Regulatory reform and competition policy

Presentation of Spain's results on the OECD indicators of product market regulation


Remarks by Angel Gurría, OECD Secretary General, at the Ministry of Economic Affairs and Finance of Spain

Madrid, 16 February 2009

Minister, Governor of Banco de España, President of the National Securities Commission, Ladies and Gentlemen:

It is a pleasure to be here with you to present Spain's results in the OECD study on Indicators of Product Market Regulation.

And I say it is a pleasure because, somewhat against the flow of the current gloomy economic news, I can report that Spain is one of the OECD countries to have most strengthened the competitiveness of its product markets over the last 10 years.

I know that the economic press is currently debating circumstantial issues such as tenths of a percentage point of contraction, the possible impact on the deficit and GDP of measures to combat the crisis, or the severe haemorrhaging of jobs. But it is also important to highlight the structural performance of the Spanish economy at this difficult time.

Structural reforms are essential for updating and strengthening our economies to adapt them to changes in the international setting, integrate them into global trade and investment flows, and to be able to create jobs, and generate technology transfer, innovation and sustainable development.

The impact of the current financial crisis, the sharp slowdown in the world economy and the bursting of the real estate bubble would have been much more acute in Spain had it not made so much progress in reforming its product markets regulation over the last few years.

The OECD recently completed a study comparing the reforms undertaken by our member countries over the last decade, to promote competitiveness and competition in their markets in key areas for economic performance.

The overall results of the so-called OECD System of Indicators of Product Market Regulation (PMR) will not be presented in March. But we have decided to announce the results for Spain early; not only because they are clearly positive, but also because the consolidation of this effort and the application of some of its recommendations can contribute to a faster recovery of production, productivity and employment.

Let me start by highlighting some of the main achievements.

Reforms to promote more competitive product markets have been deeper in Spain than in the average of OECD country. As a result, Spain now has a regulatory framework that is more friendly to competition than the average OECD country.

The reforms have been implemented across a very wide spectrum of the Spanish economy. After decades of very restrictive policies, our study identified significant progress in most of the nearly 20 areas analysed.
Over the last 10 years, Spain has significantly reduced state control over enterprises in the business domain. It has also significantly lowered barriers to enterprise, foreign trade and investment.

The indicators show that the reforms in Spain have also stood the test of time. Spain has been one of the few countries in which substantial changes in product market policies have occurred in both the 1998-2003 and 2003-2008 periods Spain's markets have been progressively opened up to competition.

This continuity has strengthened the competitiveness and attractiveness of sectors, which has not only helped cushion decline of construction and the real estate sector, but can also assist economic recovery in the next few years.

Special progress has been achieved in the electricity, gas and telecommunications sectors. In the case of gas and electricity the liberalization went even further than most European countries. There has also been significant competitive opening in other network sectors such as air and road transport.

The increasing competition in these sectors is creating incentives for investment. When the nervousness on financial markets subsides and consumers fears ease, the progress made by Spain to strengthen competition in these fields will prove very fruitful. Because investments tend to gravitate towards the most favourable regulatory frameworks, towards the most competitive markets, with the best supplier services; and you have done a fine job in these areas.

Over the last 10 years, general regulation and the issuing of business permits have been simplified; and both areas have also been made more transparent. The reduction of opacity in Spain can be seen in the growing use of one-stop shops and rules of the "silence means consent" type.

Another important element has been the continuing openness to foreign trade and investment. Over the last few years, Spain has been catching up other European countries in terms of lowering non-tariff barriers; and it has also lifted several obstacles to foreign ownership. As a result of this type of policy Spain became the world's sixth largest recipient of foreign direct investment (FDI) in 2008; and the third largest in the EU.

These are some of the areas where Spain has recorded significant improvement in the reform of its product markets. You can read about this in greater detail in the document we have brought with us and in the presentation of our study “Going for Growth 2009” next March.

But this does not mean "mission accomplished". There are still areas that require further reform to bring the Spanish economy into line with best OECD or EU practices.

For example, administrative burdens for business start-ups are still higher than in the average OECD (or EU) country. Despite progress made in simplifying and streamlining start-up requirements, Spanish entrepreneurs still have to undergo a large number of different procedures, notably when they wish to activate a public limited company.


Moreover, opening up and running retail outlets is still difficult. Entrepreneurs that want to set up a retail trade outlet in Spain are faced with relatively restrictive licensing requirements. Setting up large surfaces is also restricted by special regulations.


Another field in which a major effort at openness is required is access to the "liberal professions", since entry to these professions remains complicated. In Spain, a large number of exclusive rights continue to be granted to professionals in areas such as accounting, architecture, engineering and legal services.

These barriers serve to increase the rigidity and inefficiency of the market for professional services, thereby imposing an extra cost on firms and consumers, which is particularly "painful" at a time like now when costs and expenses need to be reduced.

The OECD study also highlights the fact that sector regulators remain insufficiently independent in Spain. In the energy sector, for example, the Ministry of Industry and Trade can revoke decisions made by the sector regulator. In some key sectors such as airports or water distribution services, there are still no specific sector regulators, separate from government ministries.

Spain has made major progress in reforming its product markets, surpassing the average of OECD countries in key areas. But this effort needs to be maintained. It is the only way to harness globalization into more and better jobs, and better education, housing and health, for the inhabitants of this marvellous country.


Ladies and gentlemen:

We know it is hard to appreciate the structural achievements of our governments in a climate of recession and growing unemployment; but it is very important not to lose objectivity at times of crisis, and retain our ability to identify and recognize indicators of progress and outstanding challenges.


The significant progress made by Spain thus far, as measured and reported in the OECD study, will help this country move out of the crisis more quickly, by lowering the cost of adjusting to new market conditions and allowing a more efficient redistribution of resources to the most dynamic sectors.


Structural reforms are not always popular, but they do build long-term stability. The measures Spain has taken over the last 10 years to strengthen market competition and competitiveness will yield a rich harvest over the next 10 years. This is a genuine State policy, which focuses more on the coming generations than the next elections.


Minister, the Spanish people can count on the OECD's support; think of us as an extension of your capacities. I'm sure that together we will be able to help reactivate the Spanish economy sooner than expected and forge the sustainable long-term growth that your policies pursue and the Spanish people deserve.


Thank you very much.