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

1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA Competition Assessment Framework (2008) Downloadable at: pdf Growth and Investment Group Department for International Development London SW1E 5HE

1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA Competition distortions may be ‘hidden’…..  Some barriers overlooked through familiarity, or accepted without further thought, especially where they are long- standing  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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA 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 7Up4 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 SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA Competition Assessment Framework (2008) Downloadable at: pdf Growth and Investment Group Department for International Development London SW1E 5HE