competition scenario bangladesh

8/6/2019 Competition Scenario Bangladesh

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Competition Policy and Consumer Rights:

Bangladesh Scenario

M. Abu Eusuf

Assistant Professor, Department of Development

Studies, University of Dhaka

Unnayan Shamannay, 16 April 2006


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Competition PolicyCompetition Policy

Intervention by public authorities

for ensuring competition in the

markets.for ensuring delivery of better qualitygoods at better prices

Concerned with actual competition


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Objectives of Competition PolicyObjectives of Competition Policy

to promote competition by preventing

agreements between firms that lead to

anti-competitive behavior either throughexplicit cartels or through tacit collusion.

to protect the consumers interest by

ensuring that they have greater choice interms of price, quality and service


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to maintain a competitive environment so that

an efficient allocation of resources can take

place, which promotes economic growth.

to allure foreign direct investment

to remove obstacles to market entry for foreign

investors

to protect abuse of dominant position by multi-national companies in the developing countries

market


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to regulate monopoly of firms

to motivate competing players to increase

their efficiency with a view to retain their

superiority in the market.

to weed out inefficient operations

to enhance consumer welfare


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Competition Policy Global Context?Competition Policy Global Context?

Out of 149 members of WTO, 80

have competition policy

Having competition policy for allcountries, still a matter of negotiations

at the international level.


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Competition Policy in BangladeshCompetition Policy in Bangladesh

Bangladesh has no competition policy.

Monopolies and Restrictive Trade Practice (Control and

Prevention) Ordinance, 1970

Has not been implemented but still validInitiatives were taken to develop a competition policy after

discussions at the 1996 Ministerial Conference in Singapore

but abandoned after Doha Meet.


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Competition Policy in BangladeshCompetition Policy in Bangladesh

At Doha in 2001, there were disagreements among WTO

members to adopt competition policy for developingcountries.

Consequently, Bangladesh has been giving least attention

for its competition policy.

Bangladesh considers it to be a dead issue.

That does not mean demand for a well-developed

competition policy has become irrelevant.


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Bangladesh Competition Policy! Bangladesh Competition Policy!

Consumers do want a competitive regime for their

benefits.Consumers right protection law 2004 wasapproved in the cabinet. This was supposed to go tothe parliament for final legislation but never went.

This act has, of course, emphasized consumersright to have goods and services at competitive price

It has focused consumers right to have informationregarding quality, quantity, standard and value of thegoods and services.


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Most Prevalent Anti-Competitive Practices in

Bangladesh (BEI Findings)

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30%

40%

50%

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Entry

barriers

Tiedsellin

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Refus

altodeal


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Anti-competitive Practices in BangladeshAnti-competitive Practices in Bangladesh

Natural monopolies (e.g. distribution of powerand gas, railways, telephone and other public

utility services)

Lack of legal provision (no legal entity tooversee the trading practices of business firms)

Mergers (e.g. Standard Chartered GrindlaysBank, visa fees of some foreign embassies needto deposit particularly in this bank)

Lack of effective consumers association

(consumers are not organized and cannot playany role in promoting their own interest)


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Anti-competitive Practices in

Bangladesh

Anti-competitive Practices in

Bangladesh

Price fixing (raising prices throughcollaboration among importers, localmanufacturers, suppliers etc.)

Presence of state-owned inefficient

industries (e.g. Textile, sugar, nationalizedcommercial banks etc.)

Manipulation of supply (through collaborationamong importers, local manufacturers,

suppliers etc)


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Anti-competitive Practices in BangladeshAnti-competitive Practices in Bangladesh

Exclusive dealing and tying arrangements (e.g.diagnostic services, educational inputs fromparticular outlets)

Weak regulatory framework (judicial system cannot

guarantee property rights e.g. ETV)Bid rigging (pre-arranged and threat driven)

Price discrimination (Dumping and chargingdifferent prices for identical products)

Bribery and gifts (e.g. bribing tax officials to avoidtaxes)

Extortion (e.g. sellers extorted by a purchasingagent)


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Lack ofLegal Provision

There is no effective legal provision designed to protect the interestof the consumers in Bangladesh. Besides, there is no legal entity tooversee the trading practices of business firms. These tasks arecomplicated. On the one hand, it needs to be ensured thatconsumers are not cheated, and on the other hand special careshould be taken so that private firms and business do not feelregulatory powers are excessive

Overseeing trading practices also requires knowledge about marketstructure, product quality, and above all technical expertise

Some businesses may consider gaining unfair competitive edge bymisleading claims about their products value, quality, and place oforigin and ingredients in order to promote sells


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Lack of Effective Consumers Association

Civil society groups acting on behalf of the consumers arealmost non-existent in Bangladesh. The existing Consumers

Association ofBangladesh (CAB), has not been particularlyvery effective in raising the concerns of the consumers

As a result, policy makers most often see strong lobbying infavour of demands for protection, they hardly encounter with

popular public demands for not grating those protectivemeasures


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Natural Monopolies

In Bangladesh sectors such as railways, telephone, and otherpublic utility services have generated such anti-competitivestructures that not only inhibits modernisation of these servicesbut also hinder private investment into these sectors

In recent times private sector has entered into the business ofcellular phone, but competition has been restricted to a fewfirms only. This allows the state owned BTTB (orBangladeshTelegraph and Telephone Board) to continue inefficiently

Though a regulatory commission has been set up for

the telephone sector. However, it is still in infancy andyet to acquire any teeth


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Regulatory Framework

Overall policy framework of the country acts as hindrance to the

promotion of an efficient and competitive market mechanism inBangladesh

The regulatory framework in the country is yet to be developed (onlytelephone sector though inefficient)

Absence of autonomous and independent effective and efficient

judicial system hampers to ensure a favourable business climate forcompetition.

Currently the countrys legal system is burdened with more than half amillion cases. Such a slow and inefficient judicial system increases thecosts of litigation

There are other sectors (e.g., telecommunication, power generation

and air transport) which are gradually being opened up and someparticipation of the private sector is taking place. However, it has beenalleged that these are being done in a non-transparent andunpredictable policy environment resulting in increased businesstransaction costs and widespread rent-seeking opportunities.


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Anti-competitive Behavior in the Banking Sector

Nationalised commercial banks (NCBs) are burdened with bad loans andloan defaults. Largely because of these bad loans the spread betweenlending and deposit rate is very high in Bangladesh.

When private Banks were allowed to operate it was hopedthat they would charge lower interest rates on lending as theydid not have to start with bad loans. It was found that privatebanks price loans follow those of the NCBs, who act as the price leaders.Such anticompetitive behaviour was responsible for allowing the NCBs to

become much bigger than the private banks and also more inefficient.

Access to governments development fund has been restricted for theprivate banks. Moreover, NCBs also operate in such activities whereprivate banking is absent (such as agriculture and rural developmentprojects). This also reduces the competition between the public andprivate sector


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Anticompetitive Business Conduct in Bangladesh

In Bangladesh, local manufacturing companies often appoint onesole distributor, in a region of the country, allowing it to dictate or

manipulate prices in that region. Often, foreign manufacturingcompanies even go so far as appointing one sole distributor or agentfor the entire country.

This sole distributor or agent establishes a monopoly for thatproduct and charges prices according to their whims. They neverdisplay company price lists, and may even refuse to show it if acustomer asks to see it. As an example, H.S. Enterprise has been the

sole distributor in Bangladesh of Honda Motor Company Limited,Japan, for 20 years, and the firm declares its status as a soledistributor in public. These types of practices are surelyanticompetitive.

City Cell is a company involved in the mobile telecommunicationbusiness. When a consumer takes a mobile phone connection from

City Cell, they have to pay for the particular mobile set supplied bythe company. In this case, the consumer is deprived of having theoption of another mobile set. This is surely a tying arrangement. So,this practice may also be considered as anticompetitive.


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Towards Efficient Regime

Setting up of an effective regime in this regard willremain a challenging task forBangladesh, which wouldrequire amongst others:

Legal and regulatory reforms

Implementation ofrule of law

Development of civil society group protecting the

consumers interest


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Bangladesh Competition Policy!...Bangladesh Competition Policy!...

Competition Policy is not panacea for

competitiveness. This depends to a significant

extent on factors such as human capital,

institutional infrastructure, ethical business codesand commitment to good governance. The civil

society too has a role to play in raising

consciousness regarding vices of anti-competitive

practices. Education, media and social

organizations have a role in mobilizing a society

for appropriate competitive regime.


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Caution !

There is also a danger of excessive competition, which

may have adverse socio-economic implication. There is,therefore, a need for open public debate on these issuesand continuous monitoring of the impact of competitionon the weaker sections of the economy (particularly onSMEs). Simultaneously, there is need for realisticassessment of the extent to which MNCs are followingthe disciplines of competition law

Indeed,government should undertake measures tosignificantly improve corporate (both local andmultinational) governance, increase corporate

transparency, prevent fraud and ensure corporate socialresponsibility


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Thank You

competition scenario bangladesh

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