Business and Industry Advisory Committee to the OECD Tel. +33 (0)1 42 30 09 60 13/15 Chaussée de la Muette Fax +33 (0)1 42 88 78 38 75016 Paris email: [email protected]France www.biac.org Colombia-OECD Accession Discussions BIAC Statement to the OECD, June 2014 This paper is based on comments received to date from BIAC members and BIAC’s observer organisation in Colombia, the National Business Association of Colombia (ANDI). Additional issues may be raised at later stages throughout Colombia’s accession process to the OECD. This paper does not necessarily reflect a final BIAC position. 1. Introduction: The importance of outreach and enlargement As stated in BIAC’s January 2014 consultation with Ambassadors, business seeks open and competitive markets that facilitate trade, investment and competitive neutrality; bold and coherent structural reforms in product and labour markets; predictable international and domestic tax policies at levels conducive to investment; and regulatory approaches whose costs and impacts are understood and considered in all decisions concerning the function of markets. 1 Urgent actions are needed in all of these areas to encourage companies to invest, innovate and create more employment BIAC looks to the OECD for leadership in thought, knowledge and action to advise governments – in advanced, emerging and developing economies alike – on appropriate policies that will unleash growth and development. We encourage governments to put to good use OECD instruments, standards and good practices for the benefit of a level playing field in global markets, thereby contributing to the resilience of our economies. In this context, BIAC welcomed the 30 May 2013 OECD Council adoption of a Resolution on strengthening the OECD’s Global Reach, which opened membership talks with Colombia and Latvia. On 19 September 2013, the 34 OECD Members approved a Roadmap to the accession of Colombia to the Organisation, which sets the stage for in-depth reviews by several OECD committees of Colombia’s preparedness for membership. In order to contribute to Colombia-OECD accession discussions, BIAC hereby provides business perspectives on a selected list of issues for consideration by the relevant OECD bodies, and we stand ready to provide further inputs throughout the process. 1 BIAC (2014) “Reinforcing the case for private sector-led growth, investment and jobs”: Discussion paper for the consultation with the OECD Liaison Committee.
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Business and Industry Advisory Committee to the OECD Tel. +33 (0)1 42 30 09 60
13/15 Chaussée de la Muette Fax +33 (0)1 42 88 78 38
3. Policy Reform Priorities for Colombia’s Accession to the OECD
Echoing many of the recommendations in the OECD’s “Economic Assessment of Colombia”, but also
highlighting additional priorities, BIAC and ANDI call for the development of Colombia’s
competitiveness through improved infrastructure; strengthened institutions; more effective capital
markets; an improved education system that meets labour market needs; greater commitment to
implementing trade agreements and greater efficiency in customs; a level playing field for
competition; increased investment in science, technology and innovation; reduced costs for
transportation and logistics; and significant efforts to reduce tax evasion and informality.
For the specific purpose of this paper, we wish to highlight the following issues as timely and
relevant to the Colombia-OECD accession discussions:
a) Market Access
Trade of goods and services have represented on average 35% of Colombia’s GDP in recent years,
making the country the world’s 39th largest exporter and 32nd largest importer (excluding intra-EU
trade).7 Colombia’s engagement in global trade and value chains should nevertheless be stepped up
in order to benefit from the growth and jobs unleashed by trade and investment.
According to the ANDI, the main limitations and challenges facing Colombia’s market access is the
country’s lack of progress in competitiveness, due mainly to high energy costs, high raw materials
costs8, VAT on capital goods, poor infrastructure and customs control issues.9
Barriers to trade in value-added extend beyond border measures. For instance, certain regulations –
such as those specific examples described in the following paragraphs – can undermine the ability of
internationally-operating businesses, both Colombian and foreign, to undertake long-term
investments and trade commitments that would favour the Colombian economy as well as its
trading partners.
Energy costs
Colombia has one of the highest energy costs in Latin America. Even though electricity and gas
surtaxes of 20% and of 8.9%, respectively, were eliminated, these costs remain high compared to the
US, Peru, Ecuador, Mexico, Argentina and Brazil. ANDI has been highly involved on this matter,
leading a study together with the public and private sectors that has identified specific opportunities
for improvement in order to reach a price that would satisfy the energy providers, and at the same
time enhance national and international competitiveness of the private sector. These identified
energy issues are now to be implemented. A similar study by ANDI is due to be carried out for the
gas sector.
7 World Trade Organisation (2014). Available here .
8 ANDI highlights the importance of permanently eliminating import tariffs of raw material and capital goods that are not produced in the country. 9 ANDI (2013) “Agenda para el salto en competitividad” Available here
references of performance of the executives in Management Reports, and creation of an
ethical line), while over 52% of companies in the rest of the economy have implemented
additional measures (such as introducing a conduct and ethics code).
Despite the strong efforts made by mostly large companies and issuers of securities, there remains
significant room for improvement of the corporate governance of SMEs and unlisted companies. It is
still difficult to access corporate information for SMEs in Colombia. Meanwhile, further efforts need
to be undertaken to raise awareness among unlisted companies about the importance of the Board
of Directors as a governing body of a company, as well as the rights of stakeholders.
BIAC encourages the OECD to further strengthen its co-operation with Colombia and involve the
country actively in discussions on the update of the OECD Principles for Corporate Governance,
which should be of value to both member and non-member countries. Future work and dialogue on
corporate governance and SMEs would be very helpful.
c) Labour market reform
Protection of union members
Disrespect for basic human and labour rights, including acts of violence against union members,
cause a severe human and economic cost to countries’ development. To cite one example, the US-
Colombia Free Trade Agreement (FTA), which entered into effect in 2012, faced years of delays due
to concerns over Colombia’s human and labour rights record. In this context, the US and Colombian
governments announced, on 7 April 2011, a Labour Action Plan (LAP) that included concrete steps to
protect internationally recognised labour rights, prevent violence against labour leaders, and
prosecute the perpetrators of such violence.
Colombia has accomplished significant advances on the reduction of crimes against the life and
integrity of its citizens, including union members. ANDI reports that progress has been made in this
area by strengthening procedures to punish human rights violations, following the model of
international tribunals. Moreover, the Inter-American Commission on Human Rights took the
decision to remove Colombia from the list under permanent observation, and Colombia passed its
Universal Periodic Review before the Human Rights Council (23 April 2013). There has also been the
development of Technical Cooperation Programmes concerning the strengthening of the
institutional capacity of the Ministry of Labour, and particularly inspection services, the
strengthening of existing social dialogue bodies, as well as improvements to the institutional
capacity of the government to protect trade union leaders, members, activists and organisers, and to
combat the impunity of those engaging in acts of violence against them.18
Informal economy
Further labour market reforms are required to address informal employment, where the practice of
sub-contracting has continued under new names despite the requirements in the LAP. Greater
18
ANDI (2014) “Colombian Progress in the Labor Field”.
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efforts are required to improve the effectiveness of the inspection system and worker
protection.
According to ANDI, even though there has been significant progress in the labour market with lower
unemployment in 2013, informal employment remains one of the main issues to be tackled. The
progress in the formalisation of employment is however indicated by a higher number of affiliations
to the health and pension social security system, which rose from 86% in 2007 to 90% in 2013.19 To
generate a greater impulse to the formalization of employment, the Colombian Congress issued the
“Formalization and Creation of Jobs Act” (commonly known as the “First Employment Act”, Law
1429, 2010) to encourage lawful businesses and labour. This law includes tax incentives and mainly
targets young people under 28, women over 40, disabled people, and family heads, covering close to
60% of the informal employees (in other words, employees without social security and other
benefits).20
Despite the progress being made by these measures, Colombia’s unemployment (7.8%) is one of the
highest in the region, compared to countries like Peru, Brazil, Mexico, Ecuador, and Chile, with
unemployment ranging from 4.6% to 5.8%. Notwithstanding the transition towards the formalisation
of employment, informal employment still remains a challenge.21
d) Anti-corruption
Transparency International’s “Corruption Perceptions Index 2013” ranks Colombia in 94th position
out of 177 countries, highlighting the prominence of corruption in the country. This has a business
cost: open and competitive markets depend on actions that eliminate corruption. It is reported by
Transparency International that official information and statistics in Colombia are rare. The
Prosecutor’s Office does not have an open system of public information or statistics on
investigations. Therefore it is difficult to determine the extent to which Colombia enforces the OECD
Anti-Bribery Convention.22
BIAC calls for improving further Colombia’s legal and judicial system, reducing unnecessary
bureaucracy, fostering and rewarding the compliance efforts of companies, and increasing the
implementation of the OECD Anti-Bribery Convention.23
19
ANDI (2013) “Colombia: Balance 2013 y perspectivas 2014”. Available here 20
Departamento Nacional de Planeacion (DNP). “Que Busca La Ley de Formalización y Generación de Empleo” Available here 21
ANDI (2013) “Colombia: Balance 2013 y perspectivas 2014”. Available here 22 Transparency International “Progress Report 2013: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery” 2013 Available here 23 Concerning the OECD’s Anti-Bribery Convention, the latest report of Transparency International on the OECD
Anti-corruption Convention (October 2013) states that the responsible units of the Colombian authorities should,
through the prosecutor general, collect, publish and analyse statistics on official investigations relating to bribery
of foreign officials. The Government should raise awareness of the foreign bribery offence among public officials
and train the prosecutor’s office’s officials on this topic.
However, it is important to point out that Colombia is already taking measures aimed at improving
this issue. As a consequence of Colombia’s adherence to the OECD Anti-bribery Convention, the
National Council for Economic and Social Policies (CONPES) approved Colombia’s comprehensive
anti-bribery public policy (PPIA in Spanish) in November 2013. The PPIA action plans includes steps
to improve access to public information and its quality, strengthen public tools for the prevention of
corruption, stimulate integrity, and develop tools to fight against impunity. Colombia also
established a Secretary of Transparency which reports directly to the Presidency, in order to advise
and assist in the formulation and design of public policies to tackle corruption and boost
transparency. The private sector has also worked along these lines by signing voluntary self-
regulation agreements between companies of particular sectors or value chains.
e) Pharmaceutical and health care issues
One of the most significant steps taken in Colombia’s economic development has been its effort to
broaden the scope of coverage of the healthcare system since its reform in 1993, reaching coverage
of 96% of the population today. In addition, Colombia has also addressed other issues in the
healthcare system: for example, the subsidised and contributory health plans were unified; the
Ministry of Health has institutionally redefined its functions focusing on those most relevant to
health; and the flow of resources to the different government entities is beginning to improve.
Despite these advances, obstacles remain that hamper the effectiveness of the Colombian health
care system.24 BIAC members point to the following key areas for reform as highlighted in the
following paragraphs. ANDI notes that these issues are currently subject to discussions between the
different actors of health-related activities in Colombia
Bioequivalence Assessment and Guidelines
Although Colombian law provides an abbreviated pathway for generic medicines, the definition of
bioequivalence still demands attention for biological medicines which are fundamentally different
from chemically based medicines including generics. Bioequivalence ensures that the biosimilar
products25 are interchangeable in terms of their quality, safety and efficacy with the original product.
Regulation on Biotherapeutics and Biosimilars
Colombia recently notified the World Trade Organization (WTO) of its fourth and final draft decree
establishing the evaluation and approval processes for biologic and biotechnological medicines. As
drafted, the proposed decree is not consistent with World Health Organization (WHO) guidelines for
approval of bio-therapeutics as it contains an (unprecedented) “abbreviated” approval pathway that
fails to provide meaningful controls or a scientifically justified framework for ensuring that a product
approved by this pathway is safe and effective. Unlike the full pathway and the comparability
24
World Bank (2013) “Colombia Case Study: The Subsidized Regime of Colombia’s National Health Insurance System” January 2013 25
Biosimilars are similar, but not identical, versions of the innovative biotherapeutic medicine of reference, given that biotherapeutic medicines have active ingredients coming from or derived from living organisms.
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pathway that are defined in the decree, the abbreviated pathway exempts the applicant from having
to file meaningful data gathered on the product itself and instead permits reliance on an undefined
category of information called “global evidence”, thus providing no level of certainty as to the
expected clinical performance of the applicant product.
Following the WTO notification several OECD members submitted comments to the WTO
highlighting the ways in which the “abbreviated pathway” fails to conform to Colombia’s regulations
as well as to WHO guidelines. Colombia should now move to revise this proposed regulation.
Support from the OECD committees to this effect would be valuable as a means of reinforcing the
importance of the WHO standards.
As Colombia seeks to join the OECD, it is important the OECD review the draft proposal and work
with the Colombian government to adopt a regulation that meets the standards endorsed by the
OECD member countries. At this time, the fourth draft substantially deviates from accepted
standards, puts patient health and safety at risk, and will undermine the international effort to
establish a base level of quality for biologic medicines worldwide.
Access to drugs and new technologies
A bill for reform of the health system, currently under discussion by the Colombian Congress, has
raised concerns about patients’ access to new technologies. Many stakeholders, such as doctors,
patients, and academia, as well as the research-based pharmaceutical industry, have unanimously
expressed their concerns regarding the vague and discretional criteria for inclusion of technologies
in the healthcare system, no defined term in which to complete evaluation and coverage of existing
technologies, and a requirement of clinical effectiveness studies for incorporation of new
technologies into the healthcare systems even though these studies – conducted in large
populations and with uncontrolled circumstances – are not available in the early phases of a new
health technology.
In terms of the role of the Colombian sanitary office (INVIMA), the modernisation and increase in its
response capacity is a priority for the Colombian private sector.
Patents and pharmaceutical innovation
On intellectual property protection, unlike most of its Latin American counterparts, INVIMA has
adequately enforced data protection for new pharmaceutical products for more than a decade.
Additionally, the Colombian patent office has been recognized globally as a top-tier patent office for
the technical strength of its patent examinations, and has been a PCT (Patent Cooperation Treaty)
filing office since 2001. Most recently the Colombian patent office has improved standardisation of
procedures with the issuance of a Patent Guideline, and most impressively, managed to reduce the
time for patent prosecution almost in half.
The Colombian Ministry of Health has however moved to reinstall a provision in the pending bill for
Reform of the Health System which would give the Ministry of Health approval authority over patent
applications for all inventions in the health sector.
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Enforcement of this provision as contained in Article 24 of the draft Law would require that the
Colombian Patent Office obtain a mandatory “technical concept” over the patentability of all
inventions “in the health sector”. Enforcement of an additional mandatory requirement for patent
grant as set forth in this initiative would entail a clear violation by Colombia of inter alia, local
(Andean) Patent Law, TRIPS, and IP obligations stemming from several multilateral agreements.
OECD accession discussions could include this patent control provision and its possible deleterious
effects on the Colombian patent prosecution system, which would create negative impacts on
fostering innovation in the health sector.
4. Conclusions: Directions for Colombia-OECD accession discussions
Colombia’s accession process to the OECD represents a critical opportunity to disseminate OECD
instruments, standards and good policy practices to one of Latin America’s leading economies,
thereby improving prospects for stronger, more sustainable and inclusive growth in the country. At
the same time, Colombia’s accession to the OECD would allow the country to share its policy
experiences with OECD member countries, thus improving the OECD’s knowledge base, advice to
policymakers and representativeness when engaging in other global fora, such as the G20. From the
business perspective, Colombia-OECD accession discussions should contribute towards a global level
playing field for international business, benefitting both Colombian and foreign companies.
While Colombia’s progress in economic reforms has been commendable in many cases, as
demonstrated in this paper, there nevertheless remain a number of impediments to
competitiveness and inclusive growth. The OECD is uniquely well-placed to encourage Colombia to
undertake further reforms that would result in benefits for both Colombia and OECD members.