EXTREME POVERTY DOWN 36% OVER 15 YEARS

Colombia 2018 | ECONOMY | VIP INTERVIEW

TBY talks to Issam Abousleiman, Country Manager of the World Bank, on accomplishments in 2017, reducing poverty, and the expected recovery of non-oil exports.

What have been the World Bank's main accomplishments and challenges in Colombia in 2017?

In 2017, the World Bank continued to engage with Colombia as one its most important development partners. Over the last year, the World Bank approved four new operations with total commitments of USD1.3 billion. This included financing to help improve the quality of tertiary education with a focus on increasing the enrollment of students from disadvantaged socioeconomic backgrounds. In addition, the bank expanded its support to Colombia's Pacific Region. As part of the Government of Colombia's “Plan Todos Somos PAZcifico," it approved a project to improve waterway transport and the quality of water supply and sanitation services in some of the poorest municipalities on the country's west coast. Furthermore, the World Bank provided development policy financing for different sectors of the economy, including support to fiscal sustainability and fostering productivity in non-extractive sectors. The bank also supported the government's green growth strategy by establishing a set of policy and institutional measures for green economy and improving environmental quality.

What is the role of the Country Partnership Framework (CPF) for 2016-2021, and how does the program support Colombia?

CPF 2016-2021 guides the World Bank Group's engagement in Colombia taking into account Colombia's historical achievements including the 2016 Peace Agreement with FARC and Colombia's tremendous progress in poverty reduction over the last 15 years. Extreme poverty was reduced by over 50% to 7.4%, and moderate poverty fell to 26.9%. Informed by a systematic country diagnostic and a set of policy notes, the CPF emphasizes three main pillars: fostering balanced territorial development, enhancing social inclusion and mobility through improved service delivery, and supporting fiscal sustainability and productivity. Recognizing the historical importance of the peace for economic development, the strategy has a cross-cutting theme of peace building.

How has Colombia's business environment improved in the Doing Business 2018 report?

Colombia is still at the forefront in Latin America and the Caribbean region in efforts to improve its business climate, create jobs, attract investment, and become more competitive. Colombia has adopted 34 reforms over the last 15 years according to the Doing Business report of the World Bank, making the country the largest reformer in the region, followed by Mexico with 26 reforms, and Jamaica with 25. However, the reform agenda has slowed in recent years. In fact, Doing Business 2018 marked the first Doing Business report where no reforms were acknowledged to Colombia for purposes of scoring. The country performs well in the areas of getting credit, with a global ranking of two, and protecting minority investors (16). In both areas, Colombia is the regional leader. Colombia scores seven out of eight points on the depth of credit information index, which is above the average of 6.6 points of OECD high-income economies. In the area of protecting minority investors, Colombia receives a score of eight out of 10 points on the conflict of interest regulation index, compared to the average of 6.4 points of OECD high-income economies. It also performs well in the area of registering property, with a global ranking of 60. Today, registering property in Colombia takes 15 days and costs 1.9% of the property value, while in the UK it takes 21.5 days and costs 4.8% to do so. Colombia also outperforms the OECD high-income economies' regional averages of 22.3 days and 4.2% of the value of the property. Colombia underperforms in the areas of enforcing contracts and trading across borders. Resolving a commercial dispute before the Colombian first instance courts takes 1,288 days and costs 45.8% of the value of the claim, compared to 767 days and 31.4% in Latin America and the Caribbean, and 577.8 days and 21.5% in OECD high-income economies. In the area of trading across borders, Colombia has a particularly lengthy border compliance process, which takes 112 hours, compared to the regional average of 63 hours and 13 hours in OECD high-income economies.

What is the World Bank's outlook for Colombia in 2018?

Growth is expected to strengthen gradually over 2018-2020 on the back of stronger private consumption, a gradual recovery of non-oil exports and higher oil prices, as well as a pick-up in the implementation of the 4G infrastructure program. Private consumption is expected to strengthen supported by lower inflation, higher formal employment, and as the one-off impact of the VAT increase on confidence subsides. Ongoing structural reforms are expected to enhance competitiveness and foster diversification, thereby supporting the growth recovery over the medium term. Continued fiscal consolidation efforts are expected to limit growth in government consumption and public investment will remain subdued, but should boost private investors' confidence.

What have been the World Bank's main accomplishments and challenges in Colombia in 2017?

In 2017, the World Bank continued to engage with Colombia as one its most important development partners. Over the last year, the World Bank approved four new operations with total commitments of USD1.3 billion. This included financing to help improve the quality of tertiary education with a focus on increasing the enrollment of students from disadvantaged socioeconomic backgrounds. In addition, the bank expanded its support to Colombia's Pacific Region. As part of the Government of Colombia's “Plan Todos Somos PAZcifico," it approved a project to improve waterway transport and the quality of water supply and sanitation services in some of the poorest municipalities on the country's west coast. Furthermore, the World Bank provided development policy financing for different sectors of the economy, including support to fiscal sustainability and fostering productivity in non-extractive sectors. The bank also supported the government's green growth strategy by establishing a set of policy and institutional measures for green economy and improving environmental quality.

What is the role of the Country Partnership Framework (CPF) for 2016-2021, and how does the program support Colombia?

CPF 2016-2021 guides the World Bank Group's engagement in Colombia taking into account Colombia's historical achievements including the 2016 Peace Agreement with FARC and Colombia's tremendous progress in poverty reduction over the last 15 years. Extreme poverty was reduced by over 50% to 7.4%, and moderate poverty fell to 26.9%. Informed by a systematic country diagnostic and a set of policy notes, the CPF emphasizes three main pillars: fostering balanced territorial development, enhancing social inclusion and mobility through improved service delivery, and supporting fiscal sustainability and productivity. Recognizing the historical importance of the peace for economic development, the strategy has a cross-cutting theme of peace building.

How has Colombia's business environment improved in the Doing Business 2018 report?

Colombia is still at the forefront in Latin America and the Caribbean region in efforts to improve its business climate, create jobs, attract investment, and become more competitive. Colombia has adopted 34 reforms over the last 15 years according to the Doing Business report of the World Bank, making the country the largest reformer in the region, followed by Mexico with 26 reforms, and Jamaica with 25. However, the reform agenda has slowed in recent years. In fact, Doing Business 2018 marked the first Doing Business report where no reforms were acknowledged to Colombia for purposes of scoring. The country performs well in the areas of getting credit, with a global ranking of two, and protecting minority investors (16). In both areas, Colombia is the regional leader. Colombia scores seven out of eight points on the depth of credit information index, which is above the average of 6.6 points of OECD high-income economies. In the area of protecting minority investors, Colombia receives a score of eight out of 10 points on the conflict of interest regulation index, compared to the average of 6.4 points of OECD high-income economies. It also performs well in the area of registering property, with a global ranking of 60. Today, registering property in Colombia takes 15 days and costs 1.9% of the property value, while in the UK it takes 21.5 days and costs 4.8% to do so. Colombia also outperforms the OECD high-income economies' regional averages of 22.3 days and 4.2% of the value of the property. Colombia underperforms in the areas of enforcing contracts and trading across borders. Resolving a commercial dispute before the Colombian first instance courts takes 1,288 days and costs 45.8% of the value of the claim, compared to 767 days and 31.4% in Latin America and the Caribbean, and 577.8 days and 21.5% in OECD high-income economies. In the area of trading across borders, Colombia has a particularly lengthy border compliance process, which takes 112 hours, compared to the regional average of 63 hours and 13 hours in OECD high-income economies.

What is the World Bank's outlook for Colombia in 2018?

Growth is expected to strengthen gradually over 2018-2020 on the back of stronger private consumption, a gradual recovery of non-oil exports and higher oil prices, as well as a pick-up in the implementation of the 4G infrastructure program. Private consumption is expected to strengthen supported by lower inflation, higher formal employment, and as the one-off impact of the VAT increase on confidence subsides. Ongoing structural reforms are expected to enhance competitiveness and foster diversification, thereby supporting the growth recovery over the medium term. Continued fiscal consolidation efforts are expected to limit growth in government consumption and public investment will remain subdued, but should boost private investors' confidence.