Download Competition Policy, Private Sector Development and

Competition Policy, Private Sector
Development and Poverty Reduction
Capacity Building on Competition Policy in Select Countries of
Eastern and Southern Africa (7Up3)
International Perspectives
Mauritius, 29 March, 2007
Roger Nellist
Investment Climate Team
Department for International Development, London
Themes
• Nature of competition
• Competition links with poverty reduction
• Competitive pressures and growth
• Investment Climate and Growth
• CP, PSD and PR - evidence and research
•
•
•
•
challenges
Impediments to competition
Competition Assessment Framework
Challenges in implementing CP
Conclusions
Page 2
Nature of Competition
• Competition is vital for the functioning of
a modern market economy
• Competition, vs. fair competition
• Competition is a process and not an
‘equilibrium event’; it is not automatic;
and needs to be nurtured, promoted and
protected
Page 3
Competition Links with Poverty
Reduction
Think of people (poor) as:
• Consumers
• Employed
• Entrepreneurs
• Recipients of government-funded services
Page 4
Links with Poverty Reduction
• Direct benefits - fair competition enhances
consumer welfare (prices, choice,
standards?); essential private goods and
services consumed by poor.
• Indirect benefits through:
- general growth enhancements;
- access to sustainable livelihoods in formal
sector (shared growth);
• Publicly provided infrastructure and services
(Govt procurement arrangements, and bid
rigging)
Page 5
Competition abuses hurt
consumers
•
CUTS 7-Up3 identified: Unfair trade practices, collective
price fixing, entry barriers, market sharing and bid
rigging
•
•
•
•
•
•
•
Cartels: basic commodities - Bangladesh (e.g. rice,
sugar, potatoes); drinking water - Lao PDR; brick
making –Nepal
Predatory pricing of beverages - Vietnam
Bid-rigging: e.g. school construction- China; water
pipes- Nepal; road construction and bridge buildingJapan; infrastructure construction- Vietnam
Transport cartels – e.g. Bangladesh, Nepal and India
International cartels e.g. vitamins
Mergers reducing cement producer competition – India
Evenett/Jenny research on Africa
Page 6
Competition – the growth story
• Level playing field for domestic SMEs (firms
•
•
•
•
and jobs, globalisation)
Free entry and exit - innovation, technology,
productivity
Intermediate inputs
Investment climate (consistent competition
framework helps investor confidence, as part
of good regulatory regime)
Growth (Inv + Productivity push out the PPF)
NB: Competition Policy is complementary to
privatisation and de-regulation reforms
Page 7
More Competitive Pressure,
More Innovation
• Firm-level surveys confirm the importance of competitive
pressure for incentives to innovative and increase
productivity
Source: WDR,
2005
Page 8
Private Investment Has Grown
Faster in Countries with Better
Investment Climates
Source: WDR,
2005
Average 1984-2000
based on
International Country
Risk Guide’s index of
“Investment Profile”
Page 9
Quote
“If each Indian state could attain the best
practice in India in terms of regulation and
infrastructure, the economy should grow about
two percentage points faster.”
Investment Climate Assessment (ICA) of India, World Bank,
2002
Page 10
Roots of Growth and Poverty
Reduction to be Found in
Improving Investment Climate
WDR2005: Investment climate reforms in, for example China, India,
and Uganda, have been associated with:
Dramatic increase in private investment/GDP
Dramatic fall in poverty
Page 11
Competition Policy, PSD and
Poverty reduction
• Assembling the evidence:
- What are we examining?
- Theoretical, anecdotal, empirical?
• Research challenges:
- attribution (CP reforms often part of a
package)
- paucity of data for DCs
- timing of benefits
Page 12
Assessing the state of
Competition
Recognise:
• Public sector as well as private sector
impediments to competition;
• Political/economy as well as technical,
legal and economic impediments - vested
interests (institutional, commercial,
individuals)
Page 13
DFID’s Competition
Assessment Framework (2007)
• How to select sectors and markets for assessment
• How to analyse competition:
- Identify the relevant markets and the
competitors
- Examine the market structure
- Consider vested interests
- Look for barriers to entry
- Look for signs of anti-competitive conduct
by firms
- Ascertain if other government policies or
institutions limit competition
• Draw conclusions
Page 14
Competition Studies of Key
Sectors in India: 2006-2007
•
•
•
•
•
•
•
•
•
•
•
•
Manufacturing
State Policies: Passenger Transportation in six states
Pesticides and Cement
Road goods Transport: Mumbai region
Energy
Telecommunications
Food Grains: three eastern states
Tea Auctions
Cartels
Bilateral Treaties
Competition authority-Regulator interface
Enterprise Compliance Guidelines
Page 15
Possible Further Competition
Studies in India: 2007-2008
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Pharmaceuticals
Railways
Gas downstream
Mining
Manufacturing (high impact industries)
Insurance
Health and Education
Banking
Fertilisers
Subsidies
Standards
The public Sector and procurement
The legal system
Property rights
Domestic barriers to trade
Page 16
Challenges in implementing
Competition Policy
• CP is at a ‘crossroads’
• Conflict with other policy objectives?
• Persistence of natural monopolies and
•
•
•
•
tension with sector-specific regulators
Resistance from vested interests
Lack of political will and independence
Small (vulnerable?) DC markets
Capacity constraints
Page 17
Conclusions
• Fair competition matters - for sustaining growth
•
•
•
•
•
•
•
•
•
and poverty reduction
It matters in Africa!!
Need pro-market commitment from top
Need bottom-up advocacy
Appropriate policies, laws, institutions
Adequate financial and human resources
Operational independence
Beware of vested interests, block reforms
Assess and address the real impediments to
competition
Must deal with some structural issues (e.g.
relationship with sector regulators)
Page 18