OECD Product Market Regulation (PMR) Indicators: How does Luxembourg 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
Luxembourg
1.68
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
Luxembourg 5 Most competition-friendly countries
OECD average 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
Product market regulation in Luxembourg is less competition-friendly than in most OECD countries. Public ownership is extensive and the governance of state-owned enterprises is only partially in line with key OECD best practices. There are considerable regulatory barriers to competition in the services sector, and new firms face a cumbersome licensing regime. In addition, there are no rules regulating the interaction between interest groups and policymakers. In contrast, barriers to entry for foreign firms and investors are low. Similarly, regulatory procedures are straightforward as laws and regulation are easy to access and understand.
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
Luxembourg
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
Luxembourg
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 The regulatory set-up is not in line with international best practice in several network and service sectors. Ecommunications and most transport sectors impose regulatory constraints to competition, due to a combination of high public ownership and of regulation not being in line with international best practice. Barriers to entry and conduct constraints are present in the regulation of most professions. Regulatory barriers to competition in retail distribution are also high, especially in the retail sale of medicines.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Luxembourg 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 Luxembourg 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
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. 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 Luxembourg.
Strengths
Challenges
Laws and regulations are easy to access and understand, and there are explicit programs in place to reduce the compliance costs for firms.
The regulatory impact assessment system requires an evaluation of potential distortions to competition arising from new regulations and a government body, separate from the ministry responsible for the new regulations, reviews these assessments.
Barriers to foreign trade and investments are very low and foreign firms face limited barriers to entry.
Public ownership is more extensive than in most OECD countries, especially in network sectors. Furthermore, the governance of state-owned enterprises is not fully in line with key OECD best practices. Line ministries directly owns state-owned enterprises, and, in some sectors, there is no separation between the public body that owns the state-owned enterprises and the industry regulator.
Barriers to entry in professional services are high. There are also considerable constraints to the conduct of professionals, for example on the right to advertise their services and on ownership and voting rights in professional firms.
Prescription and non-prescription medicines can only be sold in pharmacies, and strict rules restrict the number, location and ownership of these outlets.
There is no regulation ensuring transparency and accountability in the interaction between interest groups and public officials. In addition, members of legislative bodies, public officials and senior civil servants face no cooling-off period when they leave their post.
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