1. Market Structure and competition policy in MENA region Lahcen ACHY Accra 19-20 June 2008

2. Introduction Question –Can competition enhance competitiveness and efficiency in MENA countries? Geographical coverage –Egypt, Jordan, Morocco and Tunisia Sector coverage –Manufacturing

3. Introduction (2) Approach: Use a common methodology for the four countries to: Assess the state of competition Assess the state of efficiency Assess the relationship between competition and efficiency Draw implication for competition policy

4. To assess the degree of domestic and foreign competition, use of : –Concentration ratios (C4) –Import penetration –Markup State of competition

5. To assess the degree of efficiency, we examine: –Firm size distribution –Total Factor Productivity To study the relationship between competition and efficiency: –Correlations –Regressions analysis

6. Overview of the manufacturing sector Main manufacturing sectors (Representing together at least 50% of total VA or employment)

7. The countries, except for Jordan, are highly specialized More than 50% of the value added /employment depends on 3 (Morocco, Tunisia) to 5 (Egypt) sectors. Although their rankings differ across the three countries, the most important sectors are the same: wearing apparel, food products chemical sector and textiles. No specific trend in the evolution of specialization across the countries

8. The state of Competition

10. The state of Efficiency

11. Specific restraints to competition Survey based evidence –between 40 and more than 100 firms –main cities in each country –8 sub-sectors among which –4 sub sectors common to all countries (Cars, Beverages, Textile and Pharmaceuticals) –4 different according to country’s specificity

14. Competition Policy Competition policy concerns cases where departure from “prefect” competition justifies intervention The 4 countries have adopted a competition law. 1991 Tunisia 2001 Morocco 2004 Jordan 2005 Egypt

15. In a broad sense the laws are very similar. They :  Establish freedom of prices as a general rule.   Prohibit arrangements and acts that disrupt competition   Prohibit abuse of dominant positions  Regulate concentration  P rovided cases of exemptions (e.g. public utilities)

16. Focusing on the three most important sectors in each country, shows that in general: –They are poorly opened to foreign competition both in terms of import penetration and exports exposure –Except in Jordan, their concentration ratios (based on domestic sales) are not high –Their mark-ups are very high suggesting the existence of strong market power –The growth rate of their productivity is very low and sometimes even negative.

17. Statements Combining the various aspects of the analysis, the following statements emerge:  First: the most important sectors in the studied economies are inefficient and enjoying high market power.  Second: these sectors do not necessarily lack domestic competition (mainly local) but particularly lack foreign competition.  Third: the lack of competition is harmful to efficiency  Fourth: although our survey did not identify business practices that deter competition, various cases reported in media suggest that such practices are real  Fifth: Competition laws were enacted but the absence of their enforcement reflects the low degree of commitment towards an effective liberalization of the economy

18. Recommendations –Reinforcing the means and independence of the competition authority –Economic and legal training and capacity building –Advocating competition policy in order to spread a culture of competition and inform stakeholders about its merits,

19. Thank you for your attention