Growth and Poverty Reduction in Africa?

Transcription

1 Why is Competition Important for Growth and Poverty Reduction in Africa? Creating Better Business Environments for Enterprise Development: African and Global Lessons for More Effective Donor Practices Donor Committee for Enterprise Development Business Environment Working Group Accra, Ghana, 5 7 November 2007 Roger Nellist Investment Climate Team and Growth and Investment Group Department for International Development London r-nellist@dfid.gov.uk

2 Competitive Markets Essential for Growth Efficient, fair markets essential to catalyse private sector development and growth Innovation and productivity improvements drive growth But effective competition not automatic markets can fail Barriers diminish space for entrepreneurs and SMEs to enter markets, innovate and grow; More effective competition also limits corruption Links with national competitiveness Competition policy has an important role to play in fostering fair competition Page 2

3 Competition and Poverty Reduction: Transmission mechanisms The poor are consumers, entrepreneurs (including farmers), workers and recipients of governmentprovided services Transmission mechanisms often complex Indirect CP -> Competition -> PSD -> Growth -> Poverty reduction Direct and/or CP - > Competition - > lower prices, better quality, increased choice -> Poverty reduction (consumer welfare) Page 3

4 Why Fair Competition Matters for Africa The really big distortions to competition are in poor countries * Commission for Africa Report Role of competition policy in investment climate - Examples of low competition s impact: transport costs Need for more research but Evenett/Jenny study revealed widespread abuses in Africa, including everyday items like foodstuffs and beverages Distortions include: (1) Private sector misconduct e.g. insurance, beverages in Kenya (2) Privatization can create private monopolies e.g. Uganda (3) Subsidies for SOEs e.g. Telecoms in Zambia (4) Alleged vested interests e.g. competition law in Egypt W. Lewis (2004) The Power of Productivity Page 4

5 Legislative Barriers often a Major Impediment to Competition: Many kinds, but entry barriers particularly serious Starting a Business Africa E.Asia S.Asia Number of Procedures Time in days Cost (% Nat. Inc.) Minimum Capital (% Nat. Inc.) * Adapted from Broadman (2007), figures rounded Page 5

6 DFID s Competition Assessment Framework: the CAF (2007) Flexible diagnostic tool for developing country policy makers Holistic approach - reflects multiple causes of limited competition: private sector, public sector, vested interests How to select sectors for assessment - Identify markets and competitors - Examine market structure - Look for barriers to entry - Ascertain if government policies or institutions limit competition - Consider vested interests - Look for anti-competitive conduct by firms Draw conclusions: state of competition, causes possible remedies Page 6

7 Who can use the CAF? Applicable in wide range of situations. DFID and World Bank using it in India. DFID discussing use in Africa, and elsewhere in Asia. Part of wider public sector reforms (e.g. identifying laws/regulations unnecessarily restricting competition in key sectors or growth poles Supporting existing competition authorities to become more effective Helping civil society focus on key constraints Frameworks - part of growth diagnostic toolkit - Making Markets Work for the Poor Page 7

8 Conclusions Fair competition matters: - for stimulating growth through innovation and greater productivity - for providing scope for entrepreneurs, including SMEs, to enter markets and expand - for reducing poverty It matters in Africa!! Successful competition policy needs - pro-market commitment from the top - bottom-up advocacy - Appropriate policies, laws, institutions DFID s CAF - A flexible diagnostic tool to assess and address the real impediments to competition - Especially useful for Africa Page 8