Competition Scenario in Bangladesh Iftekar Ahmed Senior Research
Competition Scenario in Bangladesh Iftekar Ahmed, Senior Research Fellow, BEI August 16, 2005 Bangladesh Enterprise Institute
Bangladesh - At a Glance Population GDP (growth rate) 1993 -94 2003 -04 120 m $ 26 b 4. 1% $224 136 m $55. 1 b 5. 5% $421 GDP (per capita) Poverty (<$1/day) -Poverty 71 m (59%) (national poverty line) Bangladesh Enterprise Institute 47 m (36%) 68 m (50%)
Country Achievements • Impressive achievements in economic and social development • Steady economic growth, stable domestic debt, interest and exchange rate • Per capita GDP in the 1990 s rose three times faster than 1980 s. • Poverty reduced by 9% in the 1990 s • Gender parity in primary education, lower fertility rate, near universal primary school enrollment Bangladesh Enterprise Institute
Explaining these achievements • Macro-stability and opening of the economy • Private sector development • Remittances • Development of the rural economy and rural infrastructure • Capable network of NGOs and microfinance Bangladesh Enterprise Institute
Needs to achieve higher growth • Increases in investment levels and productivity • Reduce anti-export bias and open the economy to foreign trade • Diversify the economy, both manufacturing and agriculture • Improve the investment climate (infrastructure, regulatory burden, corruption, access to finance, law and order) to promote domestic and foreign investment • Create more accountable and responsive service delivery to sustain and accelerate gains in human development Bangladesh Enterprise Institute
Most Prevalent Anti-Competitive Practices in Bangladesh Enterprise Institute
Market Structure • Industrial Policy – Investment allowed in all sectors except four – Directives on saturated markets • Who decides market saturation? • Privatization Policy – Active stance to transfer ownership and management from state to private sector • FDI – Liberalization of capital controls Bangladesh Enterprise Institute
Trade Policy • Liberalization of trade regime • Reduction in import restrictions – 1989: 135 HS code banned – 2002: 5 HS code banned • Reduction in the number of tariff slabs and import duties • Legal provision for anti-dumping Bangladesh Enterprise Institute
• Government Procurement – General Perception • Bid rigging: 36% of the total respondents • Are some companies favored? – Public Procurement Regulation 2003 – – – Optimize efficiency in procurement Promote competition among contractors Promote fairness in the procurement process Contribute improved business climate in Bangladesh Procedures are needed to implement Bangladesh Enterprise Institute
Market Concentration • Pharmaceutical Sector • Top 5 companies control around 50% of market share • Toiletries – Toilet soap • Top 2 companies control around 50% of market share – Laundry soap and detergent • Top company controls over 60% of market share • Tobacco • Top company controls around 50% of market share Bangladesh Enterprise Institute
Financial Sector- Banks • 4 NCBs – 3, 496 branches – 45. 6% assets and 50. 3% industry deposits • 30 Private Banks and 10 foreign banks – 36. 2% and 6. 8% assets – 36. 8% and 7. 0% deposits • • Non-performing loans, inefficient and overstaffed Capital Adequacy Requirements higher Requirements to publish interest rates Interest rate convergence Bangladesh Enterprise Institute
Financial Sector - Insurance • Private insurance companies licensed through Chief Controller of Insurance • Dominated by public sector – Sadaran Bima (general insurance) – Jiban Bima (life insurance) • No foreign insurance company • Private insurers required to reinsure 50% through Sadaran Bima Bangladesh Enterprise Institute
Power • Dominated by public sector • Only private sector involvement in generation with long-term power purchase agreements • Recently established Bangladesh Energy Regulatory Commission which will be the independent regulatory body and set policies to "promote competition" Bangladesh Enterprise Institute
Telecommunication • BTTB enjoys monopoly in fixed lines (95%) • 5 mobile operators • Weak interconnections between mobile and BTTB • No restrictions in equity shareholding by foreign investors • Bangladesh Telecommunications Regulatory Commission established in 2002 Bangladesh Enterprise Institute
Transportation • Ports – The Port Act 1908 and Port Rules 1966 • Railways – Private Operators: Are they regulated? • Road Transportation – Cost three-times to that for similar distances in India Bangladesh Enterprise Institute
Anti-competitive Practices in Bangladesh • No well-organized evidence on anticompetition behavior of business enterprises is available • Further detailed studies are required • Transport Sector – Bus operators threatened for reducing fare • Health Sector – Private Clinics and Physicians; Diagnostic Centers Bangladesh Enterprise Institute
Competition Law/Policy in Bangladesh • No Competition Policy • Monopolies and Restrictive Trade Practice (Control and Prevention) Ordinance, 1970 • Has not been implemented but still valid • Ordinance prohibits – Undue concentration of individual economic power – Unreasonable monopoly power – Unreasonable restrictive trade practices Bangladesh Enterprise Institute
MRTP Ordinance 1970 • Relevant phrases are not properly explained • Provides for the creation of a Monopoly Control Authority to enforce the provisions of the Ordinance, but was never constituted • Never been implemented • If revived, needs amendments • Need for a new law Bangladesh Enterprise Institute
Profile of Respondents Bangladesh Enterprise Institute
Understanding of Competition Bangladesh Enterprise Institute
Reaction to Anti-competitive practices Business Community Bangladesh Enterprise Institute
Bangladesh Enterprise Institute Govt. Complain to Ignore and deal Reaction to Anti-competitive practices Consumers
Awareness of rules/laws/regulations to check anticompetitive practices in percentage Bangladesh Enterprise Institute
Bangladesh Enterprise Institute
Bangladesh Enterprise Institute
Bangladesh Enterprise Institute
The Way Forward • Bangladesh needs a competition law • Competition law is important for the continuation of the process of economic liberalization • Major Challenges – Need a New Law? – Create a Competition Authority – Awareness and capacity building on competition issues Bangladesh Enterprise Institute
- Slides: 27