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Regulation, Markets and Poverty

Edited by Paul Cook and Sarah Mosedale

Regulation, Markets and Poverty incorporates the main policy implications arising from theoretical and empirical research into competition, regulation and regulatory governance in developing countries. This analysis often challenges conventional wisdom and draws on the work of leading experts from a range of disciplines.
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Chapter 3: Designing Competition Policy


INTRODUCTION It is not surprising that governments in some developing countries have been sceptical about the benefits of economic competition. Many of them have spent years trying to protect their industries from external competition by restricting imports. Some have encouraged enterprises to become very large so as to benefit from economies of scale and have had little interest in encouraging new enterprises to enter the market. And for those with a tradition of state-owned enterprises (SOEs) competition has been more or less irrelevant. But times have changed. In the current climate of privatization and more open trade it is essential that developing countries compete more effectively. If they do not then their industries and therefore their economies will not grow. And in order to tackle their urgent economic and social problems, economic growth is essential. At the end of the 1980s only a handful of developing countries had effective competition policies but since then many more, especially the less poor, have at least established competition laws (Gray and Davis, 1993; Gal, 2004). However, many countries continue to have weak systems. The reasons for this include a reluctance to change, misunderstandings about how competition works, low capacities and the failure of ‘imported models’. The fact that competition policies are often designed and implemented by the same people who previously pursued anti-competitive policies (as in Brazil for example) does not help. COMPETITION IN CONTEXT Designing competition policy for economic growth is not a simple task. Because every economy...

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