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NORFUND Established: Increased Aid Grants to Business

At the end of 1996 the Norwegian Parliament granted 50 million kroner (US$ 6,6 million) from the aid budget to establish NORFUND.  The fund will invest in businesses in developing countries and will add to today's pot of 476 million kroner for business development in NORAD.  In 1996, this meant an addition of more than 11%.  In the Ministry of Foreign Affairs it is expected that the fund will be given 200-300 million kroner this year.  This amount constitutes an addition of  up to 63% of today's aid grants for business development.  Completely without any debate, the support for the business sector is increased in the aid budget.
Artikkelen er mer enn to år gammel. Ting kan ha endret seg.
At the end of 1996 the Norwegian Parliament granted 50 million kroner (US$ 6,6 million) from the aid budget to establish NORFUND.  The fund will invest in businesses in developing countries and will add to today's pot of 476 million kroner for business development in NORAD.  In 1996, this meant an addition of more than 11%.  In the Ministry of Foreign Affairs it is expected that the fund will be given 200-300 million kroner this year.  This amount constitutes an addition of  up to 63% of today's aid grants for business development.  Completely without any debate, the support for the business sector is increased in the aid budget.


By Morten Rønning
Norwatch

After a model used in, among others, Sweden, Denmark and Finland, the Norwegian Parliament established NORFUND - the Norwegian Investment Fund for Developing Countries. The fund shall participate by being part-owners in businesses.  The share of ownership shall normally not exceed 35%, and the fund shall never own more than 49% of any business.  The Norwegian Governments proposition concerning NORFUND names telecommunication and energy as areas in which the fund will get involved.

The establishment of the fund is among other things based on two surveys done among Norwegian companies operating in developing countries. Naturally, these companies were positive to the initiative.  NORAD (the Norwegian agency for development cooperation) will have the responsibility for the project preparation.

Operative from the Autumn
The plan is to increase the fund to 200-300 million kroner during 1997 and 1998, and later to increase the capital further.  Both Swedish Swedfund and Danish Ibu dispose more than one billion kroner.  Companies in which NORFUND holds shares can, of course, also apply for NORAD support equally with other companies.  Cato Haugland in NORAD informed NorWatch that the fund probably will be operative from the autumn onwards, and that they already have received several inquiries from companies that would like support from the fund.  In the Committee of Foreign Affairs only Fremskrittspartiet's representative was against the establishment of the fund, by claiming that the money should be used in Norway.  The fund was established with an opposition of 32 votes in the Norwegian Odelsting.  The board in NORFUND was appointed in the cabinet in May this year.  The chairman of the board is lawyer Arve Johnsen, former director of Statoil, and on the board is also, among others, Borger A. Lenth who recently resigned as chairman of the bank Kredittkassen.  The board is appointed for four years.

Helping Business
The fund shall invest in three project categories: projects where only Norwegian companies are involved; projects where Norwegian companies are involved in joint venture companies; or local finance institutions, where these alone cannot finance larger projects.  The last category, which will not have the fund's primary attention, exists in Swedfund and Finnfund, while it does not in the Danish Ibu.  This means that the fund mainly will assist Norwegian business in getting established in developing countries.

The idea behind the fund is to encourage investment in the poorer countries where the risk also is higher.  Therefore, 25% of the fund is set aside to cover future losses.  The fund will dispose the returns from its investments, and can eventually sell out, when the other owners can finance this.

The Governments proposition concerning NORFUND underlines that international financial institutions see such national funds as central co-operative partners, and it is emphasized that the fund will improve Norwegian investors' access to these institutions.

Poverty orientated
The same requirements concerning the environment, women, gender equality and poverty orientation which are a basis for NORADs other activities, will also be the basis for NORFUND.  Likewise, there is a demand that the fund shall only invest in countries in the categories lower middle income, low income and the poorest countries.

In addition, the fund is given the possibility to invest in the poorest countries in Eastern Europe and some of the republics in the Asian part of the former Soviet Union.  The fund shall also have the option in the future to take on the responsibility for some of the other business-arrangements in NORAD.  The Funds finances will, nevertheless, be kept isolated from these arrangements.

"The primary area of activity for the fund will be starting up of normal, privately owned businesses."
From the Norwegian Governments proposition no. 13, 1996-97, about the establishment of NORFUND.

"The Norwegian traditions when it comes to workers conditions, are good. The Government therefore finds it important that the fund shall encourage Norwegian business engagement in developing countries" From the Norwegian Governments proposition no. 13, 1996-97, about the establishment of NORFUND

Norwatch Newsletter 6/97

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