WPS6698 Policy Research Working Paper 6698 Product Market Policies in Romania A Comparison with EU Partners Donato De Rosa Mariana Iootty Florina Pirlea Arabela Aprahamian Alexandru Stanescu The World Bank Europe and Central Asia Region Private and Financial Sector Unit November 2013 Policy Research Working Paper 6698 Abstract Romania’s European Union accession in 2007 has restrictive of competition than most direct comparators resulted in a substantial reduction of the formal barriers in the region, whereas for other indicators Romania to integration with the European Union Single Market. is on a par with the European Union average or has This study takes stock of the progress by benchmarking achieved best practice. Nonetheless, these results should product market policies in Romania to those of European be interpreted in light of the fact that the Product Market Union countries, as measured by the OECD indicators of Regulation approach measures officially adopted policies Product Market Regulation. These indicators allow for a and does not capture implementation. Future reforms comprehensive mapping of policies affecting competition should be directed both at improving official regulation in product markets. Comparison with European Union and, where policies that favor competition are already in countries reveals that, for half of the policy areas covered place, toward effective enforcement. by the study, Romania’s product market policies are more This paper is a product of the Private and Financial Sector Unit, Europe and Central Asia Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at dderosa@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Product market policies in Romania: A comparison with EU partners Donato De Rosa (World Bank, dderosa@worldbank.org) Mariana Iootty (World Bank, miootty@worldbank.org) Florina Pirlea (World Bank, apirlea@worldbank.org) Arabela Aprahamian (World Bank, aaprahamian@worldbank.org) Alexandru Stanescu (World Bank, astanescu@worldbank.org) Key words: Regulation, Competition, Product Markets, European Union, Romania. JEL: K20, K23, L32, L38, L43, L51 Sector Board: Finance and Private Sector ACKNOWLEDGMENTS The authors are grateful to Isabell Koske and Isabelle Wanner (OECD Economics Department), who kindly shared the methodology to estimate PMR indicators for Romania and provided helpful comments and suggestions. Helpful suggestions and contributions were received from Martha Licetti and Delia Rodrigo. 2 1. INTRODUCTION This paper presents a comparative analysis of Romania’s performance in product market regulation (PMR). The approach used relies on a methodology developed by the OECD (Conway et al., 2005 and Wölfl et al., 2009), that measures the degree to which domestic policies inhibit or promote competition. The data – which are derived from a self-reported survey – are policy-focused as opposed to perception based (or based on market outcomes). They are available for OECD members as well as Brazil, China, India, Indonesia, Russia and South Africa. The most recent set of data for Romania was collected in 2011. Data for all other countries reflect the results of the 2008 survey. 1 All the PMR indicators are scored on a 0-6 scale, with higher values indicating more restrictive regulations. Of the 22 European Union countries included in the study, Romania ranks 20th for the economy-wide PMR indicator (Figure 1) 2 which suggests that its regulatory environment is more restrictive than in most EU comparators. At one end of the spectrum, countries like the United Kingdom, Ireland and the Netherlands appear to have a significantly lower level of anti-competitive regulations than the EU average. At the other end, the high scores for Romania, Poland and Greece indicate that in these countries the regulatory environment is more restrictive than in most EU comparators. Figure 1: Product Market Regulation for EU countries, aggregate level 3 Based on the results to be discussed in the next section, this paper suggests areas in which further progress could be made with respect to official policies. Some steps to improve implementation are also proposed. These include (i) ensuring greater political commitment at the highest level, and leadership in the application and enforcement of rules and regulations, (ii) redesigning the institutional set-up for regulatory reform in order to improve oversight and coordination, and (iii) expanding the use of regulatory tools, impact assessments, and consultations with the business community in order to identify and remove the regulatory barriers that are most cumbersome for business entry and operation. 1 All the indicators were calculated by the OECD. Data for Romania was collected in 2011 whereas data for all other countries is based on the results of the 2008 survey. 2 Bulgaria, Cyprus, Latvia, Lithuania, and Malta were not covered in the PMR sample (2008). 3 The EU average includes all the EU members covered by the study, except Romania. 3 When interpreting the PMR indicators, two caveats need to be considered. The first is that the PMR approach measures officially adopted policies. It does not capture implementation and enforcement. In this regard, interviews with business associations suggest a significant gap between some of the business- friendly, officially adopted policies, on the one hand, and implementation and enforcement, on the other. Romania has achieved a number of good results in terms of having laws that are more conducive to private sector development. However, the lack of a greater effort in terms of implementation and enforcement can substantially reduce the impact of the policies adopted in recent years which would hurt the competitiveness of the Romanian economy in the longer run. The second caveat is that the current analysis compares Romania in 2011 with OECD and EU countries in 2008 (the most recent year in which a PMR survey was conducted). As most OECD and EU members have actively continued to improve their product markets over the last three or four years, the analysis over-estimates how Romania ranks relative to comparators today. In the following sections we present a short methodological summary of the PMR indicator, a detailed analysis covering the component indicators of the three main policy areas surveyed: state control, barriers to entrepreneurship, and barriers to trade and investment. The last section concludes and puts forth a number of policy recommendations. 2. THE PMR METHODOLOGY A regulatory environment propitious to competition in product markets is widely believed to spur GDP growth through two main channels: productivity and employment. Competition in product markets impacts productivity as firms that are faced with vigorous competition have strong incentives to reduce costs, innovate and become more efficient and productive than their rivals. Based on a set of OECD countries and using industry-level data, Nicoletti and Scarpetta (2003) measure the extent to which multi- factor productivity (MFP) growth is affected by measures of product market regulation (reflecting the intensity of competition). They find that restrictive regulation in manufacturing tends to reduce MFP growth mainly via the process of technological catch-up. Using a similar approach, Conway et al. (2006) and Arnold, Nicoletti and Scarpetta (2008) find evidence that anti-competitive regulation is harmful particularly for technology-driven productivity improvements in ICT-intensive sectors. 4 Using a different approach, Anos Casero and Udomsaph (2009) analyze micro-level data from ECA countries to estimate total-factor productivity (TFP) and examine how changes in business environment and productivity growth are correlated in the 2001-2004 period. Successful efforts to improve the business environment are found to have a strong impact on firm productivity. By the same token, pro-competitive regulation influences employment growth as reduced barriers to entry curb the market power of incumbents while 4 All these studies use the framework proposed by Aghion and Griffith (2005) in which productivity growth in a country/sector depends on the pace with which the country/sector grows in relation to the country/sector leader. In this sense, productivity growth of a lagging country depends on how fast the leader grows and the speed at which the productivity gap is being closed. This, in turn, depends on the policy environment in the follower country/sector, especially with reference to policies that promote firm rivalry and market entry. Apart from this common framework, these three studies have some differences. Arnold, Nicoletti and Scarpetta (2008) use micro-level data and focus on MFP growth. Nicoletti and Scarpetta (2003) also measure MFP but using industry level information, while Conway et al (2006) also rely on industry level data but measuring labor productivity growth. Finally, all these studies rely on the OECD sample of countries. 4 making the entry of competitors possible, which, again, would increase both activity levels and demand for labor. 5 Product market regulation (PMR) is measurable through a methodology developed at the OECD relying on the OECD Regulatory indicators questionnaire. The methodology and key findings of the PMR for OECD countries are presented in Nicoletti et al. (1999), Conway et al. (2005) and Wölfl et al. (2009). The PMR indicators are designed to reflect regulations that have the potential to restrict competition in areas where competition is viable. By construction, they have a number of features which make them useful not only for analysis, but, more importantly, for policy advice, since they allow to pinpoint specific policies that hamper competition in product markets. First, PMR indicators are focused on enacted policies and not on outcomes, implying that they are ‘objective’, in that they are not based on opinion surveys. Second, since the summary PMR indicator is constructed as the average of well-defined components, PMR scores can be related to specific underlying policies, thus providing precise inputs in the phase of policy recommendation. Third, PMR indicators focus on regulatory measures that affect the economy at large and can therefore be considered as comprehensive measures of regulatory restrictiveness. Their advantages notwithstanding, PMR indicators are not designed to capture informal regulatory practices nor the effective enforcement of regulations, since they are only concerned with formal compliance with a number of criteria. 5 Nicoletti and Scarpetta (2005), Griffith and Harrison (2004), Griffith et al. (2007) provide evidence that easing anti- competitive product market regulation may have a positive effect on employment. 5 Figure 2: The integrated PMR indicator system Product market regulation State control Barriers to entrepreneurship Barriers to trade and (0.33) (0.33) investment (0.33) Public Involvement Regulatory and Administrative Barriers to Explicit barriers Other ownership in business administrative burdens on competition to trade and barriers (0.50) operations opacity start-ups (0.33) investment (0.50) (0.50) (0.33) (0.33) (0.50) Scope of public Admin. burdens Legal barriers enterprise Price Licenses and for corporations (0.25) Barriers to FDI (0.33) controls permits system (0.33) (0.33) Antitrust (0.50) (0.50) Admin. burdens exemptions Gov’t involvement for sole (0.25) Use of Tariffs Regulatory in network sectors Communication proprietor firms command Barriers in (0.33) barriers (0.33) and (0.33) and control network sectors (1.0) simplification Direct control regulation of rules and Sector-specific (0.25) Discriminatory over business (0.50) procedures administrative procedures Barriers in enterprises (0.50) burdens (0.33) (0.33) services (0.33) (0.25) Integration of sectoral information (NMR+FDI-Index) Source: OECD 2008 The structure of the PMR system is shown in Figure 2. The system is composed of 18 basic or ‘low-level’ indicators, each capturing a specific aspect of the regulatory regime as described in Box 1. The indicators are calculated on the basis of the qualitative and quantitative information obtained from questionnaire answers. Qualitative data are assigned a numerical value that allows ordering each of the possible responses to a given question. Quantitative information is ranked by subdividing it into categories based on a system of thresholds. The coded information is then normalized over a scale of zero to six. These data are then aggregated into basic or ‘low-level’ indicators by assigning subjective weights to the various regulatory requirements. Given the normalization of the basic data, all the low-level indicators also have a scale of zero to six, reflecting increasing restrictiveness of regulatory areas. A detailed description of the low level indicators is presented in Annex III. Basic indicators are then aggregated into broader regulatory domains. Higher level indicators are calculated as weighted averages of their constituent lower level indicators. The attribution of lower-level indicators to each higher-level indicator, and the weights used in the aggregation, are based on principal component analysis (Nicoletti et al., 1999). At the highest level of aggregation the overall indicator of product market regulation summarizes the restrictiveness of the regulatory framework in the product market. The structure of the PMR system, with progressive levels of aggregation, has the advantage of allowing a decomposition of higher-level indicators, with an increasing degree of detail, into the values of the more disaggregated indicators, each corresponding to specific regulatory provision. 6 Box 1: The 18 low-level PMR indicators The domain State control reflects the extent to which governments influence firm decisions through public ownership, price controls or other forms of coercive – instead of incentive-based – regulation. This consists of: • Scope of public enterprises: measures the pervasiveness of state ownership across business sectors as the proportion of sectors in which the state controls at least one firm. • Government involvement in network sectors: measures the extent of public ownership in the energy, communications and transport sectors. • Direct control over business enterprises: measures the existence of government special voting rights in privately-owned firms, constraints on the sale of state-owned equity stakes, and the extent to which legislative bodies control the strategic choices of public enterprises (for OECD and accession countries this is based on more disaggregated data as compared to other non-member countries). • Price controls: reflects the extent of price controls in competitive sectors, such as air travel, retail trade, road freight, professional services, and mobile communications. • Use of command and control regulation: indicates the extent to which government uses coercive (as opposed to incentive-based) regulation in general and in specific service sectors. The domain Barriers to entrepreneurship reflects obstacles to easy access to information on existing regulation, general or sector-specific administrative burdens for business start-ups and other general or sector-specific regulations that hinder entry of firms. It consists of: • Licenses and permits systems: reflects the use of „one-stop shops‟ and „silence is consent‟ rules for getting information on and issuing licenses and permits. • Communication and simplification of rules and procedures: reflects aspects of government’s communication strategy and efforts to reduce and simplify the administrative burden of interacting with government. • Administrative burdens for corporations: measures the extent of administrative burdens on the creation of corporations. • Administrative burdens for sole proprietors: measures the extent of administrative burdens on the creation of sole proprietor firms. • Sector-specific administrative burdens: reflects administrative burdens in the road transport and retail distribution sectors. • Legal barriers: measures the pervasiveness of barriers to entry across business sectors as the proportion of sectors in which there are explicit legal limitations on the number of competitors. • Antitrust exemptions: measures the scope of exemptions to competition law for public enterprises. • Barriers to entry in network sectors: measures various kinds of entry barriers in network sectors, as well as the degree of vertical integration in energy, rail transport and telecommunication sector. • Barriers to entry in services: measures barriers to entry in retail trade and professional services. The domain Barriers to trade and investment captures barriers to foreign ownership of firms, tariffs and other non-tariff barriers to trade. It consists of: • Barriers to foreign direct investment (FDI): measures general and sector-specific restrictions on foreign acquisition of equity in public and private firms, obligatory screening procedures and operational controls for affiliates of foreign firms (e.g. nationality requirement for key personnel). For OECD and accession countries, sector-specific barriers to FDI are measured by the FDI restrictiveness index. • Tariffs: reflects the average of most-favored-nation tariffs, computed from detailed product data on tariffs. For OECD countries, tariffs are computed based on more detailed data and more elaborated aggregation as compared to non-member countries. • Discriminatory procedures: reflects the extent of discrimination against foreign firms at the procedural level. • Regulatory barriers: reflects other non-tariff barriers to trade, such as mutual recognition agreements or international harmonization. Source: Wölfl et al. 2009 7 3. RESULTS As Figure 3 illustrates, for Romania, like for many other EU members, the greatest challenge to competitive markets is posed by the large degree of control the state wields over the economy (as will be shown later, particularly in the infrastructure sector). This can have significant negative effects on competition, because inefficiencies from large state-owned enterprises in network sectors impact a wide array of economic agents. In addition, despite initiatives to improve the business environment6, some legal barriers to entrepreneurship still exist (in the form of administrative barriers to start-ups and barriers to services 7) as well as a number of remaining restrictions on trade and investment. The three regulatory areas (state control, barriers to entrepreneurship, and barriers to trade and investment) will be analyzed in the following sections. Figure 3: Decomposition of the economy-wide PMR indicator Source: own elaborations based on OECD data 3.1 STATE CONTROL The gradual reduction of the state’s presence in the economy was a crucial element of the reform package associated with Romania’s EU pre-accession commitments. As a result, between 1999 and 2010, many of the commercial companies held in the portfolio of the privatization agency AVAS and in the banking sector were privatized. The energy sector was unbundled and important sales of state-owned companies took place in electricity and gas distribution. The national oil company, Petrom, was also privatized. In parallel, price liberalization in many sectors and the adjustment of energy tariffs reduced direct state involvement in services and improved the efficiency of resource allocation. 6 “Romania: Functional Review of the Ministry of the Economy”. 2010. World Bank, Washington DC 7 See section 3.2 “Barriers to entrepreneurship" 8 Figure 4: State control of economic activity in EU countries Source: own elaborations based on OECD data Despite the decline in state control over the past decade, Romania’s performance still lags behind that of most EU countries (Figure 4). Important energy generation companies, whose governance requires further improvement, continue to be managed by the state, while some energy tariffs have Figure 5: Decomposition of PMR: State Control not yet reached import price parity. The two sub-domains of state control in the PMR system are public ownership and state involvement in business operations. As the decomposition exercise below reveals (Figure 5), public ownership poses a significant challenge to competition. Whereas in Romania the government’s direct involvement in business operations has been reduced, mainly through price liberalization for many product categories, public ownership remains high, both because the state still holds on to at least one firm in a large number of industries and due to its ownership of large network companies. 3.1.1 PUBLIC OWNERSHIP The ‘public ownership’ sub-domain covers three policy areas: scope of the public enterprise sector, direct control over business enterprises, and government involvement in the infrastructure sector. Due to the large role played by the level of public ownership in many of the countries in the sample, we present below the detailed score distribution of these three components. For Romania, results indicate that while the level of direct control over business enterprises is not particularly high, both the pervasiveness of state ownership across industries and the degree of government involvement in infrastructure are above the EU average. 9 Figure 6: Scope of the public enterprise sector The scope of the public enterprise sector measures the proportion of economic sectors in which the state has at least one firm. In Romania, this is relatively wide (Figure 6) as the state continues to control at least one company in a multitude of industries, including not only network sectors (as electricity, gas and telecommunications, rail and road infrastructure, and water transport) but also manufacturing of basic metals and metal products, sale of motor vehicles, hotels and Source: Authors’ elaborations based on OECD data restaurants, and banking (see Annex III for a detailed list of sectors). 8 SOEs play a great role in the economy as more than 30% of employees work in publicly owned enterprises.9 In 2010, the total annual income of the largest Romanian state owned firms represented 8.2% of GDP. 10 State owned companies pose a challenge to the enforcement of competition law because, as previous analysis on competitive neutrality has shown (OECD 2009), SOEs may enjoy significant advantages due to their relationship with the government which can result in anticompetitive effects on the economy. Enforcing competition law in the case of SOEs can be difficult, since the level of transparency of information regarding costs and activities rarely allows for a comprehensive analysis. In addition, SOEs can have goals other than profit maximization (such as increasing employment) that could hinder the testing of competition law (OECD, 2009). The direct control over business enterprises indicator– which measures the existence of government special voting rights in privately-owned firms, constraints on the sale of state-owned equity stakes, and the extent to which legislative bodies control the strategic choices of Figure 7: Direct control over business enterprise public enterprises - places Romania below the EU average. This is due to the fact that although legal restrictions exist with regard to the sale of the shares held by government in national firms, the state does no longer retain any special voting rights (golden shares) in any firms. In fact, the government gave up its special veto rights in Petrom, under pressure from the European Commission, which in 2007 Source: Authors’ elaborations based on OECD data opened legal action against the Romanian state on the grounds that certain clauses in 8 For Romania, the number of sectors in which state, national, or provincial governments control at least one firm is (16). The average for the other 21 EU countries included in the study is (12.6) 9 Estimation is based on 2009 data from the National Institute of Statistics See the link http://www.insse.ro/cms/files/Anuar%20statistic/03/03%20Piata%20fortei%20de%20munca_ro.pdf 10 Calculations include 2010 figures for: Romgaz, Transgaz, Hidroelectrica, Transelectrica, Nuclearelectrica, Posta Romana, CFR S.A., TAROM, Oltchim, Cuprumin, Electrica Serv and Electrica Furnizare. The values for operating income (or total income in some cases) were taken from annual reports or from the online database of the Ministry of Finance. Figures in RON were converted at the average 2010 exchange rate. 10 the initial privatization contract between Petrom and OMV restricted management decisions by the new owner and were, therefore, in violation of EC Treaty Rules. As to the third indicator, evidence points to a heavy government involvement in the infrastructure sector (see Table 1). The government’s share in the largest firm in many network industries is significantly Figure 8: Government involvement in the infrastructure sector higher than the EU average, particularly for gas production and transmission, air transport, and telecommunications (PTO). However, the recent economic crisis has provided Romanian government with renewed incentives to continue the privatization process and the restructuring of SOEs in network industries (see Box 2). Source: Authors’ elaborations based on OECD data Table 1: Government involvement in network sectors Government share in the largest firm in the sector Romanian State Owned Network industry Sector Romania EU Average Enterprise Gas production/import 85 32 Romgaz Gas Gas transmission 74 41 Transgaz Gas distribution 37 47 Distrigaz Nord & Sud "Public” (4) “Mostly public” (8) Electricty “Mixed” (5) Hidrolectrica Generation, transmission, distribution "Mostly public" “Mostly private” (2) Nuclearelectrica and supply segments of the industry “Private” (2) Transelectrica "100% govt ownership” (19) “Govt is a shareholder” (1) Largest firm in operation in the “No govt ownership” (1) sector "100% govt ownership" Caile Ferate Romane (CFR) "100% govt ownership” (18) Rail transport “Govt is a shareholder” (1) Passenger transport "100% govt ownership" “No govt ownership” (2) CFR Calatori "100% govt ownership” (16) “Govt is a shareholder” (1) Freight transport "100% govt ownership" “No govt ownership” (4) CFR Marfa Air transport Domestic and international traffic 97 32 TAROM National post - basic letter services 75 86 National post - basic parcel services 75 76 "Govt. controls at least 1 firm, but other firms operate as well” Postal services Posta Romana (15) "Govt. controls at least 1 “No govt involvement in sector” firm, but other firms (6) Courier operate as well" PTO 46 22 Romtelecom Telecommunications Mobile telecommunications 0 18 - Source: OECD data and own elaborations 11 Box 2: Privatization and Governance of State-Owned Enterprises: Recent Developments 11 According to the 2009 Memorandum of Understanding between the government of Romania, the International Monetary Fund, the World Bank, and the European Union, the authorities have agreed to a comprehensive privatization agenda which includes the sale of majority and minority stakes in a number of large SOEs. As of December 2011, the following companies were listed for planned sales of majority government shares 12:  Oltchim (chemical products); Cuprumin (extractive industry); CFR Marfa (the national cargo rail company); ElectricaServ, SC ElectricaFurnizare SA and subsidiaries, Hunedoara, ElectrocentraleBucuresti (major energy producers and suppliers); In addition, auctions of minority stakes are envisioned for:  Tarom (national airline company); Transelectrica, Hidrolectrica, Nuclearelectrica, Romgaz and Transgaz (major energy companies); Posta Romana (national post – basic letter services); and Petrom. Corporate governance: Romania adopted a new law on corporate governance in November 2011. The new regulations require: - Regular independent external audits; - Quarterly publication of financial data; - Reinforcement of OECD principles on corporate governance and the rights of minority shareholders; - Suitable qualifications for management and board members of state-owned enterprises. As noted in recent analysis by the IMF (January, 2012), diligent application of the law will be instrumental in the privatization process, particularly for listings of minority stakes, where investors could be concerned with of the lack of corporate governance standards in SOEs, and the potential for abuse of minority shareholder rights. The government agreed to undertake a number of measures to improve the performance of SOEs under monitoring. 13 3.1.2. STATE INVOLVEMENT IN BUSINESS OPERATION The indicator for ‘state involvement in business operations’ captures both the existence of price controls and the use of “command and control”, as opposed to incentive-based regulation. The use of price controls has substantially decreased since the first decade of transition (World Bank 2004). However, some prices remain under government control. Retail prices for tobacco and pharmaceuticals are controlled, as well as prices of network sectors, including those for gas, water, and passenger urban and rail transport (Romanian Competition Council, 2010). Particularly in the energy sector, tariffs are set below market levels by the energy regulator (ANRE) for both individual and industrial consumers. As part of a recent program with the IMF and the EC, the government of Romania has committed to a gradual deregulation of prices in order to attract private investment, which is required to revamp the 11 IMF( January 2012) 12 As of February 2012 four SOEs were listed for privatization offers by end-April 2012: Oltchim, Transelectrica, Transgaz and Cuprumin (IMF, April 2012). According to most recent information, a majority offering for Oltchim is scheduled for May 31, 2012. Shares in Transelectrica were placed on offer on March 14, 2012. The sale of a minority stake in Transgaz is due to start at the end of June 2012. Negotiations over the sale of Cuprumin were ongoing as of April 2012. 13 IMF (April, 2012) 12 country’s energy infrastructure and achieve long-term viability. 1415For professional activities, price controls take the form of non-binding recommended fees, which are provided for all services. 16 Figure 9: Price controls Figure 10: Use of command and control regulation Source: Authors’ elaborations based on OECD data Source: Authors’ elaborations based on OECD data As to the use of command and control regulation indicator, Romania’s score is relatively high due partly to the fact that, at the economy-wide level, no guidance has been issued on the use of alternatives to traditional regulation (see Box 3 and Box 7). In addition, regulations constrain activities in a number of network sectors (road freight and railways) 17, while in the area of professional services, the Romanian government controls advertising activities for accounting and legal services. In addition, legal service providers are also limited in the forms of business organizations under which there are allowed to practice (only partnerships and some types of incorporation are allowed). However, unlike many other EU members, Romanian law also restricts legal forms of businesses for architects (partnerships and some types of incorporations), whereas in other European countries architects do not face similar restrictions. 18 14 “Romania energy deregulation key to new investment”, Reuters, April 30, 2011 15 In February 2012, the government of Romania agreed (as part of the fourth review of Romania's Stand-By Arrangement with the IMF and the second interim review of the program by the EC) that energy prices will be liberalized gradually: by the end of 2013 for non-residential consumers and by 2017 for households. 16 Average of available professional services (OECD, 2009) 17 Road freight: To the question “Do regulations prevent or constrain: Private carriage (transport only for own account)?”Romania answers “Yes”. In contrast, only 4 of 21 EU countries included in the study also answered “Yes” to this question. Railways: To the question “Are companies operating the infrastructure or providing railway services subject to universal service requirements (e.g. obligation to serve specified customers or areas)?” Romania answers “Yes”. In this area, Romania’s practice is on a par with more than half of EU respondents (14 out of 21 respondents answered “Yes” to this question). 18 18 countries out of 22 EU members included in the study. 13 Box 3: What the PMR survey means by “command and control” regulation The contrasting use of “command-and-control” and “incentive-based” regulation appear to have been brought into common usage by Schultze who wrote in a 1977 lecture about economic efficiency: “We tend to see only one way of intervening – namely removing a set of decision from the decentralized and incentive-oriented private market and transferring them to the command-and-control techniques of government bureaucracy” (page 6) In this context, the PMR attempts to measure the extent to which the cost of new regulation is assessed, and whether alternatives are considered before implementing new regulations. About half of the indicator weights are allocated to the following two questions: Regulators are required to assess alternative policy instruments (regulatory and non-regulatory) before adopting new regulation. (Current answer: yes). Explanation. The use of a wide range of mechanisms for meeting policy goals, not just traditional regulatory controls, helps to ensure that the most efficient and effective approaches are used. Approaches may include green taxes and subsidies, voluntary agreements, information programs such as eco labeling, self-regulation, permit- trading schemes, and performance-based regulation (where a sector or industry must comply with a standard but can broadly choose how to meet it). Note that the question only refers to whether the obligation exists as a specific provision in a specific legislative act, not whether the spirit of it is in fact respected. A positive answer to the question would require the existence of a normative act explicitly ruling out regulation as the default option Guidance has been issued on using alternatives to traditional regulation. (Current answer: no). Explanation. The regulatory process is governed by a standard procedure, outlining the steps to be taken to issue new regulation. For instance, the procedure may include binding ex ante regulatory impact assessment (RIA). 3.2 BARRIERS TO ENTREPRENEURSHIP The second regulatory domain covered by the PMR is ‘barriers to entrepreneurship’ which measures administrative transparency and government’s efforts simplify its communication with the public, administrative burdens for new firms at the economy-wide and industry level, and barriers to entry in specific sectors. Since the beginning of the transition period, Romania has made significant progress in reducing legal barriers to entrepreneurship, thus placing the country in a good position in terms of official regulation relatively to its European peers (Figure 11). For example, since 2001 the government has adopted an annual action plan to remove regulatory barriers for businesses, which led to a significant decrease in transaction costs for firm entry and operation. A great impetus for these reforms was the prospect of EU adherence. In 2007, the year of Romania’s accession, the country was classified by Doing Business as the second most active reformer. 19 However, progress has stalled in recent years. The implementation of the simplification agenda has been negatively impacted by a lack of institutional coherence and political support (World Bank, 2011). In 2012 Romania achieves the 72nd place for overall ease of doing business, down from 65th in 2011. 19 News release: “Doing Business 2007: Eastern European economies lead worldwide momentum for regulatory reform” (International Finance Corporation and World Bank, September 6, 2006). 14 Figure 11: Barriers to entrepreneurship in EU countries Source: Authors’ elaborations based on OECD data A decomposition exercise (see Figure 12) shows that in Romania the ‘administrative burdens on start- ups’ and the ‘barriers to competition’ constitute the main obstacles to entrepreneurship identified by the PMR study. As will be shown below, Romania’s score for the third indicator - ‘regulatory and administrative opacity’ is zero, which is indicative of best practice. This is similar to Italy, Portugal, Austria, and Spain. In this area (regulatory Figure 12: Decomposition – Barriers to entrepreneurship opacity) other countries, including, perhaps surprisingly, the United Kingdom and Germany appear to be less advanced when it comes to making information accessible to stakeholders. However, when interpreting these results one must bear in mind that the PMR measures only official regulation, and does not capture the implementation aspect. This can have important practical implications, which will be explored in the following section. Source: Authors’ elaborations based on OECD data 3.2.1 REGULATORY AND ADMINISTRATIVE OPACITY According to official regulation, Romania has achieved best practice in terms of regulatory and administrative opacity, a measure that encompasses the simplification of licenses and permits, as well as initiatives to minimize the administrative burden of interacting with the government. Specifically, the indicator for licenses and permits takes into account two main components: the “silence is consent” rule and the existence of “one-stop shops” for obtaining information and for issuing or accepting notifications or licenses. The PMR value for communication and simplification of rules measures the degree to which regulations are made transparent and accessible to citizens. 15 Figure 13: Licenses and permits system Figure 14: Communication and simplification of rules Source: Authors’ elaborations based on OECD data Source: Authors’ elaborations based on OECD data The silence-is-consent rule aims to reduce the uncertainty often faced by firms when waiting for administrative decisions and to increase the efficiency of public officials. In Romania, a response is guaranteed by law within 30 days for the approval of a certain set of licenses and authorizations from the moment of the application (or the approval is granted automatically). One-stop-shops can also help reduce the time required for business registration and may lower transactions and information costs. These benefits will be reaped only if the process is based on streamlined regulations, smooth communication between the various government authorities involved, and makes use of well-designed IT systems (Fan, 2006). Romania first established a one-stop-shop for businesses in 2001 and has also implemented a number of reforms to improve the communication of rules and procedures to stakeholders (see Box 4). Box 4 : Romania’s efforts at simplification and better communication of rules and regulations As part of the annual action plans to improve the business environment in the pre-accession phase, most of the important pieces of legislation impacting upon the business climate, such as the Silence-is-consent Law, the Decisional Transparency Law, the Free Access to Public Information Law, also benefited from broad media dissemination campaigns, including TV, radio and newspapers presentations, brochures and posters, direct free access telephone information lines to the government. Other traditional means of communication, such as meetings with relevant stakeholders, including businesses associations were broadly used, and company surveys were carried out, including by FIAS 20, to capture satisfaction with the changes and suggestions for further measures. As part of the EU accession process, Romania has also adopted the “Better regulation strategy for the period 2008 – 2013”, which is based on the “Better Regulation Agenda”, an initiative set up by the European Commission in order to improve and simplify existing regulation, design effective new legislation, and support enforcement efforts. However, the implementation of the “Better Regulation Agenda” has come against significant challenges. The multitude of institutions responsible for regulatory reform makes coordination difficult and does not help to build ownership at the political level. As a result, out of 49 bureaucratic procedures related to property registration, operating a business or building works that were selected for removal during 2008 and 2009 (as part of the Plan for Simplification in the Memorandum of Understanding between Romania and the EC) only 13 authorization procedures have been eliminated (World Bank, 2011). The problem was highlighted in the 2011-2012 National Reform Program, which emphasizes the need to reduce the number of required licenses and permits. The fact that regulatory opacity continues to pose a problem for the business environment is readily apparent when one examines the situation “on the ground”. A large number of firms still complain about a 20 The Investment Climate Advisory Services of the World Bank Group 16 gap between the provisions of the rules and their practical implementation, while others continue to find the access to relevant information difficult. According to the most recent Business Environment and Enterprise Performance survey (BEEPS) in 2009, 30% of firms still considered licenses to be a problem for doing business in the country. This is substantially more than comparator countries, and appears to have worsened since 2002. Evidence suggests that the communication strategies of the authorities have only partially succeeded in reaching the mass of companies impacted. As noted by the most recent Functional Review of the Ministry of the Economy (World Bank, 2011), despite existing measures to increase transparency, many firms continue to complain about the lack of communication between government and businesses throughout the process of drafting new legislation. In addition, interviews with the private sector 21 highlight that regulations are often times vaguely worded, leaving room for interpretation, and changes in the regulatory environment frequently occur without proper notice to stakeholders. Figure 15: Percent of firms identifying businesses licensing and Doing Business 2012 ranks permits as a major constraint Romania on the 63rd position (down from 31st in 2011) 22 for Starting a Business. This shows that, despite the progress made so far, other countries have taken the lead in reforming the environment for small and medium-sized companies. When it comes to obtaining licenses and permits, surveys of companies suggest that most of the Source: Enterprise Survey, World Bank difficulties arise for those requesting construction licenses. rd Doing Business 2012 ranks Romania 123 out of 183 countries in terms of dealing with construction permits. The procedures involved appear lengthy compared to many OECD countries: in Romania it takes 30 days to obtain an urbanization certificate and 120 days for the final assessment of the construction through the Authorization Commission (Doing Business 2012). The procedures to subsequently connect buildings to utilities, mainly gas and electricity, are also long and relatively costly23. 3.2.2 ADMINISTRATIVE BURDENS ON START-UPS Romania has made significant efforts to improve the administrative environment for starting a business, including the continued simplification of company registration procedures and, as already mentioned, the establishment of one-stop shops for firm registration. However, much remains to be done in terms of removing cumbersome restrictions, both at the firm and at the sector-level. The most recent Doing Business Report (2012) shows Romania trailing behind regional comparators, such as Hungary and Bulgaria, with regard to the ease of starting a business. In addition, recent analysis of the country’s 21 Interviews were conducted as part of the Functional Review of the Ministry of the Economy (WB, 2011) 22 Older rankings are not available in the Doing Business database. 23 In DB 2012 Romania ranks 165th out of 183 for “Getting Electricity”. 17 business environment makes it clear that administrative burdens to business operation remain a major concern for the private sector. Firms report a perceived deterioration in the business environment over the past few years, including extensive time that must be devoted to compliance with administrative procedures (World Bank, 2011). Not only does the private sector continue to report significant challenges to start-up and operation, but the evidence from the PMR survey shows that Romania’s policies for creation of new firms appear more restrictive than those of the majority of EU members. Figure 16 Administrative burdens for corporations Figure 17 Administrative burden on sole- proprietorships Source: Authors’ elaborations based on OECD data Source: Authors’ elaborations based on OECD data When examining the requirements for the two types of firms covered by the PMR survey, certain differences emerge. Romania seems better placed to support the establishment of corporations than, for example, Hungary or Poland, and has almost achieved parity with the EU ( this indicator measures the number of procedures, the number of days, and the minimum capital required to start a limited liability company). On the other hand, the administrative burdens on the creation of sole-proprietorships appear substantially higher in Romania than in other EU countries. This could be due to the fact that, according to the PMR survey, an entrepreneur in Romania would have to complete Figure 18: Sector specific administrative burdens 22 mandatory procedures in order to register an individual enterprise, versus 10 on average for the EU (pre-registration and registration). The indicator on sector–specific administrative burdens aims to assess the restrictiveness of licensing, registration and notification requirements in the road transport and retail distribution sectors. Here Romania’s score is higher than the EU average. The main difference between Romania and comparator countries, as Source: Authors’ elaborations based on OECD data measured by the PMR, appears to be that, unlike in many other EU members, 18 supplementary licenses and permits are always required for the sale of food or clothing (in addition, the retailer is required to sign-upin a commercial register and to notify the authorities) (see Annex for detailed answers). These obligations may place additional burdens on retailers and serve as evidence to support the findings from Doing Business and BEEPS outlined above. Countries with significantly lower requirements, such as the United Kingdom, show that there is significant scope for liberalization. 3.2.3 BARRIERS TO COMPETITION In the area of barriers to competition, Romania’s performance in terms of legal barriers (restrictions on the number of competitors allowed to operate a business in specific sectors of the economy) is better than that of most other countries and below the European Union average. This is largely because Romania has incorporated a significant number of EU rules and practices in national legislation. The only industries where the number of competitors is restricted are the operation of road infrastructure and other business activities (professional services). Moreover, Romania has succeeded in eliminating antitrust exemptions for state-owned enterprises (Campeanu et al, 2003) and has achieved best practice in this respect. Figure 19: Legal barriers Figure 20: Antitrust exemptions Source: Authors’ elaborations based on OECD data Source: Authors’ elaborations based on OECD data As measured by the PMR indicator, in Romania Figure 21: Barriers in network sectors the official regulatory barriers to competition in network sectors appear to be relatively low. The legal conditions to entry in most markets are classified as competitive, and legal as well as ownership separation exists in network sectors, including in: gas production and import; gas distribution and supply; transmission and generation of electricity; and between the operation of infrastructure and the provision of railway services. However, a more detailed analysis of the competitive environment in specific network industries – such as electricity – reveals that significant challenges remain, particularly when it comes to leveling the playing field between SOEs and private actors (see Box Source: Authors’ elaborations based on OECD data 19 5). Box 5: Challenges for Competition Policy in the Electricity Market Starting in the late 90s Romania conducted a series of significant reforms in the electricity sector in preparation for the entry into the EU. The reforms were designed to break up the state-owned vertically integrated utility, to separate sectors that are characterized as natural monopolies (transmission, distribution) from potentially competitive areas (generation, supply), to reduce the ownership and involvement of the state, and to create competitive wholesale and retail markets. An independent energy regulator ANRE was established. The reforms were expected to improve sector governance and to attract much needed private investments into the sector. However, the pace of the reforms slowed down even before the country joined the EU. In the recent years the government even considered the plan to return to the old model of vertically integrated national champions. The current state of the electricity market in Romania is characterized by a high degree of state involvement. The government owns the major electricity generators and the majority of electricity distribution (Nutu, 2010). Transmission operator (Transelectrica) remains independent from generation to ensure non-discriminatory access for third parties. There are many suppliers at the retail market - 55 suppliers were active in 2010, of which 7 were default suppliers (3 state-owned and 4 with majority of private ownership) (ANRE, 2011). There are several major components of the wholesale market in Romania. Wholesale markets are the markets where suppliers buy from generation companies or from other suppliers. The majority of the energy is traded through long- term bilateral contracts that are either regulated or concluded through the negotiation process. The regulated contracts are the contracts between generators and suppliers to serve the captive retail customers. The prices and volumes of the regulated contracts are established by ANRE. A series of scandals at the wholesale market that took place in 2002-2004 and in the recent years serve as an indication of the existing problems. The scandals were regarding the contracts signed by state-owned producers and certain electricity traders, industrial clients and electricity producers (so-called “smart guys”) to buy or sell at the preferential prices (below or above market-level prices). In April 2012 the European Commission opened five in- depth investigations to examine the contracts of state-owned Hidroelectrica. The investigations were opened on the grounds that preferential prices represent indirect subsidies that might breach EU state aid rules. According to the EU Commission, there are indications that the state might have played a role in the decisions of the utility regarding the investigated contracts. Ensuring the absence of preferential treatment in the electricity contracts will improve not only the competition situation at the electricity market, but also in the other affected sectors of the economy. On the other hand Romania fares worse than the EU average in terms of barriers to entry in services. The main area where Romanian law is more restrictive than that of its peers is ‘retail distribution’. 20 Figure 22: Barriers to entry in services For example, if licenses and permits are required for selling food, they are product specific. This is not the case for the majority of EU comparators included in the sample 24. Moreover, the threshold surface limit at which regulation of large outlets applies is 1000m², less than for most EU countries in the study. These restrictions constitute ‘entry regulations’, which can put in place legal barriers to the establishment of large retail outlets or have the potential to increase costs (Conway and Nicoletti, 2006). In addition to the barriers analyzed by the PMR survey, a closer inspection of the market for professional services in Romania Source: Authors’ elaborations based on OECD data finds additional challenges (see Box 6). Box 6: Challenges for Competition Policy in Professional Services Professional services are typically governed by legislation adopted by the Parliament, Government and relevant Ministries as well as guidelines adopted by the respective professional associations – nevertheless, deregulation gains more ground. In the EU countries, the type and depth of regulations differs across professional services. In particular, in the countries where regulation is minimal, the markets are more efficient, generating benefits both to consumers and service providers. The deregulation of professional services is unfolding in many EU countries and induces increasing tariff differentiation, service diversification and innovation. Since 2000, the RCC has been proactive in eliminating regulations governing professional services which were deemed highly distortive from the competition point of view. It identified several barriers to entry or to the operation in these markets, notably: (i) the obligation of membership of a professional association; (ii) restrictions on the number of service providers in certain areas or based on demography, including restrictions on the number of interns; and (iii) ownership restrictions. In Romania, any professional service provider is obliged to be member of a professional association, but the entry process seems to engender several shortcomings, creating distortions. To enter any professional service (such as lawyers, accountant, architect), a certain set of qualifications is required, but these should not be excessively burdensome, should be transparent, non-discriminatory and should provide an appeal mechanism in case of rejections. Such qualifications are mostly related to education, specialized training, experience and specific exams. A public body or a professional association certifies conformity with these entry criteria. In practice, existing professional associations are favorable to maintaining the membership obligation on the ground that it guarantees a certain level of professionalism and service quality. Nevertheless, obtaining an authorization to practice a certain professional service has not always been targeted towards ensuring high service quality, mainly because (i) other criteria than the ones mentioned above are often applied; (ii) the verification of entry qualifications is not dully done; (iii) sometimes, certain candidates are favored even if they are not the most qualified, while discrimination among certain category of candidates still exists. Moreover, for certain professions, only one professional association is allowed by law to operate in the market, while the management of such associations is ensured by its members who also decide on entry of new members. Therefore, ensuring the independence of management boards is key to remove any entry barrier and may be achieved by ensuring that the board members are not part of the same profession. Furthermore, the existence of restrictions on the number of service providers in certain areas or based on demography generates artificial tariff increases and requires balancing the benefits associated with maintain a 24 To the question “If licenses and permits are required for selling food, are they product specific?” Romania answers “Yes”. In contrast, out of 21 EU countries included in the sample, 12 answered “No” or “Not applicable”. 21 certain service quality with the loss in consumer welfare. For example, the existing deontological code governing the notary profession (art. 28, section j) considers that opening a notary office in the close proximity (in the same building or within a distance of 50 meters) of an existing notary office is anticompetitive especially without notifying the latter. Another discriminatory practice stems from the fact that certain notary offices only provide high priced services, while other services with a lower value are provided by other offices. Other restrictions are related to the obligation for a newly authorized professional service provider to undertake an internship period and be supervised by a senior member of the profession. This further entails distortions associated with: (i) discriminatory treatment of among interns based on gender; (ii) lengthy internship period, in addition to low level of remuneration; and (iii) limitations on the maximum number of interns supervised by senior experts. In this context, the existence of excessive restrictions to entry may limit competition in the market among professional service providers, leading to higher tariffs and limited choice for consumers. The RCC advocated for and intervened to eliminate of existing quantitative restrictions in many cases, such as pharmacies, dentists and notaries, but has been less active regarding the obligation of membership to an association in these cases. The restriction on ownership is another barrier to entry that also restrains access to capital for professional service providers. Although for certain professions regulation of business activity may be justified to protect the independence and the ethical standards of the service providers, it is preferable to ensure such principles through less distortionary mechanisms. Other barriers to service provision may involve: (i) setting mandatory or recommended minimum or maximum fees by the professional bodies in charge of regulation; (ii) advertising restrictions; and (iii) restrictions on creating associations of professional service bodies. 3.3 BARRIERS TO TRADE AND INVESTMENT Observance and implementation of the rules for membership of the World Trade Organization (WTO) and, even more strongly, the European Union (EU), have led to a significant reduction of barriers to trade and investment in Romania over the last two decades. Romania’s foreign trade policy has been driven most of all by the commitments of the EU Eastern Enlargement project, promoting bilateral trade liberalization initially with the EU and EFTA and, subsequently, with other preferential partners of the EU. The Pan-European Agreement on the Cumulation of the Rules of Origin, combined with the gradual removal of tariffs on all industrial products by January 2002, 25 as well as the harmonization of technical standards, led to Romania’s participation in a de facto free trade area for industrial products (World Bank, 2004). The removal of tariffs on agricultural and agro-processed goods, in January 2007, as Romania joined the Common Agricultural Policy (CAP), completed the liberalization of trade with the EU. 25 As prescribed by the European Association Agreement between the EU and Romania, signed in 1993. 22 Figure 23: Barriers to trade and investment in EU countries Source: Authors’ elaborations based on OECD data FDI inflows rose quickly in the 2000–2008 period, at an average annual rate of 38%, in excess of the regional average, following actions taken by the government to liberalize the capital account and due to a decrease in perceived country risk after Romania’s accession to the EU. As a result, between 2005 and 2010, the stock of FDI from EU partners as a share of gross domestic product rose from 22% to 38%, an impressive performance, however, still below the average for the other EU10 members of 51% of GDP (in 2010). 26 After 2008, FDI flows have plummeted, slowing down Romania’s process of catching up with its regional peers in terms of investment levels. During the last decade, total portfolio investment into Romania represented approximately 5% of GDP, significantly less than the regional average of 17%. 27 The PMR indicator on barriers to trade and investment (Figure 23) includes explicit policies (‘barriers to FDI’, ‘discriminatory procedures against Figure 24: Decomposition – Barriers to trade and investment foreign firms’, and ‘tariffs’) as well as ‘regulatory barriers’ (such as failure to engage in international harmonization treaties). These are reviewed in turn in this section, but can be summarized as follows: Romania has succeeded in eliminating tariffs and discriminatory procedures against foreign firms, but needs to improve its practices when it comes to regulatory barriers and barriers to FDI. As can be observed based on the decomposition exercise (Figure 24), for most EU Source: own elaborations based on OECD data countries the remaining barriers to trade and investment are explicit ones (for EU members these are only barriers to FDI). The situation is 26 The average includes the EU10 members, minus Romania 27 The regional average includes the EU10 members, minus Romania. The period of reference is 2001-2010. Calculations based on Eurostat (International Investment Position and National Accounts databases) 23 reversed in the case of Romania (as well as in Denmark and Germany) where regulatory barriers (or other barriers) constitute the biggest impediment to the free flow of goods and services. 3.3.1 EXPLICIT BARRIERS TO TRADE AND INVESTMENT All trade tariffs within the EU equal those of the Single Market. In Romania the barriers to FDI (Figure 25) are slightly higher than the EU average. These are foreign ownership barriers which take the form of statutory or other legal limits to the proportion of shares that can be acquired by foreign parties, or special voting rights which can be exercised by the initial (domestic) owner in case of acquisition of equity by foreign investors. These types of restriction may apply in general or in specific sectors that are considered ‘strategic’ such as air transport, telecommunications, or electricity generation. Figure 25: Barriers to FDI Source: Authors’ elaborations based on OECD data Romania maintains certain limits on the proportion of shares that can be acquired by investors in certain network sectors. However, it should be noted that such statutory or legal restrictions apply not only to foreign but also to domestic investors. For instance, as in other EU countries, a 49% foreign ownership ceiling remains in place in the airlines sector. This means that Romania does not discriminate between domestic and foreign firms, a factor that also explains also the best practice rating at procedural level, for discriminatory procedures (Figure 26). Foreign firms in Romania have equal rights with domestic firms to appeal and redress through competition agencies, regulatory bodies, trade policy bodies, or private rights of action. 24 Figure 26: Discriminatory procedures Figure 27: Regulatory Barriers (Other Barriers) 3.3.2 OTHER BARRIERS TO TRADE AND INVESTMENT As reflected by the most recent PMR indicators, in Romania there are still a number of regulatory barriers that hinder trade and investment (Figure 27). Specifically, there are as of yet ‘no specific provisions that require officials to recognize the equivalence of regulatory measures in other countries’. This is important because, in cases where international harmonized measures are not possible or cannot be implemented, recognizing the equivalence of regulatory measures or conformity assessments performed in trade partner states, may help overcome the obstacles posed by differences in regulation across countries (OECD, 1997). 4. CONCLUSION Romania’s performance on the PMR indicators shows that, despite continuous improvement in the regulatory environment over the past few years, there remains significant room for improvement: out of the 18 low-level indicators underlying the overall PMR, Romania has achieved best practice, in terms of official regulation, in five. These comprise three of the indicators falling under barriers to entrepreneurship (licenses and permits systems, communication and simplification of rules, and antitrust exemptions), and two of the four that make up barriers to trade and investment (tariffs – due to Romania’s inclusion in the EU, and discriminatory procedures). In addition, Romania performs on a par or better than the EU average on four additional indicators: direct control over business enterprise, administrative burdens on corporations, legal barriers to competition, and barriers to competition in network sectors. Romania could achieve significant progress by limiting the extent of state control over the economy. Indeed, as Figure 28 demonstrates, Romania is above the EU average, and far from best practice28, regarding the scope of the public enterprise sector and the existence of large state-owned enterprises which continue to play a dominant role in many network sectors. 28 In the PMR system “best practice” would correspond to an indicator value close to zero, meaning that no regulatory restrictions are imposed. 25 Figure 28: Remaining gaps compared to the EU average Concerning the use of command and control regulation, one concrete action the government could undertake would be to issue guidance and training on using alternative to traditional regulation. More substantively, this requires changing the regulatory and administrative culture so that new regulation is not the default option to modify economic behavior (Box 7 discusses alternative regulatory approaches). Additional areas of potential focus include: eliminating the remaining constraints on specific activities in road freight and railways (see Annex III for details) and removing limitations placed on the advertising activities and legal forms of incorporations of professional service providers. 26 Box 7. Alternative Regulatory approaches Performance-Based Regulations—specify required outcomes or objectives rather than the means by which they must be achieved. Thus firms and individuals can choose processes that are more efficient and less costly, which promotes the use of new technology on a broader scale. Such type of regulation is increasingly used in health, safety, consumer protection, and environmental regulation. Drawbacks include measurement problems related to desired outcomes, higher administrative and monitoring costs, greater responsibilities for small companies to develop appropriate compliance strategies. Most countries have resorted to the use of guidelines or “safe harbors” in conjunction with performance-based regulation. Guidelines provide information on appropriate compliance strategies, while safe harbors allow the benefits of certainty of compliance associated with prescriptive regulation to be attained, while also allowing more innovative firms to take advantage of the benefits of such regulation. Process Based Regulations—require businesses to develop processes that systematically control and minimize production risks. These processes are used in businesses with multiple and complex sources of risk, where ex post testing of the product is either ineffective or expensive. Process based regulation is predominantly used in health, food safety, and environmental regulation. Co-regulation—businesses take the lead in regulation through endorsement and adherence to codes of practice. This type of regulation is highly cost effective for the government. Drawbacks include the possibility for encouraging anti-competitive activities by business or professional organizations. Economic Instruments - taxes, subsidies, tradable permits, vouchers and the like. Economic instruments allow businesses to achieve regulatory goals in the least costly manner and provide market incentives which reward the use of innovation and technical change. Information and Education—most widely used approach to regulation in OECD member states; empower consumers to adopt actions or make informed choices to change their behavior. Examples include campaigns aimed at reducing speeding when driving, anti-litter behaviors; reducing the use of drinking water; eco-labeling of products. Guidelines—issued by regulatory authorities, setting out processing or providing interpretations to aid understanding of government objectives by businesses and citizens. Guidelines may accompany existing regulations, but also are increasingly used as stand-alone documents. Guidelines, for example, are widely used in the area of consumer protection in Denmark. Voluntary Approaches—initiated by industries, sometimes formally sanctioned or endorsed by government. They include voluntary initiatives, voluntary codes, voluntary agreements, and self-regulation. An example of a voluntary arrangement is the chemical industry’s Responsible Care Program, used in 40 countries, which promotes the adoption of rules for sound environmental management practice. _____________ Source: OECD 2002. Removing legal constraints to the share of stakes that can be acquired by foreign investors in network companies (a practice followed by many EU and OECD countries) would eliminate the remaining barriers to FDI. High barriers to entry in services are pervasive throughout the European Union, as the PMR survey indicates (although in some countries, such as the UK, the market for services is considerably more liberalized than the EU average). Like the infrastructure sectors, professional and other services provide supply inputs to a large number of firms in the economy. When the providers of these inputs are not subjected to competitive pressures (because the requirements for entry are highly onerous) this may result 27 in expensive, low-quality services. Because these are upstream markets this, in turn, could make a large number of local companies less competitive domestically and internationally. Unfortunately, in Romania the barriers to entry in services appear even higher than the EU average. A major challenge is to implement the EU Services Directive, adopted in 2006, which aims to eliminate obstacles to services provision in the EU internal market by establishing two fundamental freedoms: free establishment for service providers, and free movement of services between Member States. The Directive aims to improve the basis for economic growth and employment by abating barriers to cross border trade in services. The core of the provisions intended to eliminate obstacles to the free movement of services is the Country of Origin Principle (CoOP). This makes it easier for service providers to establish themselves, offer services in other Member States without unnecessary regulation and bureaucracy, and provide services temporarily and/or at a distance based on the rules in the country in which they are established. The Directive applies to services supplied by providers established in all Member States (e.g. business services as advertisement, estate agents, IT consultancy, management consultancy, legal services, computer services; construction services as commercial construction building services, industrial cleaning; hotels and restaurants, local services, etc.). However, it does not cover financial services, electronic communication services, audiovisual services, services in the field of transport, services of temporary work agencies, healthcare agencies publicly or privately financed. While it is imperative that Romania continues to improve on rules and legislation governing product market regulations, an equally important challenge has to do with improving practices. A series of prerequisites is necessary to improve the effectiveness of application and enforcement of regulation which will increase the long run competitiveness of the Romanian economy. A recent Functional Review of the Business Environment in Romania (WB, 2011) outlines a number of actions that can be taken to improve the institutional framework. These include: • Political commitment at the highest level. Ensuring political support from the highest level of government is crucial to generate consensus for reform both within and outside public administration. This could be achieved through the establishment of an official advisory body, chaired by the Prime Minister, to define priorities for administrative simplification based on a unified, ‘whole-of-government’ approach to regulatory reform; • Redesign of the institutional set-up for regulatory reform. Political support should be reflected in the reorganization of the institutional architecture of government with the objective of improving the coordination and cooperation among implementing agencies and the oversight of the overall regulatory process. The responsibilities of the unit in charge of regulatory reform should be carefully reviewed and prioritized and the necessary resources allocated to it; • Expand the use of regulatory tools. The use of regulatory tools and impact assessments (such as RIA) should be better explained and expanded. Consultations with the business community should be conducted in a on a regular basis and in a timely manner, before new legislation is enacted. 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"Romania Functional Review: Ministry of Economy, Energy Sector and Business Environment", Final Report, Washington, DC. 30 Annex I Number of mandatory procedures for establishing a sole-proprietorship* How many mandatory procedures would an Country entrepreneur have to complete to register an individual enterprise (pre-registration+registration)? Australia 5 Austria 15 Belgium 9 Canada 6 Chile 18 Czech Republic 9 Denmark 5 Estonia 13 Finland 17 France 5 Germany 0 Greece 11 Hungary 12 Iceland 7 Ireland 0 Israel 14 Italy 9 Japan 1 Korea 5 Luxembourg 19 Mexico 9 Netherlands 6 New Zealand 3 Norway 1 Poland 25 Portugal 8 Slovak Republic 18 Slovenia 21 Spain 6 Sweden 4 Switzerland 6 Turkey 11 United Kingdom 2 United States 3 Average OECD 8.9 Brazil 11 China 34 India 16 Indonesia 10 Russia 15 South Africa 2 * The Regulatory Indicators Questionnaire, 2008 replies; Question number (Q3.1.1) Source: The OECD International Regulation Database, extract of the questions needed to construct the regulation indicators. 31 Annex II PMR and component domains Product Country market State Barriers to Barriers to trade regulation control entrepreneurship and investment Austria 1.4 2.0 1.2 1.0 Belgium 1.4 2.5 1.4 0.1 Czech Republic 1.6 2.4 1.6 0.7 Denmark 1.0 1.4 1.2 0.5 Estonia 1.2 2.0 1.4 0.3 Finland 1.1 1.8 1.4 0.2 France 1.4 2.6 1.3 0.3 Germany 1.3 2.0 1.3 0.5 Greece 2.3 3.8 2.0 1.1 Hungary 1.2 1.9 1.7 0.1 Ireland 0.9 1.3 1.2 0.1 Italy 1.3 2.3 1.1 0.5 Luxembourg 1.5 2.5 1.7 0.3 Netherlands 0.9 1.7 0.9 0.1 Poland 2.2 3.4 2.3 0.9 Portugal 1.4 2.7 1.2 0.2 Romania 1.6 2.7 1.2 1.0 Slovak Republic 1.5 1.6 1.5 1.5 Slovenia 1.4 2.6 1.1 0.4 Spain 1.0 1.6 1.2 0.1 Sweden 1.2 2.4 1.0 0.4 United Kingdom 0.8 1.5 0.8 0.0 32 Annex II.2 State Control Public Involvement in business Country State control ownership operation Austria 2.0 3.4 0.6 Belgium 2.5 2.5 2.5 Czech Republic 2.4 3.6 1.3 Denmark 1.4 2.0 0.7 Estonia 2.0 2.2 1.8 Finland 1.8 2.8 0.7 France 2.6 3.7 1.6 Germany 2.0 2.8 1.2 Greece 3.8 4.0 3.7 Hungary 1.9 2.3 1.5 Ireland 1.3 2.2 0.4 Italy 2.3 3.4 1.3 Luxembourg 2.5 3.4 1.7 Netherlands 1.7 2.6 0.8 Poland 3.4 5.3 1.4 Portugal 2.7 3.7 1.6 Romania 2.7 3.5 1.8 Slovak Republic 1.6 2.9 0.3 Slovenia 2.6 3.9 1.4 Spain 1.6 2.2 1.0 Sweden 2.4 4.1 0.7 United Kingdom 1.5 1.9 1.1 33 Annex II.3 Barriers to entrepreneurship Administrative Regulatory and Barriers to Barriers to Country burdens on administrative entrepreneurship competition startups opacity Austria 1.2 2.1 0.0 1.4 Belgium 1.4 1.5 1.1 1.7 Czech Republic 1.6 2.1 1.3 1.3 Denmark 1.2 0.6 1.0 1.8 Estonia 1.4 1.6 1.2 1.5 Finland 1.4 1.5 1.1 1.5 France 1.3 1.3 1.0 1.6 Germany 1.3 0.5 2.0 1.4 Greece 2.0 2.6 1.4 1.9 Hungary 1.7 2.9 0.6 1.7 Ireland 1.2 0.4 2.1 1.0 Italy 1.1 1.7 0.0 1.6 Luxembourg 1.7 2.3 1.0 1.8 Netherlands 0.9 1.2 0.1 1.3 Poland 2.3 3.2 2.0 1.7 Portugal 1.2 1.7 0.0 1.8 Romania 1.2 2.2 0.0 1.4 Slovak Republic 1.5 1.9 1.6 1.1 Slovenia 1.1 1.6 0.2 1.4 Spain 1.2 2.3 0.0 1.3 Sweden 1.0 0.9 1.0 1.0 United Kingdom 0.8 0.6 1.1 0.8 34 Annex II.4 Barriers to trade and investment Barriers to trade and Country Explicit barriers Other barriers investment Austria 1.0 1.2 0.7 Belgium 0.1 0.3 0.0 Czech Republic 0.7 1.4 0.0 Denmark 0.5 0.2 0.7 Estonia 0.3 0.6 0.0 Finland 0.2 0.5 0.0 France 0.3 0.5 0.0 Germany 0.5 0.4 0.7 Greece 1.1 1.5 0.7 Hungary 0.1 0.1 0.0 Ireland 0.1 0.3 0.0 Italy 0.5 1.1 0.0 Luxembourg 0.3 0.5 0.0 Netherlands 0.1 0.3 0.0 Poland 0.9 1.2 0.7 Portugal 0.2 0.5 0.0 Romania 1.0 0.5 1.6 Slovak Republic 1.5 1.3 1.6 Slovenia 0.4 0.8 0.0 Spain 0.1 0.1 0.0 Sweden 0.4 0.7 0.0 United Kingdom 0.0 0.1 0.0 35 Annex II.5 State Control: values of the low-level indicators Direct Scope of Government Use of control public involvement in Price command Country over enterprise infrastructure controls & control business sector sector regulation enterprise Austria 3.0 3.9 3.4 0.4 0.8 Belgium 2.3 2.6 2.8 0.7 4.4 Czech Republic 3.8 3.4 3.6 0.4 2.2 Denmark 2.5 1.3 2.4 0.1 1.3 Estonia 1.9 2.1 2.7 1.3 2.3 Finland 3.5 1.4 3.4 0.2 1.3 France 3.8 3.8 3.5 0.2 2.9 Germany 3.3 3.2 1.8 1.2 1.2 Greece 3.8 3.8 4.5 2.4 5.0 Hungary 3.0 1.5 2.3 0.8 2.3 Ireland 2.0 0.6 3.9 0.0 0.8 Italy 4.3 2.6 3.3 1.2 1.3 Luxembourg 3.0 3.4 3.7 1.4 1.9 Netherlands 2.3 2.9 2.6 0.4 1.3 Poland 6.0 6.0 4.0 1.1 1.7 Portugal 3.5 3.7 3.9 1.2 2.0 Romania 4.4 2.2 4.0 1.3 2.3 Slovak Republic 3.1 2.4 3.2 0.6 0.1 Slovenia 3.8 4.1 3.6 1.7 1.2 Spain 3.5 1.1 2.1 0.3 1.7 Sweden 3.9 5.0 3.3 0.6 0.8 United Kingdom 1.3 3.6 0.8 0.2 2.0 36 Lic Commu ens nication Admini Admini Sector e and strative strative Annex II 6 (1) Barriers to specific and simplific burdens burdens entrepreneurship: values of the low-level adminis per ation of for for sole indicators trative mits rules and corporat propriet burdens syst procedur ion or firms em es Austria 0.0 0.0 2.3 2.0 2.1 Belgium 2.0 0.3 1.8 1.3 1.4 Czech Republic 2.0 0.5 2.3 1.8 2.3 Denmark 2.0 0.0 0.8 0.8 0.4 Estonia 2.0 0.3 1.3 1.8 1.7 Finland 2.0 0.3 1.0 2.3 1.1 France 2.0 0.0 1.5 1.3 1.1 Germany 4.0 0.1 0.8 0.3 0.4 Greece 2.0 0.8 3.0 2.5 2.4 Hungary 0.0 1.1 2.3 3.5 2.8 Ireland 4.0 0.2 0.8 0.3 0.3 Italy 0.0 0.0 1.8 1.8 1.5 Luxembourg 2.0 0.0 1.8 3.0 2.3 Netherlands 0.0 0.2 1.8 1.0 1.0 Poland 4.0 0.0 4.0 3.3 2.4 Portugal 0.0 0.0 1.0 2.8 1.4 Romania 0.0 0.0 1.8 2.8 2.0 Slovak Republic 2.0 1.1 2.5 1.8 1.6 Slovenia 0.0 0.3 1.5 2.0 1.4 Spain 0.0 0.0 2.5 2.3 2.3 Sweden 2.0 0.0 1.0 1.0 0.6 United Kingdom 2.0 0.2 0.8 0.5 0.5 37 Annex II.6 (2) Barriers to entrepreneurship: values of the low-level indicators Legal Antitrust Barrier in Barrier to entry in Country barriers exemptions network sectors services Austria 0.3 0.0 1.3 4.0 Belgium 1.2 0.0 1.9 3.6 Czech Republic 1.7 0.0 0.5 3.0 Denmark 0.9 2.5 0.3 3.7 Estonia 0.3 0.0 2.3 3.4 Finland 0.6 0.0 2.1 3.3 France 0.3 0.0 1.9 4.0 Germany 0.9 0.0 1.4 3.4 Greece 1.1 0.0 1.7 4.6 Hungary 1.4 0.8 0.8 3.9 Ireland 0.3 0.0 1.9 1.7 Italy 0.6 0.0 1.6 4.1 Luxembourg 0.9 0.0 2.3 3.9 Netherlands 1.4 0.0 1.3 2.3 Poland 0.9 0.0 1.4 4.7 Portugal 1.7 0.0 1.6 3.8 Romania 0.6 0.0 1.2 4.0 Slovak Republic 0.3 0.0 1.3 2.9 Slovenia 1.1 0.0 2.2 2.5 Spain 0.3 0.0 1.4 3.4 Sweden 1.1 0.0 1.5 1.5 United Kingdom 0.9 0.0 0.5 1.7 38 Annex II.7 Barriers to Trade and Investment: values of the low-level indicators Discriminatory Regulatory Country Barriers to FDI procedures barriers Tariffs Austria 1.5 2.3 0.7 0.0 Belgium 0.9 0.0 0.0 0.0 Czech Republic 1.4 2.7 0.0 0.0 Denmark 0.2 0.5 0.7 0.0 Estonia 0.7 1.1 0.0 0.0 Finland 1.4 0.0 0.0 0.0 France 1.1 0.5 0.0 0.0 Germany 1.2 0.0 0.7 0.0 Greece 1.4 3.1 0.7 0.0 Hungary 0.2 0.3 0.0 0.0 Ireland 0.9 0.0 0.0 0.0 Italy 2.6 0.7 0.0 0.0 Luxembourg 1.0 0.5 0.0 0.0 Netherlands 0.8 0.0 0.0 0.0 Poland 3.3 0.3 0.7 0.0 Portugal 1.2 0.3 0.0 0.0 Romania 1.5 0.0 1.6 0.0 Slovak Republic 2.2 1.8 1.6 0.0 Slovenia 1.0 1.4 0.0 0.0 Spain 0.1 0.3 0.0 0.0 Sweden 1.5 0.7 0.0 0.0 United Kingdom 0.2 0.0 0.0 0.0 39 ANNEX III Table 1. Integrated PMR indicator, low-level indicator: Scope of the public enterprise sector Coding of National, state or provincial government controls at least one firm in: answers Weight ISIC (a i ) United Slovak (Rev. 3.1) Sector Yes No Romania EU Hungary Poland Kingdom Republic code 16 Manufacture of tobacco products 1 6 0 no na No No No Yes 232 Manufacture of refined petroleum products 1 6 0 no na No No No Yes 27 Manufacture of basic metals 1 6 0 yes na No No No Yes Manufacture of fabricated metal products, machinery and 28, 29 1 6 0 equipment yes na No No No Yes Electricity: electricity generation/import or electricity 4010 1 6 0 transmission or electricity distribution or electricity supply yes na No Yes Yes Yes Gas: gas production/import or gas transmission or gas 4020 1 6 0 distribution or gas supply yes na No No Yes Yes 4100 Collection, purification and distribution of water 1 6 0 yes na No Yes Yes Yes 50, 51 Wholesale trade, incl. motor vehicles 1 6 0 no na No No No Yes 55 Restaurant and hotels 1 6 0 yes na No No No Yes Railways: Passenger transport via railways, Freight transport 601, 6303 1 6 0 via railways, operation of railroad infrastrucutre yes na No Yes Yes Yes 6021 Other urban, suburban and interurban passenger transport 1 6 0 yes na No Yes Yes Yes Other scheduled passenger land transport 6021 1 6 0 . na No No Yes 6023 Freight transport by road 1 6 0 no na No No No Yes 6303 Operation of road infrastructure 1 6 0 yes na No Yes Yes Yes 61 Water transport 1 6 0 yes na No Yes No Yes 6303 Operation of water transport infrastructure 1 6 0 yes na No Yes Yes Yes 62 Air transport 1 6 0 yes na No No No Yes 6303 Operation of air transport infrastructure 1 6 0 yes na Yes Yes Yes Yes Telecommunication fixed line services, mobile services, 642 1 6 0 internet services. yes na No No Yes Yes 6519, 659, Financial institutions 1 6 0 671 yes na Yes Yes Yes Yes 66, 672 Insurance 1 6 0 no na Yes Yes Yes Yes 74 Other business activity 1 6 0 no na No No No Yes 851 Human health activities 1 6 0 . na Yes Yes Yes Yes 9211, Motion picture distribution and projection 1 6 0 9212 yes na Yes Yes No Yes percent of sectors with state ownership 66.7% 52.5% 20.8% 50.0% 50.0% 100.0% if number of Country score (0-6) answers>=20 then (Σ ia i answeri)/Σ ia i 4.4 3.3 1.3 3.0 3.1 6.0 40 Table 2. Integrated PMR indicator, low -level indicator: Government involvement in netw ork sectors Industry Question United Slovak weight weight Coding of answers Romania EU Hungary Poland Kingdom Republic (bj) (ck) Gas industry 1/6 What percentage of s hares in None Between 0 and 100% 100% the larges t firm in the gas 1/3 0 3 6 production/im port s ector are owned by governm ent? 85 na 0 0 31 85 What percentage of s hares in the larges t firm in the gas 1/3 0 3 6 trans m is s ion s ector are owned by governm ent? 74 na 0 0 31 100 What percentage of s hares in the larges t firm in the gas 1/3 0 3 6 dis tribution s ector are owned by governm ent? 37 na 0 0 50 85 Electricity industry 1/6 What is the owners hip s tructure of the larges t com panies in the generation, trans m is s ion, dis tribution, Private Mos tly private Mixed Mos tly public Public and s upply s egm ents of the 0 1.5 3 4.5 6 Mos tly Mos tly Mos tly electricity indus try? 1 Public na Private Mixed Public Public Rail transport 1/6 What is the s hare of No Between 0 and 100% 100% governm ent owners hip in the owners hip 1/3 3 6 larges t firm in operation of 0 100% govt No govt 100% govt 100% govt 100% govt infras tructure s ector? owned na owners hip owned owned owned What is the s hare of governm ent owners hip in the 1/3 0 3 6 larges t firm in operation of 100% govt No govt 100% govt 100% govt 100% govt pas s enger trans port s ector? owned na owners hip owned owned owned What is the s hare of governm ent owners hip in the 1/3 0 3 6 larges t firm in operation of 100% govt No govt 100% govt 100% govt 100% govt freight trans port s ector? owned na owners hip owned owned owned Air transport 1/6 What is the percentage of s hares in the larges t carrier (dom es tic and international traffic com bined) owned by national, s tate or provincial authorities ? 1 % of s hares owned by the governm ent /100*6 97 na 0 0 0 68 Postal services 1/6 What percentage of s hares in the larges t firm in the s ector: None Between 0 and 100% 100% national pos t - bas ic letter 1/3 0 3 6 s ervices are owned by the governm ent? 75 na 100 100 100 100 What percentage of s hares in the larges t firm in the s ector: national pos t - bas ic parcel s ervices are owned by the governm ent? 1/3 0 3 6 75 na 100 100 100 100 Govt. Govt. Govt. Govt. Govt. No Govt Govt controls at leas t 1 Govt controls all controls at controls at controls at controls at controls at involvem ent firm , but other firm s dom inant firm s in leas t 1 leas t 1 leas t 1 leas t 1 leas t 1 1/3 in s ector operate as well s ector What is the extent of public firm , but firm , but firm , but firm , but firm , but 0 3 6 owners hip in the courier other firm s other firm s other firm s other firm s other firm s (activities other than national operate as operate as operate as operate as operate as pos t) s ector? well na well well well well Telecommunication1 1/6 What percentage of s hares in the PTO are owned by governm ent? 1-wm % of s hares owned by the governm ent /100*6 46 na 0 0 53 4 What percentage of s hares in the larges t firm in the m obile telecom m unications s ector is owned by governm ent? wm % of s hares owned by the governm ent /100*6 0 na 0 0 53 4 na Country s cores (0 - 6) ∑ j b j ∑ k ck ans werjk 4 3.1 1.3 3 3.1 6 1 PTO s tands for “Public telecom m unications operator”. The weight w m is the 1998 and 2003 OECD-wide revenue s hare from m obile telephony in total revenue from trunk, international, and m obile. 41 Table 3. Integrated PMR indicator, low-level indicator: Direct control over business enterprises Coding of answers Weight Weight Weight United Slovak wi bi ai Yes No Romania EU Hungary Poland Kingdom Republic General constraints 30% *wi (% of business Are there any legal or constitutional constraints to the sale of the stakes held by government sectors in which 1 6 0 yes 20/21 yes yes yes yes yes in publicly controlled firms? the state controls at least a firm) 20% *wi Strategic choices of any publicly-controlled firms have to be reviewed and/or cleared in ( % of business sectors in which 1 6 0 yes 7/21 yes yes yes no yes advance by national, state, or provincial legislatures the state controls at least a firm) Golden shares 50% National, state or provincial governments have special voting rights (e.g. golden shares) in any 1/2 6 0 no 15/21 yes yes no no yes firms within the business sector Extent of the special rights These special rights can be exercised in merger with or acquisition by another company 1 6 0 10/21 yes yes yes These special rights can be exercised in change in controlling coalition 1 6 0 8/21 yes yes yes These special rights can be exercised in choice of management 1 6 0 8/21 yes yes yes These special rights can be exercised in strategic management decisions 1 6 0 9/21 yes yes yes Weight:% of business sector in which the state controls at least a firm (scope of public 1/2 (Σiai answeri)/Σiai enterprise sector/6) ) 66.7% 52.5% 20.8% 50.0% 50.0% 100.0% Country scores (0-6) Σi wi*bi*answeri 2.2 2.9 3.6 1.5 2.4 6.0 42 Table 4: Integrated PMR indicator, low -level indicator: Price Controls Coding of answ ers Romania Hungary UK Industry Question weights weights (c k ) (b j ) Yes No Air travel 1/5 Prices of domestic air fares are regulated 1/2 6 0 no no no Relativ number of 5 or 4 busiest routes subject to price regulation 1/2 (n/5)*6 or (n/4)*6 0 0 0 Road freight 1/5 Retail prices of road freight services are regulated in some w ay by 1/3 6 0 the government no no no Government provides pricing guidelines to road freight companies 1/3 6 0 no no no Professional bodies or representatives of trade and commercial interests are involved in specifying or enforcing pricing guidelines or 1/3 6 0 regulations no yes no Retail distribution 1/5 Retail prices of certain products are subject to price controls yes yes yes Retail prices of certain staples (e.g. milk and bread) are subject to 1/6 6 0 price controls no no no Retail prices of gasoline are subject to price controls 1/6 6 0 no no no Retail prices of tobacco are subject to price controls 1/6 6 0 yes no no Retail prices of alcohol are subject to price controls 1/6 6 0 no no no Retail prices of pharmaceuticals are subject to price controls 1/6 6 0 yes no yes Retail prices of other product are subject to price controls 1/6 6 0 yes no yes Telecom m unication 1/5 Retail prices of digital mobile service in telecommunications are 1 6 0 regulated no no Professional services (1) 1/5 Non-binding Non-binding Maximum Minimum Maximum Minimum Non-binding No recommended recommended prices on prices on Regulations on prices and fees: Are the fees or prices that a prices on all prices on all recommend regulation prices on some prices on all some some profession charges regulated in any w ay (by government or self- services services ed prices No regulation 0 services services services services regulated)? 4 6 on all 1 2 3 5 services Country scores (0-6) Σjbj Σk c k answerjk 1.3 0.8 0.2 43 Annex III Table 5: Integrated PMR indicator, low -level indicator: Use of command and control regulation Coding of answ ers Industry Topic Question w eights w eight (ai) w eights (ck) (bj ) Slovak Yes No Romania EU United Kingdom Hungary Poland Republic General information 1/2 Regulators are required to assess alternative policy instruments (regulatory and non-regulatory) before 1/2 0 6 adopting new regulation yes yes no yes yes Guidance has been issued on using alternatives to 1/2 0 6 traditional regulation no 17/21 yes yes yes yes yes Sector specific information 1/2 Road freight 1/5 Regulations prevent or constrain backhauling 1/4 6 0 (picking up freight on the return leg) no 5/21 yes no no no no Regulations prevent or constrain private carriage 1/4 6 0 (transport only for ow n account) yes 4/21 yes yes no no no Regulations prevent or constrain contract carriage (contractual relation betw een an otherw ise 1/4 6 0 independent haulier and one shipper) no 3/21 yes no no no no Regulations prevent or constrain intermodal operations (operating or ow nership links betw een 1/4 6 0 firms in different transportation sectors) no 2/21 yes no no no no Retail distribution 1/5 Shop opening hours are regulated 2/3 6 0 no 14/21 yes yes no no yes Government regulations on shop opening hours 1/3 6 0 apply at national level(1) national national local Air travel 1/5 Carriers operating on domestic routes are subject to universal service requirements (e.g. obligation to 1 6 0 serve specified customers or areas) no 9/21 yes yes no no yes Railways 1/5 Companies operating the infrastructure or providing railw ay services are subject to universal service 1 6 0 requirements (e.g. obligation to serve specified customers or areas) yes 14/21 yes yes no no yes Professional services (1) 1/5 No specific Advertising is Advertising is regulated regulated for regulated for Regulations on advertising: Is advertising and regulation prohibited regulated for prohibited regulated for 1/3 3 accounting and accounting marketing by the profession regulated in any w ay? 0 6 legal for legal accounting legal and legal Some Incorporation Sole practitioner No restrictions incorporation some some some Regulation on the form of business: Is the legal forbidden only restrictions for no 1/3 0 allow ed restrictions for restrictions restrictions form of business restricted to a particular type? 5 6 accounting restrictions 2 arch and legal for legal for legal Allow ed w ith All forms Generally Generally some some comparable Inter-professional cooperation: Is cooperation allow ed allow ed forbidden all forms all forms restrictions all forms restrictions 1/3 professions betw een professionals restricted? 0 2 6 allow ed allow ed for acc and allow ed for acc and 4.5 legal legal Country scores (0-6) Σ i ai Σ j bj Σ kc k answ erijk 2.3 1.8 2.0 2.3 0.1 1.7 (1). Average of indicators for professional services (accounting, legal, architecture, engineering) 44 Annex III Table 6: Integrated PMR indicator, low-level indicator: Licenses and permits system Coding of Question answers weights United Slovak (ck) Yes No Romania EU Hungary Poland Kingdom Republic The 'silence is consent' rule (i.e. that licenses are issued automatically if the competent 1/3 0 6 yes n.a yes yes no yes licensing office has not acted by the end of the statutory response period) is used at all There are single contact points (“one-stop shops”) for getting information on notifications 1/3 0 6 yes n.a yes yes yes no and licenses There are single contact points (“one-stop shops”) for issuing or accepting on notifications 1/3 0 6 yes n.a no yes yes no and licenses Country scores (0-6) Σkck answerjk 0 1.6 2 0 2 4 45 Annex III Table 7: Integrated PMR indicator, low-level indicator: Communication and simplification of rules and procedures Coding of answers Question Weights by weights theme (b j ) United (c k ) Yes No Romania EU Hungary Slovakia Poland Kingdom Communication 1/2 There are systematic procedures for making 2/12 0 6 - yes n.a. yes yes yes yes regulations known and accessible to affected parties There is a general policy requiring "plain language" 1/12 0 6 - yes n.a. yes yes yes yes drafting of regulation Yes or in In some in all some in all in all No - n.a. in all cases Affected parties have the right to appeal against all cases cases cases cases cases cases 4/12 adverse enforcement decisions in individual cases 0 3 6 - n.a. There are inquiry points where affected or interested foreign parties can get information on the operation 3/12 0 6 - yes n.a. yes yes and enforcement of regulations Government policy imposes specific requirements in In some Yes No - yes n.a. yes yes yes yes relation to transparency/freedom of information 2/12 cases government wide 0 3 6 - n.a. Simplification 1/2*(W i/ Max W 98) n.a. National government (all ministries and agencies) keeps a complete count of the number of permits and 1/3 0 6 yes n.a. no no yes yes licenses required There is an explicit program to reduce the administrative burdens imposed by government on 1/3 0 6 no n.a. yes yes yes yes enterprises and/or citizens There is a program underway to review and reduce the number of licenses and permits required by the 1/3 0 6 n.a. no yes no yes national government Country scores (0-6) Σjbj Σk c k answerjk 0.0 0.3 0.2 1.1 1.1 0.0 Weight for the simplification element W i Weights (d k ) Administrative burdens for corporation 1/4 Administrative burdens for sole proprietor firms 1/4 Sector specific administrative burdens 1/4 Communication 1/4 Country weight (0-1) Σk dk scorek 46 Annex III Table 8: Integrated PMR indicator, low-level indicator: Administrative burdens for corporations Scale 0-6 Weight (c k ) United 0 1 2 3 4 5 6 Romania EU Hungary Slovakia Poland Kingdom Number of mandatory procedures required to register a public limited company (pre- 1/4 <=4 <=7 <=12 <=18 <=23 <=29 >29 registration+registration) 34 18 9.0 18.0 26 25 Number of public and private bodies to contact to register a public limited company (pre- 1/4 <=1 <=3 <=5 <=7 <=9 <=11 >11 registration+registration) 2 4 3.0 5.0 4 6 Number of working days required to complete all mandatory procedures for registering a public 1/4 <=16 <=33 <=49 <=66 <=82 <=98 >98 limited company (pre-registration+registration) 15 16 8.0 17.0 11 75 Total cost (US$) of registering a public limited 1/4 <=550 <=1150 <=1700 <=2800 <=5600 <=8500 >8500 company (pre-registration+registration) 355.00 827.00 61.00 1492.00 1839 Country scores (0-6) Σk c k answerk 1.8 1.7 0.8 2.3 2.5 4.0 Table 9: Integrated PMR indicator, low-level indicator: Administrative burdens for sole proprietor firms Scale 0-6 Weight (c k ) United 0 1 2 3 4 5 6 Romania EU Hungary Slovakia Poland Kingdom Number of mandatory procedures required to register a sole-proprietor firm (pre- 1/4 <=1 <=3 <=4 <=7 <=10 <=13 >13 registration+registration) 22 10 2 12 18 25 Number of public and private bodies to contact to register a sole-proprietor firm (pre- 1/4 <=1 <=3 <=5 <=8 <=10 <=12 >12 registration+registration) 2 3 2 4 1 6 Number of working days required to complete all mandatory procedures for registering a sole- 1/4 <=7 <=14 <=29 <=43 <=58 <=72 >72 proprietor firm (pre-registration+registration) 15 9 1 19 6 35 Total cost (US$) of registering a sole-proprietor firm 1/4 0 <=110 <=350 <=550 <=850 <=1150 >1150 (pre-registration+registration) 310.00 167.00 0.00 895.00 6 52.00 Country scores (0-6) Σk c k answerk 2.8 1.8 0.5 3.5 1.8 3.3 Note: Total cost of registering a sole-proprietor firm are adjusted for PPPs Missing data: If no more than 1 element is missing the indicator is calculated as a simple average of the available data 47 Annex III Table 10: Integrated PMR indicator, low-level indicator: Sector specific administrative burdens Question Industry weights Coding of answers weights (b j ) (c k ) United Slovak Romania EU Kingdom Hungary Republic Poland Road freight 1/2 In order to establish a national road freight business, operators need to obtain a license (other Yes No No No No yes na yes yes yes no than a driving license) or permit from the government or a regulatory agency In order to operate a national road freight business, operators need to notify any level of government or No Yes No No No na yes yes yes a regulatory agency and wait for approval before they can start operation Registration in transport register is required in 1/3 order to establish a new business in the road No No Yes No No yes na yes yes yes no freight sector In order to operate a national road freight business, (other than for transporting dangerous goods or goods for which sanitary assurances are required) No No No Yes No na yes yes yes operators need to notify any level of government or a regulatory agency Scale for the first element of road freight 4 3 2 1 0 Yes No There are criteria other than technical and financial fitness and compliance with public safety 1/3 1 0 no na no no yes yes requirements considered in decisions on entry of new operators These entry regulations apply also if a firm wants 1/3 1 0 no na yes yes no no to transport only for its own account "depends on type of goods sold" or Retail distribution 1/2 "always required" "no requirement" "depends on size of outlets" Registration in commercial register is needed to depends on always always not a always start up a commercial activity for seeling food 1/8 6 3 0 na type of good required required requirement required products sold Registration in commercial register is needed to always always always not a Always start up a commercial activity for selling clothing 1/8 6 3 0 na required required required requirement required products Notification to authorities is needed to start up a always always always not a always 1/8 6 3 0 na commercial activity for selling food products required required required requirement required Notification to authorities is needed to start up a always always always not a Always 1/8 6 3 0 na commercial activity for selling clothing products required required required requirement required Licenses or permits are needed to engage in depends on always always always always commercial acitivity (not related to outlet siting) for 1/8 6 3 0 na type of good required required required required selling food products sold Licenses or permits are needed to engage in always not a always always commercial acitivity (not related to outlet siting) for 1/8 6 3 0 na no required requirement required required selling clothing products Licenses or permits are needed for outlet siting (in not a not a not a always always addition to compliance with general urban planning 1/8 6 3 0 na requirement requirement requirement required required provisions) for selling food products Licenses or permits are needed for outlet siting (in not a not a not a not a depends on addition to compliance with general urban planning 1/8 6 3 0 na requirement requirement requirement requirement size of outlet provisions) for selling clothing products Country scores (0-6) 2.0 1.5 0.5 2.8 1.6 2.4 Note: Normalised value of the indicator of general administrative burdens on startups w=wi / Max w98 48 Annex III Table 11: Integrated PMR indicator, low-level indicator: Legal barriers to entry National, state or provincial laws or other regulations restrict the number of Coding of answers competitors allowed to operate a business in at least some markets in: ISIC Weight (ai) United (rev. 3.1) Sector Yes No Romania EU Hungary Slovak Rep. Poland Kingdom code 16 Manufacture of tobacco products 1 6 0 no n.a. No No No No 232 Manufacture of refined petroleum products 1 6 0 no n.a. No No No Yes 27 Manufacture of basic metals 1 6 0 no n.a. No No No No 28, 29 Manufacture of fabricated metal products, machinery and equipment 1 6 0 no n.a. No No No No Electricity: electricity generation/import or electricity transmission or electricity 4010 1 6 0 n.a. supply no No Yes No Yes 4020 Gas: gas production/import or gas transmission or gas supply 1 6 0 no n.a. No Yes No Yes 4100 Collection, purification and distribution of water 1 6 0 no n.a. No Yes Yes No 50, 51 Wholesale trade, incl. motor vehicles 1 6 0 no n.a. No No No No 55 Restaurant and hotels 1 6 0 no n.a. No No No No Railways: Passenger transport via railways, Freight transport via railways, 601, 6303 1 6 0 n.a. passenger transport no Yes Yes No No 6021 Other urban, suburban and interurban passenger transport 1 6 0 . n.a. 6023 Freight transport by road 1 6 0 no n.a. No No No No 6303 Operation of road infrastructure 1 6 0 yes n.a. No Yes No No 61 Water transport 1 6 0 no n.a. No No No No 6303 Operation of water transport infrastructure 1 6 0 no n.a. No No No No 62 Air transport 1 6 0 no n.a. Yes No No No 6303 Operation of air transport infrastructure 1 6 0 no n.a. Yes No No No Telecommunication: fixed-line network, fixed-line services, mobile services, 642 1 6 0 n.a. internet services no No No No No 6519, 659, Financial institutions 1 6 0 n.a. 671 no No No No No 66, 672 Insurance 1 6 0 no n.a. No No No No 74 Other business activity 1 6 0 yes n.a. No No No No 9211, Motion picture distribution and projection 1 6 0 n.a. 9212 no No No No No proportion of sectors with legal 9% 14% 23% 5% 14% barriers to entry if number of answers>=20 then Country scores (0-6) 0.6 0.9 0.9 1.4 0.3 0.9 (Σ iai answeri)/Σ iai 49 Annex III Table 12: Integrated PMR indicator, low-level indicator: Antitrust exemptions Coding of answers Question Overall weight weights (c k ) United Yes No Romania EU Hungary Slovakia Poland Kingdom Is there rule or principle providing for exclusion or exemption from liability under the general competition law for conduct that is required or authorized by other government authority 1/4 6 0 (in addition to exclusions that might apply to complete sectors)? no na no yes no no Publicly-controlled firms or undertakings are subject to an Weight exclusion or exemption from competition law such as =wi 1/4 6 0 horizontal cartels = (Scope + Size Publicly-controlled firms or undertakings are subject to an of public sector exclusion or exemption from competition law such as vertical enterprises)/2) 1/4 6 0 restraints or to abuse of dominance no Publicly-controlled firms or undertakings are subject to an exclusion or exemption from competition law such as 1/4 6 0 mergers Country scores (0-6) wi ∗Σk c k answerk / wimax 0 0.2 0.0 0.8 0.0 0.0 50 Annex III Table 13: Integrated PMR indicator, low -level indicator: Barriers in netw ork sectors Theme Question United Slovak w eight w eight Coding of answ ers Rom ania EU Hungary Poland Kingdom Republic (ai) (ck) 1/2 Gas industry How are the terms and conditions of Regulated TPA Negotiated TPA No TPA third party access (TPA) to the gas 0 3 6 Regulated Regulated Regulated Negotiated transmission grid determined? 1/3 Regulated TPA TPA TPA TPA TPA What percentage of the retail market is open to consumer choice? 1/3 (1-% of market open to choice/100)*6 54 100 40 100 100 Do national, state or provincial law s or other regulations restrict the number of No, f ree entry in all Yes, in all competitors allow ed to operate a markets Yes, in some markets markets No, f ree No, f ree No, f ree No, f ree business in at least some markets in 0 3 6 No, f ree entry entry in all entry in all entry in all entry in all the sector: gas production/import 1/3 in all markets markets markets markets markets Electricity industry How are the terms and conditions of third party access (TPA) to the Regulated TPA Negotiated TPA No TPA electricity transmission grid 0 3 6 Regulated Regulated Regulated Regulated determined? 1/3 Regulated TPA TPA TPA TPA TPA Yes No Is there a liberalised w holesale market 0 6 f or electricity (a w holesale pool)? 1/3 Yes Yes Yes Yes No Betw ee Betw een More n 500 No <250 250 and than No choice and What is the minimum consumption 0 1 500 1000 6 1000 threshold that consumers must exceed 2 4 3 in order to be able to choose their electricity supplier (in GWh/year) ? 1/3 0 0 0 0 0 Rail industry Early f ranchised to a Free entry (upon paying Early f ranchised to several single f irm or Entry Entry Entry Entry What are the legal conditions of entry access f ees) times regulated Free entry f ranchised f ranchised f ranchised f ranchised into the passenger transport rail 0 3 according to EU (upon paying to several to several to single to several market? 1/2 1991 directive) access f ees) f irms f irms f irm f irms Free entry Free entry Free entry (upon (upon (upon Entry Free entry paying paying paying f ranchised What are the legal conditions of entry 0 3 6 (upon paying access access access to several into the f reight transport rail market? 1/2 access f ees) f ees) f ees) f ees) f irms Airlines industry Yes No Does your country have an open skies 0 6 agreement w ith the United States? 1/2*W yes No No Yes Yes Is your country participating in a regional agreement? 1/2*W 0 6 yes Yes Yes No Yes Is the domestic aviation market in your country f ully liberalised? That is, there are no restrictions on the number of (domestic) airlines that are allow ed to operate on domestic routes (1-W) 0 6 yes Yes Yes Yes Yes 51 Annex III Road freight industry Does the regulator, through licenses or Yes No otherw ise, have any pow er to limit 6 0 industry capacity? 2/5 No No No No No Are professional bodies or representatives of trade and commercial interests involved in specifying or enforcing entry regulations? 3/5 6 0 Yes No Yes Yes No Postal industry Do national, state or provincial law s or other regulations restrict the number of competitors allow ed to operate a No, free entry in all Yes, in all business in at least some markets in markets Yes, in some markets markets Yes, in Yes, in Yes, in Yes, in the sector: national post - basic letter 0 3 6 Yes, in some some some some some services 1/3 markets markets markets markets markets Do national, state or provincial law s or other regulations restrict the number of competitors allow ed to operate a business in at least some markets in No, free Yes, in No, free No, free the sector: national post - basic parcel No, free entry entry in all some entry in all entry in all services 1/3 0 3 6 in all markets markets markets markets markets Do national, state or provincial law s or other regulations restrict the number of competitors allow ed to operate a business in at least some markets in No Yes the sector: courier activities other than 0 6 national post 1/3 No No No No No Telecom industry Franchised to 1 Free entry Franchised to 2 or more firms firm What are the legal conditions of entry 1/4*w 0 3 6 into the trunk telephony market? t*(1-w m) Competitive Competitive Competitive Competitive Competitive 1/4*(1-w What are the legal conditions of entry t)*(1-w 0 3 6 into the international market? m) Competitive Competitive Competitive Competitive Competitive What are the legal conditions of entry 0 3 6 into the mobile market? 1/2*w m Competitive Competitive Competitive Competitive Competitive 52 Annex III 1/2 Gas industry What is the degree of vertical separation betw een gas Ow nership separation Legal/accounting separation Integrated production/import and the other 0 3 6 Legal Ow nership Ow nership Accounting Accounting segments of the industry? 1/2 separation separation separation separation separation What is the degree of vertical separation betw een gas supply and 0 3 6 Ow nership Accounting Ow nership Accounting Accounting the other segments of the industry? 3/10 separation separation separation separation separation Is gas distribution vertically separate 0 3 6 from gas supply? 1/5 Yes Yes Yes Yes Yes Electricity industry What is the degree of vertical separation betw een the transmission Separate companies Accounting separation Integrated and generation segments of the 0 3 6 Separate Separate Separate Separate Separate electricity industry? 1/2 Companies Companies Companies Companies Companies Unbundled Mixed Integrated What is the overall degree of vertical 0 3 6 integration in the electricity industry? 1/2 Unbundled Unbundled Unbundled Unbundled Unbundled Rail industry What is the degree of separation betw een the operation of infrastructure and the provision of railw ay services Ow nership legal Accounting No (the actual transport of passengers or 0 3 4.5 6 Legal Ow nership Ow nership No Legal freight)? 1 separation separation separation separation separation Country scores 1.2 1.5 0.5 0.8 1.3 1.4 53 Annex III Table 14: Integrated PMR indicator, low-level indicator: Barriers in services (Methodology) 54 Annex III Table 14: Integrated PMR indicator, low-level indicator: Barriers in services (Answers) Table 14: Integrated PMR indicator, low-level indicator: Barriers in services United Slovak Romania EU* Hungary Poland Kingdom Republic Professional services Professional services: Licensing How many services does the profession have an exclusive or shared exclusive Q 4.1.1 right to provide? 9 5.6 5 9 2 8 How many services does the profession have an exclusive or shared exclusive Q 4.1.1 right to provide? 8 4.0 0 5 2 5 How many services does the profession have an exclusive or shared exclusive Q 4.1.1 10 0 10 10 6 right to provide? 5.0 How many services does the profession have an exclusive or shared exclusive Q 4.1.1 9 0 9 10 10 right to provide? 6.5 Professional services: Education requirem ents Q 4.2.1 What is the duration of special education/university/or other higher degree? 3 4.7 3 7 5 5 Q 4.2.1 What is the duration of special education/university/or other higher degree? 5 4.6 0 5 5 5 Q 4.2.1 What is the duration of special education/university/or other higher degree? 4 0 4 5 5 4.0 Q 4.2.1 What is the duration of special education/university/or other higher degree? 4 0 5 5 5 4.5 What is the duration of compulsory practise necessary to become a full member Q 4.2.1 of the profession? 3 2.9 5 3 5 2.5 What is the duration of compulsory practise necessary to become a full member Q 4.2.1 of the profession? 2 1.8 0 5 5 3 What is the duration of compulsory practise necessary to become a full member Q 4.2.1 0 0 0 5 3 of the profession? 1.1 What is the duration of compulsory practise necessary to become a full member Q 4.2.1 2 1 3 3 4 of the profession? 2.7 Are there professional exams that must be passed to become a full member of Q 4.2.1 the profession? yes 17.0 Yes Yes Yes Yes Are there professional exams that must be passed to become a full member of Q 4.2.1* the profession? yes 10.0 No Yes Yes Yes Are there professional exams that must be passed to become a full member of Q 4.2.1 no No No Yes Yes the profession? 9.0 Are there professional exams that must be passed to become a full member of Q 4.2.1 yes No Yes Yes Yes the profession? 18.0 55 Annex III Table 14: Integrated PMR indicator, low-level indicator: Barriers in services (Answers) Table 14: Integrated PMR indicator, low-level indicator: Barriers in services United Slovak Romania EU* Hungary Poland Kingdom Republic Retail trade Licences or perm its needed to engage in com m ercial activity If licences or permits are required for selling food (type 2) are they product Q 6.1.3a) specific? Yes 9 Yes Yes No Yes If licences or permits are required for selling food (type 2) do they relate to a Q 6.1.3b) certain type of activity? Yes 11 Yes Yes Yes Yes Specific regulation of large outlet What is the threshold surface limit at w hich regulation of large outlets applies Not Not Q.6.1.5 (m2)? 1000 8 applicable 3000 applicable 2000 Protection of existing firm s Are professional bodies or representatives of trade and commercial interests Q.6.1.7 involved in Type 2, Type 3 or Type 4 licensing decisions? No No No No No Are there products that can only be sold in outlets operating under a local or Q.6.1.8 national legal monopoly (franchise)? No No No No Yes * average for EU countries included in the sample 56 Annex III Table 15: Integrated PMR indicator, low-level indicator: Barriers to FDI Weights Question Coding of answers by theme weights (ck) (bj ) Yes No Romania EU UK Hungary Slovakia Poland General barriers 1/2 There are statutory or other legal 2/3*wi (% of limits to the number or proportion of business sectors shares that can be acquired by in which the 6 0 yes no no yes yes foreign investors in publicly- state controls at controlled firms least a firm) Special government rights can be exercised in the case of acquisition 1/3 6 no no yes yes of equity by foreign investors 0 Sector-specific barriers 1/2 FDI indicator value * 6 0.008 0.05 0.08 0.06 0.05 0.11 Country scores (0-6) Σjbj Σk c k answerjk 1.5 1.2 0.2 0.2 2.2 1.2 Notes: Values of FDI restrictiveness index (Golub (2003) and Koyama and Golub (2006)), except for Luxembourg for which the old methodology is used. The sectors covered: manufacturing, construction, electricity, distribution, air, maritime and road transport fixed and mobile telecoms, insurance and banking, hotels and restaurant and business services (legal, accounting, architecture and engineering). Table 16: Integrated PMR indicator, low-level indicator: Tariffs Coding of answers Romania EU UK Hungary Slovakia Poland Average production- <=3% <=6% <=9% <=12% <=15% <=18% >18% weighted tariff 0.0 0.0 0.0 0.0 0.0 0.0 Country scores (0-6) 0 1 2 3 4 5 6 0.0 0.0 0.0 0.0 0.0 0.0 57 Annex III Table 17: Integrated PMR indicator, low-level indicator: Discriminatory procedures Coding of answers Weights Question by theme weights Yes No Romania EU UK Hungary Slovakia Poland (b j ) (c k ) General discrimination 2/3 Country has any specific provisions which require or encourage explicit recognition of the national 3/6 0 6 no n.a. yes yes yes yes treatment principle When appeal procedures relating to regulatory decisions are available in domestic regulatory 2/6 0 6 yes n.a. yes yes yes yes systems, they are open to affected or interested foreign parties as well There are specific provisions which require that regulations, prior to entry into force, be published or 1/6 0 6 yes n.a. yes yes no yes otherwise communicated to the public in a manner accessible at the international level Competition discrimination 1/3 0-6 Scale for competition discrimination When business practices are perceived to restrict competition foreign firms can have redress through Yes Yes Yes Yes Yes No/- Yes Yes Yes No/- Yes No/- No/- No/- No/- No/- yes n.a. yes yes yes yes competition agencies When business practices are perceived to restrict competition foreign firms can have redress through Yes Yes No/- No/- Yes Yes No/- Yes No/- Yes No/- No/- Yes No/- Yes No/- yes n.a. yes no no no trade policy bodies When business practices are perceived to restrict competition and hence prevent effective access of Yes No/- Yes No/- Yes Yes Yes No/- Yes No/- No/- No/- No/- Yes Yes No/- yes n.a. yes yes no yes foreign firms (foreign owned or controlled) to such markets, foreign firms can have redress through regulatory authorities involved When business practices are perceived to restrict competition foreign firms can have redress through Yes Yes Yes Yes No/- Yes No/- No/- Yes Yes No/- Yes No/- No/- No/- No/- yes n.a. yes yes yes yes private rights of action 0 0.75 0.75 1.5 2.625 2.625 3.375 3.375 3.375 3.375 4.125 4.125 5.25 5.25 5.25 6 Country scores (0-6) Σjbj Σkck answerjk 0.0 0.8 0.0 0.3 1.8 0.3 58 Annex III Table 18: Integrated PMR indicator, low-level indicator: Regulatory barriers Question Coding of answers weights United Yes No Romania EU Hungary Slovakia Poland (c k ) Kingdom The country has engaged in Mutual Recognition Agreements (MRAs) in at least a sector with any 2/5 0 6 yes na yes yes yes yes other country There are specific provisions which require or encourage regulators to consider recognizing the equivalence of regulatory measures or the result 4/15 0 6 no na yes yes no yes of conformity assessment performed in other countries, wherever possible and appropriate There are specific provisions which require or encourage regulators to use internationally 2/9 0 6 yes na yes yes yes yes harmonized standards and certification procedures wherever possible and appropriate There are any specific provisions which require or encourage regulatory administrative 1/9 0 6 yes na yes yes yes yes procedures to avoid unnecessary trade restrictiveness Country scores (0-6) Σk c k answerjk 1.6 0.2 0.0 0.0 1.6 0.7 59