Privatization Program

There are no privatization programs in Iceland at the moment. However, the Icelandic State now owns two of the three largest commercial banks (Landsbankinn and Islandsbanki) and has stated that it intends to privatize both. The government has authorized the sale of a 30 percent stake in Landsbankinn to private investors. The terms and process of the sale have not yet been disclosed, but there is public pressure for the sale to be conducted in a transparent and non-discriminatory manner that allows all investors, including foreign, to bid on the stake.

Investment Climate Statements
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