Reigniting growth through productivity-enhancing reforms in Colombia

Over the past decade, sound macroeconomic policies and an improved business environment have helped generate relatively strong GDP growth. Investments in infrastructure are improving connectivity and trade integration has been facilitated by lower tariffs. Simplification in opening of businesses, getting construction permits, registering property and payment of taxes improved the ease of doing business. Nevertheless, labour productivity remains low with large differences between firms and regions, and the contribution of technological progress to growth has been negative in recent years. Low productivity growth reflects poor educational and managerial quality, still large infrastructure gaps, low investment in innovation and R&D and stringent regulations in some sectors. To raise productivity growth Colombia should focus on some key areas. First, reverse the drop in public investment and reduce high transport and logistics costs. Second, intensify trade links and participation in GVCs, by further improving trade facilitation, to encourage firms to adopt the best technologies and know how. Third, create better incentives for firms to invest on R&D, and strengthen the links between the business sector and research institutions to foster innovation. Fourth, increase competition and reduce regulation in specific sectors to promote investment and facilitate the allocation of resources towards most productive firms. And fifth, upgrade the quality of education to develop better skills and professional management to enhance the creation and diffusion of new technologies. In 2016, the government established the National Policy for Productive Development to address the impediments to increased productivity. This Working Paper relates to the 2017 OECD Economic Survey of Colombia (www.oecd.org/eco/surveys/economic-survey-colombia.htm)