Competition Assessment Review

of Romania

Launch event – Bucharest, 28 June 2016

Key findings from the OECD Report

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Background

Since joining the EU in 2007, Romania's economy has made remarkable progress. In 2015, the country achieved one of the highest growth rates of all EU.

In 2014, the OECD was asked by the Romanian government to review three key sectors of the Romanian economy to identify regulations that may hinder the competitive and efficient functioning of markets: Construction

Freight transportFood processing

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The project and results

Making use of the methodology in the OECD Competition Assessment Toolkit, the project team during a 12-month period analysed 895 pieces of legislation and assessed costs and benefits of regulations restricting competition in the designated sectors. The study identified 227 potentially problematic regulations and made 152 specific recommendations on legal provisions that should be amended or repealed. It also identified the sources of those benefits and, where possible, provided quantitative estimates.

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1 Initial mapping of all relevant legislation for the three sectors.

2 In-depth scan of legislation to identify potential obstacles to competition. Economic overview of the relevant sectors.

3 Analysis of the selected regulations to assess the harm to competition and understand policymakers’ objective. Qualitative and quantitative (subject to availability of suitable data) estimate of benefits from removing restrictions

4 Formulation of recommendations for the redesign or abolishment of regulations shown to be harmful to competition.

5 Publication of a final report

Stages of the project

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Summary of legal provisions analysed by sector

Construction Freight transport

Food processing

Legislation scanned 162 566 167Restrictions found 95 85 47Recommendations made

72 46 34

895 Pieces of legislation were scanned

227 Potentially problematic regulations were identified

152 Provisions where changes could be made to foster competition

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The construction sector

In 2014, the construction sector:

• Represented 6.29% of Romania GDP

• Employed approximately 1 115 000 people

• From total turnover generated by companies active in this sector:

66.7% was generated by the construction of roads and railways, 17.0% by the construction of utility projects and 16.2% by the construction of other civil engineering projects.

For this sector:

165 Pieces of legislation were scanned

95 Potentially problematic regulations were identified

72 Recommendations were made

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The freight transport sector

566 Pieces of legislation were scanned

85 Potentially problematic regulations were identified

46 Recommendations were made

In 2014, the freight transport sector:

Generated a turnover of approximately 5% of Romania GDP

Employed approximately 133 000 people

Had a modal split of freight transport in terms of volume of:

For this sector:

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The food processing sector

167 Pieces of legislation were scanned

47 Potentially problematic regulations were identified

34 Recommendations were made

The food processing sector:

Generated EUR 1.4 billion of GVA in 2013, representing 10% of total GVA generated by manufacturing and 1% of total economy

Employed approximately 156 613 people in 2014

Processing and preserving of meat, bakery and farinaceous products, and dairy products are the most significant subsectors, representing a combined output of approximately 65% of total sector output.For this sector:

Where can Romania make improvements to boost its

competitiveness and encourage growth?

Main recommendations

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Benefits of competition

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Key Recommendations : Construction sector

• Various recommendations against limitation of the number of participants in public tenders.

• Abolish exceptions in construction legislation to apply the usual tender procedure.

• Abolish the maximum prices for sand and gravel. • Exempt stalls that only need to be supplied with electricity from

the obligation to obtain a building permit .• Remove the national interdiction to execute construction or

maintenance works between 15 May and 15 September in the coastal areas.

• Implement a code of conduct to eliminate conflicts of interest when professional associations are involved in the decision-making process and control the activity of public authorities.

• Abolish outdated restrictions on the location of professional schools or medical centres.

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Key Recommendations : Freight transport

Road• Abolish unnecessary authorisations , such as the authorisation to

repair, adjust, reconstruct and dismantle vehicles that may unnecessarily limit the number of operators and increase costs.

• Abolish the requirement for road transport operators to display on their vehicles a plate containing information on the dimensions and maximum weight authorised for the vehicle.

• Modify the requirements for obtaining a copy of the transport licence.

Rail • Modify unclear provisions regarding access to railway infrastructure

and the independence of the infrastructure manager.Inland waterway and maritime freight transport• All tariffs set by the port authorities should be supervised and

approved ex ante by an independent regulatory body.• Port safety services, such as pilotage and towage, should not be

granted directly by the port authority, but instead they should be tendered in an open and transparent procedure.

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Key Recommendations : Food processing

• Eliminate 10 m2 minimum areas in stores for the sale of bread and grant operators greater flexibility with respect to the conditions in which they sell bread, so long as they can ensure food safety.

• Revise rules concerning staff training.• Review licence regimes in order to provide clear deadlines by

which authorities must decide on applications for licences.• Review control regimes to eliminate double controls by different

authorities.• Clarify ambiguous legislative provisions to remove uncertainty

for market operators and reduce the potential for arbitrary decisions and corruption.

• Repeal outdated legislation, especially domestic rules that are redundant in the light of EU regulations with the same regulatory content that became effective when Romania joined the European Union.

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Synthesis of positive effects of lifting the regulatory barriers to competition

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Conclusion

If the recommendations detailed in the report are implemented: • Cumulative, long-term impact on the Romanian

economy of lifting all the restrictions identified as harmful, including those that were more technical in nature, will be significant.

• Positive quantifiable effect of at least EUR 434 million (efficiency gains and lower prices on goods and services for consumers).

• The recommendations in these sectors will also positively affect the ability of businesses to compete in the longer term.

OECD Competitio

n Assessment Review ofRomania

2016

Full report available at:

oe.cd/1pj