Competition Policy and Law in Bangladesh Objective: The objective of the program is to provide technical assistance to the Government

of Bangladesh (GoB) to undertake competition advocacy, public awareness and training about competition issues. The competition Background: Bangladesh does not currently have any clearly defined competition policy at the macro level or any sector specific policy that addresses competition issues. The government does not have any institutional mechanism to review and administer existing and proposed policies that affect competition or regulate business activities that are anticompetitive. The Monopolies and Restrictive Trade Practices Ordinance (MRTPO) was promulgated in 1970 by the Government of Pakistan. Since independence of Bangladesh, neither the government nor the private sector has attempted to invoke the law. The GoB has indicated its intent to pass a competition law in its Poverty Reduction Strategy Paper. In this connection, during the design phase of the Competition Policy Review component of the Private Sector Development Support Project (PSDSP), a joint WB-DFID team of experts held a number of meetings in Dhaka and Chittagong with a wide range of public and private sector officials, including representatives of government ministries and departments, academic and policy-research institutions, industry and trade associations, business and commercial law firms, civil society and non-governmental organizations. The team of experts proposed a number of steps to assist the Government of Bangladesh address competition related issues in the domestic economy: (a) Engage in consultations with private and public sectors, identify, and agree on three or four critical sectors where competition assessments and regulatory impact analysis should be conducted by Bangladesh based consultants/academics and policy-research institutions using methods discussed at the proposed workshop. (b) In collaboration with think tanks, consumer protection association, chambers of commerce, and other civil society, organize a conference aimed at a broad audience on the role, importance, and benefits of competition policy, international best practices. Examples would be drawn from developing countries so as to alleviate various misconceptions, build better public understanding and to encourage support for promoting competitive markets. The team also proposed a longer term approach to build the capacity of Bangladeshi civil servants through a formal training program in policy analysis and evaluation in areas such as industrial organization economics, regulation, trade and investment, to promote future modern policy design and formulation methods. Project Description: The program can be divided into three phases:

a) Awareness raising on competition policy issues among various stakeholders including the government, businesses, media, think tanks and research institutions and academia. b) Formation of a committee headed by the commerce minister/advisor and representation from industries ministry, ministry of home affairs, ministry of law justice and parliamentary affairs and other appropriate ministries c) Conduct diagnostic studies on some priority sectors that are in urgent need of addressing anti-competitive practices. These sectors will be identified based on detailed consultation with the government, local and foreign experts. d) Create an institutional framework and build capacity within the government to advocate, enact and enforce competition law and policy in Bangladesh. Aware raising would be the first and most critical step of competition policy given the low level of understanding among the stakeholders. A BEI survey on policymakers, businesses and consumers revealed that only a small portion of respondents are aware of the presence of any competition law or policy in Bangladesh. The business community was the more informed than policymakers and consumers. Another finding was that 65% of the respondents believed price-fixing to be a major anticompetitive practice in Bangladesh markets, followed by monopoly and bid-rigging (48%), discriminatory dealings (39%) and entry barriers (30%). The relevant officials within the government should be exposed to international and regional best practices on competition policy to raise the level of understanding and ensure buy-in. India would be a suitable candidate for regional best practices since the country underwent major amendments to the Monopolies and Restrictive Trade Practices Act in 1991 and then passed new Competition Act in 2002. Countries that are recognized for international best practices on competition policies and law and strong enforcement would include Australia, UK, USA, Canada etc. A 1-2 day workshop will be organized to transfer knowledge and build capacity in appropriate Bangladesh government agencies, academia and policy-research institutions, and other entities on conducting market studies, competition assessments and regulatory impact analysis. Sector Study: Below are some potential sectors for assessment of competition scenario based on some consultation with local experts and the work that Bangladesh Enterprise Institute (BEI) did with Consumer Unity and Trust Society (CUTS International): Essentials: rice, sugar, pulse, edible oil, fresh vegetables Pharmaceutical, power, telecom, toiletries, tobacco, cement, fertilizer, corrugated steel, financial services, intercity bus services, health services Competition Assessment for a particular sector/market needs to take account of three related elements. First, there is a set of supply and demand factors, which affect the costs of production and customer demand. Second, regulations that change the competitive process through directly specifying market outcomes (e.g. specifying a minimum

standard for a product). Third, regulations that directly impact on the competitive process (e.g. by changing barriers to entry or expansion, or by affecting industry concentration). A tool that is part of Competition Assessment is competition filter which is a set of questions to be answered for each sector/market likely to be affected by the proposed regulation. It is likely that there will be some regulations that do not change the competitive process in any way; others could have a substantial impact. The purpose of the competition filter is to identify quickly those proposals that are most at risk of having a significant detrimental effect on competition. 1. In the market(s) affected by the new regulation, does any firm have more than 10 per cent/20 per cent or the largest three firms together have at least 50 per cent market share? 2. Would the costs of the regulation affect some firms substantially more than others? For example, costs of paperwork or administration affect smaller firms to a substantially greater extent than larger firms, or if significant costs are imposed on particular companies because of the resources they use or where they are located. 3. Is the regulation likely to affect the market structure, changing the number or size of firms? This question will address among other issues, for instance, whether some firms will be forced to leave the market or will they merge with other firms to survive. 4. Would the regulation lead to higher set-up costs for new or potential firms compared with the costs for existing firms? This question focuses on the initial entry barriers in the form of set-up costs. 5. Would the regulation lead to higher ongoing costs for new or potential firms compared with the costs for existing firms? This may include the extent to which there may be time lags in introducing the regulations for existing firms. If new firms have to meet requirements immediately while the existing firms have a period of grace, then the regulation would have discriminatory impact. 6. Is the market characterized by rapid technological change? The reason for identifying those markets experiencing rapid technological change is that there is a risk that regulation may restrict innovation in such markets. 7. Would the regulation restrict the ability of firms to choose the price, quality, range or location of their products? Minimum standards or requirements are ways in which firms freedom to choose product type or quality can be restricted. Other examples would include restrictions on prices charged, the quantities of certain inputs used or the location of certain activities which would limit opportunities for firms to compete. Publications of Competition Policy: Competition and Investment: Issues in Bangladesh, Mohammed Eusuf Competition in the Agriculture Sector in Bangladesh, Unnayan Shamannay