Economic Survey of Spain 2008: Fostering competition in product markets to boost productivity

 

Contents | Executive summary  | How to obtain this publication | Additional information

The following OECD assessment and recommendations summarise chapter 4 of the Economic survey of Spain published on 19 November 2008.

 

Contents                                                                                                                             

Reforming product market regulation can play a key role in raising productivity performance

Trend productivity growth has been weaker than in other European countries across a broad range of both manufacturing and services sectors. Over the past decade productivity advances appear to have been particularly meagre in international comparison in transport services as well as post and telecommunications. Measures to further strengthen competition in these sectors, as well as in other network industries and in the professional services, would stimulate productivity growth beyond the sectors concerned, owing to their use as intermediate goods and services. Recent reforms have already resulted in visible improvements in competition, for instance in the energy sector.

  • The independence and powers of sectoral regulators in some network industries should be strengthened. In some sectors (railways and airports, for example), regulation is conducted by a central government ministry. Independent sector regulators should be introduced in all sectors. Regulatory autonomy is also compromised by government interventions in regulatory decisions, especially in the energy industry, and by the option of re appointing the members of the regulators’ boards. Sectoral regulatory decisions should not be subject to government review, while the contracts of senior regulatory officials should not be open for renewal.
  • In the electricity industry, regulatory policy is more advanced than in many other OECD countries, notably with respect to vertical separation, helping new entrants gain market share. Electricity is still offered at regulated retail prices, which are set below cost. This practice undermines efforts to achieve greenhouse gas emission targets. The government intends to phase out regulated retail prices from 2009 to 2012, following the helpful elimination of high voltage business customer tariffs in July this year. Remaining regulated retail prices should be phased out as soon as possible, not only because of the distortions involved for users but because of the future risk that the current bond financed supplier payment system poses to the taxpayer.
  • In transport, the government has announced measures to strengthen competition among ports, which are welcome. Licensing requirements in road freight haulage are more onerous than in other OECD countries, hindering entry and restructuring. These licensing requirements should be eased. The government is renewing road passenger transport licenses. These licenses should be tendered on a competitive basis without favouring incumbents. In the railways, market entrants have gained little market share in freight transport. Access of competitors to the incumbent’s rolling stock at non discriminatory conditions should be guaranteed. Competition in passenger services should be introduced as soon as possible. Experience in several OECD countries shows that the tendering of public service obligations in regional transport services, linked to the payment of subsidies, has been effective in lowering costs.
  • In the telecommunications sector, the incumbent has been able to retain a large market share in ADSL services, but the spread between the incumbent’s and competitors’ prices for high speed internet access is still unusually high. To what extent this is the result of ongoing non price discrimination against competitors in their access to the local loop is worthy of investigation. Spain has moved ahead of other countries in considering how to regulate the new fibre optic networks. In view of the limitations to the unbundling of individual customer connections to these networks, functional separation may perhaps need to be imposed on the incumbent to ensure effective competition. The regulator should therefore be explicitly empowered to impose functional separation on the incumbent. In postal services, competitors’ access to the incumbent’s network facilities, including address data bases, is limited. Their access to these facilities should be improved.
  • The range of professional services for which Spanish regulation requires specific qualification requirements to be met is unusually large in international comparison, generating barriers to entry. The government is planning to reform entry conditions. Qualification requirements for professional services should be reviewed and the range of covered professions narrowed.
  • Entry barriers at the regional level on large scale retail outlets continue to depress productivity in retail trade with a significant impact on aggregate outcomes. The government appropriately intends to use the European Union Services Directive as an opportunity to remove them.
  •  

Retail prices and market shares of broadband providers1


1. Prices are adjusted for PPP, and are for advertised access speeds between 2 and 10 Mbps, which accounts for around 84% of all connections in Spain.
2. Best available offer.
Source: Comisión del Mercado de las Telecomunicaciones and European Commission.

 

How to obtain this publication                                                                                   

 

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Spain 2008 is available from:

 

Additional information                                                                                                  

 

For further information please contact the Spain Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Andrès Fuentes and Eduardo Camero under the supervision of Peter Jarrett. Research assistance was provided by Sylvie Foucher-Hantala.

 

 

 

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