Colombia: Policy Priorities for Inclusive Development [electronic resource]

2015·1.7 MB·English

by  Organisation for Economic Co-operation and Development

“CBettOer PoLlicieOs” SeMriesBIA
POLICY PRIORITIES FOR
INCLUSIVE DEVELOPMENT
JANUARY2015
@))OECD
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countries.
Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoverany
territory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityor
area.
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andIsraelisettlementsintheM/esfBankunderthetermsofinternationallaw.
ThisdocumentwaspreparedbytheOECDSecretariat.Maincontributors:VirginiaRobano(Centrefor
Entrepreneurship,SMEsandLocaiDeveiopment),BertBrys(CentreforTaxPoiicyandAdministration),Patricia
Heriard-Dubreuii,HectorLehuede(DirectorateforFinanciaiandEnterpriseAffairs),AnnaJankowska,Angei
Meiguizo,SebastianNietoParra(DeveiopmentCentre),GuiiiaumeBousquet,ChristianDaude,Christine
deiaMaisonneuve(EconomicsDepartment),JuiianaZapata(EducationDirectorate),HerveBouihoi,Paoio
Faico,ianForde,HoracioLevy,VeerieMiranda(DirectorateforEmpioyment,LabourandSociaiAffairs),
FrederiqueZegei(EnvironmentDirectorate),JacoboGarciaViiiareai,AdamOstry,RaffaeieTrapasso,
(PublicGovernanceandTerritorialDevelopmentDirectorate),AimeeAguilar-Jaber,MarioBarreto,Luis
Martinez,StephenPerkins(InternationalTransportForum),IvyBrasilTurner,AgnesCimper,AgustinDiaz-
Pines,AlexiaGonzalezFanfalone,GernotHutschenreiter,MollyLesher,DimitriosPontikakis(Directoratefor
TSrciuednyceW,itTbercehunkol(TorgaydeanadndInAdgursitcryu)l,tuKreelDsieryecBtuorrantse,).DaJluilaanCYeerrvmanotceoso-rGdoidnoayt,edEvtdhoekpiuablMiocTastieo,nSwyiltvhiathSeorOeEscCuD,
DevelopmentCentre(SebastianNietoParra,AngelMeiguizo),andthesupportofVictorDuggan,underthe
guidanceofGabrielaRamos.IsabelleRenaudprovidedproductionandadministrativesupport.
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TABLEOFCONTENTS
Foreword 1
1.Introduction 2
2.Territorialandagriculturaldevelopment:keyprioritiesforinclusiveandSustainablegrowth 7
2.1.Boostingregionalcapacitiestoimproveequityandproductivity 8
2.2.Makingagriculturemoreefficientandinclusive 12
2.3.Urbanandruraldevelopmentpoliciesforbetterlives 15
2.4.Aligningpoliciesforagreeneconomy 18
3.EducationandequityforafairerEconomy 21
3.1.Ensuringquality,jobrelevanteducationforall 22
3.2.Promotingsocialinclusion,moreandbetterjobs 26
4.Fosteringcompetitivenessandgrowth 30
4.1.Boostinginnovationandentrepreneurshiptomoveupvaluechains 31
4.2.Enhancinginfrastructureandlogisticstoimprovecompetitiveness 34
4.3.BetterICTPoliciestopromoteinnovation 38
4.4.Abetterbusinessenvironmentforentrepreneurs 40
5.Towardsmoreeffectivegovernance 45
5.1.Moreeffectivegovernancetoimplementreforms 46
5.2.FiscalreformformobilisingresourcestosupporttheNationalDevelopmentPlan 50
Furtherreading 54
On29May2013,theOECDdecidedtoopenaccessiondiscussionswithColombiaand
on19September2013,anAccessionRoadmapwasadoptedsettingouttheterms,
conditionsandprocessforaccession[C(2013)110/FINAL]whichincludesin-depth
reviewsby23OECDCommittees.
ThispublicationhasbeenpreparedbytheOECDSecretariatonthebasisofcurrently
availableinformationanddoesnotprejudgeinanywaytheresultsoftheongoing
reviewsofColombiabyOECDcommitteesaspartoftheprocessofaccessiontothe
OECD.
FOREWORD
UndertheleadershipofPresidentJuanManuelSantos,Colombia'seconomyhasperformed
stronglyinrecentyears.Robustgrowthhasbeenaccompaniedbylowinflation,decliningpublic
debtandbettermanagementofpublicresources. Povertyhasdeclinedsubstantiallyandthe
shareofmiddle-incomehouseholdsinthepopulationhasexpandeddramaticallyoverthelast
decade.Thegovernment'smajorreformefforts-includinganewfiscalframework,and
importanttaxandlabourmarketreforms,amongothers-havecontributedtotheimproving
economicandsocialsituation.Asuccessfulconclusiontotheongoingpeaceprocessholdsthe
promiseofasubstantialsocialandeconomic'peacedividend',ifcoupledwithambitiousreform
efforts.
Withaviewtobuildingonthissignificantprogress,theColombiangovernmentispreparinga
National Development Plan 2014-2018restingonthreecorepillars: Peace, Equityand
Education.Inthiscontext,theOECDhasbeenaskedtoprovidesubstantiveinputstothePlan.
FollowingtherecentlyreleasedEconomicSurveyofColombia,thisreportidentifiesasetof
policyprioritiestosupportmorebalanced,sustainableandinclusivegrowthtoimprovethe
well-beingofthepopulation,inlinewiththekeygoalsoftheNationalDevelopmentPlan.
Colombia'sroadaheadtohigh-incomestatuswillbechallenging.Productivitygrowthhasbeen
slowandremainswellbelowlevelsofOECDcountries.Thecountryalsoremainsbesetbyhigh
levelsofinformality,unemploymentandincomeinequality.Overthecourseofitsrenewed
four-year term, the government needs to address Colombia's equity and productivity
challengesthroughacomprehensivepolicyreformpackage.Furtherreformsareneededto
tackledeficienciesinthecountry'sterritorialdevelopment,educationandinnovationsystems,
competitionframework,landrights,andinfrastructure.Colombiashouldalsoconsiderareform
ofitssocialprotectionandtaxsystemstomakethemfairerandmoregrowth-friendly.
Taxreformshouldbecomethegovernment'simmediatepriority.Taxrevenuesareinsufficient
tomeetthepublicspendingandinvestmentneededtoclosetheproductivitygap.Thedesign
ofthetaxsystemcouldbeimprovedtomakeitmoreprogressive,reducethenegativeimpact
onemploymentandpromotegreengrowth.Determinedandstronggovernmentactionisalso
necessarytotacklepervasivetaxevasion.
Todeliverthisambitiousreformagenda,Colombianeedstocontinuetomoderniseitspublic
institutions.Inrecentyears,thegovernmenthasmadesignificantprogressinimplementinga
good-governanceagenda.Butmajorimprovementscanstillbemadetostrengthencontract
enforcement,addressregionaldisparitiesinpublicservices,raisethequalityofthejudicial
process,andfightcorruption.
Theimplementationofthesepolicyrecommendationswouldcomplementthelegislativeand
trheegulOaEtoCrDyracecfeosrsmisonthaptroCcoelsosmbliaaunicshceadrriynin2g01o3u.tiWnevarliooouksfpoorliwcayrdarteoascaosntiitnmuionvgestoahseuapdpoornt
ColombiainitsreformagendaandontheroadtomembershiptotheOECD.
AngelGurria
Secretary-General,OECD
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014
1.INTRODUCTION
Inrecentyears,Colombiahasmademajoreconomicandsocialadvances.Despitethisrecent
progress,Colombiafacessignificantstructuralchallengesassociatedwiththeconcentration
ofeconomicactivity-particularlyexports-inafewsectors,lowlevelsofproductivity,and
highinequality.Embarkingonapathtowardsinclusivegrowthisvitalinthecontextof
successfullyeradicatingpoverty,providingopportunitiesforitsgrowingmiddleclassand
solidifyingprogresstowardslastingpeace.Theroadaheadtohigh-incomestatuswillbe
demandingandcallsformajorpolicyinitiativesinareassuchaseducation,innovation,
infrastructureandruraldevelopment,asembodiedintheNewDevelopmentPlan2014-2018:
Everyoneforanewcountry.Furthermore,thecountryneedstoworktowardsbolstering
governmentcapacities,buildingstronginstitutions,andeffectivelymobilisingdomestic
revenuestofacilitateeffectiveimplementationofitspublicpolicypriorities.
Escapingthemiddleincometrap
Colombia'srecenteconomicperformancehasbeenoneofthemostdynamicinLatinAmerica,but
highervalue-addedandmoreinclusivegrowthisneeded.Thecountryhasremainedwithinthemiddle-
incomerangeforover60years,attaininglimitedconvergencerelativetohigh-incomecountriesaswell
asmanyothercountriesintheregion(Figure1.1).Thus,Colombianeedstobuildontheprogressmade
in recentdecadestoovercomeitsobstaclestosustainedeconomicgrowth. Effectiveincome
convergencerequiresboostinglabourproductivityandcreatingqualityemploymentopportunitiesby
movingtowardshigher-valueaddedeconomicactivities.
Figure1.1.ColombiaremainsintheMiddleIncomeTrap(GDPpercapita,1990USD)
CHL URY ARG VEN CRI MEX COL BRA PER DOM OECD
average
Note:Themhiodridzloent(aUlMIl)inaesndmahrigkhtihnecobmouen(dHaIr).ieTshebOetEwCeDenavtehreagleoiwn-cilnucdoesmeth(eLI)3,4lmoweemrb-emirdcdoluentirniceso.me(LMI),upper
Source:OECDLatinAmericanEconomicOutlook2015basedonTheConferenceBoard-TotalEconomyDatabase
andWorldBankWorldDevelopmentIndicators.
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014
GivingallColombiansastakeinprogress
Despiterecentimprovements,incomeinequalityisstillamongthehighestintheworld.In2012,the
ratiooftheaverageincomesofthetop10%tothebottom10%ofthepopulationwas37:1,compared
toanOECDaverageof9:1in2011(over25:1inChileandMexico).Furthermore,Colombia'smeasureof
interdecileinequality,atover11:1,alsostandsoutinternationally(Figure1.2).Thelong-termchallenge
ofmoresustainableandinclusivegrowthpersists,andliesinensuringequalityofopportunity.
Figure1.2.IncomeinequalityistoohighinColombia
(P90/P10ratiosin2012)
Note:TheP90/P10ratioshowstheupperboundincomeoftheninthdecileintheincomedistributiontotheupper
boundincomeofthefirstdecile.2011dataforOECDeconomies.
Source:OECDincomedistributiondatabaseandSEDLAC(CEDLASandTheWorldBank).
Colombiaalsoneedstotacklesignificantspatialinequalitiestoensurelastingpeaceandtheeffective
integrationitswealthofnaturalandhumanresources(Chapter2).ComparedtoOECDeconomies,
ColombiadisplaysoneoftbehighestlevelsofregionalinequalityintermsofGDPpercapita.Tbelegacy
ofarmedconflict,disjointedurbanandruralcontexts,andlimitationsinsubnationaladministrative
capacity,havegeneratedvastdiversityandstarkinequalityamongregions.
Territorialpolicieswillplayakeyroleinaddressingthesechallenges.Inparticular,thereisaneedto
maximisetheimpactoftheredistributivepowerofroyaltypaymentsthrougheffectivelycoordinated
regionalinvestmentswithcurrentexpenditures(GeneralSystemofTransfers).Anotherkeygoalisto
buildcapacitiesandcooperationbetweennationalandsub-nationalentitiesthrougharrangementssuch
astheContratosPlan.Regionalresourcesshouldalsobedevotedtowardsinitiativesaimedatgreening
growthandharnessingColombia'secologicalabundanceinasustainablewaytocreateneweconomic
opportunitiesoutsideoftheextractivesectors.
Tohelprestoreregionalequityandsupportinclusivegrowth,furtherprogressisalsoneededin
upgradingproductivityandperformanceintheagriculturalsector,whichisakeysectorintermsof
employment.Since1990,theaverageannualgrowthrateofagriculturalproductionhasbeenover2.5
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014
timeslowerthanthatofotherregionalproducerssuchasBrazilandPeru.Inaddition,morethan40%of
landownershipcontinuestobeinformal,signallingtheneedforeffectivelystrengtheninglandrights,
improvingaccesstolandandmodernisingproductionstrategies.Bettertransportandcommunicationlinks
betweenColombiancitiesandregionsarealsonecessarytoboostdomestictradeandproductivity,aswell
asamoreholisticapproachtoruraldevelopmenttofacilitateaccesstokeyservicesandbuildlocal
capacities.
BuildingequitybycultivatingskillsandIntegratingworkersintheformaleconomy
Equitableaccesstoqualityeducationandformalemploymentiscriticalforfosteringsocialcohesion,as
wellasimprovingeconomicperformance(Chapter3).SecondaryschoolstudentsinColombiaranked
amongthelowestperformanceinmathematicsinthecountriescoveredinthe2012PISAsurvey.The
performancegapisequivalentto2.9yearsofschoolingincomparisonwithOECDaverage.Improving
academicperformanceandensuringthatallstudents-particularlythemostdisadvantaged-achieveat
leastminimumskilllevelswillbeessentialforthecountry'slongtermdevelopment.Thisrequires
improvingaccessfrompre-primarytotertiarylevelsofeducation,enhancingstaffcapacities,increasing
thehoursofinstruction,andeffectivelyassessingbothstudentandteacherperformance.Theneedfor
thesereformsisfurtherreflectedinsomeofthedeterminantsofwell-beingofColombiancitizens,
particularlywithregardstothelowlevelsofsecurity,relativelylowleveloflifeexpectancy,aswellas
limitationsineducationoutcomesandemploymentopportunities(Figure1.3).
Figure1.3.Well-beingindicatorsinColombiahighlightkeychallenges
GNIpercapita
Note:Thedifferencebetweenthevaluesofthevariableforthecountrywithrespecttothesimpleaverageofthe
OECDcountries,normalisedbythestandarddeviation.Distancefromthecentredelineatesincreasingly
betterresultsforeachvariable.
Source:OECD2015EconomicSurveyofColombia.
Theseopportunitiesneedtobecomplementedwiththeappropriatesocialsafetynets,inordertoprotect
vulnerablemembersofsociety,andensureaccesstokeyservicessuchashealthcare,whilemaintaining
incentivesforformalisation.Withinthecontextofemergingeconomies,itisimportanttolookbeyond
thesetraditionalwellbeingindicatorsandtakeintoaccountotherpertinentissuessuchasvulnerable
employment.Nearly60%ofColombianworkersareemployedoutsideoftheformalsector,averyhigh
levelgiventhecountry'seconomicrankingwhichispartlyexplainedbytherelativelyhighnon-wagelabour
costsandminimumwage,andunderestimationofthebenefitsofbeingformal.Inaddition,thedesignof
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014
thepensionsystemleadstotheexclusionofalargemajorityofworkers,effectivelydeprivingthemof
financialsecurityduringtheirretirementyears.Asinformalityandunemploymentaretwomajordriversof
inequality,addressingthesesocialproblemswouldgoalongwaytowardsimprovingequity.
Enhancingcompetitivenessandinstitutionaicapacityforsuccessful
implementationoftheNationalDevelopmentPlan
Thecurrenteconomicstructurepresentsnotablechallengesforsparkingdynamicandinclusivegrowth.
Recenttradeperformancesignalsthehighandgrowingimportanceofenergyandcommoditiesinthe
exportbasket,andmuchlowerroleofthemanufacturingandagriculturalsectors(Figure1.4).Energy-
relatedindustriesmakealimitedcontributiontoaggregateemploymentcreation,inadditiontoraising
concernsoverenvironmentalsustainability.Furthermore,volatilityandtherecentdeclineofcommodity
prices(mainlyoilprices)underscoretherisksassociatedwiththispatternofspecialisation.
Figure1.4.ExtractiveindustriesplayaprominentroleinColombia'sexportbasket
ShareoftotalColombianexports2013(%}(LHS)
ChangeinColombia'sshareofworldtrade{2006-2013,percentagepoints)(RHS)
1.4
1.2
1
0.8
0.6
0.4
0.2
0
-0.2
-0.4
Note:Datafor2006to2013inSITCRev2.
Source:OECDbasedonUNCOMTRADEdata.
Creatingnewgrowthandemploymentopportunitiesandfosteringinnovationandentrepreneurship
requiresthestrengtheningofframeworkconditionsaswellascohesiveeffortstosupportterritorial
integration.Colombianeedstomakeeffectiveuseofitscommodityrentstowardscreatingbetterjobs,
boostingproductivityandpromotingeconomicdiversification.Policyprioritiesincludearangeofbroad-
basedpolicies:addressingtransportinfrastructureandlogisticsbottlenecksinordertoreducetransport
costs,spurringcompetitionbystrengtheninginstitutionssuchastheCompetitionAuthority,aswellas
supportingthepropagationofInformationandCommunicationTechnologies(ICTs)andinnovative
capacities (Chapter4).
SuccessfulimplementationoftheNationalDevelopmentPlanalsodependsonconsistentandconcerted
publicpolicyaction(Chapter5).Strongpublicsectorinstitutionsandgovernmentcapacitiesareneededto
providetheregulatoryandadministrativebackbonesforsupportingeconomictransformationand
equitableprogress.Colombiahasmadesignificantprogressinimplementingagood-governanceagenda
aimedatstrengtheningitsinstitutionstopromotesustainableandinclusivegrowththroughoutthecountry.
Nevertheless,expandingcoverage,andimprovingthequalityof,publicservicesiscrucial.Furthereffortsare
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014
alsoneededintheareaofcontractenforcementaswellastowardsenhancinggovernmenttransparency
andaccountability.Withtaxrevenuescloseto20%ofGDP,atthelowerendofOECDcountries,and
decliningpublicrevenuesfromcommodities,acomprehensivefiscalreformiscrucialforunderpinningthis
developmentstrategy.
Mainpolicyrecommendations
TerritorialandAgriculturalDevelopmentformoreinclusiveandsustainablegrowth
• Enhancethemanagementandmonitoringofregionalinvestments.Reinforceco-ordinationacross
levelsofgovernmentstopromoteamulti-annualbudgeting/planningframework.
• Improvetheeffectivenessofregionaltransfersbyreducingearmarkedtransfers,introducingnew
equalisationmechanisms,andimprovingthecoordinationwiththeroyaltiessystem.
• Improvelandrightsandtheuseoflandsbyspeedinguptheprocessofformalisation,while
strengtheningtheprotectionofexistinglandrights.
• Improvetheurbantransportregulatoryframeworkthroughbettermanagementofentrypointsfor
commercialtransportationandbyincreasingenforcementoftheregulationoflocaltransportation.
• Strengthenthesystemofenvironmentalmanagementinvolvingdifferentlevelsofgovernment.
Promotegreateruseofenvironmentallyrelatedtaxesandcharges.
EducationandEquityforaFairerEconomy
• Ensureastrongstartineducation,particularlyforthemostdisadvantagedpupils,byimproving
thequalityofstaffinschoolsandavoidingtheprevalenceoftwo-oreventhree-shiftschools.
• Undertakeacomprehensivereformofthepensionsystemtoreduceold-agepovertybymaking
thesystemlessregressiveandmoresustainable.
• Improveincentivesforemploymentformalisationbysmoothingeligibilityforwelfarebenefits,
includinghealthcareandfurtherreducingnon-wagelabourcosts.
• Improvelabourlawenforcementbyincreasingthenumberofinspectorsandprovidingadequate
trainingopportunities.
FosteringCompetitivenessandGrowth
• FurtherimprovetheframeworkconditionsforInnovationandentrepreneurship,byfocusingon
skills,includingengineering,designandinformationtechnology,andmid-levelprofessionalskills.
• Strengthentheefficiencyof,andcitizens'participationin,theallocationofenvironmentaland
sociallicensesininfrastructurebyavoidingdiscretionaryenvironmentalassessments,aswellas
delaysandabusesinthegrantofsociallicensesbysomelocalcommunities.
• Givethecompetitionauthority(SIC)greaterindependence.Reviewbarrierstocompetitioninkey
productmarkets,suchasfinancial,food,andbothfixedandmobilecommunicationsmarkets.
• Strengthenthegovernanceofstate-ownedenterprisesbyappointingmoreindependentboard
directorswithrelevantskillsandexperience.
Towardsmoreeffectivegovernance
• FurtherstrengthentheeffectivenessandefficiencyofColombia’sjusticesectorbyenhancing
contractenforcementandincreasingthespecialisationofcourtdecisions.
• Enforcehigh-qualityregulationandmovetowardsaregulatorygovernance approach by
strengtheningtheautonomy,accountabilityandlegalprotectionofarm's-lengthregulatorsandthe
Superintendencias.
• Reformthetaxsystemtoincreaserevenues,enhanceefficiencyandstrengthenequity.
BetterPoliciesSeries-Colombia:PolicyPrioritiestoBoostProductivityandSocialInclusion2014©OECD2014