Remarks by Angel Gurría, OECD Secretary-General, delivered at the G20 Finance Ministers and Central Bank Governors' Meeting
Washington, 10 April 2014
(As prepared for delivery)
Mr. Chair, Ministers and Governors:
You made an impressive commitment in Sydney to lift its GDP by more than 2% above the baseline over the coming 5 years - this would amount, according to our simulations, to 18 million additional jobs.
But where would this additional growth come from? The answer is a two-pronged reform strategy aimed at fostering productivity growth and labour force participation at the same time. I would like to highlight in particular one area where you have great opportunities to achieve higher productivity growth, raise investment and foster job creation: this is competition.
We all need to foster competition in our economies. A lack of competition in many markets keeps prices high and output low. Too many firms are sheltered from the incentives to innovate and adopt management best practices. Competition is hampered in some countries by an outdated regulatory framework and rules which do not foster innovation and keep new firms out of the market. Weak enforcement of competition law adds to the problem. Also our education and apprenticeships systems need to look more at creativity and “innovative spirit”
This really matters! A large part in our IMF/OECD/World Bank analysis to identify gains from stronger G20 action come from higher productivity through stronger competition and more innovation. OECD estimates suggest that a 10% reduction in the level product market regulations can boost GDP by 1 to 1.5%. This corresponds to the size of reforms made by countries that have undertaken significant reforms over the past decade. And this is a challenge and an opportunity for advanced and emerging economies alike.
In particular, we need more competition in services to make them more efficient - which in turn will help your countries compete and upgrade in global value chains. Services sectors such as transport, logistics, trade finance are key to a smooth functioning of global value chains, while domestic services are increasingly important components in exports of valued added. Yet, these sectors often lagged behind with respect to the modernisation of their regulatory framework and remain impervious to competition – it’s time to catch up! On 7 May, at our ministerial council meeting which some of you will attend, we will release our Services Trade Restrictiveness Indices (STRI), covering 40 countries and 18 services sectors. They will enable your countries to benchmark their individual service sectors against less restrictive and more efficient performers. They will provide the core information for you to pursue desirable policy reforms, with specific commitments under the national growth strategies.
Of course, competition is only one instrument in your weaponry and must be associated with other relevant policies. I am thinking of raising labour force participation, in particular participation of women in the labour market - which is critical to sustain economic growth over the medium to long-term, including in the context of ageing.
To conclude: Meeting the G20 2% commitment will not be “an easy walk” - and the sketches of your growth strategies show that additional efforts are needed. But you have the levers in your hands. Your ambition will help to lift the world economy. The OECD stands ready to help on the way to the Summit!