1. Competition Policy and Development CUTS - 7Up3 Project Launch Meeting 22-23 March - Entebbe, Uganda Lucian Cernat Competition and Consumer Policy Branch Division on International Trade UNCTAD, Geneva

2. Main elements 1.The need for competition policy Domestic International, including regional 2.CLP and development: Key lessons 3.UNCTAD’s role

3. Make prices more flexible and closer to costs Promote efficient resource allocation throughout the economy Augment variety of cheaper or better quality goods and services for customers Encourage technological innovation Encourage market entry by new firms Increases economic efficiency Safeguards and promotes consumer welfare Results: Benefits of Competition: Domestic level Mechanisms:

4. Benefits of Competition: Open economy TradeFDI Competition Policy Market access Export-oriented FDI/ supply capacity International cartels Export competitiveness Increased concentration Increased competition ??

5. The potential gains from trade liberalization At multilateral level: E.g. 50 per cent reduction of tariffs in agriculture would increase world welfare by about $20 billion ($13,4 billion for developing countries); in all sectors, will double the amount (Cernat, Laird, Turrini 2003). But… as a result of price fixing conspiracies during the 1990s (Levenstein and Suslow 2001), developing countries paid approx. $ 20-25 billion in excessive prices (Jenny 2003)

6. FDI and competition as in the case of trade in goods and services, open and contestable markets for FDI do not destroy all market power of incumbents a wide range of RBPs - both horizontal and vertical - could affect potential entrants' investment decisions and impede FDI flows moreover, MNC’s strong competitive position can lead to anti-competitive structures and behaviour and thus to the establishment of new entry barriers, especially when FDI is accompanied by M&As

7. What have we learned? anti-competitive practices impair the process of development in developing countries more significantly than has previously been thought trade and FDI liberalization may not by themselves eliminate the propensity of firms to engage in anti-competitive practices

8. What have we learned? (cont’d) Contrary to “traditional wisdom”: –Competition policy is not a luxury for the rich: poor countries suffer most from RBPs –There is need for competition law and policy in all countries, including LDCs

9. What have we learned? (cont’d) merely adopting a competition law is no panacea… what really makes a key contribution to competitiveness and development is effective CLP implementation If not part of a well-coordinated set of legal and economic institutions, the impact of competition policy on productive capacities and in favour of more competitive economies is likely to remain sub-optimal

10. What have we learned? (cont’d) It is not possible to copy existing competition law and policy from developed countries: there is no “one- size-fits-all” system: Each country needs its own “tailor-made” competition law and policy (CLP); Each country will have to experiment and amend gradually its CLP; Each country will need to adopt its CLP as the economy develops.

11. 2. UNCTAD’s mandate UNCTAD XI and 4th Review Conference: to contribute to a more efficient, but also a more equitable world economy, based on competition principles at national, regional and multilateral levels to boost competitiveness, and hence accelerate the development of developing countries, in particular LDCs, by promoting a competition culture to defend consumer interests by ensuring that applying competition rules results in better quality and choice, and lower prices of goods and services

12. unique position as a fully multilateral body with full membership of developing countries long standing experience in Competition Law and Policy issues related to development addresses national, regional and multilateral competition issues comprehensive developmental approach, including linkages with trade, FDI, and other related policies UNCTAD’s strengths

13. helps developing countries build capacities; strengthens competition advocacy of their public institutions responsible for competition and consumer protection; helps creating a competition culture, in developing and transition countries where competition is a new concept Jointly with other organizations, UNCTAD:

14. Main types of Technical Assistance: Introductory Seminars Economic Mapping and Needs Assessment Assistance in drafting competition laws Advisory Services for setting-up competition authorities and training of officials Seminars and workshops for exchange of expertise among countries in the implementation phase

15. www.unctad.org/competition UNCTAD Competition Website www.unctad.org/competition All Competition policy studies and documents Reports of meetings Scheduled events: The 5th Review Conference of the UN Set 14-18 November 2005, Turkey