Market Structure and competition policy
in MENA region
Lahcen ACHY
Accra 19-20 June 2008
Introduction
• Question
– Can competition enhance competitiveness and
efficiency in MENA countries?
• Geographical coverage
– Egypt, Jordan, Morocco and Tunisia
• Sector coverage
– Manufacturing
Introduction (2)
• Approach: Use a common methodology for the
four countries to:
• Assess the state of competition
• Assess the state of efficiency
• Assess the relationship between competition and
efficiency
• Draw implication for competition policy
State of competition
• To assess the degree of domestic and foreign
competition, use of :
– Concentration ratios (C4)
– Import penetration
– Markup
• To assess the degree of efficiency, we examine:
– Firm size distribution
– Total Factor Productivity
• To study the relationship between competition
and efficiency:
– Correlations
– Regressions analysis
Overview of the manufacturing sector
• Main manufacturing sectors
(Representing together at least 50% of total VA or employment)
CodeSector
Egypt Jordan Morocco Tunisia
311Food manufacturing
1
1
1
2
313Beverage industries
.
7
.
.
321Textiles
2
.
4
.
322Manufacture of wearing apparel, except footwear
x
6
3
1
351 Manufacture of industrial chemicals
3
5
2
3
352Manufacture of other chemical products
4
3
.
.
369Manufacture of other non-metallic mineral products
5
2
.
.
381Manufacture of fabricated metal products, except machinery and
equipment
.
4
.
.
x
.
.
.
.
.
x
x
x
x
382Machinery, except electrical
383Electrical machinery
385Professional and scientific equipment
Source: UNIDO
1=Most Important
2=Second
3=Third
x=Not important but fast growing
.
.
The countries, except for Jordan, are highly
specialized
• More than 50% of the value added /employment
depends on 3 (Morocco, Tunisia) to 5 (Egypt) sectors.
• Although their rankings differ across the three countries,
the most important sectors are the same: wearing
apparel, food products chemical sector and textiles.
• No specific trend in the evolution of specialization
across the countries
The state of Competition
Import penetration and export orientation (%)
Code Sector
Egypt
Jordan
Morocco
Tunisia
M
X
M
X
M
X
M
X
311 Food manufacturing
26
4
52
.
14
26
11
7
321 Textiles
12
27
NA
NA
55
54
43
48
37
11
43
1
95
22
0
93
29
0
98
41
0
99
322 Manufacture of wearing apparel, except
footwear
351 Manufacture of industrial chemicals
55
8
352 Manufacture of other chemical products
67
.
369 Manufacture of other non-metallic
mineral products
8
.
Average
Minimum
Maximum
36
0
90
13
0
48
57
3
97
Source: UNIDO. M=Imports/(output+imports-exports), =Exports/output
1=Most Important, 2=Second, 3=Third
Concentration (C4) and Mark-up (%)
Code Sector
Egypt
C
Mk
311 Food manufacturing
54
173
321 Textiles
76
120
Jordan
C
Morocco
Mk
50
163
322 Manufacture of wearing apparel, except
footwear
351
Manufacture of industrial chemicals
352 Manufacture of other chemical products
369 Manufacture of other non-metallic
mineral products
Average
Minimum
Maximum
Source: UNIDO and national statistics.
C=Concentration ratio (C4)
Mk=Mark-up
1=Most Important
2=Second
3=Third
70
C
Tunisia
Mk
C
20
112
31
119
10
109
30
117
62
118
127
62
122
.
.
66
16
99
135
95
216
Mk
.
.
40
10
76
106
100
114
56
13
95
122
117
136
The state of Efficiency
Total Factor Productivity
Code
Sector
311 Food manufacturing
321 Textiles
322 Manufacture of wearing apparel, except footwear
351
Manufacture of industrial chemicals
Egypt
Jordan
Morocco
Tunisia
-0.05 -0.61
-2.45
0.20
.
-1.25
0.50
0.02
0.61
0.80
0.01
352 Manufacture of other chemical products
.
0.01
.
.
369 Manufacture of other non-metallic mineral products
.
.
.
.
2.33
-3.07
-0.19
0.60
TFP of the whole economy*
Source: UNIDO and national statistics.
1=Most Important
2=Second
3=Third
Specific restraints to competition
• Survey based evidence
– between 40 and more than 100 firms
– main cities in each country
– 8 sub-sectors among which
– 4 sub sectors common to all countries (Cars, Beverages,
Textile and Pharmaceuticals)
– 4 different according to country’s specificity
Barriers to entry
Barriers
Egypt
Technological knowledge
x
Economies of scale
x
Jordan
Morocco Tunisia
x
x
x
x
Access to funds
x
x
Access to adequate human resources
x
x
Government intervention and policy
x
x
Most frequently used vertical restraints
Restraints
Egypt
Exclusive dealing
X
Exclusive supply
X
Jordan
Tunisia Morocco
X
X
Franchising fee
X
Long term contract
X
Quantity forcing
X
X
Resale price maintenance
Tying arrangements
X
X
X
X
Competition Policy
• Competition policy concerns cases where departure from
“prefect” competition justifies intervention
• The 4 countries have adopted a competition law.
1991 Tunisia
2001 Morocco
2004 Jordan
2005 Egypt
• In a broad sense the laws are very similar. They :
 Establish freedom of prices as a general rule.
 Prohibit arrangements and acts that disrupt competition
 Prohibit abuse of dominant positions
 Regulate concentration
 Provided cases of exemptions (e.g. public utilities)
Focusing on the three most important sectors in each country,
shows that in general:
– They are poorly opened to foreign competition both
in terms of import penetration and exports exposure
– Except in Jordan, their concentration ratios (based on
domestic sales) are not high
– Their mark-ups are very high suggesting the existence
of strong market power
– The growth rate of their productivity is very low and
sometimes even negative.
Statements
Combining the various aspects of the analysis, the
following statements emerge:
 First: the most important sectors in the studied economies are
inefficient and enjoying high market power.
 Second: these sectors do not necessarily lack domestic
competition (mainly local) but particularly lack foreign
competition.
 Third: the lack of competition is harmful to efficiency
 Fourth: although our survey did not identify business
practices that deter competition, various cases reported in
media suggest that such practices are real
 Fifth: Competition laws were enacted but the absence of their
enforcement reflects the low degree of commitment towards
an effective liberalization of the economy
Recommendations
– Reinforcing the means and independence of the
competition authority
– Economic and legal training and capacity building
– Advocating competition policy in order to spread a
culture of competition and inform stakeholders about
its merits,
Thank you for your attention