Transcription
Hi everyone, I'm Nicolangan, the CEO of the Norwegian Zan Wealth Fund, and today I'm really excited because I'm here with a guest uh who has defined the last 30 years of Norway's place in the world. So, warm welcome to Yen Slenberg.
"Thank you so much for having me."
Now, um, you created the fiscal rule uh that turned Norway's oil money into the world's largest sovereign wealth fund. You've been prime minister twice. You led NATO for 10 years. Uh, and now you are back as finance minister, running the fund you helped create. Uh, so, very, very interesting.
"It is a fascinating history, and of course, there have been many decisions making this fund possible. But actually, when I was, when I became finance minister 30 years ago in 1996, that was the year we made the first installment into the fund, and since then I've followed the fund very closely."
Now, this week, you compared Norway and Britain, two countries who basically produce the same amount of oil. Right? Now, we've got a big uh, sovereign wealth fund. Britain has uh, quite a bit of debt. What, what happened here? How do, how did we prioritize differently?
"It's al- always very difficult uh to compare different countries, but uh, but the fundamental message is that uh, the United Kingdom, they have produced more or less the same amount of oil and gas as we have in Norway."
"Mhm."
"Uh, in Norway, we have a sovereign wealth fund of more than two trillion US dollars. Uh, in, in the UK, there is no sovereign wealth fund. And of course, there are many differences. For instance, the UK is a much larger country, more, more people."
"Uh, but I think that the, the main difference, the main reason why we have and and the UK doesn't have a sovereign wealth fund is that uh, we decided to have a big government take as part of the oil and gas industry. We have a 78% tax rate."
"Uh, and we have strong uh, direct state ownership. So much of the cash flow goes directly into the uh, state coffers. And uh, and second, we have, we have a generally relatively high tax level in Norway. So, when we started to earn net revenues from the oil and gas, uh, we were able to save everything. And uh, and that has not been the case in the United Kingdom."
"You have um, there were, there's been some pretty big calls uh done here. So, one, to save the revenues, invest in in equities, uh, and then of course, you also have the, the spending rule. So, what do you think are the most important ones, and were they obvious at the time?"
"No, all of them were politically controversial. And I think what we have learned in Norway is that when you, when you, if you want to make or to create a sovereign wealth fund, you have to make three important political decisions."
"Uh, one is how much to save."
"M."
"The second is uh, how much to uh, use, so how much to put in, and then how much to take out of the fund."
"Uh, and then the third decision is uh, uh, where to invest."
"And to the first question, how much to save, by law, uh, we have decided that all the oil and gas revenues uh, are saved. Every cent, every, every dollar earned is saved into the fund. That's the first decision, how much to pay to put, to put in."
"The second important political decision is about how much to take out. And then we created the golden fiscal rule back in 2001. Uh, and uh, and that says that the only thing we can withdraw from the fund is the expected financial real return, meaning that, that we have estimated that to be 3%."
"So..."
"Do, do you think you would have done that differently if you knew how big the fund would become?"
"No, I don't think so. Do you think that we, for instance, would have been a clause that the fund cannot account for more than, I don't know, now it's 25% of the state budget? Do you think, for instance, you would have put in a max at 10%?"
"No, I don't think so. Uh, but, but of course, I, I, I was prime minister when we decided that rule. So maybe I'm very biased. It has served Norway well for now 26 years, the fiscal rule to only spend the, the expected real return. Um, and I will always be open to to other models, to listen to, to, to alternative ways of doing this. But, but fundamentally, I think we need to understand that the oil and gas wealth, wealth is not for the Norwegian state. It's for the Norwegian people."
"And by uh, spending the financial return, we ensure that the Norwegian people, today and in the future, will benefit from the oil and gas wealth."
"But then, just the third political decision is then where to invest. And we decided back in 1997, actually in this room, this very room in the Ministry of Finance, to then start to invest in equity."
"Uh, in 2001, uh, in the white paper, it said that the money should go to three things: incentives for working, investments, knowledge, and infrastructure. Do you think that's been..."
"Yes. First of all, it was not the only thing we should spend on. Uh, the main, the main purpose of the fund is to support the state budget, healthcare, defense, police, whatever it is."
"Um, um, uh, uh, second, we, we said that we should spend some on uh, on, on, on infrastructure. We have spent very much on infrastructure. I think one of the challenges we face in Norway is that not all our infrastructure investments are very much, let's say, are, are very profitable, meaning that, that, that if you look at the, the kind of cost-benefit, the cost is quite high. But we have spent a lot on infrastructure."
"Uh, research and education, well, we spend a lot on research and education, at least government-funded. Uh, and uh, and on taxes, well, roughly one-third of the total, total oil and gas revenues have financed reduced taxes, in particular, reduced taxes on uh, electric cars. So, one of the reasons why Norway, you know, more than almost 100% of all new cars in Norway are electric, and the main reason is that we have removed almost all taxes on them, and that has been quite expensive."
"Absolutely."
"Now, uh, the fund was set up to avoid the Dutch disease. Some people would argue that we've caught some Norwegian disease instead. What do you, what do you think about what, how do you think about that?"
"Well, the, the Norwegian economy is not perfect. We have problems uh, related to, for instance, the fact that we have many people on different kind of disability uh, uh, schemes, welfare schemes. Uh, uh, we struggle to increase the work participation uh, rate. And, and of course, we are vulnerable just by, by the fact that uh, 25% of our uh, expenditures are financed by the fund, which is very much dependent on fluctuations in the uh, financial markets. So, yes, we have to be aware of those challenges. And I think the most important thing we have to do in Norway is to look into how can we increase the work participation. And how can we ensure that more people uh, work? And therefore, we we have implemented the big pension reform. We are looking out how we can further reform our welfare system to make it more profitable and to encourage more people to work."
"What do you think it does to a country where you don't really have to prioritize when you have kind of you don't have to have either that or that, you can have both?"
"No, I, yeah, I compared to most of the countries, we are extremely privileged. That's correct. But my message is that in one way, it's luck that we are that we found oil and gas on the continental shelf. But it's a result of political decisions that we have managed this income better than most other countries with big income from uh, natural resources, uh, uh, through those important political decisions that we saved every cent, that we uh, uh, only use or withdraw from the fund the financial return, and that we invested in, in, in equity. This is not luck. This is political decisions that enable the fund to become so big."
"Now, everyone supports this golden rule that we only spend the financial return. But in the beginning, and I remember that well, because that was 10 years I was prime minister, it, it, it, it was extremely controversial that we didn't spend more, because then 3% of a small fund was not a big amount of money. Now, 3% of a big fund is a big amount of money, and therefore it's more accepted today than some years ago."
"Do you think it's making the country complacent?"
"At least there is the risk uh, and, and, and therefore we, we need to be aware of that risk, because we have seen other countries become too complacent if they have too much oil and gas uh, revenues. Again, it helps that we save everything. So the only thing we spend is uh, is 3%. That, that, because if, if we spent it as we earned it, we would have spent much more, and then uh, we would have been without any oil and gas revenues when the, when the production uh, now has started to go down."
"M."
"Um, uh, but, but again, it's not a problem uh, uh, to be rich, but there is a challenge to not become complacent."
"And uh, and uh, the main message from, from me as minister of finance is that the, the main source for our wealth is not oil. The main source for our wealth is is labor, work."
"Uh, and uh, and uh, and therefore we need to do whatever we can uh, to mobilize more, in which to work more."
"Changing uh, tax remit here. Last year, you suspended the ethics council. Uh, why?"
"Because it had some unintended consequences. Uh, uh, that was not foreseen by the Norwegian Parliament when they decided these ethical guidelines back in 2004 and adjusted them in, in, in 2024. Um, uh, the fund is still managed uh, within an ethical uh, framework. You know better than anyone that there's still responsible management, there are expressed expectations to the companies. The fund can be in dialogue with different companies and, and in, in some cases, also divest from, from, from those companies."
"The thing we, and of course, it has to follow Norwegian law. It has to, to follow international law. The, the thing that, and actually, and the management of the fund is based on, um, core guidelines from the OECD and the and the UN. The, the thing we suspended was a part of the ethical guidelines, a system where we have an independent ethical council giving advice."
"Uh, to, to, to the, which bank to, to, to defund, to withdraw from companies."
"And then you set down a, a committee to review this. What, what do you hope they will come up with?"
"I hope they will come up with uh, guidelines that will ensure that we continue to have a solid ethical framework around the fund, but which will uh, work in a better way uh, than the previous guidelines uh, did, at least towards over the last years. Because what we have seen is that these ethical guidelines have led to that we are not invested in major uh, uh, defense producing companies, producing using key defense capabilities, which Norway are dependent on. Norway buys F-35s, but we cannot be invested in Lockheed Martin producing those F-35s. We cannot be invested in Boeing, which are delivering key military capabilities not only to Norway but to NATO allies and to Ukraine. And for me, that's a paradox that country that companies which are so critical for our security, we buy a lot from them, but we cannot own 1% of their shares."
"So, when you, of course, you got more experience than anybody else having been the NATO Secretary General. What, so when you were NATO Secretary General and you saw that Norway had these things in place, did you just, um, realize that it was increasingly untenable?"
"Yeah. Yeah. The reason why I took the initiative, or one of the part, one, one of the reasons I, I took the initiative last, last fall to adjust the, the ethical guidelines was the experience I had from, from NATO. As NATO Secretary General, I traveled around and urged allies to, to build up the defense industry, to work more closely with all these companies. And then I realized that the pension fund, which I had been, you know, working so closely with for so many years, had a guideline, a rule saying that we cannot be invested in those companies I wanted more of. And, and, and that was a contradiction. It was a paradox."
"Uh, and, and of course, in one way, that didn't matter so much when the fund was smaller and the pe, and the world was more peaceful. Now we live in a full-scale, we have a full-scale war going on in Europe, in Ukraine. We do whatever we can to support Ukraine. Again, the key capabilities, the Patriot missiles, the interceptors, the air defense systems we are delivering to Ukraine are delivered by companies that Norway cannot be invested in. That's a paradox."
"You, but you have five political parties in the coalition. Do you think you'll get them to come along to your view?"
"I, yes. So, I cannot guarantee on behalf of them, uh, uh, but at least I hope that we will, we will have a recommendation from this, uh, independent expert council, uh, actually shared by former governor of the central bank, Sidsel. Um, then we will have their proposal. It will be a public hearing about, uh, that proposal starting later on this year, and then we will propose, present the proposal to the Parliament next spring. Um, uh, let's see. Uh, I hope that we can have broad agreement on, uh, revised ethical guidelines."
"And also, another paradox is that we see that tech and defense, it's more and more integrated. Uh, and of course, a broad-based international sovereign wealth fund, as the Norwegian sovereign wealth fund is, if we cannot be invested in the big tech companies, which deliver, of course, different services to, uh, many defense companies, then we cannot be a broad-based national uh, uh, wealth fund anymore. So that's another paradox, another challenge we have to solve."
"The challenge that, um, that you've had an ESG backlash in other parts of the world, whilst the Norwegian political parties basically have unchanged views. Just, how is that opening up, what should we say, challenges? And I guess we saw that with Caterpillar, in particular, right?"
"Yes, but yes, but, but I think that Norwegians, and I, and the Norwegian government, we are concerned about environment, uh, sustainability, governance, all those, uh, uh, considerations, which are in also the ESG framework. But, but sometimes the way this has been applied, it has been understood, has not functioned very well. And, and Caterpillar is not an example for the which malfunction. Um, this independent ethical council, based on the guidelines the Parliament had decided, uh, recommended that which wealth should sell out, divest from, uh, from, from Caterpillar. Caterpillar is an important provider of, you know, a lot of trucks and other things we use in Norway, then which government is a customer. Um, but on a small amount of those trucks are then sold to the US government, which then sell them to Israel, and then in Israel, they use them to, to, to violate international law, destroying homes, Palestinian homes. We all agree that that's bad. But the question is whether Norway cannot be invested in a company where a tiny part of what they do contributes through two governments, the US government and the Israeli government, to do bad things. If that's in itself sufficient to totally leave the company, to not be invested, then it's very hard to see how we can be invested, for instance, in the big tech companies."
"Absolutely."
"Yeah. Big tech companies. Now, some people ask, you know, who are the big gainers from what's going on in the tech bowl? And it's basically one of them is the Norwegian sovereign wealth fund, right? I think last five years, one, 1,600 billion Norwegian kroner from the top, from the top companies. Now, now, the top 10 companies in the portfolio account for 25% of the fund. What are your reflections about that?"
"First, it's the same as you just stated, that hardly anyone in the world has earned more money from tech companies than Norway, because we have been invested in them for a long time. We have followed the up as the equity and share prices have increased, and also the returns from those investments has been incredible."
"Uh, then of course, if something goes up, it's also is that also is that it can fall down. Uh, and I will not speculate about the likelihood of what will happen in the US stock market or or with these specific companies. As you said, 10 companies, uh, roughly 25% of the wealth, of the sovereign wealth fund. But my, my main challenge is, uh, uh, to, address the issue, should we change the guidelines? Because the guidelines decided, uh, by Norwegian government, is that you should be broad-in invested, uh, in all listed companies, follow the international markets, and a kind of index fund. And, I think that if I started to politicize that and to say that, no, no, now I believe that the market will in the US will go down because it is so high. First of all, it has been kind of concern for many years, and that will continue to to increase. So if we had made that decision four, five years ago, we have lost a lot of money. Second, I'm just afraid that if we try as politicians to forecast the market, we will end in a very bad place."
"So, I'm confident that we should still remain a broad-based international uh, uh, uh, index fund with some active management by the, by, by, by you and, and your people. And then, and then there will be downturns."
"But do you think it makes sense to own, do you think it makes sense to own 7,000 companies, given that the big ones are so important, and given that if something happens, if something bad happens somewhere in the world, we, the fund typically owns it. Do you really need all these companies?"
"Well, again, whether it's 7,000, it actually used to be close to 10,000. Then we have reduced to 7,000, to, to minimize a bit also the administrative costs. And of course, I'm, I'm not ruling out that there will be also adjustments in the future. But the fundamental idea that we should be broadly diversified over different markets, different companies, uh, uh, that, that's the best way to have the best return over time and the lowest risk. That I still believe in. Uh, it has served us well for all these 20, no, 30 years, actually. And I believe that's a basic right approach also for a government-owned sovereign wealth fund in a democratic nation."
"Um, Mr. Stoltenberg, we have, uh, some big privately held companies coming to the to the stock market this year. You know, SpaceX, Anthropic, OpenAI. Do you think the fund should be able to, uh, also own private companies?"
"Well, this is a very sensitive political issue in Norway. Um, and of course, it has been a great advantage that we have a very high degree of transparency. We have easily defined the benchmarks, and that's e- more straightforward, at least to establish when you have listed companies as, as we invest in, uh, uh, uh, today. Then I, I admit that, that there is a dilemma that some of the, some of these big, private companies, uh, uh, will, most likely soon become public companies, and then we will buy into them. So the parallel is, as soon as SpaceX or Anthropic, whatever, or OpenAI becomes public companies, then Norway will invest based on the fact that we follow the markets and are invested in almost all listed companies. That's a paradox. Uh, whether that's what I say, a big enough paradox to change our policy, I think it's far too early to decide. Uh, uh, but at least I think we should be aware of, uh, that that's that's a challenge that we face, that we buy as soon as they are listed."
"We run stress tests which say, for instance, that the fragmented world is generally negative for markets. We are seeing rivalries between some of the superpowers. We are seeing trade barriers and so on. Just, what are your, what are your reflections on the, how the current geopolitical situation is impacting the fund?"
"That we have to be prepared, as also you have stated many times, that the value of the fund, uh, may actually fall, uh, substantially, and that will have a direct impact on the state budget. Um, we have just presented the revised budget, and in the revised budget to the Parliament, we have some, uh, some, some scenarios. If we have a, the same development in the international stock market today, as we had after the oil crisis in the 70s, the value of the fund would have gone dramatically down, and it would have taken, more than 15 years before we came back to the, to the, to the, to the starting point. And of course, since we spend 3% of the fund, uh, into the state budget, it will affect our state budget."
"Um, the, the way to try to prepare for that is that actually, when the, now the, the value of the fund and the stock markets have increased substantially over the last years, we have actually spent a bit less. So we have spent like 2.7%, 2.8% uh, over now many years. So we have actually saved, you kind of buffer. There's no way to totally avoid consequences. Um, but by being careful when the, uh, market goes up, we have some buffer when, and we, and if the market goes down."
"So, where do you think the biggest risk to the fund is now?"
"To be honest, I think that's an extremely difficult question to answer because, uh, it is the unpredictability that, uh, anyway, characterizes, uh, the world, both financial, economically, but also, uh, when it comes to security, the geopolitical unpredictability. Wars are bad for business, at least for, uh, global business, maybe specific companies. And we have a very dangerous situation in the Middle East, and we have a full-scale war in, uh, in, in Ukraine. I hope that there will be ways to end this war, but wars are dangerous. They can, they can spiral and come out of control, and then it will affect the global markets and the value of the fund. So, it's not only the human cost of war, but also the economic cost."
"Um, and then of course, um, I believe that AI is changing the global economy. I believe that AI is creating a lot of value. Um, but of course, with this enormous increase, uh, in, in the share prices, there is a risk that it may, uh, go down. But again, my question, my task is not to speculate. My task is not to, uh, forecast future stock prices. My task is to, uh, define the best strategy for Norway to manage, uh, uh, the uncertainty. And again, diversify many markets. That's the best way to reduce the risk for Norway."
"The technology company share prices have gone up because there is, um, because there's so much potential in the technologies, right? Do you feel that Norway is using AI enough?"
"Is, I think to say enough will be wrong. Um, but we, we are actually quite good at using AI. According to Euro, we are the European country that is using AI the most. So, based on EU statistics, we are quite good in Norway using AI."
"But given that we are, but given that we are highly educated, very digital, and not too keen on working, should we not use it much more?"
"Absolutely. And, uh, and, and I think it is a great potential. And, but, but again, if you use it, so whether the glass is half full or half empty depends what you compare with. If you compare with other European countries, we're doing quite well. We're using AI a lot in Norway. If, if you compare with what should be ambition, yes, I think we should use it more. Then I think the issue is not only about using AI, it's about using AI in the right way, and, and in the right say frameworks. In this ministry, we have just, uh, really upgraded the way we use AI. We have developed a, a new way of integrating AI into our daily work. We have, uh, integrated, uh, the AI models we use here with the data banks of the central bureau of statistics and the Ministry of Finance. So now I can just go into my computer and make the most beautiful charts and, and, and figures, uh, uh, by just using the enormous amount of data that the Ministry of Finance is responsible for, including the central bureau of statistics. So, so, and I think that the public sector could and should use AI much more. I think it's a great advantage that the average kind of Norwegian is quite, quite educated and is used to use the different digital things, and therefore we should just stimulate more use of AI."
"Talking about, uh, beautiful graphs and figures, so you, uh, were out of the country for 10 years."
"Yeah."
"What was the biggest change or surprise that you had when you came back into into the ministry?"
"Uh, well, as the biggest change from, because I'm in that paradoxical, I, I've experienced that I, I'm back now in the ministry, I was 30 years ago. I was minister of finance in 1996, and the biggest change from that time was that at that, in '96, it was zero, uh, in the Norwegian sovereign wealth fund. Now it's more than two trillion US dollars."
"Um, um, if you compare with the last 10 years, 10 years I was out in NATO, so politically, I think the biggest change is that we have an even more fragmented political landscape. So, to be a responsible minister, being a minister of finance, is in one way more challenging now, because we just have to negotiate more. We have to make more compromises to get things agreed in the region, parliament."
"So, Mr. Stoltenberg, just to round off, what do you think are the most important things to remember for the next 30 years?"
"It is that oil and gas is good, but it's not enough to ensure that a country develops in a good way. Uh, uh, the most important is, as always, that we are able to ensure that people, uh, work, uh, and, uh, and that they are well educated, and that we invest for the future. The oil and gas helps us, but it's not a guarantee."
"And if you were to give, uh, some advice to the people running the fund, what would you say?"
"Continue as you do, because you do an excellent job. Uh, and I'm proud, uh, always when I work or meet you, but also when I travel, uh, abroad, to see the, the great respect that you, but also the fund has, because you are such a professional, such a well-managed, uh, fund, which serves Norway so well."
"Thank you, and thank you for everything you've done for the fund and for the nation."
"Thanks so much."