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Roger Nellist Acting Head Growth and Investment Group Department for International Development London r-nellist@dfid.uk

Introduction to the Competition Assessment Framework Seminar on Enhancing Development through a Competition Culture 14 August 2008, New Delhi. Roger Nellist Acting Head Growth and Investment Group Department for International Development London r-nellist@dfid.gov.uk. Why it matters.

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Roger Nellist Acting Head Growth and Investment Group Department for International Development London r-nellist@dfid.uk

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  1. Introduction to theCompetition Assessment Framework Seminar onEnhancing Development through a Competition Culture 14 August 2008, New Delhi Roger Nellist Acting Head Growth and Investment Group Department for International Development London r-nellist@dfid.gov.uk

  2. 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)

  3. 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

  4. Competition Assessment Framework (2008) Downloadable at: http://www.dfid.gov.uk/pubs/files/caf-2008.pdf Growth and Investment Group Department for International Development London SW1E 5HE r-nellist@dfid.gov.uk n-godfrey@dfid.gov.uk t-allan@dfid.gov.uk

  5. 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 to be dug out of each market”; “they are hard to find…(and) significant forces gain from their existence” (William Lewis, The Power of Productivity, 2004)

  6. 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…

  7. 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.

  8. 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)

  9. 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)

  10. 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)

  11. Competition Assessment Framework (2008) Downloadable at: http://www.dfid.gov.uk/pubs/files/caf-2008.pdf Growth and Investment Group Department for International Development London SW1E 5HE r-nellist@dfid.gov.uk n-godfrey@dfid.gov.uk t-allan@dfid.gov.uk

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