Italy: Market Dynamics

Italy: Better regulation needed to strengthen market dynamics

Italy has made significant progress in cutting regulatory costs, liberalising product markets and modernising its public administrations in recent years. But it must continue along the path of regulatory reform to make its economy more competitive and speed up its recovery from the economic crisis, according to a new OECD report.

"The Italian government's commitment to reform has helped secure the good results achieved to date. Further reforms are needed both to strengthen Italy's short-term recovery from the crisis and long-term sustainable growth," said OECD Secretary-General Angel Gurría at the presentation of the report in Rome.

Italy: Better Regulation to Strengthen Market Dynamics notes that product market regulation is now on a par with neighbouring countries, such as Germany, Austria and France. New political impetus for reform has appeared in recent years. Regulatory reform and liberalisation policies have been carried out. The authorities have cut a large number of unnecessary laws and made it easier for businesses to start up. Efforts to reduce administrative burdens are estimated to have created annual cost-savings to business of over EUR 4 billion. The Antitrust Authority has promoted competition in major infrastructure sectors and increased transparency and consumer choice in many other sectors.

Major challenges remain and there are still important goals to achieve. For Italy to grow faster, productivity needs to be boosted. Reducing regulatory costs is key to achieving this. For instance, according to OECD estimates, reforming regulations in the electricity and gas, retail and professional services sectors could boost productivity by nearly 14% over 10 years.

To boost competitiveness and economic growth, and to improve the quality of regulation at every level of government, the report recommends the Italian authorities to:

• Maintain the momentum of the administrative simplification programme to cut red tape
• Consolidate capacities for quality regulation across public administrations, as well as across levels of government, through greater coordination and quality control from the centre.
• Strengthen competition, for example by giving the Antitrust Authority the power to sanction associations more effectively, extending the timeline for merger investigations, and increasing resources for the Italian competition authority.
• Reduce the high cost of barriers to entry in retailing and improve co-ordination of retail regulations between the state and regions.
• Facilitate competition in and for local transport and consider setting up a national transport regulatory authority.
• Adopt market-based regulations in all parts of the energy sector and clarify legal frameworks to foster new investment in capacity.

Italy is the fourth OECD member country to have requested a broad monitoring of its progress with regulatory reform, after Japan, Korea and Mexico. The report presents simulations of impacts of reforms over the next 10 years, together with analysis of better regulation, competition policy and professional services. The report also contains an assessment of multi-level challenges, with specific reviews of the implications of regulatory reform for commercial distribution, local transport and energy.

ENDS

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