Introduction to the Competition Assessment Framework Seminar on

Introduction to the Competition Assessment Framework Seminar on Enhancing Development through a Competition Culture 14 August 2008, New Delhi Roger Nellist Acting Head Growth and Investment Group Department for International Development London r-nellist@dfid. gov. uk

Why it matters § Why are we interested in (fair) competition? ‘Competition is absolutely essential at every stage of economic development’ (Robert Solow, Commission on Growth and Development, May 2008) § Role for Competition Policy ‘Strong competition policy is not just a luxury to be enjoyed by rich countries, but a real necessity for those striving to create democratic market economies’ (Joseph Stiglitz, Nobel Prize Winner, August 2001) § Reflections on Competition Policy ‘An active competition body is an essential element in the architecture of a modern market economy’ (Indian Prime minister, 2006) 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

DFID support for Competition Policy § Technical National regimes (inc Peer reviews); Market studies (India, Bangladesh, VN); COMESA RCP; UNCTAD; international Roundtables; Competition Assessment Framework (CAF) § Building a broad-based culture of competition Four major CUTS policy/advocacy programmes in 27 Africa and Asia countries § Research ODI research project (5 countries, using CAF+); CUTS political/economy of competition/regulatory regimes 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

Competition Assessment Framework (2008) Downloadable at: http: //www. dfid. gov. uk/pubs/files/caf 2008. pdf Growth and Investment Group Department for International Development London SW 1 E 5 HE r-nellist@dfid. gov. uk n-godfrey@dfid. gov. uk t-allan@dfid. gov. uk 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

Competition Assessment Framework (CAF) In part, a response to: “The ‘really big’ distortions to competition are in poor countries” Distortions to competition are not always obvious: “they have to be dug out of each market”; “they are hard to find…(and) significant forces gain from their existence” (William Lewis, The Power of Productivity, 2004) 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

Competition distortions may be ‘hidden’…. . § Some barriers overlooked through familiarity, or accepted without further thought, especially where they are longstanding § Barriers affecting intermediate goods/services may be obscured in price/supply of final goods/services § Significant policy/regulatory barriers may exist at State/local government level in some sectors, but attention may focus on national level . . . Need for systematic analysis of the state of competition… 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

CAF: Design considerations § Practical diagnostic policy tool for use by policy makers § § § and others in developing countries; Reflects public sector restraints on competition as well as private sector ones; Recognises role of ‘vested interests’ as well as more ‘technical’ impediments to competition; Builds on best and evolving good practice, but recognises more limited data, capacity and experience in many DCs; Developed as by-product of DFID-FIAS partnership with CCI; Pilot use, to be extended/updated with experience. 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

The CAF Approach: Summary (1) § CAF poses sets of questions grouped by theme § Select sectors important to economy or consumers § Identify relevant markets, competitors and market structure § Look for barriers to entry (natural, strategic, regulatory, gender) § Do Government policies/institutions hinder competition? (all levels of government, SOEs, public procurement, regulated sectors, trade and industrial policy, unequal enforcement of laws) 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

The CAF Approach: Summary (2) § Identify vested interests § Look for signs of anti-competitive conduct by firms (abuse of dominance, collusion and cartels, M&As, vertical issues, other) § Drawing Conclusions on state of competition in relevant market, and possible corrective actions § Annexes: Typical competition issues in 8 Sectors (Agriculture, Construction, Distribution, Energy, Finance, Manufacturing, Telecoms, Transport) 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

Examples of CAF in Use § Some of the CCI market competition studies § Bangladesh and Vietnam § ODI Research Programme (5 countries in Africa § § and Asia) CUTS 7 Up 4 programme countries (West Africa) UK OFT training programme in recent EU accession countries National training WSs (e. g. East/Southern Africa) Growth diagnostics (Making Markets Work for the Poor) 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA

Competition Assessment Framework (2008) Downloadable at: http: //www. dfid. gov. uk/pubs/files/caf 2008. pdf Growth and Investment Group Department for International Development London SW 1 E 5 HE r-nellist@dfid. gov. uk n-godfrey@dfid. gov. uk t-allan@dfid. gov. uk 1 Palace Street, London SW 1 E 5 HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G 75 8 EA