1. Bangladesh Enterprise Institute Competition Scenario in Bangladesh Iftekar Ahmed, Senior Research Fellow, BEI August 16, 2005

2. Bangladesh Enterprise Institute Bangladesh - At a Glance 1993-94 2003-04 Population 120 m 136 m GDP $ 26 b $55.1 b GDP (growth rate) 4.1% 5.5% GDP(per capita) $224 $421 Poverty (<$1/day) -- 47 m (36%) Poverty 71 m (59%) 68 m (50%) (national poverty line)

3. Bangladesh Enterprise Institute Impressive achievements in economic and social development Steady economic growth, stable domestic debt, interest and exchange rate Per capita GDP in the 1990s rose three times faster than 1980s. Poverty reduced by 9% in the 1990s Gender parity in primary education, lower fertility rate, near universal primary school enrollment Country Achievements

4. 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 micro- finance

5. 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

6. Bangladesh Enterprise Institute Most Prevalent Anti-Competitive Practices in Bangladesh

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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"

14. 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

15. 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

16. Bangladesh Enterprise Institute Anti-competitive Practices in Bangladesh No well-organized evidence on anti- competition 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

17. 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

18. 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

19. Bangladesh Enterprise Institute Profile of Respondents

20. Bangladesh Enterprise Institute Understanding of Competition

21. Bangladesh Enterprise Institute Reaction to Anti-competitive practices Business Community

22. Bangladesh Enterprise Institute Reaction to Anti-competitive practices Consumers Ignore and deal Complain to Govt.

23. Bangladesh Enterprise Institute Awareness of rules/laws/regulations to check anticompetitive practices in percentage

24. Bangladesh Enterprise Institute

27. 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