Business Ethics and Corporate Governance, Second Edition

CONSTRAINTS TO COMPETITION IN DEVELOPING COUNTRIES

Among developing countries, restricted competition in the market for goods and services is a more prevalent situation. There are diverse constraints, ranging from anti-competitive practices by firms to government policy restrictions on ownership and entry. Frequently, entry barriers are disguised as regulation purportedly designed to serve the ‘public interest’. In fact, these policies usually give the preferred producers and service providers profits in excess of competitive returns. Such profits, however, come from distorted prices, which is truly a hidden tax on consumers.

With easy if not ensured profits and preferential treatment, such firms have little or no incentive to use resources efficiently. ...