Introduction to theCompetition Assessment Framework

Seminar onEnhancing Development through a Competition Culture

14 August 2008, New Delhi

Roger NellistActing HeadGrowth and Investment GroupDepartment for International DevelopmentLondonr-nellist@dfid.gov.uk

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

Why it matters

Why are we interested in (fair) competition? ‘Competition is absolutely essential at every stage of economic

development’ (Robert Solow, Commission on Growth and Development, May 2008)

Role for Competition Policy ‘Strong competition policy is not just a luxury to be enjoyed by rich

countries, but a real necessity for those striving to create democratic market economies’ (Joseph Stiglitz, Nobel Prize Winner, August 2001)

Reflections on Competition Policy ‘An active competition body is an essential element in the

architecture of a modern market economy’ (Indian Prime minister, 2006)

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

DFID support for Competition Policy

Technical National regimes (inc Peer reviews); Market studies (India,

Bangladesh, VN); COMESA RCP; UNCTAD; international Roundtables; Competition Assessment Framework (CAF)

Building a broad-based culture of competition Four major CUTS policy/advocacy programmes in 27 Africa

and Asia countries

Research ODI research project (5 countries, using CAF+); CUTS political/economy of competition/regulatory regimes

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

Competition Assessment Framework (2008)

Downloadable at:http://www.dfid.gov.uk/pubs/files/caf-

2008.pdf

Growth and Investment GroupDepartment for International DevelopmentLondon SW1E 5HE

r-nellist@dfid.gov.ukn-godfrey@dfid.gov.ukt-allan@dfid.gov.uk

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

Competition Assessment Framework (CAF)

In part, a response to:

“The ‘really big’ distortions to competition are in poor countries”

Distortions to competition are not always obvious: “they have tobe dug out of each market”; “they are hard to find…(and)

significant forces gain from their existence”

(William Lewis, The Power of Productivity, 2004)

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

Competition distortions may be ‘hidden’…..

Some barriers overlooked through familiarity, or accepted without further thought, especially where they are long-standing

Barriers affecting intermediate goods/services may be obscured in price/supply of final goods/services

Significant policy/regulatory barriers may exist at State/local government level in some sectors, but attention may focus on national level

...Need for systematic analysis of the state of competition…

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

CAF: Design considerations

Practical diagnostic policy tool for use by policy makers and others in developing countries;

Reflects public sector restraints on competition as well as private sector ones;

Recognises role of ‘vested interests’ as well as more ‘technical’ impediments to competition;

Builds on best and evolving good practice, but recognises more limited data, capacity and experience in many DCs;

Developed as by-product of DFID-FIAS partnership with CCI;

Pilot use, to be extended/updated with experience.

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

The CAF Approach: Summary (1)

CAF poses sets of questions grouped by theme Select sectors important to economy or consumers Identify relevant markets, competitors and market

structure Look for barriers to entry (natural, strategic,

regulatory, gender)

Do Government policies/institutions hinder competition? (all levels of government, SOEs, public procurement, regulated sectors, trade and industrial policy, unequal enforcement of laws)

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

The CAF Approach: Summary (2)

Identify vested interests Look for signs of anti-competitive conduct by firms

(abuse of dominance, collusion and cartels, M&As, vertical issues, other)

Drawing Conclusions on state of competition in relevant market, and possible corrective actions

Annexes: Typical competition issues in 8 Sectors (Agriculture, Construction, Distribution, Energy, Finance, Manufacturing, Telecoms, Transport)

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Examples of CAF in Use

Some of the CCI market competition studies Bangladesh and Vietnam ODI Research Programme (5 countries in Africa and

Asia) CUTS 7Up4 programme countries (West Africa) UK OFT training programme in recent EU accession

countries National training WSs (e.g. East/Southern Africa) Growth diagnostics (Making Markets Work for the

Poor)

1 Palace Street, London SW1E 5HEAbercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

Competition Assessment Framework (2008)

Downloadable at:http://www.dfid.gov.uk/pubs/files/caf-

2008.pdf

Growth and Investment GroupDepartment for International DevelopmentLondon SW1E 5HE

r-nellist@dfid.gov.ukn-godfrey@dfid.gov.ukt-allan@dfid.gov.uk