By Morten Rønning
The Norwegian Council for Africa recently called for investing one percent of the Government Petroleum Fund in developing countries, and thus contribute to economic development. According to the Council's chairman, Øyvind Eggen, this is showing respect.
The proposal is based on a narrow understanding of the word respect. The Norwegian Petroleum Fund is swelling due to high oil prices, while many developing countries bleed as they have to import expensive petroleum products. As we see it, investing some of these profits in the very same countries is not a matter of respect, if we wish to define respect more widely than in purely financial terms. The result is a concentration of power on the hands of the Norwegian government, a power that ought to belong to national and local interests.
Eggen should be aware what a double-edged sword such economic development is. So far, only the very few have succeeded in contributing to a general economic growth through investments. The money remains on a few hands, even if it is invested in developing countries. I don't think the Norwegian Council for Africa is unaware of the lopsided distribution of resources in many of the countries they now call for Norway to invest its oil riches in. Nothing in the proposal, as it has been presented in the media, suggests that this distribution would change as a result of such investments. The result may quickly become the opposite.
If the Petroleum Fund is to be invested in stocks, might we remind Eggen of an initiative that he himself was once involved in promoting, namely, environmental and social guidelines for Norwegian investments abroad? This aspect appears to have dropped out of the Council for Africa's proposal, which appears to be on purely geographical and economic terms.
For where does the money go? A recently published report by ECON (62/2000) studies the impact of oil earnings on the countries of Angola and Azerbaijan. The results make depressing reading: "A wealth of natural resources has become a curse, rather than a blessing, for large parts of the population." ECON concludes that countries experiencing increased oil earnings are falling further and further down on the UNDP Human Development Index. The result of the activities of chiefly foreign oil companies is, in this case, that wealth is spread on a few, already affluent hands, domestically and internationally.
This is a "solution" that appeals to the Norwegian government. The minister for international development has injected new millions into the government's investment fund for developing countries, Norfund, which now holds a total capital of NOK 1.1 billion (USD 130 mill.) . The money is earmarked for two purposes: direct investments in Norwegian companies setting up activities in developing countries, i.e. ownership; and stakes in national venture funds that fund local business projects. The underlying idea of Norfund is for the fund to one day become self-supporting, and that the profits realised by the companies and funds are to be re-invested in new companies and funds. It is not clear how much money the government will move from the development aid budget to Norfund before they're satisfied.
Norwegian investor Fred. Olsen thinks the government's investment plan for the Petroleum Fund is paltry. Mr Olsen has called for using the fund to buy foreign companies outright. In other words, not to invest with a view to earnings and risks, but aiming to buy power.
We would readily believe that minister of trade and industry Grete Knudsen would like to have Microsoft in her ministry's portfolio, but we are not entirely sure that this would make the world a better place. Except for Norwegians, of course, who would be able to inject the company's profits into the government treasury, or rather, the Petroleum Fund.
The rest of the world is probably better off with Bill Gates, who recently donated no end of millions to AIDS research. Grete Knudsen most likely would not have. For more money in the Petroleum Fund means more power, means new investments, means new companies, means more earnings, etc. There are several ends to that sort of investment strategy; some of them make us feel uneasy.
So, can't we do anything good with all this money? We could of course change them into dollars, stuff them into a plane and then spread them over the savannahs of Africa. Even the development minister would have to take a critical view of that kind of proposal. Viewed against the development needs that exist in large parts of the world, I fear that the Petroleum Fund is useless. The suspicion creeps in that all these "constructive" proposals on how to buy development with money are rooted in one thing: the need to buy ourselves a clear conscience. To this end, our oil wealth is quite useful.
Norwatch Newsletter 2/01