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Priority Issues and Challenges for Competition Reforms in 7 UP 4 Countries. Lahcen ACHY Carnegie Middle East Center Beirut Research Adviser for 7UP4. Outline. Profile of the 7UP4 countries Two key lessons Three Priorities Three Challenges. Profile of the 7UP4 countries.

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Priority Issues and Challenges for Competition Reforms in 7 UP 4 Countries

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Priority issues and challenges for competition reforms in 7 up 4 countries

Priority Issues and Challenges for Competition Reforms in 7 UP 4 Countries

Lahcen ACHY

Carnegie Middle East Center Beirut

Research Adviser for 7UP4


Outline

Outline

  • Profile of the 7UP4 countries

  • Two key lessons

  • Three Priorities

  • Three Challenges


Profile of the 7up4 countries

Profile of the 7UP4 countries

  • Economic Background

    • High reliance on agriculture particularly for jobs

    • Large share of informal urban sector

    • Low income countries

    • High reliance of ODA (except Nigeria)


Profile of the 7up4 countries 2

Profile of the 7UP4 countries (2)

  • Recent historical background

    • Central planning and State-led growth after independence

    • High debt and macro economic mismanagement in the 80s

    • Structural adjustment programs in the 80s and 90s

    • Poverty reduction strategy and SGR in last decade


Profile of the 7up4 countries 3

Profile of the 7UP4 countries (3)

  • Legal and regulatory

    • Burkina, Senegal and Mali competition laws adopted since mid nineties. Togo since 1999. The Gambia more recently

    • Nigeria and Ghana: draft laws exit but not yet adopted

    • Apart from Nigeria, there is no specific law on consumer protection in the six other countries.

    • But many pieces of legislation on consumer protection exist. Competition authority is empowered to protect consumer interests to some extent (Burkina, Senegal, Togo).

    • All 7UP4 countries are members of WTO and ECOWAS

    • Four of them are members of WAEMU (B,M,S,T)


Key lessons

Key lessons

1. Pro-competition policies adopted in 7UP4 countries as part of their structural adjustment programs had adverse effects on consumers and domestic small businesses


Broad lessons 2

Broad lessons (2)

  • Case of Agriculture Policy

    • Removal of subsidies and guaranteed prices

    • Privatization and attraction of foreign investors

    • No input subsidies: lower use of selected seeds and fertilizers decline of productivity Lower production for small farmers

    • No State guaranteed prices for output small farmers targeted by large traders lower prices Lower revenues for farmers

    • Openness to food imports had negative impact: on local production: Agriculture special case by competition policy in developed countries (US, EU): exemptions and subsidies


Broad lessons 3

Broad lessons (3)

  • Case of Investment Policy

    • Removal of restrictions on foreign ownership

    • But FDI not up to expectations:

      • In terms of their amount

      • In terms of orientation : rent seeking with no spillover on the rest of the economy

      • In terms of contractual provisions

      • FDI because of size of projects has access to incentives (fiscal rebates, cheaper land) that don’t benefit other investors

      • large multinationals dominate market and crowd out domestic firms of smaller size and modest technology

    • In most countries, industrial sector declined since the 80s


Broad lessons 4

Broad lessons (4)

  • Case of Privatization Policy

    • Privatizations and disengagement of the State in heavily indebted public enterprises

    • In some cases, public monopolies were privatized as contracts of exclusivity, providing monopoly powers to the private sector with serious competition concerns

    • Privatization of basic services (water, electricity) without provision of a minimum universal service for the poor had its social cost.


Broad lessons 21

Broad lessons (2)

2. Complex overlapping regulations

  • Inconsistent with economic structure

  • Poor enforcement even when regulations exist

    • In Burkina, Senegal and Mali competition adopted since mid nineties. In Togo since 1999.

  • Political economy of Interference and diluted responsibilities

    • Cartels and abuses of dominance are dealt with at the level of WAEMU (Precedence on national law)

    • ECOWAS Treaty (1975) does not make clear reference to competition. But competition regulations are embodied in two Supplementary Acts adopted in Abuja in 2008


Priorities

Priorities

  • In terms of approach

    1. Streamline and rationalize regulations (RQ)

    • Content

    • Institutional architecture and sharing of responsibilities

      • Avoid conflicts of jurisdictions

      • Grant more responsibilities to national authorities in sanctioning anti-competitive practices.

        2. Focus on most abusive practices to consumers and business


Priorities1

Priorities

  • In terms of sectors

    3. Focus on sectors that would make a substantial difference for the poor

    • Agriculture

    • Basic services (social and backbone services for business)

      • Water

      • Electricity

      • Telecommunications

    • Public procurement s

      • Size: largest buyer

      • Allocation: use public money

      • Equity: services key to the poor: education, health and infrastructure


Challenges

Challenges

1. Strengthen State Capacity

  • Market economy needs strong and effective state

    • Rule of law: contract enforcement

    • Effectiveness: capacity to negotiate and to manage

    • In both cases need for more resources (human and financial)


Challenges 2

Challenges (2)

2. Strengthen the advocacy role of CSOs

  • Provide more space to consumers’ associations

    • Politically: voice and accountability

    • Legally: recognition of CSOs and their role

  • Build their capacity and support them play effectively their role (raising awareness and advocacy)


Challenges 3

Challenges (3)

3. Advocacy for better international governance

  • Domestic solutions are only part of the solution

  • Negative effects of absence or lack of competition in poor countries is largely due to

    • Impact of powerful multinationals

    • Impact of state subsidies in developed countries


Priority issues and challenges for competition reforms in 7 up 4 countries

Thank you for your attention

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