Competition%20Scenario%20in%20Bangladesh

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Competition Scenario in Bangladesh

• Iftekar Ahmed, Senior Research Fellow, BEI August
  16, 2005

2
Bangladesh - At a Glance

• 1993-94 2003-04
• Population 120 m 136 m
• GDP 26 b 55.1 b
• GDP (growth rate) 4.1 5.5
• GDP (per capita) 224 421
• Poverty (lt1/day) -- 47 m (36)
• Poverty 71 m (59) 68 m (50)
• (national poverty line)

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Country Achievements

• Impressive achievements in economic and social
  development
• Steady economic growth, stable domestic debt,
  interest and exchange rate
• Per capita GDP in the 1990s rose three times
  faster than 1980s.
• Poverty reduced by 9 in the 1990s
• Gender parity in primary education, lower
  fertility rate, near universal primary school
  enrollment

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Explaining these achievements

• Macro-stability and opening of the economy
• Private sector development
• Remittances
• Development of the rural economy and rural
  infrastructure
• Capable network of NGOs and micro-finance

5
Needs to achieve higher growth

• Increases in investment levels and productivity
• Reduce anti-export bias and open the economy to
  foreign trade
• Diversify the economy, both manufacturing and
  agriculture
• Improve the investment climate (infrastructure,
  regulatory burden, corruption, access to finance,
  law and order) to promote domestic and foreign
  investment
• Create more accountable and responsive service
  delivery to sustain and accelerate gains in human
  development

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Most Prevalent Anti-Competitive Practices in
Bangladesh
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Market Structure

• Industrial Policy
• Investment allowed in all sectors except four
• Directives on saturated markets
• Who decides market saturation?
• Privatization Policy
• Active stance to transfer ownership and
  management from state to private sector
• FDI
• Liberalization of capital controls

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Trade Policy

• Liberalization of trade regime
• Reduction in import restrictions
• 1989 135 HS code banned
• 2002 5 HS code banned
• Reduction in the number of tariff slabs and
  import duties
• Legal provision for anti-dumping

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• Government Procurement
• General Perception
• Bid rigging 36 of the total respondents
• Are some companies favored?
• Public Procurement Regulation 2003
• Optimize efficiency in procurement
• Promote competition among contractors
• Promote fairness in the procurement process
• Contribute improved business climate in
  Bangladesh
• Procedures are needed to implement

10
Market Concentration

• Pharmaceutical Sector
• Top 5 companies control around 50 of market
  share
• Toiletries
• Toilet soap
• Top 2 companies control around 50 of market
  share
• Laundry soap and detergent
• Top company controls over 60 of market share
• Tobacco
• Top company controls around 50 of market share

11
Financial Sector- Banks

• 4 NCBs
• 3,496 branches
• 45.6 assets and 50.3 industry deposits
• 30 Private Banks and 10 foreign banks
• 36.2 and 6.8 assets
• 36.8 and 7.0 deposits
• Non-performing loans, inefficient and overstaffed
  
• Capital Adequacy Requirements higher
• Requirements to publish interest rates
• Interest rate convergence

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Financial Sector - Insurance

• Private insurance companies licensed through
  Chief Controller of Insurance
• Dominated by public sector
• Sadaran Bima (general insurance)
• Jiban Bima (life insurance)
• No foreign insurance company
• Private insurers required to reinsure 50 through
  Sadaran Bima

13
Power

• Dominated by public sector
• Only private sector involvement in generation
  with long-term power purchase agreements
• Recently established Bangladesh Energy Regulatory
  Commission which will be the independent
  regulatory body and set policies to "promote
  competition"

14
Telecommunication

• BTTB enjoys monopoly in fixed lines (95)
• 5 mobile operators
• Weak interconnections between mobile and BTTB
• No restrictions in equity shareholding by foreign
  investors
• Bangladesh Telecommunications Regulatory
  Commission established in 2002

15
Transportation

• Ports
• The Port Act 1908 and Port Rules 1966
• Railways
• Private Operators Are they regulated?
• Road Transportation
• Cost three-times to that for similar distances in
  India

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Anti-competitive Practices in Bangladesh

• No well-organized evidence on anti-competition
  behavior of business enterprises is available
• Further detailed studies are required
• Transport Sector
• Bus operators threatened for reducing fare
• Health Sector
• Private Clinics and Physicians Diagnostic
  Centers

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Competition Law/Policy in Bangladesh

• No Competition Policy
• Monopolies and Restrictive Trade Practice
  (Control and Prevention) Ordinance, 1970
• Has not been implemented but still valid
• Ordinance prohibits
• Undue concentration of individual economic power
• Unreasonable monopoly power
• Unreasonable restrictive trade practices

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MRTP Ordinance 1970

• Relevant phrases are not properly explained
• Provides for the creation of a Monopoly Control
  Authority to enforce the provisions of the
  Ordinance, but was never constituted
• Never been implemented
• If revived, needs amendments
• Need for a new law

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Profile of Respondents
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Understanding of Competition
21
Reaction to Anti-competitive practicesBusiness
Community
22
Reaction to Anti-competitive practicesConsumers
23
Awareness of rules/laws/regulations to check
anticompetitive practices in percentage
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The Way Forward

• Bangladesh needs a competition law
• Competition law is important for the continuation
  of the process of economic liberalization
• Major Challenges
• Need a New Law?
• Create a Competition Authority
• Awareness and capacity building on competition
  issues