Assessing impacts of competition – experience

from ODI researchKaren Ellis

Head of Private Sector & Markets Programme, ODI

Project assessing economic impact of

competition and related policy

Policy context &market environment

Degree of competition

Market outcomes

Countries and markets analysed

Countries:

• Bangladesh• Vietnam• Ghana• Kenya• Zambia

Markets:

• Sugar• Cement• Mobile phones• Beer

The sugar market

Country Number of firms (sugar mills / refiners)

State ownership

Market shares of leading firm

Imports as % domestic consumption

Kenya 8 Yes, the state owns nearly all mills

54% (firm with most private sector participation)

15%

Zambia 3 No 93% 0%

Ghana 0 N/A N/A 100%

Vietnam 40 Yes, high degree of state ownership

9% 4%

Bangladesh 16 SOE mills & 4 private refiners

Yes, State owns nearly all mills

47% 10%

Comparing efficiency

Average sugar production (tonnes produced per hectare of sugar

grown)

1

1.4

5

15.3

0 5 10 15 20

Kenya

Bangladesh

Vietnam

Zambia

Sugar Retail Price (USD)/kg at PPP rates

(2007 figures)

Cement market structure

Country Number of firms

State Ownership

Estimated market

shares of leading firm

Head of population

(millions) per cement

company

Kenya 3, but with joint ownership

1 SOE 65% 13.6

Zambia 3 No 85% 4.42

Ghana 2 No 64% 12.2

Vietnam 90

33 SOEs 40% 0.99

Bangladesh 34 1 SOE 12% 4.8

Retail Cement Price Per 50kg Bag (in US$) , 2007/8

figures

Cement: percentage change in price between

2007 and 2010

Mobile telecoms benefits

Mobiles marketAverage per minute

mobile tariff (2007 figures in USD)

Zambia´s International Gateway Problem

• Only one international gateway exchange operated by monopoly

• State charged v. high price for international gateway licence

• $18 million, compared to $214,000 in Kenya & $50,000 in Uganda

• Drove up prices and distorted whole mobiles market, increasing the costs of doing business in the country.

Peak rate 1 minute call to the USA in 2007

Average per minute mobile tariff (2007 figures in USD)

Director for Mergers and Monopolies at the Zambian Competition Commission:

‘Many times it becomes very difficult to actually show the benefits. Of course, a report like this makes it much easier to advocate to the government. With our persistence, we kept going to the government and highlighting the benefits of competition, showing them the statistics as such a report has done. And eventually we have gotten through to the government. And the fee for the international gateway has fallen ...’

The Impact

• June 2010, Govt reduced license fee to $350,000

• Licences awarded to the 2 private operators

• Within 1 month, both private operators reduced international tariffs by 40-80%

• “I think it’s a huge benefit to the Zambian consumers and also to the business community.” (Director of Regulation, ZICTA)

Thank you

k.ellis@odi.org.uk