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This book is an introduction to competition and the laws and policies affecting competition in developing-country markets. Its focus is on the practical problems these countries face and the steps they have taken and can take to overcome them.

The last few decades have seen huge changes in the way developing countries manage their economies. Most governments have moved away from central planning toward supporting a market economy and allowing the growth of local, privately owned businesses. National economies have become more reliant on the capabilities of individual firms making their own decisions about the production of goods and services based on market signals. A wave of privatization across the globe has seen governments withdraw, in large part, from providing not only goods but also infrastructure and social services for their people.

These in-country changes have taken place at the same time as great changes have swept the global economy. Merchandise trade has become freer and more capital is available. Firms everywhere are encouraged to export while facing greater competition from both imports no longer subject to high tariffs and foreign firms that set up commercial operations locally. Moreover, firms based in developing countries are increasingly linked with businesses abroad through franchises, subcontracts, or long-term supply relations.

However, the market is never completely “free.” Restraints can come from the state trying to protect its citizenry. Privatized utilities and network service providers are regulated to ensure good coverage and quality of service; banks are subject to prudential and other regulations to ensure stability and good performance; health service providers have to meet government-set standards of care and treatment; and producers of goods and services have to abide by quality, performance, and safety standards.

Another form of restraint arises within the market and is largely aimed at exploiting and overcharging consumers and governments. Private firms meet to agree on a price for products or services, agree not to compete with each other or to keep out newcomers, or, in the case of the largest firms, simply abuse their power in the marketplace. With globalization also comes the possibility that these restraints allow for transfers of income and profits abroad. Governments are not always blameless in this second form of restraint: poorly designed regulations, lack of oversight, opaque bidding practices, and downright corruption all interfere with competition.

A number of policies and laws exist to counter this latter form of restraint. Generally known as competition law and policy, they are also referred to as antitrust or antimonopoly rules. The different terminology depends largely on culture and tradition rather than the content of the laws and policies themselves.

This book is about anticompetitive practices in developing countries and the policies that governments and citizens can promote and practice to limit their impact. We provide the non-specialist reader with some background on the nature and meaning of competition and competition law and policy. We explore the special features and challenges for policy-making in developing countries in this area, taking into account the diversity of developing-country economic structures, circumstances, development paths, and political systems.

We attempt to convey three lessons: the importance of competition in the development process; the fact that individual countries can tailor and enforce competition law to suit their particular situation; and the importance of international cooperation in entrenching fair business practices and standards.

In Part 1, we provide a brief primer on trade and competition and outline the issues and particular challenges that developing countries face in an era of increasing globalization and international interdependence. In Part 2, we describe IDRC’s involvement in supporting developing-country research in the area of competition law and policy. Part 3 contains a wealth of information that IDRC has garnered, lessons it has learned from the work it has supported, and advice for new economies seeking to promote competition and overcome abuses in their market systems. Finally, Part 4 provides practical strategies for introducing and enforcing a competition law. The text is supplemented by a glossary of terms pertaining to economics and competition as well as the abbreviations used in the book.

The bulk of the text is empirical. Gathering evidence is not straightforward in this or any other field. Evidence must be research-based, with careful documentation of experiences, an analysis of cause and effect, and an understanding of context, before any lessons can be drawn. This book presents a summation of the mass of new evidence gathered by IDRC-supported xiv www. idrc.ca/ in_focus_compet i t ion researchers in developing countries over the past 5 years, anchored in the wider literature in which developing-country experiences have received inadequate attention.

Susan Joekes is Senior Program Specialist in IDRC’s Globalization, Growth and Poverty program, currently working out of IDRC’s Cairo office. Before joining IDRC, she was a Fellow and Member of the Globalisation Team at the Institute of Development Studies, University of Sussex. She has also worked with UNCTAD, the International Center for Research on Women, and the World Bank.

Phil Evans is Head of Consumer Policy and a Director at FIPRA, a specialist public affairs firm. Before joining FIPRA, he spent 10 years as Principal Policy advisor at the UK Consumers' Association, where he was responsible for dealing with competition policy investigations and submissions and for developing its trade policy. He is a visiting lecturer at Bristol Business School and has taught at the London School of Economics, the University of London, and the University of North Carolina. He has also provided technical assistance to a number of national and international organizations.

11 February 2008

Document(s) 2 of 9