Presentation of the 2017 OECD Economic Survey of Colombia

OECD ECONOMIC SURVEY OF COLOMBIA 2017 Boosting inclusive growth 25 May 2017, Bogota

www.oecd.org/eco/surveys/economic-survey-colombia.htm @OECDeconomy @OECD

Main findings  The economy has been resilient to the fall in commodity prices  Raising productivity and making growth more inclusive are key to lifting living standards  A solid macroeconomic policy framework sustained growth  The landmark 2016 tax reform will boost investment and reduce the dependence on oil revenues  Reforms to strengthen the business environment and the quality of education, to reduce informality and increase women’s work opportunities would raise productivity and reduce income disparities

Living standards have improved

Source: World Bank, World Development Indicators database.

Poverty has declined

Source: DANE, Encuesta Continua de Hogares (2002-2005) y Gran Encuesta Integrada de Hogares (2008-2015).

Growth has been robust

Source: OECD Productivity Statistics database.

The shock to the terms of trade was large Index, 2007=100 140

LAC-4

Index, 2007=100 140

Colombia

135

135

130

130

125

125

120

120

115

115

110

110

105

105

100

100

95

Q1 2007

Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q1 2014

Q1 2015

Q1 2016

Note: LAC-4 refers to the unweighted average of values for Argentina, Brazil, Chile and Mexico. Series calculated as a 4-quarter centred moving average.

Source: OECD Economics Department database.

95

The peso depreciated significantly

Source: Banco de la RepĂşblica.

Inflation is coming down Y-o-y % changes

Y-o-y % changes 10

10

Inflation

Core Inflation

Inflation expectations 12-months forward

9

9

8

8

7

7

6

6

5

5

4

4

3

3

Inflation target range

2 1 0

2 1

2011

2012

2013

2014

2015

Source: OECD Economics Department database and Banco de la RepĂşblica.

2016

2017

0

The tax reform is a step in the right direction but more revenue is needed Statutory corporate income tax rates as of 2016 %

%

Note: *COL refers to 2017 and **COL refers to 2019.

Source: OECD Tax database.

COL*

USA

FRA

BEL

COL**

ITA

DEU

MEX

AUS

JPN

PRT

LUX

GRC

NZL

CAN

ESP

NOR

NLD

ISR

AUT

0

KOR

0

CHL

5

SWE

5

SVK

10

DNK

10

CHE

15

GBR

15

TUR

20

ISL

20

FIN

25

EST

25

POL

30

HUN

30

CZE

35

SVN

35

LVA

40

IRL

40

Key recommendations Further improve macroeconomic resiliency

• Raise more revenue in the medium term. • Approve the law awarding the financial superintendence regulatory powers over holding companies of financial conglomerates.

Creating better quality jobs

Informality is high 2013 or latest available year A. Employees

%

B. Self-employed

%

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

CHL

CHN

BRA

TUR

CRI

ZAF

ARG

COL

MEX

CRI

MEX

ZAF

COL

Note: Informality among employees is defined as the share of employees not contributing to the pension system.

Informality among self-employed is defined as the share of self-employed who did not register their business.

Source: OECD (2016).

ARG

0

Self-employment is widespread

Self-employment as a percentage of total employment, 2015

%

%

Note: Self-employment is defined as the employment of employers, workers who work for themselves, members of producers' co-operatives, and unpaid family workers.

Source: OECD Economic Department Database and DANE, GEIH.

COL

GRC

TUR

ITA

MEX

KOR

POL

SVN

NLD

IRL

BEL

PRT

CAN

0

OECD

0

NZL

5

CZE

5

GBR

10

ESP

10

SVK

15

AUT

15

ISR

20

LVA

20

ISL

25

FIN

25

JPN

30

FRA

30

DEU

35

AUS

35

LUX

40

HUN

40

CHE

45

EST

45

DNK

50

USA

50

NOR

55

SWE

55

Formal workers earn much higher wages

1500

1500

Formal workers

Informal workers

Average worker

1200

1200

900

900

600

600

300

300

0

2008

2009

2010

2011

2012

2013

Note: Formal workers are employees and self-employed people aged 15-64 who pay pension contributions.

Source: OECD calculations based on GEIH of DANE.

0

Thousands

Gross earnings in thousands of Colombian pesos, 2008-13

Tax reforms have helped the formal job creation Job creation at national level, annual changes Y-o-y % changes

Informal

15

Formalisation and Job Creation Law

Y-o-y % changes

Formal

15

Abolition payroll taxes

10

10

5

5

0

0

Abolition health care contribution employers -5

2008

2009

2010

2011

2012

2013

2014

2015

Note: Formal job creation is defined as the year-to-year change in the number of workers (including employees and self-employed) contributing to the pension system.

Source: OECD calculation based on GEIH data sourced from DANE.

2016

-5

The female employment to population ratio is below the OECD average Employment to population ratio of women aged 15-64, 2015 90

100

% 80

% 90 80

70

70

60

60 50 50 40

40 30

30

20

20

Source: OECD Labour Force Statistics database.

TUR

GRE

MEX

ITA

CHL

ESP

KOR

SVK

COL

POL

IRL

HUN

BEL

OECD

FRA

LUX

SVN

PRT

CZE

USA

ISR

JPN

LTV

AUS

AUT

FIN

EST

GBR

NZL

NLD

CAN

DEU

DNK

NOR

0

SWE

0

SWI

10

ISL

10

The gender gap is declining, but still high Male minus female employment to population ratios, in percentage points CHL

% points

MEX

OECD

COL

45

40

35

30

25

20

15

2001

2002

2003

2004

2005

2006

Source: OECD Labour Force Statistics database.

2007

2008

2009

2010

2011

2012

2013

2014

2015

Key recommendations to create better quality jobs

• Further reduce taxes and fees on wages (non-wage labour costs).

• Simplify procedures for company registration and the affiliation of workers to social security.

• Ensure the provision of affordable, good-quality child care and affordable long-term care for elderly relatives or those with disabilities.

• Expand access to and make greater use of active labourmarket programmes.

Enhancing the quality of education is key

Productivity is too low to support growth

GDP per person employed, as percentage of the US, constant 2010 PPPs, 2015 %

% 80

80

60

60

40

40

20

20

0

OECD

EU

CHL

Source: OECD Productivity Statistics database.

MEX

BRA

COL

CHN

IND

0

Income inequality remains high P90/P10 ratio, 2014 or latest available year

Note: The P90/P10 ratio is the ratio of income of the 10% of people with highest income to that of the poorest 10%.

Source: OECD (2016), OECD Employment Outlook.

COL

CRI

CHL

MEX

USA

TUR

ISR

EST

ESP

JPN

GRC

LVA

PRT

KOR

ITA

CAN

NZL

AUS

GBR

POL

IRL

DEU

HUN

CHE

0

LUX

0

FRA

2

BEL

2

NLD

4

AUT

4

SWE

6

SVN

6

FIN

8

SVK

8

CZE

10

NOR

10

ISL

12

DNK

12

Many students do not attain basic skills Student performance in sciences Mean science score in PISA, 2015

Source: OECD, PISA 2015 Database.

IDN

MEX

CRI

COL

TUR

URU

ROM

CHL

SVK

GRC

ISL

ISR

HUN

ARG

ITA

LVA

LUX

ESP

CZE

OECD

FRA

SWE

AUT

USA

PRT

NOR

POL

BEL

DNK

IRL

CHE

300

NLD

300

DEU

350

GBR

350

AUS

400

SVN

400

NZL

450

KOR

450

HGK

500

FIN

500

CAN

550

JPN

550

EST

600

SGP

600

Improving skills will boost growth Long-run growth increase

% points

% points

Note: "Long-run growth increase" refers to increase in annual growth rate (in percentage points) once the whole labour force has reached higher level of educational achievement.

Source: OECD (2015), Universal Basic Skills: What Countries Stand to Gain, OECD Publishing.

PER

COL

BRA

ARG

URY

MNE

CRI

MEX

CHL

TUR

ISR

ROU

SVK

GRC

ITA

FRA

SWE

ISL

LUX

OE…

HUN

NZL

ESP

BEL

NOR

PRT

AUT

CZE

0.0

USA

0.0

DNK

0.2

GBR

0.2

AUS

0.4

SVN

0.4

IRL

0.6

DEU

0.6

NLD

0.8

CHE

0.8

POL

1.0

CAN

1.0

FIN

1.2

JPN

1.2

EST

1.4

KOR

1.4

Few students enrol in professional and technical degrees % 60

60

Percentage of students in secondary education enrolled in vocational programmes Percentage of students in tertiary education enrolled in technical programmes

Source: UNESCO Institute for Statistics. Data for 2012.

NLD

AUT

BEL

CZE

ITA

SVN

AUS

CHE

SVK

FIN

LUX

NOR

SWE

PRT

DNK

CHL

TUR

ISL

CHN

EST

FRA

ISR

IDN

DEU

ESP

GRC

CRI

RUS

IRL

MEX

HUN

0

OECD

0

THA

10

NZL

10

ARG

20

JPN

20

LAC

30

KOR

30

GBR

40

COL

40

BRA

50

ZAF

50

%

Skill mismatches remain high Composition of labour supply and demand by level of education in Colombia %

%

90

90 Supply

Demand

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

High School Dimploma or less

Technical degree

Source: Colombian Atlas of Economic Complexity (Lora, 2015).

Bachelor's degree

Graduate degree

0

The education system could do more to promote social mobility Share of resilient students across OECD and LAC countries As a percentage of all students

% 50

% 50

Note: A student is classified as resilient if he or she is in the bottom quarter of the PISA index of economic, social and cultural status in the country/economy of assessment and performs in the top quarter of students among all countries/economies, after accounting for socio-economic status.

Source: OECD, PISA 2015 Database, Table I.6.7.

PER

BRA

CRI

COL

URY

MEX

CHL

ISR

ARG

ISL

SVK

HUN

GRC

LUX

TUR

CZE

SWE

AUT

NOR

ITA

FRA

BEL

DNK

0

CHE

0

OECD

5

IRL

5

NZL

10

NLD

10

USA

15

AUS

15

POL

20

DEU

20

LVA

25

SVN

25

PRT

30

GBR

30

ESP

35

CAN

35

FIN

40

KOR

40

JPN

45

EST

45

Key recommendations to enhance the quality and outcomes of education • Provide more public support to skills training in regions lagging behind.

• Establish a national curriculum for school education and professionalise teachers’ careers.

• Provide more public support to increase enrolment rates of disadvantaged children in less developed regions.

• Expand early childhood education.

Boosting infrastructure and improving the business climate

Public investment has increased % 5

% 5

Colombia

OECD

4

4

3

3

2

2000

2001

2002

2003

2004

2005

2006

Source: OECD Economics Department database.

2007

2008

2009

2010

2011

2012

2013

2014

2015

2

The quality of infrastructure needs to be improved Index

Ports

Index 7

6

6

5

5

4

4

3

3

2

2

1

1

0

0

FIN BEL ESP DNK NZL USA NOR DEU GBR SWE CAN PRT JPN KOR IRL LVA FRA OECD CHL LUX AUS SVN CHE ZAF GRC CHN ITA TUR AUS MEX CZE IND IDN POL HUN ISR COL SVK CRI BRA

7

Note: Index scale 1-7, from lowest to highest quality.

Source: World Economic Forum (2015).

4 4

3 3

2 2

1 1

0 0

Note: Index scale 0-6, from least to most stringent.

Source: OECD, Product Market Regulation Database.

Barriers to trade facilitation

Diff. treatment of foreign suppl.

Tariff barriers

Barriers to entrepreneurship

Barriers to FDI

Barriers in network sectors

Antitrust exemptions

OECD average

Legal barriers to entry

Barriers in services sectors

State Control

Admin. burdens for sole propr. firms

5

Admin. burdens for corporations

Comm. and simplification

Licenses and permits system

6

Command and control regulation

Index

Price controls

Involvement in business operation

Governance of SOEs

Direct control

Gov't involvement in network sectors

Scope of SOEs

Business regulation remains restrictive Product market restrictiveness, 2013 Colombia Index 6

Barriers to trade and

investment 5

Regulation is restrictive in the electricity, transport and railway sectors Road Index 6

Index 6

5

4

4

3

3

2

2

1

1

0

0

AUS CRI BRA CAN ISR PER CHE ARG AUT DNK FIN DEU IRL JPN LUX MEX NZL NOR SVK SWE GBR OECD HUN BEL CZE EST ISL KOR NLD POL PRT SVN ESP CHL GRC COL FRA TUR ITA

5

Note: Index scale 0-6, from least to most stringent.

Source: OECD, Product Market Regulation Database.

The court system is slow to resolve commercial disputes Days

Time required to enforce a contract, 2014-15

Days 1600

1400

1400

1200

1200

1000

1000

800

800

600

600

400

400

200

200

0

NZL KOR NOR RUS LUX SWE JPN FIN MEX CHE AUS FRA HUN AUT DNK ISL USA EST PER DEU GBR CHN LVA IDN CHL BEL ESP NLD OECD PRT CAN TUR ECU ARG PRY VEN CZE IRL POL PAN SVK URY BRA CRI ISR ITA SVN COL IND GRC

1600

Source: World Bank, Doing Business Database, 2015.

0

Key recommendations to boost infrastructure investment and improve the business framework • Sustain the increase in public investment.

• Finance more infrastructure programmes on a regional basis.

• Implement the road infrastructure program (4G) and guarantee that Private-Public-Partnerships continue to have proper cost-benefit analysis.

• Remove regulations on public ownership and vertical integration in electricity, vertical integration and market structure in rail.

• Introduce a court or a division of a court dedicated solely to commercial cases and facilitate case management through electronic case management tools.

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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