OECD Product Market Regulation (PMR) Indicators: How does Costa Rica compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Costa Rica
2.32
OECD countries Average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Costa Rica 5 Most competition-friendly countries
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2019. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Product market regulation in Costa Rica is less competition-friendly than in most OECD countries. Overall, public ownership of firms is in line with the OECD average. However, the presence of the state is heavily concentrated in network sectors, and the corporate governance of these state-owned enterprises falls short of key OECD best practices. The administrative requirements necessary to set up a new firm are burdensome and, more generally, regulatory procedures could be simplified. In addition, regulatory barriers to competition in network sectors are higher than in many other OECD countries. In contrast, barriers to foreign investments and tariff barriers are low, and overall regulation in services is close to the OECD average.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Costa Rica
Barriers to Domestic and Foreign Entry
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2019. Source: OECD 2018 PMR database.
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Costa Rica
SECTOR-SPECIFIC HIGHLIGHTS Costa Rica falls short of international best practices in the regulation of network sectors and could benefit from a review of their regulatory framework to remove unnecessary obstacles to competition. In contrast, regulatory barriers in professional services and retail trade are close to the OECD average.
Regulation in network and service sectors PMR Indicators for network sectors* Index scale 0 to 6 from most to least competition-friendly regulation Costa Rica 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Rail
Air
Energy
Road
Water
Transport
Fixed
Mobile
E-Communications
PMR Indicators for professional services+ and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Costa Rica 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* There is no natural gas sector in Costa Rica. + When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2019. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
With regulatory barriers to competition in Costa Rica that are higher than in many OECD countries, there is scope for improving product market regulation in several areas. The country would benefit from a review of its regulatory setup in many sectors and domains to identify and remove unnecessary regulatory obstacles to competition.
Strengths
Challenges
Barriers to foreign investment are well below the OECD average.
Tariff barriers to foreign trade are limited.
Competition in fixed e-communications is limited by the existence of a monopoly for the provision of most services.
Entry is constrained in the electricity sector. Private companies can operate in the production of energy only up to a maximum of 30% of the national system’s installed capacity, and only a limited number of companies are allowed to distribute electricity to final users.
The administrative requirements necessary to set up new businesses are burdensome, and there is no one-stop shop from which to obtain information on all licensing requirements.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org