Norway - Economic development

The government holds shares in a number of large enterprises: a minority of shares in most industrial establishments and all or controlling shares in some armaments factories, as well as in chemical and electrometallurgical companies, power stations, and mines. The government also participates in joint industrial undertakings with private capital, in enterprises too large or risky for private capital, and in establishments with shares formerly held by German interests. Government policy also aims at attracting foreign investment.

Rapid industrial development and exploitation of resources are major governmental goals, with special emphasis on northern Norway, where development has lagged behind that of the southern areas. The Development Fund for North Norway, established in 1952, together with a policy of tax concessions, resulted in progress there at a rate more rapid than that of the rest of the country. The exploitation of offshore oil and natural gas reserves has had a profound effect on Norway's economy in recent years. Increased oil revenues have expanded both domestic consumption and investment. The government has used oil revenues to ease taxes and increase public investment in regional development, environmental protection, social welfare, education, and communications. In 1992, Norway's offshore oil and taxes amounted to K R 32,299 million. Although the expansion of innovative oil development projects—such as the $4.2 billion Heidrun oil project—continues, Norway is looking to produce more natural gas than oil. The $5 billion Troll gas field is one such project.

A tax law permits industry and commerce to build up tax-free reserves for future investment, foreign sales promotion, and research. Designed to provide a flexible tool for influencing cyclical developments, the law's intent is to help ensure that total demand at any given time is sufficient to create full employment and strong economic growth. In the late 1970s, the government introduced combined price and wage agreements in an effort to restrain inflation and ensure real increases in buying power for consumers.

To stimulate industry, incentives are available for undertakings in the north as well as in other economically weak regions; companies may set aside up to 25% of taxable income for tax-free investment. Tariff incentives are available for essential imports. A Regional Development Fund grants low-interest, long-term loans to firms to strengthen the economy of low-income, high-unemployment areas anywhere in the country.

In 1991, the government introduced a three-year program to improve infrastructure and reduce unemployment. This plan was to spend nearly K R 10 billion, primarily for road and rail communications, with the money coming from budget cuts in other areas.

Although Norwegians rejected EU membership in a 1994 referendum, Norway's economy is largely integrated with that of the EU. Norway has a free trade agreement with the EU; its currency is generally kept on par with the euro. Yet despite these elements of association, Norway retains extensive control over its own economic development policies.

Norway has been active in aiding developing nations under the Norwegian Agency for International Development. The leading recipients have been Tanzania, Mozambique, Zambia, Bangladesh, Nicaragua, and Ethiopia. Norway is one of four countries meeting the UN international aid target for donor countries (0.7% of national income); Norway gave 0.91% of gross domestic product (GDP) in 1999.

The country's Petroleum Fund reached $67 billion at the end of 2001; the fund will be used to finance government programs once Norway's oil and gas resources run out. The mainland economy was in recession in 2003; however, GDP growth was forecast for 2% in 2004. The offshore sector absorbs a large percentage of investment.