OECD Product Market Regulation (PMR) Indicators: How does Latvia 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
Latvia
1.28
OECD 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
Latvia
OECD average
5 Most competition-friendly countries
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 2018. 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.
ECONOMY-WIDE HIGHLIGHTS
Overall product market regulation in Latvia creates few barriers to competition. The administrative requirements imposed on new firms are among the lowest in the OECD. The country benefits from laws and regulations that are easy to access and understand. Barriers to international trade and investments are very low. However, public ownership of firms is more extensive than in many OECD countries, in particular the government owns the largest operators in many network sectors. To reduce the impact that state-owned enterprises could have on competition, their corporate governance could be better aligned with key OECD best practices. In addition, there is no system for assessing the impact of new regulations on competition.
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
Latvia
Barriers to Domestic and Foreign Entry
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
Latvia
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. 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.
SECTOR-SPECIFIC HIGHLIGHTS The regulatory framework in network industries is not very competition-friendly, with the exception of natural gas and rail transport. This is mostly due to public ownership of some of the largest operators in these sectors. Regulations of most professions are more restrictive than in most OECD countries. In contrast, the regulatory framework governing retail trade is relatively competition-friendly, except when it comes to the retail sale of medicines.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Latvia 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Latvia 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
* 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 2018. 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
Regulatory barriers to competition in Latvia are limited, but there is scope for improving product market regulation in some sectors and domains.
Strengths
Challenges
The administrative requirements necessary to set up new personally owned enterprises and limited liability companies are among the lowest in the OECD. In addition, there is a ‘one-stop-shop’ for informing businesses about their licensing requirements and for issuing all licences and permits, as well as a ‘silence is consent’ rule that reduces the waiting time for approval. The government has also put in place programmes to review and reduce the number of licenses. There are clear rules regulating the interaction between interest groups and public officials during the regulatory process. There are also rules that regulate conflict of interest that involve public officials. Laws and regulations are easy to access through an online searchable database, and easy to understand. In addition, there are explicit programs in place to reduce the compliance costs for enterprises, such as ex-post review of costs of regulation and egovernment.
Even though the regulatory constraints on most professions are close to the OECD average, there is scope for improving entry and conduct regulation. For example, notaries face very rigid constrains on their conduct, for example on setting of fees, and on the possibility to advertise.
Regulation of the retail sale of medicines is restrictive. Only pharmacies can sell nonprescription medicines and the number, location and ownership of these outlets are strictly regulated.
The government still owns a 100% of the shares in the largest operator in all the key segments of the electricity industry.
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