The Oil that did not get in the Head

In the very northern region of Europe lies a country worth noting, not just for its actions but also for what it avoids. This country is Norway, and nature has shaped and endowed it in a manner that can teach those of us offshore willing to learn how to navigate numerous contradictions that the rest […]

In the very northern region of Europe lies a country worth noting, not just for its actions but also for what it avoids. This country is Norway, and nature has shaped and endowed it in a manner that can teach those of us offshore willing to learn how to navigate numerous contradictions that the rest of the world can only imagine. 

Unlike most European countries, Norway is an amazingly rich place in terms of natural resources. The country is not just one of the largest exporters of seafood; it is also rich in oil, natural gas, hydroelectric power, forests, and minerals that can make most developing known as rich with natural resources look rather poor. And though it ranks high amongst the top fifteen producers and exporters of crude oil, amazingly, most people offshore do not think of Norway when they think of natural resources.

Think about it: The Media and other analysts who enjoy labelling do not term or introduce Norway as an oil-rich” country the way they do with other countries that then turn out to be poorer than Norway. Rather, it is considered and grouped as a developed, advanced high economy as defined by the UN, World Bank, IMF, and other international bodies.

Like a sober, lucky winner, Norway goes about its business with natural resources as if it has drunk from a cup of intoxicating oil that must not get into its head. Just as the people of Norway prefer to lead their lives in very frill-less and purely functional ways- from their dressing to their language and their coyness about displaying wealth- the country itself acts as if its oil is not there.

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To avoid falling into the boom and bust trap associated with the fluctuating and unpredictable revenues typical of countries and systems reliant on the commodity market, Norway has taken three significant, interrelated steps that may seem commonsensical and evident to some of us. However, good things are not as straightforward as they might appear: Knowing is one phase of the process, doing what is known is another phase, and doing it successfully is yet another step beyond the first two.

For Norwegians, the diversification and expansion of the economy are neither shifting goals, platitudes, proclamations, nor dreams; they are a shared, living reality that can be tested and yield tangible benefits for all to see, both at home and offshore.

Their gas industries, where value is added and needed skills are employed, provide more jobs and generate more revenue than the oil sector.

Norway is not a country anyone can reasonably describe as grassland; instead, it is plagued with shockingly short summers and very cold winters to be passed on high mountains and steep hills. Yet they are sober enough to take agriculture seriously in all shades, from their farms and ranches to their schools and research centres, or is the other way round? Over 90% of their domestic demand for beef and sheep is met nationally. There is more to it: They also produce their grain and potatoes, then go on to sell the rest of the world fish and other seafood.

Innovation and manufacturing are two significant areas where Norwegians seem to find joy, engaging in them with a remarkable sense of seriousness.

As if they dont trust the luck that oil can bring, Norway is also the country that ensures it produces for itself and exports high-revenue-generating products such as pulp and paper, large power and office machines, telecommunications, and computer equipment. They also manufacture and export medicines, chemical products, fertilisers, pharmaceutical products, and plastic raw materials. Additionally, they quietly build and sell ships.

Just ensure this oil doesn’t get into their heads. To illustrate this point, Norwegians decided to invest a significant portion of the money they receive from oil into other sectors and even countries. They established a fund where proceeds from their oil wells are directed to generate revenue from diverse areas. The reasoning behind this decision, Norwegian leaders and fund managers explain with subdued glee to the rest of us offshore, is to guarantee responsible and long-term revenue management of Norways oil and gas resources so that this wealth benefits both current and future generations.

The consequences and results of that policy are worth noting: today, that fund earns more money than the revenue it receives from its oil. It is referred to as the oil fund and controls 1.4% of the value of the worlds listed companies, with investments in over 9,000 companies across 73 countries.

It is essential to highlight how transparent this fund’s management is. Every Norwegian and even those of us offshore who are interested can see how the funds are invested across every sector, country, and company. Information about the fund’s performance is regularly updated and available with just a click of a mouse.

There is a catch, though, as no lunch is free: their government is no Father Christmas, and Norwegians are among the most taxed people in the world; the citizens, not the oil, pay for their excellent schools, healthcare services, and other public infrastructure. The average single worker in Norway is taxed around 39%. The advantage of this tough love, no hubris, no free lunch attitude is that the government is truly accountable: when Norwegians refer to taxpayers’ money or the commonwealth, they genuinely mean it. No public administrator or elected politician gives gifts or money. Their politicians dont help; they serve by providing the services they are elected and paid to deliver: governance.

Since the people are stakeholders and the system works equally for everyone across the country, no one discusses resource control, and there is no fear of civil war or unrest among the excluded. There is no fear of foreign aggression, invasion, or manipulation over their oil because they have established a solid foreign affairs unit that operates quietly and efficiently, always positioned where it is most needed when important issues arise.

Soberly and successfully, Norway continues to move on from progress to prosperity, making sure its oil does not get in its head.

Join me if you can, @anthonykila, to continue these conversations.

Anthony Kila is a Jean Monnet Professor of Strategy and Development at the Commonwealth Institute of Advanced and Professional Studies.