Norway

   
 

Key Challenges

Well-functioning
political system
The Norwegian political system functions well, and is characterized by continuity, a sound economy and a generous welfare regime, as well as a relatively high degree of trust and legitimacy, and internal and external security.
Resource revenues boost sustainability
Revenues from the petroleum industry have further strengthened the sustainability of the system. An effective public administration and well-developed, cooperative relations between the government and various interest organizations (particularly organizations representing employers and employees) have helped mitigate conflict and enhance the ability of stakeholders to implement joint reforms and adaptations. Nonetheless, the process of implementation has been subject to inertia. Though Norway’s engagement in international frameworks has improved the country’s reform capacity.
Challenges tied to oil,
gas dependence
The most critical challenges involve reducing the country’s dependence on the petroleum sector, managing the effects of a potentially long period of significantly lower oil and gas prices, and ensuring the sound management of the county’s economy and vast oil fund. Ensuring the competitive viability of the economy over the long term will be a key challenge. Norway’s economy and policymaking will suffer if global oil prices remain low for long and the risk of stranded assets grows as the effects of climate change intensify.
Concerns over coordination failures remain
The terrorist attack in 2011 revealed serious shortcomings in an otherwise robust governance system. Specific shortcomings in security and police routines have been addressed, although concerns remain over the ability to confront and resolve systemic implementation and coordination failures. A governance system that allowed inertia and complacency to negatively affect its most basic responsibility (i.e., protecting citizens) in the first instance, has compounded this failure by responding slowly in the aftermath of the attack. This has led to widespread public questioning of the governance system, in particular the system’s management, implementation, learning, adaptability and reform capacities.
Immigration, integration are public worries
The recent election demonstrated that voters are increasingly concerned about how to manage immigration and integration. Labor mobility from the European market has brought talent and resources to Norway and has reduced incentives for businesses to outsource production. However, it has also created a slight downward pressure on salaries, and increased tensions between trade unions and business. In addition, Norway, along with many European countries, faces many challenges stemming from a largely heterogeneous population.
 
Other persistent challenges include:
Diversity of leadership needed
• National leadership. The state-centered tradition in Norway has many strengths, but is also seen by some as a burden on the country’s capacity for encouraging enterprise, innovation and reform. In a world of economic and social competition, there is a need, particularly in a small country, for pluralism and diversity of leadership in order to drive modernization, change and competitiveness. However, Norway has demonstrated considerable adaptability to changing global markets, and its consensus-based culture featuring high levels of trust has been instrumental to fostering effective reforms and changes.
Economic restructuring underway
• Economic restructuring. There is renewed awareness of the need to restructure the economy to sustain a high level of wealth, decrease dependency on the petroleum sector, and ensure a more diversified and internationally competitive economy. This transition is now underway and new initiatives are being introduced to further stimulate developments in the maritime, seafood and green-tech sectors, among others. The high labor costs in the oil service sector are being reduced and a weaker currency has helped strengthen economic competitiveness.
Quality of education
a concern
• Education. The Norwegian government must direct more attention toward the quality of education. The government must do more to strengthen student incentives, monitor and improve teaching quality, and promote a culture of excellence. As Norwegian society becomes more heterogeneous, securing high-quality education, promoting effective integration and ensuring equal access to the job market for immigrants have become increasingly important.
Increases in R&D investment needed
• Research policy. Investments in research and development (R&D), both public and private, must be increased. Investments in academic and basic research should also be increased, promoting more joint activity between public and private actors. This major area of reform is currently widely neglected.
Regional policy should
be reconsidered
• Infrastructure and regional policy. Norway’s stress on regional redistribution is excessive. Yet, infrastructural investments in national networks, and around the major cities of Oslo and Bergen have been insufficient. The railway system, including commuting services, is inadequate. The policy of agricultural subsidies is costly and should at a minimum be reconsidered.
Security spending a
source of tension
• Security and defense. Norway is a founding member of NATO, and its security depends to a large extent on a well-functioning transatlantic alliance and good cooperation with European partners. Norway has committed to increasing its defense spending to meet NATO targets, although Norway has not yet met its targets. In the new geopolitical security climate, it is necessary for Norway to increase its spending on security. However, this will be demanding and likely come at the expense of further welfare spending.
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