Ref. Ares(2019)5141439 - 07/08/2019
EUROPEAN COMMISSION
DIRECTORATE GENERAL
ECONOMIC AND FINANCIAL AFFAIRS
Growth, competitiveness and structural reforms
Macroeconomic imbalances and adjustment
Brussels, 17 Feb. 2016
ECFIN.B1
National Competitiveness Boards:
Set-up and characteristics
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Note for the attention of EPC
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1.
BACKGROUND AND PURPOSE
This issue note is aimed at supporting the EPC discussion on the Commission
recommendation for a Council recommendation for a system of National
Competitiveness Boards (NCBs).. The EPC decided to first discuss different aspects related
to the substance of competitiveness and productivity developments in Member States, and in a
second step, to address the details of how the Council would recommend the creation of the
proposed system of NCBs. The Secretariat of the EPC invited DG ECFIN to provide
respective issues notes to support the discussion.
The first note, discussed in the January EPC, focussed on the economic rationale for
raising productivity, boosting competitiveness, and supporting the implementation of
reforms as major challenges for the EU and the euro area Member States. These challenges
fall within the scope of the proposed analytical mandate in the Commission recommendation.
Overall, the discussion in the EPC indicated a broad agreement that these are key challenges
which require additional efforts.
The discussion on the first note also showed that members would like to further discuss
the institutional and operational aspects of the creation of NCBs. Questions raised related
inter alia to the flexibility of the institutional set up, how existing institutions fit in and how
the system of NCBs would operate in practice at the national level and how they could
interact with the EU level.
With a view to help shaping consensus towards a Council recommendation, this second
note is meant to feed the debate on the proposed set-up and the necessary requirements
for NCBs. It highlights and explains the key principles and elements of guidance provided in
the Commission's recommendation. The rest of the note is structured as follows. Section 2
discusses the set-up of NCBs. Section 3 elaborates on the requirements for NCBs including
the notion of independence, unbiasedness and their implications.
2.
SETTING UP COMPETITIVENESS BOARDS
The Commission recommendation aims at providing sufficient flexibility in setting up
NCBs. The text of the recommendation permits the setting up of NCBs with different possible
modalities such as: (i) creation of a new institution; (ii) appointment of an existing
organisation, and modifying its mandate if needed; and (iii) a collaboration between existing
institutions.
Article 4 states that "each Member State should identify one competitiveness board, which
could in turn rely on different existing bodies". The aim of the Article is to ensure that in each
Member State there is a single recognisable NCB. A single identifiable contact point is
necessary for the effective operation of a network across participating countries and at euro-
area/EU level. The article also permits NCBs to operate using the existing web of bodies and
institutions that carry out relevant economic and policy analysis (
see Box 1). This permits
leeway in the practical setting up of the operations of NCBs. It means that there is no
requirement that all relevant activities are centralised in a single encompassing institution. It
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also means that, in case more than one institution exists in a Member State that could be
eligible to participate (see points below on requirements for NCBs), there can be different
ways to arrange the operations for such existing bodies, provided that there is a clear
identification of one NCB. In case no existing bodies qualify to participate in the NCB,
several options are open, including the transformation of existing bodies or the setting up of a
new body.
The statutory regime of NCBs needs to be grounded in law or administrative acts. The
government of each Member State is responsible for the setting up of an NCB. As stated in
Article 6 a, the NCBs' shall be characterised by a "statutory regime grounded in national laws,
regulations or binding administrative provisions". This is necessary for the unambiguous
identification of the NCB and for the specification of a number of requirements that NCBs
need to fulfil. It is also important to have permanent bodies in order to build credibility over
time. It is useful here to draw a parallel with the set-up of fiscal councils which have also been
grounded in national law in a rather flexible manner (
see Box 2).
Box 1: Examples of existing authorities dealing with competitiveness-related matters
Most Member States in the Euro area have already established institutions monitoring
competitiveness which could be used as a basis to set up their NCB
Many Member States have set up independent economic councils which are in charge of monitoring
economic developments and provide inputs for policy making.
The magnitude and influence of these bodies in the policy-making process differs greatly. In particular,
a number of them fulfil purely ad-hoc tasks, sometimes focusing solely on a very narrow scope (e.g.
wage developments) and only a few of them provide regular analysis on competitiveness and
productivity developments.
A few Member States require these bodies to consult with stakeholders and social partners, particularly
when dealing with wage matters.
1. Examples of offices for economic analysis or groups of experts dealing with competitiveness
In
the Netherlands, the
Bureau for Economic Policy Analysis (CPB) is an agency that belongs to the
ministry of Economic Affairs and that carries out independent economic research and provides policy
recommendations. Its main focus is not necessarily competitiveness as such. The CPB represents an
independent institution contributing to the economic decision-making process of politicians and
policymakers.
In
Belgium, the
Federal Planning Bureau (BFP) is a public institute that carries out economic forecasts and
research aimed at shedding light on policy decisions. This is also the case, to some extent, of the
German research institutions in charge of analysing the state of the German and world economy (IFO, IfW, IWH,
RWI) and the
Austrian Institute of Economic Research (WIFO).
In
France, the
Council of Economic Analysis (CAE) is an independent, non-partisan advisory body that
reports to the Prime Minister. Its members belong to the academic community and are chosen by the Prime
minister. To bring further knowledge, some economists from the business sector may join in to contribute to
specific projects. A permanent staff mainly made of professors or researchers provides the analytical
support.
In
Germany, the
Council of Economic Experts is an academic body advising German policy makers on
questions of economic policy. It is composed of five members (the "Five Sages") who mostly belong to the
academic world. The Council is supported by a Scientific Staff (13 persons).
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2. Examples of systems or bodies involving stakeholders
In
Ireland, a
National Competitiveness Council (NCC) reports on key competitiveness issues and offers
policy recommendations to enhance competitiveness. Its members include both experts and social partners'
representatives. Each year, the NCC publishes a benchmark for Ireland (Ireland's Competitiveness
Scorecard) based on statistical indicators. Built on these data, the NCC publishes another report, the
Competitiveness Challenge report, which identifies issues and provides recommendations. The NCC takes a
broad definition of competitiveness referring to the 'ability of firms to compete in markets', and
encompassing a large range of factors including education and training, entrepreneurship and innovation,
technological infrastructures, taxation.
In
Belgium and
France, the
Conseil Central de l'Economie (CCE) and the
groupe d'experts indépendants
sur le SMIC represent entities that directly involve social partners but their scope is narrow, limited to wage
developments and minimum wage respectively.1
France provides another example of entities that directly reflect stakeholders' views. The
Economic, Social
and Environmental Council (CESE) consists of more than 200 counsellors appointed by organisations that
represent all the facets of the civil society: employees, firms, agriculture, doctors, students etc. This council
writes reports on any kind of topics (incl. annual report on French economy, Europe 2020 strategy) and
issues opinions that are the outcome of a vote.
3.
CHARACTERISTICS OF COMPETIVENESS BOARDS
The Commission recommendation specifies a number of required characteristics for
NCBs. These requirements are aimed at ensuring the fulfilment of the ultimate goal of a
European system of NCBs, i.e., improved policy making at national level and at EU level
through increased national ownership and analytical expertise. Article 6 outlines a number of
minimum requirements regarding the characteristics of NCBs.
NCBs are required to be independent and unbiased. Recital 6 in the Recommendation
helps to clarify the meaning of independent and unbiased: "…independent from the ministries
or public authorities that deal with competitiveness-related issues…. unbiased, in the sense
that they should not convey only or mainly views of specific groups of stakeholders". The
recital also elaborates on the rationale for this requirement: "…such independence and
unbiasedness requirements are aimed at ensuring that the advisory role of competitiveness
boards adequately reflects expert judgement formulated in the general interest." These
1 In Belgium, the CCE reports on the evolution of the Belgian competitiveness relative to its three main trading
partners (Germany, France and the Netherlands). The members of this body are appointed upon recommendation
of organisations that represent both the employers' side (banks, SMEs, etc.) and the employees' side (trade
unions, consumer associations). The technical reports provided by the CCE are then used by social partners
during negotiations to fix a wage norm. In France, the
groupe d'experts indépendants sur le SMIC is in charge of
analysing and providing views on the minimum wage. This group of eight experts is composed of researchers,
professors and some administration's representatives. Each year, it provides a report based on multiple
consultations with social partners, collecting their views on the minimum wage and its desired evolution. The
group can also rely on analyses provided by the public administration. The annual report then feeds into the
negotiations organised by the 'national commission of collective bargaining'.
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requirements are also essential to ensure that NCBs have the necessary credibility to influence
the economic debate and policy making.
A number of provisions would help to ensure independence and unbiasedness. Such
provisions would be included in the legislation or administrative acts defining the NCB
statute.
NCBs should not take …"instructions from any public authorities dealing with
competitiveness-related issues or from any other public or private body" (Article 6 b).
This concerns the various activities, both in the analytical sphere (NCBs need to be
free to choose topics of analysis, analytical approaches, etc.) and regarding policy
recommendations.
NCBs should also have "the capacity to communicate publicly in a timely manner"
(Article 6c). This is a condition for the NCBs to play a role in the national and
international debates on productivity in an active way both on analytical terms and
from a policy viewpoint.
Independence and unbiasedness is also related to the procedure for the nomination of
their members, which should be based on "experience and competence" (Article 6d).
The aim of the recommendation is to ensure that the governance of NCBs is inspired
by non-partisan professionalism.
Independence can work in practice only if "adequate resources and appropriate access
to information to carry out their mandate" (Article 6 e).
The Recommendation foresees that NCBs consult relevant stakeholders in their
activities. The aim of this requirement (Article 7) is to make sure that the expert judgement of
NCBs is corroborated by a rich and regular dialogue with the main economic actors and that
their views are heard. The Recommendation makes an explicit reference to social partners, as
NCBs are expected to analyse competitiveness developments, including for what concerns
labour costs, and "informing the wage setting processes" (Article 3b). Which social partners
would be consulted and through which modalities would depend on the specific wage setting
system and on the organisation of collective bargaining prevailing in each Member State.
Article 7 also states that NCBs should not convey mainly the views of a particular group
of stakeholders. Such requirement is a necessary corollary to the requisite of unbiasedness
(Article 6 b), but it implies also that NCBs should engage in consultations with a sufficiently
comprehensive set of stakeholders and that their analysis and recommendations are
sufficiently balanced not to systematically reflect the views of a particular group only. The
experience from existing institutions monitoring competitiveness in member States suggests
that the relationship with stakeholders can follow several models, including consultation on an
ad-hoc basis, or required consultation at regular intervals with no obligation to incorporate
views.
Requirements are also aimed at ensuring that the NCBs are able to meet their mandate
in terms of analytical capacity (Article 5, 6e). NCBs should be able to participate in the
national and international debates on productivity in an active way. To this purpose, they
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should be endowed with the necessary resources to carry out analysis and acquire in-depth
knowledge of national specificities and practices. The Recommendation does not specify that
analysis and research is expected to be carried out exclusively in-house. Part of the analytical
work of the NCB could be commissioned to external bodies (public or private research
institutes, academia,…) or carried out in cooperation with public institutions (e.g., Central
Banks, Ministries) in respect of the autonomy principle. The analytical capabilities of NCBs
depend also on the access to relevant information. In this respect, their statute could guarantee
access to relevant information for the formulation of analysis and policy recommendations in
the competitiveness domain that is available to public authorities.
Box 2: The independent fiscal institutions – Set up and experience
The recommendation by the Commission to set up NCBs bears some similarity, in the economic policy
sphere, with the efforts to set up independent fiscal institutions (IFIs). In both cases, the institutions seek to
improve national ownership to improve policy implementation. Moreover, some of the requirements, and
notably the independence, are shared by both types of institutions. It is thus useful to highlight the main
features and results achieved by IFIs.
Mandate: In order to reinforce the EU economic governance, the six-pack introduced the requirement to set
up independent fiscal institutions. The mandate of these institutions, which was further expanded with the
two-pack and the Fiscal Compact, is to monitor the compliance with national fiscal rules. In particular, the
TSCG introduces a correction mechanism according to which national authorities have to comply or explain
why they depart from national fiscal rules, as monitored by the IFIs.
Institutional set-up: In order to reflect the diversity of national frameworks, and notably the fact that in
most Member States some institutions were already monitoring fiscal developments, the legal requirements
at the EU level focused on essential features geared to the preservation of the independence of IFIs. In
particular, no structural template for IFIs was imposed. As part of the European Semester, the Commission
reviewed the institutions put in place in the various Member States and, in some instances, the Council
issued a country-specific recommendation to set up or strengthen the institution (e.g. for Poland and
Slovenia in 2015).
Influence on policy making: IFIs have a clear impact on the credibility of national fiscal rules by ensuring
that deviations are acknowledged and explained by the government. They participate in a more transparent
fiscal policy by ensuring that sufficient information is provided on the government's budgetary strategy.
Finally, IFIs can reinforce the relevance of existing checks and balances embedded into the budgetary
process (Parliament, Constitutional Courts, Court of auditors, EU authorities, and eventually the public at
large) by providing a credible and independent assessment of the budgetary strategy.
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