Competitiveness and Recovery - Development Policy Loan

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The development objective of the Competitiveness and Recovery Development Policy Loan in Colombia is to encourage a high-productivity and sustainable recovery from the COVID-19 crisis by: (i) improving regulation for private sector-led recovery; (ii) promoting innovation and digital finance; and (iii) fostering entrepreneurship and internationalization. The operation supports the authorities’ strategy for a broad-based, inclusive, and sustainable recovery by addressing structural issues hindering productivity and is based on three pillars. The first pillar seeks to enhance the productivity of the Colombian economy by improving the regulatory environment for private sector activity. A first set of measures aims at reducing the time and cost allocated to comply with administrative procedures or government transactions as well as associated carbon footprint, and at establishing whole-of-government better regulation to the production and review of technical regulations. Second, a clearer regulatory framework for green finance will help power a broad-based, climate-friendly and environmentally sustainable recovery, with an expected increase of green bond issuances. The second pillar supports innovation and the development of digital finance, whose shortcomings have become evident in the wake of the COVID-19 crisis and hinder productivity. First, investment in science, technology, and innovation (STI) will receive a boost from the expanded use of tax incentives by smaller firms. Moreover, the allocation of a greater share of resources from the General Royalties System to STI, unprecedented for green projects, will foster innovation with positive spillovers for an environmentally sustained recovery. The third pillar fosters high-growth entrepreneurship and builds on the work of the ongoing Internationalization taskforce, aiming to improve business entry, operation and growth and increasing the international integration of the Colombian economy.