Overview
Iceland’s economy is basically capitalistic, yet mirrors other Scandinavian countries with regard to an extensive welfare system, low unemployment, and an even distribution of income. The service sector dominates the regional economy, with 77% of the work force. Unemployment is low, around 2-3% in the Reykjavík area. Construction is an important industry in the rapidly growing capital area, while manufacturing largely centers on food production and light industry, along with high-technology fields. According to 1999 figures, the Reykjavík labor force as a whole is divided between manufacturing (12.9%), fishing and fish processing (11.8%), construction (10.7%), other services (59.5%), and agriculture (5.1%).
Sheep and maritime products have been the lifeblood of Icelanders for over 1000 years, and the fisheries sector is still the single most important part of the Icelandic economy. Almost 60% of all Icelandic exports are made up of seafood products. However, the Icelandic economy has greatly diversified in the past 50 years. Other industries include the sale of minerals such as aluminum, ferro-silicon, cement and nitrates. Reykjavík has traditionally been attractive to foreign investors because of low unemployment rate, a highly educated work force and low energy costs.
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Fish products account for about 75% of Iceland's exports and earn more than half of the country's foreign exchange. The government remains opposed to membership in the European Union because of Icelandic concerns about losing control over their fishing resources. The harbor approach is unrestricted and ice-free year round. The two main harbor areas are Gamla Höfnin (Old Harbor) and Sundahöfn. The old harbor mainly handles smaller ships, recreational cruise ships, and other smaller crafts. Sundahöfn is the primary commercial port of Iceland. The majority of large commercial and container traffic is handled in this harbor. The harbor is the 5th largest among Nordic countries and handles 60% of imports and 40% of exports. |
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 Reykjavik's
two main port areas |
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| Central
Business District Throughout Reykjavik's rapid periods of modernization and growth, the old City Center is still the most important business, retail, and entertainment district within the city - if not the whole country. Financial institutions, government offices, and upscale retail stores are all concentrated within a two mile stretch. The streets are narrow, residents often commute long distances to work or shop here, and it is considered a highly desirable place to live - especially for those ages 20s to 30s. Yellow areas indicate city center, main shopping areas, and service areas. Red represents public institutions while purple is retail, office, and light industry. |
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| Laugavegur
Street The main street running west to east through the Central Business District is Laugavegur. The street was originally forged by women who walked with their washing to the hot springs in Laugavegur valley; Laugavergur literally means "poolsroad." The street has undergone many changes in the past 100+ years.
The image on the left was taken in 1897. The trading site of Reykjavik had only recently begun to grow. The middle image is from 1965. Post-war prosperity has transformed the city into a modern, industrial nation. On the right is Laugavegur today. |
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In the picture on the left note the McDonalds in the lower left-hand corner (marked by a yellow-arrow sign). Probably one of the most expensive McDonalds in the world. |
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Concentration The majority of jobs and services are located within the old City Center, situated on the Western edge of the expanding Reykjavik Municipal Area. This area is very dense and contains little room for new development. By the 1950s it was evident the old city center could not accommodate new growth activities and was no longer centrally located in the city. Measured were proposed to construct new retail structures away from the downtown area. While the shopping center was not built until 20 years later, commercial activities continued to develop in a linear fashion eastward from the city center. However, the city center has retained its primacy in the hierarchy of retail and commercial areas. Downtown Development Projects The city plans to renew all paving and street fittings in the old City Center with heating pipes being laid beneath all pavements and squares. These projects will be completed within the next few years at a great benefit to the urban environment of the city center. The last 20 years has seen the construction of a considerable amount of commercial structures in the Reykjavik area (especially around the CBD), particularly for retail outlets and office accommodation. Since 1997 city authorities, in cooperation with shopkeepers, property-owners, inhabitants and others, have systematically worked on a plan to strengthen the downtown area. Projects in the near future will deal with “filling in the gaps,” by tearing down buildings that have fallen into disuse, and renovating those linked to the city’s culture and history. The idea is to create a city center where the old-fashioned corrugated-iron houses co-exist with the increasing amounts of modern architecture. A new residential area near the waterfront is scheduled to replace some of the city’s oldest structures. Waterfront Development The waterfront area is heavily orientated toward industry (as a result of 1960s planning directives) and under-developed recreationally, especially considering its close proximity to such a vibrant business district. Icelandic cultural connections to the ocean, values concerning the natural environment, and views of the surrounding mountains contrast with the small amounts of recreational, commercial, and residential areas along the water. In the past decade planners have recognized the potential for mixed-use waterfront development. The most ambitious project calls for the construction of an oceanfront opera house and conference center located within the historic harbor area. |
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The "new economy" of Iceland, and especially Reykjavík, features biotechnology, software production, tourism and other service industries of the 21st century.
Gardabaer, a city just south of Reykjavik is emerging as a potential Silicon Valley for Iceland. Discussions began in late October of 2000 to build a special industrial park for hi-tech companies in Gardabaer. The aim of the planned industrial park is to bring together all the software firms that are scattered around Gardabaer in to one area. If talks about renting a 420m2 plot of land are successful, the next move will be to approach town authorities about further development.
Reflecting Reykjavik modern economy and decreasing reliance upon agriculture, tractors are no longer allowed to roam free on busy highways during certain times of the day.
The Port of Reykjavík's participation in the cruise business has grown steadily throughout the 1990s. In 1995, 51 cruise ships called at Reykjavík between early June and late September, carrying more than 21,000 passengers. Figures for 1996 are about the same. A new trend in recent years has been for some cruise operators to use Reykjavik as a turnaround port rather than a simple call. As Iceland's biggest port, Reykjavík is a natural choice of call for cruise vessels. Since the cruise business took off in the late 1980s the City of Reykjavik and its port authority have made continuous improvements to berthing and passenger reception facilities in order to ensure that all visitors are given a "red carpet" welcome. Close co-operation with cruise operators has led to new ideas for itineraries using Reykjavík as a starting and finishing point. About half a dozen cruise ships changed passengers in Reykjavík during 1996, generating welcome business for local cruise agents, hotels and airports.
Reykjavik has maintained close connections with the geothermal heat and hot springs abundant within the region. Vikings used the natural hot springs to bathe in and today’s population both profits and utilizes this resource. Reykjavik Energy, an independent utility owned by the city, is responsible for distributing geothermal water, electricity and drinking water to residents of the region. Geothermal water was first used for heating houses in Reykjavik in 1930. At that time the majority of houses were heated with coal fires, casting a gray grime upon the city. By 1970, nearly all houses in Reykjavik were receiving electricity and hot water for heating and washing, and sales began to nearby municipalities. Today, 99.9% of homes within the Reykjavik municipal region obtain hot water from geothermal energy.
Armed with these abundant and clean natural resources, Reykjavik (and Iceland) has the potential to become an oil-free society. Plans are underway to use renewable hydroelectric power to produce hydrogen fuel cells which will supply vehicles and eventually the fishing fleet. The Reykjavik Municipal Bus Service is looking into converting its vehicles using electric motors, driven by hydrogen fuel cells. Other uses for geothermally heated water include pipes laid under pavements and parking lots to keep snow at bay and the creation of a summer swimming resort by pumping hot water into the ocean at Nauthólsvík on the city’s south coast.
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Figure 1 illustrates the progression Iceland has followed with regard to primary energy consumption. At the turn of the century coal was the primary energy component, by 1999 energy consumption was a mix of geothermal (primary source), hydro-power, and oil. The blue dots in figure 2 represent unharnessed hydro-power sites. Green dots indicate hydro-power sites currently in use, while dot size corresponds to the amount of GWhts.
More information regarding geothermal energy and distribution in Iceland and Reykjavik can be found here.