The government is business-friendly but not yet market-friendly
This is the story of two government agencies.
Both were established after the current government came to power and both deal with the business sector.
The first just celebrated its tenth birthday: the Bangladesh Economic Zone Authority (BEZA) was established in November 2010 under the 2010 Bangladesh Economic Zones Act.
The second is the Bangladesh Competition Commission set up under the Competition Act of 2012 and operational from 2016.
Their trajectories since then could not be more different.
The Economic Zones Authority, reporting to the Prime Minister’s Office, is one of the most visible and dynamic agencies of the government.
Meanwhile, the Competition Commission operates almost like a recluse from an obscure office on Eskaton Road.
The Zones Authority has an ambitious plan to develop 100 economic zones throughout the country, some in the public sector, some through public-private partnerships and some purely private.
Every now and then we hear reports of new zones being developed or of investors signing up for plots in the upcoming zones.
Several country-specific zones are also being developed to attract investors from countries such as Japan, China and India.
In a country where a lack of serviced industrial land and inadequate infrastructure are cited as two of the biggest problems faced by investors, it is hard to exaggerate the vital role the authority is playing.
The Competition Commission’s mandate is important too.
The website of the Bangladesh Competition Commission informs us about the grand objective of the 2012 Competition Act, i.e., to “promote, ensure and sustain congenial atmosphere for the competition in trade, and to prevent, control and eradicate collusion, monopoly and oligopoly, combination or abuse of dominant position or activities adverse to the competition”.
Promoting competition is important.
As we can see from Chart 1, Bangladesh scores poorly compared to its peers on the degree of competition in the economy, as measured by the Global Competitiveness Indicators.
The Competition Commission is meant to implement the Competition Act.
In December 2012, seven months after the Act was passed by parliament, a gazette notification announced the establishment of the Commission.
But, for a long time, nothing much happened.
The commission got its first chairman only in April 2016 and two members five months later. But it had to wait another four years to get its full set of members.
What has the commission done in the eight years since the Act was passed in 2012?
The core task of a competition agency is to investigate complaints about anti-competition behaviour, either proactively or in response to complaints from the public or other agencies.
It is also expected to do competition-related advocacy, both within the government and amongst the public, and build a knowledge base on the state of competition in different markets.
According to its annual reports, the commission has received 12 complaints since it became operational in 2016.
It appears that only two had been resolved by June 2020 although investigation reports have been submitted for several.
The annual reports also mention a couple of sectoral competition studies and several awareness-building activities.
But its real work, i.e., concrete actions against anti-competition behaviour, has been limited.
Among the major countries in South Asia, Bangladesh was the last to establish a competition agency.
In the eight years since its birth, it has remained a largely ineffective body, notwithstanding some recent ramping up.
This is reflected in Bangladesh’s poor score amongst its peers in the World Economic Forum’s score on the effectiveness of anti-monopoly policy (chart 2).
This is not good news. The real strength of a market economy lies in competition.
Profit-driven businesses are forced to enhance efficiency to survive the competition. This is what makes an economy dynamic.
Businesses naturally dislike competition and, thus occasionally, some of them would try to subvert competition.
Such behaviour drains the economy of vitality and deprives it of the full benefit of a market economy.
Thus, one of the important economic functions of governments is to check monopolistic behaviour and ensure a level playing field.
That is why, all over the globe, governments have enacted competition laws and established competition agencies.
The economic zones authority is providing a vital resource to businesses, i.e., serviced industrial land with assured infrastructure. It is a business-friendly body.
The Competition Commission’s mandate is to promote a level playing field in the market. It is a market-friendly entity.
The widely differing trajectories of these two agencies tell us something about the broad policy stance of the government.
The government is business-friendly but not yet market-friendly. It is time it changed its stance. We need competition to be competitive.
The author is an economist, previously with an international development agency