At general election in Norway, held in 2014, a conservative leader Erna Solberg has won over Jens Stoltenberg a Labourist prime minister. Once she starts leading the country she will be faced with a much different problems then the most of the colleagues in the world. Instead of thinking about crisis and saving, she will have to deal with the question on how to run a huge fortune of Norway.
One of the aspects of that problem is so called overheating of the economy. If more money goes to consumption, the prices will rise. In the period from 2008 to 2021, available income of Norway has grown approximately 3.8 percent a year, while in Organization for Economic Co-operation and Development that percent was only 0.8 percent.
Consequences? The apartment prices have risen 6 percent during the last year. The workers are twice more expensive than in neighboring countries and EU.
Erna Solberg will have to find a cure for this disease. Boom of Norwar’s oil economy controls the market and it affects the economy based on oil to become ineffective.
And there is also a “tiny” thing about state social fun, which is constantly rising due to cash influx from oil.
The biggest pension fund in the world, which isn’t bother by pensions
State pension fund, officially called, or oil fund as everybody calls it is probably the biggest social fund in the world. His current value is around 760 billion dollars, and it is expected that by the 2020 it will pass 1.1 billion. Fund owns approximately 2.5 percent of every European company.
Fund isn’t burdened by debt, such as pensions. It has a great operating space.
Fund running is built to be transparent and fair. Even though it is controlled by a Ministry of Finance of Norway, on daily basis it is run by a Central Bank of Notway. Ethical committee for investment takes care of avoiding bad investments into socially unacceptable companies such as tobacco and weapons industry, or ones employing minors.
Fund makes the companies to act responsible
Fund plans to enter into more active role in running the companies where they own a certain percentage, especially in those where they have shares in over 1 billion of worth, or more then 5 percent of the company.
That means the fund will play higher role in naming the chief executives and board members. Director of the fund Ingve Slingstad has recently joined the naming committee at the Volvo group. Fund will also apply pressure to companies in order to improve the corporative management and to introduce higher ethical standards.
Norway is a European country of progress. This Nordic country has so much money, that they literally don’t know what to do with it. Because of that they are trying to find the best way to spend the huge amounts of money, brought by oil incomes, but without inflicting long term damage towards economy.
All countries around us have to reduce their costs and spending. Our biggest problem is that our fortune is so hue, that there is a danger that we will spend it vain on projects that aren’t profitable enough. – Ainstein Derum says, chief economist of the DBN bank, the biggest bank in Norway.
From the end of the 90s, Norway has responsibly invested into oil incomes into fund, which in a long term should secure the financing of the utopian country. The fond most frequently invests in shares, dividends and real estate, and in order to avoid overheating the money is mostly placed outside Norway.
The biggest state fund in the world
In that way, Norway has become the biggest state investment fund in the world – 760 billion dollars’ worth (575 billion euros), or approximately owner of 1.25% of each company in the world or owner of 2.5% of each company in Europe.
In order to secure the further growth of the fund, the government must not withdraw more than 4 percent a year (a projected profit of the fund in one year) in order to keep the budget balanced which would otherwise be negative.