Economic: Otso
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Contents
- 1 Economic Overview
Economic Overview
Otso is a resource‐poor and relatively small politico‐economic entity. The country has no deposits of natural gas or coal.
Otso’s economy is moderately successful, but appears underdeveloped compared to some of its immediate neighbors. There is little heavy industry and timber and paper manufacture remain major contributors to the country’s gross domestic product (GDP). The fur trade is still significant, but has declined considerably from its heyday. Tourism has proved to be a major source of hard currency. Otso has some successful light industries and minor software companies – mainly producing components or bespoke programs for major firms outside the country. Supplied with an abundance of water, sufficient Hydroelectricity is produced to meet the country’s needs and a surplus for export to both Bothnia and Donovia. Various projects to expand capacity are under consideration, as are ones to potentially export electricity across the Gulf of Finland to the Baltic States. Like many other countries, Otso is promoting environmentally friendly industries and has had significant success producing solar panels for Siemens and other companies. There are plans to grow this business. Outside of the capital, Otavia, there is little industry other than paper making and the majority of employment is in agriculture, timber, fresh water fisheries and tourism. The majority of exports are to the European Union (EU), with Donovia and the Gulf of Bothnia countries the next major destinations. The majority of imports are sourced from the EU. The balance of trade is broadly neutral. However, Otso possesses a large specialist merchant marine, operating a fleet of bulk dry goods and liquid gas vessels. In normal times, these generate a substantial income for the country. Other than water and timber; Otso has little in the way of natural resources beyond those required for its own needs.
Otso has an industrialized, mixed economy with a high per capita output equating to that of other European countries. The largest sector of the economy is services at 60%, followed by manufacturing and refining at 35%. Primary production is 3.9%. With respect to foreign trade, the key economic sector is manufacturing. The largest industries are electronics (20%), machinery, vehicles and other engineered metal products (22%), forest industry (15%), and chemicals (8.9%). Otso has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around USD1 billion annually) are politically sensitive to rural residents. Otavia and the Lappeenranta areas generate around a third of GDP. Overall short-term outlook was good and GDP growth has been above many European countries peers.
Economic Data
Economists attribute much growth to reforms in the product markets. According to OECD, only four European countries have less regulated product markets and only one has less regulated financial markets. Otso was a pioneer in Europe in liberalizing energy, postal, and other markets. The legal system is clear and business bureaucracy less than most countries.
| Measure | Data | Remarks (if applicable) |
| Nominal GDP | $52.64 billion | Agriculture 5.2%, Industry 34.8%, Services 60.0% |
| Real GDP Growth Rate | 2.1% | 5 year average 1.1% |
| Labor Force | 823.7 thousand | Agriculture 4.5%, Industry 41.4%, Services 54.1% |
| Unemployment | 3.5% | |
| Poverty | 1.0% | % of population living below the international poverty line |
| Net Foreign Direct Investment | -$6.01 billion | $10.13 billion outbound |
| Budget | $42.83 billion revenue
$42.34 billion expenditures |
|
| Public Dept | 32.2% of GDP | |
| Inflation | 2.8% | 5 year average 5.0% |
Government expenditure is detailed below in accordance with the Classification of the Functions of Government (CFOG).
| 2013 | 2014 | 2015 | 2016 | 2017 | 2017 | ||
| Function | USD
billions |
OECD Avg | |||||
| Total function | 100% | 100% | 100% | 100% | 100% | 42.34 | |
| General public services | 14.39% | 14.28% | 14.22% | 14.38% | 14.18% | 6.00 | 13.10% |
| Defense | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | 0.42 | 3.80% |
| Public order and safety | 2.71% | 2.65% | 2.64% | 2.69% | 2.67% | 1.13 | 4.00% |
| Economic affairs | 9.44% | 9.49% | 9.32% | 9.52% | 8.99% | 3.81 | 11.40% |
| Environment protection | 0.64% | 0.66% | 0.69% | 0.64% | 0.63 | 0.27 | 1.70% |
| Housing & community amenities | 0.57% | 0.60% | 0.71% | 0.86% | 0.99% | 0.42 | 1.90% |
| Health | 14.66% | 14.53% | 14.53% | 14.87% | 14.99% | 6.35 | 14.70% |
| Recreation, culture & religion | 2.21% | 2.21% | 2.28% | 2.28% | 2.27% | 0.96 | 2.70% |
| Education | 12.43% | 12.70% | 12.62% | 12.44% | 11.79% | 4.99 | 13.10% |
| Social protection | 41.95% | 41.88% | 41.99% | 41.32% | 42.49% | 17.99 | 33.50% |
Foreign Direct Investment
In 2016, Foreign Direct Investment (FDI) from Otso to overseas was USD10 billion and from overseas to Otso USD4 billion.
Economic Activity
The Otso government fiscal year is the calendar year. It has a mixed economy. The Otsan economy embraces a wide range of service industries employing over 54.1% of the labor force.
Pre-World War II
Otso started out as a relatively poor country that was vulnerable to shocks to the economy such as the great famine of the 1860s. Until the 1930s, the Otsan economy was predominantly agrarian, and, as late as in the 1950s, more than half the population and 45% of output were still in the primary sector.
Post-World War II
Otso is strongly competitive in manufacturing ‐ principally the wood, metals, engineering, telecommunications, and electronics industries. Otso excels in high-tech exports such as mobile phones and the optical industry. It has developed a small but respected software industry. Except for timber and several minerals, Otso depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self‐sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. Otso had been a high performing economy in recent years and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand hard in 2009, with Otso experiencing a severe contraction and this served as a brake on economic growth in 2010‐11. The slowdown of construction, other investment, and exports will cause employees to be made redundant. The recession will leave a mark on general government finances and the debt ratio. It has turned previously strong public finances into deficit within a year. In the next few years, the great challenge of economic policy will be to implement a post‐recession exit strategy in which measures supporting growth will be combined with general government adjustment measures.
Otso has modified its system of economic regulation since late 1980s. Financial and product market regulations were modified. Some state enterprises were privatized and some tax rates were altered. However, Otso has not adopted polices such as a basic income or negative income tax.
Economic Policy
Otso has been free‐trading and relatively welcoming towards skilled migrants from Gulf of Bothnia countries for over a century, though in Otso immigration from outside the region, is a relatively new phenomenon. This is due largely to Otso's less hospitable climate and the fact that the Otsan language shares roots with none of the major world languages, making it more challenging than average for most to learn.
As an economic environment, Otso’s rules and regulations are efficient and effective. Otso is highly open to investment and free trade. The level of protection in commodity trade has been low, except for agricultural products. Otso has top levels of economic freedom in many areas, although there is a heavy tax burden and inflexible job market. Otso is ranked 16th (ninth in Europe) in the 2016 Index of Economic Freedom. Recently, Otso has topped the patents per capita statistics and overall productivity growth has been strong in areas such as electronics. While the manufacturing sector is thriving, the Organization for Economic Co-operation and Development (OECD) points out that the service sector would benefit substantially from policy improvements. Otso is one of the most fiscally responsible European countries.
Household Incomes and Consumption
Food, beverages, tobacco, clothing and footwear make up approximately 20%/5%/4%/1% of the Household Final Consumption Expenditure (HFCE). In Otso the price is 99 against an EU (27 Countries) mean of 100. Otso's income is generated by approximately 800,000 workers, who make an average USD35 per hour (35hr week). In 2015 residents worked on average around 10 years for the same employer and had around 5 jobs in lifetime. 62% worked for small and medium‐size enterprises. Otso's part‐time work rate was one of the smallest in OECD.
Future liabilities are dominated by the pension deficit. Unlike in other countries, where pension savers can manage their investments, in Otso employer chooses a pension fund for the employee. The pension funding rate is higher than in most Western European countries, but still only a portion of it is funded and pensions exclude health insurances and other unaccounted commitments. Directly held public debt has been reduced to around 32% in 2007. In 2007, the average household savings rate was ‐3.8 and household debt 101% of annual disposable income, a typical level in Europe.
In 2006, there were 581,500 households of an average size of 2.1 people. 40% of households consisted of single person, 32% two and 28% three or more. There were 466,500 multi dwelling buildings in Otso and the average residential space was 38 m2 per person. The average residential property (without land) cost USD1,187 per m2. Consumer energy prices were 8‐12 cent per kilowatt hour. 74% of households had a car. There were 430,000 cars and 50,000 other vehicles. Around 84% have a mobile phone and 58% Internet connection at home. The average total household consumption per year was USD20,000, out of which housing at around USD5,500, transport at around USD3,000, food and beverages excluding alcoholic at around USD2,500, recreation and culture at around USD2,000. Upper level white collar households consumed an average USD27,456, lower‐level white‐collar households USD20,935 and blue‐collar households USD19,415.
The availability of durable consumer goods and luxuries is meeting demand as the population grows richer. By 2017 the statistics were as follows:
| Durable/Luxury Goods | Data |
| Central heating | 96% |
| Washing machine | 95% |
| Microwave | 93% |
| Telephone | 32% |
| Computer | 88% |
| Mobile phone | 84% |
| Dishwasher | 40% |
| Satellite | 78% |
| CD player | 80% |
| Television | 70% |
| Car | 42% |
Consumption Issues
In the Europe, tourism and air travel are emerging as key areas of future impacts. The pan-European region is generating ever more waste. Landfill, environmentally the least preferred option, is still the most common method of waste management across the pan-European region. Proper waste collection and safe landfilling remain a challenge.
Urban Issues
Otso has an urban population of 880,742 (63%), by 2020; this will have increased by 176,150. This expansion, often occurring in a scattered way throughout countryside, is called urban sprawl. The extension of urban areas offers benefits, allowing people more living space, single‐family houses and gardens. But it can also create negative environmental, social and economic impacts for Europe's cities and countryside, in particular in the case of low density and scattered urban sprawl. These include increasing energy demand, human health problems and declining stocks of natural resources. From a social perspective, urban sprawl exacerbates social and economic divisions.
Agricultural Impacts
The agricultural sector is a major source of pressure on Europe's environment. As a result, the agricultural sector is responsible for a large share of the pollution of surface waters and seas by nutrients, for the loss of biodiversity, and for pesticide residues in groundwater. Reforms in the 1990s, and measures taken by the sector itself, have brought about some improvements, but more is needed to balance agricultural production, rural development, and the environment. Modern, intensive agriculture often has a negative impact through its use and pollution of air, water and soil. Geographically, Torrike is naturally well irrigated but further work is needed to reduce a decline in quality caused by salinization and land degradation. On the other hand, farming still plays a positive role in preserving Europe's landscapes and biodiversity.
Tourism and Transport Impacts
International tourist arrivals in Otso continue to grow. Tourism is one of the main drivers of increased demand for the most environmentally damaging transport modes: private cars and, more critically, air transport. Coasts, islands and mountains remain particularly sensitive to tourism development. Degradation, sometimes irreversible, has already occurred in some popular mass-tourism destinations. The impacts of tourism are projected to grow as a result of increasing affluence and lifestyle and demographic changes. Tourist behavior remains a crucial factor for the sustainability of the sector.
Transport accounts for around a third of all final energy consumption in western countries and for more than a fifth of greenhouse gas emissions. It is also responsible for a large share of urban air pollution as well as noise nuisance. Furthermore, transport has a serious impact on the landscape because it divides natural areas into small patches with serious consequences for animals and plants. Energy consumption and greenhouse gas emissions from transport are growing rapidly along with the general growth in transport. Otso is developing competitive urban transport solutions to reduce traffic congestion and air quality problems as well as improving transport safety.
Energy Impacts
Energy consumption and resulting greenhouse gas emissions have been increasing in the pan-European region since the Kiev Conference, despite energy efficiency improvements and an increased use of renewable energy in some areas. This trend is expected to continue if no additional policies and measures are implemented. Energy markets in the three pan European sub regions are closely linked. A significant share of natural gas and oil imports into Otso is projected to rise substantially to 2030.
In recent year in Otso, energy consumption increased by 44% in electricity and 30% in the total energy use. The electricity consumption increased almost equally in all sectors (industry, homes, and services). The forest industry uses 30% of all electricity in Otso. One half of all the energy consumed in Otso goes to industry, one fifth to heating buildings and one fifth to transport. Lacking indigenous fossil fuel resources, Otso has been an energy importer.
- Electricity consumption is 87.25 billion kWh (2017).
- Oil consumption is 201,200 bbl/day (2017). Petroleum comprises 25% of Otsonian energy consumption. Most of petroleum is used in vehicles, but about 150,000 homes are heated by heating oil.
- Natural gas consumption is 4.5 billion m3 (2017).
Industry Impacts
While industry is often portrayed as the main source of environmental problems, Otso's industrial sector has actually made more progress in reducing its environmental impact than areas such as household consumption and private transport. This is partly because industry was the first target of environmental regulation. It is also easier to force through changes in a few thousand companies than convince hundreds of millions of people to alter their lifestyles and habits. There is a growing trend away from heavy manufacturing, Otso industry is increasingly focusing on providing services which are generally more environmentally‐friendly and smart high value‐added products.
Food, Housing, and Mobility Impacts
The majority of key environmental pressures caused by total national consumption can be allocated to eating and drinking, housing and infrastructure, and mobility. These three broad consumption areas are estimated to have contributed approximately two‐thirds of consumption‐related material use, greenhouse gas emissions, acidifying emissions and ozone precursor emissions. The reasons for these high shares are that food and drink, housing and mobility are the areas which Europeans spend most on and at the same time the areas with the highest pressures per euro spent. Tourism is a fourth area causing high and growing environmental impacts.
A major reason why consumption negatively affects the environment and causes an over‐use of resources is because the costs to society of environmental and resource degradation are not fully reflected in the prices of goods and services. Thus, many goods are relatively cheap even though they cause major harm to the environment, ecosystems or human health.
Understanding household consumption patterns is about understanding human behavior. Consumption patterns in Europe are very different to those 50 years ago. Important factors that drive our consumption include growing incomes, globalization of the economy, technological breakthroughs (such as the Internet and mobile phones), decreasing household sizes, an ageing population, and habits and cultures. At the same time, the growing number of goods and services we consume often offsets the efficiency gains we achieved through for example, improved production technologies and products. As a result, environmental pressures are increasing. Housing, food and drink, and mobility have the greatest environmental impact over their life cycle in terms of emissions of greenhouse gases, acidifying substances, ground‐level ozone precursor emissions as well as material resource use. Consumption (megajoules per person) statistics are:
| Country | Emission | Country | Emission |
| Arnland | 40 | Otso | 42 |
| Bothnia | 45 | Torrike | 30 |
| Framland | 45 | EU average | 22 |
Emissions of greenhouse gases have increased in recent years in most European countries and are projected to continue to do so in the future. Many European countries have adopted national programs to reduce emissions, but some of them will still have difficulties in reaching their Kyoto targets. The Kyoto Protocol, under the UN Framework Convention on Climate Change, and its first commitment period represent only a first step in addressing climate change. Global emissions will have to be reduced by up to 50% by 2050 to limit temperature increases to a maximum of 2°C above pre‐industrial levels. CO2 emissions in Gulf of Bothnia countries are:
| Country | Emission | Country | Emission |
| Arnland | 14 | Otso | 12 |
| Bothnia | 14 | Torrike | 11 |
| Framland | 11 | EU average | 11 |
Water Impacts
Efficient wastewater treatment, good drinking water quality, low water charges and a reliable supply make the Torrikan water sector more or less invisible to the public. People take a functioning water and sanitation sector for granted and, thus, consumer water organizations do not exist. Strong self‐government and municipal responsibility also makes the issue uninteresting for national politicians, with the main discussions and debates about water and sanitation services taking place between water professionals and local politicians.
Retail
Otso retail consists of the sale of goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Another common practice is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. Prices are generally fixed and displayed on signs or labels. Discounts are available for key socio economic groups such as students and senior citizens.
Export/Import
Exports equal USD23 billion (2017); imports were USD20 billion. Otsan major export partners (as of 2017) are Germany (10%), Donovia (11.6%), the Baltic States (6.4%), Poland (5.5%), Torrike (5.1%), Bothnia (10%), and Framland. Major export commodities are electrical and optical equipment, machinery, transport equipment, paper and pulp, chemicals, basic metals and timber. Electricity exports are 3.335 billion (kWh (2017). Oil exports are 130,500 bbl/day (2017) OtsoOil is the sole oil refiner in Otso, exporting petroleum products such as gasoline and fuel oil to Baltic countries and North America.
Imports were USD20 billion (20017). Import commodities are foodstuffs, petroleum and petroleum products, chemicals, transport equipment, iron and steel, machinery, textile yarn, fabrics and grains. Import partners are Donovia 16.2%, Germany 15.6%, Bothnia 13.5%, Torrike 6.3%, Olvana 5% and Poland 4.2%. Electricity imports are 16.11 billion kWh (2017). In 2017 oil imports were 337,900 bbl/day. In 2016, OtsoOil imports came from Norway, Donovia and other markets. Most of petroleum is used in vehicles, but about 260,000 homes are heated by heating oil. In 2016 natural gas comprised 10% of Otsonian energy consumption. All natural gas is imported from Donovia. Natural gas has been used since 1974 after the first oil crisis. OtsoGas is the Otsonian importer and seller of natural gas, which owns and operates the Otsonian natural gas transmission system. Natural gas vehicles aren't popular in Otso, but natural gas powered buses exist. Natural gas imports were 4.5 billion m3 (2017).
Economic Diversity
Services are another important area of consumer welfare in any industrialized society. The term is used here in a broad sense to include retail trade, public transportation and communications, as well as barbers, plumbers and service stations. Although again improvements had been made, the number of supermarkets and other stores, restaurants and service centers had risen significantly more than meeting the needs of an increasingly prosperous society.
Manufacturing industries dominate the Otsan production with chemicals, electronics, metallurgy, textiles and food processing providing considerable employment and wealth creation.
Energy sector
Oil and Gas
Otso has a strategic petroleum reserve (SPR) of approximately 11,880,000 barrels (117 days). OtsoOil is the Otsan importer and seller of petroleum products. Through its refining processes, it does produce 10,000 bbl/day (2016) of oil. OtsoOil was established in 1948 as the state petrol company of Otso, to ensure the availability of fuel. This entailed the building of refineries and developing the necessary technology. The oil transport infrastructure in Otso was built and is owned by OtsoOil and all petrol stations obtain fuels from OtsoOil. In the 1970s, OtsoOil introduced petrochemical and plastics production and natural gas to Otso. In 1994, OtsoGas was established. In 2005, the chemical divisions were sold to other companies, making OtsoOil an oil refining and marketing company producing mainly transportation fuels and other refined petroleum products. OtsoOil shares are quoted on the Otavia Stock Exchange with the State of Otso maintaining a controlling interest (51%) in the company.
| Type | Public, Limited |
| Industry | Energy |
| Founded | 1948 |
| Headquarters | Otavia, Otso |
| Products | Petroleum |
| Revenue | USD4,636 billion (2017) |
| Operating income | USD135 million (2017) |
| Owners | Otso Government (51%) |
| Subsidiaries | OtsoOil Petroleum, OtsoOil Retail, OtsoOil RE, OtsoOil Services. |
| Employees | 2,260 (2017) |
OtsoOil has three business areas: Oil products, oil retail and renewable fuels. It produces, refines and markets oil products and shipping and engineering services, as well as licensing production technologies. Its main products are petrol, diesel fuels, aviation fuels, marine fuels, heating oils, heavy fuel oils, base oils, lubricants, traffic fuel components, solvents, LPG and bitumen. OtsoOil has a chain of service stations with a 50% market share. It has about 100 service stations in Otso.
Natural Gas. In 2016 natural gas comprised 10% of Otsan energy consumption. OtsoGas is the Otsan importer and seller of natural gas, which owns and operates Otsan natural gas transmission system.
| Type | Public, Limited |
| Industry | Energy |
| Founded | 1994 |
| Headquarters | Otavia, Otso |
| Products | Natural gas |
| Revenue | USD82 million (2016) |
| Operating income | USD10.8 million (2016) |
| Owners | Otso Government (51%), (21%), BothGas (15%) |
| Employees | 1,290 (2016) |
Coal
4.6 million tons were used in 2017.
Renewable Energy
Otso electricity production with renewable energy was 46% in 2015. The volume of non‐renewable electricity has not declined compared to year 2010.
Renewable energy of electricity (2015):
- Water: 10%
- Forest industry black liquor: 20%
- Other wood residues: 10%
- Wind power: 0.4%
- Other: 6%
Electricity
The electricity sector in Otso relies on forest industry black liquor and wood consumption, co-generation and electricity import from Donovia. According to the Ministry of Finance the consumption of electricity will increase in Otso from the year 2018. Co‐generation of heat and electricity in industry and district heating is common in Otso. Electricity production is 77.44 billion kWh (2017).
Electricity exports are 3.335 billion kWh (2017). Electricity imports are 16.11 billion kWh (2017).
Industry’s share of electricity consumption was 28% in 2017. The yearly net import of electricity has been between 5‐20% of consumption.
| Year | Consumption | Production | Net Import |
| 2016 | 87 | 74 | 13 |
| 2017 | 81 | 69 | 12 |
Otso’s power capacity in 2017 was 1010MWe.
| 2014 | 2015 | 2016 | 2017 | ||
| GWh | % | ||||
| Hydro power | 7,542 | 9,327 | 11,272 | 8,376 | 31 |
| Wind power | 53 | 88 | 161 | 176 | 1 |
| Condensing power | 3,577 | 4,377 | 4,779 | 5,108 | 19 |
| Combined heat & power, industry | 6,885 | 6,471 | 6,061 | 7,590 | 28 |
| Combined heat & power, district heat | 5,692 | 5,289 | 5,414 | 5,591 | 21 |
| Total production | 23,749 | 25,552 | 27,687 | 26,841 | 100 |
Agriculture
Given the complexity of current risks, especially climate change, new thinking on mechanisms to improve the evidence base to support action on soils is needed. Otso does not suffer as much as Bothnia from the poor management of the land legacy of the post war era.
Otso's climate and soils make growing crops a particular challenge. The country lies between 60° and 70° north latitude and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, Otso and Bothnia contain half of the world's arable land north of 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate, farmers have relied on quick‐ ripening and frost‐resistant varieties of crops, and they have cultivated south‐ facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralize excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water.
Until the late nineteenth century, Otso's isolation required that most farmers concentrate on producing grains to meet the country's basic food needs. In the fall, farmers planted rye; in the spring, southern and central farmers started oats, while northern farmers seeded barley. Farms also grew small quantities of potatoes, other root crops, and legumes. Nevertheless, the total area under cultivation was still small. Cattle grazed in the summer and consumed hay in the winter. Essentially self‐ sufficient, Otso engaged in very limited agricultural trade.
This traditional, almost autarkic, production pattern shifted sharply during the late nineteenth century, when inexpensive imported grain from Donovia and the United States competed effectively with local grain. At the same time, rising domestic and foreign demand for dairy products and the availability of low‐cost imported cattle feed made dairy and meat production much more profitable. These changes in market conditions induced Otso's farmers to switch from growing staple grains to producing meat and dairy products, setting a pattern that persisted into the late 1980s.
In response to the agricultural depression of the 1930s, the government encouraged domestic production by imposing tariffs on agricultural imports. This policy enjoyed some success: the total area under cultivation increased, and farm incomes fell less sharply in Otso than in most other countries. Barriers to grain imports stimulated a return to mixed farming, and by 1938 Otso's farmers were able to meet roughly 90% of the domestic demand for grain. The disruptions caused by WWII caused further food shortages. The experiences of the depression and the war years persuaded the Otsans to secure independent food supplies to prevent shortages in future conflicts.
After the war, the first challenge was to resettle displaced farmers. Most refugee farmers were given farms that included some buildings and land that had already been in production, but some had to make do with "cold farms," that is, land not in production that usually had to be cleared or drained before crops could be sown. The government sponsored large‐ scale clearing and draining operations that expanded the area suitable for farming. As a result of the resettlement and land‐clearing programs, the area under cultivation expanded by about 200,000 hectares, reaching about 800,00 hectares by the early 1960s. Otso thus came to farm more land than ever before, an unusual development in a country that was simultaneously experiencing rapid industrial growth.
During this period of expansion, farmers introduced modern production practices. The widespread use of modern inputs, (chemical fertilizers and insecticides, agricultural machinery and improved seed varieties) sharply improved crop yields. Yet the modernization process again made farm production dependent on supplies from abroad, this time on imports of petroleum and fertilizers. By 1984 domestic sources of energy covered only about 20% of farm needs, while in 1950 domestic sources had supplied 65% of them. In the aftermath of the oil price increases of the early 1970s, farmers began to return to local energy sources such as firewood. The existence of many farms that were too small to allow efficient use of tractors also limited mechanization. Another weak point was the existence of many fields with open drainage ditches needing regular maintenance; in the mid‐1980s, experts estimated that half of the cropland needed improved drainage works. At that time, about a quarter of a million hectares had underground drainage, and agricultural authorities planned to help install such works on another million hectares. Despite these shortcomings, Otso's agriculture was efficient and productive.
Fishery
A particular characteristic of the Otsonian fisheries is created by the Arctic climatic conditions. Fishing waters, and especially coastal waters, are to varying extents covered by ice for part of the year. This means that ice fishing using nets, hooks and traps is common in the winter season while the main fishing period lies between April and November. There are around sixty species of fish indigenous to Otso, of which approximately twenty are fished, including commercial and main recreational species, and one species of crayfish. The commercial fleet is largely comprised of small‐scale vessels, with the majority of the vessels less than 18m long. Most of the national catch however is comprised of herring and sprat taken for industrial purposes by a small number of larger trawlers. There is a small but active inland commercial fishing industry, largely targeting vendace. Recreational fishing is also important, with approximately forty per cent of the population fishing at least once a year. 90% of the inland catch is taken in recreational fisheries, as is approximately half of the marine catch other than Baltic herring. Aquaculture is economically important, more so than capture fisheries, with the most important cultured species being rainbow trout raised in sea cages.
Catch profile. Both the volume and value of landings decreased over the past few years. From 2014, national landings increased gradually and in 2018 reached 100,000. By far the most important commercial species is Baltic herring. Most of the catch is used in industrial processing for animal feed for the fur farming industry. Because of the large catch volumes, Baltic herring is the most economically important species even though the unit price is low.
Fishing units. The Otsonian fleet consists of trawlers, gill‐netters and coastal vessels. In 2018 the fleet consisted of 1,012 vessels. Trawlers land the majority of the catch, both in terms of volume and value. Small‐scale privately owned fisheries are a socially important part of the Otsonian fishing fleet, accounting for approximately 65% of vessels and 75% of employment in fisheries.
Inland fisheries. Inland freshwater commercial fisheries mainly target vendace (freshwater white fish). Of the 2,100 tons of freshwater catch landed in 2018, 1,700 tons were vendace. Other species include roach and perch. The value of the inland fishery was USD4 million in 2018. Since the 2005 both catch volume and value have decreased.
Recreational fishery. Recreational fishing is one of the most important outdoor leisure activities in Otso. Approximately 50% of the population takes part in recreational fishing once a year in order to boost their food source. In recent years the volume of the recreational catch was around 15,000 tons a year. The number of recreational fishermen also decreased.
Aquaculture. With decreasing catches of wild salmon in the Baltic Sea, aquaculture became a commercial activity in the 1970s and intensified in the 1980s. Most of the aquaculture installations are located in coastal areas. The most important species in aquaculture is rainbow trout raised in sea cages, representing around 80% of the total production from aquaculture. The rest consists of rainbow trout raised in freshwater ponds and a few other finfish. There is also farming of crayfish and production of fry and salmon for restocking purposes in the Baltic Sea. In 2018, the aquaculture production was about 10,000 tons.
Fisheries management. Bilateral agreements on access to resources in national exclusive economic zones in the Gulf of Finland are negotiated annually with Bothnia, Donovia and Estonia. Management of fisheries resources in Otso is dependent on the property rights in Otsonian waters: Waters close to the coast are privately owned (to 500m from the 2m depth line), but mostly administered by a fishing association at village level.
Mining
The main minerals are Iron ore, copper, lead, zinc, chromites, nickel, gold, silver and limestone.
Manufacturing
From the early 2000s, Otso’s industry, which for centuries had relied on the country's vast forests, became dominated to a larger extent by electronics and services, as globalization lead to a decline of more traditional industries. Outsourcing resulted in more manufacturing being transferred abroad, with Otsan‐based industry focusing to a greater extent on Research and Development (R&D) and hi‐tech electronics. Main outputs are metals and metal products, electronics, machinery and scientific instruments, shipbuilding, pulp and paper, foodstuffs, chemicals, textiles and clothing.
Metals and Minerals
Metals. Companies tend to focus on high added‐ value processing of metals. The exports include the production steel, copper, zinc and nickel, and finished products such as steel roofing and cladding, welded steel pipes, copper pipe and coated sheets. Outokumpu is known for developing the flash smelting process for copper production and stainless steel. The manufacturing industry is a significant employer of about 41% of the labor force
Minerals. Modern society requires the use of mineral‐based products in the construction and maintenance of housing and other buildings, earthen structures, railroads, road networks, power lines, pipelines and other infrastructure. Industrial production and manufacture of machinery, equipment, vehicles and ICT technology are largely based on the utilization of mineral‐based materials. Mineral fertilizers and agricultural machinery are also vital to food production.
Metals and minerals are non‐renewable natural resources. However, the lifespan for products derived from metals and minerals is typically long, of the order of decades, and they can be recycled effectively. However, recycling can only partially meet the current demand for minerals. For example, more than 80% of copper is recycled but due to rapidly increasing demand and the fact that the average life of copper products is more than 30 years, recycling covers only one-third of current needs. The increased use of metals can be considerably slowed through careful product planning based on material efficiency and recycling. Price increases, as well as adoption of new and replacement materials, can also lower the demand for traditional raw materials. The rapid expansion of information and communications technology and developments in new energy technologies has created an entirely new demand for a range of metals. The prosperous Asian superpowers have increased the demand for mineral resources in a way that has totally transformed the global market in the minerals sector. Governments are having an increasingly important role in mining activities and the resolution of problems relating to sustainable production and consumption will require closer political cooperation in the future.
Otso has an abundance of minerals (iron ore, copper, lead, zinc, chromites, nickel, gold, silver, limestone) but many large mines have closed down, and most raw materials are now imported mainly in the Outukumpu area of Otso. The Otsokumpu Group, by far the largest producer, operated the Otsokumpu mines, as well as others producing cadmium, chromite, ferrochrome, mercury, pyrite, and zinc. The company also invested in foreign mines and produced mining equipment. The Otsokumpu Group, through a subsidiary company controlled the Otanmaki iron mine, other mines producing cobalt, quartz, and vanadium, and Otso's largest steel plant. Under Otsan law, the Ministry of Employment and The Economy controlled prospecting and mining rights. Otso’s main mineral production was gold in 2017. The country produced 7000 kilograms, an increase of 40%.
The mineral potential of Otso is good:
| Metal/Mineral | Mining Production in Otso | Discovery Potential in Otso |
| Critical: | ||
| Antimony | Deposits | Moderate |
| Cobalt | Mining production | Good |
| Graphite | Deposits | Moderate |
| Niobium | Mining projects | Good |
| Platinum group metals | Mining projects | Good |
| Rare earth metals | Deposits | Good |
| Tantalum | Deposits | Moderate |
| Tungsten | Deposits | Moderate |
| Economically very important: | ||
| Chromium | Mining production | Good |
| Iron | Mining projects | Moderate |
| Manganese | Mining projects | Moderate |
| Molybdenum | Deposits | Moderate |
| Nickel | Mining production | Good |
| Tellurium | Deposits | Good |
| Vanadium | Mining projects | Good |
| Zinc | Mining production | Good |
| Economically important: | ||
| Clay minerals | Deposits | Moderate |
| Copper | Mining production | Good |
| Feldspar | Mining production | Good |
| Limestone | Mining production | Good |
| Lithium | Mining projects | Good |
| Quartz | Mining production | Good |
| Silver | Mining projects | Moderate |
| Talc | Mining production | Good |
| Titanium | Mining projects | Good |
Electronics
The Otsan electronics and electrotechnics industry relies on heavy investment in R&D, and has been accelerated by the liberalization of global markets. Electrical engineering started in the late 19th century with generators and electric motors. Other Otsan companies have succeeded in areas such as industrial automation, medical and meteorological technology.
Forestry
Otso’s natural forests are its greatest natural asset. Forests play a key role in the country's economy, making it one of the leading wood producers and providing raw materials at competitive prices for the crucial wood‐ processing industries. As in agriculture, the government has long played a leading role in forestry, regulating tree cutting, sponsoring technical improvements, and establishing long‐ term plans to ensure that the country's forests continue to supply the wood-processing industries. Otso's wet climate and rocky soils are ideal for forests. Tree stands do well throughout the country, except in some areas north of the Arctic Circle. In 1980 the forested area totaled about 9.8 million hectares, providing 7 hectares of forest per capita far above the European average of about one-half hectare. The proportion of forest land varied considerably from region to region. In the central lake plateau and in the eastern and northern provinces, forests covered up to 80% of the land area, including areas which would be better utilized for agriculture. The main commercial tree species, pine, spruce and birch, supplies raw material to the sawmill, pulp and paper industries. The forests also produce sizable aspen and elder crops.
As is the case in Bothnia, the heavy winter snows and the network of waterways were used to move logs to the mills. Loggers were able to drag cut trees over the winter snow to the roads or water bodies. In the southwest, the sledding season lasts about 100 days per year; the season is even longer to the north and the east. The country's network of lakes and rivers facilitates log floating, a cheap and rapid means of transport. Each spring, crews float the logs downstream to collection points; tugs tow log bundles down rivers and across lakes to processing centers. The waterway system covers much of the country, and by the 1980s Otso had extended roadways and railroads to areas not served by waterways, effectively opening up all of the country’s forest reserves to commercial use.
Forestry and farming are closely linked. During the twentieth century, government land redistribution programs had made forest ownership widespread, allotting forestland to most farms. In the 1980s, private farmers controlled 36% of the country's forests; other persons held 26%; the government, 25%; private corporations, 8%; and municipalities and other public bodies, 5%. The forestlands owned by farmers and investors, some 70,000 plots, were the best, producing 75 to 80% of the wood consumed by industry; the state owned much of the poorer land, especially that in the north.
The ties between forestry and farming are mutually beneficial. Farmers supplement their incomes with earnings from selling their wood, caring for forests, or logging; forestry made many otherwise marginal farms viable. At the same time, farming communities maintain roads and other infrastructure in rural areas, and they provide workers for forest operations. Indeed, without the farming communities in sparsely populated areas, it would be much more difficult to continue intensive logging operations and reforestation in many prime forest areas.
The Ministry of Agriculture and Forestry has carried out forest inventories and drawn up silvicultural plans. According to surveys, between 1945 and the late 1970s foresters had cut trees faster than the forests could regenerate them. Nevertheless, between the early 1950s and 1981, Otso was able to boost the total area of its forests by some 2 million hectares and to increase forest stands less than 40 years of age by some 2.2 million hectares. Beginning in 1965, the country instituted plans that called for expanding forest cultivation, draining peat land and waterlogged areas, and replacing slow‐growing trees with faster‐growing varieties. By the mid‐1980s, the Otsans had drained 2.5 million hectares, fertilized 1.8 million hectares, and cultivated 2.6 million hectares. Thinning increased the share of trees that would produce suitable lumber, while improved tree varieties increased productivity by as much as 30%.
Comprehensive silvicultural programs had made it possible for the Otsans simultaneously to increase forest output and to add to the amount and value of the growing stock. During the post war period, the annual cut increased by about 100% to about 20 million m3. By the mid‐1980s, Otso's forests produced nearly 30 million m3 of new wood each year, considerably more than was being cut. Wood burning fell to one‐fifth the level of the immediate post war years, freeing up wood supplies for the wood‐processing industries, which consumed between 10 million and 12 million m3 per year. Indeed, industry demand was so great that Otso needed to import 2 million to 3 million m3 of wood each year.
To maintain the country's comparative advantage in forest products, Otsans authorities moved to raise lumber output toward the country's ecological limits. In 1994 the government published the Forest 2010 plan, drawn up by the Ministry of Agriculture and Forestry. The plan aimed at increasing forest harvests by about 3% per year, while conserving forestland for recreation and other uses. It also called for enlarging the average size of private forest holdings, increasing the area used for forests, and extending forest cultivation and thinning. If successful, the plan would make it possible to raise wood deliveries by roughly one-third by the end of the first decade in the twenty‐first century. The indications are that Otso will fall short of its target by only 5%.
Forest products have been the major export industry in the past, but diversification and growth of the economy has reduced its share. In the 1970s, the pulp and paper industry accounted for half of Otsan exports. Although this share has shrunk, pulp and paper is still a major industry with 22 sites across the country. Furthermore, several of large international corporations in this business are based in Otso.
Chemical
The chemical industry has been growing worldwide. In the EU and GBCC the production of toxic chemicals has increased at almost the same rate as total chemical production, and both have grown faster than GDP. If there is a conflict between production and environmental standards then Otso strives to lessen the negative.
The chemical industry is one of Otso's largest industrial sectors with its roots in tar making in the 17th Century. It produces an enormous range of products for the use of other industrial sectors, especially for forestry and agriculture. In addition, its produces plastics, chemicals, paints, oil products, pharmaceuticals, environmental products, Biotech products and petrochemicals. Biotechnology is regarded as one of the most promising high‐ tech sectors in Otso and it is growing rapidly.
Banking and Finance
Around 70‐80% of the equity quoted on the Otavian Stock Exchange is owned by foreign‐registered entities. The larger companies get most of their revenue from abroad, and the majority of their employees work outside the country. Cross‐shareholding and other noncompetitive practices have been abolished and there is a trend towards an Anglo‐Saxon style of corporate governance. However, only around 15% of residents had invested in stock market. From 2013 to 2017, early stage venture capital investments relative to GDP were 8.5% against 4% in the EU and 11.5% in the US. Later stage investments fell to the EU median. ‘Invest in Otso’ and other programs attempt to attract investment. Acquisitions and mergers have internationalized business in Otso.
International Trade
Otso is integrated in the global economy and international trade is a third of GDP. About 35% of foreign trade is with the GBCC and 20% with the EU. The largest trade flows are with Germany, Donovia, Bothnia, Torrike, the Baltic States and Poland.
In 2017, the foreign exchange and gold reserves was USD3 billion. In 2010, Foreign Direct Investment (FDI) from Otso to overseas was USD10 billion and from overseas to Otso USD4 billion. By 2017, Otso to overseas was USD39 billion and from overseas to Otso it was USD26 billion.
Exchange Rates and Currencies
0.6927 Florins per USD. The currency (the Florin) is stable and fully convertible. Inflation remains low and not least because the banking system concentrates largely on its home territory, the financial stability of Otso suffered little from the recent financial crisis.
Most crypto-currencies are accepted by the major banks in Otso. These include Bitcoin (BTC), Basic Attention Token (BAT), Cardano (ADA), EOS (EOS), SALT (SALT), Civic (CVC), Litecoin (LTC), Lisk ($LSK), ZCoin (XZC), Zcash (ZEC), monero (XMR), and TorrikeCCoin (TCC).
Taxation
The main taxes are from municipal income tax, state income tax, state value added tax, customs fees, corporate taxes and special taxes. There are also property taxes, but municipal income tax pays most of municipal expenses. Taxation is conducted by a state agency, Revenue Department, which collects income taxes from each pay check, and then pays the difference between tax liability and taxes paid as tax rebate or collects as tax arrears afterward. Municipal income tax is a flat tax of 16%, with deductions applied, and is paid directly to the municipality (a city or rural locality). The state income tax is a progressive tax (tax brackets 5% to 35%); low income individuals do not necessarily pay any. The state transfers some of its income as state support to municipalities, particularly the poorer ones.
The middle income worker's tax element is 44% and effective marginal tax rates are very high. Value‐added tax is 18% for most items. Capital gains tax is 40% and corporate tax is 30%. Property taxes are low, but there is a transfer tax (2% for apartments or 4% for individual houses) for home buyers. Alcoholic beverages are separately taxed and highly restricted. Some taxation is avoided in the black market and self‐service culture.
Much of the taxes are spent on public sector employees, many of which are jobs for life and amount to 34% of the labor market. Social spending such as health or education is around above OECD medium. Social transfers are also around OECD medium. Some reforms toward more equal marketplace were made in 2016. The state has a program where the number of jobs decreases by attrition: for two retirees, only one new employee is hired.
Tax evasion is not a prevalent issue.
The overall tax burden is now around 41% of GDP. (OECD Av Europe 34.8; America 27.8)
Cryptocurrencies accepted at banks are considered as property for tax purposes and are subject to capital gains tax.
Employment Status
The unemployment rate was 3.5% and the employment rate was 6.9% in early 2017. The unemployment security benefits for those seeking employment are at an average OECD level. The labor administration funds labor market training for unemployed job seekers, which is often vocational. The aim of the training is to improve the channels of finding employment. The labor force is 823,675 (2017) and is divided by occupation as follows:
- Agriculture and Forestry: 4.5%
- Manufacturing: 41.4%
- Industry: 18.2%
- Construction: 7.3%
- Commerce: 15.9%
- Services: 54.1%
- Finance, insurance, and business services: 14.5%
- Transport and communications: 6.9%
- Public services: 32.7%
Labor Market
Otso increased job market regulation in the 1970s to provide stability to manufacturers. In contrast, during the 90s, Denmark liberalized its job market, Framland and the Baltic States moved to more decentralized contracts, whereas Otsonian trade unions blocked many reforms. Many professions have legally recognized industry‐wide contracts that lay down common terms of employment including seniority levels, holiday entitlements, and salary levels, usually as part of a Comprehensive Income Policy Agreement. Some consider these agreements to be bureaucratic, inflexible, and, along with tax rates, a key contributor to unemployment and distorted prices. Possibly it may also slow down structural change as there are fewer incentives to acquire better skills, although Otso already enjoys one of the highest skill‐levels in the world.
Greater labor market flexibility would allow the economy to respond better to the pressures stemming from globalization. Otso has enjoyed a period of strong labor market performance in recent years, with robust employment growth and steadily declining unemployment. However, further progress in dealing with the on‐going restructuring associated with globalization requires decisive reforms to labor market institutions and it was acknowledged that raising wage flexibility should be a priority. This was an essential element of the realization that the Government needed to address future issues of skill shortages and an aging population.
In addition to those Otsonians who are self‐employed full time, there are others who engage in private economic activity on the side. The best known and most important examples are families who cultivate private plots (which can be as large as one‐half hectare). Their contribution is significant; according to official sources, in 2015 the farmers privately owned about 10% of the hogs, 24% of the sheep, 42% of the horses and 40% of the laying hens in the country. Professionals such as commercial artists and doctors also worked privately in their free time, subject to separate tax and other regulations. Their impact on the economic system, however, was negligible.
Corruption
Ultimately better governance helps fight poverty, improves living standards and raises development outcomes. With improved governance, infant and maternal mortality will decline significantly as resources allocated to health service delivery are fully deployed as intended. The same is true for improving education and boosting GDP. Furthermore, good governance has been found to significantly enhance aid effectiveness. Transparency lies at the heart of much of this, and will continue to be a core principle for one’s advocacy work across the world. Otso is rated 8.4 in the Corruption Perceptions Index.
Prevention
Otso has introduced measures directed at both the public and private sectors. These include model preventive policies, such as the establishment of anti-corruption bodies and enhanced transparency in the financing of election campaigns and political parties. The public services are subject to safeguards that promote efficiency, transparency and recruitment based on merit. Once recruited, public servants are subject to codes of conduct, requirements for financial and other disclosures, and appropriate disciplinary measures. Transparency and accountability in matters of public finance are also promoted and specific requirements are established for the prevention of corruption, in the particularly covering the judiciary and public procurement. Otso actively promotes the involvement of non‐governmental and community‐based organizations, as well as other elements of civil society and raise public awareness of corruption and what can be done about it.
Criminalization
Illegal economic activities are assessed to be equivalent to 12% (USD21 billion) of GDP in Otso.
Otso follows the UN Convention to the letter and has established criminal and other offenses to cover a wide range of acts of corruption, many of which were already crimes under domestic law. Otso criminalized not only basic forms of corruption such as bribery and the embezzlement of public funds, but also trading in influence and the concealment and laundering of the proceeds of corruption. Offenses committed in support of corruption, including money‐laundering and obstructing justice, are also dealt with and this also covers the problematic areas of private‐sector corruption.
International Cooperation
As a signatory of the GBCC, it is not required to abide by any GBCC conventions but it has have agreed to cooperate with members in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders. They are bound to render specific forms of mutual legal assistance in gathering and transferring evidence for use in court, to extradite offenders. They are also required to undertake measures which will support the tracing, freezing, seizure and confiscation of the proceeds of corruption.
Asset Recovery
Several provisions specify how cooperation and assistance will be rendered. In particular, in the case of embezzlement of public funds, the confiscated property would be returned to the state requesting it; in the case of proceeds of any other offense covered by the Convention, the property would be returned providing the proof of ownership or recognition of the damage caused to a requesting state; in all other cases, priority consideration would be given to the return of confiscated property to the requesting state, to the return of such property to the prior legitimate owners or to compensation of the victims.
Arctic Economic Strategy
Otso is one of eight states with an exclusive economic zone north of the Arctic circle. Their economic strategy addresses broader concepts that are applicable to mining, shipping, fishing, use of additional resources, delimitation of maritime areas, pollution prevention, ocean research and economic dispute resolution. Otso’s foundational stance puts environmental protection and conservation above any economic development of it’s Arctic territory. This can be done conceptually by focusing on clean energy, sustainability of resources, and protection of indigenous Otsonian Arctic culture. The Otsonian government believes these are interwoven and mutally achievable goals that form a greater Arctic Economic Strategy.