It doesn’t matter what report you read, Norway consistently ranks as one of the best countries in the world for quality of life. With stunning natural wonders, such as fjords, mountains and a picture perfect coastline, a vibrant and historic culture and a modern and forward thinking economy it’s rather hard not to see why it would do so well on these lists but what many don’t quite realise is just how wealthy a nation Norway is.
There is a lack of ostentatiousness that many associate with wealth, in Norway despite many having the money to do so. Take for example Bergen, the centre of Norway’s booming oil and gas industries which have set it out as a major player on the world stage when it comes to the energy trade.
There are few flashy sports cars or designer products on show in a city that has effectively struck it rich which, in part, is due to Norwegian culture and, in part, due to the giant Sovereign Wealth Fund that the country has and it is this in which the country is continuing to invest its income from its oil wealth.
A giant savings account worth around $800bn (£483bn), the Sovereign Wealth Fund owns 1% of the world’s stocks and has the ability to make every citizen in the country a millionaire in their own currency but why is it there and what purpose does it serve?
To answer that, we have to look at Norway pre its oil boom where it was a nation surviving predominantly on the fishing trade brought in from the North Sea. This trade left a lot to be desired what with seasonal catches varying and a heavy reliance on unpredictable ecological events and, since the discovery of oil, the country has seen its fortunes transformed.
However, the Norwegians are aware that their oil supply is a finite resource and so, although the good times are currently rolling in, they are aware that another, possibly painful, economic transition is on the horizon and this is where the Sovereign Wealth Fund comes in.
By setting apart a portion of the revenue brought in by the oil and gas trade the country has created a ‘rainy day’ fund that is there for when the country needs to transition to another economic market, something for which it is already planning for with politicians and economists hoping for a gradual shift over the next few years rather than a major jolt.
The fund is actually so large that part of it is used to fund infrastructure and public projects but there is legislation in place that limits only 4% of the surplus from the fund to be used. Such is the pragmatism and carefully economic planning of the Norwegian people that they are actually currently operating under even this very thin margin.
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