How can reform of product market regulation improve the environment for doing business?
Pro-competitive regulation of product markets contributes to improving productivity performance, stimulating investment and innovation. The government has embarked on a number of reforms designed to move the economy towards a more pro-competitive stance. The telecoms regulator’s remit has been extended to the gas and electricity industries, improving the regulatory conditions for non-discriminatory network access for market entrants. Entry barriers to practicing a handicraft have also been reduced by removing the master certificate requirement in many crafts and exempting new craft businesses from contributions to the crafts association for four years. However, deregulation needs to continue as about 90 per cent of establishments in the craft sector remain subject to some entry requirements. Similarly, compulsory contributions to enterprise associations should not act as a barrier to market entry. Fee schedules of professional associations limit price competition among members and are legally binding in some cases. The government intends to allow private contracts to deviate from binding fee schedules for architects and engineers. This should be implemented and further deregulation should be considered. The government has also launched an initiative to reduce bureaucracy in order to reduce administrative opacity, including the planned simplification of complex and non- transparent rules on public procurement, which accounts for 17 per cent of German GDP. Competition for public procurement should be strengthened further by removing the participation of business organisations in the procurement process. To prevent administrative opacity in future regulatory initiatives, regulatory impact analysis should be strengthened. This would help, inter alia, to foster the establishment of new enterprises and company growth.
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