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

Constraints to Promoting Competition in 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)

Number of Countries with Competition Laws by Region Africa No of countries: regional integrations East Asia and Pacific No of countries: 32 Latin America and Caribbean +North America No of countries: regional integrations Europe and Central Asia No of countries: regional integration Middle East, North Africa No of countries: 21 South Asia No of countries: 8 No of countries with a Competition Law: 17 (including regional integrations) No. of IDA countries: 11/39 CL: 13 No. of IDA countries: 4/13 CL: 19 (including regional integrations) No. of IDA Countries: 2/9 CL: 47 (including regional integration s) No. of IDA Countries: 8/10 CL:7 No. of IDA Countries: 0/2 CL: 3 No. of IDA Countries: 3/8

Figure 1 Per Capita GDP (constant 2000 USD in thousands) and Intensity of Competition in Local Markets Source: Global Competitiveness Report and World Bank DDP, 2005 Low High Low Intensity High Intensity

Figure 2 Intensity of Local Markets Competition and Effectiveness of Competition (Antitrust) Law- Policy Source: Global Competitiveness Report Low Effectiveness High Effectiveness Low High

Figure 3 Effectiveness of Competition (Antitrust) Law- Policy and the Extent of Market Dominance Source: Global Competitiveness Report Low Dominanc e Low Effectiveness High Effectiveness High Dominance

Figure 4 Business Competitiveness Index and Effectiveness of Competition (Antitrust) Law-Policy Source: Global Competitiveness Report High Effectiveness Low Effectiveness Low High

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