1. 1 Trade related regulations in services sectors - Balkan experiences Nora Dihel OECD Trade Directorate

2. 2 Balkan experiences on regulatory convergence Qualitative assessments Quantitative assessments

3. 3 Qualitative assessments Based on the Database on regulatory measures in services sectors in SEE: Constructed on the basis of responses to the sectoral questionnaires sent to ministries and regulatory agencies Sectoral coverage: telecommunication services, financial services, transport services, electricity, construction, professional services (accountancy, legal, architectural and engineering services), distribution and tourism services.

4. 4 Example: Conditions of trade in the telecom fixed-line service sector in SEE including local, long distance, international and leased line services

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8. 8 Example: Conditions of trade in the telecom mobile service sector in SEE including analogue and digital mobile

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10. 10 Example: Conditions of trade in the telecom mobile service sector in SEE including analogue and digital mobile

11. 11 Example: Conditions of trade in the telecom mobile service sector in SEE including analogue and digital mobile

12. 12 Quantitative assessments Based on methods for measuring restrictions on trade in services Measuring levels of restrictions Measuring the effect of restrictions

13. 13 Measuring levels of restrictions Collecting information on restrictions Classifying restrictions Developing and calculating a trade restrictiveness index

14. 14 Measuring levels of restrictions Index Measure Nature and extent of restrictions Qualitative information on restrictions is converted to quantitative information System of scores and weights for each restriction A result is calculated for each service sector in an economy based on the number and severity of restrictions

15. 15 Trade Restrictiveness Index Foreign index –Measures restrictions imposed on foreign service suppliers –Discriminatory and non- discriminatory restrictions Domestic index –Measures restrictions imposed on all service suppliers –Non-discriminatory restrictions

16. 16 Foreign and Domestic Indices

17. 17 Trade Restrictiveness Index – Telecom South Eastern Europe

18. 18 Trade Restrictiveness Index – Banking South Eastern Europe

19. 19 Trade Restrictiveness Index – Distribution South Eastern Europe

20. 20 Trade Restrictiveness Index – Professional Services South Eastern Europe

21. 21 Trade Restrictiveness Index – Professional Services South Eastern Europe

22. 22 Trade Restrictiveness Index – Professional Services South Eastern Europe

23. 23 Trade Restrictiveness Index – Professional Services South Eastern Europe

24. 24 Measuring the Effect of Restrictions Converting an index of trade restrictiveness into a tariff equivalent Using indirect methodologies which determine a benchmark price and attribute part or all of a divergence from the benchmark price to restrictions. Using direct methodologies which estimate the effect of restrictions – as given by the trade restrictiveness index – on output, the price and/or cost of service suppliers

25. 25 What are the effects? Price-cost (or profit) margins Costs Price - restrictions can increase Combination of price and costs increases Cost - restrictions can increase

26. 26 Fixed linesCellular phones MA/ FDI NT/ FDI TotalMA/ FDI NT/ FDI Total Albania11.514.325.85.24.39.5 Bosnia & Herzegovina10.413.924.26.46.613.0 Bulgaria8.56.915.40.64.04.5 Macedonia11.419.731.111.18.920.1 Moldova12.310.022.25.44.510.0 Romania9.58.518.03.54.07.6 Serbia & Montenegro11.014.025.06.6 13.2 Quantity impacts of market access and national treatment restrictions on investment in telecommunications

27. 27 Tax equivalents of market access and national treatment restrictions on investment in telecommunications, % Fixed linesCellular phones MA/FDINT/FDITotalMA/FDINT/FDITotal Albania11.616.827.44.64.08.6 Bosnia & Herzegovin a 9.415.925.35.66.512.1 Bulgaria7.67.114.70.53.43.9 Macedonia10.524.434.910.29.820.1 Moldova11.4 22.84.84.39.0 Romania8.69.017.63.03.76.7 Serbia & Montenegro 10.116.326.45.86.512.4

28. 28 Tax equivalents of market access and national treatment restrictions on banking, % Trade barriers market access Trade barriers – national treatment Low foreign ownership Excess capital ratios Excess liquidity ratios Total Albania2.420.003.811.888.12 Bulgaria2.420.520.243.18 Croatia2.420.127.390.9610.89 Macedonia2.420.3211.077.272.0923.17 Moldova2.420.326.797.240.5217.29 Serbia & Montenegro 2.422.4810.810.8816.59

29. 29 Price- and cost-raising effects of barriers to trade in engineering services, % Price impactCost impact Foreign barriers to establishment Foreign barriers to Ongoing operation All foreign barriers Domestic barriers to establishment Albania0.02.2 1.8 Bulgaria0.41.62.00.0 Moldova2.90.33.20.0

30. 30 Cost-raising effects of barriers to trade in distribution services, % Barriers to establishment of domestic entrants Barriers to establishment of foreign entrants Bulgaria13.84.8 Croatia2.60.9 Macedonia17.35.5 Moldova0.00.2 Romania12.24.8

31. 31 Summing up: Banking services Relatively liberal regimes with regard to traditional trade policy measures dealing with market access and national treatment Insurance activities are the sector most commonly restricted both for domestic and foreign operators The permanent movement of people is the most often encountered additional restriction on foreign operators Supervisory authorities commonly have considerable power to take action, whereas their diversification and legal protection measures appear mixed Bank accounts are generally informative, with many countries having quite high capital and liquidity ratios Macroeconomic instability and lack of structural reform are key factors inhibiting banking sector performance

32. 32 Summing up: Telecom, fixed line Performance being held back by regulations restricting competition With exception of Albania, all SEE countries have effective monopoly in fixed line services, in Albania restrictions to rural services apply Considerable scope for enhancing competition by liberalising fixed line markets, including opening up to foreign firms Liberalization could lead to price reductions up to between 20 to 30 per cent

33. 33 Summing up: Telecom, mobile Policies are less restrictive than in fixed line telecommunications Eliminating general restrictions could lead to increase in penetration of 10%, opening up to greater foreign competition to an additional increase of 10% Liberalization of general restrictions should entail price reductions of up to 10%, removing restrictions on foreign equity participation to an additional reduction of up to 10%

34. 34 Summing up: Distribution Heterogeneous results across the SEE countries With regards to non-discriminatory restrictions Bulgaria, Macedonia and Romania are relatively restrictive Croatia’s and Moldova’s distribution services exhibit a higher degree of liberalisation Restrictions on the movement of people for services provision in distribution are not significant The removal of non-discriminatory restrictions on establishment could decrease the cost of distribution services

35. 35 Summing up: Professional Services Legal and accounting professions appear to be more heavily restricted than architectural and engineering professions In Albania and Macedonia regulation of the legal profession comprises a set of measures, with restrictions being far more severe on foreign practitioners than elsewhere Heavy discrimination against foreign presence exists also with regards to accounting services where restrictions in the SEE countries are generally above average