Pradeep S. Mehta, Secretary General Interim Review Meeting Political Economy of Competition and Regulation in Developing Countries Pradeep S. Mehta, Secretary General CUTS International Interim Review Meeting 7Up4 project, The Gambia July 30th, 2009

Background Appropriate regulation, competition policy and law are fundamental requirements in a market oriented economy Developing countries pose unique challenges Political economy considerations influence regulatory institutions and are under researched. Strong need exists to address and overcome problems

Problems Lack of political will to adopt and implement the law Constraints that frustrate the adoption and implementation of competition and regulatory regimes Lack of political will to adopt and implement the law Non-conducive government policies Conflicting objectives of stakeholders Overlap between competition and regulatory authorities Public interest considerations

Contd…. Barriers posed by vested interests Lack of competitive neutrality Unsynchronised regulation Lack of basic institutional infrastructure Lack of commitment to growth as a political objective

Consequences Over or under regulation depending upon pressure exerted by interest groups Sub-optimal level of competition especially in industries where competition has to be sustained by cooperation among players (roaming agreement) Use of regulation to promote economic power of vested interest groups at the expense of weaker socio economic groups Proliferation of anti-competitive practices leading to lower output, limited choice, and poor quality

Overcoming problems Alignment of competition policy outcomes and creation of incentives for all stakeholders Political will and consensus for reforms Mechanism to synchronise regulatory activities Prioritisation of work Allocation of behavioural issues to competition authorities, and structural issues to the regulators

Contd… Pursuit of public interest as an important policy objective: Promotion of employment opportunities Promotion of participation of SMEs in the economy Pursuit of efficiency objectives including promotion of adaptability, and economic development Resolution of conflict through trade offs

Recommendations for the Future Important to create a culture of competition Necessary to better understand the nexus among regulation, politics and markets Customisation is necessary Perceived successes and failures should be studied Consumer advocacy and empowerment is crucial

Thank You Email: psm@cuts.org Cell: +919829013131