Priority Issues and Challenges for Competition Reforms in 7 UP 4 Countries

1. Priority Issues and Challenges for Competition Reforms in 7 UP 4 Countries Lahcen ACHY Carnegie Middle East Center Beirut Research Adviser for 7UP4

2. Outline • Profile of the 7UP4 countries • Two key lessons • Three Priorities • Three Challenges

3. Profile of the 7UP4 countries • Economic Background • High reliance on agriculture particularly for jobs • Large share of informal urban sector • Low income countries • High reliance of ODA (except Nigeria)

4. Profile of the 7UP4 countries (2) • Recent historical background • Central planning and State-led growth after independence • High debt and macro economic mismanagement in the 80s • Structural adjustment programs in the 80s and 90s • Poverty reduction strategy and SGR in last decade

5. Profile of the 7UP4 countries (3) • Legal and regulatory • Burkina, Senegal and Mali competition laws adopted since mid nineties. Togo since 1999. The Gambia more recently • Nigeria and Ghana: draft laws exit but not yet adopted • Apart from Nigeria, there is no specific law on consumer protection in the six other countries. • But many pieces of legislation on consumer protection exist. Competition authority is empowered to protect consumer interests to some extent (Burkina, Senegal, Togo). • All 7UP4 countries are members of WTO and ECOWAS • Four of them are members of WAEMU (B,M,S,T)

6. Key lessons 1. Pro-competition policies adopted in 7UP4 countries as part of their structural adjustment programs had adverse effects on consumers and domestic small businesses

7. Broad lessons (2) • Case of Agriculture Policy • Removal of subsidies and guaranteed prices • Privatization and attraction of foreign investors • No input subsidies: lower use of selected seeds and fertilizers decline of productivity Lower production for small farmers • No State guaranteed prices for output small farmers targeted by large traders lower prices Lower revenues for farmers • Openness to food imports had negative impact: on local production: Agriculture special case by competition policy in developed countries (US, EU): exemptions and subsidies

8. Broad lessons (3) • Case of Investment Policy • Removal of restrictions on foreign ownership • But FDI not up to expectations: • In terms of their amount • In terms of orientation : rent seeking with no spillover on the rest of the economy • In terms of contractual provisions • FDI because of size of projects has access to incentives (fiscal rebates, cheaper land) that don’t benefit other investors • large multinationals dominate market and crowd out domestic firms of smaller size and modest technology • In most countries, industrial sector declined since the 80s

9. Broad lessons (4) • Case of Privatization Policy • Privatizations and disengagement of the State in heavily indebted public enterprises • In some cases, public monopolies were privatized as contracts of exclusivity, providing monopoly powers to the private sector with serious competition concerns • Privatization of basic services (water, electricity) without provision of a minimum universal service for the poor had its social cost.

10. Broad lessons (2) 2. Complex overlapping regulations • Inconsistent with economic structure • Poor enforcement even when regulations exist • In Burkina, Senegal and Mali competition adopted since mid nineties. In Togo since 1999. • Political economy of Interference and diluted responsibilities • Cartels and abuses of dominance are dealt with at the level of WAEMU (Precedence on national law) • ECOWAS Treaty (1975) does not make clear reference to competition. But competition regulations are embodied in two Supplementary Acts adopted in Abuja in 2008

11. Priorities • In terms of approach 1. Streamline and rationalize regulations (RQ) • Content • Institutional architecture and sharing of responsibilities • Avoid conflicts of jurisdictions • Grant more responsibilities to national authorities in sanctioning anti-competitive practices. 2. Focus on most abusive practices to consumers and business

13. Priorities • In terms of sectors 3. Focus on sectors that would make a substantial difference for the poor • Agriculture • Basic services (social and backbone services for business) • Water • Electricity • Telecommunications • Public procurement s • Size: largest buyer • Allocation: use public money • Equity: services key to the poor: education, health and infrastructure

14. Challenges 1. Strengthen State Capacity • Market economy needs strong and effective state • Rule of law: contract enforcement • Effectiveness: capacity to negotiate and to manage • In both cases need for more resources (human and financial)

16. Challenges (2) 2. Strengthen the advocacy role of CSOs • Provide more space to consumers’ associations • Politically: voice and accountability • Legally: recognition of CSOs and their role • Build their capacity and support them play effectively their role (raising awareness and advocacy)

19. Challenges (3) 3. Advocacy for better international governance • Domestic solutions are only part of the solution • Negative effects of absence or lack of competition in poor countries is largely due to • Impact of powerful multinationals • Impact of state subsidies in developed countries

20. Thank you for your attention ****