Tuesday, 5 March 2013

Does competition help alleviate poverty?

CI’s Phil Evans, Coordinator of the International Network of Consumer Antitrust Advisers, reports from the 2013 OECD Global Forum on Competition. 

When the more than 400 delegates of the OECD Global Forum on Competition (GFC) arrived for the first day of their two-day meeting they were met by a banner for a meeting in the room opposite their own for the 2013 Annual Meeting of the Tractor Codes.

Many probably wondered what you could talk about for two days solely regarding tractors; but this is probably precisely the view of most of the rest of the world about the GFC!

The GFC is divided into a series of sessions first looking at the relationship between competition policy and poverty; and then focusing on the more ‘normal’ issues of sector-specific reviews of media and competition.

A criticism often levelled at these big fora is that they are great at producing hot air and poor at producing any useful insight or pointers. Thankfully, this criticism rang hollow with the GFC. Presentations combined strong analysis with specific case studies of how poverty can interact with competition policy and vice versa.

There were long discussions about the role of consumers and small producers in the alleviation of poverty.

Given many agencies have to contemplate competition issues from a consumer welfare perspective, it is difficult to carry out such an analysis of the market when there are a large number of non-consumers who may operate at irregular intervals at the margin of the market.

One of the definitions of poverty is the absence of an individual from a market because they simply can't afford to operate in it. How do we assess their welfare when we are looking at a competition case?

Do we simply ignore them as they are outside of the market or do we include them because they ‘might’ be in the market in the future IF competition can help drive down prices and drive up demand or a merger offers to widen access to products though an improved distribution network?

The wider discussion focused on whether competition policy could help lessen poverty, or indeed make it worse. There was also an involved debate about whether competition law was even capable of doing anything useful in poverty alleviation.

Thankfully, a number of countries, most notably South Africa and Senegal, produced some cogent examples of how new entry in market encouraged by competition policy can help widen access and bring more poor consumers into markets.

However, many more examples were produced of how the working of the market itself, rather than any specific actions of a government agency, could help drive down poverty.

Senegal outlined a very interesting series of examples about enterprising Senegalese citizens acting as micro retailers for mobile phone cards and how some were repackaging large packs of detergent into micro packs to be sold at low prices to those who could not afford to buy the full pack.

One theme that ran through the day, and was encapsulated most notably in a presentation by a representative of MPESA, a mobile phone-based money transfer system, was the role that information technology may play in alleviating poverty.

While much of this overall debate can smack of fashionable thinking, the discussion here at OECD was largely denuded of the misty-eyed optimism that many discussions of ICT can be encumbered with.

The OECD discussion, however, focused on specific cases of how ICT developments can help widen access and participation and how regulatory agencies can have an impact upon them.

While not directly competition-policy related, the examples used focused more on the role of incumbent banks and some central banks’ willingness to do their bidding by slowing the spread of mobile phone-based micro payments.

There was almost a plea to the assembled bodies to ensure that finance ministries and central banks did not act to restrict entry and competition and to help market entry.

The 2013 OECD GFC started well with a detailed focus on the competition policy/poverty with a decent balance between high-level analysis and detailed case studies.

CI made good connections with all the major bodies at the meeting and its presence was noted positively. There was also a clear desire to see greater connections with civil society bodies to promote competition and debate the benefits (or not) of competition policy in helping countries develop.

As with all such pleas, the challenge will be in finding ways to make this debate happen at the national level.

A blog report from Day 2 of this meeting will appear next week.

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