Edited by Paul Cook, Colin Kirkpatrick, Martin Minogue and David Parker
Chapter 2: Competition policy, market power and collusion in developing countries
Paul Cook INTRODUCTION Interest in promoting competition in developing countries has increased over the past decade. Despite differences, developing countries are generally characterised by lower degrees of market competition than their industrialised country counterparts. Until relatively recently, few developing countries had OECD-type competition policies. By the end of the 1980s only about a dozen developing countries had workable antitrust legislation and institutions (Gray and Davis, 1993). By the early 2000s the range of developing countries with competition policy had increased considerably, although to what effect is largely unknown. The heightened interest in competition in developing countries has various explanations. In part, it is undoubtedly linked to the wave of neoliberal economic reforms introduced since the 1980s, and in particular to the issues raised as a result of privatisation. To many, privatisation was a response to the government failures encapsulated in the notion of the ‘grabbing hand of government’, a term coined by Shleifer and Vishny (1998). This, drawing on public choice theory, indicated that the key problem of state enterprises was government interference in their activities, which led them to pursue political rather than economic goals. Privatisation was viewed as a policy that would restrict the future influence of the state on enterprises previously publicly owned. This view sees government control, and in particular regulation, as the main vehicle for enriching politicians and promoting corruption and, therefore, as a fundamental problem. As a consequence, deregulation and liberalisation were viewed as inevitable solutions. The issue of competition in relation to privatisation...
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