Competition issues at sub-national level: Spurring entrepreneurship

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Competition issues at sub-national level
Spurring entrepreneurship innovation
January 31, 2005 Mark Dutz (mdutz_at_worldbank.org)
South Asia Finance and Private Sector Development
Department The World Bank
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Outline

• Benefits of competition at sub-national level
• Road freight logistics innovation an example
• Implications for competition policy
• Enforcement actions to open strategic
  bottlenecks
• Enhanced competition advocacy
• Governance institutional design

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Benefits of local competition Road freight
logistics innovation

• Mexico Free entry into trucking cargo
  handling, 1989-93
• New goods by user firms due to faster more
  reliable trucking
• Representative fertiliser co. improves operating
  margin by 10
• Central Europe Increased competition spurs
  innovative logistics
• 165 road freight services providers
• 493 user enterprises in food processing
  distribution, and automotive
• Just-in-time consolidation/ bar-coding tracking
  services stimulated by increased trucking
  competition
• Logistics innovations, in turn, dampen cost
  increases raise revenues of business users
• ease barriers to competition in upstream
  business services

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2a. Enforcement actions to open bottlenecks

• Focus enforcement on detecting collusive
  agreements or exclusionary practices aimed at
  foreclosing access to essential business services
• focus on ensuring provision of essential inputs
• ex.1 examine exclusive purchase, supply or
  distribution agreements (including shipping,
  importing and distribution millers cartel in
  Orissa bid rigging in construction contracts
  cartels in local services)
• ex.2 examine behaviour in land and financial
  markets

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2b. Enhanced competition advocacy

• Address missing or poorly-functioning rules
  institutions
• recommendations to amend existing rules to
  promote competition
• State procurement policy
• Tied-selling of education health services
  replaced by competition for market or other
  competition-friendly approach
• oversight responsibility to ensure that relevant
  institutions perform their role
• State systems for distribution marketing of
  liquor
• Eliminate rules that suppress rivalry
• State/local rules impeding entry
• Promote culture of competition
• Awareness raising about benefits of competition
• Strengthening of natural allies

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2c. Governance and institutional design

• Objectives
• Independence (predictability of enforcement)
• Influence (with local policymakers)
• Reduce legal uncertainty/ confusion
• Make best use of scarce managerial technical
  capabilities
• Avoid opportunism (forum shopping) local
  pressure
• 1 common set of rules approach
• Establish coherent central approach to
  enforcement advocacy
• Create regional offices under control of national
  authority
• Local delegation monitoring (open
  investigations) voice
• Central responsibility policy, adjudication and
  resolution