WORLD TRADE G/SCM/N/3/ISL
G/SCM/N/16/ISL
ORGANIZATION 31October 1996
(96-4595)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
NOTIFICATIONS PURSUANT TOARTICLE XVI.1 OFTHE GATT 1994
AND ARTICLE 25OFTHE AGREEMENT ONSUBSIDIES AND
COUNTERVAILING MEASURES
ICELAND
Thefollowing communication, dated 22October 1996, hasbeenreceived fromthePermanent
Mission ofIceland.
_______________
Pursuant toIceland ’sobligations under Article 25.2oftheWTO Agreement onSubsidies and
Countervailing Measures andArticle XVI.1 oftheGATT 1994, please findenclosed anotification
ofagricultural andindustrial programmes granted ormaintained byIceland.
Table ofContents Page No.
Introduction ..........................................................2
Methods andScope oftheNotification ..................................2
TheIcelandic Economy .............................................2
1. TheAgricultural Sector .............................................3
1.1 Agricultural Agreements; Payments forsheep andmilk production .........3
2. Support forR&D andTechnological Innovation ............................6
2.1 Technology Fund ............................................6
2.2 Industrial Research ...........................................8
2.3 Development andMarketing intheFishing Industry ....................9
3. Support toSmall- andMedium-Sized Companies ..........................10
3.1 Small Companies inRural Areas ................................10
3.2 Industry Development andMarketing .............................11
4. Marketing Promotion ..............................................11
4.1 Reaching Out .............................................11
5. Support foremployment andtraining ..................................12
5.1 Vocational Training Fund. Support forVocational Training .............13
5.2 Employment Opportunities forWomen inRural Areas .................14G/SCM/N/3/ISL
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Page No.
5.3 Vocational Rehabilitation andEmployment ofDisabled Persons ..........14
5.4 Vocational Training intheFishing Industry .........................15
6. Regional Support ................................................16
6.1 Assistance toDevelopment Projects ..............................16
6.2 Assistance toLocal Economic Development ........................17
Annex I............................................................18
Introduction
Methods andscope ofthenotification
Thenotification covers existing programmes. Theamounts notified aresubsidies paid outin
thefinancial years 1994 and1995. Thenotification follows ingeneral thequestionnaire format in
document G/SCM/6.
Aidmeasures aregenerally based ontheBudget. Allbudget decisions aremade forasingle
fiscal yearwhich isthesame asthecalendar year. Thenotification refers tospecific additional legislation
where relevant.
TheIcelandic economy issmall andislargely based ontheuseofrenewable natural resources.
State aidhasingeneral been rather lowinIceland compared toother countries.
Thenotification covers aidtothemanufacturing industry, agriculture andfishing. Thegeneral
ruleisthatsubsidies aretaxable asincome totherecipient.
Thequantitative information isbased onthenetcosttogovernment method. This approach
isused intheEFTA Annual Report onState AidandbyOECD inits"Subsidies andStructural
Adjustment" project (seeAnnex I).
Asaparty totheEEA Agreement, Iceland hasadjusted itslaws andregulations inthefields
ofstate aidandcompetition tothose oftheEU.
TheIcelandic Economy
Themain element ofthenational economic policy istoenhance themacroeconomic environment
ingeneral. Due, inter alia,tothesizeoftheeconomy, theindustrial andtechnological policies are
more orlessincorporated intothemacroeconomics policy. However, there isagrowing interest to
give higher priority toindustrial competitiveness andtechnological policy andtoformulate itmore
comprehensively than before.
TheIcelandic economy islargely based ontheuseofrenewable natural resources, themost
important ofwhich arethecoastal fishing stocks, hydro-electric andgeothermal power andthegrasslands
which support thelivestock industry. Theeconomy, traditionally based onfisheries andagriculture,
hasinthelastdecades diversified intomanufacturing, processing andservice industries, while atthe
same time diversifying itsmarine sector.G/SCM/N/3/ISL
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While state aidinIceland hasingeneral been low, recent years have seen itcuteven further.
Theframework conditions ofthesupport programme have become more general thanbefore, focusing
more onareas likeR&D andsmall- andmedium-sized enterprises, training etc.
1. The Agricultural Sector
A. Name ofprogramme
1.1 Agricultural Agreements; Payments forsheep andmilk production
B. Responsible authority
Ministry ofAgriculture
C. Policy objective
Icelandicagriculturalpolicyisimplementedinpursuitofobjectiveswhichincludeself-sufficiency
forthecountry ’smajor commodity production; using domestic inputs totheextent possible; increasing
efficiency intheagricultural food sector; using export opportunities totheextent feasible; securing
anequitable income forfarmers; andintegrating environmental issues with agricultural policy.
D. Form ofsubsidy
Asof1993, direct payments toproducers have replaced consumer subsidies forsheepmeat and
milk, respectively. Allocations fortheAgricultural Agreements aremade under item Nos. 04-801
and04-805 oftheBudget (Ministry ofAgriculture).
E. Amount ofsubsidy
Theamount ofsupport measured bytotal costs budgeted for1994 and1995 arelisted inthe
tables below.
TABLE 1
Item No.04-801, Agricultural Agreements, Million ISK1
1994 1995
Agricultural Productivity Fund 300.0 250.0
Market Regulation 816.5 945.6
Price Support (direct payments) 3,973.3 3,478.7
Vacation andtemporary relief services 12.5 15.0
1Source: National accounts/Ministry ofAgriculture Budget (both tables).G/SCM/N/3/ISL
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TABLE 2
Item No.04-805, Price Support, Million ISK
1994 1995
Subsidies; wool 289.2 247.2
F. Rules andconditions
Implementation oftheagricultural policy revolves around Agricultural Agreements negotiated
between theGovernment andtheFarmers 'Union. Under ActNo.99/1993 onProduction, Pricing and
Sales ofAgricultural Products, theMinister ofAgriculture isgiven authority tonegotiate with the
Farmers ’Union onbehalf oftheGovernment onthequantity ofmilk andsheepmeat forwhich the
State willguarantee administered prices.
Support isprovided formilk, sheepmeat, wool, market regulation andvacation andtemporary
relief services.
1. Themilk sector
Milk producers receive direct payments from theGovernment onproduced quantity
within individually allocated quantity-limiting quotas. Theamount ofmonetary support
foreach litreofmilk delivered tothedairies isequal forallproducers inIceland (i.e.
irrespective oflocation).
2. Themeat sector
Producers ofsheepmeat receive direct payments from theGovernment onproduced
quantitywithinindividuallyallocatedquantity-limitingquotas.Theamountofmonetary
support foreach kilogram ofsheepmeat delivered totheslaughter-houses isequal for
allproducers inIceland (i.e.irrespective oflocation).
3. Wool
Wool scouring plants receive asupport which maintains theIcelandic producer price
forwool above theworld market price level.
4. Vacation andtemporary relief services scheme
Inorder toenable dairy producers vacation andtimeoffinlinewithother self-employed
persons andwage-earners, these farmers areprovided with workers onthefarms under
avacation andtemporary relief services scheme. (This scheme wasterminated asof
31December 1995.)
5. Market regulation
Market regulation funds areused topayforstockholding costs, marketing efforts and
withdrawal ofquota ofsheepmeat. Due totherelatively short slaughter period (on
average about sixweeks inthemonths ofSeptember andOctober) accumulation and
holding ofstocks ofsheepmeat between slaughter periods isnecessary asasafetyG/SCM/N/3/ISL
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measure toensure supply. Specific marketing efforts geared toward sheepmeat are
included under thisheading along with costs associated with permanent withdrawal
ofquota ofsheepmeat.
Oftheabove-mentionedprogrammes,directpaymentstodairyproducersandsheepmeatproducers
aregranted directly tothefarmers. Therestoftheprogrammes aremarket regulation schemes.
G. Duration
Theschemes have inprinciple, aduration ofoneyearsince theAgricultural Agreements contain
clauses which permit annual adjustments. Thepertinent agreements forthisnotification willonthe
onehand, terminate attheendof2000 (sheep farmers) andontheother hand, attheendof1998 (dairy
farmers). Since 1985, sixmain Agricultural Agreements have been signed. Thefirstthree agreements
were ofasimilar nature (i.e.stipulating thequantity inrespect ofwhich thefarmers were guaranteed
administered prices).
However, theagreements made in1991, 1992 and1995 were different, both with regard to
content andprocedure.
H. Legal basis
ActNo.99/1993 onProduction, Pricing andSales ofAgricultural Products.
TheBudget, item Nos. 04-801 and04-805.
I. Trade effects
Anassessment ofthetrade effects ofthesubsidies isnotavailable. Below, inTables 3and
4there are,however, presented statistics onproduction, consumption andexports ofthepertinent
agricultural commodities.
TABLE 3
Quantity ofmilk received bydairies andcalculated consumption byfatcontent
ofmilk-derived products (in1,000 litres)
Year Milk
received by
dairiesCream Yoghurt
products, etc.Butter Cheeses Skimmed
milk
powder, etc.
1991 105,510 16,283 1,858 26,714 17,782 1,434
1992 99,722 16,039 1,688 26,285 18,837 790
1993 99,917 15,853 2,142 27,183 20,075 840
1994 102,052 16,148 2,928 26,605 19,328 1,512
1995 102,850 16,187 3,010 25,706 20,493 1,784G/SCM/N/3/ISL
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TABLE 4
Quantity ofsheepmeat (in1,000 kilograms)
Year Production Exports Consumption
1991 9,309 1,683 7,947
1992 9,203 1,143 7,976
1993 8,859 979 8,088
1994 8,787 1,283 7,224
1995 8,663 1,138 7,160
2. Support forR&D andTechnological Innovation
A. Name ofprogramme
2.1 Technology fund
B. Responsible authority
TheTechnology Fund isoperated bytheIcelandic Research Council, which isagovernmental
agency, reporting totheMinistry ofCulture andEducation. TheMinistry coordinates public research
inIceland.
C. Policy objective
Theobjective oftheTechnology Fund istofacilitate innovation through supporting research
andtechnological development.
D. Form ofsubsidy
Grantsareawardedthroughthreedifferentschemes.Thefirstschemeisageneralprojectsupport
awarded upon application. Thesupport hastobeapplied forannually, butthemaximum duration of
grants isthree years. Allawards arematching grants. Thesecond scheme isaimed atfacilitating the
transfer ofknowledge from universities andresearch institutions tobusiness enterprises. Thesupport
isamatching grant forenabling small firms tohirescientifically ortechnologically skilled persons for
thepurpose ofdefining technological needs andR&D strategies forthefirms forperiods uptothree
years. TheTFsupport, which isaltogether project-based, never exceeds 50percentofthesalary of
thescientist ortechnician involved. This scheme wasintroduced in1994. Theobjective ofthethird
scheme istofacilitate cooperation with foreign scientists .Grants areawarded tocover partially travel
expenses andpreparations ofjoint applications, e.g.toEU’sFramework Programme.G/SCM/N/3/ISL
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E. Amount ofsubsidy
Million ISK
TFScheme 1994 1995
General project support 184.0 171.0
Transfer ofknowledge 2.2 7.7
Cooperation 0 13.6
186.6 192.3
General project support :In1994, support wasgranted to108projects ofwhich 75percent
were technology driven and/or company managed. Theremaining 25percentwere strategic projects
where research institute-based oruniversity-based scientists were project leaders. Theaverage support
granted perproject bythefund amounted to26.4 percent ofthetotal project expenditures.
In1995, support wasgranted to107projects. Theaverage support granted perproject bythe
fund amounted to29.7 percent. Approximately 75percentoftheprojects areexplicitly technology -
driven. Theremaining 25percentwere granted toprojects aiming atcapacity building andstrategic
basic research.
Allprojects areco-financed.
Technology transfer :In1994 twogrants were awarded andseven in1995.
Cooperation support :Inthisscheme approximately 90grants were awarded in1995. The
average support amounts toISK0.15 million perproject.
F. Duration
TheTechnology Fund programme wascommenced in1995. Duration hasnotbeen specified
buttheactgoverning theoperation ofthefund isdueforrevision in1999.
G. Rules andconditions
Subsidies aregranted only onthebasis ofproject applications andallprojects areco-financed.
There isnoformal upper limit forsupport, buttheaverage support granted isaround 30percent of
total project expenses. There areonly matching grants andapplicants finance theremaining costs by
own funding. Support isgranted touniversities, public research institutes, business enterprises and
individual scholars. Allcategories ofapplicants, regardless ofthebranch ofindustry, areeligible.
H. Legal basis
ActNo.61/1994 ontheIcelandic Research Council, asamended byAct No.44/1995.
I. Trade effects
Thesupport isgranted toavariety ofsmall projects andsectors, therefore itisdifficult topresent
statistical data permitting anassessment oftrade effects.G/SCM/N/3/ISL
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A. Name ofprogramme
2.2 Industrial research
(No. 11-240-101)
B. Responsible authority
Ministry ofIndustry andCommerce
C. Policy objective
Theaimoftheprogramme istoincrease knowledge andinnovation within companies. The
assistance isingeneral very limited.
D. Form ofsubsidy
Support upto30percentofprimary R&D costs, innovation costs andcostofnewproducts,
process andsystems forindustrial production.
E. Amount ofsubsidy
Figures reported refer tomanufacturing.
Million ISK
1994 1995
16 14
F. Rules andconditions
Theactivity must beinthemanufacturing industry. Well prepared production andfinancial
plans areacondition ofeligibility. Theprogramme isavailable tocompanies inthemanufacturing
industry.
G. Duration
There isnotime limit, buteach programme isdecided onforoneyear atatime.
H. Legal basis
TheBudget, item No.11-240.
I. Trade effects
Toourbestknowledge there arenotrade effects ofthesubsidy duetothegeneral framework
ofthescheme andlimited support.G/SCM/N/3/ISL
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A. Name ofprogramme
2.3 Development andMarketing intheFishing Industry
B. Responsible authority
Ministry ofFisheries
C. Policy objective
Aim oftheprogramme istoincrease knowledge andinnovation within companies. Itisfor
instance done byorganizing courses andtraining programmes forpeople working inthefisheries sector.
Theassistance isingeneral very limited.
D. Form ofsubsidy
Grant, upto30percentofprimary R&D costs, innovation costs andcostofdeveloping new
content fortraining courses.
E. Amount ofsubsidy
Figures reported refer tomanufacturing.
Million ISK
1994 1995
8 8
F. Rules andconditions
Theprogramme isavailable toallcompanies inthefishing industries wishing toparticipate
intheprogramme.
G. Duration
There isnotime limit, buteach programme isdecided onforoneyear atatime.
H. Legal basis
TheBudget, item No.05-190.
I. Trade effects
Itisnotpossible tomeasure trade effects.G/SCM/N/3/ISL
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3. Support toSmall andMedium-Sized Companies
A. Name ofprogramme
3.1 Small Companies inRural Areas
(No. 11-299-140)
B. Responsible authority
IceTec, under theauspices oftheMinistry ofIndustry andCommerce.
C. Policy objective
Topromote innovation anddevelopment ofSMEs inrural areas.
D. Form ofsubsidy
Grant, R&D andcostofproduct development, marketing etc.
E. Amount ofsubsidy
Figures reported refer tomanufacturing.
Million ISK
1994 1995
11 11
F. Rules andconditions
Theprogramme isavailable tocompanies inmanufacturing.
G. Duration
There isnotime limit, buteach programme isdecided foronyear atatime.
H. Legal basis
TheBudget, item No.11-299.
I. Trade effects
Toourbestknowledge itisreasonable toassume thatthere arenotrade effects ofthesupport
duetothegeneral framework ofthescheme andlimited support.G/SCM/N/3/ISL
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A. Name ofprogramme
3.2 Industry Development andMarketing
(No. 11-299-114, 11-299-150)
B. Responsible authority
Ministry ofIndustry andCommerce
C. Policy objective
Topromote innovation, development andmarketing ofSMEs.
D. Form ofsubsidy
Grant, primary R&D cost, product andmarketing cost.
E. Amount ofsubsidy
Figures reported refer tomanufacturing.
Million ISK
1994 1995
18 17
F. Rules andconditions
Theprogramme isavailable tocompanies inmanufacturing.
G. Duration
There isnotime limit, buteach programme isdecided foronyear atatime.
H. Legal basis
TheBudget, item No.11-299.
I. Trade effects
Itisnotpossible tomeasure trade effects.
4. Marketing Promotion
A. Name ofprogramme
4.1 Reaching Out
B. Responsible authority
Ministry ofForeign Affairs/Export Council ofIceland.G/SCM/N/3/ISL
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C. Policy objective
Itsobjective is,firstly, toincrease knowledge andcompetence ofsmall- andmedium-sized
enterprisesregardingthemarketingoftheirproductsabroad.Secondly,tosupportthemarketingactivities
ofenterprises onforeign markets andincrease employment opportunities.
D. Form ofsubsidy
Cost items incurred formarket activities areeligible forgrants. Preparation ofuser
documentation,participationintradefairsabroad,travelexpensesincurredwhilevisitingforeignmarkets,
consulting activities andmarket research. Support shall ingeneral notcover more than 30percent
ofeligible expenses andmust notexceed 50percent. Themaximum amount ofagrant formarket
research isISK500,000. Grants arepaidintwoparts, 60percentatthebeginning ofataskand40per
cent attheendofaphase.
E. Amount ofsubsidy
Million ISK
1994 1995
50 40
F. Rules andconditions
Firms andindividuals having aregistered domicile inIceland canapply foragrant. Individuals
who apply forgrants according tothese rules must declare thatthey have notreceived agrant from
theGovernment amounting tomore thanISK4.2million (ECU 50,000) since thebeginning ofthelast
three years, thegrant applied forincluded. Inthiscontext, special grants forinvestment arenotincluded.
G. Duration
There isnotime limit, buteach programme isdecided onforoneyear atatime.
H. Legal basis
TheBudget.
I. Trade effects
Toourbestknowledge itisreasonable toassume thatthere arenotrade effects ofthesubsidy
duetothegeneral framework ofthescheme andlimited support.
5. Support forEmployment andTraining
Themain objective forthelabour market support inIceland isaimed atincreasing thequality
ofworkers andstrengthening labour demand. Aspecific aimistowards qualifying individuals who
faceparticular difficulties finding work, forinstance young people andwomen without work experience,
disabled andlong-term unemployed.G/SCM/N/3/ISL
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A. Name ofprogramme
5.1 Vocational Training Fund. Support forVocational Training
B. Responsible authority
Ministry ofSocial Affairs.
C. Policy objective
Themain purpose ofthisprogramme istomaintain anddevelop vocational skills, inmost cases
forpeople already employed.
Theaimoftheprogramme istostimulate increased vocational training inthebusiness sector
with theintention offostering increased productivity, raising thequality anddevelopment inIcelandic
business, fostering improved practical skills andincreased ability onthepartofworkers toencounter
newdemands andachanging environment, increasing theopportunities andknowledge oftheindividual,
making employees more abletotakeonnewandchanged tasks, togivethose inemployment andthose
whoaretemporarily unemployed, andinparticular those whohave hadlittle ornoprevious vocational
training, thesame access tovocational training bymaking basic training forparticular jobs, orforwork
inaparticular occupation, readily available.
D. Form ofsubsidy
Grants.
E. Amount ofsubsidy
Actual total expenditure: 1994: ISK49.0 million. 1995: ISK48.7 million
Throughtheprogramme34recipientshavereceivedsubsidiesfor90differentvocationaltraining
courses. Most ofthese recipients arenon-profit orpublic organizations. Itisdifficult togive exact
information onhow many jobshave been created ormaintained asmany courses aretemporary orjust
afewweeks every year.
F. Rules andconditions
GrantstoorganizationsonapplicationtotheVocationalTrainingFundmainlytomakecurriculum
orother teaching materials forthevocational training courses.
G. Duration
Theprogramme commenced in1993. Duration hasnotbeen specified.
H. Legal basis
Thelegal provisions arelaiddown inActNo.19/1992 onVocational Training.
TheBudget, item No.07-981.G/SCM/N/3/ISL
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A. Name ofprogramme
5.2 Employment Opportunities forWomen inRural Areas
B. Responsible authority
Ministry ofSocial Affairs
C. Policy objective
Themain purpose ofthisprogramme istocreate newjobsandencourage increased participation
ofwomen inbusiness.
D. Form ofsubsidy
Grants, upto50percentofprimary R&D costs, innovation costs andcostofnew products,
process andsystems forindustrial production.
E. Amount ofsubsidy
Actual total expenditure inmillion ISK. 1994: 30.2. 1995: 10.3.
Itisdifficult togive exact information onhow many jobs have been created ormaintained
asmany ofthese new jobs arejustparttime jobs.
F. Rules andconditions
Grants towomen onapplication totheMinistry ofSocial Affairs mainly tonew product
developing andmarketing. Thegrant canalsobegiven tocompanies which have been established by
women.
G. Duration
Theprogramme commenced in1990. Duration hasnotbeen specified.
H. Legal basis
Thelegal provisions arelaiddown byaGovernmental decision from 1990. TheBudget, item
No.07-981.
A. Name ofprogramme
5.3 Vocational Rehabilitation andEmployment ofDisabled Persons
B. Responsible authority
Ministry ofSocial Affairs
C. Policy objective
Themain purpose ofthisprogramme istomaintain jobs fordisabled persons.G/SCM/N/3/ISL
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D. Form ofsubsidy
Gross wage subsidy torehabilitation centres.
E. Amount ofsubsidy
Actual total expenditure inmillion ISK1994: 82.1. 1995: 85.6.
Throughtheprogrammetenrecipientshavereceivedsubsidies.Everyyearapproximately165full
time jobsforhandicapped persons aremaintained bythisprogramme and47other fulltime jobs are
inthese rehabilitation centres.
F. Rules andconditions
Therehabilitation centres need anoperating licence from theMinistry ofSocial Affairs to
apply totheMinistry forsubsidies. Mainly subsidies forsalaries todisabled persons.
G. Duration
Thenew programme commenced in1992. Duration hasnotbeen specified.
H. Legal basis
Thelegal provisions arelaiddown inActNo.59/1992 Affairs oftheHandicap Actandfinanced
bytheBudget, item Nos. 07.701-07.703, 07.706-07.708 and07.711.
A. Name ofprogramme
5.4 Vocational Training intheFishing Industry
B. Responsible authority
Ministry ofFisheries
C. Policy objective
Theaimoftheprogramme istopromote thequality awareness andthequality oftheworking
lifewithin theindustry with theresult ofbetter products andmore pleased workers.
D. Form ofsubsidy
Subsidy isintheform ofgrants, based onadministration costs ofseminars andtraining
programmes concerning, training, quality, working conditions, etc. The aidispaid toconsultant
companies concerned, forgeneral administration costoftheprogramme, such asforsalaries, travels,
materials etc.
E. Amount ofsubsidy
Figures reported refer tomanufacturing. Million ISK
1994 1995
22 10G/SCM/N/3/ISL
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F. Rules andconditions
Theprogramme isavailable toalldomestic fishprocessing companies.
G. Duration
There isnotime limit, buteach programme isdecided ononeyear atatime.
H. Legal basis
TheBudget, item No.05-190.
I. Trade effects
Itisnotpossible tomeasure trade effects.
6. Regional Support
A. Name ofprogramme
6.1 Assistance toDevelopment Projects
B. Responsible authority
Institute ofRegional Development
C. Policy objectives
Theobjective oftheprogramme istoassist theeconomic development ofthenationally assisted
areas ofIceland. Theassisted projects areverysmall, andcover mostly product development, marketing,
training andfeasibility studies.
D. Form ofsupport
Grants, uptoaround 40percentofproject costs. Theinstitute haslegal provisions forother
types ofsupport.
E. Amount ofsupport
Million ISK
1994 1995
27.4 96.9
F. Rules andconditions
This programme isavailable toindividuals, private companies, local development companies
andmunicipalities.G/SCM/N/3/ISL
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G. Duration
There isnotime limit buttheamounts aredecided onforoneyear atatime.
H. Legal basis
ActNo.64/1985 ontheInstitute ofRegional Development.
TheBudget, item No.01-221.
A. Name ofprogramme
6.2 Assistance toLocal Economic Development
B. Responsible authority
Institute ofRegional Development
C. Policy objectives
Theobjective oftheprogramme istoassist local economic development companies inproviding
counselling forsmall businesses intheir area.
D. Form ofsupport
Grants ofupto50percent ofspecified running costs ofcounselling operations.
E. Amount ofsupport
Million ISK
1994 1995
28.6 27.0
F. Rules andconditions
Theprogramme covers general economic counselling andfrom 1996 alsospecial counselling
services totourism.
G. Duration
There isnotime limit buttheamounts aredecided onforoneyear atatime.
H. Legal basis
ActNo.64/1985 ontheInstitute ofRegional Development.
TheBudget, item No.01-221.G/SCM/N/3/ISL
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ANNEX I
Theobjective ofthenetcosttogovernment (NCG) methods istoobtain aconsistent measure
ofgovernmentaid,wheresupportfromvariousinstruments,i.e.grants,loans,guarantees,equityinjections
andtaxconcessions, areadded together. TheNCG-method isused intheEFTA annual surveys of
industrial aidandbyOECD initsproject "Subsidies andStructural Adjustment".
Netcostiscalculated asfollows:
Grants : Actual amount paid outminus repayment androyalties ifany.
Guarantees : Claims paid minus feesreceived andrecoveries.
Loans : Estimated capital costbased ondifference between thegovernment
borrowing rateandactual interest payment received.
Equity capital : Estimated capital costbased onthegovernment borrowing rateand
dividend received.
Itshould benoted thatthenetcostdoes notcorrespond totheactual transfer offunds from
theGovernment tothefirms inanygiven year, i.e.theexpenditure asreported intheState budget,
butthenetcosttogovernment ofsupport toindustry. TheNCG-method isnotadirect guide todetermine
theextent ofdistortion ofcompetition nortoapproximate theultimate benefit toindustry. However,
theNCG isauseful guide totheevolution andthestructure ofgovernment support over time.