Better regulation to ensure market dynamics


Remarks by Angel Gurría, OECD Secretary-General

Rome, 4 May 2010

Minister Tremonti, Minister Calderoli, Professor Catricalà, Ladies and gentlemen,

It is a great pleasure for me to present the OECD’s report on Better Regulation to Ensure Market Dynamics.
This report helps us understand the policy settings in Italy at a very important time for the Italian economy when we see an urgent need to consolidate the recovery. We hope that our recommendations will be helpful food for thought, as you seek to boost growth and put Italy on a sustained growth path.

We would like to thank Minister Tremonti for hosting this meeting. We look forward to welcoming you at our next OECD’s annual Ministerial Meeting [27-28 May], which Italy is Chairing. We would also like to thank the Italian officials who participated actively in the process, including Luigi Carbone, Fiorenza Barazzoni, Lorenzo Codogno, Alberto Heimler, Silvia Paparo, and many other experts who provided information and opinions.

Let me share with you some of the reflections and recommendations of this work.

1. Encouraging Signs First

For a long time the OECD has been monitoring regulatory reform developments in Italy. We have acknowledged the progress made, including thanks to the simplification of procedures and the elimination of unnecessary administrative burdens. Underpinning this conclusion are our Going for Growth indicators, which benchmark Italy against other OECD member countries.

Our data on product market regulation show that Italy is on a par with neighboring countries, such as Germany, Austria and France, although it remains behind the best OECD countries, such as Canada, the Netherlands, Denmark or the United Kingdom.

On administrative reforms, more specifically, the Cutting Law exercise is producing tangible results.  Following the elimination of many unnecessary laws - 7 000 in 2008 and another 29 000 in 2009 - the Guillotine is becoming an Italian trademark. Further adding to this progress, in March 2010, over 70 000 legal texts were abrogated and the regulation on business start-ups has been further simplified.

Italy has also engaged major efforts to strengthen the effectiveness of its public administration. This has allowed to rejuvenate management practices and favored the instillation of performance-based and outcome-oriented approaches. Thus, the deficit in the transposition of European Union laws, compared to other countries, has been closed. It is estimated that in 2009 alone, efforts to reduce administrative burdens generated annual cost-savings to business of over 4 billion Euros, mostly benefiting small and medium-sized enterprises.

Furthermore, Italy has integrated the OECD Competition Assessment Toolkit into its legislative process. Bold steps have been taken to advance the opening of energy markets, with incentives for gas storage under way, the launch of a market for gas, and efforts to transfer the benefit of economic liberalization to final clients. These are praiseworthy achievements.

2. Challenges Ahead

Still, challenges remain and Italy must and can do better.

Our experts have prepared economic simulations on the potential benefits of further regulatory reform over the next ten years. Reforming regulations in electricity and gas, retail and professional services, would boost productivity by nearly 14%. Against the backdrop of sluggish productivity growth in Italy and unit labor costs rising faster than in neighbouring EU partners, the potential gains stemming from market forces deserve special attention.

The report identifies several other areas for productivity-enhancing reform.
Given that small and medium-sized enterprises are particularly penalized by the presence of regulatory burdens,  entry and exit should be further facilitated. The momentum for normative and administrative simplification programs to cut red tape should be intensified.

We recognize the effectiveness of the Competition Authority, the ACGM, and the competence of its staff and we welcome its work. But it is essential to give the authority the resources it needs to accomplish its tasks.

We also acknowledge in the report that decentralisation to regions can boost public sector efficiency. Still, we believe that regulatory policies and reforms could be made more coordinated across levels of government. The Australian experience, which we discussed in a recently released OECD report, illustrates well the positive economic returns of a properly structured multilevel system economy.

Local authorities have significant regulatory powers for retail trade, energy and transport. It is important that competition principles be not only promoted at the national level, but also translated into practice at the sub-national levels. The high cost of barriers to entry in retailing should be reduced. The co-ordination of retail regulations between the State and the Regions could be improved. The effects of the recent extension of market-based regulations in the energy sector should be monitored carefully.

The lack of significant progress to eliminate barriers to entry and price restrictions in a number of professional services should also be addressed. Greater flexibility in professional fees is one way to allow market forces to operate.

To conclude, regulatory reform is progressing well and Italy has accumulated several success stories in this important area of structural change. Yet, further improvements could be achieved to ensure that the benefits of lower regulatory barrier are fuelled to economic growth.  Before finishing, let me explain that this report is the fruit of a long OECD tradition of peer-review and of evidence based analysis. This report on Italy is part of a long series of reports, including most OECD countries, but also large emerging economies such as Brazil, China and Russia. It is the accumulated experience of all these countries that we bring to you today. 

We very much hope that this report helps enrich the policy debate in Italy.


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