Competition Policy and Developing Countries

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Yesterday I attended an excellent presentation by John Fingleton, Chief Executive of the UK office of Fair Trading. He discussed his recent paper: “Government in markets – why competition matters – a guide for policy makers".  

Fingleton highlighted the importance of competition and the appropriate role of the government in facilitating it. Of interest to me was his notation that there was no such thing as a cookie-cutter approach to competition policy. Rather, he suggested that competition policy instruments are sequential and it was important that each country have a vision of what their institutional setting will look like. In other words, while the promotion of competition is the clear goal, the form it takes institutionally should be country-specific and capacity-specific. This applies to countries at all levels of development and varied political structure. Fingleton also talked about moving towards best practices and having similar competition rules across countries (so that the application of completion policy is more predictable and firms know what to expect).
The competition policy agenda clearly has great benefits for consumers in all countries. For developing countries, as industries and economic activities develop, ensuring competition can help ensure productivity gains and avoid market capture by incumbent or large firms. But due to the diffuse nature of the benefits, policy makers don't always take into account economic efficiency or the public interest. 

Many of you may not remember that during the early rounds of the current multilateral trade negotiations, the European Union pushed strongly for an agreement on an international competition policy framework. The developing world barely showed any interest. Actually, the way I recall it, many delegations from developing countries complained that they had already signed agreements during the Uruguay Round that they were now just realizing would be hard and costly to implement. They didn’t want to sign any more documents until they got implementation assistance on the old agreements. Furthermore, they claimed that they did not see the benefit of signing on to a competition policy framework where they had so many other critical issues to negotiate, such as market access and agriculture. So the competition policy initiative quietly died off and has not really regained traction in the negotiations since then.

Now, I am left to consider how we at the World Bank Group can incorporate the competition policy agenda into our dialog with client countries. How do we incorporate the principles in our analytical and operational products and how do we help our countries work towards a more competitive domestic market without burdening them with more layers of bureaucracy and inefficiency?

I would appreciate any suggestions readers have.


Dorsati Madani

Senior Country Economist

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