Economic Policy Reforms 2023

Colombia

See more data for Colombia on the related dashboard.

Product and labour markets functioning

Performance gaps

• Productivity growth has fallen behind regional peers and competition is weak. Regulations in product markets, administrative barriers, and high business registration costs restrict market entry of formal firms and hamper competition.

• Low trade openness affords high protection to some domestic producers, often characterised by low productivity.

• Courts are slow to resolve civil disputes and enforce contracts.

Recommendations

• Reduce domestic regulatory barriers to entrepreneurship and market entry.

• Reduce tariff and non-tariff barriers to trade, starting with those items where current barriers are highest.

• Strengthen the performance of the judicial system by enhancing court automation and electronic case management tools and reducing adjournments.

Digital transition

Performance gaps

• Colombia has one of the lowest fixed and mobile broadband penetration rates in the OECD, with lower average speed and higher prices. Socio-economic divides in the use of digital tools are large.

• Digitalisation of the public sector and the strategic use of data for decision-making by authorities lags behind.

Recommendations

• Better target public funding for public internet centres in poor and remote communities.

• Ensure adoption of the recent Digital Government Policy to improve job matching, education choices, reduce compliance costs for firms, and speed up customs procedures.

Inclusiveness, social protection, and ageing

Performance gaps

• The pandemic has highlighted major gaps in social protection, leaving around 40% of the population in absolute poverty (according to the national definition). Income-support programmes are highly fragmented.

• Informality, which affects 60% of the workforce, precludes workers from access to social security benefits such as pensions, which disproportionally benefit the better off. High charges on formal labour sustains labour informality.

Recommendations

• Merge existing cash transfer schemes into a single cash benefit for poor households while maintaining conditionalities for households.

• Establish a comprehensive strategy to foster formalisation, including lower non-wage costs, stronger enforcement, and improvements in tax administration.

• Reduce the tax burden on formal labour income by gradually shifting the financing burden of social protection towards general taxation, particularly by broadening the base of the personal income tax.

Climate transition

Performance gaps

• Deforestation of the Amazon and other green areas has risen and reaching current objectives for reducing greenhouse gas emission will require stronger declines in deforestation.

• Cadastral information is outdated, land informality is high, and a patchy land registry encourages opportunistic deforestation.

Recommendations

• Increase resources dedicated to anti-deforestation enforcement activities to follow up on more cases of detected deforestation.

• Accelerate progress in expanding the land registry, especially into remote areas.

Overall performance