Maximizing the Benefits of the Internet Economy

Digital economy ministerialMinisters, the business community, civil society, labour and the Internet technical community will gather in Cancún, Mexico on 21-23 June for an OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity. Today’s post is by Daniel Sepulveda, US Deputy Assistant Secretary, Department  of State

The open Internet combined with today’s emerging technologies has launched the information revolution and is powering the global digital economy.  Everyone has a stake in that development, both as individuals and in the organizations in which we serve and affiliate ourselves.  In multiple venues, governments, academia, industry, civil society, and others gather regularly to ask and discuss what the global digital economy means for them and how we can best maximize its benefits for everyone.

The June 2016 OECD Ministerial Meeting on the Digital Economy in Cancun, Mexico is an important opportunity to continue that dialogue, build on the previous OECD Ministerial meetings in Seoul and Ottawa, and showcase the work of the OECD and its constituencies.  The meeting will feature high-level discussions that will help inform the current debate and present new ideas and perspectives for the participants to consider when they return home and chart their own paths to developing robust and productive local, national, and regional digital economies.

If you have an interest in the digital economy and the future of the Internet, this is an event you will want to attend.

We need to preserve the Internet as an open, secure, interoperable, and reliable platform, which serves as the backbone of the global digital economy.  Its ability to enable the transfer of data and information across borders and between people and things is our best hope for global economic and social development.  The question before policymakers and stakeholders is how to maximize their own economies’ ability to participate in and benefit from the digital economy.

We’ve identified three elements necessary for growth: (1) we need to connect everyone in the world to the Internet; (2) we need to digitize every sector of our economy and every service that is delivered to people by their governments or industries in every sector; and (3) we need to invest in providing everyone with the digital skills necessary to use that access productively.  The question for any public policy under consideration is how it will contribute to or detract from those goals.

Getting people connected is the first imperative.  It creates opportunities for budding entrepreneurs in developing economies to start businesses and escape poverty.  It makes workers more productive and enables employers to increase pay commensurately, leading to a higher standard of living.  It creates more high-skilled, high-paying jobs, and improves an economy’s competitiveness in the global marketplace.  It increases economic opportunities in rural and poor regions, and enables public services to reach the often underserved populations there, while also linking them to the mainstream economy as untapped markets.

It has taken only two decades for 40 percent of the world’s population to begin using the Internet.  By contrast, it took a century for electricity to reach that mark.  So we are doing well but must do more.  With that in mind, the U.S. Department of State and its partners in the public and private sectors recently launched the Global Connect Initiative (GCI) to catalyze multi-stakeholder efforts to bring an additional 1.5 billion people online by 2020.  We are working with our international partners to change the mindset of connectivity as a luxury and make it clear that broadband connectivity infrastructure has to be a vital element of national development plans, on the same level as water, power, and transportation, and prioritize funding accordingly.  For those deployment plans to work, public policy has to encourage investment, provide certainty for firms, and enable innovation.

Beyond connecting people, we need to digitize all sectors of the economy so that each of us as individuals or nations can become better at whatever it is we do best.

Experience has shown that the most successful models for the digitization of the economy feature accountable and responsive public institutions with transparent processes, free competition, “light touch” market regulations, and predictable policies over the long-term, so that investors can be assured their investments will be secure and relatively free of risk.

By contrast, economies where telecommunications markets are controlled by monopolies fail to compete in the global digital economy, and countries which impose data localization requirements or impose ICT domestic production requirements raise operational costs for businesses and institutions using ICT and increase the barriers to entry.  This is also true for policies that apply separate tax regimes to digital products.  These activities detract from the first goal of connecting people and the second goal of enabling the use of ICTs for increased productivity across sectors.

Lastly, for the digital economy to change people’s lives, stakeholders must also invest in skills development in their educational systems, and create training opportunities for professionals to acquire and update skills relevant to emerging technologies.  Many countries have achieved impressive results by supporting the formation of industry associations, establishing partnerships with industry to train workers, supporting investment promotion activities, and developing technology parks as incubators for IT start-ups, where entrepreneurs can receive mentoring, training, and administrative support in their early phases.  Rather than creating a dedicated ICT sector in a vacuum, all parts of the economy should be incentivized and enabled to adopt ICT for productivity enhancement, and let the growing economy-wide demand drive the organic development of an ICT sector to service its needs.  Once people have developed the necessary skills to use ICT, they will be able to enhance their own productivity, create content, and become active on the Internet as both consumers and producers.

The digital economy is still very early in its development, and it is as yet unclear whether all users will be guaranteed safe and equal participation in the future.  Our goal, as members of the OECD, should be to craft policies that reflect stakeholder input and serve the global public interest, while continuing to support the growth of the digital economy.  The OECD, with its rich history of collecting and analyzing data to draw evidence-based conclusions is just the right organization to support us in seizing these opportunities.

I look forward to seeing you in Cancun.

Useful links

OECD Digital Economy Outlook 2015

OECD work on Innovation in science, technology and industry

The Force of Finance for Responsible Business: How the financial sector could and should contribute to responsible business conduct

ForumRBCRoel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr). This article also includes a contribution by Bob Jennekens, LL.M./M.A. student, Maastricht University Faculty of Law/Arts and Social Sciences.

These days a critical mass of investors promote investment approaches which take into consideration environmental, social, governance (ESG) factors, otherwise known as responsible investment. Investors involved in the ‘Principles for Responsible Investment (PRI) Initiative, a membership based organization which seeks to promote responsible investment, currently manage over $60 trillion in assets.

Responsible investment is not only an ethical consideration but also relevant to managing risks regarding returns on investment as often there will be alignment between salient ESG risks and financial materiality. A wide body of research suggests that responsible business practices can represent a competitive advantage for firms, creating increased returns for investors, while irresponsible practices can pose serious risks and costs. For example, earlier this month investors of ExxonMobil and Chevron voted to support a resolution for a climate ‘stress-test’, signalling that investors view climate change as a material financial risk.

In this context many investors rely on the OECD Guidelines for Multinational Enterprises (the OECD Guidelines) as an important benchmark for responsible business conduct (RBC) for their investee companies. The OECD Guidelines are a comprehensive multilateral agreement on corporate responsibility which are accompanied by a globally active grievance mechanism that aims to resolve issues arising under the Guidelines, including those linked to investments in companies which may be behaving irresponsibly. This mechanism is known as the National Contact Point (NCP) system.

Because they hold the purse strings, investors have the potential to exert substantial influence, or leverage, on their underlying companies. Under the Guidelines institutional investors are expected to conduct due diligence and use their leverage to influence companies they invest in to prevent or mitigate negative impacts they are causing.  Similarly, PRI members subscribe to the principle of being active owners of their investments, which in practice also includes engaging with and exerting leverage on investee companies to promote responsible business practices. We have already seen many significant examples of the ‘’force of finance’’ in promoting responsible business practices. In the context of the OECD Guidelines’ grievance mechanism, investors have helped persuade companies to come to a mediated agreement with parties raising complaints and have followed up on NCP statements with recommendations, adding ‘teeth’ to the process. In practice this has resulted in investor engagement to fight forced labour in Uzbekistan, to prevent environmental damage in the Democratic Republic of the Congo (DRC) and to prevent human rights violations in India.

These examples, described in more detail below, have demonstrated that harnessing the “force of finance” can create real market incentives for responsible business and promote respect of non-binding international standards, such as the OECD Guidelines.

The OECD Guidelines and National Contact Points (NCPs)

The OECD Guidelines, affectionately referred to as the grandmother of all corporate responsibility standards, celebrate their 40 year anniversary this year. The Guidelines are a comprehensive set of recommendations directed towards multinational enterprises (MNE’s).  While they are non-binding for companies they represent a “firm expectation by governments on company behaviour.”

They are however binding for member states of the OECD, who are obliged to 1) promote the OECD Guidelines amongst MNEs operating in or from their territories and 2) establish National Contact Points (NCPs).  NCPs are mandated to promote the OECD Guidelines within their jurisdictions and to serve as the unique grievance mechanism of the OECD Guidelines.[1] NGOs, citizens and other interested parties can refer complaints to NCPs regarding alleged non-observance of the OECD Guidelines, termed as “specific instances.” Specific instance proceedings usually involve mediation between the parties followed by a final statement on the issues.

The role of the financial sector in promoting RBC is increasingly being discussed in the context of specific instance proceedings.  Specific instances involving the financial sector have seen significant increases in terms of submissions of complaints, from about 8% of specific instances from 2000-2010 to 17% of specific instances from 2011. Increased attention to expectations of investors to manage environmental and social risks in their underlying companies as well as recognition of the financial materiality that such risks may bring has encouraged investors to take an active role in promoting responsible business conduct. Below we highlight five specific instances to illustrate the potential force of finance in promoting the recommendations of the OECD Guidelines.

Divestment based on poor stakeholder engagement and risks to Indigenous Peoples

In 2009 the UK NCP handled a specific instance involving Vedanta Resources, a diversified metals and mining group, with regard to establishment of a bauxite mine and the expansion of an aluminium refinery in Orissa, India.  The NCP concluded that Vedanta Resources had failed to adequately consult indigenous communities about the proposed mine.  In response to this finding and the ongoing controversy, some investors made an effort to engage with Vedanta while others disinvested or significantly decreased their stakes in the company.  Investors that chose to divest included the Norwegian Government Pension Fund (one of the largest pension funds in the world), the Church of England, the Joseph Rowntree Charitable Trust and more recently, the PGGM, a large Dutch pension fund manager.  PGGM noted that it had attempted engagement with Vendanta for two years with regard to its mining activities in Orissa, and that it had met with the company’s management and non-executive directors. PGGM stated however that when it had tried to organise a meeting with a  group of other investors: ‘to discuss possible solutions to the problems in Orissa, Vedanta did not accept the invitation to participate.’

Engagement with government regarding human rights and forced labor in the cotton sector

In 2014, the Korean NCP received a complaint alleging that Daewoo International had breached the human rights provisions of the Guidelines by purchasing cotton produced in Uzbekistan despite their awareness of on-going state-sponsored forced labour in the country. The Korean NCP recommended that the company continue to monitor the situation and respond actively to the issues by means of dialogue and co-operation with the government of Uzbekistan, state-owned companies, related international organisations, NGOs, and local communities.

Upon issuance of these recommendations by the NCP the CEO of Daewoo  and other senior executives of the company asked the government for consistent efforts to eliminate the risk of forced labor in Uzbekistan.   Pension funds from Sweden, UK, Denmark, Poland, etc. have also been engaged with Daeweoo to  encourage them to contribute to improved labor conditions in the cotton industry. These major global investors want the company to keep pressing the government of Uzbekistan to introduce risk mitigation measures in this context, for example, independent monitoring of the cotton harvesting.

Exclusions and human rights violations in the mining sector

In 2012 three complaints were filed claiming POSCO, a South Korean steel company had not engaged in meaningful stakeholder consultations and had not respected environmental and human rights standards when establishing a new plant in India.  In addition to bringing a specific instance involving Posco’s parent company, two other specific instances were filed implicating pension funds with investments in POSCO. These were ABP, one of the Netherlands’ largest pension providers, and its administrator APG and Norges Bank Investment Management (NBIM).

As a result of the NCP process ABP agreed to use its leverage in the future to bring the operations of POSCO up to the required international standards and proposed organizing a fact finding mission to India to map the adverse impacts. However this fact finding mission was not undertaken and POSCO was effectively excluded from ABPs portfolio. Subsequent to the issuance of a final statement from the Norwegian NCP, POSCO has been included on NBIM’s conduct-based investment exclusion list.

Prevention oil prospecting in a World Heritage Site

In 2013 a complaint was lodged by the World Wildlife Fund (WWF) at the UK NCP against SOCO, a British oil and gas exploration company for its operations in the Virunga National Park in the DRC. These operations were deemed to be contrary to the DRC’s treaty obligations to protect the Virunga National Park as a UNESCO World Heritage Site.  WWF also appealed to SOCO investors to engage with the company. The investors, including Aviva, heard WWF’s call and responded by engaging with SOCO to bring it in line with expectations under the OECD Guidelines. Some even called to remove SOCO’s CEO in reaction to the event. As a result of the NCP case and pressure exerted by investors SOCO committed to cease exploration in the park unless UNESCO and the DRC government agree that such activities are not incompatible with its World Heritage status and also committed to “not to conduct any operations in any other World Heritage site.”

Protesting the pharmaceutical sector’s involvement with capital punishment 

Recently a case was brought to the Dutch NCP involving Mylan, a pharmaceutical company, for possible human rights abuses associated with the production and sales of rocuronium bromide to the United States for use in lethal injections.  In parallel to the specific instance proceeding several investors entered into dialogue with Mylan to persuade the company to ensure that its products are not used to carry out lethal injection executions. ABP had been in talks with Mylan since October 2014 about the use of muscle relaxants in executions in US prisons, however because it felt its requests to alter its distribution systems were  not met with an adequate response, ABP decided to sell its shares in the company.  Other shareholders, such as ROBECO, PGGM-Pensioenfonds Zorg & Welzijn and NNGroup N.V., indicated their intention to continue the dialogue. Excluding investments was seen to be ‘a last resort that should be used only when all other forms of active shareholdership have not led to the desired result.’  Since the specific instance was first filed Mylan has taken active steps to prevent the rocuronium bromide from being used in US prisons for executions. The Dutch NCP concluded in its final statement for the specific instance that “dialogue as well as disengagement by some [investors] appear to have contributed to improvements in Mylan’s conduct.”

Investors have the power  

Investors have significant potential to use the “force of finance” to promote better business behaviour amongst their investee companies.  Indeed, applying this leverage is an expectation under the OECD Guidelines as well as Principles for Responsible investment.

These five specific instances represent fascinating case studies of how investors can exert leverage on their underlying companies, either through engagement or divestment, to promote responsible business conduct.  In practice, often investor engagement with investee companies is done in confidence and thus likely many more examples of successful outcomes exist.  Furthermore, direct engagement and divestment represent only two approaches investors have at their disposal in using the force of finance to promote responsible business practices. Shareholder activism is another potentially effective approach. Recently AFL-CIO, the most powerful trade union in US, introduced a shareholder resolution at seven companies urging them to participate in mediation processes to remedy human rights violations, including through NCPs. Even if these resolutions are not ultimately successful they nevertheless will serve to heighten awareness amongst investee companies at the board level about the NCP procedure as well as importance of these issues for their investors.

While these initiatives and results are promising, active ownership and application of due diligence as promoted by the OECD Guidelines by institutional investors is a trend that is still only in its infant stage. In order to have greater impacts these ESG initiatives will have to be scaled up considerably and global investors will have to collaborate with one another to encourage positive solutions to pervasive challenges in the context of corporate responsibility.

Useful links:

The Global Forum on Responsible Business Conduct, 8-9 June  will be broadcast live starting at 9.30am Paris time on Wednesday, 8 June 2016 Watch

Roel Nieuwenkamp maintains a blog where all of his articles are archived. Please visit https://friendsoftheoecdguidelines.wordpress.com/

[1] Established per article I, paragraph 1 of the Amendment of the Decision of the Council on the OECD Guidelines for Multinational Enterprises

Can a shipping levy affect the growth of Passive House in Australia?

SkysailsScott Stewart, Australia-based Certified Passive House Designer

Shayne MacLachlan wrote an excellent piece Carbon emissions all at sea: why was shipping left out of the Paris Climate Agreement? Outlining the carbon emissions generated by the shipping industry, and possible solutions for encouraging technological advances (wind power, better fluid mechanics …) and behaviour change of the industry ($25/tonne carbon levy).

As a kite surfer myself I know the power a modern kite can generate, but as someone who uses shipping as a tool in Australia for also reducing emissions I thought it necessary to do some further research and consultation as to the possible unintended consequences of an industry behaviour changing carbon levy.

The issue of a carbon levy in Australia is incredibly divisive and if introduced needs to be explained through economic modelling and examples as well as environmental benefit.

It is important to consider all industries that are attempting to reducing the demand for electricity and thereby reducing emissions as we may end up pulling in opposite directions when we are trying to achieve the same outcome. A corresponding credit system could be introduced to offset a levy on sea freight movements for elements that are reducing carbon emissions. Examples for the supply and demand sides of the energy equation are explored below.

Supply – Solar Panels and Batteries

Since the 1970s and 1980s the majority of Australian houses have been designed and built less for climate and more for aesthetics (function following form).  The advent of relatively in-expensive air-conditioning and cheap electricity has allowed the housing industry to move away from houses designed for climate to houses that control climate. The trend is changing with education and rising electricity prices, cheaper solar panels have enabled more people to participate in the lower carbon economy with the supply of cheaper solar energy. The majority of the manufactured solar panels are imported via sea freight and almost all the components for solar panels as well as new battery technologies are also imported.

According to the Clean Energy Council in 2014, small-scale solar was responsible for 15.3 per cent of Australia’s clean energy generation and produced 2.1 per cent of the country’s total electricity. The typical solar system of 2kW in Australia will prevent between 1.75 – 2.05 tonnes of carbon dioxide entering the environment depending on the mix of carbon generating energy is being offset.

According to EcoTransIT a pallet of solar panels, which would typically be enough for three houses generate 690 kg or 0.69 tonnes of CO2e for transit via Road-Ship-Road from China to Australia , which at $25/tonne = $17.25.

Therefore a credit of $26.5 could be realised when a credit of $43.75 (1.75 x $25) is introduced.

Demand – Passive House in Australia

The demand for energy is also being addressed with the introduction of Passivhaus to Australia. Passive House (Passivhaus) was developed by Wolfgang Feist and Bo Adamson with the first Passivhaus residence build in Darmstadt, Germany in 1990. Passive House, according to the Passive House Institut is a building standard that is truly energy efficient, comfortable, affordable and ecological at the same time, more simply Passive House can be explained in 90 seconds

The Passive House movement in Australia is growing but is still at a fragile and embryonic stage. Overseas experience has shown that for housing the cost increase for Passivhaus is generally 3-5% of build cost. LAB Design has shown if the build cost premium was 10%, for a $300K build in Toowoomba, Queensland at 8% interest rates a passive house is approximately $1000 per year more cost effective when considering both running costs and interest payments.

The major challenge for Passive House in Australia (and other nations far from the Passive House component manufacturing hubs) is and the cost and availability of two key components for a Passive House: high performance windows (typically double glazed in Australia); and Mechanical Heat Recovery Ventilation (MVHR).

In the short term, importation of high performance components is cost-viable to produce the performance outcome and to provide the industry behaviour change incentive by increasing volumes and reducing cost of high performance windows and MVHR.

According to EcoTransIT the windows for the Toowoomba Project generate 870kg or 0.87 tonnes of CO2e for transit via Road-Ship-Road from Europe to Australia , which at $25/tonne = $21.75

However, the PHPP (Passive House Planning Package) calculation of two variants of the Toowoomba project, one to Passive House Standard the other to existing Australian Standards, realises a reduction of over 4.5 tonnes of CO2e per annum.

I discussed the issue with Elrond Burrell, an architect working at the forefront of Passivhaus design in the UK. He provided some insight from his experience in the UK where the Passive House industry is far more developed than in Australia. “In markets where Passivhaus is still relatively new, most of these components need to be imported. Over time, as demand increases, the market matures and local manufacturers can start to meet the demand for components of the highest energy efficiency performance.”

In Australia, the mere mention of a carbon levy without thorough modelling and education will be met with resistance and provoke the perception that it is yet another cost and hence a barrier to Passive House. A $21.75 cost however is quite small, and may be offset with a $112.5 credit. Considering the ongoing emissions reductions of a Passive House, we can’t afford to lose momentum.

Useful links

OECD work on environment and trade

Greening Household Behaviour: The Role of Public Policy

Paris Floods: A Local Disaster, A Global Challenge

Rolf Alter, Director of the OECD Public Governance and Territorial Development Directorate @raltergov

The feet of the “Zouave” statue of the Alma bridge in Paris have been covered by the rising level of the Seine. It is the classic indicator for Parisians of a significant flooding of the river and a stark reminder of the historic 1910 event when the water reached the Zouave’s shoulders. If, as is the case today, only one tributary of the Seine is overflowing, what would happen if others did the same, as in 1910?

A major flood similar to 1910 would have direct and indirect impacts on nearly 5 million citizens, many companies and the life of the city for several months. In a 2014 OECD report, Seine Basin, Île-de-France: Resilience to Major Floods, the economic damage of a major flood in the Paris region was  estimated at a minimum of EUR 3 billion up to a staggering EUR 30 billion for direct damage. The significant macroeconomic impact in terms of GDP, jobs lost and public finances also need to be taken into account.

One of government’s key responsibilities is to ensure that large metropolitan areas are resilient to major risks, to guarantee the safety and welfare of the public and maintain public trust. This is a major governance challenge. The governance of risks includes the need to develop a long term flood management strategy, to strengthen the risk culture, to foster urban resilience, particularly for critical infrastructure, and to develop a long-term financial strategy.

This is not only a challenge for Paris but is affecting countries across the world as vulnerabilities to climate change and its impact on precipitation patterns begin to be felt. OECD countries come together to discuss and share their experience with us in our High Level Risk Forum and OECD research and good practice support efforts to build resilience to major shocks and promote adaptation to climate change.

Following the Great East Japan Earthquake or the flooding associated with Hurricane Sandy in New York, governments, local authorities and civil society have become increasingly aware of the fragility of major urban centres when disasters occur and of the degree to which critical infrastructure are interconnected.

We need to assess the capacity of cities to adapt to extreme weather, water or climate events and look for innovative solutions to build resilience. Preventing such shocks from happening and limiting the damage they cause should be a public policy priority. The Paris floods are another call to action for the international community.

Useful links

Seine Basin, Île-de-France, 2014: Resilience to Major Floods  Version française ici

Financial Management of Flood Risk

OECD Recommendation on the Governance of Critical Risks

OECD work on risk governance

Digital innovation – what does it really mean?

Digital economy ministerialMinisters, the business community, civil society, labour and the Internet technical community will gather in Cancún, Mexico on 21-23 June for an OECD Ministerial Meeting on the Digital Economy: Innovation, Growth and Social Prosperity. Today’s post is by Paul Chaffey, State Secretary in the Norwegian Ministry of Local Government and Modernisation.

Some weeks ago the last video rental store in Oslo closed down. In 1990 there were 3500 such stores in Norway. Today there are only a few left. How could that happen?

Digital distribution has taken over many value chains in the last ten years. As we know, the marginal cost of such distribution is near zero. Thus, music, films, news stories, maps, encyclopaedias, books, charts, etc. may be made available for millions of people at almost no cost at all.

Digitalisation of goods and services destroys established business models and disrupts existing value chains. New value chains emerge. This is often called disruptive innovation. Digital technology influences the way we organise various economic sectors in a very profound way already. And this is only the beginning. More and more business models and value chains will be disrupted. Examples are plenty – the Nordic music streaming service Spotify pushed down CD sales almost overnight; Netflix is on the way to pushing out linear television from our homes; Facebook is in the process of taking over the media business; and Uber poses a serious challenge to the taxi business in many countries.

The music industry story is a case in point that illustrates that the denial of the looming technology development is not a very good strategy to adopt in a long term. Even if we know that employment in the CD-producing and distributing industry will decrease, we must realise the enormous possibilities new digital technologies afford us to develop whole new industries and to create new employment opportunities. That’s why all CEOs and public sector managers should acquire strategic ICT-knowledge – to be able to monitor and follow up on this development. Digital technology is a great driver for change and it creates the opportunities for new and improved business processes, new products and new services all the time. If you do not follow, you will be eliminated.

Understand value creation potential

It is crucially important to understand the drivers for this development and the paradigm shift that has happened the last few years when it comes to availability of new digital service platforms. The potential for value creation that springs from this development is twofold:

  • Ability to solve great societal challenges by harnessing digital innovation.
  • The added value that smart digital applications represent in a commercial. environmental and social context, including new employment opportunities.

The potential for value creation lies at the crossroads of new technology, new business models and the knowledge and competences of the workforce. It is up to our political will to make it happen.

A good starting point

Norway has a good starting point to succeed with value creation based on digital innovation:

  • We have a highly educated population with high participation in the labour market.
  • We have a highly productive and adaptable work force with employees thriving in their workplace, taking responsibility and accepting responsibility.
  • We adapt to using new technologies very quickly, both as private persons and businesses.
  • We have a digital infrastructure of high quality and high penetration – both mobile and fixed.

Let me mention some examples of Norwegian digital innovation agility. The municipal commuting company in Oslo – Ruter – has developed an app to buy all kinds of tickets for local transport. No cards or card machines are needed any more – you can buy your ticket (with all kinds of duration) anytime, anywhere.

Our tax authority has totally digitised tax returns – as a citizen, you actually do not need to do anything to hand in your tax return. It will be posted on the government website Altinn where you may view it, and you may change it – but if you do not have any remarks, you just do nothing. Most of Norwegian population are now “digital taxpayers”.

The last example concerns a new app for state employees to hand in their travel expense reimbursement claims. This may be done entirely on your smartphone – you just snap a picture of all paper receipts and upload it to the government website. This was made possible by changing the government regulations to drop the requirement for physical paper receipts to be enclosed to your reimbursement claim.

ICT and digitalisation, a crucial factor for innovation and productivity growth

Innovative use of digital technologies increases the competitiveness of our businesses and contributes to society’s total productivity. It is the foundation of our future welfare as a nation. Thus we as a government must create favourable conditions for digital innovation to thrive. We need to adapt our regulations, remove obstacles to digitalisation and secure a first class digital infrastructure offering communication services of high quality. We also need to ensure that the availability of digital competences and skills meets the demand in both the private and public sector.

Digitalising the public sector to reap benefits – care technologies

Digitalising the public sector is a high priority for the Norwegian government. State agencies and municipalities offer more and more digital services and the use of these has significantly increased over the last few years. Within our health and care sector, we are aiming for a country-wide rollout of digital care services in our municipalities. Care technologies represent a relatively new business segment with great potential for saving costs for care services and affording home-tailored, safe solutions for elderly and chronically ill citizens at the same time.

Taking a wider view, this technology may have a revolutionary impact on the whole health and care sector, by preventing quality decline that would inevitably come when the demographics kick in.

Today, a large portion of care workers’ time goes to looking for information from various sources, travelling from place to another place, collating and handing over information to others, instead of doing their actual job. Efficient use of digital care technologies could provide real time support for various tasks and enable seamless communication between various entities involved in patient and elderly care.

We have conducted a series of highly successful pilots about care technology use in various municipalities in Norway. These projects demonstrated a great potential for cost savings and better quality of care. What we learned from them is summarized below.

  • Successful implementation of assistive technologies and remote care largely depends on the involvement of the users – citizens – at an early stage, and careful consideration of their capability of and interest in benefitting from the technology.
  • Close cooperation between the health and care services and the technology providers is essential to optimize the functionality of devices and services to meet the needs of both care workers and the citizens.
  • Benefits of care technology rollout will materialize over time. However, the introduction of new technology requires implementation of change management in the public sector. Service design may be an important methodology to lean on here.
  • National coordinated approaches are needed to scale the use of care technologies to the whole of the public sector and create conditions for a thriving care technology market.

This is digital innovation in practice – and we need to make it happen to be able to care for an increasingly old population. This is also a unique opportunity for our ICT-businesses to develop solutions for a global market.

I am looking forward to discussing digital innovation at the forthcoming Cancun Ministerial on digital economy.

Useful links

Effekter av teknologiske endringer på norsk nærings- og arbeidsliv

Kronikk: Når digitaliseringen kommer og tar oss

Årskonferansen 2016: Remix – det nye arbeidslivet

OECD work on Innovation in science, technology and industry

OECD Digital Economy Outlook 2015

The doctor will see you now (if you turn on the video) Mark Pearson on OECD Insights

 

How’s Your Life and What Matters Most to You? Going Beyond GDP

BLI InitiativeJulia Stockdale-Otarola, OECD Public Affairs and Communications Directorate

How do you judge your quality of life? What factors matter most to you?

Countries have long focused on GDP as the best proxy to measure well-being. However, governments are increasingly interested in subjective indicators for a more holistic understanding citizen well-being.

The OECD Better Life Index builds on the Stiglitz-Sen-Fitoussi Commission’s Report on the Measurement of Economic Performance and Social Progress. This report examined how both wealth and social progress can be measured beyond the use of GDP. The interactive Better Life Index tool continues these efforts by examining both material and subjective indicators of well-being.

People are able to express what matters most to them based on the following 11 well-being dimensions:  housing, income, jobs, community, education, environment, civic engagement, health, life satisfaction, safety, and work-life balance. Participants can then share and compare their answers with people across 38 OECD member and non-member countries in 7 different languages.

Since its launch in 2011, the Better Life Index tool has received responses from more than 110 000 users from some 180 countries and territories. This year, the Better Life Index welcomed the inclusion of well-being data from Latvia and South Africa. The tool now includes all OECD member countries, as well as Brazil and the Russian Federation.

The OECD Better Life Index also provides pages with analysis at the country and dimension level, giving people an opportunity to examine rankings and find examples of “Better Policies for Better Lives”.

An examination of nearly 90 000 responses has found that health, education and life satisfaction are the topics that matter most in OECD countries. Regionally, education is highly valued in Latin America while work-life balance and life-satisfaction are more important to North Americans. Safety is particularly important in the Asia-Pacific. In Europe, health, community and the environment are all priorities.

Age and gender also impact what matters most to people. Men tend to assign more importance to income while women tend to value work-life balance and community. Environment, civic engagement and health gain importance later in the life cycle while life satisfaction and income are prioritised among youth.

To learn more and create your Better Life Index, visit: www.oecdbetterlifeindex.org.

Happy exploring!

Useful links

How’s Life? 2015: Measuring Well-being 

OECD Better Life Index

OECD Better Life Initiative

OECD Regional Well-Being

OECD Economic Outlook 2016 sees global economy stuck in low-growth trap unless policymakers act now to keep promises

Eco outlook 2016Continuing the cycle of forecast optimism followed by disappointment, global growth has been marked down, by some 0.3 per cent, for 2016 and 2017 in the 2016 OECD Economic Outlook since the November 2015 OECD Interim Economic Outlook and the global economy is set to grow by only 3.3 per cent in 2017. This reflects a combination of subdued aggregate demand, poor underlying supply-side developments, with weak investment, trade and productivity growth, and diminished reform momentum.

OECD GDP growth is projected to be just under 2% on average over 2016-17, broadly in line with outcomes in the previous two years. Supportive macroeconomic policies and low commodity prices should continue to underpin a modest recovery in the advanced economies, assuming that wage increases and business investment growth both start to pick up and tensions in financial markets do not reoccur. However, weakness in external demand stemming from the emerging economies remains a drag on the advanced economies.

The potential exit of the United Kingdom from the European Union (Brexit) is a major downside risk. Brexit would have much stronger spillovers if it were to undermine confidence in the future of the European Union. In such a scenario, equity prices would drop further and risk premia for euro area sovereign and corporate bonds would increase by more, slowing GDP growth more substantially. Together with a fall in the euro, this would add to pressures on private and public finances, especially in countries where debt remains high. This risk would compound the existing political tensions in the European Union related to high refugee inflows and ongoing financial efforts to stabilise Greece. Other downside risks to global activity relate to a possible escalation of conflicts, including in Ukraine and the Middle East.

The prolonged period of low growth has precipitated a self-fulfilling low-growth trap. Business has little incentive to invest given insufficient demand at home and in the global economy, continued uncertainties, and a slowed pace of structural reform. In addition, although the unemployment rate in the OECD is projected to fall to 6.2 per cent by 2017, 39 million people will still be out of work, almost 6.5 million more than before the crisis. Muted wage gains and rising inequality depress consumption growth.

In per capita terms, the potential of the OECD economies to grow has halved from just below 2 per cent 20 years ago to less than one per cent per year, and the drop across emerging markets is similarly dramatic. It will take 70 years, instead of 35, to double living standards.

Global trade growth, at less than 3 per cent on average over the projection period, is well below historical rates, as value-chain intensive and commodity-based trade are being held back by factors ranging from spreading protectionism to China rebalancing toward consumption-oriented growth.

In trying to revive economic growth with monetary policy alone, with little help from fiscal or structural policies, the balance of benefits-to-risks is tipping. Financial markets have been signalling that monetary policy is overburdened. Pricing of risks to maturity, credit, and liquidity are so sensitised that small changes in investor attitude have generated volatility spikes, such as in late 2015 and again in early 2016.

Fiscal policy must be deployed more extensively, and can take advantage of the environment created by monetary policy. Governments today can lock in very low interest rates for very long maturities to effectively open up fiscal space. Prioritised and high quality spending generates the capacity to repay the obligations in the longer term while also supporting growth today. Hard infrastructure (such as digital, energy, and transport) and soft infrastructure (including early education and innovation) have high multipliers. The right choices will catalyse business investment, which, as the Outlook of a year ago argued, is ultimately the key to propelling the economy from the low-growth trap to the high-growth path.

Potential output per capita growth for the OECD as a whole is estimated at 1% in 2016, which is between ¾ and 1 percentage point below the average in the two decades preceding the crisis. Two main factors have contributed to this decline: weak capital stock growth accounts for around one-half of the slowdown, and the rest is accounted for largely by declining total factor productivity growth.

Sluggish demand and productivity growth, low inflation, substantial downside risks and, in some areas, high unemployment call for sustained well-balanced macroeconomic policy stimulus and productivity-enhancing structural reforms. Policy needs differ across countries, reflecting differences in their cyclical position, past policy measures and resulting policy space. Adopting a more co-ordinated and comprehensive policy approach both within and across countries offers the prospect of breaking out of the low-level global growth environment.

Useful links

Projections in Excel or OECD.Stat and Statistical Annex (PDF)