Competition Reforms in Key Markets for Enhancing Social & Economic Welfare

PHILIPPINES

1st Meeting of National Reference Group

CREW Project BriefingRafaelita M. Aldaba, PIDS30 July 2013, PIDS, Makati City

Presentation Outline

• Background: Competition, parameters used in analysis of impact of competition reforms on consumer welfare, producer welfare

• Project Description CREW Project: Goal, objectives, outputs & outcome Scope & Implementation: 3 Phases Structure & Organization Competition Analysis: Rice, Passenger transport

• Project Status & Planned Activities till Oct-Nov 2013 • Role of NRG Members

1. Background & some definitions

• Competition: rivalry as firms independently strive for buyers’ patronage to achieve a particular business objective (profit, sales, market share)– Forces firms to become efficient & offer a wider selection of goods &

services at lower prices

• Competition can be lessened by– Behavioral restraints such as collusive agreements to restrict prices or

outputs & other anticompetitive business practices that negatively affect welfare

– Government policies & regulations: barriers to entry such as permits, licenses; restrictions that are not equally applied to new entrants & incumbents; tariffs, quotas & other NTBs

• Competition Analysis– Consumer welfare, producer welfare (benefits)

Consumer Welfare Analysis

Indicator Analytical QuestionAccess Has reach of goods and services widened to include

consumers in areas where they were not available earlier (efficiency of distribution system)?

Quality/Price

Are better quality goods and services available for consumers? Have prices changed substantially for such good/services

Choice Are new products available to consumers? Are new firms offering wider variety of products?

Price Have prices change?Time savings

Do offered goods & services help save time for consumers?

Producer Welfare (Benefit) Analysis

Indicator Analytical QuestionAccess to essential services

Is there easy access for firms to public service & infrastructure networks such as power, water, internet, telephone etc?

Free movement of goods and services

Is mobility affected by policies & practices (inputs & outputs), infrastructure constraints?

Predictability of regulatory actions

Are legislations enforced by autonomous yet accountable institutions?

Cost savings Have new innovation activities led to reduction in costs?

Indicators of Producer Welfare (Benefits)

Indicator Analytical QuestionFair market processes

Are new firms able to enter market easily (low cost) & existing firms able to exit or close businesses effectively?

Level-playing field

Is the principle of competitive neutrality observed between private and public enterprises?

Transparency in market

Do market regulators have well laid out policies & predictable implementation processes?

2. CREW Project Goal & Objectives

• Goal – To better demonstrate measurable benefits from effective

competition reforms in DCs for ensuring long-term support for competition

• Objectives– Enhance understanding of benefits from competition

reforms in DCs (consumers & producers)– Develop & test a methodology to assess effectiveness of

competition reforms in benefitting consumers & producers in specific markets

– Advocate to key actors (national & international) for greater support to competition reforms in key markets

– Sustain momentum on competition reforms & take it forward

Outputs & Outcome• OUTPUTS

– Documented evidence of benefits from competition reforms in key markets

– Dialogues involving multiple stakeholders on benefits of competition reforms in DCs

– Strategy for capacity building of DC competition agencies and sector regulators

– Framework (Tool) for monitoring and evaluating the process of competition reforms in DCs

– Demand from elsewhere (other sectors and/or countries) for similar exercise

• OUTCOME – Greater attention and impetus for competition reforms in key DC

markets resulting in consumer and producer benefits

Project Implementation: 3 Phases

PHASE MAJOR ACTIVITIESDiagnostic Phase

Assess implications of competition reforms in specific markets; identify benefits and causes of existing consumer & producer concerns

Design Phase

Design a composite methodology to quantify (actual & potential) benefits of competition reforms

Validation Phase

Test the veracity of this methodology in micro-locations in project countries; and use results for advocacy

Diagnostic-diagnostic country report

Design-framework for competition promotion

Validation-validate FCP-advocacy, public education

Sector-specific Consumer & Producer Welfare

STAPLE FOOD PASSENGER TRANSPORTCONSUMER

WELFARE- Availability of good

quality staple food.- Change in prices of

staple food for ordinary consumers

- Availability of good quality transport services to ordinary consumers within city (intra-city) to get to workplace, markets, college/university on a daily basis & also on busy inter-city routes

- Change in pricesPRODUCER WELFARE

- Participation of private entities in procurement, storage and distribution of staple food

- Change in prices of inputs and outputs

- Access to road networks for a new player (operator) in a specific geographic market for providing such services

- Change in bus fares

Project Structure & OrganizationCUTS International• Implementation Team: CUTS International• Project Advisory Committee (PAC):

Country Level• Country Partner Organizations (PH: PIDS & AER)• National Reference Group (NRG)• National Entities

– Competition Agency– Sector Regulators– Private sector groups– Research Institutes & Think Tanks – Academe– Civil Society groups– Media

3. Project Status & Planned Activities

• Inception Meeting: Countries & Sector selection• Review of literature & Fact Finding in project countries• Opening Meeting in project countries: April to May, 2013 (PH:

May 7, 2013)• Outline of Diagnostic Country Report (DCR)• DCR Research Methodology- Nathan Associates • Review of DCR Methodology by PAC members

Sectors Ghana Zambia India PH

Staple food Maize/Rice Maize Wheat Rice

Passenger transport

Bus (inter, intra city)

Bus (inter, intra city)

Bus (inter, intra city)

Bus (inter, intra city)

DCR Activities • Finalize the DCR Methodology (in countries)• Research /Fieldwork to identify the following

– competition reforms undertaken in markets– relevant stakeholders/respondents– benefits of reforms on consumers and producers– existing concerns, reform possibilities and estimated benefits from them

Research Methodologies: Perception/Feedback Survey, Case Studies, Quantitative Analysis, Qualitative Analysis

• Conduct in-depth interview, perception surveys of relevant stakeholders/respondents

• Data Collation & Analysis • Preparation of the draft DCR: impact of competition reform on

consumer & producer welfare indicators; benefits from specific elements of competition reforms

• Presentation of the draft DCR in NRG-2 meeting to get feedback

4. National Reference Group: RoleNRG• Multi-stakeholder group: experts & practitioners, competition

scholars, sectoral stakeholders• 15 members in each country• Meet periodically to discuss project progress & issues

Role of Members• Guidance & support in project implementation• Inputs in designing components of research• Review important project documents - Diagnostic Country Report,

Framework for Competition Promotion (FCP), etc.• Access to country-specific network of institutions for data (literature,

statistics, market environment, etc.) & project application tools• Participate in project meetings CREW findings would help them in their own work agenda

NRG Meetings & TimelinesPhase NRG Tentative

DateMain Agenda

I NRG 1

July, 2013 • Provide project orientation & update• Discuss Conceptual Framework (Phase-I)• Inputs on DCR Methodology (country-specific)

I NRG 2

October, 2013

• Discuss Draft DCR• Discuss DCR findings & refinements

II NRG 3

January, 2014

• Orientation on common findings of final DCR• Discussion on development of Framework for Competition Promotion (FCP)

• Duration: May 2013-October 2015• Diagnostic Country Report (DCR) will gather evidence to

understand the impact of competition reforms on consumers & producers; indicators of these impacts

NRG Meetings & TimelinesPhase NRG Tentative

ScheduleMain Agenda

II NRG 4 July, 2014 • Presentation of the sector specific FCPs• Discussion on the FCP for fine tuning & refinement

III NRG 5 Nov, 2014 • Presentation of the final FCP• Planning of country-specific implementation of FCPs

III NRG 6 May, 2015 • Discussion on the findings of the FCP after implementation (Impact Analysis)

• FCP: Framework for Competition (to be developed by CUTS) to guide the process of competition reforms in key markets & measure the impacts of such reforms

www.pids.gov.ph www.aer.org www.cuts-ccier.org/CREW

Thank you for your attention.