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Competition Policy and Economic Development. by Rughvir (Shyam) Khemani Advisor, Competition Policy Financial and Private Sector Development Vice-Presidency The World Bank Group Washington DC United States Email: rskhemani@worldbank.org.
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Competition Policy and Economic Development by Rughvir (Shyam) Khemani Advisor, Competition Policy Financial and Private Sector Development Vice-Presidency The World Bank Group Washington DC United States Email: rskhemani@worldbank.org
Constraints to Promoting Competitionin Developing and Emerging Market Economies Inherent high industry/market and ownership concentration in product & financial markets. Entrenched firms & other stakeholder-interest groups, close or opaque government-business relations lobbying, rent-seeking behavior, corruption & bribery Underdeveloped capital & financial markets, insufficient sources of commercial information, and related ‘business’ infrastructure……. Weak legal framework, contract enforcement, property rights Institutional capacity, resource, skills, knowledge constraints, staff turnover Lack of political will/ competition culture.
The Tyranny of Predatory Vested Interests: Competition Can Be Thwarted … “The corrupt version of capitalism—when powerful corporations deliberately try to eliminate healthy competition to preserve their privileged position—generates economic inefficiencies and social injustice, thereby undermining political support for the free-market based system….” (R.Rajan & L.Zingales, The Road to Prosperity:Saving Capitalism from Capitalists, Transition, 2003)
Figure 1Per Capita GDP (constant 2000 USD in thousands) and Intensity of Competition in Local Markets High Low High Intensity Low Intensity Source: Global Competitiveness Report 2006-2007 and World Bank DDP, 2005
High Low Low Effectiveness High Effectiveness Figure 2Intensity of Local Markets Competition and Effectiveness of Competition (Antitrust) Law- Policy Source: Global Competitiveness Report 2006-2007
High Dominance Low Dominance High Effectiveness Low Effectiveness Figure 3Effectiveness of Competition (Antitrust) Law- Policy and the Extent of Market Dominance Source: Global Competitiveness Report 2006-2007
Figure 4 Business Competitiveness Index and Effectiveness of Competition (Antitrust) Law-Policy High Low Low Effectiveness High Effectiveness Source: Global Competitiveness Report 2006-2007
Key Factors for Successful Competition Law and Policy Implementation Complementary, broader ‘systemic’ public policies and regulations impeding competition also need to be simultaneously or sequentially addressed (trade, investment, ‘doing business’…reforms) Well designed CLP, specialized agency, well resourced-financial and human capital Independence of/safeguards to protect competition agency, case review and adjudication process from political and business pressures ‘Demand’ driven process…in response to credible complaints Broad public understanding of benefits and support for competition