THINKING

What is the Status of Colombia’s Application to Join the OECD?

The Organization for Economic Cooperation and Development (OECD) is an international body that contains 34 member countries and promotes good practice in the design and implementation of public policy. Its ultimate goal is to improve the wellbeing of society. Its motto is: ‘Better Policies for Better Lives’. The OECD provides continuous updates of statistical data and is regarded as one of the most comprehensive and trustworthy sources in the world in the fields of economic and social studies.

The member countries of the organization are currently: Australia, Finland, Ireland, New Zealand, Sweden, Germany, the Czech Republic, Italy, Norway, Switzerland, Austria, France, Japan, Poland, Turkey, Belgium, Greece, Korea, Portugal, United Kingdom, Canada, Hungary, Luxemburg, Slovakia, USA, Slovenia, Iceland, Estonia, Denmark, Israel, Spain, and The Netherlands while the only Latin American representatives are Chile and Mexico.

Recent applications for membership to the OECD have been made by Colombia, Latvia, Lithuania and Costa Rica, and Colombia has been approved by the largest number of committees thus far.

Currently, Colombia is in the process of proving to each committee that it meets OECD standards. So far, the country has been approved by 17 of the 23 committees required. The most recent approval came in June 2016 and it is expected that by the end of the first semester of 2017 approval by the remaining 6 committees shall be given.

The evaluation of each of the 23 Committees has been carried out progressively since 2014. The evaluation process involves several stages, which vary from Committee to Committee as each defines its own procedure.

Colombia must thus take part in the application sessions run by each evaluation Committee and present the progress it has made in each area. The Committee will then give its approval of the measures taken or provide recommendations, with the country returning to present further progress at the next session.

Below is a summary of which committees are still evaluating Colombia and which have already given their approval:

1 Agriculture Committee Approved
2 Fiscal Affairs Committee Pending
3 Trade Committee Pending
4 Competence Committee Approved
5 Environmental Policy Committee Pending
6 Statistics Committee Approved
7 Economics, Development and Public Governance Committee Pending
8 Employment, Work and Social Affairs Committee Pending
9 Health Committee Approved
10 Consumer Policy Committee Approved
11 Financial Markets Committee Approved
12 Science and Technology Policy Committee Approved
13 Regulatory Policy Committee Approved
14 Fiscal Affairs Committee Approved
15 Education Committee Approved
16 Territorial Policy Committee Approved
17 Investment Committee Approved
18 Digital Policy and Economics Committee Approved
19 Chemicals Committee Pending
20 Corporate Governance Committee Approved
21 Fisheries Committee Approved
22 Insurance and Private Pensions Committee Approved
23 Working Group on International Corruption Approved

 

Summary of the main committees to have given their approval:

 

  1. Regulatory Policy Committee: This Policy Committee is one of the most important as it requires the National Government to issue regulations to resolve public policies only in those cases where doing so is the best option for society. This is measured by a Regulatory Impact Analysis (RIA) which assesses the advantages and disadvantages of various alternatives for resolving the problems in question. Given the high cost that regulations impose upon consumers and the private sector, this policy will make the country more competitive. Between them, the different bodies that make up the National Government have issued 473 decrees, i.e.: a decree every 1.3 days. Of these, 148 were of substantial impact to the economy, businesses and citizens. Of these 148, 58 modified a previous regulation.
  2. Pensions and Insurance Committee: This Committee recognized Colombia’s work in creating and implementing regulatory reforms that have had positive effects on the pension system, including:
    1. Decree 1817 which establishes a fixed term for superintendents (Trade, Companies and Industry) and seeks to make the election and removal process transparent and structured as well as setting a fixed term of 4 years.
    2. Decree 036 was created to provide a living income to pensioners and cover a market that insurers had not previously offered due to regulatory problems.
  3. Digital Economy Committee: In order to obtain approval from this committee, Colombia has proposed improvements to digital security with the aim of creating a safe digital environment to maximize the economic and social benefits of the use of Information and Communications Technologies (ICTs) and also to improve competition and productivity in every sector of the economy.
  4. Fiscal Affairs Committee: Before giving its approval, the Committee evaluated the fiscal policies of Colombia and found that they meet the standards of the 34 member countries of the OECD. The OECD focused its evaluation on the following issues:
    1. Exchange of Tax Information
    2. Tax Policy and Fiscal Statistics
    3. Taxation of Multinational Companies and Transfer Prices  
    4. Indirect Taxation (VAT and other taxes on the consumer)
    5. Aggressive Fiscal Planning
    6. Fiscal Crimes and other financial crimes
    7. Tax Conventions and Treaties

The above areas were included in the Tax Reform that was approved in December 2016.

  1. Education Committee: The committee noted that Colombia had increased its coverage of education, reaching 11.2 million students. Also, the coverage rate for higher education has doubled. It is anticipated that these figures will be maintained and increased once the country has entered the OECD.
  2. Investment Committee: The Investment Committee evaluates issues related to the country’s investment regime, evaluating whether it is open to direct overseas investment in a transparent and non-discriminatory manner. It checks that international agreements on investment are being met and that property rights are respected. It is also very important to show that the Guidelines for Multinational Companies are being implemented properly. The Investment Committee approved the country on the condition that changes are made to how Direct Overseas Investment is measured. What is being sought is greater clarity over the true origin of investments given that triangulation through financial centres occasionally makes it difficult to determine the actual origin of the investments.
  3. Consumer Policy Committee: The main issues for approval were related to product safety and reporting of harm caused by products. This will lead for the first time to systematic information that allows for the identification of dangerous products and rapid measures to protect consumers from risks to their lives, health or integrity posed by products. In addition, in the realm of electronic commerce, the Superintendent actively collaborated on a decree that regulates refunds and issued a circular containing guidelines on how to inform consumers of their right to return products for comment.
  4. Regional Policy Committee: The country has adopted many policies and instruments that have been recognized as good practice by the OECD’s Regional Policy Committee and has promoted the fulfilment of the Effective Public Investment instrument at every level of government. In addition to improving development and making the regions more competitive, this has made it possible to institutionalize channels of dialogue at different levels of government by making OCAD the only decision making channel for the presentation of investment products. This mechanism has improved the quality of public investment. The methodology for closing gaps, territorial typologies and the index of territorial convergence was recognized by the OECD as key evidence of the sustainability and seriousness of the reforms that have been set in motion and the commitment to working in the short, medium and long terms on regional issues.
  5. Financial Markets Committee: This committee evaluates the quality of regulations and supervision in the financial sector and the safety with which financial operations are carried out in this country. The committee believes that Colombia meets the standards of the club of global best practices.
  6. Investment Committee: The approval of this committee is a guarantee of the policies adopted by the country in the field of investment and demonstrates the country’s commitment to sticking to them. It promotes the adoption of good practice in attracting foreign investment, encourages international cooperation and facilitates a better understanding of the rules that apply to the movement of capital. In addition, it takes care of interpreting and implementing decisions on international investment and multinational companies. It is also makes the country responsible for following the implementation of Codes of Free Movement of Capital and Invisible Operations.
  7. Agriculture Committee: The Agriculture Committee of the OECD has fully accepted that the Colombian Ministry of Agriculture qualifies for acceptance in the club of countries with the best policies on quality of life among the rural population. Acceptance will allow the country to take part in different meetings and committees in which the application of agricultural policies across the world are discussed.
  8. Statistics Committee: The OECD made several recommendations including organizing statistics within a spatial framework, improving urban and rural classifications and strengthening the focus on regions in the National Development Plan and industrial policy. In addition, the body suggested progressively increasing policies for regional development.

 

Healthcare

The OECD’s Healthcare Committee approved Colombia in June 2016, recognizing the progress that has been made with coverage, which is currently 97%. In addition, it emphasized that the Healthcare System is well-designed and has solid institutions and policies from which other countries might learn, stating that they deserve to be shared internationally.

The OECD’s priority areas for monitoring and measurement in Healthcare, which it rated favourably in Colombia, are:

  • Healthcare spending
  • Healthcare quality
  • Prevention economies
  • Efficiency/Effectiveness of healthcare costs
  • Financing in healthcare
  • Medications
  • Planning and Administration of Human Resources in Healthcare
  • Long term care

Although progress has been significant, there are still difficulties to be resolved, especially those related to the sustainability of a quality universal healthcare system.

Some of the notable results highlighted by the Committee:

  • Insurance coverage of the population has grown from 23.5% of the population in 1993 to 96.6% in 2014.
  • Costs to the individual fell from 52% of total healthcare spending to 14% in 2014, one of the lowest figures in the region.
  • The population’s healthcare indicators have rapidly improved: life expectancy for men has risen from 59.02 years in 1970 to 72.1 in 2015 and for women from 62.82 in 1970 to 78.5 in 2015, about 4 years lower than the average for countries in the OECD, while child mortality has fallen to 40 deaths per 1000 births in 1970 to 12.8 in 2013.

 

The Ministry of Health and Social Protection has come to propose a series of reforms aimed at guaranteeing the sustainability of the system, reducing costs and generating greater efficiencies. One example is the regulation of the price of medications and a request for the cooperation of pharmaceutical laboratories with regard to the acquisition and distribution of these products.

However, the Healthcare Sector does not just need approval from the Health Committee, it must also be approved by the Chemicals Committee, whose approval is currently pending, as well as the Commerce and Science and Technology Committees, which also have a say on policies in the sector.

The challenges for Colombia presented by the remaining Committees 

  1. Committee of Financial and Business Affairs: The role of the Department of Financial and Business Affairs (DFB) is to promote the effective functioning of the markets and business in a globalized market economy. It thus encourages the liberalization of international investments, capital movements and exchanges of services and outlines measures that will create a favourable investment climate. It also studies developments in financial markets and procedures in the fight against corruption. Issues related to the Committee of Fiscal Affairs are being dealt with by the National Planning Department in collaboration with the Treasury Ministry.
  2. Trade Committee: The objective of this committee is to maintain and improve the multilateral trade system based in the World Trade Organization (WTO) through measures aimed at limiting protectionism and liberalizing the international exchange of goods and services. It seeks to reinforce trade relations with developing countries, contributing to their economic progress, and to integrate them into the international commercial system, eliminating obstacles that distort competition, especially export subsidies and restrictive commercial practices in the private sector. The implementation of the recommendations of the OECD is handled by the Ministry of Commerce, Industry and Tourism.
  3. Environmental Policy Committee: The main work of the Environmental Policy Committee is to encourage the effective administration of natural resources, coordination between environmental, commercial, energy and agriculture policies and the analysis of the economic aspects of climate change, among other issues. Environmental Policy is handled by the Ministry of the Environment.
  4. Committee of Employment, Work and Social Affairs:  A high unemployment rate, precarious, poorly paid jobs, poverty and insufficient training give rise to tensions in society that affect the country’s economy.  This Committee works in numerous interrelated areas to help governments to take the right measures to prevent social exclusion and also examines employment and pay structures. It further studies the efficiency of different initiatives in healthcare and social welfare, the status of women in the job market and the way in which technology influences workers. These issues are handled by the Ministries of Labour and Health and Social Protection.
  5. Economics and Development Committee: This Committee analyzes and seeks to ameliorate macro-economic problems, monitoring economic issues and analyzing global outlooks and alternatives in the economic policies of member countries. It places special emphasis on the analysis of structural policies, for example, best practice in the development of comprehensive strategies to improve employment figures and pay. In Colombia, the area is handled by the National Planning Department.
  6. Chemistry Committee: This Committee is probably most closely related to the Health Sector and the implementation of policies regarding medications. It is handled in Colombia by the Ministry of the Environment. The committee has currently approved 8 instruments including Mutual Data Acceptance (MDA), Principles of Good Practice in Laboratories (GPL), Evaluation of manufactured nano-materials, Exchange of information related to the exportation of prohibited or severely restricted chemicals, measures to reduce anthropogenic emissions of mercury into the environment and Biodegradability of tenso-active anionic agents. Instruments pending approval by the committee include: The prevention, preparation and response to chemical accidents, reduction of the risks of lead, evaluation of the potential effects upon the environment of chemical substances, procedures and requirements to anticipate the effect of chemical substances on human health and the environment and systematic research into existing chemical substances, among others.

The next steps:

Currently, the Congress of the Republic is discussing the Proposed Law “On the ‘Agreement between the Republic of Colombia and the Organisation for Economic Cooperation and Development (OECD) on privileges, immunities and facilities granted to the organization’ adopted in Punta Mita, Mexico, 20 June 2014.”, which was approved following a second debate on 17 November 2016.

Once Colombia receives approval from all 23 committees mentioned, the Rector Council of the OECD will take a consensus decision on admitting Colombia into the OECD.

Finally, the process will be completed with the signature of the OECD convention and its approval by the Congress of the Republic as well as an automatic revision by the Constitutional Court.

As can be observed, these moves are being prepared as it is expected that the country will have the approval of the 23 Committees by the end of the first semester of 2017 and so the Proposed Law will take priority in the legislative agenda once the Extraordinary Sessions have concluded in March.