Competition Policy and Issues of
Sustainable Economic Growth in
African Context: A Framework
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1. The Scope of Competition Policy
• Competition policy refers to all policies that can
enlarge competition and eliminate all barriers to the
operation of market forces
• Such market obstacles can be created both by
gov’t/public and private agents
Hence competition policy involves:
• Liberalization measures (trade, finance, industry,
infrastructure, even the judiciary)
• Privatization
• Competition law
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1. The Scope of Competition Policy …
Competition law: deals with all business restrictive
practices both at national and International levels.
At national level, it includes:
•
Horizontal and vertical agreements (cartelization)
•
Abuse of dominance (monopolistic) position
•
Mergers and acquisitions
•
Unfair competition
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1. The Scope of Competition Policy …
At international level, it deals with all practices hampering
trade and investment, including:
• Agreements to ease and secure foreign investment –
TRIMs
• Agreements on the abolition of subsidies – SCM
• Introduction of competition in service sectors – GATS
• Anti-dumping
• Polices related to technology transfer - TRIPs
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2. Relevant Competition Policies in African Context
What aspects of the competition policy are essential in
African context?
2.1 Factors to consider:
• No blue print for competition policy, particularly for
achieving sustainable growth
• Countries (to some extent regions) have their own
specifics – both economic and social
African economy can be largely characterized by
- Large subsistence sector – mainly agriculture
- Small industrial base
- Outmoded technology/Lack of technological capability
- Large public sector dominance/control of modern
industrial & service sectors
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2. Relevant competition ….
As a result
• Low productivity, and low income
• Small market size, Limited availability of entrepreneurs
• Poor infrastructure, etc.
Prime objective: Institutional and structural change
2.2 Prime goal of competition
(a) Generate short term efficiency gains
(b) Sustainable growth (long term dynamic efficiency)
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2. Relevant competition ….
(a) Competition policy and Short term efficiency: How
is it achieved?
•
Introducing measured liberalization: decontrolling
product and factor market prices, etc.
•
Introducing regulatory measures to improve the
efficiency of public sector service provisions – granting
operational autonomy
•
SOEs: Reducing protection and subsidy, granting
operational autonomy, and privatizing some
•
Subjecting private enterprises in general to create
rivalry (healthy competition) in the domestic market
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2. Relevant Competition ….
Therefore, competition policy/law should address,
• Horizontal and vertical agreements (cartel
conduct)
• Abuse of dominance (monopoly behavior)
Such an approach is meant to create short term efficiency
gains while at the same time,
- Limit unnecessarily deep liberalization
- Target most harmful restrictive practices
- Avoid the need for excessive administrative
supervision
- Avoid unnecessarily maximum (wasteful) competition
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2. Relevant competition ….
(b) Competition policy for sustainable economic
growth
• Does competition policy alone lead to sustainable
economic growth?
• While the short term efficiency gain of competition is
widely acknowledged, there is no guarantee for its
efficacy to produce long term dynamic gains
Underline arguments
• Institutional and structural obstacles could make
competition an unpredictable process
• Barriers to global market entry for developing countries
limits the benefits of competition
As a result, competition policy in developing
countries, particularly in LDCs may have to be
managed
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3. Managed competition
3.1 Experiences in some E. Asian economies
• Sequencing new entrants (investment), and deterring
excessive competition at an early stage
• Provision of incentives to deepen industrial structure,
technological upgrading, and exports rather than
towards enhancing the microeconomic efficiency of
resource allocation
• Incentives and protection to stimulate local industrial
activity (traditional infant industry) at different stages of
maturity, but selectively to achieve international
competitiveness
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3. Managed Competition ….
• Promoting managed competition, including the
encouragement of mergers, coordination of capacity
expansion to create scale economies
• Entry restrictions to promote specific industries by
preventing excessive competition among domestic firms
• Selective control on imports and even FDI
• Tying import licenses to export performance (rather than
opening up)
• subsequently relaxing intervention and deepen
liberalization to allow new entrants and strengthen
financial and technical capabilities
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3. Managed Competition ….
3.2 The lesson to note:
• Sustainable economic growth requires not only freemarket competition but also some form of cooperation
(managed competition) at an early stage
•
the need to reconcile competition policy objectives with
other policy objectives for sustainable growth
(employment, income, etc)
• Exposure to international competition alone is not
sufficient and active policies for the promotion of
sustainable competitiveness are also necessary
Hence the need for a broader concept of competition
policy at the national level; stronger international
cooperation and adopting int’l competition policies
selectively and gradually as domestic
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competitiveness strengthens.
4. The Competition Authority
4.1 The role of the competition authority
• Day-to-day follow up of business practices, investigate
anti-competitive conducts
• Accept complaints from business, public, civil society
groups and individuals and conduct investigation
• Conduct advocacy programs on competition for public,
private/business and civil society forums
• Coordinating/leading public institutions for reconciling
different polices and competition policy
• Provide guidance and technical support to government
authorities with regard to other policies requiring
changes for improving the competitive environment, and
also identification of firms requiring structural intervention
before privatization.
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4. The competition authority
4.2 Composition and structure of the competition
authority
• Its composition need to be broad based: public,
business, consumer groups, labor union, etc
• Independent of any government body with own budget
• Chair of the authority (commissioner /minister) be
appointed by the legislative
• Decision of the authority be available for public use
• Be able to report to Parliament
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THANK YOU
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