Norway: an example of effective resource management for Australia?

By Dr Martha Knox Haly  

On Sunday 10th August 2025, someone leaked an Advance Australia email to GetUp! about Advance’s plans for a three year campaign to destroy the net zero emissions target. One of Advance’s proposed strategies was to link high energy bills with zero emissions. The reality is that high energy bills are a consequence of the private sector ownership and/or management of resource extraction and energy infrastructure. I am grateful to Advance Australia for bringing attention to the issue of natural resources ownership.

The possession and exploitation of natural resources can enrich or ruin a country. Because of the vast amounts of money that is associated with the resources sector, the sector can also be a magnet for corruption and economic damage in both developed and developing economies. Whether the resources sector has these impacts is strongly influenced by how sovereign governments choose to manage national resources.

Poorly management resource booms

Unmanaged resource booms in developed countries run the risk of ‘Dutch disease’. During the 1960s, large gas reserves were discovered in the Netherlands. The discovery resulted in a sudden influx of wealth. The Dutch guilder became so strong, that Dutch manufacturing became uncompetitive. In developed economies, such as Australia for example, the post-millenium mining resources boom caused property prices to spiral in towns and cities near mines. This resulted in increasing regional and metropolitan homelessness. Skilled labour was suctioned up into the mining sector during its project construction phase, leaving adjacent employers in manufacturing, rural, hospitality and commercial / residential construction sectors unable to compete for labour. A strong Australian dollar made non resource based exports less uncompetitive. On the East Coast, Australians are currently paying record gas prices for their own resources. This is because gas companies are allowed to pocket natural resources, sell them on overseas markets, which onsell Australians their own resources at grossly inflated prices.

In case studies of developing economies, the impact of a resources boom has been referred to as the ‘resource curse.’ This is where politicians in nascent democracies are bribed by international resources companies, and democracy is replaced with plutocracies or dictatorships. For example, Angola is oil rich, exporting in excess of ½ a trillion dollars worth of oil between 2002 and 2014. Despite this extraordinary wealth, most of Angola’s population is illiterate and lives in poverty. Angola’s elite used consultancy firms, intermediaries and tax havens to pocket the oil profits. A similar pattern occurred in Equatorial Guinea, which was blessed with abundant oil and minerals. Seventy per cent of the population lives in poverty, and life expectancy is below the continental norm. Oil companies were entering into partnerships with companies that were wholly or partly owned by the ruling Obiang family. Rachel Maddow has explored a number of case studies illustrating that dictatorships facilitate oil production, because dictatorships represent a simplified one stop shop for oilcompanies. As long as the dictator is giving approval, then exploration can proceed.

Norway: transparent management of a resource boom

Norway has been presented as an example of effective management of a natural resource. The astute management around oil resources underpins Norway’s high scores on the Human Development Index (a composite index measuring standard of living, longevity and education), with Norway reporting lower unemployment rates than other OECD countries. Norway is one of the most egalitarian countries in the world, with a Gini coefficient of 27.6, compared to the United States Gini coefficient of 41.1 in 2018. Norway is an example of how transparent reporting, political commitment to equitable distribution of resource gains and full participatory democracy are needed for beneficial, non-corrupt resource management.

The cases of Equatorial Guinea and Angola demonstrate that ‘national ownership’ is not enough. The critical ingredients are around institutional structures and reporting processes,which are designed for transparency. Shell companies, tax havens, and use of consultants to facilitate tax minimisation do not constitute examples of institutional or procedural transparency for the voting public.

Vinsvold and Vabo have identified that Norway has a combination of democratic governance structures: interactive participation (where citizens and politicians collaborate to identify solutions) and distributive participatory governance arrangements (where citizens make decisions themselves, not answering to governments or voters at elections). They note that in government literature, the evidence suggests that politicians will conform with the ‘rules of the game.’ The Norwegian Government Pension Fund Global is an example of where political leadership and a permanently appointed civil service conformed to the institutional ‘rules of the game’, which were designed to serve the people in a full participatory democracy.

Transparency is a central principle in the management of Norways Government Pension Fund (GPF) (also popularly known as the Petroleum Fund). The GPF comprises the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN) which are both savings mechanisms for state. In Norway, there are explicit institutional structures and processes for transparency of the national sovereign wealth fund. The operational management of the GPFG and the GPFN are carried out by Norges Bank and the National Insurance Scheme Fund respectively. The National Insurance Scheme Fund’s reporting on the management of the GPFN is available here. There is a full listing of investments and fund returns, reports are available from 2007, and views are available for the total portfolio versus the equities portfolio.

There is an Ethics Council overseeing investment, and a Supervisory Board overseeing the operational management entity Norge Bank. There is quarterly reporting by Norge Bank, as well as more frequent reporting of board voting records, visibility on communications around governance and performance data on the Norge Bank’s website. Norge Bank is answerable to the Ministry of Finance. The Ministry of Finance submits a white paper on both funds each year.

Norge Bank’s reports are published on their website, along with details of 7000 companies which makes up the fund portfolio, along with companies which have been excluded, and the guidelines for inclusion and exclusion. Companies are excluded if they are found to have engaged in grossly unethical conduct, and the exclusion process is managed by the Ministry of Finance, following recommendations from the Council on Ethics.

Norges Bank provides information about voting patterns in the various companies, and on individual matters, as well as publishing dialogue on governance issues with different companies in its portfolio, right down to how it votes in individual matters. General meeting votes are published on the website one day after the meeting.

As of the 7th August 2025, the GPFG has a total value of 19981044582425 Nok (2677066404332.93 Euros). As the fund’s value is continually being updated by live feed through Norge Bank’s website, it is impossible to precisely report value down to the last Norwegian krone. The GPFG is the largest sovereign wealth fund in the world. Its purpose is to create a national nest egg when oil revenue stops coming in, as well as allocating a portion of investment returns to meet current public services funding.

The GPFG’s story began in May 1963, when the Norwegian Government claimed sovereignty over the Norwegian continental shelf, and that any resources discovered on that shelf were owned by the state. Boundaries with Denmark and the UK were clarified on the basis of median lines in March 1965. Only the King had the power to issue exploration and production licenses. Twenty-two production licenses were awarded in April 1965. The first oil was discovered in Balder in 1967, but this field would not be viable for another 30 years. In 1969, the first profitable oil field was discovered by Phillips in Ekofisk. Production started in June 1971. Although Norway was not a member of OPEC, it benefitted from the substantial increases in oil prices generated by OPEC over the 1970s. The oil and gas sector grew to one third of Norway’s GDP, and contributes 25% of annual income.

The Norwegian Government Pension Fund Global proves the lie to the conservative view that public sector management diminishes asset value. Unlike Australia, Norway’s public sector departments are led by permanently appointed career civil servants, who are answerable to the Parliament. Security of tenure means that these civil servants can more confidently provide frank and fearless advice to their minister. The GPFG was established in 1990 by governing politicians and civil servants. The then Labor Prime Minister argued that it was necessary to establish a fund and management structure before revenues began flooding in. There was a concern with rivers of gold being otherwise highjacked for partisan projects which would not add collective value to the economy.

The GPFG was seen as a means of gradually integrating oil revenues into the economy, and a future wealth fund strategy. Decisions around the fund were not initially deliberated in open democratic forums. Decision making was controlled by democratically elected political representatives from the government and the opposition, as well as civil servants from the Ministry of Finance. Public debate and contributions from all political representatives began to influence the GPFG’s investment choices from 1997 onwards.

Norway’s experience rebuts the idea that oil companies will leave a country if they are subject to democratic governance and taxation. In 1996, Norway began taxing oil and gas profits at 78% (this consists of 22% corporate tax and 56% petroleum tax). The Government derives revenue from having state owned oil and gas enterprises, taxes revenues on oil production, and direct ownership of a portion of oil fields. Ownership revenue and state owned enterprise dividends are directed towards Norway’s sovereign wealth fund, whilst taxes fund government services. This division represents a philosophy of equitable distribution through a generous welfare state and prudent fiscal restraint to avoid over heating the economy.

The fund received its first deposits in 1996, and Norges Bank was charged with retaining and investing a portion of funds for future social obligations. To protect the GPFN’s principal, the country only takes 4% each year of  Norges Bank Investment Management (NBIM) returns for spending on the country’s operations. The NBIM is Norway’s national bank, and the fund is managed in a transparent and stringent manner. Parliament appoints the Norge Banks Supervisory Council, which ensures that the bank is compliant with governance and ethical provisions. The Executive Board submits an annual risk assessment to Norge Banks Supervisory Council, based on internal audit and administrative risk assessment.

From 1997 onwards, populists on the left and right began to argue for increased spending, along with growing environmental and ethical concerns. This lead to the creation of a fiscal rule where transfers from the fund would be based on the expected real return from the fund. The fund’s investment strategy had to conform with ethical guidelines, and Norges Bank pays whatever tax it is obligated to pay in countries where earnings are made. Both sides of the political spectrum have respected this fiscal rule. Norge Bank also surveys 400 executives each quarter to gather information about the state of the economy, this provides Norges Bankwith economic data more quickly than is possible with publicly available statistics.

The Council on Ethics evaluates where potential targets for investment of the fund’s money, ensuring conformance with ethical guidelines. The Council then makes recommendations to NBIM about where money should be invested, and which companies should be excluded. Norges Bank also has the right to divest on ethical grounds from companies which exact significant environmental and societal costs. The establishment of political concensus means that the fund, its investment and spending policies are supported by both sides of the political spectrum, the corporate sector and the general public.

The success of the fund was based on national ownership, multiple institutional mechanisms for transparency and accountability, high visibility and detailed procedural reporting, strong levels of resource taxation, an incorruptible and permanently appointed civil service bureaucracy, and a cultural belief that natural resources are collectively owned. Ordinary Australians should take note.

 

Also by Dr Martha Knox Haly:

Taxing mining – will Australians stop shooting themselves in the foot?

 

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