It would be difficult for an investor to find a country more financially stable than the Kingdom of Norway. This Scandinavian nation has consistently held robust rates of economic growth through relatively prosperous periods of global expansion and more importantly through periods of instability and even crisis. The economy is set to expand 3% this year after a similar rate of expansion over the last few years.
It is true that Norway has relied heavily on its North Sea oil ,to help finance an extensive social welfare program for the nation at large. However, it has also permitted Norway the ability to invest heavily in the infrastructure and economic development of the country to the benefit of the citizenry of the country.
As opposed to a number of neighbors, Norway made the decision to keep the nation’s oil and gas industries mostly in government hands through a number of entities. The regime also made the decision to invest this bounty in a diversified portfolio in 1990. This has permitted Norway to accumulate the largest single sovereign wealth fund in the world at $878 billion USD (United States Dollar). TheFund is now anticipated to increase in value to $1 trillion USD by 2020.
In comparison, the country with the next largest sovereign wealth fund is the United Arab Emirates at $773 billion USD followed by Saudi Arabia with $737.6 billion USD. It is important to note that if you add up the various funds set up by China, they are in sum, larger than Norway’s single fund.
Another advantage for the investors of the fund is that they can afford to look at the long term when investments are made. When a mistake is made, they can afford to wait until there is a market correction in a stock or asset. A recent example of this was when the the Fund made the decision to invest in Facebook, after careful consideration. The Norwegians also immediately lost money, along with everyone else. However, unlike a number of other institutional investors, they did not sell the shares purchased. The assumption was made correctly, that in the long term it would be a good investment.
The Sovereign Pension Fund of Norway employs more than 200 people in Oslo, the capital of Norway. Another 100 can be found in offices that are located in London, New York, Shanghai and Singapore. The mission of the Fund is to create a basis of wealth for Norway that will outlast the nation’s supply of oil and gas.
The taxes and profits from the gas and oil industry gives the Fund an additional $1 billion USD every week. This has allowed this one Fund to hold 1% of all of the stocks that exist in the world. In Europe alone, it owns 2% of all the listed companies.
The continuation of the Fund through successive governments is a testament to the wisdom of the Norwegian people and their political leaders. Part of this trust is built on the openness and transparency of the Fund. It also aims to influence the way in which the companies it invests in behave.
Of recent there have been discussions to possibly separate the Fund into a number of separate entities, for reasons of safety and competition. Other may wish to invest more in the country of Norway itself, but the continued existence of the Fund, is not at all in question.
The existence of the Sovereign Wealth Fund and the importance it has on the economy of Norway cannot be underestimated. It provides the economy of Norway and it’s currency(the Norwegian krone), a resiliency that other nations would be hard pressed to match. An investment in Norway is much safer then elsewhere at present.
As a result of the Fund the Gross National Savings Rate was 35.2% of GDP (Gross Domestic Product) in 2010, 37.7% in 2011 and 40.1% in 2012.
Despite the small size of Norway with a population slightly more than 5 million the country makes a large presence in the world economy. As late as 2010 Norway was the 2nd largest exporter of fish and seafood products in the world. They are the 3rd largest exporter of natural gas, and the 4th biggest maritime nation globally. They are the 7th biggest oil exporter and the 6th biggest hydro-power producer in the world.
Norway is 385,178 km2 or 148,718 square miles ranking it 61st in geographic size. That gives the country a population density of just 15.5/km2 or 35 people per square mile. That is ranked 213 in the world. The end reality is that there are many open spaces in Norway.
The nominal GDP of Norway was estimated to be close to $516 billion USD. This gives the kingdom the 22nd rank in size in the world. Quite an achievement for a nation this size. Per capita that is $101,271 USD. That gives Norway the 3rd nominal rank in the world.
More importantly, for the people of Norway is PPP (Purchasing Power Parity). This is just over $282 billion USD in GDP and per capita that works out to be $55,398 USD, the 4th highest in the world.
The GDP of the country is based on 2.9% agriculture, 41.8% industry, and 55.3% services. The labor force of 2.678 million is engaged in the previous sectors at 2.9%, 21.1% and 76% respectively.
Unemployment is a bit over 3% and has remained there for a number of years. It is mostly due to the higher youthful unemployment. It was over 8% as late as 2011.
The federal budget remains in surplus. The excess is 13.8% of GDP. Public debt was 29.7% in 2012, a very manageable amount considering the overall financial health of the nation. The credit rating of the country is AAA, both foreign and domestic.
The inflation rate remains low and unlike other nations, they are not agonizing over the possibility of deflation. Estimates for inflation were 1.3% in 2011 dropping to 0.7% in 2012. Norwegian monetary policy is concerned with maintaining a stable inflation and exchange rate.
The chief agricultural products of Norway consist of barley, beef, fish, milk, pork, potatoes and wheat.
The chief industries of Norway are petroleum and gas, food processing, shipbuilding, pulp and paper products, metals, chemicals, timber, mining, textiles and fishing. Much of what is produced is a result of the abundant natural resources of the country in these sectors. The industrial production growth rate was 6.5% in 2012 alone.
Imports were $89.1 billion USD in 2011 and $86.72 billion USD in 2012. Imports consisted mostly of machinery, equipment, chemicals, metals and foodstuffs. The major trading partners for imports were Sweden at 13.6% of the total, Germany at 12.4% and China at 9.3%. Denmark, the United Kingdom and the United States came in at 6.3%,5.4% and 5.4% respectively.
Exports totaled $159.2 billion USD in 2011 and $158.8 billion USD in 2012. As you can see the country enjoys a sizable trade surplus. Exports are mostly comprised of petroleum and petroleum products, machinery and equipment, metals, chemicals and fish. The countries that comprise the major export partners consist of the United Kingdom at 25.6% of the total, Germany 12.6% and the Netherlands at 12%. France follows with 6.7% then Sweden at 6.3% and the United States at 5%.
The current account balance of the country was $70.3 billion in 2011, rising to $76.1 billion USD in 2012. Foreign exchange reserves were $49.4 billion USD at the end of 2011 and $51.86 billion USD at the end of 2012.
External debt was $595.7 billion at the end of 2011 and rose to $659.1 billion at the end of 2012. Yet, Norway remains a major net external creditor.
Direct foreign investment in Norway was $236.4 billion USD in 2012 an $244.2 billion USD in 2013. Abroad, Norway had invested a total of $210.6 billion USD and $224.9 billion USD for the same years.
The main impetus to invest in Norway still remains the stable political environment, a respected judicial system and a well functioning internal market. It ranks in the top 10 (number 6) in the ease of doing business by the World Bank. There is a robust banking and financial system that is well managed.
The United Nation’s Human Development Index gives Norway the best standard of living, education and life expectancy ranking.
The cooperation between government research and development institutions and industry, have enhanced the development of technologically advanced companies. Government encouragement has led to clusters of companies that offer a high degree of variance within each major cluster. The use of the latest technologies and a focus on quality allows Norway to maintain a competitive advantage in world markets.
Although Norway is not a member of the European Economic Community and is not part of the common currency of Europe, it still has access to the European market through the European Economic Area Agreement.
Overall, Norway is a low risk investment and offers a number of long term investment opportunities.
There are a number of comparative advantages that Norway possesses that make it a good place to consider for investment. Along with high technology and a highly educated work force, the country has an incredible natural beauty that makes it an ideal tourist destination. There is also high purchasing power as a result of the wealth of the country, so it is an excellent export market for a variety of goods and services. There is a plethora of opportunities to ponder if one is considering a business investment.
If as an investor you would like to be more conservative, you could purchase Norwegian stocks by use of an ADR (American Depository Receipt). These are foreign stocks bought by American banks in bundles and then are reissued in American stock exchanges. The listed prices are from $10.00 USD to $100 USD per share making them very affordable. The most popular Norwegian ADR is Statoil ASA. On the New York Stock Exchange (NYSE) it is listed as STO. It is the 11th largest oil and gas company in the world and the 26th largest company in the world by profit.
You could also invest in Norway through the use of ETFs (Exchange Traded Funds). These funds provide access to a diverse basket of securities across several different industries. The most popular ETF is the Global X FTSE Norway 30 ETF (NYSE: NORW). It encompasses the country’s largest companies and has net assets of $63.6 million USD. The fund holds primarily interests in oil and gas companies.
The only cloud on the horizon for Norway would be a major downturn in energy markets, particularly oil and gas. Given the present surging demand in Latin America and East Asia, that is unlikely in both the short and long term.