Further Regulatory Reforms Would Safeguard Norway's Prosperity

02/06/2002 - Abundant energy resources and skilful macro-economic management has made Norway one of the wealthiest countries in the world. To maintain that high standard of living in the future, Norway should take steps to reform its large public sector, instil competition in protected industries, and liberalize rigid labour markets, concludes an OECD report.

Norway's oil and gas industry underpins the economy, providing up to 25% of the country's gross domestic product, says the report, Norway: Preparing for the Future Now. Judicious stewardship of the economy has made the most of those natural resources. The innovative Petroleum Fund was put in place to preserve and manage the country's oil wealth for future generations.

Norway has made significant progress on regulatory reform since the mid-1980s. It was a pioneer in some key areas, such as the electricity sector. Competition policy has been strengthened and important initiatives such as 'Simplifying Norway' have improved the regulatory environment. The recent 'Modernizing the Public Sector' programme is also a notable initiative to make government services more efficient and user-friendly.

However Norway needs to confront a number of significant long term risks:

• The dominance of oil and gas in the economy is creating a dual industrial structure, splitting the offshore oil and gas sector from the mainland economy.
• An already very large public sector crowds out private sector needs. Employment growth from 1998 to 2001 was almost entirely in the public sector.
• Competitiveness of the non-oil export sector has weakened substantially and many product markets are still over-regulated and subject to insufficient competition.
• Labour market rigidities and growing burdens on the pension system in a context of an aging population are bottlenecks for growth.

To meet these challenges the OECD suggests Norway should:

• Pursue broader and deeper reform of its public sector, notably by clearly splitting commercial and non-commercial functions, and by promoting privatisation.
• Foster competition that will enhance productivity in key sectors such as telecommunications, civil aviation, railways and postal services. Other weak spots include grocery retailing, the construction industry, and bus and taxi transport.
• Strengthen regulatory governance with renewed political support for impact assessments of new laws and regulations, as well as supporting structures in the centre of government, and
• Improve labour market flexibility.

The report on Norway is the latest in a series of regulatory reviews of OECD economies. It reflects the input and views of all 30 OECD member countries and the European Commission, as well as contributions from the business and labour communities.

The report is available to journalists on the OECD's password-protected website, or from the OECD's Media Relations Division (tel. +33 1 45 24 97 00). For further information, journalists are invited to contact César Córdova-Novión, OECD's Directorate for Public Governance and Territorial Development (tel. +33 1 45 24 89 47).

See background reports