Swiss Economic Cooperation and Development Colombia Country … · 2019. 9. 2. · In 2012 the...

Swiss Economic Cooperation and Development

Colombia Country Strategy 2013-2016

Federal Department of Economic Affa i rs , Educat ion and Research EAER State Secretariat for Economic Affairs SECO

Colombia 3

State Secretariat for Economic Affairs (SECO)

SECO’s Economic Cooperation and Development

Division is responsible for the planning and imple-

mentation of economic cooperation and develop-

ment activities with middle income developing coun-

tries, 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 interna-

tional cooperation is sustainable global develop-

ment 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 specifi c areas of compe-

tence and experience in promoting economic and

fi scal 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 appro ximately

380 million Swiss francs per year. Ambassador

Beatrice Maser heads the division.

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 classifi ed as middle-income countries (MICs). As their role in the global economy expands, they

continue to gain in signifi cance, for example in providing global public goods. However, despite rapid growth rates in these coun-

tries, 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 specifi c expertise in economic

issues. Whether we are seeking to strengthen economic and fi scal 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 fi rst 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.

The present Country Strategy is based on the framework credit for economic and trade policy measures, as described in the afore-

mentioned 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 fi rmly 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-FleischState Secretary,Director of SECO

Beatrice MaserAmbassador,Head of Economic Cooperationand Development SECO

4 Colombia

Editorial 3

Abbreviations 4

1. Country context 6

1.1 Political situation 6

1.2 Economic and social situation 7

1.3 Bilateral economic relations 10

2. Development cooperation context 11

2.1 Partner country development strategy 11

2.2 Donor landscape 12

2.3 Lessons learnt from 2009-2012 13

3. Development challenges and SECO’s response 15

4. Financial resources 21

5. Results monitoring 22

6. Partner institutions 24

7. Statistical annex 26

AML/CFT Anti-Money Laundering/Combating the Financing of Terrorism

APC Colombian Presidential Agency for International Cooperation

APEC Asia-Pacific Economic Cooperation

CAF Andean Corporation Bank

CDM Clean Development Mechanism

CHF Swiss Franc

COOF Swiss Cooperation Office

CPC Cleaner Production Centre

CSR Corporate Social Responsibility

EFTA European Free Trade Association

EU European Union

FARC Fuerzas Armadas Revolucionarias de Colombia

FATF Financial Action Task Force

FDI Foreign Direct Investment

FTA Free Trade Agreement

GHG Green House Gas emissions

GDP Gross Domestic Product

IBRD International Bank of Reconstruction and Development

IDB Inter-American Development Bank

IDP Internally Displaced People

IFC International Finance Corporation

ILO International Labour Organization

IMF International Monetary Fund

IPR Intellectual Property Rights

MDG Millennium Development Goals

NDP National Development Plan

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PEFA Public Expenditure and Financial Accountability Programme

PFM Public Financial Management

PPP Public-Private Partnership

REDD+ Reducing Emissions from Deforestation and Forest Degradation

SDC Swiss Agency for Cooperation and Development

SECO State Secretariat of Economic Affairs

SME Small and Middle-sized Enterprise

TBT/SPS Technical Barriers to Trade/Sanitary and Phytosanitary Measures

USD United States Dollar

WTO World Trade Organization

SECO’s economic and trade policy measures strive to integrate its partner countries into the global economy.

Abbreviations Contents

Colombia 76 Colombia

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 implement-

ing the “policy of demo cratic 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 eco-

nomic 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 vic-

tims 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 normal-

ized its relations with Venezuela, giving hope to revived

trade relations with two traditional and important com-

mercial partners.

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 elec-

tions 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 con-

trol over most of the national territory, internal

security remains tense: Regardless of some key mili-

tary 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. Country context

second only to Sudan, with some 4-5 million IDPs 2 seek-

ing 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 para-

military 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 corrup-

tion scandals involving various offices have come to

light since Santos assumed office. The new administra-

tion 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 institu-

tional setup attempts to clarify the division of responsi-

bilities and competences, it could potentially create new

inter-institutional coordination challenges.

1.2 Economic and social situation

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 grad-

ually risen. Combined with improved security, these fac-

tors 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-

A new government with a positive mind set.

1 The next legislative and presidential elections are set for March and May 2014, respectively.

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).

Improved livelihoods thanks to organic and fair-trade standards in cocoa production.


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 eco-

nomic 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: Not-

withstanding recent reforms, the Colombian public sec-

tor is still characterized by bureaucratic red tape, weak

tribution of income, as reflected by the Gini coefficient.

Labour market rigidities and structural skill mismatches

are contributing to this underutilization of a considera-

ble section of the potential labour force. Indeed, the

Colombian labour market is still characterized by persis-

tently 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 mil-

lion 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 contrib-

utes only 0.37% of greenhouse gases at global level

and has a “clean” energy mix. Further, Colombia’s pop-

ulation 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. Nowa-

days, 70 to 75% of the population lives in urban areas 7,

challenging the provision of good public services, espe-

cially in the area of waste management.

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 distor-

tionary 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 poten-

tial 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 predictabil-

ity and stability and hence the importance of further

diversification of economic activity. Additional fiscal

challenges relate to the government‘s obligation to pro-

vide health care and pensions, as well as increased eco-

nomic 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, Colom-

bia’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-

Remarkable eco-nomic performance have advanced Colombia to the second-best sovereign risk in Latin America.

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 multidimen-sional aspects of poverty.

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%.

Improving working conditions and promoting corporate social responsibility contribute to a better quality of life.


1.3 Bilateral economic relations

Excellent and fairly formalized: Bilateral eco-

nomic 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 bet-

ween 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 rati-

fied 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 mil-

lion in 2011, up by more than 100% compared to 2000.

They proved resilient and remained stable during the

2008-2009 financial crisis. Chemicals and pharmaceuti-

cals are the main export products (over 60%). Colom-

bian 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.

2.1 Partner country development strategy

The National Development Plan 2010-2014 –

Prosperity for All: The National Develop ment 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 conti-

nuity, it essentially retains the central elements of the

previous administration’s economic policy, i.e. attracting

foreign invest ment, fostering macroeconomic stability,

addressing high unemployment and widespread infor-

mality, 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 infra-

structure 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) Environ mental and Disaster Risk Manage-

ment, (c) Good Governance in public policy delivery, (d)

Innovation in new and existing productive activities and

(e) Regional Development and convergence.

In addition it identifies five “locomotives” or “growth

drivers”:

■ Innovation to add value to productive processes by

scaling-up investments into research and develop-

ment, promoting technology transfers and address-

ing pending regulatory bottlenecks;

■ Agribusiness to develop world-class products and

sectors to emulate the coffee precedent symbolized

by the Juan Valdez trademark and particularly rele-

vant 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 mer-

chandise trade costs due to deficient road, port and

rail capacity;

■ Mining & Energy to generate growth and neces-

sary income for redistribution programmes, through

the responsible use of Colombian’s natural resource

endowment based on transparent concession proce-

dures.

The National Strategy for International Cooper-

ation 2012-2014: The strategy differentiates between

international cooperation received and offered by

Colombia. It outlines six broad priority areas for interna-

tional cooperation destined to Colombia: 1) integral risk

management and sustainable reestablishment of com-

munities affected by natural disasters, 2) equality of

opportunities for democratic prosperity, 3) economic

growth and competitiveness, 4) environment and sus-

tainable 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.

2. Development cooperation context

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.

Supporting the industrial resource efficiency, leads to increased competitiveness and a lower „environmental footprint“.


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 assis-

tance 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 eco-

nomic 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, Ger-

many and the Netherlands, while Switzerland ranks

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 interna-

tional 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 Develop-

ment 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 coordi-

nation, 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 insti-

tutions. This aims at better structuring the dialogue with

the Colombian government, in particular with the APC.

2.3 Lessons learnt from 2009-2012

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 signifi-

cant savings for the private sector at the national and

sub-national level, the enactment of a new Law on Con-

sumer 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 elec-

tronic waste and the launching of the first collective

compliance scheme for the collection and recycling of

electronic waste in Latin America. The measures sup-

ported 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 require-

ments. 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 net-

work of international experts. Since national procure-

ment 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.

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 financial and technical assistance helps to improve drinking water and sanitation systems.

SECO’s added value may there-fore not be in terms of volume but rather in terms of specific know-how, best practices and a network of international experts.


Constraints in implementing the Paris Declara-

tion – Using country systems and donor coordination

has proven difficult:

■ Use of country system: The current legal frame-

work of international cooperation is characterized by

large “grey areas” not conducive to and limiting the

use of country sys tems for cooperation implementa-

tion. Channelling ODA through the national budget

sys tem often proves administratively complicated as

well as time-consuming. As a re sult, only around

10% of ODA is currently provided through the

national budget and many government agencies pre-

fer 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 facil-

itate 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 manage-

ment (ODA in 2010 represented only 0.5% of GDP).

As a result, deal sourcing and project structur-

ing has proven more complex and time-con-

suming than expected.

■ 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 imple-

mentation 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.

■ Multi-bilateral cooperation: Most multilateral

agencies face shareholder pressure to increase com-

mitments and staff location in poorer countries (IDA

countries), while restricting new operations in upper-

middle-income countries to projects linked to innova-

tion. 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 dif-

ficulty in developing multi-bilateral projects in the

future, as well as efficiency problems in implement-

ing regional programmes in countries such as Colom-

bia due to the personnel policy of multilateral institu-

tions (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 inter-

ventions 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 suc-

cessfully addressing some of its key development chal-

lenges, 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.

3. Development challenges and SECO’s response

The development of the financial sector creates new investment opportunities for Colombian and international investors.


Objective 1: Strengthen public institu-tions to improve service delivery and governance

Challenge: In order to fully exploit the potential oppor-

tunities, public institutions have to manage resources in

a more efficient, effective and transparent way. New

technologies (e.g. e-government) can help but, in addi-

tion, 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 strength-

ening of the public sector with the objective of support-

ing a more efficient, effective and transparent manage-

ment of its resources. To this end, management

capacities in government institutions at all levels are

improved, and effective tools for planning and coordi-

nating policies, programmes and projects put in place

with a view to ensuring stable, transparent and account-

able public finances and addressing imbalances in ser-

vice delivery at the national and sub-national level. This

pillar also encompasses measures to further strengthen

market institutions and improve the economic frame-

work in areas such as financial, trade and business regu-

lations, thereby facilitating the emergence of a competi-

tive private sector. Finally, under this pillar, SECO plans

to support public technical agencies in charge of imple-

menting 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 (mac-

roeconomic analysis, international reserve man-

agement, 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 simplifica-

tions, natural resource taxation and green taxa-

tion), 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 develop-

ment 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 strength-

ening at the national and sub-national level as a means

of improving governance. Given the transversal charac-

ter 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 manage-ment of its resources.

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 persis-

tently 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 econ-

omy 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 good-

quality jobs and develop a more equitable society. These

different constraints to private sector development need

to be tackled in order to enhance Colombia’s interna-

tional competitiveness.

Focus: SECO supports Colombia’s efforts to maintain

sustained and dynamic growth and for the growth pat-

tern to become more inclusive. To this end, constraints

to private sector growth are addressed, such as low fac-

tor 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 perfor-

mance. In order for growth to be more inclusive, this

pillar also encompasses measures to promote innova-

tion and the diversification of the economy to unlock

new drivers for growth. Reforms of the productive struc-

ture coupled with improved vocational training are cru-

cial for inclusive growth to generate more good-quality

jobs and develop a more equitable society.


Support economic diversification

Enhance Colombia’s trade capacity to enable

compliance with international standards and cre-

ate export networks

Assist the implementation of better govern-

ance 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 (long-

term) 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 “envi-

ronmental footprint”


ment 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.

SECO supports Colombia’s efforts to maintain sustained and dynamic growth and for the growth pattern to become more inclusive.


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 manage-

ment and sanitation, as well as urban policies and plan-

ning in general, so as to create greener and more sus-

tainable cities over time.

Focus: SECO supports Colombia in its effort to

strengthen climate risk management policies and infor-

mation systems, focusing on climate-relevant informa-

tion and data. This will allow Colombia to define and

implement specific environmental policies and strate-

gies in alignment with the priorities of the National Dis-

aster 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 includ-

ing 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.


Support Colombia by enhancing its capacity

with respect to environmental analysis, enabling

it to collect and evaluate environmental and cli-

mate data in an up-to-date manner

Facilitate Colombia’s market-readiness for new

carbon market schemes

Improve the managerial capacity of public ser-

vices enterprises to enable financially sustainable

operation and a better public service offering

Support the establishment of specific environ-

mental 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


ment objectives: The proposed measures are expected

to contribute particularly to Colombia’s objective in the

priority field of environment and sustainable develop-

ment with its various sub-objectives, such as improved

preparedness to climate change and sustainable urban

development.

Modality mix

SECO will continue to pursue a mix of modalities. Its

programme will be implemented in line with the princi-

ples of Aid and Development Effectiveness: SECO will

seek to align its programme with the government’s pri-

orities 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 build-

ing capacity and interacting closely with public and pri-

vate actors. Assistance will be provided through a mix of

modalities of technical assistance and capacity building,

predominantly on a specific project basis, either bilater-

ally, directly with the Colombian counterpart(s), or by

co-financing a multilateral organization’s project and

clearly defined and closely monitored investment pro-

jects. Given the public-private character of many inter-

ventions, 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 ini-

tiatives. Finally, country specific measures are comple-

mented by multi-country or even global programmes

co-financed by SECO and implemented generally by

multilateral organizations.

SECO’s activities are complementary to those of other

Swiss cooperation actors. In addition to SECO’s eco-

nomic 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.

Economic governance and gender as cross-cutting issues

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 eco-

nomic growth. Economic governance comprises all insti-

tutions, regulations, judiciary systems and norms that

promote the effectiveness, non-discrimination, legiti-

macy and accountability of economic activity and there-

fore contribute to combating corruption. The majority of

SECO’s interventions strengthen good economic gov-

ernance at public and private levels.

SECO sees gender equality as an important element of

poverty reduction and improving the economic pros-

pects of partner countries. No projects should place

women or men at a disadvantage. The gender dimen-

sion is integrated into project design and implementa-

tion, where it can contribute to the greater effectiveness

of SECO’s projects.


SECO’s interventions under this strategy will be

financed through the Swiss Framework Credit for Inter-

national 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 part-

ners in each priority country.

Accordingly, the following information on planned com-

mitments 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.

4. Financial resources

Planned commitments for Colombia 2013-2016CHF 55 million*

Projected funds allocated to each strategic

objective:

1. Strengthening public institutions 25%

2. Enhancing international competitiveness 30%

3. Climate 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.

The following table provides an overview of the

future economic cooperation with the proposed moni-

toring and evaluation indicators at the outcome level

and alignment with the Colombian development objec-

tives.

The monitoring and evaluation indicators are selected

examples; the success of implementation of this country

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 devel-

opment objectives as a whole.

5. Results monitoring

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

… 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

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

• 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

• 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)

• Support the reparation, restitution and recon ciliation process (implementation of law 1448) through

– Support for the consolidation of informa-tion and registry systems

– Technical support for cadastral information

Strengthening e-waste management allows for local recovery of valuable or dangerous metals/substances and supports the development of a recycling industry.


The strategy will be monitored on an annual basis, with

the following purposes:

Institutional learning: Documentation and repli-

cation 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

SECO’s strategy is aligned with the development strat-

egy of Colombia. Therefore, the annual country strategy

monitoring also seeks to verify that SECO’s portfolio

does indeed contribute to the achievement of Colom-

bia’s development goals. Adaptive or corrective meas-

ures will be implemented if major changes occur in the

country context or development goals.

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

… to achieve more inclusive growth and to reduce inequalities

• Improved access to long-term investment capital through innovative and efficient financing instruments creates new jobs

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

• 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

• Create equal opportunities through better professional education

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

• 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

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

• Better climate risk management through – Strengthened national and sub-national

risk and climate-relevant information and management systems

• Design of more efficient systems of waste water management, including sludge management

• Better environmental urban management through:

– sustainable cities developmentsystems – implementation of integrated waste

management models

13 Based on Colombia’s national strategy for international cooperation 2012-2014

In the past, most of SECO’s programmes in Colombia

were carried out by its strategic partners, often multilat-

eral institutions, with proven programme approaches

and methodologies. These will remain important part-

ners for SECO in Colombia. However, with a local pres-

ence 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 pri-

vate sector development. Private sector support is cru-

cial 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.

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.

6. Partner institutions


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

Superintendencia de Industria y Comercio

Superintendencia de Sociedades

UNGRD 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

International partners

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

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 Eco-

nomic Forum, the ILO and the UNDP.

7. Statistical annex

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 –

Sustainable Growth* 2008 2009 2010 20112012

(proj.)2013

(proj.)

GDP per capita (current international USD) 5.303 5.189 6.312 7.132 8.127 8.359

Real GDP growth (annual %) 3.5 1.7 4.0 6.0 4.7 4.4

Global Competitiveness Index (rank) – – 69 68 68 –

External Debt Stocks (% of GDP) 19.0 22.1 21.8 – – –

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

Domestic credit provided by banking sector (% of GDP) 55.3 61.5 65.6 – – –

Interest rate spread 15 7.4 6.9 5.7 – – –

14 International Monetary Fund, World Economic Outlook Database, April 201215 Lending rate minus deposit rate (%)


Improvement of economic governance* 2008 2009 2010 2011

Ease of Doing Business (rank) 53 37 39 42

Trade Across Borders (rank) – 97 99 87

Governance Indicators of the World Bank:17

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 –

Improvement of environmental conditions* 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 – –

Reduction of disparities* 2008 2009 2010 2011

Gini index 16 57 57 56 –

Unemployment rate (%), labour force survey 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 –

Access to electricity (%) – 93.6 – –

* 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).

Notes

Federal Department of Economic Affa i rs , Educat ion 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

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