On the Edge: Norway as an offshore country
“On the Edge” is the new opinion column in the Norwegian American Weekly, offering opinions written by invited contributors to make some comments on the current issues that define modern Norway.
By Svein Ludvigsen
Governor of Troms county
Norway was once one of the poorest countries in Europe. So many inhabitants left their homeland that more ethnic Norwegians live abroad than in Norway. On the other hand, the descendants of those who stayed home are now among the richest in the world. Rich fisheries, lots of hydro electric energy and enormous offshore wells filled with oil and gas are like having money in the bank.
The U.S. company Phillips Petroleum opened the fairy tale at the Ekofisk field off the west coast of Norway in 1969. The company has been instrumental in the changes in economy and living standard for the 4.8 million Norwegians, who in common have a lot of money in the bank. And still puts more and more on the account, the Government Pension Fund, established in 1996 by the Storting.
Today, the Government Pension Fund-Global is one of the largest funds in the world. Not bad for a little country far north in the Arctic. Furthermore the Fund represents more than one year’s total GDP, or roughly NOK 600,000 (approximately $103,000) per person. The Ministry of Finance has estimated the fund to be doubled in 10 years, which means every Norwegians in 2020 own more than NOK 1 million (approximately $171,000) in the Fund!
Forty years later, the offshore oil activities in the North Sea has changed Stavanger from a sleepy town to a busy international city, often characterized as Little America. And since the first organized immigrants from Norway left Stavanger harbor for the New World and the U.S. in the 1820s, the payback nearly 200 years later is activity and revenues which have contributed to growth, employment, technological development and social welfare nobody could have dreamed about.
Look at a map of Norway, this narrow and long strip of land on the Scandinavian Peninsula, and you might be astonished to know that the coastline is seven times as big as the land area. Traditionally, the rich fisheries, cod, herring, farmed salmon and many other species under healthy and sustainable management, have been one of Norway’s largest export products.
Today the petroleum sector is by far the largest industry, and accounts for around 22 percent of national value creation. And the net cash flow from the petroleum sector amounts to approximately 27 percent of total revenues this year.
Petroleum activities offshore the coast, from Stavanger to Hammerfest, have contributed significantly to Norwegian economic and welfare growth. After 40 years ,the industry has created values of approximately NOK 8000 billion. Statistics indicate that the value created by the petroleum industry is around three times higher than inland-based industry, and 22 times the total value creation of the primary industries.
In 1996, The politicians decided to establish a government pension fund to support government savings to finance pension expenditure of the National Insurance Scheme and long-term considerations in the spending of government petroleum revenues. This idea is based on the vision that the present oil wealth shall benefit coming generations too.
The investments done by the Fund have long-time goals, and are spread over several thousand individual equities and bonds in the international financial markets. This helps ensure broad diversification of risk. The growing accumulation of financial capital means that the Norwegian fund is a major owner in the global financial markets. And the Fund represents roughly 1 percent of the total value of the world’s listed companies at the end of 2009.
The Fund is managed by Norges Bank (The National Bank of Norway), and the ownership is focused on six strategic priority areas, equal treatment of shareholders, shareholders influence and board accountability, children’s rights, climate change, water management as well as well-functioning, legitimate and efficient markets.
And for the Norwegians, very few clouds are in the economy sky. Only 40 percent of the expected total recoverable resources have been produces. In other words, 60 percent is still stored deep under the surface of our waters.
The global financial crisis had a dramatic impact on the financial system and the economy in many countries. For the Norwegians the crises have been more like a soft flu, more than an economically health problem.
Svein Ludvigsen (member of Høyre/Conservative party) was elected to the Norwegian Parliament from Troms in 1989, and was re-elected on two occasions. From 2001 to 2005, Ludvigsen was Minister of Fisheries and Coastal Affairs. In 2001 he was appointed County Governor of Troms, but because of his job as cabinet minister he assumed the office in January 2006.
This article was originally published in the Jan. 7, 2011 issue of the Norwegian American Weekly. For more information about the Norwegian American Weekly or to subscribe, call us toll free (800) 305-0217 or email email@example.com.