1 OECD ECONOMIC POLICY REFORMS GOING FOR GROWTH 218 EDITORIAL EXECUTIVE SUMMARY: ENGLISH AND KOREAN KOREA NOTE G2 FINANCE MINISTERS & CENTRAL BANK GOVERNORS MEETING 19 MARCH 218 BUENOS AIRES, ARGENTINA
2 ECONOMIC POLICY REFORMS: GOING FOR GROWTH Editorial: An opportunity that governments should not miss Global growth is finally back to cruising speed. For the first time in many years, all the major regions of the world are enjoying a widespread and largely synchronised upswing, even if some economies have been in steady expansion for much longer than others. Hopefully, the stagnation of living standards endured by a large share of the population in many OECD economies is coming to an end. The more rapid decline in unemployment seen in recent months is clearly an encouraging sign. However, the improvements in labour markets have yet to translate into significant and broad-based wage gains. Comprehensive structural reforms are needed to sustain stronger growth beyond the cyclical upswing, create more and better paying jobs, improve opportunities and strengthen inclusion. Figure 1. Global growth is back to cruising speed Real GDP, year-on-year growth Per cent World G2 Advanced G2 Emerging Note: Average of annual growth rates for 23-7 and OECD Projections for 218 and 219. Source: OECD, Interim Economic Outlook, March 218. Based on the review of actions taken on structural policy priorities presented in this Going for Growth report, there is little sign of an imminent pick-up in the pace of reforms. If anything, the review points to a further slowdown in 217 from the already modest pace observed in the previous two years. Notwithstanding, some countries have managed to introduce significant reforms in the past year. In Japan, measures have been taken to improve access to childcare services, helping women to stay in the labour force. France has implemented a broad labour market reform, covering both employment
3 ECONOMIC POLICY REFORMS: GOING FOR GROWTH protection legislation and collective wage bargaining. India has rolled out a goods and services tax, while Argentina has just passed a comprehensive tax reform. Figure 2. The pace of reforms is modest Number of reform actions taken as a percentage of Going for Growth recommendations Per cent In process of implementation In process of implementation Note: Fully coloured bars refer to the share of fully implemented reforms. For 217, reforms in the process of implementation are included to ensure comparability with previous two-year periods. For the two-year periods, the responsiveness rate is annualized. Emerging economies include Chile, Mexico, Turkey, Argentina, Brazil, China, Colombia, Costa Rica, Indonesia, India, Russia and South Africa. Advanced economies include all non-emerging OECD member countries and Lithuania. By and large, governments have continued to devote greater attention to employment and social protection, including also through measures to improve healthcare services. Examples include Greece and Italy, where significant measures have been taken to strengthen social protection, as well as China, where access to healthcare for migrant workers has been improved. The broader attention to employment and income support is important for achieving greater inclusiveness and a more balanced distribution of income. To a large extent, reform efforts are paying off: the employment rates of low-skilled and youth still low in some countries hardest hit by the crisis are improving and already roughly back to their pre-crisis levels on average across countries, while the labour-force participation of women continues to rise. However, significant reforms have remained too few and far between to boost productivity and to reduce the reliance on macro-policy stimulus. The return of higher global growth offers a window of opportunity to make renewed progress on structural reforms, with higher chances that they bear fruit more rapidly. Individually and collectively, decision makers need to find ways to overcome political resistance to reforms that address well-known growth bottlenecks, and lay the groundwork for their economies to make the most of the ongoing digital transformation. Higher and more sustained growth would also help to reduce financial risks related to the high public and private debt levels built up in a low interest rate environment. While finally gathering momentum, business investment still remains weak in comparison with past expansions. Furthermore, recent data shows that investment in digital technologies, which is fundamental to boosting productivity, varies greatly across countries and firms. The growing productivity gap between leading and lagging firms is
4 ECONOMIC POLICY REFORMS: GOING FOR GROWTH itself a source of growing wage inequality and productivity slowdown. OECD analysis suggests that firms face various constraints affecting both their incentives and capabilities to invest in such technologies. Raising investment incentives requires measures to create a more competitive business environment, notably by promoting the entry of firms through lower regulatory barriers to start-ups and by reducing obstacles to foreign direct investment. Despite progress in these areas for example in the European Union with the recent Services Package -- entry in business services in countries such as France, Germany and Spain is still hampered by administrative and regulatory barriers. Meanwhile, more needs to been done to reduce barriers to foreign investment where they remain relatively high, including Indonesia, Mexico and Russia. And, trade protectionism can only harm investment by raising costs and uncertainty, eroding the competitive environment and narrowing the scope for successful firms to grow. There is also scope in many countries for reforming insolvency regimes to facilitate the orderly exit or restructuring of unsuccessful firms. This is important both to encourage experimentation of new ideas and to free the resources needed for successful innovative firms to expand. Chapter 3 of this Report presents new OECD indicators of insolvency regimes across countries, laying out the main design features to achieve such objectives. In countries such as Australia, Italy and South Africa, lowering barriers to corporate restructuring in case of distress is a priority. Reforms are also needed to harmonise insolvency procedures across member states in the European Union. Taxation is another area where governments can act to raise private incentives to invest. This includes reforms of tax systems to broaden the tax base through the elimination of loopholes, not least those that mostly benefit individuals with high levels of income or wealth, while making room for rate reductions, especially on more mobile sources such as capital and labour income. Reforms along those lines have been implemented in countries such as Argentina, Canada and Spain, while corporate tax rates have been reduced in the United States. But reforms have yet to tackle a key distortion of tax systems, which is to favour debt over equity financing. Not only does such a bias contribute to making growth overly dependent on debt, but it also discriminates against innovative young firms. More broadly, most countries have ample scope for reforms that can reconcile growth and inclusiveness objectives, notably by relying more on tax revenues from immovable property and inheritance. Internationally, in the effort to make corporate taxation fairer and more transparent, progress is being made to limit tax avoidance by multinationals through the so-called Base Erosion and Profit Shifting (BEPS) action plan elaborated under the auspices of the G2 and the OECD and the rolling out of the automatic exchange of information. In countries such as India, Indonesia and Turkey, but also Italy and Greece, labour informality remains a key challenge for boosting inclusive growth. Addressing this requires reforms of burdensome product and labour regulations, along with reducing labour tax wedges on low-paid workers where they remain high. Bringing more workers in formal jobs will offer better prospects to improve skills and productivity while providing them with better social protection. In China, further measures to provide more equal access to public services while abolishing the household registration system, would promote labour mobility, productivity and inclusion. The effectiveness of reforms in these areas is best supported by the successful implementation of measures to reinforce the fight against corruption - such as the steps taken in Mexico - and to strengthen the rule of law.
5 ECONOMIC POLICY REFORMS: GOING FOR GROWTH In both emerging and advanced economies, the shortage of skills, including managerial and organisational talent, is one factor limiting the capabilities of many firms to adopt digital technologies. A longer-term response is reforms of education and training systems to ensure that workers acquire the cognitive and non-cognitive skills that the new digital technologies and knowledge-based capital make increasingly necessary. This includes measures to facilitate access to education for disadvantaged groups so as to reduce the digital divide. In the shorter term, the response to the skills shortage consists in providing workers with better opportunities for up-skilling and reducing the mismatch between the skills provided by workers and those demanded by employers. Developing training and life-long learning programmes that benefit those who need them most remains a challenge shared by most countries. Hence, in spite of stronger economic growth this is no time for complacency. Going for Growth provides policy priorities and recommendations to unlock skills development and innovation capacity, to promote business dynamism and the diffusion of knowledge, and to help workers benefit from a fast-changing labour market. In the spirit of ensuring the sustainability of the gains in incomes and wellbeing it also increasingly takes into account environmental risks and bottlenecks (see Chapter 2). The current economic upswing provides a window for the successful implementation of reforms that can best achieve the objective of strong, inclusive and sustainable growth. The opportunity should not be missed. Álvaro Pereira OECD Acting Chief Economist
6 ECONOMIC POLICY REFORMS: GOING FOR GROWTH Executive Summary At nearly 4 per cent projected for 218, the annual GDP growth rate of the global economy is close to the pace of growth preceding the great recession. This period of strong and broadly-based global growth creates favourable conditions for the successful implementation of structural reforms necessary to turn the upswing into stronger and sustainable long-term growth for all. Amid these positive short-term developments, still underpinned by supportive fiscal and monetary policy, medium and longer-term challenges remain for policy makers. Productivity growth is still disappointing. Despite the long-awaited employment recovery, wages have so far failed to follow, and many vulnerable groups are still confronted with weak prospects in the labour market. Inequality is persistent and on a longer-term trend rise within many countries indicating that parts of society have not benefited much from growth. On top of this, megatrends such as digitalisation, environmental pressures and demographics, may carry risks for the sustainability of longterm growth unless the policy challenges they raise are properly addressed. Going for Growth provides policy makers with concrete reform recommendations in areas which are identified as the top five country-specific priorities in order to tackle medium-term challenges, revive productivity and employment growth, while ensuring a broad sharing of the benefits. The priorities are identified building on OECD expertise on structural policy reforms and inclusive growth. The areas covered are diverse, including product and labour market regulation, education and training, tax and transfer systems, as well as trade and investment rules, physical and legal infrastructure and innovation policies. Policy recommendations across these areas are articulated so as to form a coherent reform strategy, which is crucial to reap synergies, manage trade-offs and ensure that the benefits are broadly shared over time. As such, the Going for Growth framework has been instrumental in helping G2 countries make progress on their structural reform agenda, including through monitoring their growth strategies to achieve sustained and balanced growth. This Interim report reviews progress on structural reforms with respect to priorities identified in Going for Growth 217. Actions taken on policy priorities In 217, the pace of reforms has remained similar to the relatively slow pace observed in the last two years and below the one observed in the direct aftermath of the crisis. Nevertheless, some bold actions have been taken over one third of actions implemented in 217 can be viewed as major steps. Notable examples include reforms to strengthen social protection in Greece and Italy, a long-overdue reform of the labour market in France, significant measures in Japan to increase childcare
7 ECONOMIC POLICY REFORMS: GOING FOR GROWTH capacity, a goods and services tax in India and a comprehensive tax reform in Argentina, to be phased in over the next 5 years. More generally, the intensity of reforms has varied across policy areas. Among reforms to boost skills acquisition and innovative capacity, widespread actions were taken to increase the size and efficiency of R&D support. The bulk of actions taken to promote business dynamism and knowledge diffusion have focused on strengthening physical and legal infrastructure as well as on making product market regulation more competition-friendly. Significant actions have been taken in the area of social benefits, which is important for social cohesion. To further help workers to cope with potentially rapid changes in jobs and tasks, more reforms are needed in complementary areas, such as improving active labour market and housing market policies to facilitate the job-market transition and mobility. Special chapters reviewing indicators to enrich the Going for Growth analysis This report includes two special chapters that review indicators for extending the scope of the Going for Growth framework: green growth indicators and OECD indicators of insolvency regimes. The links between green and growth: what the indicators reveal The ability to sustain long-term improvements in GDP and well-being, as advocated in Going for Growth, depends among other things - on the ability to reduce negative effects (such as pollution) associated with economic activity, minimise environmentrelated risks and lower the reliance on (limited) natural capital resources. Hence, a more systematic approach to environment-related challenges in Going for Growth is warranted. At the same time, the links between the environment, environmental policies and economic growth are complex. In that regard, Chapter 2 reviews the indicators available and the recent progress made on the measurement of environmental outcomes and policies. While no single broadly-accepted measure of environmental performance exists, significant progress has been made in the measurement of green growth, notably as part of the OECD Green Growth Indicators, paving the way for a more consistent treatment of green growth in Going for Growth. Facilitating orderly exit: insights from the new OECD insolvency regimes indicators Poorly performing insolvency regimes can be linked to three inter-related sources of labour productivity weakness: the survival of so-called zombie firms that should otherwise exit the market; capital miss-allocation, i.e. the trapping of resources in low productivity uses; and stalling technological diffusion. Chapter 3 presents the newly developed OECD indicators of insolvency regimes, which will allow the extension and fine-tuning of reform recommendations on exit policies in Going for Growth. The analysis reveals significant cross-country differences in the extent to which insolvency regimes promote orderly exit of non-viable firms, indicating that some countries have scope to improve resource allocation and productivity through reforms of bankruptcy laws and procedures.
8 OECD Multilingual Summaries Economic Policy Reforms 218 Going for Growth Interim Report Summary in Korean 218 년경제정책개혁구조개혁평가중간보고서 한국어개요 Read the full book on: /growth-218-en 218 년에글로벌경제의 GDP 연간성장률은거의 4% 에이를것으로예상되며, 이는금융위기로인한 대불황 이발생하기직전의수준의성장률에근접하는수치이다. 강력하고광범위한기반하고있는현재의글로벌경제성장으로인해구조개혁의성공적이행에대한우호적인조건을만들어지고있으며, 현재의상승세를더많은이들을위한강력하고지속가능한장기적인경제성장으로전환시키기위해서는구조개혁은필수적인요건이다. 여전히재정정책및통화정책의지원을통해뒷받침되고있는이러한긍정적인단기적경제적상황전개에도불구하고, 정책입안자들에게는이를중장기적으로지속시키기는것에는여전히어려움이남아있다. 생산성향상은여전히실망스러운수준이다. 오랫동안기다려온고용이회복세에돌아섰음에도불구하고, 임금은이를따라잡지못하고있으며, 많은취약집단에게서노동시장은여전히약세전망을피하지못하고있다. 많은국가들에게서불평등은지속적이고장기적으로증가하는추이를보이고있으며, 이는해당사회의일부집단은경제성장의혜택을받고있지못함을나타낸다. 이에추가하여, 디지털화, 환경압박및인구구성변화등이제기하는당면과제들에적절하게대처되지않는다면이러한메가트렌드는장기적경제성장의지속가능성에리스크가될수있다. 구조개혁평가 (Going for Growth) 는정책입안자들에게국가별로상위 5 가지우선순위로파악된분야에대해서구체적인개혁권고사항을제공하여, 중기적인당면과제에대처하고생산성및고용향상을회복시키면서동시에경제성장에따른혜택이광범위하게공유되도록방안의마련에도움을주는것을목적으로한다. 우선수위는구조정책개혁및포용적경제성장에대한 OECD 전문지식에기반하여파악되었다. 개혁우선순위의사안에는혁신정책, 제품시장및노동시장규제, 교육및훈련, 세금및소득이전체계는물론교역과투자규칙, 물리적및법적인프라, 혁신정책등다양한분야가다루어지고있다. 이러한분야들에대한정책권고사항은시너지효과를극대화시키고절충적상황을관리하여시간이경과함에따라그혜택이광범위하게공유되게만드는것이핵심인일관된개혁전략을형성할수있도록구체적으로제시되고있다. 이와같은방식으로 구조개혁평가 프레임워크는 G2 국가가지속가능및균형적성장을달성하려는성장전략의모니터링등을포함하여구조개혁과제를진행에도움의제공에서중요한역할을해왔다. 본중간보고서는 217 년 구조개혁평가 에서설정한우선순위대한구조개혁의진척상황을검토하고있다. 정책우선순위에의해취해진조치 217 년에개혁의속도는그이전 2 년동안에관찰된상대적으로느린속도와유사한수준을유지했으며, 이는금융위기바로직후에비교하여낮은수준이다. 하지만, 일부에있어서과감한조치가취해졌다. 217 년에이행된조치들의 1/3 이상이 주요단계 로간주될수있다. 이에포함되는대표적인사례로는그리스와이탈리아의사회안전망의강화를위한개혁, 프랑스의오랫동안지체되었던노동시장의개혁, 일본의육아설비확충을위한유의적조치및향후 5 년동안에단계적으로시행될아르헨티나의종합적세금개혁등이있다. 보다일반적으로살펴보면, 개혁의강도는정책분야별로상이하다. 직업능력습득과혁신역량의향상을위한개혁중에서연구 개발 (R&D) 의규모와효율성을향상시키는광범위한조치들이취해졌다. ECONOMIC POLICY REFORMS ISBN OECD 218
9 기업역동성과지식확산을향상시키는다수의조치들은물리적및법적인프라의강화와더불어제품시장규제의보다경쟁친화적으로만드는데에집중되었다. 사회통합에중요한역할을하는사회복지의분야에서유의적인조치들이취해졌다. 노동자들이일자리와업무에서잠재적인급변에대처하도록효과적으로도움을주는보완적인분야에서보다많은개혁이필요하다. 즉노동자들의일자리시장의변환과이동을원활하게만들기위해서활성노동시장의향상및주택시장정책의개선등이이에포함된다. 특별단락 구조개혁평가 분석을향상시키는지표의검토 본보고서에는 구조개혁평가 프레임워크의분석범위를확대시키기위한지표들인녹생성장지표와 OECD 파산체제지표를검토하는두개의특별단락이포함되어있다. 녹색정책과경제성장사이의연관성 : 지표가드러내는사실 구조개혁평가 에서주창한대로, GDP 및복지의장기적향상을지속시키는능력은, 다른무엇보다도, 경제활동과관련된부정적영향 ( 예 : 오염 ) 을줄이고환경관련리스크를최소화하며 ( 한정된 ) 자연자본자원에대한의존성을낮추는능력에달려있다. 따라서, 구조개혁평가 에서는환경관련당면과제에대한보다체계적인접근하는것이필수적이다. 이와동시에, 환경, 환경정책, 경제성장사이의연관관계는복합적이라는사실도유념해야한다. 이러한사안과관련하여제 2 장에서는사용가능한지표와환경적결과및정책의측정에관한최근의진전논의를검토하고있다. 환경적성과에대해광범위하게수용되는단일한측정법이없지만, 녹색성장의측정에관해서는유의적인진전을이루었다. 대표적으로, OECD 의 녹색성장지표 는 구조개혁평가 에서녹색성장에대한더욱일관성있게측정을하는방안을제공하고있다. 질시정연한퇴출전략 : OECD 의새로운파산체제지표 파산체제 (insolvency regimes) 를잘못운영하는경우는노동생산성의상호연관된세가지요인과연결되었을수있다. 소위말하는 좀비 기업 ( 시장에서이미퇴출되었어야할기업 ), 잘못된자본배분 ( 낮은생산성사용에자원집중 ), 기술확산의지체가바로그것이다. 제 3 장은파산체제에대해 OECD 가새롭게개발한지표를제시하고있으며, 이를바탕으로 구조개혁평가 의퇴출정책에대한개혁권장사항을확대하고미세조정할수있게된다. 분석결과에따르면, 회생불가기업의질서정연한퇴출을촉진시키는파산체제는국가별현저한차이가있는것으로드러났으며, 이는일부국가에서는파산법및파산절차의개혁을통해서자원배분과생산성을향상시킬여지가많은있음을나타낸다. OECD 본개요는 OECD 공식번역이아닙니다. 본개요의복제는경제개발협력기구의저작권및해당출판물의제목이명시될때에만허가됩니다. 본개요는다음과같은영어불어제목으로출판된경제협력개발기구출판물중에서발췌한내용을번역한것입니다. Read the complete English version on OECD ilibrary! OECD (218), Economic Policy Reforms 218: Going for Growth Interim Report, OECD Publishing. doi: /growth-218-en ECONOMIC POLICY REFORMS ISBN OECD 218
10 ECONOMIC POLICY REFORMS: GOING FOR GROWTH Korea Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 218 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year - in both advanced and emerging economies - on policy priorities identified in the previous issue of Going for Growth. Country highlights Korean GDP per capita remains close to the OECD average reflecting sustained rapid growth. Productivity, however, is significantly lower than the OECD average, while working hours are among the longest in the OECD. Inequality is below the OECD average but the most deprived section of the society hold a part of national income below the OECD average, not least reflecting wage inequality stemming from labour market dualism. Boosting productivity is a key challenge and requires reforms to reduce barriers to entry and competition, particularly in services, as well as reducing administrative burden so that the transformation of the economy and workplace culture are better suited to face pressures from rapid technological change and ageing. Female labour force participation remains also another challenge with the gender employment gap among the highest in the OECD countries. Boosting female participation - particularly important in a context where rapid population ageing increases labour force shortages - requires further progress on the childcare system as well as on work place culture. Gender employment gap Persons aged 15-64, 216 Difference in % points CAN FRA DEU GBR RUS AUS ESP USA ZAF JPN ITA KOR BRA MEX TUR Note: Defined as the difference between male and female employment to population ratios. Data refer to 215 for Brazil. Source: OECD, Labour Force Statistics by sex and age Database.
11 Going for Growth 217 recommendations include: ECONOMIC POLICY REFORMS: GOING FOR GROWTH Reduce the regulatory burden on economic activity by assessing and reducing the regulatory burden, improving regulatory quality and phasing out entry barriers, in particular in the service sector. Strengthen policies to support female labour force participation by enhancing childcare quality and increasing the take-up of maternity and parental leave systems. Raise parental leave benefits and promote a workplace culture that supports work-life balance. Reform EPL and tackle labour market dualism by relaxing employment protection for regular workers, in particular improving the procedures for unfair dismissal, and by increasing the minimum wage and expanding social insurance coverage and training for non-regular workers. Improve the efficiency of the tax system and strengthen the social safety net by increasing taxes which have a less negative impact on growth, such as VAT, property and environmental taxes, and by focusing the basic pension on the elderly with the lowest incomes to reduce the relative poverty rate for the population aged over 65 years, and expanding the coverage of the National Pension Scheme. Reduce producer support to agriculture by further reducing barriers to agricultural imports, scaling back the actual level of support and shifting its composition away from market price measures toward direct support. Recent policy actions in these areas include: Labour market dualism will be reduced as the new government plans to turn 25, non-regular workers in the public sectors into regular staff by 22. The labour force participation of women has been enhanced as the parental leave benefit increased twice the benefit level for the first three month of the leave increased from 4% of the ordinary wage to 8% of that, which started to be applied since September, 217. It is expected to further increase by 219 with the benefit level beyond the first three month reach 5% of the ordinary wage from 4%, the current rate. The social safety net has been strengthened by relaxing the eligibility criteria, particularly on age, for the Basic Livelihood Security Programme for children under 13 to children under 17.