Minister Jens Stoltenberg

Statement concerning industrial policy

The Storting (Norwegian parliament), 10 October 1995

The overriding objectives of the Government's economic policy are:

• full employment
• an equitable distribution and
• the further development of a strong welfare society

If we are to achieve these objectives, we must have a robust business sector, strong enterprises throughout the country and access to capital and skills so that enterprises can develop in an environment of new and more demanding competitive conditions.

Our welfare is contingent on value added in both the private and public sector. At the same time, it is our ability to create and distribute these values that determines the level of employment. Political direction is required to achieve these objectives. The Government's industrial policy is therefore aimed at increased value added, higher employment and a stronger competitive position for Norwegian industry and commerce.

Through the solidarity alternative, which is a strategy aimed at improved competitiveness and higher employment, considerable progress has been made in restoring balance in the Norwegian economy. The main challenge to industrial policy is a continuation of the solidarity alternative.

Low price inflation and improved competitiveness are fundamental preconditions for a successful industrial policy. In recent years the Government has called for incomes policy cooperation, an active labour market policy and a policy for equalizing living conditions as the main elements in the fight against unemployment. It has produced results: We have managed to bring price inflation under control, we have succeeded in reducing interest rates, and we have managed to create many new jobs throughout the country. A joint effort has been made in cooperation with the trade union movement and other labour market organisations which has benefited the entire society. But there are still too many people unemployed, and the policy aimed at a cohesive economy and an egalitarian wage policy must therefore be continued.

We need an industrial policy which promotes the development and establishment of enterprises and jobs throughout the country. This cannot be left to the market alone. The authorities must assume responsibility and actively pave the way for the creation of profitable enterprises and secure jobs.

The government is responsible for conducting an economic policy which entails that prices and costs are maintained at a level that is competitive internationally. In addition, however, the government is responsible for a number of other tasks that are important in industrial policy, including:

• helping to ensure that Norwegian enterprises have equal access to foreign markets and that they compete on a level playing field
• ensuring that the market functions on the basis of the requirements established by the authorities concerning, for example, the environment, distribution and regional considerations.
• contributing to research, development and skills so that the business sector and the government administration can cope with new challenges resulting from an increased internationalization of the economy and more rapid technological advance; in particular, the development of information technology requires a greater focus on research, development and skills.
• contributing to access to capital to foster innovation and a balance between Norwegian and foreign ownership of Norwegian enterprises.

It is not possible here to provide a complete review of all the factors which influence the development of industry and commerce in Norway. I will therefore use these four main tasks - market access, market regulation, skills and the supply of capital - as a starting point for a description of key elements in the Government's industrial policy. Let me also point out that the Government has now planned a broad review of industrial policy through the establishment of a separate committee headed by Arent M. Henriksen. The Government will later revert to an appropriate follow-up of this work.

1. Securing market access and equal competitive conditions

I will begin by commenting on the first main task: securing market access and equal competitive conditions.

Few countries in the world have a more open economy and are more dependent on international trade than Norway. With just over four million inhabitants, our domestic market will necessarily be small. This means that many enterprises and industries are completely dependent on exporting their goods, and this explains why

• virtually all the oil and gas we produce are exported,
• why between 80 and 90 per cent of all Norwegian fish products are exported,
• why about the same percentage of all aluminium and other metals is exported,
• why the lion's share of our pulp and paper products is sold to foreign buyers and
• why Norway's tourist industry is so dependent on the choice of Norway as a tourist destination for foreigners.

Norwegian shipping has always been an international industry. Today, other industries like construction, banking, wholesale and retail trade, insurance and the food manufacturing industry are also turning to markets outside the country's borders.

We import approximately half of everything we consume in Norway. This demonstrates that it is not only export companies that are exposed to international competition, but that a number of the companies that supply goods and services to the domestic market are actually also exposed to international competition in Norway. Whether we like this or not, it is still our ability to produce and develop goods that are competitive in international markets, either in Norway or abroad, that determines our ability to maintain employment, create more jobs and maintain and further develop the welfare society.

Our open economy also means that it is in Norway's interest to participate in the elaboration of international ground rules which safeguard the conditions for trade and investment. And we have a long-standing tradition for active participation in such work going back to the establishment of the Bretton Woods institutions at the end of the 1940s.

Norway worked actively for the establishment of the new World Trade Organization, WTO. The Government attaches importance to following up this agreement, among other things by reducing tariff rates and other trade barriers. Our own close adherence to the provisions in the agreement will reinforce the demand that other countries do the same.

The Government will work actively to develop further the international ground rules in the world economy. This applies, for example, to the further development of the new WTO Agreement on trade in services. We have also raised the issue of trade and the environment, and Norway has played a very active role in the process of moving this issue to the top of the agenda in the World Trade Organization.

In the period ahead of the first ministerial conference in the WTO, in 1996, new issues on the WTO's agenda will be discussed. In addition to trade and the environment, Norway is supporting the demand that workers' rights and social dumping must also be included on the WTO's agenda.

Norway also participates actively in OECD efforts concerning a separate agreement on cross-border investment, and when we look into the future where Norway will increasingly be a capital exporter, it is obvious that the rules on cross-border investment will be even more important for us in the years ahead.

Norway has long traditions as a shipbuilding nation. For a number of years the Norwegian shipbuilding industry has received considerable state support in order to cope with competition from other countries. This year, for example, more than NOK 1.3 billion has been allocated to the shipbuilding industry in Norway. Public subsidization of shipbuilding is an example of how a profitable industry can become unprofitable, and how competition between enterprises is replaced by competition between government authorities to provide maximum support. A subsidy war is not only detrimental to the many Norwegian enterprises that are well placed for competing successfully in an environment of fair competition, but also for society at large which incurs expenditure for activities which in principle shall create values.

Support for shipbuilding will be abolished in the OECD area, in South Korea and in Japan from 1 January 1996 if all the parties ratify the agreement prohibiting such support. Norway has played an active role for reaching consensus on this agreement. We are of the view that the entire shipbuilding industry is best served by the elimination of subsidies - not only in Norway, but in all the countries that have signed the agreement. The shipyards must then compete on price and quality as equal competitors. In this situation Norwegian shipbuilders will have good possibilities for success.

It will be an important task for the Norwegian authorities to ensure that there is compliance with the agreement. The agreement gives us the opportunity to request information and consultations when there are grounds for doubt concerning the implementation of the agreement in other countries. This work requires close contact with the industry, and this is being planned by the Government.

Norway was also one of the countries which took the initiative for the Agreement of the European Economic Area; the EEA Agreement. It is important, particularly after a majority voted no to EU membership, that this agreement is given the importance that was intended.

The EEA Agreement is an important instrument for Norway in order to secure a level playing field and equal access to our closest and largest markets. But the EEA Agreement is evolving. It requires active follow-up, among other things to incorporate new European rules in Norwegian regulations. It will also be necessary to negotiate improved market access for fish and agricultural products.

The EEA Agreement entails that Norway participates in the EU's research and development programmes on an equal footing. The same applies to the EU's measures and programmes for small and medium-sized enterprises. Thus far Norwegian participation has been secured in 250 projects. It is particularly gratifying to note that the percentage of participating Norwegian manufacturing enterprises is rising sharply. The Government is proposing that next year NOK 300 million be allocated for contributions and project support to utilize the cooperation with other countries in the EU and EFTA in research and development. The EEA Agreement gives us access to the world's largest market for public procurement, a market of about NOK 5 500 billion annually. It is a large market. This provide Norwegian enterprises with new opportunities, and the results have begun to materialise.

The EEA Agreement also allows enterprises from other EEA countries to compete for tenders in Norwegian municipalities and counties and in the central government. This entails new challenges for Norwegian enterprises. However, we have already registered that municipalities can save considerable amounts by inviting tenders in international competition. This frees up resources which can be used for other purposes, for example to increase employment and to enhance welfare in the public sector. One specific example of this is Oslo Municipality, which reduced its expenditure on insurance by NOK 20 million a year, equivalent to about 40 per cent, following an international round of tenders in keeping with the EEA rules. In other cases savings arise through competition between Norwegian enterprises. The overall impression following the implementation of the EEA Agreement is primarily that competition between Norwegian enterprises is stronger. So far only a limited number of foreign enterprises have been active in the public procurement market as a result of the EEA Agreement.

2. Ground rules within which the market shall function

I will now turn to the second main task, the ground rules and requirements within which the market shall function in Norway.

In Norway we have what is often referred to as a mixed economy. This entails that production and the distribution of goods and services are partly determined by supply and demand in the market and partly determined by government authorities at different levels.

The market has favourable features with regard to promoting efficiency, innovation and technological advance. At the same time, however, we need a strong public sector to safeguard welfare and an equitable distribution. And this is not the only reason we need a strong public sector: Norwegian enterprises and our business sector are completely dependent on satisfactory services in the area of, for example, education, research, communications and various social security schemes. It is through the interplay of the public and private sector that the Norwegian welfare state and our economy have been able to expand vigorously. Both are important in industrial policy. Both sectors create enormous values each year, and the public and private sector are mutually dependent on each other.

It is crucial that there is a balance between public sector revenues and expenditure and between public and private value added. This means, for example, that the public sector must always evolve to satisfy the various needs which exist in the business sector and in enterprises. The telecommunications sector is one example. Telecommunication charges have been reduced by half between 1989 and the present time. This entails that Norwegian enterprises save about NOK 5 billion a year. This is important not least to enterprises located in more remote districts in Norway. Without the necessary restructuring of the telecommunications sector we would have had more insecure jobs both in public and in private enterprises that are dependent on buying telecommunication services.

The private sector of the Norwegian economy is not a liberalistic free-competition market. On the contrary, the authorities set out clear ground rules under which the enterprises must operate. This applies to everything from taxation, environmental and safety requirements, requirements concerning industrial democracy and distribution. Within the limits that are established politically, the enterprises themselves are responsible for using their resources to create profitable activities.

The Government is of the view that we need strong government rules and regulations to ensure that the market functions for the good of society as a whole. If the enterprises are left to themselves and to the free play of market forces, we may run the risk of reduced competition and a loss of welfare. This means that we need an active competition policy. But we also know that a good competition policy must take into account that the conditions for competition change when an increasing number of trade barriers are scaled back and the economy becomes more international. Expanded competition across national borders requires new evaluations of competition policy. An enterprise that is large in Norway may be rather small in an open EEA market. We must take account of important realities when we discuss the structure of different Norwegian industries.

The Government's industrial policy is in principle industry-neutral. This means that it aims at giving enterprises in all industries equal operating conditions. We must nevertheless take into account that special industries or regions can encounter special challenges and opportunities.

One example of this is the food processing industry which actually is Norway's second largest manufacturing sector measured in terms of number of employees. Due to the EEA and WTO Agreements, the farm-based food manufacturing industry in particular is experiencing considerable changes in its operating conditions. This applies, for example, to the transition from volume-regulated import protection to tariff protection. The WTO Agreement requires that tariff rates be reduced by an average 36 per cent by the end of the year 2000. The Government has already acted on this obligation by implementing the reductions in their entirety this year. It may be necessary to reduce tariff rates further.

The WTO Agreement also entails minimum market access for a number of farm-based products and reduced export support. This means that the agricultural based food processing industry must expect both increased foreign competition and altered export conditions in the years ahead.

As a result of these changes the Government drew up an extensive restructuring programme for the agricultural based food processing industry last year. The programme received the support of the Storting (Norwegian parliament). The objective is to contribute to the development of an internationally competitive agricultural based food processing industry. A total amount of NOK 900 million was allocated to the programme. Almost the entire amount was administered by the Norwegian Industrial and Regional Development Fund, SND.

After being considered by SND, the resources were distributed among more than 150 projects in all parts of the industry and in all parts of the country. More than half of the approved commitments have gone to "soft" investments, i.e. investments in the development of new products, skills upgrading and marketing. This is in accordance with the guidelines drawn up by the Government for the restructuring programme. The Ministry will follow the programme and projects actively. SND is now in the process of starting its own evaluation of the restructuring programme in the agricultural based food processing industry.

Norway's fisheries industry is an industry with a large growth potential. In the course of a few years Norwegian fisheries have gone from being an industry dependent on substantial support to one that can survive on its own.

The enlargement of the EU has created problems for parts of the fisheries industry. The Government has attempted to solve these problems through negotiations on compensation. A separate programme has also been introduced to enhance the growth potential in the fisheries industry. The programme comprises network cooperation, strategy and management development, the development of new products and research and development-oriented activities. This year NOK 90 million was allocated to the programme, and next year an additional NOK 50 million has been proposed. These efforts must be viewed in connection with SND's own activities in the fisheries industry within its ordinary budget.

In the power supply sector amendments have been made to legislation which have resulted in a better management of Norway's hydropower resources. Value added in the billions is created in this sector each year. This is also a sector in which the public sector plays a dominating role and exercises political management, as owner, as the licensing authority and as legislator.

Investments in the petroleum sector have been very high the last few years, but they will now decline. It is essential for the future of this industry that it is not solely dependent on developments on the Norwegian shelf, i.e. that Norway's oil industry does not live and die in step with production on the Norwegian continental shelf. The industry itself has already made considerable efforts to find new markets, including the British sector, Russia, Kazakhstan, in Azerbaijan, Southeast Asia and Latin America.

A special forum has been established and a separate programme has been drawn up to help the oil and gas industry cope with new competitive conditions and developments in oil and gas activities internationally. Along with the oil companies, the supplier industry and the trade union movement, the authorities have participated in joint efforts to lower costs and make things better and cheaper in the Norwegian oil and gas industry. Impressive results have already been achieved through the use of new technology, more standardised solutions and improved organisation. One example of this is that the oil companies estimate that the cost of drilling wells has been reduced to a fourth over the past ten years. The objective now is to cut costs by half in the period to 1998, i.e. a further halving of costs in the oil and gas sector.

Such savings benefit the entire society. They strengthen the Norwegian oil and gas industry, but they primarily benefit the central government and government finances because the state is a large owner. As a result of direct ownership and the tax system, it is the central government which bears the main burden of expenditure on oil and gas activities, and when costs are reduced most of the reductions thus accrue to the state.

Over the past few years there has been an important shift in industrial policy from passive support to active measures for restructuring. The restructuring of activities in Sør-Varanger and Mo i Rana is an example of this. Many new jobs have been created in Sør-Varanger. The company A/S Sydvaranger, however, is still facing major challenges. Projects are under way for special products, but some testing still remains before it will be possible to evaluate the commercial potential of these products. Additional time is therefore required to examine the company's plans before a final decision is taken.

Many new jobs have been established in restructuring areas, among other things by utilizing the possibilities that exist locally and through cooperation between the central authorities, the local community and business organizations. It has also been demonstrated in Askim that cooperation has generated new activities and new jobs.

On Svalbard, which has a somewhat special situation, the number of employees in coal mining operations has been reduced by about 100 over the past three years, and today mining activities employ about 270 persons. Mining activities are being reorganized, and the number of employees will be further reduced to 210 over the next few years. In recent years a number of new undertakings have been created in tourism, other private business activities, research and education. As a result, total employment in Longyearbyen has increased despite the decline in mining employment. There are now a little more than 800 persons employed in Longyearbyen. Over the next few years we expect a further growth in other non-coal activities and a reduction in the number of employees in coal mining operations.

The Government is now working on restructuring in Grenland, Østfold and Narvik. Both the Ministry of Industry and Energy and the Ministry of Local Government and Labour have supported this restructuring in their budgets. SND and the local authorities are responsible for the orientation of these measures. It is important that the restructuring has local roots and that there is close cooperation between SND and local participants.

It is also essential that industrial policy contributes to creating new jobs throughout the country. This requires additional efforts in the regions and was an important objective when SND was established in 1993.

I would emphasize the importance of SND's involvement in the development of competitive enterprises in towns and central areas. In my view there is no conflict between this and the special priority given to enterprises in the regions.

SND established a separate innovation department in 1994, and this will improve SND's possibilities for following new companies from their establishment up to profitable operations.

More than 60 per cent of all jobs in Norway are found in enterprises with fewer than 50 employees. It is in the small and medium-sized enterprises that we must be successful if we are to reduce unemployment even more. The Government is therefore concentrating on small enterprises.

SND plays an important role here. Most of the enterprises that receive support from SND have fewer than 20 employees. Today nearly 15 000 Norwegian enterprises are customers of SND, and most of the resources in the Fund are used for business development in the regions and for smaller companies. The establishment of SND was an important regional policy measure which has played an important part in decentralizing decisions on enterprise support in Norway. More decisions are being made by the regions than ever before. More than 90 per cent of all commitments concerning regional-oriented instruments in 1994 were provided by the county, and 90 per cent of all commitments concerning loans for basic financing were provided by SND's regional offices.

In the organization of SND considerable emphasis has been placed on regional ties and competence. This must also be the case in the future. The Government intends to present proposals concerning the organization of SND's external bodies in the spring of 1996. The goal must be to develop further the strong features of SND today and, at the same time, create a simpler and more efficient organization for users.

The public sector's policy on fees is also of considerable importance to entrepreneurs and small enterprises. Partly for this reason the Government is proposing a sharp reduction in the fees paid to the Enterprise Register. The proposal entails that the costs of registering an enterprise will be virtually halved. This means a great deal, particularly for business start-ups and small enterprises.

The present Government has assigned high priority to the development of transport activities in all parts of the country. A high standard for the road and railway network and efficient air transport and telecommunications services are a precondition for a well-functioning business sector in the entire country. The emphasis on transport infrastructure will therefore continue to be an important part of our industrial policy.

It is in Norway's interest to participate actively in cooperation in the Barents region and in the EU's INTERREG II-programmes. Outlying areas along our entire border with the EU and Russia may find new opportunities for growth and development through this cooperation initiative.

3. Research, development and skills

The third main task I mentioned was research, development and skills.

Norway is a country with abundant natural resources. But our most important resource is the population itself, all the people who each day create values and satisfy needs in a diverse labour market. Even when we add up the value of all the country's natural resources, including all oil and gas and all real capital, we do not even approach half of the value of what economists often call human capital.

Sound management of this human capital is therefore perhaps the most important task of industrial policy. If we allow unemployment to take hold at a high level, it is an indication that this management function is handled in a very unsatisfactory manner.

The Government is of the view that investment in research and development cannot be left to the enterprises alone. The exchange of knowledge and movement of labour between enterprises entail that the efforts made in one enterprise have ripple effects on the rest of the business sector. The benefit for society of having enterprises invest in research may therefore often be greater than the gain derived by the enterprise itself. Research is a remarkably good example of the difference between what is privately profitable and what is profitable to society. In general it is more profitable to society as a whole than to individual businesses to invest in research. At the same time, we know that research and development is characterized by risk. It is not possible in advance to indicate the result of a specific research project. Research is an area in which the results must necessarily be uncertain. Research is thus a good example of an area where the market alone will not create sufficient activity. It is important that the central government contributes actively in order to trigger sufficient research.

Some time ago we learned that Norway was high on the OECD list with regard to the educational attainment of the population. Never before have so many reforms been implemented in the education sector as in the last few years. We have never had more students, more who complete their examinations or more who graduate from universities with a doctorate. We must nevertheless increase this number.

Government support for research in Norway is on a par with that of our competing countries. In Norwegian industry and commerce, however, the situation is different. Here, the level is far below what we find in other countries even though there are considerable variations between the various industries. We must therefore increase the total research commitment, not least by increasing research activities in private enterprises.

The Government and the Ministry want to encourage increased research and development in Norwegian industry and commerce. A special committee has therefore been established which is to evaluate measures under the auspices of both the private and public sector in order to strengthen the research activities of industry and commerce.

The path from research to commercial activities can often be very long. Much research will never lead to profitable business activities, but the Government is making attempts to ensure that the efforts shall largely yield results which the enterprises can utilize.

The arrangement involving industrial research and development contracts is an example of how we are attempting to help research translate into commercial activities. The arrangement for research and development contracts was started in 1994. The objective is to bring about the development of new products through collaboration between a supplier enterprise and a customer, and so far experience has been favourable.

A similar arrangement exists for research and development collaboration between the business sector and public institutions. This has also been a successful arrangement. However, it appears that it is primarily large central government bodies and the largest municipalities which make use of the arrangements relating to government research and development contracts. The Ministry of Industry and Energy has therefore joined forces with the Norwegian Association of Local Authorities and SND in a project to increase the involvement of municipalities and counties in supplier development. Government development contracts are an important instrument here.

In addition to research, traditional education and other skills are essential, and in this context "Reform 94" is important for industrial policy.

This past spring the Government appointed an industrial policy committee whose task is to examine the business sector's need for skills. A follow-up of the established cooperation between the authorities and the social partners is of substantial importance for success in this work. According to the Basic Agreement between the Norwegian Confederation of Trade Unions and the Confederation of Norwegian Business and Industry, each enterprise must identify its skills requirements, and I am gratified that the Government is receiving active support for its work in labour market organizations.

The task of the public employment service is to channel labour with the qualifications in demand to the jobs available. A considerable organization has been developed to handle job placement and a number of measures have been introduced under labour market policy which aim at upgrading the skills of the unemployed so that they can fill the jobs available.

4. Ownership and capital

Earlier this year I was requested to discuss the issue of ownership, and this is the fourth main task that I would now like to comment on in connection with the supply of capital for Norwegian industry and commerce.

It is not inconsequential how the ownership structure of Norwegian industry and commerce develops. The Government encourages long-term and stable Norwegian ownership of Norwegian enterprises. We have recently had a debate on the subject of Norwegian ownership. This debate is important, and there are at least three fundamental aspects we should include when entering the debate:

• First, it should be noted that Norway's ownership interests abroad are of about the same magnitude as foreigners' ownership interests in Norway. In fact, Norwegian ownership abroad is increasing at a faster pace than foreign ownership in Norway.
• Second, there is broad agreement in Norway concerning the need for investing some of the higher revenues from petroleum activities, among other things, in the form of financial instruments abroad.
• Third, we should bear in mind that Norwegian manufacturing industry and other parts of the business sector have benefited substantially from foreign investment. Good examples of this include the first development of Norwegian hydropower resources at the beginning of this century and the development of Norwegian petroleum resources in more recent times. Companies like Norsk Hydro and Elkem are enterprises that were established with the help of foreign capital and foreign know-how.

A committee headed by Hermod Skånland has recently discussed in depth the question of capital supply and ownership, and the committee's report was followed up in the National Budget for 1996.

One of the main views expressed in the Skånland Committee's report was that even though the owners' nationality is of importance, it is as a rule more important for the enterprise to have a sound and qualified owner rather than owners who are Norwegian. For many Norwegian enterprises a higher percentage of foreign ownership interests may play an important part in securing market access and access to necessary resources and know-how.

It is nevertheless the Government's view that it is important that there are some larger enterprises with ownership based in Norway. This may ensure, for example, that head offices and the know-how linked to them remain in Norway. The authorities have contributed to Norwegian ownership through direct state investment. This applies, for example, to the electricity sector and petroleum activities, but also within other sectors of industry. In addition, the authorities make a contribution through measures which promote private saving in Norway.

I would, however, not recommend the use of general measures which can make it more difficult for foreigners to invest in Norwegian companies. This would make it more difficult for us to obtain capital, market access and the know-how we need to develop Norwegian industry and commerce, and thereby secure jobs in Norway.

Through the new Act relating to acquisitions, which replaced the former provisions in licensing legislation, we have been given an opportunity to intervene in acquisitions of Norwegian enterprises. Whereas previously we could only intervene in the case of foreign buyers, the new Act applies to both foreign and Norwegian buyers. The Act relating to acquisitions thus gives a stronger and better instrument for managing the economy than the former rules. For example, the new Act relating to acquisitions gave us an opportunity to follow up Norske Skog's purchase of Agnes Fabrikker in Larvik earlier this year. We had a dialogue with Norske Skog and the employees, and through various conditions and requirements we helped to ensure that the new owners will employ resources to maintain and further develop activities at the plant. This is a Norwegian acquisition of a Norwegian enterprise, and the former rules would not have permitted the authorities to intervene. The new Act relating to acquisitions gave us improved management tools which we used in the example.

It is also important to be aware that there is a relationship between the supply of capital and possibilities for Norwegian ownership. The Government followed up the Skånland Committee's discussions of saving and equity capital formation in the National Budget.

An important recommendation from the Skånland Committee was that household saving in banks and shares should be stimulated further. This can help to channel a higher share of savings to equity capital in enterprises and thereby contribute to strengthened ownership. The committee pointed to several factors which influence household saving. The committee was of the view that the most important in this connection was the system for property taxes, the taxation of housing and the wealth tax. A greater emphasis on housing and property taxes in relation to the wealth tax could, in the committee's opinion, encourage households to increase their saving in banks and shares. This restructuring would require a more realistic and correct valuation of housing. The Government will present a report on this subject later this autumn. The Government has also appointed a special committee which shall undertake a broad evaluation of property taxes. This committee will submit its report in April 1996.

The authorities contribute to the enterprises' supply of equity capital through e.g. SND's equity capital scheme, the National Insurance Fund's investments in the share market, the arrangement involving investments in unit trusts allowing tax credits (AMS) and the arrangement concerning "discounts" on shares when determining wealth. Moreover, the Government is proposing that the AMS arrangement be expanded to include investments in individual shares. All of these measures contribute to higher saving and a higher supply of capital in Norway and thereby stronger ownership. The most important source of equity capital in the business sector, however, is the saving which takes place in the enterprises, i.e. retained earnings which are used to strengthen their own equity capital. The best and most effective measure for ensuring that the enterprises have sufficient equity capital is thus a policy aimed at a profitable business sector. Then there will also be more equity capital in the enterprises.

5. The role of the service sector

In connection with a question in the Storting earlier this year, I was requested to give the Storting an evaluation of the service sector.

This is an important sector. About 80 per cent of all the people who are employed in Norway work in service industries. Projections from Statistics Norway indicate that this percentage will probably rise, and that even more people will be working in the service sector in the years ahead.

The service sector, however, is a very diversified sector, and the industries involved in various service activities cover a very wide range. To some extent the conditions contributing to growth within the various segments of this sector are entirely different. Some industries are decentralized and follow settlement patterns and have few or no comparative advantages linked to large-scale operations. For other industries, the service is easy to distribute, the market is international, and specialized know-how is the most important comparative advantage.

Growth in employment varies between the different service sectors, and some have also experienced a decline in recent years. The diversity of the service sector is an important element when we evaluate the need for a separate industrial policy focused on the service sector.

The interrelationship of service and goods-producing industries is important. Large parts of the service sector supply services linked to the production or distribution of goods. Similarly, goods-producing industries supply intermediate goods to the service industries.

This illustrates that the service sector is a very heterogenous group which is facing very diverse challenges. In terms of industrial policy it is therefore inappropriate to deal with the service sector as one industry with common challenges. Some service industries, however, are facing special challenges which should be taken into account. This relates, among other things, to the level of skills and education.

The level of education is of significance to important parts of the service sector, particularly business services. Continued efforts to ensure a satisfactory level of education and access to qualified labour are thus important for this segment of the service sector.

Service industries primarily supply their services to the domestic market. They are less exposed to competition than goods-producing industries. We see, however, that some industries, particularly business services and tourism, are recording higher exports and are also encountering increased competition on the domestic market for imported services. This demonstrates that the industry is in a position to make use of the opportunities resulting from a more internationalized world economy.

The tourist industry competes with tourist destinations in other countries. The Government has actively contributed to strengthening the tourist industry. A programme of action was launched in 1993 focusing on international marketing, skills development and local enterprise development. As regards marketing, the plans call for increased user management of the marketing body NORTRA. Norwegian nature and culture and the experiences inherent in our landscape and nature, in towns and villages, are an important basis for Norwegian tourism.

Distributive trades are also becoming increasingly internationally oriented. The strong competition we have witnessed domestically in recent years seems to have contributed to more efficient enterprises that are in a position to compete abroad. In the interest of both the industry itself and society at large it is therefore important to maintain domestic competition.

In the hospital sector and in the area of medical research there are highly competent environments that are constantly developing new products and services. It should be possible to make greater use of these commercially and to provide a basis for commercial and industrial development. The authorities will therefore give priority to the work on commercial development within the health sector.

The service sector is highly influenced by developments in information technology. This particularly applies to the telecommunications sector and some business services. The telecommunications infrastructure and the telecommunications services offered are well developed in Norway, also compared with many other European countries. Telenor's objective is full digitalization of the telecommunications network in 1997. This development is important for Norwegian industry and commerce and in particular for service industries. The decisive factor here will be the degree to which we cope with the challenges which information technology represents and the degree to which we succeed in expanding the infrastructure through e.g. the digitalization of the telecommunications network.

The appointment of a State Secretary Committee for information technology is an indication of the importance of this area. The committee shall assist in the coordination of the Government's information technology policy. The committee will submit its report before the spring of 1996. A special Government committee, headed by the Prime Minister, has also been appointed to coordinate the Government's work on information technology issues.

Enterprises which supply services to households, such as laundries and dry cleaners, domestic work and repairs, must compete with unpaid services produced in the home. In addition, undeclared work creates difficult working conditions for bona fide enterprises within this group. Households are strongly motivated to perform this type of service themselves as they then avoid paying taxes.

Marginal tax rates and the overtime tax on income from employment were reduced in connection with the tax reform in 1992. Along with subsequent reductions in payroll taxes, this has contributed to an increase in demand and employment in service sectors serving households. Higher employment in household-oriented services may in particular provide improved job opportunities for those with little formal education.

There is a great deal of work performed in private homes today that is not reported for taxation. The Government is therefore of the view that conditions should be created to allow private, paid services in the home to be performed in legal forms. In the recently presented government budget we propose the introduction of simplified employer routines and exemption from pay-roll taxes for wages of up to NOK 30 000 annually for private employment in the home. Today, a wage statement must be submitted when the total payment to one person exceeds NOK 400 from the same employer. The Government proposes that the threshold amount be raised to NOK 1 000 for all work. The goal is to simplify the rules so that such work can be performed legally with regard to taxes.

The Government has also started work on a through analysis of the service sector. It shall eventually result in a more complete study and analysis which will be presented in the Long-Term Programme for 1998-2001.

6. Conclusion

The Government's industrial policy shall contribute to achieving the overriding objectives of the Government and the Labour Party: full employment, an equitable distribution and a strong and secure welfare state.

The instruments used to achieve these objectives must necessarily vary according to the industry concerned, the specific challenges at hand and the current situation of the enterprise in question.

It is only by developing competitive and profitable enterprises that we can create durable jobs and secure income for the country. Experience from recent years has taught us that we can only create sound framework conditions for the business sector if all groups in society contribute, and if we succeed in maintaining orderly public sector finances.

Profitable enterprises do not emerge by themselves. The authorities - the central government, counties and municipalities - have a basic responsibility for ensuring that there is scope for innovation and initiatives, that society has access to capital and skills, and that enterprises in Norway are able to compete on the same terms as those found abroad. We need active owners, enterprises that have faith in themselves and their products, and cooperation between the social partners.

For some years now we have succeeded in gaining support for a policy based on public sector efforts to give Norwegian enterprises improved working conditions. But even though the economy is expanding and employment is rising we must not forget that the results are vulnerable. If we want to reduce unemployment even further, it is necessary that all of those employed are still willing to contribute.

The Government wants to be a constructive partner for Norwegian enterprises and all the people who work there. It is gratifying to register that Norwegian industry is functioning better than it has in many years, and that we are heading in the right direction. In industrial policy emphasis must be placed on safeguarding the results so that we can progress further. The more successful industrial policy is, the easier it will be to achieve the most important objectives of the Government's and the Labour Party's policy.

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