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Relevance of Competition Reforms in Africa: Freer Markets for Development

This presentation by Professor Eleanor M. Fox from New York University School of Law explores the importance of competition policy and law in promoting growth and development in Africa. It discusses the challenges faced by African economies and the potential benefits of competition reforms. The presentation also highlights the role of competition authorities in protecting competition and overcoming external and internal restraints.

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Relevance of Competition Reforms in Africa: Freer Markets for Development

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  1. RELEVANCE OF COMPETITION REFORMS FOR DEVELOPMENT IN AFRICA:Freer Markets for the People Professor Eleanor M. Fox New York University School of Law Dakar 6-7 August 2010

  2. outline • 1 Globalization, promises and challenges • 2 The CUTS 7Up Projects as blueprint • 3 The challenges to be met • a. Fighting restraints coming from outside • Trade, competition • b. Fighting restraints coming from inside • Trade, competition, governance • c. What can the competition authority do?

  3. 1 Globalization, Progress, Challenge • Opening of opportunities; appreciation of the benefits of integration • Africa has made progress in growth • “From 2000 to 2008, African economies grew at twice the pace than .. in the 1980s and 1990s” • Those with natural resource wealth grew at 5.4%/yr • Others grew at 4.6% • Even in 2009, African nations grew 1.4% • NYT 24 June 2010, quoting McKinsey study

  4. But not all African economies get the advantage • The special problems of the bottom billion (Paul Collier, 2007) • Plagued by bad governance, corruption, some land-locked, scarce resources, income inequality exacerbated by commodity exporting, insufficient education and infrastructure, bad economic policy • and the opportunities opened by freer trade have been filled by better situated countries • Prescriptions commonly include aid • Question: Can the African countries be helped in their growth and development by competition policy and law, and how?

  5. 2. 7Up, starting from ground up • Good competition law and policy are important ingredients in growth and development • But what is “good”? • The error of much of the world has been to assume that • 1 What is good for the developed world is good for the developing world • 2 Liberalization and minimalist antitrust intervention are “good” • Sometimes this is so, but …. CONTEXT MATTERS

  6. The 7 Up projects • The 7 Up projects are remarkable for their attention to context • Political, social and economic • With thick descriptions of institutions, resources and powers, FDI and cross-border activity; structure of markets and concentration; sectoral regulation • The facts: the restraints and abuses that harm the nation’s consumers and hold back entrepreneurs from competing on merits; country case studies, sector case studies • Starting with: Pulling Up our Socks • CUTS has provided the platform and blueprint for getting a pragmatic grip on what is good policy

  7. 3. The Challenges to be met • The competition authority wants to protect competition on the merits; to protect all of the forces that inspire rivalry and good performance and bring lower prices, new products • But they are faced with undermining forces from all sides • Foreign firms that try to exploit, exclude, monopolize • Foreign governments that want to help their firms • Domestic firms that get special privileges and have power • Their own governments’ privileged SOEs, favored lobbyists • and even good-willed bad policy

  8. 3.a. Fighting off restraints coming from outside • Not so many years ago when the industrialized countries were asked about developing countries and competition they would answer: They are hurting us. They have commodity cartels. • Today it is well recognized that the developed countries are hurting the developing world and keeping them from developing • Subsidies and anti-dumping laws • World cartels against the most vulnerable • Deals by MNEs who get privileges in return for FDI

  9. 3.b. Fighting off restraints coming from inside • Cronyism, corruption and privilege, often blocking the opportunities necessary for competition • Lobbying: insiders (and outsiders) get government measures • Bureaucrats enact excessive regulation • All of these restraints hurt competition, growth and development • They hold back good performers from doing what they can do best

  10. 3.c. What can the competition authority do? • 1 Get the facts • This is more simply said than done • Sometimes it requires coordination with other authorities, cross-border or across the world • 2 Advocacy • The power of persuasion; strong sound arguments against bad economic policy, with facts showing the costs • 3 Enforcement • 4 Telling stories • Sharing the success stories, see http://www.usaid.gov/stories/; http://www.usaid.gov/regions/afr/success_stories/zambia.html#story2

  11. CONCLUSION • Constructing and safeguarding a competitive environment is one essential ingredient to growth and development • The job is hard; it takes: • The facts • The perspective • The voice • The resources, credibility and authority

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