"Development of the Norwegian economy, its competitiveness and economic relationship with Australia".

Lunch meeting with Norwegian Industrial Forum in Sydney 2 April 1998.

Statement by State Secretary Mrs Harriet Berg.

(1. Introduction)

Mr Ambassador, Ladies and Gentlemen,

It is a true honour for me to address you at this meeting at the Norwegian Industrial Forum. It is a pleasure and privilege to meet this assembly of representatives from the Norwegian and Scandinavian business communities here in Sydney, and I look forward to hearing about your experiences and views regarding your activities in Australia.

The theme of my intervention is "Development of the Norwegian economy, its competitiveness and economic relationship with Australia". I would therefore like to share with you today some reflections concerning the globalisation of the world economy, before I highlight certain aspects of the industrial and trade policies of the new Norwegian Government. Finally, I will touch upon Norway's relationship with Asia and with Australia in particular.

(2. Globalisation process)

What we are witnessing today is the realisation of Marshall McLuhans prediction in the 1960s that "electronic interdependence would create the world in the image of a global village". Twenty-four hours-a-day, the electronic networks carry information, services, business contracts, currency transactions, instantaneously across time zones, borders and cultures. By bridging geographical distances and creating the closest thing yet to a single, borderless global economy - the information age will have profound implications for our way of life, how we do business and how we govern.

Technological advances, improved communication and increased trade and cooperation have linked countries and regions together and made them more dependent on each other than ever. What happens in the financial markets in Asia these days will leave no country - nor any international company - unaffected.

During the last decade, international trade has grown at a rate twice as high as the growth in the world's GDP. In addition, the trend towards closer integration of international markets, acquisitions, mergers and other forms of structural changes across borders, will definitely continue.

How do we develop an active industrial policy in this global environment of constant and rapid change? In my opinion, increased international cooperation and coordination are among the basic answers. While each government's individual ability to shape their industrial policies have been reduced, increased multilateralism and bilateral political cooperation have improved our ability to manage the global economy.

(3. Industrial policy issues.)

Looking deeper into the domestic challenges, there are four priority areas in the industrial policy of the new Norwegian government. They are:

• The importance of competence, innovation, research and education.
• Decentralisation of businesses and reduction of our dependence on the petroleum sector.
• Increased attention to the needs of small and medium sized enterprises.
• Challenges concerning the internationalisation of our companies.

Let me comment each and one of these components.

(Education and research)

The globalisation of the world economy has to change the way we think about competitiveness and the comparative advantages of our countries in the future. Knowledge will probably be a much more crucial production factor than labour, raw materials or capital. It has been predicted that improved knowledge and better organisation of the production will contribute to between one half and two thirds of the economic growth until the year 2030. For Norway, it is especially important to invest in education and research to reduce our dependence upon the petroleum sector, and to have something to fall back on, when the oil and gas wells run dry.

To meet this trend, the government will increase the resources allocated for education and research. Total spending on research in Norway is currently below the average OECD level - a reality the government wants to change. However, this is not a task for the government alone. As important is the contribution from companies and research institutions. The authorities have, however, a particular responsibility for basic scientific research.

There are relatively few Norwegian companies which have their own Research & Development department. The government wants to stimulate all enterprises' participation in R&D activities, not necessarily within their own companies, but through cooperation with research institutions and universities.

Today, both producers and buyers of research are operating in an international market. I take it that the challenges are the same for Australian and Norwegian research institutions. Research institutions have to compete internationally for industrial research projects. In such an environment, the Norwegian institutions are encouraged to set up a strategy and to choose in which areas they want to have a leading position.

Another consequence of the internationalisation of R&D, is that the multinational companies choose to localise their R&D departments in countries and region where such activities are given the best conditions. Tax systems, the supply of well-educated workers and researchers, as well as an environment conducive to innovation and know-how, are all important factors in this context. We want Norway to be an attractive site for R&D activities, thus it is important for us to improve what the companies consider to be the determining factors for their choice of localities.

In this respect, one factor in favour of Norway is the general standard of education, which is among the highest in the OECD. The government also wants to amend the availability of supplementary training for our work-force and to make it easier for everyone to refresh their previous education.

Furthermore, I want to mention that we will give priority to increase the number of students in the information technology sector, trying to relieve the current and foreseen lack of this type of expertise.

(Information technology)

Excellence in developing and utilising information technology is an integral part in a strategy to increase the competetiveness of Norwegian industries. The new information technology could also be an effective vehicle to restrain centralisation of power, businesses, know-how and settlement - all major objectives of the new government. When it comes to networking between companies, distance working, and to raise the competence of companies, located far away from research institutions and universities, the new technology is unique. Not least for the small and medium sized enterprises, which often have limited resources to invest in these areas.

The governments' policy towards the information technology sector and its' implications on our society, consists of four main components.

Firstly, as I already have mentioned, we will increase the capacity of the universities and the institutions which educate students in information technologies. Today, the supply of qualified workers is a real bottleneck, driving up wages through the resulting fierce competition for the workforce.

Secondly, it is decisive that the development in the information technology sector is not hampered by the governments' general industrial policy. Measures aimed at increasing the active and personal ownership in companies, improving their access to risk capital and know-how, are important elements in this respect.

Thirdly, the government wants to use information technologies to modernise and to increase the efficiency of the public sector. Through for instance the BEDUIN system - which will serve as a sort of pathfinder on the Internet from April this year - we will make it easier for the companies to find information concerning laws and regulations, public grants, advisory institutions and other information relevant to their businesses. Information technology could also be a vehicle to reduce the burden of reporting requirements and in cutting red tape.

The last element in the governments' information technology policy, is to ensure that the whole country takes part in the development, and may benefit from the advantages of the new technology. This requires that all areas have access to the same tele-communication services, and that our regional institutions for research and know-how are maintained and given the necessary resources to attract competent workers.

Let me in this respect mention that the Government's IT policy recently was presented in a Plan of Action for the IT sector. One of the challenges discussed in this plan is how to make full use of the global electronic network as a market channel for increased trade and communication.

(SME)

Small and medium sized enterprises constitute a significant, and increasing part of employment and production in Norway. 96 per cent of the enterprises in Norway have less than 20 employees. Many of these companies are located outside the big cities, which makes them crucial to the vitality and viability of rural areas. Also, creativity, new ideas and products bloom more easily in small sized companies, than in bigger and more bureaucratic organisations.

This does not mean that we do not appreciate our larger companies. They function as locomotives in the business communities. Nevertheless, limited resources make it more difficult for the smaller enterprises to give attention to, and allocate means to fulfill longer term objectives.

The government aims at facilitating the process of establishing and running companies, and we will in short time finalise an action plan for SMEs, in which the following strategies will be presented:

• Simplification of the legal procedures and requirements, regulating the activities of SMEs.
• Changes in the tax system to encourage active and personal ownership.
• New measures to strengthen the competence of the SMEs, as well as their cooperation with research institutions and universities.
• Increase SMEs' access to, and use of the new information technologies.

However, the industrial policy is not just about legal framework and public measures. Culture and attitudes towards people who are running their businesses have to change. Too many business people in Norway feel that their efforts to create new jobs and economic values, are not really appreciated by their fellow citizens. In this respect, I think Norwegians have a lot to learn from other countries.

I understand that small and medium sized business is also on the political agenda in Australia. We shall be following the development here with great interest.

(Ownership)

An other element I want to focus on in connection with our industrial policy is the strategic importance of ownership in business.

In contrast to the previous government, we want to stimulate active, personal ownership instead of public and institutional ownership. Public ownership as a tool for management and control has some clear limitations, not least because of the potential confusion between the various roles of the government. This mix-up of conflicting roles may even lessen, instead of improving, the governments ability to govern the companies. One example is within the energy sector, where the government is the owner, the licence applicant, the concessionaire and the responsible supervisor at the same time. It is quite clear that some of these roles may come in conflict with each other in the long run.

In addition, there is always a danger that public ownership might be an excuse for the company to relax, and to switch its focus away from the market. The new government's answer to the challenge of providing guidance to important Norwegian sectors and companies, is to focus more on legislation and to better enforce the existing licensing system.

The tax system is of crucial importance in order to stimulate active and personal ownership. It is decisive for our economy and business climate that Norway is an attractive target for both Norwegian and foreign investors. The government should provide stable and competitive conditions for capital invested in Norway. The new government has made some changes in the tax system, and will look further into it, to improve the conditions for active and personal ownership.

(4. Trade policy issues.)

Let me continue by giving you a glance at some of the main priorities in our trade policy.

As a small nation, we have to pursue an active trade policy aimed at gaining access to important markets and securing a system of equal and fair conditions for international trade.

As a member of the European Economic Area, Norway is fully integrated in the European internal market. Since the EU countries account for around three-quarters of Norway's foreign trade, full access is of vital importance. Through the EEA agreement we are as much a part of the Single market as any EU member state. The agreement enables Norwegian companies to compete with companies from EU countries on equal terms. An Australian investor interested in investing in Norway will also be meeting the same regulatory framework as in the EU countries. The EEA Agreement covers the four freedoms: Free movement of capital, goods, services, and people. Moreover, EU's legislation governing the Internal Market is applied in Norway in the same manner as in the 15 EU member states. The dynamic nature of the agreement means that new EU legislation can be incorporated into Norwegian law.

As Norway is not a member of the EU, we will have to follow the changes within the EU closely in order to prevent any negative effects for Norwegian interests. The Government will therefore do its utmost to make sure that Norwegian companies will benefit from any improvements in the internal market through the EEA Agreement.

Currently, we are facing three main challenges in this context: The possible expansion with new countries from Central and Eastern Europe; the establishment of the European Economic and Monetary Union (EMU) and a new EU plan of action for the internal market.

Similarly, the World Trade Organization is of vital importance to Norway because it provides a multilateral framework ensuring that the same rules apply for all countries - whether big or small. The Norwegian Government hopes that the upcoming Ministerial Conference in the WTO in May will adopt a working plan that could ease the beginning of a new round of negotiations starting in 1999/2000. A new round should further improve market access for goods and strengthen the multilateral trading system in general. Furthermore, Norway gives high priority to the issue of extending the General Agreement on Trade in Services to include shipping as well.

Other new issues, such as trade and the environment, should also be taken into account. Any agreement in this area should both promote the possibility of implementing national and international environmental policies, and at the same time avoid new trade barriers as a result of environmental concerns being exploited for protectionist purposes.

(The Strategic Plan for Asia.)

Our efforts to secure fair competition and market access through multilateral instruments must be supplemented by efforts to promote exports and investments abroad. While the individual companies must carry the primary responsibility for their market operations, the authorities have a role to play in supporting their efforts, in particular in new growth markets. This is the rationale behind the development of policy instruments like the Government's Asia plan.

I take it that Australians will have no problem in accepting that we have taken the liberty to include Australia as one of the priority markets under the umbrella of the Norwegian Government's Asia plan.

The Plan is based on the recognition that Asia is fast becoming a new centre of gravity in the world economy, as well as in the world society in general, regardless of current economic fluctuations. Our approach is guided by the vision that it should contribute to increased trade and economic relations with Asia, in order to stimulate growth and sustainable development in Norway as well as in the partner countries in Asia. A concept of partnership is embedded in the vision, as economic relations are a matter of mutual benefit. Furthermore, sustainable development is a guiding principle in the plan, reflecting the need for a long-term perspective, beyond our own generation.

Another basic feature of our Strategic Plan for Asia is its integrated nature: Our relations with Asian countries should be regarded as a whole, not as a matter of trade and economics alone. Economic relations should be reinforced by a close political dialogue. They should be nurtured by actions to promote an understanding of our different cultures, and by the educational, scientific and other forms of contact which allow our people to work together. This is what we call "Team Norway", different Norwegian actors working together towards the same goal.

(Financial turmoil in Asia)

The question is sometimes asked in this period of financial turmoil in Asia, whether Norway's active approach to Asia should be reconsidered in view of the apparently higher risks involved. Our answer can be found in the long-term nature of our presence in Asia, and in the fundamental character of Norwegian products' competitiveness in international markets.

Very few of Norway's exports are short-lived fashion articles. On the contrary, most of our presence in international markets is in areas where we compete on the basis of the merits of our technology and our natural resources. Furthermore, Norwegian goods and services are often essential elements in vital and highly complex processes where long-term reliability is essential.

We believe that this is the time to demonstrate commitment to the region. The Government will, for its part, continue to support the development of political, cultural and commercial relations with Asia. We believe that our seriousness and commitment in the present climate of economic uncertainty in large parts of Asia, eventually will be rewarded.

(5. Economic relationship with Australia.)

Having conveyed to you some information about some of the main issues in our industrial and trade policy, let me turn to trade relations between Norway and Australia.

As for the total trade between Norway and Australia, there has been a positive and fairly rapid development of the trade relations over the last few years. Norway's exports cover a broad range of products, with paper and paperboard being the most important. We import from Australia slightly more than what we export, and Australia's exports are dominated by metal ores and metal scrap.

The maritime sector has played an important role in the bilateral relationship between Norway and Australia. Our contacts were originally based on shipping and trade. Our business relations have expanded over the years to include other sectors, but the maritime sector still plays a major role.

Many of you at this luncheon represent Norwegian shipping, which traditionally has been the very backbone of Norwegian business in Australia. I have learned how companies like Wilhelmsen, Jebsens, Western Bulk Carriers - to mention some - have been able to adapt to changing market conditions and competition to remain in the absolute forefront in this market.

My ministry is also responsible for shipping policies, and I am pleased to note that the instruments which have been established over the years to strengthen Norwegian shipping - I am thinking both of NIS and tax reform - have been seized by such companies and made them more vital and competitive. I feel confident that Norwegian shipping will continue to profile Norwegian business in Australia in an effective manner.

Shipping will also have a role to play in the rapidly increasing Norwegian presence in the Australian offshore, oil and gas market.

A number of Norwegian and Norwegian-related offshore companies have a local presence in Western Australia, including large EPC contractors, seismic survey companies, and drilling companies. For the companies already established in Perth, there is a margin for further growth in cooperation with local partners. However, I believe there is also room for more companies to follow suit, both for providers of products and services, and for exploration and development companies. Some of the companies in this category were present at the oil and gas technology seminar in Perth on Monday, where I participated myself.

I believe there are good prospects for increased cooperation between the oil and gas industries in Norway and Australia. Firstly, Norwegian oil and gas technology has been developed under conditions similar to those encountered in Australia. Secondly, a parallell history of offshore petroleum development and cultural affinity facilitate closer cooperation between companies from the two countries. Thirdly, such cooperation will enable both the Norwegian and Australian offshore sector to excel in a competitive international environment.

It should also be duly noted that there are no major problems in the bilateral economic relations between Norway and Australia. Both governments are eager, I am sure, to do their utmost to stimulate closer commercial cooperation.

Let me finally add that I have learned that the Australian openness and their casual way of being ares highly appreciated by Norwegian companies established here. After having spent 4 days here in Australia, I am amazed how well we have been received. I have highly appreciated the Australian friendliness.

(6. Conclusion.)

In conclusion, I hope that I have given you an idea about how the new Norwegian Government see the current industrial landscape, and how we plan to address some of the main challenges facing us today and in the future.

I want to thank the Norwegian Industrial Forum for letting me having this opportunity to address you. I would appreciate feedback from you all on what you consider to be important in connection with my reflections here today.

With these words, I thank you very much for your attention!