Polical advisor of Local Government and Regional Development Mrs Roger Iversen

Enhancing regional competitiveness through increased innovation and focus on growth regions and centres and through decentralization and parnerships.

Intervention at OECD/TDPC in Martigny,Switzerland, June 25th 2003.

0. Introduction.

Thank you, Chair. It is a great pleasure to be here in Martigny and to have the opportunity to discuss regional questions. The present committee and its working parties have now been in operation for four years. I would like to congratulate the OECD on its achievements in this field. The establishment of this youngest of all OECD committees was a bold and forward looking step. Focusing on territorial dimensions fills an important and often neglected gap in promoting policies for sustainable development.

Territorial policy is very important in enabling us to integrate and respond to sectoral interests in a broader and more holistic context. The committee has broken new ground by carrying out extensive reviews of countries and regions. The keen interest shown by member countries demonstrates its success. I also would like to draw special attention to the working parties. They have in a very useful manner explored questions of particular relevance to member states in the pursuance of their regional policies.

Of course, the scale of regional problems in Norway may seem modest to many of you. However, such questions are close to the hearts of most Norwegians. All politicians have them high on their agenda. Our particular challenges on the very fringe of Europe explain this attitude.

I am also happy for this opportunity to comment on both the present subject and the themes that will be dealt with later today and tomorrow.  All these aspects must be seen as a whole, since improving territorial governance, to a large extent, contributes to enhancing regions’ competitiveness.

I. Norwegion regional policy.

Norwegian policy initiatives recognise the growing importance of a territorial approach in all policy and sector areas. We also recognize the necessity of enhancing regional competitiveness and growth in territorial policies. The main responsibility for growth in Norway lies with the individual person, company and region. The Government’s task is to compensate for market failure and to create framework conditions so that each person has real freedom to settle wherever he or she wishes.

• The policy’s main objectives and focuses are:
• To achieve a more balanced development with population growth in all five national regions. 
• To ensure the basis for good living conditions in all parts of the country.
• To promote industrial restructuring, innovation and entrepreneurship.
• To focus on regions and centres with growth potential.
• To decentralise tasks, instruments and means and give more freedom to regional and local levels.

Potential entrepreneurs are the main target group for measures in the business sector.

In our view, increased emphasis on innovation, growth areas and decentralization will contribute to a more efficient use of public resources and a stronger industrial base. This also implies more focus on economic growth in weaker areas benefiting from distributed grants from the national authorities.

We recognize, like other countries, that urban areas are growing, in terms of inhabitants, employment opportunities and area. To acknowlegde the importance of well functioning cities, the government recently presented a white paper on urban policy. This is the first white paper in Norway with an overall and complete grasp of the situation in such areas. The paper signals an important change in our regional policy that has primarily focused on weaker and rural areas. Urban questions have now become a much more distinct and integrated part of this policy.

II. Enhancing the Competitiveness of Regions in a Global Economy.

The competitiveness of a region may be described as its ability, over time, to ensure economic growth, including the ability to attract and retain productive capital and competent human resources and to be innovative in a broad sense of the word. It is therefore imperative for a region to ensure attractive localization conditions for both enterprises and people. The larger cities can play an important role in creating such conditions.

Many factors determine an area’s localization potential. We have, however, no unambiguous and straightforward way of measuring regional competitiveness.  There are many important factors to take into account, for example cultural environment like entrepreneurship and social conditions, agglomeration of firms and inhabitants, physical and human infrastructure, industrial diversity and population structure, restructuring ability in products, markets, workplaces and jobs, cooperation and networks, supply of private and public services, institutional conditions etc. Moreover, for the individual enterprise to survive over time, a combination of competition and cooperation is necessary.

The relative importance of all these factors may differ, also between regions. But in order for a region to be competitive over time all of them have to “be present”, at least to some degree.

Some regions, especially smaller ones, may for many years have had economic growth. If based on one dominant branch or company, such one-sided industrial areas are very vulnerable. On the other hand, specialisation is often a prerequisite to becoming and staying competitive.

Many studies conclude that the level of production, investment in physical capital, the supply of human capital and institutional conditions are the most important elements in fostering growth. In my view, it is vital to have a broad perspective and include many more factors when addressing this question.

Our data on economic growth in individual regions are incomplete. Detecting the underlying causes for economic growth or the lack of it is difficult, but necessary in order to develop a more accurate and targeted regional policy.

However, by using indirect indicators we get a fairly good picture of lagging and prosperous regions. We therefore apply data on income per personal taxpayer, unemployment rate, centrality, population density, population growth, proportions of females and young people etc. This can be justified by the fact that a region‘s competitiveness must be viewed over time. Using migration as a key indicator is also very relevant since people normally are more attached to a place than capital and enterprises.

Indicators, quantitative data and methods will never give a complete picture of the situation in a region. Such information must be the subject of professional and skilled judgement.

As shown in our answer to the questionnaire on territorial development, applying indicators represents an important part of our work. We use them in determining our target area maps for investment support and social security taxes, in our national transport plans and agricultural policy and in redistributing public funds to counties and municipalities.

We have not so far used benchmarking. On the other hand, dividing our country into geographical zones necessitates a comparison between all our regions. A reporting system on public income and expenditure on a municipal and county level also allows for similar exercises.

Against this background we are confident that the work of the TDPC in this area will represent a major contribution in analysing regional competitiveness.

III. Strengthening Good Territorial Governance.

A year ago my government published a white paper on the division of labour between our three levels of government. It emphasised regionalization, decentralization and a bottom up approach. We want to replace rules, regulations and instructions by dialogue. An important aim is to strengthen democratic rights, to become more user oriented and to ensure a better adaption of the use of resources to the challenges in the individual region. Earlier this month OECD presented a report on regulatory refom in Norway, underlining the need for policy development.

County councils have been given a far more comprehensive and decisive role in regional development questions. Regional authorities are expected to develop their own policy, adapted to challenges and problems in their areas. They shall develop and implement county plans in close cooperation with a partnership, with representatives from municipalities, industry, high schools, regional colleges, university, NGOs etc. As a result the links between counties and municipalities have been strengthened. On the other hand, the partnerships vary a lot. To take one example: Some partnerships discuss budgetary questions, whereas others do not.

We will carry out pilot projects at the regional level. Let me mention three examples. 1) We will give three county councils, in cooperation, the responsibility for national transport and industrial policies and means. 2) In another county, resources from different state sectors will be decentralised, leaving it to the county council to prioritize between different purposes. 3) And we plan to try out a model merging the administration of a democratically elected county council and the administration of the region’s state-appointed county governor.

In addition, we will increase the autonomy of regional state actors. Our ambition is to develop a user oriented policy in which sectoral “silos” are modified through increased emphasis on programs and cross-sectoral dialogues.

Municipalities and counties are expected to be strategic service planning bodies and to make priorities and find the best and most effective service provider, whether public or private. We will reduce the amount of earmarked grants and in consequence distribute more resources through our general purpose block grant scheme.

Also in this field we plan some experiments. We will try out task differentiation on a subnational level, dependent of size and task solving ability, deviating from the present national policy with identical distribution of tasks. This is especially relevant for the larger cities, as they have resources and competence to take greater responsibility, but also larger municipalities or clusters of small municipalities are included.

Cities and larger towns are centres of knowledge and capital, creativity and innovation and traffic nodes. They are growth engines in their regions and in the country as a whole, and they play a crucial role in improving territorial competitiveness and sustainable spatial development. It is important to clarify and bring into sharper focus their role in this respect.

We will through cooperation and partnership with the local and regional authorities and private partners stimulate these forces. We have today a forum for dialogue between the six larger cities and several ministries, focusing on physical urban planning. We will develop this forum. And we will establish a joint data base, containing relevant criteria on city development.

The white paper on larger cities focuses on the larger functional urban areas as more relevant for monitoring and policy-making. Their challenges are related to governance issues, physical planning, cross-sectoral coordination and relations between different layers of government.  Increased cooperation with other local, regional and central authorities is also needed, especially on transportation and housing policy. As part of our decentralization policy, we will launch pilot projects where some cities are given responsibility for public transport in their region, across administrative borders. We also have projects where we delegate the responsibility for administration and management of the cultural heritage.

In these urban areas, development projects may come to a halt because of conflicting interests between the state as land owner and its sector interests and the municipalities as planning authorities. My ministry has therefore been given the responsibility for finding solutions when economic interests or guidelines interfere with, obstruct or hamper planning and implementation of uban development projects. Such a new institutional arrangement is especially important when facing officially approved plans, where changes in state priorities or lack of previous state participation impedes the implementation of the project. This role as a mediator implies better coordination between different state bodies. This arrangement shall supplement, not replace, existing ways of resolving conflicts. Before my ministry becomes involved, the state’s county governor shall act as a mediator between the contending parties.

Success in all these areas is increasingly dependent on processes of interactive learning through dialogue and cooperation at an international level.

IV. Establishing TDPC's role as the Prime International Forum for Understanding and Enhancing Competitive Advantages.

We therefore welcome the committee’s work on comparisons between regions across countries, and I am pleased to invite the TDPC to carry out a broad review of Norwegian regional policy. In Norway, white papers on regional policy in general are presented every four years. A TDPC-study is therefore very welcome.

A precondition for fruitful international dialogue and learning is the ability to describe relevant features – structural characteristics as well as processes of change – in ways that are comparable across territories and regardless of national borders. This must be done within a perspective of sustainable development and cohesion. Continuous attention must be paid to improving comparability and analytical potential. The work must cover all the original four established areas plus selected indicators on aspects of governance. The emphasis on disparities in competitiveness also requires comparisons of functional urban areas. Explaining territorial differences may require new indicators to the data base, covering important determinants of competitiveness.

V. Conclusion

Let me conclude by stating that the Norwegian Government strongly supports the continuation of the excellent work of the TDPC, its three working parties and of course the secretariat.

Thank you.