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7Up3 Project on Capacity Building on Competition Policy in Select Countries of Eastern and Southern Africa Project Launch Meeting Entebbe, 22-23 March 2005 “Competition Policy and Economic Development. David Otieno Ong’olo Principal Consultant Spellman & Walker Co. Ltd.
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7Up3 Project on Capacity Building on Competition Policy in Select Countries of Eastern and Southern AfricaProject Launch Meeting Entebbe, 22-23 March 2005“Competition Policy and Economic Development David Otieno Ong’olo Principal Consultant Spellman & Walker Co. Ltd
What we hope to cover….. • Importance of competition policy and law (CPL) for economic development: • Domestic aspects • International aspects • Harm caused by international cartels • Some issues for consideration • Concluding remarks
Competition policy and economic development - Domestic CPL complements economic liberalization and regulatory reform and has a crucial role in a balanced and fair marketaccess. • Lower prices, more consumption and production particularly through tackling cartels/monopolies that raise business input costs (e.g. energy and distribution sectors) • Promotion of efficiency and productivity, fostering innovation and stimulation of sectoral restructuring and creating opportunities for new entrepreneurs • Ensuring that privatization/deregulation genuinely contribute to development/consumer welfare
Competition policy and economic development - International Impact of international cartels on developing countries • Possible relationship between cartels and predatory conduct against developing country suppliers • Many examples: vitamins, lysine, citric acid, graphite electrodes, fax paper, heavy electrical equipment, others • Inflict heavy costs on consumers and user industries (Levenstein and Suslow: US$ 81 billion in developing country imports in 1997 alone. Industrial development challenge is to maximize the domestic benefits of complementing foreign direct investment
Some issues for consideration…1 • Long term growth and productivity and resultant development is based on willingness and ability to invest. • To what extent would CPL reduce prices and corporate profits to the benefit of consumers and inhibit ability to reinvest? • Industrial policy must focus on investment, technical progress and promotion of dynamic efficiency. • Government’s role in investment coordination through industrial policy may best be served through promotion of oligopolistic rivalry based on an appropriate blend of competition and industrial policies.
Some issues for consideration…2 • What can we learn from how CPL have been implemented in countries at different stages of economic development and transition? • What are the key economic, political and social supporting factors in establishing an effective CPL and what were the main constraints encountered and overcome? • Which factors have shaped the institutional design of competition authorities, and which role have other institutions and social partners played in this process? • Which initiatives have been found useful to strengthen the credibility and independence of the enforcement agency?
No ‘one size fits all’ in terms of policy focus and institutional setup. Effective implementation and conducive policy environment are crucial for inculcating a competition culture. Costs of required institutional capacity can be high. Civil society, especially consumer organizations must be closely involved in the advocacy efforts. The international dimension of competition challenges cannot be ignored – the costs are very high.
