OECD reviews of regulatory reform : regulatory reform in Greece

Foreword Acknowledgements Table of Contents Part I Executive summary Chapter 1 Regulatory Reform in Greece Introduction Regulatory reform emerged in the wake of macroeconomic reforms, and by the late 1990s many significant reforms were underway Yet Greece lags other OECD countries in Regulatory reforms, and still suffers the high costs of poor regulation Box 1.1. What is regulation and regulatory reform? Long traditions of political intervention and protection of economic actors are difficukt to reverse, but a pro-reform... The Macroeconomic context for sectoral regulatory reform Macroeconomic reforms and EMU membership establish a basis for continued strong growth, and provide a good opportunity... Greece's state-led development strategy based on import substitution and credit allocation produced strong growth until 1974. ...but left a legacy of corporatism and extensive state collaboration with powerful private firms, and fostered the growth... Economic performance deteriorated sharply after 1974, in the midst of historic change and international economic turbulence State interventions into an increasingly troubled private sector, combined with wage awards that exceeded productivity... A vicious cycle had emerged as weaker enterprises required more state support, and as a faltering economy was used to justify Greece paid a large price for the poor economic and budgetary policies of the 1980s, and in many respects ended the decade... Genuine reforms were launched in the 1990s qith important changes to financial and labour market regulations, some product... The corner was turned in the mid-1990s, when a package of EU-related reforms boosted growth and investment... Today, the Greek economy is on track to continued solid growth. A high priorority should be placed on supply-side reforms... Box 1.2. External factors affecting Greek economic policy in the 1990s Economic impacts of sectoral regulatory reform Box 1.3. Key structural problems in the Greek economy Public enterprises have created costly economy-wide distorsions. Continuation of the privatisation programme is a high... In the telecommunications sector, services and prices have improved after reform, but energy reforms lag Box 1.4. Recent and envisioned privatisations of state owned enterprises in Greece Market liberalisation has proceeded the furthest in the financial sector Simplification of the tax system has improved transparency and tax revenues, but major reform is necessary to establish... Reducing red tape and regulatory uncertainties for firms should boost potential growth... Table 1.1. Sectoral regulatory reform in Greece by early 2001 Table 1.2. Potential impacts of sectoral regulatory reform in Greece Box 1.5. Labour market reforms should be a high priority in Greece Distorsions and disincentives in public sector performance continue to reduce the certainty and efficiency of the general... Anticipated effects of further regulatory reform Many concrete steps can be taken to raise potential output growth. The focus should be on comprehensive reforms... The reform package must also include the wider policy environment: labour market rules, public sector performance, and the in Figure 1.1. Comparativee indicators of product market regulation in OECD Countries, end-1997 Overall regulatory approaches Figure 1.1. Comparativee indicators of product market regulation in OECD Countries, end-1997 (cont.) Chapter 2 Government Capacity to Assure High Quality Regulation Box 2.1. Managing regulatory quality in Greece A cultural tradition within the public service of mistrust of market forces has led to over-regulation and rent-seeking ...including strengthening the professionalism and accountability of the public administration... ...and improving policy coordination A government-wide strategy for regulatory quality and a framework of quality standards should be adopted... ...and made effective through new institutions to protect the quality of domestic regulations Box 2.2. Self-assessment of regulatory reform in Greece Despite recent improvements, regulatory transparency in Greece lags behind other OECD countries Box 2.3. Transparency of regulatory systems in selected OECD countries Use of regulatory analysis can improve understanding of costs and benefits of regulatory actions within the Greek public... ...and should be accompanied by periodic reviews of the need for existing regulations Poor compliance practices, too, undermine the competitiveness of law-abiding firms Decentralisation is bringing regulatory decisions closer to the citizens, but regulatory quality controls should be... Independent sectoral regulators are needed to promote market competition in newly privatised markets Box 2.4. Battling the high cost of red tape in Greece Chapter 3 The Role of Competition Policy in Regulatory Reform Competition policy has not been strong in Greece... ...and hence the benefits of market liberalisation will be harder to achieve than necessary In late 2000, Greece took positive steps to strengthen the competition agency, but EU reforms may require further steps Formal competition policy has been in place since 1977, but it developed slowly... ...and even today competition principles are not well integrated into policy-making processes in the government Underlying many problems is a lack of resources and skills in the Competition Committee and its secretariat,... ...wich, in combination with low thresholds for merger notification that have wasted available resources... ...has weakened enforcement against costly competition abuses The rules for horizontal agreements are adequate, but have gone disused due to lack of resources The Competition Committe has been too dependant on a ministry that was not committed to market competition Table 3.1. Trends in competition policy actions in Greece Consumer protection policy has no clear connection to competition policy goals, and application is left principally... Box 3.1. Consumers are harmed by anti-competitive regulations Chapter 4 Enhancing Market Openness through Regulatory Reform Greece is pursuing market opening policies... ...wich are important for a small country dependent on trade, ... ...but Greece has a poor record in attracting foreign investment Box 4.1. The OECD efficient regulation principles for market openess Greece has integrated several of the efficient regulation principles into domestic regulations, but falls short on... The discretionary character of public consultation has reduced market confidence among foreign parties... ...while the one-stop for foreign investors was not given the means to be effective Market openness is further reduced by regulatory complexity and inefficient administration Public procurement is formally open, but in practice problems still arise Box 4.2. Transparency in the regulation of the Greek Capital Market Measures to ensure non-discrimination should concentrate on the services sectors The absence of prior addessment of regulatory impact on the economy raises the risk of unduly trade-restrictive regulation Greece ranks high on use of internationnaly harmonised standards... ...and is advanced in recognition of equivalence of other countries' regulatory measures, but institutions for accreditation... Chapter 5 Regulatory Reform in Electricity, Domestic Ferries, and Trucking Regulatory reform in the electricity sector must account for a range of economic and social policy objectives Greece has taken many of the steps needed to improve the performance of its electricity sector, but package is not yet... Electricity prices are at OECD averages, but these prices mask inefficiencies and distortions that reduce job creation and... The integrated structure of the Greek electricity sector is the largest barrier to market competition Figure 5.1. One and two firm concentration ratios in selected countries and regions,1998 Further clarity about the role of the state and the market will improve both market confidence and the performance of PPC... ...such as designing the corporate governance of PPC to encourage commercial incentives for efficiency More attention is needed to access issues to open the markets to new entrants Resources and regulatory powers must be placed in a regulatory body, independent of Ministry and the regulated companies The domestic ferry sector is crucial in Greece and historically has been highly regulated Regulatory institutions need to be modernised so that producers do not have undue influence Box 5.1. Regulation matters: Adriatic ferries versus Aegean ferries Economic regulation should be eased, so that the companies make choices about commercial operations in response to consumer.. As producers make more commercial decisions, the Ministry should ensure that the regulatory framework is transparent, account Several regulatory reforms would increase efficiency and reduce the costs of ferry service, such as a focus on service... ...extending competitive tendering for unprofitable routes... ...and freeing up fares over competitive routes. With reform, service can be maintained to all designated islands, but at lower cost... ...while employement can be increased by more competition Box 5.2. Creating a new regulatory framework for domestic ferries In a more competitive ferry industry, the role of the regulating ministry would shift to protecting competition and safety The Greek regulatory regime for trucking is unsustainable Chapter 6 Regulatory Reform in the Telecommunications Industry Regulatory regimes must simultaneously promote competition and protect other social policies in dynamic markets Greece reformed its telecommunications sector later than most OECD countries, and competition is relatively undeveloped... With the right reforms, Greece could quickly build a transparent and neutral regulatory framework based on sound economic... An urgent issue is that important requirements of the EC derogation are still unmet Due to delays in implementing the regulatory framework, essential regulatory safeguards are still missing Box 6.1. Greece is strengthening the independent regulatory authority, which is key to competition Regulation of entry and licensing is unnecessarily burdensome and discourages market entry Interconnection and regulation of interconnection prices Figure 6.1. Comparison of EU peak interconnection rates based on a call duration of 3 minutes Greece is taking positive action to open access to the local loop, but a lack of alternate infrastructure will slow... In parallel with adding new pro-competition regulations, the arduous task of continual streamlining of the regulatory regime Chapter 7 Conclusions and Policy Options for Regulatory Reform Most Greeks will benefit from regulatory reform, but the resistance of many protected groups to needed change is hard to over The benefits of further regulatory reform for Greece are likely to be substantial, higher than for most OECD countries More effective competition policy is essential Enduring governance issues are at the heart of the regulatory challenges facing Greece Policy options for regulatory reform Managing regulatory reform Notes Bibliography Part II Background Report on Government Capacity to Assure High Quality Regulation Table of Contents 1. Regulatory reform in a national context 1.1. Administrative and legal environment in Greece Box 1. Good practices for improving the capacities of national administrations to assure high quality regulation Box 2. Regulatory inflation in Greece 1.2. Recent reform initiatives to improve public administration capacities Table 1. Selected reform legislation relating to regulatory reform in Greece Box 3. Main features of the loannis Kapodistrias Programme Box 4. The ARIADNE programme 2. Drivers of reulatory reform: national policies and institutions 2.1. Regulatory reform policies and core principles Box 5. Principles of good regulation 2.2. Mechanisms to promote regulatory reform within the public administration Box 6. Making laws in Greece 2.3. Co-ordination between levels of government Table 2. Division of main regulatory powers across levels of government in Greece 3. Administrative capacities for making new regulation of high quality 3.1. Administrative transparency and predictability Box 7. Transparency of regulatory systems in selected OECD countries Box 8. Consultation in Greece in the reforms of the postal service Box 9. Best practices in consultation: “notice and comment” in the United States 3.2. Choice of policy instruments: regulation and alternatives Table 3. Economic instruments used in Greece 3.3. Understanding regulatory effects: the use of Regulatory Impact Analysis (RIA) Box 10. A step toward RIA: the budgetary impact report 3.4. The changing institutional basis for regulation 4. Dynamic change: keeping regulations up-to-date 4.1. Revisions of existing regulations, laws and subordinated regulations Table 4. Recent changes concerning administrative burdens in Greece Box 11 . Simplifying business licences and permits 5. Conclusions and recommandations for action 5.1 General assessment of current strengths and weaknesses 5.2. Policy options for consideration Notes Bibliography Background Report on the Role of Competition Policy in Regulation Reform Table of Contents Executive summary Box 1. Competition policy's roles in regulatory reform 1. Competition policy foundations 1.1. Formal competition policy has been in place since 1977, but its roots are still shallow 1.2. Reform has made little use of competition policy or principles 1.3. Key issues in competition policy today 2. Substantive issues: content of the competition law 2.1. Horizontal agreements: The rules are adequate, but they have gone disused for lack of resources 2.2. Vertical agreements Box 2. The competition policy toolkit Box 3. The EU competition law toolkit 2.3. Abuse of dominance 2.4. Mergers: substantive rules are adequate, but administration has distorted priorities greatly Table 1. Merger filings and decisions 2.5. Unfair competition: The privately-applied rules could impair competition, if they were strongly enforced 2.6. Consumer protection: Policy has no clear connection to competition policy goals, and application is left principally... 3. Institutional issues: enforcement structures and practices 3.1. Law enforcement tools are not well tested 3.2. Other means of applying general competition principles 3.3. International trade issues in competition policy and enforcement 3.4. Agency resources, actions, and implied priorities Table 2. Trends in competition policy resources Table 3. Trends in competition policy actions 4. Limits of competition policy: exemptions and special regulatory regimes 4.1. Economy-wide exemptions or special treatments 4.2. Sector-specific exclusions, rules and exemptions 5. Competition advocacy for regulatory reform 6. Conclusions and policy options 6.1. General assessment of current strengths and weaknesses 6.2. The dynamic view: the pace and direction of change 6.3. Potential benefits and costs of further regulatory reform 6.4. Policy options for consideration 6.5. Managing regulatory reform Notes Bibliography Background Report on Enhancing Market Openness through Regulatory Reform Table of Contents Executive summary 1. Market openness and regulation: the policy environment in Greece 1.1. Overview of regulatory reform to date4 1.2. The role of foreign investment Table 1. Cumulate flows of FDI involving OECD countries 1990-98 2. The policy framework for market openness; the six “efficient regulations” principles 2.1. Transparency, openness of decision making and of appeal procedures Box 1. Transparency in the regulation of the Greek capital market Box 2. Provision of information in the field of technical regulations and standards: Notification obligations... Box 3. EU rules on public procurement 2.2. Measures to ensure non-discrimination 2.3. Measures to avoid unnecessary trade restrictiveness Box 4. Promoting competitiveness through the improvement of the business environment. Simplification initiatives... 2.4. Measures to encourage use of internationally harmonised measures Box 5. Harmonisation in the European Union Figure 1. ELOT standardisation activities 2.5. Recognition of equivalence of other countries’ regulatory measures Table 2. Mutual Regognition Agreements concluded or under negociation by the E.U. 2.6. Application of competition principles from an international perspective 3. Assessing results in selected sectors 3.1. Telecommunications services 3.2. Telecommunications equipment 3.3. Automobiles and components 3.4. Electricity 4. Conclusions and policy options for reform 4.1. General assessment of current strengths and weaknesses Figure 2. Restrictiveness of regulatory approaches in OECD countries 4.2. The dynamic view: challenges for future reform 4.3. Policy options for consideration 4.4. Managing the reform Notes Bibliography Background Report on Regulatory Reform in Electricity, Domestic Ferries and Trucking Table of Contents Regulatory reform in electricity, domestic ferries and trucking Regulatory reform in electricity 1. Introduction to the electricity sector 1.1. Description of the electricity sector Box 1. Greek electricity sector at a glance Box 2. Description of the electricity sector Figure 1. International price comparisons Industrial electricity prices in selected OECD countries, 1998 Figure 2. International price comparisons Household electricity prices in selected OECD countries, 1998 1.2. Governance and regulatory institutions Table 1. Assignment of regulatory powers Box 3. Main features of Law No. 2773/99: Liberalisation of the electricity market – regulation of energy policy issues... 1.3. Analysis Box 4. Access regulation to the Greek grids Figure 3. One and two firm concentration levels for selected countries or regions, 1998 Box 5. Effects of competition in electricity 1.4. Conclusions and policy options Regulatory reform in domestic ferries 2. Introduction to the domestic ferry sector 2.1. Policy objectives 2.2. Description of the sector Table 2. Structure of the Greek ferry sector Table 3. Earnings and sales of Athens stock exchange-listed shipping companies 2.3. Regulatory regime Box 6. Prices in the Aegean vs. Adriatic Box 7. Destructive competition Box 8. Predatory pricing Box 9. Creating a new regulatory framework for domestic ferries 2.4. Conclusions and policy options Regulatory reform in trucking 3. Introduction to the trucking sector 3.1. Regulation Table 4. Trucks registered in Greece 3.2. Conclusions and policy options Table 5. Development of goods transport in Greece (in thousand million tonne-kilometres) Notes Bibliography Background Report on Regulatory Reform in the Telecommunications Industry Table of Contents Executive summary 1. The telecommunications sector in Greece 1.1. Development of telecommunications in Greece Table 1. Major events in Greek telecommunications (1930-2000) 1.2. The national context for telecommunication policies 1.3. General features of the regulatory regime Box 1. Developments in the Greek telecommunications regulatory regime 1.4. Telecommunications market and participants Table 2. Structure of the Greek telecommunication market Table 3. Mobile operators and their current ownership status Table 4. Milestones in OTE's privatisation 2. Regulatory structures and their reform 2.1. Regulatory institutions and processes Table 5. Greece: division of responsabilities among main actors (1994-2000) 2.2. Telecommunication regulation and related policy instruments Table 6. State of competition (as in December 2000) Figure 1. Comparison of EU peak interconnection rates based on a call duration of 3 minutes Table 7. Changes in tariffs relative to the consumer price index (%) 2.3. Streamlining regulation 2.4. Consumer protection and information 2.5. Quality of service 2.6. Universal Service Obligation 2.7. Application of competition principles 2.8. Greece and the WTO agreement 2.9. The impact of convergence on regulation 3. Performance of the telecommunications industry 3.1. Introduction Table 8. Main telecommunication indicators Table 9. OTE's distribution of telecommunication service revenue 3.2. Network development and modernisation Table 10. Public telecommunication investment as a percentage of revenue Table 11. International telecommunication investments by OTE 3.3. Digitalisation Table 12. OTE's rate of digitalisation 3.4. Cellular mobile services Table 13. Cellular mobile subscribers Table 14. Distribution of subscribers by type of subscription Table 15. Cellular mobile revenue (GRD million) 3.5. Development of competition 3.6. Price performance and rebalancing Table 16. Local telephony charges Table 17. Distance service charges (GRD per minute) Figure 2. OECD Composite Residential basket, November 2000 Figure 3. OECD Composite Business basket, November 2000 3.7. International telecommunication prices Table 18. Accounting rates with the United States (USD) Figure 4. Mobile consumer basket, November 2000 Figure 5. Leased lines charges, November 2000 3.8. Quality of service Table 19. OTE's quality of service 3.9. Employment and productivity Table 20. Employement and labour productivity 3.10. Internet developments and performance Table 21. OECD Internet access basket for 20 hours at peak times using discounted PSTN rates, September 2000, including VAT 4. Conclusions and recommendations 4.1 General assessment of current strengths and weaknesses Box 2. Strengths Box 3. Weaknesses 4.2. Potential benefits and costs of further regulatory reform 4.3. Policy recommendations Notes Bibliography Under the spur of intensifying European competition and seizing the opportunity of a stable political and macroeconomic environment, Greece has launched itself on the road to market liberalisation. This road, trod later in Greece than in most OECD countries, is necessary to fuel the sustainable economic growth that will create jobs and drive convergence with other European countries. Sustained and consistent reforms over the next few years will do much to bring Greek regulatory practices up to OECD good practices and build credibility for Greek reforms. Greece still suffers from the high cost