Sweden should instil more competition in the public sector, cut red tape and liberalize labour markets if it is to meet the challenge of an ageing population and maintain its high standards of social welfare, according to a new OECD report.


"Sweden: Achieving Results for Sustained Growth" finds that Sweden has made significant progress on regulatory reform since the early 1990s, and enjoyed major productivity gains as a result. Sweden’s GDP per capita is above the euro area average and its spending on research and development as a percentage of GDP is higher than any other OECD country, standing at 4% compared to an OECD average of under 2%.

To build on these successes, further reforms are needed, says the report. Despite strong economic growth, few new jobs have been created. Improving labour market flexibility, cutting red tape and facilitating competition would boost entrepreneurship and job creation, notably in the services sector.

More competition, notably at a local level, would also make the public sector more productive and efficient. The rules for public procurement should be simplified. The public sector competes in many areas with the private sector at a national and local level, including examples such as running bakeries, gyms and garden centres: this distorts the competitive playing field and hinders the creation of small firms. Firm action to tackle anti competitive behaviour by state entities has not yet been taken.

Competition should be improved in key sectors such as construction and food retailing. The Competition Authority should be made more independent and given stronger powers, including the ability to decide fines. The regulatory frameworks for the electricity and telecommunications sectors should also be reviewed to improve their performance, strengthening the powers and independence of the sectoral regulators.

Sweden has been a pioneer in setting and meeting ambitious environmental goals. Its use of market-friendly taxes, for example, has virtually eliminated the dependency of the heating and household sectors on fossil fuel. Sweden should continue to ensure transparency and consultation in the context of European Union regulations, as well as cut red tape further in relation to permits, especially for small and medium-sized firms, says the report.

Sweden should strengthen coordination between national and local levels of government and develop a stronger focal point for regulatory reform within government. It would also help to capitalise on the roles of the Parliament and National Audit Office in promoting the need for and benefits of reform.

The Swedish government is one of a number of OECD countries - including all G7 countries - to have requested a broad review by the OECD of its regulatory practices and reforms. The report presents an overall picture, set within a macroeconomic context, of regulatory achievements and challenges including the quality of regulation, competition policy and market openness. It also includes a detailed review of Sweden’s environmental regulations and policies as well as a discussion of regulation across levels of government.