Features Promoting Competitive Markets in Developing Economies: The Case of Egypt

 

Project Number: 101674
Project Timeframe: March 2003 - March 2007
IDRC Budgetary Contribution: CAD $773,500

 

Recent research has suggested that measures to bolster competition in developing economies' markets can enhance their economic growth and benefit consumers. However, with the exception of trade barriers, little is known about the scope and nature of impediments to competitive market outcomes in developing economies. At the same time, there has been growing, although sporadic, attention at the international level over the past few years to the need to establish multilateral approaches to international competition policy issues.

 

Based on the need for better information to inform discussions of competition policy, this project supplied rigorously derived and wide-ranging evidence on internal and external impediments to competition in six large developing countries. The impediments to competition identified were also assessed for their relative importance, in order to provide a basis for prioritising the policy actions to be taken in each country, including actions by dedicated competition authorities.

 

 

The overall objective of this project was to give a comprehensive assessment of the competition-related challenges facing policymakers in seven large developing countries, and to suggest policy interventions to address those challenges effectively. The specific objectives of the project were as follows.

 

 

 

Six countries were selected for study - Egypt, India, South Africa, Mexico, Brazil and Argentina -  based on the availability of good data on their industrial sectors and on the need to ensure both a geographical spread and varying initial conditions (such as degrees of regulation of competition, and different levels of state or private ownership of the industrial sectors). The research teams consisted of local scholars based at universities or other research institutions, who carried out the work in collaboration with the project’s lead researcher, based on a common research framework and methodology.

 

The analysis of external impediments to competition focused on sectors in which the developing countries are very import dependent, on changes in international markets due to mergers and acquisitions, and on market abuses by international cartels. In relation to the largest part of the study, which examined domestic dimensions of competition, the research teams studied the degree and determinants of competition among firms, as well as the challenges to, and desirability of, more active competition law enforcement.

 

Each country study examined the impacts on the private sector of structural adjustment reforms carried out since the 1980s. In this regard, they assessed the role of competition law and policy within the overall set of liberalisation measures the country took (including trade liberalisation, foreign direct investment liberalisation, privatisation, and deregulation). Researchers studied the design and enforcement in each country of competition law, which is the policy instrument used to maintain inter-firm rivalry. Alternate analyses were carried out where competition law was not in place, such as in Egypt, where the researcher examined cases of alleged anti-competitive conduct in the cement, steel and cinema industries and described how the government had tried to use policy instruments (such as trade policy) to curb the worst excesses.

 

 

The project produced a country study in each of Egypt, India, South Africa, Mexico, Brazil and Argentina.   Its outputs also feature several thematic or cross-country products in areas related to key international competition concerns of developing countries.  These include:

 

 

The project made a novel contribution in systematically bringing together, for the first time, large bodies of data relating to the size and character of the private sector and to the operation of the policies governing the private sectors in large developing countries. This data will constitute a major resource for other researchers. The studies of prior enforcement actions and anti-competitive practices constitute a valuable and original contribution, by investigating two matters that have not received a lot of attention in developing countries. In addition to greatly adding to the factual record, these studies and analyses have shed light on the potential contributions of competition to development.  

 

One of the most interesting findings suggested by the country studies was the apparently small effect of the structural adjustment reform packages on the development of the private sector. Another study, on the efficacy of advice given to developing countries, controversially questioned the conventional wisdom that they should avoid enforcement activities and instead focus on competition advocacy.

 

The rejection of competition policy from the negotiating agenda of the World Trade Organization in November 2003 led to a reorientation of the project’s initial proposed focus on other relevant international initiatives on competition law and policy, including the International Competition Network (ICN), which has emerged as a predominant international forum for discussions of competition matters. Given the perception that the ICN's non-binding approaches have value over binding alternatives, the paper regarding the ICN was notable in revealing that whatever the nature of the international obligation, the same constraints influence compliance. More specifically, it showed that the same pressures thought to hold developing countries back from signing binding commitments at the WTO also influence conformity with non-binding commitments.

 

 

The research results were presented at a project workshop in Buenos Aires in March 2005.  This involved three days of debate and discussions among 27 participants, including project researchers and a number of high-level scholars, analysts and practitioners engaged in related work on competition policy (including members of various national competition authorities).

 

In addition, selected project results, as well as further discussion papers, were presented and discussed at a further workshop supported through this project,  ‘Competition Law and Policy: Economic Perspectives,’ held in Cape Town, South Africa on May 2, 2006. This workshop preceded the International Competition Network’s Fifth Annual Conference (May 3-5, 2006) held at the same venue, and attracted over 100 participants.

 

Project results have been presented at other leading international fora including those organised by the United Nations and the Organisation for Economic Co-operation and Development.  Papers and datasets produced for the project will be made available on the internet to other researchers, and a synthesis publication gathering the results of the various studies is planned. 

 

Project Coordination

 

Prof. Simon J. Evenett, Ph.D.
University of St. Gallen
Bodanstrasse 8
9000 St Gallen
Switzerland

Tel: +41 71 224 2315
Fax: +41 71 224 2298
E-mail: simon.evenett@unisg.ch