Bangladesh should have a sound competition policy to regulate monopoly of firms, ensure efficient use of resources and enhance consumer welfare, the Asian Development Bank (ADB) suggested in its latest quarterly economic update.

Such a policy has two elements -- firstly, policies enhancing competition in the market including privatisation, trade and foreign exchange liberalisation and deregulation, and secondly, competition laws that prevent or control anticompetitive business practices and unnecessary government interventions, the ADB said.

"There is a need for competition policy to ensure that firms do not behave collusively and that market power is not exploited," stated the report released on Sunday, since there is no clearly defined competition policy or law in Bangladesh.

The ADB quarterly update stressed the need for safeguards against anti-competitive business conduct as well as public support

and consumers' awareness about their rights to achieve the objectives of competition policy.

As large importers resort to predatory pricing to ward-off new entrants and trade policy can hardly regulate monopoly in trading services, the ADB said appropriate competition law and authority are needed to regulate such practices.

"Adoption of a sound competition policy and establishment of an effective competition agency will complement measures such as trade liberalisation and deregulation resulting in more domestic market competition," it stated.

The quarterly update for January-March 2004 further said an effective competition policy will also promote efficient use of resources and enhance consumer welfare while protecting freedom of action of the economic agents.

"A sound competition policy by affecting competitive behaviour of enterprises and industry promotes competition in the economy leading to more efficient allocation of resources and widening of con-

sumer choices."

Moreover, the ADB report said, experience with competition at the domestic level will equip developing countries like Bangladesh in more clearly defining their individual negotiating position on multilateral competition policy at the WTO.

About competition in financial and trading services, the bank said in spite of the improvement in the bank and non-bank financial regulatory framework, the nature of competition, characterised by a high level of concentration and oligopolistic markets, has remained largely unchanged. "A competition law and policy is essential to regulate the market behaviour of the dominant banks," itsuggested.

"The slower than required pace of reforms of nationalised commercial banks (NCBs) retarded improvement in the cost and quality of their services. New entry has not generally benefited the rural areas and competition has been impeded by the segmented nature of the credit market," the ADB report added.