Product Market Regulation : Country Note Cyprus

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OECD Product Market Regulation (PMR) Indicators: How does Cyprus*+ compare? ___________________________________________________________________________________ Competitive product markets foster economic growth Overall PMR Indicator and can improve the living standards of citizens.

Index scale 0 to 6 OECD’s Product Market Regulation Indicators assess Cyprus 1.80 the alignment of a country’s regulatory framework with internationally accepted best practices. The EconomyOECD countries wide Indicator measures the distortions to competition that can be induced through the involvement of the Average 1.38 State in the economy, as well as the barriers to entry 5 Most competition1.00 and expansion faced by domestic and foreign firms in friendly countries 5 Least competitiondifferent sectors of the economy. This indicator is 1.82 friendly countries complemented by a set of Sector Indicators that 0.0 2.0 4.0 6.0 measures regulatory barriers to competition at the level of specific network and service sectors. * Footnote by Turkey: The information in this document with reference to "Cyprus" relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognizes the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of United Nations, Turkey shall preserve its position concerning the "Cyprus issue". + Footnote by all EU Member States of the OECD and the European Union: The Republic of Cyprus is recognized by all members of the United Nations with the exception of Turkey. The information in this database relates to the area under the effective control of the Government of the Republic of Cyprus.

Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation

6

Cyprus

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 2019.

Source: OECD 2018 PMR database.

ECONOMY-WIDE HIGHLIGHTS

Product market regulation in Cyprus is somewhat less competition friendly than in most OECD countries. While public ownership is less extensive than in most OECD countries, the government still owns some of the largest network operators. The administrative burden imposed on new firms is high and there is scope for better regulating the interactions between policymakers and interest groups. In addition, barriers in the service sectors are above the OECD average. However, efforts have been made to reduce the complexity of regulatory procedures and barriers to international trade and investment are low.

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

Cyprus

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

Cyprus

Note: All the averages include only OECD countries. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Information refers to laws and regulation in force on 1 January 2019.

Source: OECD 2018 PMR database.

SECTOR-SPECIFIC HIGHLIGHTS Overall, regulatory barriers to competition in the network and service sectors are higher than in many OECD countries.

With the exception of accountants, professionals operate in a restrictive regulatory environment. Similarly, in many network industries there is scope for making the regulatory set-up more competition friendly.

Regulation in network and service sectors PMR Indicators for network sectors* Index scale 0 to 6 from most to least competition-friendly regulation 6

Cyprus

OECD average

5 Most competition-friendly countries

5 Least competition-friendly countries

5

4 3 2 1 0 Electricity

Air

Road

Energy

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

Cyprus

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

* There is no natural gas sector and no rail sector in Cyprus. + 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. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Information refers to laws and regulation in force on 1 January 2019.

Source: OECD 2018 PMR database.

OVERALL ASSESSMENT

With regulatory barriers to competition that are higher than the OECD average in several areas, there is scope for improving product market regulation in Cyprus.

Strengths 

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Challenges

The regulatory framework in transport by water is competition-friendly and close to that of the best performing OECD countries. There are no major barriers to foreign entry, access to the market is regulated through a lean notification system, and the government does not own any player in the industry.

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The administrative requirements necessary to start-up a new limited liability company are more burdensome than in most OECD countries, as seven bodies need to be contacted to fulfil all of them.

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The government owns the largest operators in all the segments of the electricity industry and regulation is not in line with international best practice.

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There is no regulation requiring transparency in the interactions between interest groups and policymakers, which may favour lobbying activities by incumbents.

Foreign suppliers face low barriers to enter both in the network and service sectors, less than in many OECD countries.

Further information 

“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website

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Vitale, C., et al. (2020), "2018 Update of the OECD PMR Indicators and Database - Policy Insights for OECD and some non-OECD Countries", OECD Economics Department Working Papers

Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org