Download Colombia Country Strategy 2013-2016

Federal Department of Economic Affairs,
Education and Research EAER
State Secretariat for Economic Affairs SECO
Swiss Economic Cooperation and Development
Colombia Country Strategy 2013-2016
Editorial
Egypt, Ghana, South Africa, Indonesia, Vietnam, Colombia, Peru – all rapidly expanding economies on the threshold of global
market integration yet still facing the problem of poverty. These have been SECO’s priority countries since 2008 and, together with
Tunisia, they will remain the focus of our intervention over the next four years.
All of SECO’s priority countries are classified as middle-income countries (MICs). As their role in the global economy expands, they
continue to gain in significance, for example in providing global public goods. However, despite rapid growth rates in these countries, their development remains fragile. Poverty and social disparities persist, accompanied by other global challenges such as
urbanisation, infrastructure bottlenecks and unemployment.
Through its economic cooperation, SECO strives to integrate its partner countries into the global economy and to foster economic
growth that is both socially responsible and environmentally friendly. These approaches correspond to the main challenges facing
MICs. Middle-income countries are also important regional hubs of development for neighbouring States and serve as valuable
examples.
SECO’s activities are based on our many years of experience in international cooperation and our specific expertise in economic
issues. Whether we are seeking to strengthen economic and fiscal policy, expand urban infrastructure and utilities, support the
private sector and entrepreneurship, promote sustainable trade, or stimulate climate-friendly growth: all of our measures are
aligned with Switzerland’s foreign trade policy and the Federal Council’s foreign policy objectives.
In 2012 the Swiss Parliament passed the 2013-2016 Message on International Cooperation. For the first time, all of the tasks in
international cooperation were presented in a single bill, incorporated into a joint, overall strategy. This has the overriding objective
of sustainable global development that will reduce poverty and global risks.
State Secretariat for Economic Affairs (SECO)
SECO’s Economic Cooperation and Development
Division is responsible for the planning and implementation of economic cooperation and development activities with middle income developing countries, with countries of Eastern Europe and the
Commonwealth of Independent States (transition
countries) as well as the new Member States of
the European Union. It coordinates Switzerland’s
relations with the World Bank Group, the regional
development banks and the economic organizations
of the United Nations. SECO is part of the Federal
Department of Economic Affairs, Education and
Research (EAER).
The overriding objective of Switzerland’s international cooperation is sustainable global development that will reduce poverty and global risks.
Accordingly, SECO’s economic and trade policy
measures strive to integrate its partner countries
into the global economy and foster economic growth
that is both socially responsible and environmentally
friendly. The Economic and Development Division
bases its activities on its specific areas of competence and experience in promoting economic and
fiscal policy, urban infrastructures and utilities, the
private sector and entrepreneurship, sustainable
trade and climate-friendly growth. Special emphasis
is placed on issues relating to economic governance
and gender. SECO is headed by the State Secretary
Marie-Gabrielle Ineichen-Fleisch. SECO’s Economic
Cooperation and Development Division employs
100 people at headquarter and spends approximately
380 million Swiss francs per year. Ambassador
Beatrice Maser heads the division.
The present Country Strategy is based on the framework credit for economic and trade policy measures, as described in the aforementioned Message. It is determined by our areas of expertise and comparative advantages and paves the way for our continued
efforts over the next four years. We firmly believe that, in doing so, we can support our partner countries on their development path
while also making a contribution to addressing global challenges.
Marie-Gabrielle Ineichen-Fleisch
State Secretary,
Director of SECO
Beatrice Maser
Ambassador,
Head of Economic Cooperation
and Development SECO
Colombia
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Abbreviations
Contents
AML/CFT Anti-Money Laundering/Combating the Financing of Terrorism
IDP
Internally Displaced People
APC
Colombian Presidential Agency for International Cooperation
IFC
International Finance Corporation
APEC
Asia-Pacific Economic Cooperation
ILO
International Labour Organization
CAF
Andean Corporation Bank
IMF
International Monetary Fund
CDM
Clean Development Mechanism
IPR
Intellectual Property Rights
CHF
Swiss Franc
MDG
Millennium Development Goals
COOF
Swiss Cooperation Office
NDP
National Development Plan
CPC
Cleaner Production Centre
ODA
Official Development Assistance
CSR
Corporate Social Responsibility
OECD
Organization for Economic Cooperation and Development
EFTA
European Free Trade Association
PEFA
Public Expenditure and Financial Accountability Programme
EU
European Union
PFM
Public Financial Management
FARC
Fuerzas Armadas Revolucionarias de Colombia
PPP
Public-Private Partnership
FATF
Financial Action Task Force
REDD+
Reducing Emissions from Deforestation and Forest Degradation
FDI
Foreign Direct Investment
SDC
Swiss Agency for Cooperation and Development
FTA
Free Trade Agreement
SECO
GHG
Green House Gas emissions
GDP
Editorial3
Abbreviations4
1. Country context
1.1 Political situation
1.2 Economic and social situation
1.3 Bilateral economic relations
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6
7
10
2. Development cooperation context
2.1 Partner country development strategy
2.2 Donor landscape
2.3 Lessons learnt from 2009-2012
11
11
12
13
3. Development challenges and SECO’s response
15
4. Financial resources
21
State Secretariat of Economic Affairs
5. Results monitoring
22
SME
Small and Middle-sized Enterprise
6. Partner institutions
24
Gross Domestic Product
TBT/SPS
Technical Barriers to Trade/Sanitary and Phytosanitary Measures
IBRD
International Bank of Reconstruction and Development
USD
United States Dollar
7. Statistical annex
26
IDB
Inter-American Development Bank
WTO
World Trade Organization
4
Colombia
SECO’s economic and trade policy measures
strive to integrate its partner countries into
the global economy.
Improved livelihoods thanks
to organic and fair-trade standards
in cocoa production.
1. Country context
1.1 Political situation
Change in continuity: A new government with a
positive reform mind-set. After two terms in office
(2002-2010) and a clear rejection by the constitutional
court of the possibility of a third term, Alvaro Uribe
handed over presidency to his successor Juan Manuel
Santos in 2010. Santos emerged as the clear winner of
the second round of the election, obtaining close to
70% of the votes. He had assumed various ministerial
positions during Uribe’s administration and, as former
Minister of Defence, played a crucial role in implementing the “policy of demo­cratic security” which resulted in
a considerable weakening of the FARC (Fuerzas Arma-
das Revolucionarias de Colombia). While retaining the
central elements of the previous administration’s economic policy, the 80% majority in Congress of his
“national unity” coalition allowed the new government
to initiate a broad legislative reform agenda, including
sensitive key issues such as the recognition of the victims of the armed conflict and the restitution of lands.
The new government also endorsed a normalization of
the previous tensions between the executive branch
and the judiciary powers. Additionally, Colombia has
resumed diplomatic relations with Ecuador and normalized its relations with Venezuela, giving hope to revived
trade relations with two traditional and important commercial partners.
A new government with
a positive mind set.
1.2 Economic and social situation
The official recognition of the very existence of an
“armed conflict” in Colombia marked a fundamental
departure from the more confrontational stance of the
preceding government towards a more pragmatic and
conciliatory position. The municipal and regional elections held in October 2011 did not result in a major
fragmentation of political forces. The outlook for further
important reforms is therefore positive for the years to
come.1
Despite the government’s efforts to regain control over most of the national territory, internal
security remains tense: Regardless of some key military successes and persistently high levels of military
pressure, security outside the large urban centres
remains fragile and a key challenge. Significant parts of
Colombia are still ridden with the violence associated
with narcotráfico (drug trafficking), and several former
paramilitary groups have reconverted into armed gangs
controlling various kinds of illegal activities in urban
centres. In addition, the problem of internally displaced
people (IDPs) remains a serious challenge: Colombia is
1 The next legislative and presidential elections are set for March
and May 2014, respectively.
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second only to Sudan, with some 4-5 million IDPs 2 seeking refuge in the slums of large cities like Bogotá,
Medellin or Cartagena. Military clashes between national
forces, FARC guerrilla and former paramilitary groups
have doubled since 2008 despite serious blows to the
FARC in 2010/11, including the death of its military and
ideological leaders. Thus, even if the guerrilla and paramilitary groups are weakened and discredited, no end to
the conflict is in sight. On a positive note, however, the
Colombian government confirmed in August 2012 that
it was holding exploratory talks with the FARC guerrilla
with a view to possible peace negotiations.
Serious governance issues remain: Several corruption scandals involving various offices have come to
light since Santos assumed office. The new administration has therefore embarked on significant institutional
reforms including an increase from 13 to 16 ministries,
the closure of some agencies and the creation of six new
special national agencies, including the National Agency
for International Cooperation. While the new institutional setup attempts to clarify the division of responsibilities and competences, it could potentially create new
inter-institutional coordination challenges.
Regaining investment grade credit rating:
Colombia has accomplished much in the past few years.
Good economic policies have provided a higher level of
macroeconomic stability and living standards have gradually risen. Combined with improved security, these factors led to a better economic environment and have
contributed to Colombia regaining investment grade
credit rating in mid-2011.
Strong macroeconomic framework: Colombia is an
upper-middle-income country, characterized by a solid
and stable economy with a large domestic market and a
rich natural resources endowment. Significant reforms
implemented since the 1990s pursuing prudent fiscal
management, inflation targeting and a flexible exchange
rate have led to remarkable macroeconomic stability.
This strong macroeconomic framework helped cushion
the impact of the 2008-2009 global economic crisis,
with GDP growth reaching 5.9% in 2011, compared to
1.7% in 2009. Private domestic demand, supported by
higher consumer and investor confidence and access to
cheap credit, has led the recovery process. On the supply
side, the recovery was spearheaded by the oil/mining
and financial sectors in the context of moderate infla-
2 As of end 2011, around 3.9 million people were internally displaced according to the government, and around 5.3 million according to the
independent Observatory on Human Rights and Displacement (CODHES).
Colombia
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Remarkable economic performance
have advanced
Colombia to
the second-best
sovereign risk in
Latin America.
tion (3-4%). All of the above helped offset
the current account deficit (3% of GDP)
traditionally run by the country. FDI inflows
have been the fastest growing of all Latin
American countries, boosted by the robust
expansion of exploration and production in
the oil and mining sectors. Additionally,
Colombia is now reaping the gains from
the negotiation of several free-trade agreements (FTA)
under the Uribe administration; with 10 FTAs currently
in force (including the one with EFTA, which, in the case
of Switzerland, became operational in 2011, and the
much awaited FTA with the US, which entered into
force in 2012) and the one recently signed with the
EU and on-going negotiations with Panama, Israel,
Turkey, the country is promoting trade diversification
and integration into the world economy. The trend is
now eastward, with increasing interest in an FTA with
China, the signing of the FTA with Korea in July 2012,
and a formal application to join APEC with a view to
enhancing economic links with the Pacific Rim.
All these reforms and the resulting remarkable economic performance have advanced Colombia to the
second-best sovereign risk in Latin America, second only
to Chile. As a testimony to Colombia’s new ambitions,
President Santos also presented his country’s candidacy
for OECD membership in spring 2011. This is likely to
provide a stimulus for further economic and social
reforms.
Yet, despite such progress, many structural challenges to
achieving balanced inclusive growth still remain.
Poor public sector governance, inefficient public
service delivery and a deficient tax system: Notwithstanding recent reforms, the Colombian public sector is still characterized by bureaucratic red tape, weak
Improving working conditions
and promoting corporate
social responsibility contribute
to a better quality of life.
institutional articulation capacity and inter-institutional
coordination challenges, leading to poor public service
delivery. Even if the government has achieved significant
progress in enhancing public finances – tax revenues
are growing fast in real terms and non-financial public
sector net debt is relatively low (27.5% of GDP) based
on solid growth and active liability management – a
number of challenges have not been fully addressed.
Public spending remains inflexible, reliance on distortionary taxes persists and the tax revenue base is still
very weak (at 11.7% of GDP, substantially below the
global and even the Latin American average) due to a
significant number of tax exemptions and widespread
tax evasion, given the highly inefficient tax structure.
Other macroeconomic challenges arise from the potential Dutch Disease effect of an appreciating real
exchange rate as well as commodity price volatility,
which increases economy-wide uncertainty. Considering
that both national and sub-national budgets rely heavily
on commodity revenues, this affects budget predictability and stability and hence the importance of further
diversification of economic activity. Additional fiscal
challenges relate to the government‘s obligation to provide health care and pensions, as well as increased economic losses and fiscal contingent liabilities as a result
of recent natural disasters.
Low productivity, high income inequality: Lacking
productivity growth has constrained output growth,
which, coupled with unequal income distribution, has
left a large part of the population in poverty 3. Even if
poverty levels according to national statistics fell
between 2002 and 2009 from 49.7 to 37.2% and
extreme poverty declined from 17.7 to 12.3% 4, Colombia’s progress in reducing poverty falls far below the
performance of regional peers, with poverty levels
remaining relatively high given the country’s income per
capita. In part, this is explained by a highly unequal dis-
3 According to a World Bank study, the country is the seventh most unequal country in the world (comparable to countries such as Haiti and
Angola) and the second in Latin America.
4 It is to be noted that the Colombian government introduced a new poverty index methodology in 2011, taking into account multidimensional aspects of poverty.
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Colombia
tribution of income, as reflected by the Gini coefficient.
Labour market rigidities and structural skill mismatches
are contributing to this underutilization of a considerable section of the potential labour force. Indeed, the
Colombian labour market is still characterized by persistently high unemployment (9.5% in 2011) as well as
pervasive labour informality, comprising 50-70% of the
labour force, depending on the definition used.
Vulnerability to climate change: Colombia has
been experiencing some of the heaviest rainfall in recent
history, leading to widespread flooding and landslides,
caused by the La niña phenomenon. More than 3.5 million people, especially the poor, have been directly
affected. Economic losses are expected to have exceeded
4.3% of GDP. The fiscal cost of the disaster increased
the central government deficit by 1.5% of GDP in 2011.
Total emergency relief, rehabilitation and reconstruction
costs have been estimated at some USD 260 billion in
the next five years, but the bill could rise even further,
especially on the infrastructure side.5 Such numbers are
clear evidence that Colombia is one of the countries
most vulnerable to climate change 6, although it contributes only 0.37% of greenhouse gases at global level
and has a “clean” energy mix. Further, Colombia’s population has predominantly settled in the highlands
(Andes mountain range) or on the coast, i.e. areas prone
to flooding and unstable grounds. In addition, due to
the internal conflict, urban centres have grown extremely
rapidly and unsystematically in recent decades. Nowadays, 70 to 75% of the population lives in urban areas 7,
challenging the provision of good public services, especially in the area of waste management.
5 See “Análisis de la gestión del riesgo de desastres en Colombia”,
World Bank, 2012.
6 According to the Center for Global Development, Colombia
ranked 15th in the Extreme Weather Risk Country Index in 2008.
7 Average urban population worldwide is 50%.
Colombia
9
Supporting the industrial resource
efficiency, leads to increased
competitiveness and a lower
„environmental footprint“.
2. Development cooperation context
2.1 Partner country development strategy
1.3 Bilateral economic relations
Excellent and fairly formalized: Bilateral economic relations can be described as excellent and fairly
formalized through an array of bilateral agreements,
initiated at the beginning of last century with the Treaty
of Friendship, Establishment and Trade and followed by
an agreement on technical and scientific cooperation in
1967. Further important milestones were the signing of
the Investment Protection Agreement in 2006 and the
Double Taxation Treaty in 2007, both of which have
since come into force. This process culminated with the
signing of a comprehensive free-trade agreement between the EFTA states and Colombia on 25 November
2008, which, in the case of Switzerland, came into force
in July 2011. It covers a broad range of areas including
trade in goods, trade in services, investment, intellectual
property rights, government procurement, competition
and cooperation. As part of the instruments establishing
the free trade area, Switzerland and Colombia also ratified a bilateral arrangement on agricultural products
that entered into force simultaneously to the FTA.
Although trade with Colombia accounts for only 0.1%
of total Swiss trade, Colombia was Switzerland’s fifth
most important export destination in Latin America in
2011.8 Trade relations have intensified in recent years,
with Swiss exports to Colombia reaching CHF 344 million in 2011, up by more than 100% compared to 2000.
They proved resilient and remained stable during the
2008-2009 financial crisis. Chemicals and pharmaceuticals are the main export products (over 60%). Colombian exports to Switzerland were much more affected by
the economic crisis and show major fluctuations over
the past decade. They amounted to CHF 138 million in
2010, down from CHF 453 million in 2007, and
rebounded again in 2011. Nevertheless, Switzerland
was the 11th largest importer of Colombian goods in
2011, accounting for 1.7% of Colombian exports.9
Finally, Colombia is also one of the most important
countries in Latin America for Swiss FDI 10, with a total
stock of CHF 1.9 billion in 2010 and Swiss companies
employing approximately 15,000 people in Colombia.
8 after Brazil, Mexico, Argentina and Venezuela
9 Whereas Swiss statistics have usually shown a slightly positive trade balance for Switzerland in recent years, Colombian statistics
traditionally register a considerable trade surplus for Colombia due to the fact that Swiss official data do not include gold in bilateral trade
statistics for confidentiality reasons but also because imported gold is, to a considerable degree, re-exported. In 2010, gold trade made up
more than 27% of Swiss imports and 23% of overall exports.
10 Fifth in terms of volumes and fourth in terms of people employed.
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Colombia
The National Development Plan 2010-2014 –
Prosperity for All: The National Develop­ment Plan for
2010-2014 (NDP) is a very ambitious roadmap which
translates the electoral promises of President Santos
into a broad action plan and was approved by Congress
in June 2011. Following the mantra of change in continuity, it essentially retains the central elements of the
previous administration’s economic policy, i.e. attracting
foreign invest­ment, fostering macroeconomic stability,
addressing high unemployment and widespread informality, and improving the business environment. It was
developed in close cooperation with state agencies,
local authorities and civil society. The NDP is aimed at
setting the guidelines for growth and improvement in
the country and determines the processes to be carried
out to meet these goals.11 The NDP estimates total
investment needs at USD 317 billion, of which private
investment should represent 40%, mainly in the coal,
oil, mining, housing construction and transport infrastructure sectors (see growth drivers below).
Its guiding principle is to achieve prosperity for all
through the creation of jobs, less poverty and
more security. The strategy has three main pillars: (1)
Sustainable Growth and Competitiveness to increase
employment, (2) Equality of Opportunities for Social
Prosperity to reduce poverty, and (3) Consolidation of
Peace to improve security. Moreover, it highlights five
cross-cutting focuses: (a) Relevance of International
Relations, (b) Environ­mental and Disaster Risk Management, (c) Good Governance in public policy delivery, (d)
Innovation in new and existing productive activities and
(e) Regional Development and convergence.
11 Such as a sustained economic growth level of above 5%, bringing
an additional 2.5 million Colombians out of poverty, reducing
unemployment to 9% and building one million housing units.
In addition it identifies five “locomotives” or “growth
drivers”:
■ Innovation to add value to productive processes by
scaling-up investments into research and development, promoting technology transfers and addressing pending regulatory bottlenecks;
■ Agribusiness to develop world-class products and
sectors to emulate the coffee precedent symbolized
by the Juan Valdez trademark and particularly relevant for rural areas which suffer the most from the
lack of sustainable economic opportunities;
■ Housing, focusing on the provision of sustainable
social housing;
■ Transport infrastructure to address a serious con-
straint to economic development and reduce merchandise trade costs due to deficient road, port and
rail capacity;
■ Mining & Energy to generate growth and necessary income for redistribution programmes, through
the responsible use of Colombian’s natural resource
endowment based on transparent concession procedures.
The National Strategy for International Cooperation 2012-2014: The strategy differentiates between
international cooperation received and offered by
Colombia. It outlines six broad priority areas for international cooperation destined to Colombia: 1) integral risk
management and sustainable reestablishment of communities affected by natural disasters, 2) equality of
opportunities for democratic prosperity, 3) economic
growth and competitiveness, 4) environment and sustainable development, 5) governance and 6) victims,
reconciliation and human rights. Each category regroups
several sub-priorities with specific potential lines of
intervention. At the same time, it also presents areas
where Colombia is offering international cooperation
which it expects to reach USD 8 million a year.
Colombia
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2.2 Donor landscape
Aid focus and volume: Net ODA reached USD 1
billion in fiscal year 2010 (0.5% of GDP). Against the
background of 5 million IDPs and large parts of the rural
area still affected by the conflict, donor grants are still
heavily focused on humanitarian and social aid often in
rural areas. Much of the “economic” development assistance is financed by multilateral loans, making SECO
one of the very few donors in that area. Nevertheless,
some other bilateral donors have broadened the scope
of their programmes traditionally restricted to security
and humanitarian activities to also encompass economic development.
Bilateral aid: Of the ten major bilateral donors, USAID
still takes the lion’s share, with roughly 60% of total net
ODA. The top five donors are the US, EU, Spain, Germany and the Netherlands, while Switzerland ranks
2.3 Lessons learnt from 2009-2012
eighth.12 With the current crisis in Europe, this order is
likely to change in the coming years. It is also a declared
objective of the Colombian national strategy for international cooperation to seek diversification of its aid
sources with an increased focus on Asia, particularly
China, Korea and Japan.
Multilateral assistance: The World Bank Group
remains the largest source of development financial
assistance with a portfolio of roughly USD 7.5 billion,
principally as IBRD loans. Colombia represents the
World Bank’s third-largest exposure in Latin America,
and the seventh globally. The Inter-American Development Bank’s (IDB) portfolio is roughly USD 3.5 billion,
while the CAF’s portfolio is around USD 3 billion, with
essentially the same characteristics, i.e. predominantly
loans.
Donor coordination: Donor coordination to date has
generally been restricted to the humanitarian sphere,
associated with the “Group of 24” (G24), a group of
donors pursuing the objective of intermediating in the
dialogue between the government and civil society in
relation to the internal conflict. The government had
hitherto also played a very limited role in donor coordination, often preferring bilateral interactions. This is
likely to change in the future with the establishment of
a new Colombian Agency for International Development
Cooperation (APC), created in November 2011. The APC
is mandated to guide and assume the technical and
financial coordination of ODA received and provided by
Colombia. In parallel, a new “Donor Group” was also
formed at the end of 2011, including multilateral institutions. This aims at better structuring the dialogue with
the Colombian government, in particular with the APC.
12 Swiss ODA in Colombia encompasses the programs of SDC, foreign affairs as well as SECO, and represents approximately USD 20 million annually.
SECO’s added
value may therefore not be in
terms of volume
but rather in terms
of specific knowhow, best practices
and a network
of international
experts.
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Colombia
SECO’s financial and technical assistance helps
to improve drinking water and sanitation systems.
SECO’s 2009-2012 country strategy for Colombia
had proven relevant and in line with Colombia’s national
development strategies. Among the major successes
were the enactment of several key decrees simplifying
the business environment and contributing to significant savings for the private sector at the national and
sub-national level, the enactment of a new Law on Consumer Protection and the enactment of a national policy
on National Disaster Risk Management. Another major
outcome has been the enactment of a decree relating to
the private sector’s responsibilities in managing electronic waste and the launching of the first collective
compliance scheme for the collection and recycling of
electronic waste in Latin America. The measures supported by SECO also helped to raise awareness and
transfer knowledge on various innovative issues linked
to national priorities, such as the preparation of a
national “Green Building” code, the dissemination of
corporate governance tools for family businesses, as
well as new capital markets regulatory regime requirements. Some important lessons can be drawn from its
implementation:
Potential role of SECO: The financial additionality of
SECO’s potential interventions is at times limited
because of the availability of other financial resources.
Several of SECO’s areas of work are addressed through
huge multilateral and bilateral loans. SECO’s added
value may therefore not be in terms of volume but rather
in terms of specific knowhow, best practices and a network of international experts. Since national procurement rules complicate access to international experts,
international cooperation is often the only means of
accessing that expertise for many Colombian public
actors. Furthermore, well-targeted, selected activities of
a high quality allowed Switzerland to gain visibility and
recognition with Colombian counterparts despite its
modest contribution in relative terms.
Colombia
13
3. Development challenges and SECO’s response
Constraints in implementing the Paris Declaration – Using country systems and donor coordination
has proven difficult:
■ Use of country system: The current legal frame-
■ Multi-bilateral cooperation: Most multilateral
work of international cooperation is characterized by
large “grey areas” not conducive to and limiting the
use of country sys­tems for cooperation implementation. Channelling ODA through the national budget
sys­tem often proves administratively complicated as
well as time-consuming. As a re­sult, only around
10% of ODA is currently provided through the
national budget and many government agencies prefer donors to set up parallel structures, which is
clearly sub-optimal. The government has recognized
this challenge and acknowledges it explicitly in its
2012-14 cooperation strategy. The APC, responsible
for the effective implementation of the strategy, has
vowed to streamline existing processes so as to facilitate the use of country systems. Another difficulty
has been the complexity in receiving good project
proposals, especially from the public sector. In part,
this can be explained by their limited experience with
grants / international cooperation project management (ODA in 2010 represented only 0.5% of GDP).
As a result, deal sourcing and project structuring has proven more complex and time-consuming than expected.
agencies face shareholder pressure to increase commitments and staff location in poorer countries (IDA
countries), while restricting new operations in uppermiddle-income countries to projects linked to innovation. There is therefore clear pressure to embark on
more regional approaches, where IDA countries have
the lion’s share, but which also allow for operating in
non-IDA countries. This may imply an increasing difficulty in developing multi-bilateral projects in the
future, as well as efficiency problems in implementing regional programmes in countries such as Colombia due to the personnel policy of multilateral institutions (hire TA staff in IDA countries only).
Based on the context analysis, and recognizing, that
a political reform agenda is key to durable systemic
change, SECO’s programme in Colombia aligns its interventions with the priorities as defined by the Colombian
government in the NDP, the national strategy for inter­
national cooperation and related sector strategies. With
its core competences, SECO is certainly well positioned
to effectively and efficiently support Colombia in successfully addressing some of its key development challenges, namely in the field of institutional strengthening,
promoting inclusive growth and addressing climate
change and unsustainable urban development.
Though presented separately, the different objectives
overlap to a significant extent, allowing for the creation
of synergies and ensuring the overall coherence of
SECO’s portfolio in Colombia. Accordingly, a programme
or project may address challenges and issues mentioned
under different objectives.
The development of the financial sector creates new investment
opportunities for Colombian and international investors.
■ With the exception of humanitarian aid, donor
coordination has been weak. Taking into account
that several ministries/agencies generally work on
the same issues, and multilateral institutions often
support reforms with loans rather than grant money,
project coordination is often inefficient and implementation prone to duplication. However, since the
creation of the new National Cooperation Agency in
November 2011, some promising first advances
towards strengthening inter-institutional articulation
and coordination can already be recorded.
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Colombia
Colombia
15
Objective 1: Strengthen public institutions to improve service delivery and
governance
Challenge: In order to fully exploit the potential opportunities, public institutions have to manage resources in
a more efficient, effective and transparent way. New
technologies (e.g. e-government) can help but, in addition, management capacities need to be improved and
effective tools for planning and coordinating policies,
programmes and projects put in place. Despite some
promising reforms in recent years, bureaucratic red tape
persists, and institutional articulation capacity remains
generally weak combined with a low tax revenue base,
negatively impacting the capacity and quality of public
service delivery.
Focus: SECO contributes to the institutional strengthening of the public sector with the objective of supporting a more efficient, effective and transparent management of its resources. To this end, management
capacities in government institutions at all levels are
improved, and effective tools for planning and coordinating policies, programmes and projects put in place
with a view to ensuring stable, transparent and accountable public finances and addressing imbalances in service delivery at the national and sub-national level. This
pillar also encompasses measures to further strengthen
market institutions and improve the economic framework in areas such as financial, trade and business regulations, thereby facilitating the emergence of a competitive private sector. Finally, under this pillar, SECO plans
to support public technical agencies in charge of implementing the government’s leading initiatives (i.e. land
reform) through capacity building measures.
Proposed SECO measures:
Support stable macroeconomic framework
conditions through targeted implementation
assistance in the realm of monetary policy (macroeconomic analysis, international reserve management, macro-prudential supervision, etc.)
Contribute to an improved investment climate
through targeted business environment reforms
Improve the managerial capacity of selected
public technical entities
Support public financial management reforms
with a particular emphasis on tax policy and
administration (including domestic tax simplifications, natural resource taxation and green taxation), fiscal decentralization and public service
delivery at a sub-national level
Assist the enhancement of the regulatory and
supervisory framework of financial intermediaries
(pension funds, banks, insurances), including the
establishment of an efficient AML/CFT framework
Contribution to Colombia’s country development objectives: Colombia’s strategy for international
cooperation defines good public governance as a key
requisite to achieving its overarching goal of democratic
prosperity. The proposed measures aim at supporting
Colombia in its effort to advance institutional strengthening at the national and sub-national level as a means
of improving governance. Given the transversal character of strong public institutions, measures under this
component will also contribute to all other five priority
objectives of the Colombian cooperation strategy.
SECO contributes to the institutional strengthening
of the public sector with the objective of supporting
a more efficient, effective and transparent management of its resources.
16
Colombia
Objective 2: Enhance international
competitiveness to achieve more
inclusive growth and reduce inequalities
Challenge: Colombia is characterized by one of the
highest income-inequality rates globally. Despite persistently remarkable growth rates in the past decade,
income and regional disparities have been rising. This is
partly due to very low levels of productivity and a high
concentration of economic activity in the primary
resource sector and the major urban centres. Its economy is further characterized by high levels of informality,
hampering competition and limiting SME access to
finance and foreign markets. Therefore, the productive
structure needs to be diversified and professional and
technical training improved to generate more goodquality jobs and develop a more equitable society. These
different constraints to private sector development need
to be tackled in order to enhance Colombia’s international competitiveness.
Focus: SECO supports Colombia’s efforts to maintain
sustained and dynamic growth and for the growth pattern to become more inclusive. To this end, constraints
to private sector growth are addressed, such as low factor productivity, insufficient financial market deepening
and barriers to market access. The creation of a more
conducive business environment will provide for more
enterprises to enter the formal sector. This will reinforce
SME competitiveness gains and further improve their
access to finance and foreign markets. For growth to be
sustainable, resources need to be used more efficiently
and biodiversity preserved. Adequate entrepreneurial
skills and good corporate governance further increase
sustainability and positively impact economic performance. In order for growth to be more inclusive, this
pillar also encompasses measures to promote innovation and the diversification of the economy to unlock
new drivers for growth. Reforms of the productive structure coupled with improved vocational training are crucial for inclusive growth to generate more good-quality
jobs and develop a more equitable society.
SECO supports Colombia’s
efforts to maintain
sustained and dynamic
growth and for the growth
pattern to become more
inclusive.
Proposed SECO measures:
Support economic diversification
Enhance Colombia’s trade capacity to enable
compliance with international standards and create export networks
Assist the implementation of better governance structures to improve management and
performance capacities of SMEs, leading to a
decrease in bankruptcy/liquidation rates
Support the provision of new innovative
finance mechanisms to facilitate access to (longterm) financing and carbon finance
Support efforts to reduce the mismatch
between vocational training programmes on offer
and the skills required by the market to improve
employability and labour productivity
Support industrial resource efficiency, leading
to increased competitiveness and a lower “environmental footprint”
Contribution to Colombia’s country development objectives: Measures under this component will
particularly contribute to the two priority objectives of
promoting economic growth and competitiveness and
encouraging equality of opportunities for democratic
prosperity.
Colombia
17
Objective 3: Strengthen climate change
risk management and sustainable urban
development to mitigate the impact
of climate change and manage rapidly
growing urbanization
Challenge: Natural threats, like the recent flooding,
have shown that Colombia is one of the most vulnerable
countries to climate change. This vulnerability is further
exacerbated by rapid and erratic urbanization. This calls
for strengthening disaster risk management policies and
information systems in line with the newly established
National Disaster Risk Management System (SNGRD) as
well as urban development and management, focusing
on sustainability aspects. Indeed, the rapid pace of
growing urbanization poses specific challenges in terms
of access to water and energy services, waste management and sanitation, as well as urban policies and planning in general, so as to create greener and more sustainable cities over time.
Focus: SECO supports Colombia in its effort to
strengthen climate risk management policies and information systems, focusing on climate-relevant information and data. This will allow Colombia to define and
implement specific environmental policies and strategies in alignment with the priorities of the National Disaster Risk Management System (SNGRD), in terms of
both adaptation to and mitigation of climate change.
SECO also supports Colombia’s efforts to strengthen
sustainable urban management. Key areas of support
include integrated waste management systems including sanitation, urban planning, sustainable construction
and housing, as well as the promotion of renewable/
non-conventional energies. SECO’s support in this field
is aimed at contributing to the gradual emergence of
greener and more sustainable cities over time, factoring
in climate change risks and vulnerabilities.
18
Colombia
Modality mix
Economic governance and gender
as cross-cutting issues
SECO will continue to pursue a mix of modalities. Its
programme will be implemented in line with the principles of Aid and Development Effectiveness: SECO will
seek to align its programme with the government’s priorities and to harmonize it with other donors’ activities.
SECO’s programme will be reinforced by thorough policy
dialogue with key government partners and, whenever
possible, will refer to country systems in order to foster
ownership and effective institutions. To ensure effective
development cooperation, SECO is committed to building capacity and interacting closely with public and private actors. Assistance will be provided through a mix of
modalities of technical assistance and capacity building,
predominantly on a specific project basis, either bilaterally, directly with the Colombian counterpart(s), or by
co-financing a multilateral organization’s project and
clearly defined and closely monitored investment projects. Given the public-private character of many interventions, particularly in the case of urban infrastructure,
Public Private Partnership models may be an effective
structure for efficient resource allocation and effective
implementation, especially with a view to innovative initiatives. Finally, country specific measures are complemented by multi-country or even global programmes
co-financed by SECO and implemented generally by
multilateral organizations.
The reinforcement of economic governance in the
partner countries is an essential component of SECO’s
support for the integration of partner countries into the
global economy and the promotion of sustainable economic growth. Economic governance comprises all institutions, regulations, judiciary systems and norms that
promote the effectiveness, non-discrimination, legitimacy and accountability of economic activity and therefore contribute to combating corruption. The majority of
SECO’s interventions strengthen good economic governance at public and private levels.
Proposed SECO measures:
Support Colombia by enhancing its capacity
with respect to environmental analysis, enabling
it to collect and evaluate environmental and climate data in an up-to-date manner
Facilitate Colombia’s market-readiness for new
carbon market schemes
Improve the managerial capacity of public services enterprises to enable financially sustainable
operation and a better public service offering
Support the establishment of specific environmental regulations (e.g. Green Building Code;
energy labelling) to make existing growth drivers
sustainable
Support sustainable urban development and
planning, including water and sanitation
approaches
Promote renewable energy solutions in order
to contribute to a reduction in greenhouse gas
emissions
Improve Colombia’s institutional capacity to
devise and implement cost-effective financial
strategies for the fiscal protection of the state
against natural disasters
Contribution to Colombia’s country development objectives: The proposed measures are expected
to contribute particularly to Colombia’s objective in the
priority field of environment and sustainable development with its various sub-objectives, such as improved
preparedness to climate change and sustainable urban
development.
SECO sees gender equality as an important element of
poverty reduction and improving the economic prospects of partner countries. No projects should place
women or men at a disadvantage. The gender dimension is integrated into project design and implementation, where it can contribute to the greater effectiveness
of SECO’s projects.
SECO’s activities are complementary to those of other
Swiss cooperation actors. In addition to SECO’s economic development activities, Switzerland has been
engaged in the fields of peace building and human
rights for over ten years. Pursuing the overall objective
of supporting the transformation of the internal conflict,
this programme focuses its activities on the areas of
improved human rights, dealing with the past processes
and support for the civil society. Furthermore, Colombia
is also a priority country for Switzerland’s humanitarian
aid, focusing on protecting and improving the living
conditions of the population hardest hit by the internal
conflict and also on emergency relief.
Colombia
19
4. Financial resources
5. Results monitoring
SECO’s interventions under this strategy will be
financed through the Swiss Framework Credit for International Cooperation 2013-16. The allocation of funds
to individual countries, programmes and projects will
depend on the identification of suitable transactions,
the absorption capacity as well as the efficiency and
effectiveness of the cooperation with the relevant partners in each priority country.
The following table provides an overview of the
future economic cooperation with the proposed monitoring and evaluation indicators at the outcome level
and alignment with the Colombian development objectives.
Accordingly, the following information on planned commitments for the four-year period of this strategy is
indicative. It cannot be considered a firm commitment or
claimed as such by the partner country. This information
serves merely as a basis for the forward spending plans
that are reviewed each year. Actual disbursements will
depend on various factors, such as the changes in the
project portfolio and the framework conditions of the
partner country.
Strengthening e-waste management allows for local recovery of valuable
or dangerous metals/substances and supports the development of a recycling industry.
Planned commitments for Colombia 2013-2016
CHF 55 million*
The monitoring and evaluation indicators are selected
examples; the success of implementation of this country
Projected funds allocated to each strategic
objective:
1. Strengthening public institutions
25%
2. E nhancing international competitiveness
30%
3. C
limate change risk management and
sustainable urban development
45%
*Colombia also benefits from regional and global initiatives
financed by SECO. When these measures cannot be earmarked
to a specific country, they are not accounted for in the financial
projections mentioned above.
strategy will be measured in relation to the projects
implemented by SECO. The different projects agreed
upon will contain some of these indicators. This will
make SECO and the Colombian partners accountable
with regard to what has been achieved by the projects
implemented in the framework of this country strategy.
It is not SECO’s intention to measure Colombia’s development objectives as a whole.
SECO’s overall objective for Colombia
Support Colombia in its pursuit of economically, ecologically and socially sustainable growth to combat poverty and inequality and to pave the
way towards beneficial and balanced integration into the world economy.
Main objectives of
SECO’s interventions
Contribution by SECO’s program
Colombia’s country development
objectives 13
Objective 1:
Strengthen public
institutions to improve
service delivery and
governance
• Economic reforms and improved financial policy
lead to a transparent fiscal policy and a more reliable
administration of public finances in Colombia
• Institutional strengthening at national and
sub-national level through
– Transparency and accountability
– Effective public management
– Efforts to combat corruption
– Improved public services
– Strengthened monitor and evaluation
systems
– Adequate and effective fiscal control
– Transversal support of the decentralization
process (institutional strengthening)
… to improve service
delivery and governance
Selected indicators: Public access to key financial
information; PEFA indicators
• Enhanced regulation and supervision of the financial
sector (including in the area of AML/CFT) contribute
to a stable, diversified and competitive financial
market
Selected indicators: Number and type of relevant
measures for financial market regulation and super­
vision; compliance with FATF 40+9 recommendations
• An improved business environment and efficient
regulation framework promote competitiveness
Selected indicators: “Doing Business” Indicators;
number and type of impeding procedures eliminated;
number and type of reforms
• Support the reparation, restitution and
recon­ciliation process (implementation of law
1448) through
– Support for the consolidation of information and registry systems
– Technical support for cadastral information
• Improved information systems and technical
capacities of public institutions support better
economic policy formulation, implementation
of national regulation as well as international
agreements
Selected indicators: Number and type of reforms;
government efficiency indicators
20
Colombia
Colombia
21
Main objectives of
SECO’s interventions
Contribution by SECO’s program
Colombia’s country development
objectives 13
Objective 2:
Enhance international
competitiveness to achieve
more inclusive growth and
reduce inequalities
• Improved access to long-term investment capital
through innovative and efficient financing instruments
creates new jobs
• Increased competitiveness of the economy
and enhanced productivity of companies
through
– Strengthened commercial capacity for the
implementation and the benefit of trade
agreements recognizing Colombia’s
environmental potential
– Deepening of training strategies and SME
assistance in corporate governance,
environmental management and access
to finance
– Strengthened value chain organization
focusing on adherence to international
quality standards
… to achieve more
inclusive growth and to
reduce inequalities
Selected indicators: Number of jobs retained and
created; type and number of new financing products
created and in demand
• More efficient production capacities improve SME
productivity and international competitiveness
Selected indicators: Number of producers with a higher
net income; number of jobs retained and created
• Strengthened entrepreneurship promotes the creation
of new businesses and enhances the success of
existing ones
Selected indicators: Number of companies supported
that receive a loan; number of entrepreneurs trained
Objective 3:
Strengthen climate risk
management and
sustainable urban
development
… to mitigate the impact
of climate change and
manage rapidly growing
urbanization
• Improve climate change mitigation policy formulation
and implementation, including information and data
management
Selected indicators: Number and type of policy
initiatives and reforms implemented; reduction
in CO2 emissions
• Create equal opportunities through better
professional education
• Better climate risk management through
– Strengthened national and sub-national
risk and climate-relevant information and
management systems
6. Partner institutions
In the past, most of SECO’s programmes in Colombia
were carried out by its strategic partners, often multilateral institutions, with proven programme approaches
and methodologies. These will remain important partners for SECO in Colombia. However, with a local presence now in Colombia, SECO will increasingly work
directly with local partners, both public and private.
Indeed, certain national and sub-national public entities,
the national umbrella organization of the chambers of
commerce, selected chambers of commerce and selected
business associations have already become important
project partners, directly or indirectly. These partnerships
will be further strengthened under the present strategy.
This is particularly true for measures related to the private sector development. Private sector support is crucial for the sustainability and effectiveness of such
reforms. Their success depends largely on their ability to
address and respond to effective private sector needs. It
is therefore indispensable that these requirements be
adequately taken into account and for the private sector
to participate in the reform process.
• Design of more efficient systems of waste
water management, including sludge
management
• Enhance public utilities management and overall
framework conditions to improve water supply as
well as solid waste and wastewater management
Selected indicator: Number of people having access
to improved public utilities
• Promote sustainable urban development and
management
• Better environmental urban management
through:
– sustainable cities developmentsystems
– implementation of integrated waste
management models
Colombia is a highly urbanized country with 70-75% of the population living in urban
areas posing specific challenges in terms of providing good public services.
Selected indicator: Number and type of relevant
measures
• Increase financial resilience to natural disasters and
improve the capacity to meet post-disaster funding
needs without compromising fiscal balances
Selected indicators: Type and number of new
financing products created and in demand
The strategy will be monitored on an annual basis, with
the following purposes:
Institutional learning: Documentation and replication of best practices or lessons learnt
Monitoring of relevance, topicality, efficiency and
effectiveness of SECO’s programmes and projects (and
corrections/adaptations where necessary)
Accountability:
• between the field and headquarters
• to the public
• to the partner country
22
Colombia
SECO’s strategy is aligned with the development strategy of Colombia. Therefore, the annual country strategy
monitoring also seeks to verify that SECO’s portfolio
does indeed contribute to the achievement of Colombia’s development goals. Adaptive or corrective measures will be implemented if major changes occur in the
country context or development goals.
13 Based on Colombia’s national strategy for international
cooperation 2012-2014
Colombia
23
Abbreviation
Institution
Local partners
APC
Agencia Presidencial de Cooperación Internacional
Bancoldex
Banco de Comercio Exterior de Colombia
Confecamaras
Confederación de Cámaras de Comercio de Colombia
CAMACOL
Cámara Colombiana de Construcción
CNPMLTA
Centro Nacional de Producción más Limpia y Tecnologías Ambientales
DIAN
Dirección de Aduanas e Impuestos Nacionales
DNP
Departamento Nacional de Planeación
MADS
Ministerio de Ambiente y Desarrollo Sostenible
MCIT
Ministerio de Comercio, Industria y Turismo
MHCP
Ministerio de Hacienda y Crédito Publico
MINMINAS
Ministerio de Minas y Energía
MINTIC
Ministerio de Tecnologías de Información y las Comunicaciones
MVCT
Ministerio de Vivienda, Ciudad y Territorio
ProExport
Superintendencia Financiera
UNGRD
7. Statistical annex
The following data from the respective years are
based on statistics from the World Bank and other inter-
national bodies, including the IMF 14, the World Economic Forum, the ILO and the UNDP.
Sustainable Growth*
2008
2009
2010
2011
2012
(proj.)
2013
(proj.)
GDP per capita (current international USD)
5.303
5.189
6.312
7.132
8.127
8.359
3.5
1.7
4.0
6.0
4.7
4.4
–
–
69
68
68
–
Real GDP growth (annual %)
Global Competitiveness Index (rank)
Superintendencia de Industria y Comercio
External Debt Stocks (% of GDP)
19.0
22.1
21.8
–
–
–
Superintendencia de Sociedades
Government Gross Debt (% of GDP)
30.8
35.9
36.1
34.7
32.3
32.4
Gross Capital Formation (% of GDP)
23
22
24
–
–
–
Inflation, average consumer prices (annual %)
7.0
4.2
2.3
3.4
3.5
3.1
55.3
61.5
65.6
–
–
–
7.4
6.9
5.7
–
–
–
Unidad Nacional para la Gestión de Riesgo en Desastres
Swiss partners
COMCO
Swiss Competition Commission
EMPA
Federal Material Testing Laboratory
FiBL
Swiss Research Institute for Organic Agriculture
IPI
Swiss Federal Institute for Intellectual Property
SIFEM
Swiss Investment Fund for Emerging Markets
SIPPO
Swiss Import Promotion Programme
Swiss-contact
Swisscontact Foundation
Domestic credit provided by banking sector (% of GDP)
Interest rate spread 15
International partners
24
Colombia
AFD
Agence Française de Développement
HEID
Graduate Institute of International and Development Studies
IDB
Inter-American Development Bank
IFC
International Finance Cooperation
ILO
International Labour Organization
IMF
International Monetary Fund
ITC
International Trade Centre
KFW
Kreditanstalt für Wiederaufbau
PPIAF (WB)
Public Private Infrastructure Advisory Facility
UNCTAD
United Nations Conference on Trade and Development
UNIDO
United Nations Industrial Development Organization
UNDP
United Nation Development Programme
USAID
United States Agency for International Development
WB
World Bank
Strengthened integration
in the world economy*
2008
2009
2010
2011
Exports of goods and services (E) (% of GDP)
18.2
20.4
16.3
–
Imports of goods and services (I) (% of GDP)
20.4
16.3
18.3
–
FDI (net inflows, BoP, current USD) (millions)
10.596
7.137
6.914
–
14 International Monetary Fund, World Economic Outlook Database, April 2012
15 Lending rate minus deposit rate (%)
Colombia
25
Reduction of disparities*
2008
2009
2010
2011
57
57
56
–
11.4
12.0
11.8
10.8
Poverty headcount ratio at national poverty line
(% of population)
46
45.5
–
–
Improved water source, urban
(% of population with access)
99
–
99
–
Improved sanitation facilities, urban (% of population)
55
–
82
–
–
93.6
–
–
2008
2009
2010
2011
53
37
39
42
–
97
99
87
a) Government Effectiveness (%)
56.3
53.6
60.8
–
b) Regulatory Quality (%)
59.2
56.0
60.3
–
c) Rule of Law (%)
39.9
42.7
45.0
–
d) Control of Corruption (%)
51.0
49.3
43.1
–
2008
2009
2010
2011
CO2 emissions / population (tonnes per capita)
1.35
1.33
–
–
Share of renewable energy of TPES (%)
27.7
25.1
–
–
Energy use per unit of GDP
(tonnes of oil equivalent per thousand US dollars) 18
0.08
0.08
–
–
Gini index 16
Unemployment rate (%), labour force survey
Access to electricity (%)
Improvement of economic governance*
Ease of Doing Business (rank)
Trade Across Borders (rank)
Notes
Governance Indicators of the World Bank:17
Improvement of environmental conditions*
*
Missing data due to one of the following reasons:
– Depending on source, no projections available
– Statistics collected only on perennial base
– Data for the respective year not yet available
16 A value of 0 represents absolute equality, and a value of 100 absolute inequality.
17 Percentile rank indicates the percentage of countries worldwide that rate below the selected country. Higher values indicate better
governance ratings.
18 The GDP data have been compiled for individual countries at market prices in local currency and annual rates. These data have been scaled
up/down to the price levels of 2000 and then converted to US dollars using the yearly average exchange rates of 2000 or purchasing
power parities (PPPs).
26
Colombia
Colombia
27
Federal Department of Economic Affairs, Education and Research EAER
State Secretariat for Economic Affairs SECO
Imprint
Federal Department of Economic Affairs,
Education and Research (EAER)
State Secretariat for Economic Affairs SECO
Holzikofenweg 36
CH-3003 Berne
Phone +41 31 324 09 10
www.seco-cooperation.ch
[email protected]
Editing/Coordination:
SECO Cooperation
Graphic Design/Concept:
Casalini, Berne
www.casalini.ch
Project Photos:
SECO/Alejandro Chaparro
Copies may be ordered from
[email protected]
Phone +41 31 324 09 10
Berne 2013