OECD Product Market Regulation (PMR) Indicators: How does Finland compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Finland
1.37
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Finland
OECD average
5 Most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS Overall product market regulation in Finland is very close to the OECD average. Barriers to entry for domestic and foreign firms are generally low, in particular the administrative burden on new firms. However, there is scope to reduce the distortions to competition due to the involvement of the state in the economy. Public ownership is more extensive than in many other OECD countries, but this is partially compensated by the fact that the governance of SOEs in Finland is aligned with most key OECD best practices. There are no rules ensuring transparency in the interaction between interest groups and policymakers, and no cooling off period is required when public officials leave their post. In addition, the public procurement rules could be improved in order to facilitate business participation in public tenders.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Finland
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Finland
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS While the regulatory set-up in some professional services and e-communications is among the most competitionfriendly among OECD countries, regulations in gas, road transport and rail transport are not in line with international best practices. Retail distribution and the retail sale of medicines are characterised by relatively high regulatory barriers to competition.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Finland 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation 6
Finland
OECD average
5 most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2
1 0 Lawyers
Accountants
Architects
Civil engineers
Professional services
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
Regulatory barriers to competition in Finland are limited, but there is still scope for improving product market regulation in some sectors and domains.
Strengths
Challenges
In the area of simplification and evaluation of regulations, Finland has one of the best set of rules for assessing potential distortions of competition arising from new regulations, and for ensuring the involvement of stakeholders during the regulatory process. In addition, the legal regime is transparent, with an online searchable database that includes all laws and regulations, and a clear regulatory agenda.
Professions in Finland are subject to limited regulatory constraints. Barriers to entry and conduct restrictions faced by accountants, architects, civil engineers and estate agents are among the lowest in the OECD. Only lawyers encounter some constraints on their conduct even though the profession is characterised by a more competition-friendly regulatory set-up than in many OECD countries. In particular, there are rigid rules on ownership and voting rights in law firms as well as limits to lawyers’ rights to advertise their services.
Regulation of the natural gas sector is not in line with international best practices. There is neither a liberalised wholesale market, nor a competitive retail market. The government has considerable participation in the capital of the largest operators in the import, storage and retail supply segments, and a legislative action would be necessary to sell these shares. In addition, the regulated retail tariffs are not based on the costs or tariffs of the most efficient supplier.
Public ownership of firms is more extensive in Finland than in most other OECD countries. However, the potentially adverse impact on competition is mitigated by the fact that the governance of state-owned enterprises is in line with many key OECD best practices.
The regulatory framework for some transport sectors, in particular rail and road, is not competition-friendly. The government owns firms in both sectors, entry in the road freight transport sector is still based on an authorisation system, and there is no competition in the market for rail passenger transport.
The rules regulating retail online sales create some obstacles in setting up e-retail outlets. In addition, the retail sale of pharmaceutical products is subject to numerous regulatory constraints, including on the number and the ownership of pharmacies, as well as on where non-prescription medicines can be sold.
Regulation of transport by water in Finland is among the most competition-friendly in the OECD.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org