recently made investors uneasy. the long equities bull market may be nearing an end. in a transitional period, higher interest rates will also reduce the value of the gpfg ’ s fixed income portfolio. norges bank economic perspectives 17 february 2022 developments ahead may also be marked by demographic changes, tension between countries and lower global trade integration. moreover, we are facing a necessary transition to a low - carbon economy. whatever happens abroad will still leave its mark on the gpfg. no investment is completely safe, as history has shown. in 1904, the norwegian government set funds aside in the state reserve fund to be used only “ in extraordinary circumstances or in an emergency ”. when it was dissolved in 1925, it was nearly empty. creative accounting must take some of the blame. yet it didn ’ t help either that it was invested in only a few assets – mainly uk, french and german government bonds – investments regarded at the time as absolutely safe. after the first world war, the value of german and french government bonds was close to zero, wiping out much of the state reserve fund ’ s assets. 5 the investment strategy behind the gpfg stands in stark contrast. the fundamental principle underlying the strategy is risk diversification. this lessens the potential for an across - the - board value decline in gpfg assets. underlying this principle is also the recognition that we cannot predict how the world will evolve. we must be open to and prepared for the unexpected. we have seen how sudden events, such as the global financial crisis and more recently the pandemic can lead to a fall in the value of the gpfg. looking ahead, our management model may face new challenges. analysing different scenarios of possible outcomes is certainly useful, but making major strategic changes based on a particular vision of the future is still a risky undertaking. broad diversification should continue to be a pillar of the strategy. conclusion nicolai rygg delivered his final annual address on 12 february 1940. when the tradition was reinstated after the war, it was under a new governor. the time also represents an important turning point in norwegian economic policy. the ideal of an independent central bank with decision - making authority over the instruments at its disposal had been abandoned. the bank ’ s primary task was to carry out the government ’ s decisions, and the policy rate was geared towards objectives other than low and stable inflation. it was to take forty years for the pendulum to swing back. in 1986,

time when the industry is no longer expanding, but gradually declining, and we will need growth in other industries. businesses must drive structural change and innovation, but the authorities can provide favourable operating conditions to promote an innovative and sustainable business sector. norway ranks high on the ease of doing business index4, supported by solid institutions, a high degree of confidence and a solid welfare system. history has shown that norwegian business and industry have a strong capacity to adapt. many of today ’ s oil service operators had a long history in other industries before moving into the oil sector. a prime example is the shipbuilding industry, which faced a sharp drop in demand for ships in the 1970s. the industry had resources and skills that could be reoriented to production of platforms and other inputs in the oil industry. in hindsight, this was a fortunate stroke of serendipity. companies in other industries have also seen the opportunities afforded by new technology or changes in operating conditions. one example is borregaard. the company has existed through several industrial revolutions. an abundant supply of timber and hydropower from the sarpsfossen waterfall was a good starting point. through the years, new technology was adopted – from water - driven sawmills in the 1600s to waterfall power at the end of the 1800s, and to today ’ s fully automated activities. timber has steadily found new applications in borregaard ’ s products, such as building materials, biofuels and medicine – with timber always as the main raw material. 5 norway ’ s industry structure is in flux. in the past decades, the manufacturing industry has continued to decline ( chart 8 ), reflecting increased automation and relocation abroad. increased prosperity has generated more demand for both private and public services. employment has shifted towards the service sector. 3 blomgren, a. et al ( 2015 ) “ industribyggerne 2015 ” [ industry builders 2015 ]. iris report 2015 / 031 ( norwegian only ). 4 world bank “ ease of doing business index ”. https : / / data. worldbank. org / indicator / ic. bus. ease. xq. 5 throughout its history, borregaard has had various owners and names. see eg bergh, t. and e. lange foredlet virke – historien om borregaard 1889 – 1989 [ processed timber – the story of borregaard ]. ad notam forlag as, oslo ( norwegian only ), and www. borregaard.