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Competition Scenario in Bangladesh

Competition Scenario in Bangladesh. Iftekar Ahmed, Senior Research Fellow, BEI August 16, 2005. Bangladesh - At a Glance. 1993-94 2003-04 Population 120 m 136 m GDP $ 26 b $55.1 b GDP (growth rate) 4.1% 5.5%

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Competition Scenario in Bangladesh

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  1. Competition Scenario in Bangladesh Iftekar Ahmed, Senior Research Fellow, BEI August 16, 2005 Bangladesh Enterprise Institute

  2. Bangladesh - At a Glance 1993-942003-04 Population 120 m 136 m GDP $ 26 b $55.1 b GDP(growth rate) 4.1% 5.5% GDP(per capita) $224 $421 Poverty (<$1/day) -- 47 m (36%) Poverty 71 m (59%) 68 m (50%) (national poverty line) Bangladesh Enterprise Institute

  3. Country Achievements • Impressive achievements in economic and social development • Steady economic growth, stable domestic debt, interest and exchange rate • Per capita GDP in the 1990s rose three times faster than 1980s. • Poverty reduced by 9% in the 1990s • Gender parity in primary education, lower fertility rate, near universal primary school enrollment Bangladesh Enterprise Institute

  4. Explaining these achievements • Macro-stability and opening of the economy • Private sector development • Remittances • Development of the rural economy and rural infrastructure • Capable network of NGOs and micro-finance Bangladesh Enterprise Institute

  5. Needs to achieve higher growth • Increases in investment levels and productivity • Reduce anti-export bias and open the economy to foreign trade • Diversify the economy, both manufacturing and agriculture • Improve the investment climate (infrastructure, regulatory burden, corruption, access to finance, law and order) to promote domestic and foreign investment • Create more accountable and responsive service delivery to sustain and accelerate gains in human development Bangladesh Enterprise Institute

  6. Most Prevalent Anti-Competitive Practices in Bangladesh Bangladesh Enterprise Institute

  7. Market Structure • Industrial Policy • Investment allowed in all sectors except four • Directives on saturated markets • Who decides market saturation? • Privatization Policy • Active stance to transfer ownership and management from state to private sector • FDI • Liberalization of capital controls Bangladesh Enterprise Institute

  8. Trade Policy • Liberalization of trade regime • Reduction in import restrictions • 1989: 135 HS code banned • 2002: 5 HS code banned • Reduction in the number of tariff slabs and import duties • Legal provision for anti-dumping Bangladesh Enterprise Institute

  9. Government Procurement • General Perception • Bid rigging: 36% of the total respondents • Are some companies favored? • Public Procurement Regulation 2003 • Optimize efficiency in procurement • Promote competition among contractors • Promote fairness in the procurement process • Contribute improved business climate in Bangladesh • Procedures are needed to implement Bangladesh Enterprise Institute

  10. Market Concentration • Pharmaceutical Sector • Top 5 companies control around 50% of market share • Toiletries • Toilet soap • Top 2 companies control around 50% of market share • Laundry soap and detergent • Top company controls over 60% of market share • Tobacco • Top company controls around 50% of market share Bangladesh Enterprise Institute

  11. Financial Sector- Banks • 4 NCBs • 3,496 branches • 45.6% assets and 50.3% industry deposits • 30 Private Banks and 10 foreign banks • 36.2% and 6.8% assets • 36.8% and 7.0% deposits • Non-performing loans, inefficient and overstaffed • Capital Adequacy Requirements higher • Requirements to publish interest rates • Interest rate convergence Bangladesh Enterprise Institute

  12. Financial Sector - Insurance • Private insurance companies licensed through Chief Controller of Insurance • Dominated by public sector • Sadaran Bima (general insurance) • Jiban Bima (life insurance) • No foreign insurance company • Private insurers required to reinsure 50% through Sadaran Bima Bangladesh Enterprise Institute

  13. Power • Dominated by public sector • Only private sector involvement in generation with long-term power purchase agreements • Recently established Bangladesh Energy Regulatory Commission which will be the independent regulatory body and set policies to "promote competition" Bangladesh Enterprise Institute

  14. Telecommunication • BTTB enjoys monopoly in fixed lines (95%) • 5 mobile operators • Weak interconnections between mobile and BTTB • No restrictions in equity shareholding by foreign investors • Bangladesh Telecommunications Regulatory Commission established in 2002 Bangladesh Enterprise Institute

  15. Transportation • Ports • The Port Act 1908 and Port Rules 1966 • Railways • Private Operators: Are they regulated? • Road Transportation • Cost three-times to that for similar distances in India Bangladesh Enterprise Institute

  16. Anti-competitive Practices in Bangladesh • No well-organized evidence on anti-competition behavior of business enterprises is available • Further detailed studies are required • Transport Sector • Bus operators threatened for reducing fare • Health Sector • Private Clinics and Physicians; Diagnostic Centers Bangladesh Enterprise Institute

  17. Competition Law/Policy in Bangladesh • No Competition Policy • Monopolies and Restrictive Trade Practice (Control and Prevention) Ordinance, 1970 • Has not been implemented but still valid • Ordinance prohibits • Undue concentration of individual economic power • Unreasonable monopoly power • Unreasonable restrictive trade practices Bangladesh Enterprise Institute

  18. MRTP Ordinance 1970 • Relevant phrases are not properly explained • Provides for the creation of a Monopoly Control Authority to enforce the provisions of the Ordinance, but was never constituted • Never been implemented • If revived, needs amendments • Need for a new law Bangladesh Enterprise Institute

  19. Profile of Respondents Bangladesh Enterprise Institute

  20. Understanding of Competition Bangladesh Enterprise Institute

  21. Reaction to Anti-competitive practicesBusiness Community Bangladesh Enterprise Institute

  22. Complain to Govt. Ignore and deal Reaction to Anti-competitive practicesConsumers Bangladesh Enterprise Institute

  23. Awareness of rules/laws/regulations to check anticompetitive practices in percentage Bangladesh Enterprise Institute

  24. Bangladesh Enterprise Institute

  25. Bangladesh Enterprise Institute

  26. Bangladesh Enterprise Institute

  27. The Way Forward • Bangladesh needs a competition law • Competition law is important for the continuation of the process of economic liberalization • Major Challenges • Need a New Law? • Create a Competition Authority • Awareness and capacity building on competition issues Bangladesh Enterprise Institute

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