by Angel Gurría, OECD Secretary-General
An address to the Confederation of Finnish Industries
29 September 2006
I would like to thank Christoffer Taxell for inviting us to the Confederation of Finnish Industries, for hosting this lunch and for this opportunity to say a few words on the topics on today’s agenda. I will begin with the global outlook and risks, and then highlight some of the key challenges for Europe. I will also touch briefly on improving competitiveness through boosting innovation, and finally conclude with the specific challenges for Finland.
I do not need to give you much background information on the OECD – the Organisation I have the privilege to lead. The OECD has a mandate to promote economic growth and development in countries throughout the world. We have 30 members and work with many other countries. We promote market-oriented economies and open, rules-based, and non-discriminatory trading and financial systems, supported by good governance.
Global outlook and risks
Now turning to my first topic – global outlook and risks. I have just come back from the World Bank and IMF meetings in Singapore, where these issues were discussed in detail.
Despite high and volatile energy prices, global expansion is expected to continue and broaden this year as well as next year. The US economy is running at around full capacity and expansion in Japan is on course to become the longest lasting in half a century. Growth in the euro area is likely to reach 2.7% this year – its strongest performance since 2000. Finland’s growth has been among the highest in the OECD, underpinned by a strong innovation performance and high educational attainment (Finland ranks top in the Programme for International Student Achievement (PISA)). All this is also helped by fairly supportive financial market conditions.
But this is not a time to be complacent, as we are indeed facing many challenges:
Labour productivity and labour utilisation
I want to touch very briefly on the need to boost labour productivity and on how to improve labour utilisation. There has been some progress in raising labour productivity.
First, entry barriers to labour market and other regulations inhibiting competition are being eased in some countries. For example, the administrative costs for start-ups are set to be slashed by one fourth in the Netherlands. The privatisation of government-owned commercial companies has continued in Finland and in Poland. And at the EU level, efforts are underway with the Services Directive albeit with limited success. But there is still uncertainty about Europe’s capacity to keep up momentum.
Second, concerning human capital formation, many countries are strengthening their education systems, even if reforms are still at an early stage.
But new initiatives to increase labour utilisation have been scarcer. In particular, too little has been done to reduce the implicit tax on work for the so-called ageing workers. That said, we do welcome the broad thrust of the measures announced in France to reduce hiring disincentives in the smaller firms, and, more recently, to boost the hiring of youth and the employment of older workers.
Competitiveness through innovation
Let me now turn to improving competitiveness by boosting innovation. We can divide the OECD countries into four clusters:
Challenges for growth in Finland
I want to conclude with Finland’s structural challenges. There are three main challenges:
Thank you for your attention during my introductory comments. I now look forward to our discussion.