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What could be done to boost productivity growth?
Establishing the conditions for greater product market competition is part of the answer, given its central role in bolstering productivity growth. Over the past 10 to 15 years, Sweden has strengthened competition legislation and deregulated a number of sectors, including electricity, telecommunications and parts of transport. The scope for competition from non agricultural imports has also been augmented by increasing economic integration within the European Union. However, Sweden may not obtain the full benefits from these reforms until all its product markets are sufficiently exposed to competition, and labour and capital are able to move quickly to their most productive uses.
Does the institutional framework for competition need strengthening?
Vigorous competition needs to be underpinned by both a strong institutional framework and vigilance in identifying and eliminating anti competitive behaviour. Although Sweden’s arrangements are already broadly in line with international best practice, there are several ways in which the approach could be rendered more effective:
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Strengthening the Competition Authority’s capacity to combat hard core cartels and other serious breaches of competition law so that fear of detection, prosecution and damaged public image provide an effective and strong deterrent to collusive behaviour.
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Providing for substantial sanctions on individuals actively and knowingly engaged in anti competitive activities in a way that reinforces the effectiveness of the newly introduced leniency system.
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Streamlining the process and reducing the time taken for competition cases to be dealt with.
Which sectors require specific measures?
More competition could be injected into several sectors, including some areas where extensive improvements have already been made. This could involve the following:
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Making further investments in the Nordic electricity infrastructure including the Swedish system to reduce the scope for any producer to exercise market power at times when transmission bottlenecks prevent the regional Nordpool electricity market from functioning efficiently.
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Exposing all the activities of the state owned passenger rail company to competition, including inter regional routes, and requiring it to operate under a hard budget constraint, with no prospects of further government capital injections to bail it out.
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Eliminating the tendency towards collusive behaviour in building and construction by tougher enforcement of competition law.
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Examining carefully the equity and efficiency implications of a more market oriented allocation of rental housing, instead of the present controls on rent setting.
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Modifying the planning process to require that the benefits of increased competition be explicitly taken into account when local authorities are deciding on applications for supermarket sites.
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Considering alternative regulatory mechanisms that would allow the introduction of competition for retailing of alcohol without sacrificing control over access to liquor.
How can the public sector be exposed to more competition?
There is also room for greater efforts to boost competition in Sweden’s large and decentralised public sector and in its interactions with the private sector. Over the longer term the Swedish authorities should consider whether the private sector is better placed to provide some of the goods and services that the public sector currently provides. Although the government has taken a number of steps already to increase exposure to competition and to promote a more level playing field, some further changes would help, including:
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Strengthening the legal framework governing the market activities of municipalities and other public institutions, bringing them clearly within the scope of the competition legislation and providing greater opportunity for competitors to seek redress.
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Rationalising the present supervisory structure for public procurement into a single agency covering all levels of government and with scope to impose sanctions, and modifying legislation to require that tenders from internal units and external suppliers be treated equally.
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Increasing outsourcing of public services, which would not only boost competition and lead to higher quality and/or lower costs, but would also provide more opportunities for nascent entrepreneurs to emerge in currently under developed parts of the personal and social services sector.
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Monitoring more effectively the activities of state agencies and their effects on competition, which would also demonstrate the government’s commitment to promoting competition in the public sector.
More generally, efforts need to be made to ensure that all rules affecting private and public suppliers are designed so that providers can compete on fair and equal terms in every respect.
General government consumption and employment
Per cent, 2002
Source: OECD.
Openly advertised public procurement
Per cent of GDP
Source: Eurostat.
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The full edition of the OECD Economic Survey Sweden is available from:
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