Reviving Fair Markets: How Competition Policy Can Drive Inclusive Global Growth

The World Bank report Competition Policy for Development: Powering Markets for Inclusive Growth represents a milestone in global economic policy research. Spearheaded by the World Bank’s Trade, Investment and Competitiveness Global Practice, with support from the Competitive Markets for Development program under the Prosperity Vice-Presidency, this comprehensive report draws on contributions from global economists and scholars, including Professor Thomas Philippon. The research blends cutting-edge methodologies with data from firm-level surveys in ten middle-income countries, including India, Peru, the Philippines, and Serbia. It also builds on proprietary datasets that map global business ownership networks and document cartel enforcement. The result is a data-rich, policy-oriented document that repositions competition policy as a central tool for inclusive growth.

Conglomerates and the Rise of Market Concentration

The report's core message is urgent: many developing economies are not reaping the full benefits of market competition. Instead, they are witnessing a growing dominance of conglomerates, networks of firms often sharing ownership and operating across sectors and borders. These networks are not just large; they are sprawling, strategic, and deeply intertwined. The 1,000 largest companies on the Forbes Global list are now connected to over 90,000 firms across 572 industries in 133 developing countries. Between 2019 and 2022, their reach expanded by over 50 percent in low- and middle-income countries, especially in digital and agrifood value chains. In over 60 percent of the industries surveyed, two or more Forbes-linked companies operate side by side in the same industry and country, and 40 percent of the top firms share common ownership. These ties often reduce competitive pressure through multimarket contact and tacit cooperation. Seven percent of linked firms are co-owned by multiple top firms, undermining incentive structures for innovation and price competition.

This concentration of corporate power is particularly concerning because it is not always the result of merit-based success. The report details how conglomerates, particularly those with links to the state or politically connected individuals, often benefit from preferential treatment, subsidies, and market regulations that disadvantage smaller, independent firms. Such strategic advantages distort value chains, hinder entry, and stifle productivity. In sectors like digital services, agribusiness, and green energy, these vertically integrated networks often control essential inputs and dominate downstream markets, raising barriers to entry and reducing consumer choice.

State Power in Markets: A Double-Edged Sword

Another central theme of the report is the rising involvement of governments in markets, often with unintended negative consequences for competition. The role of state-owned enterprises (SOEs) and sovereign wealth funds (SWFs) has grown dramatically. Revenues of SOEs in the Fortune Global 500 more than doubled between 2015 and 2020. Meanwhile, SWFs have ballooned to over $11.7 trillion in assets, increasing by $1 trillion every two years. Yet, the report warns that governance reforms have not kept pace with this expansion. In many cases, public entities operate without clear competitive neutrality, undermining the level playing field.

Industrial policies have also made a comeback, especially in the wake of the COVID-19 pandemic and geopolitical tensions. While such policies can promote strategic sectors, the report finds that many developing countries are now using subsidies and domestic preference clauses in ways that entrench incumbents and undermine competition. Systems to ensure that state support is necessary, proportionate, and transparent are often absent or underdeveloped. The risk, the authors argue, is that well-intended policies could harden monopolies instead of fostering innovation and inclusion.

New Tools to Measure the Invisible: A Multivariate Approach

Recognizing the complexity of competition dynamics, the report introduces a new multivariate methodology to evaluate industries at risk of weak competition. This approach analyzes four key pillars, market structure, firm dynamism, price-cost margins, and labor productivity, using harmonized administrative datasets at the industry level across ten countries. The method employs a color-coded flag system to identify industries with weak contestability, low efficiency, and entrenched market power.

The results are striking. At least 20 percent of industries in the sample countries were identified as high or medium-high risk. These sectors accounted for roughly 20 to 41 percent of total national revenues and up to 45 percent of employment. Services such as retail, transportation, accommodation, ICT, and water supply were frequently identified as high-risk sectors. Even industries critical to food security and digital transformation, like fertilizers, sugar production, or telecom infrastructure, were flagged. In high-risk industries, productivity growth was 11 to 14 percent lower and wage growth around 2 percent lower annually than in more competitive ones. If reforms brought high-risk industries up to low-risk standards, the analysis suggests annual productivity gains of 6 to 9 percent and wage increases of about 1 percent.

Enforcement, Advocacy, and the Road Ahead

The report acknowledges the essential but limited role of competition authorities. Despite resource constraints, agencies in 78 countries, including 52 low- and middle-income economies, identified over 1,000 cartels between 2017 and 2022. Bid rigging, especially in public procurement, was the most common violation. A case study across six countries, Bolivia, Kenya, Indonesia, Mexico, Peru, and Tunisia, showed that dismantling just ten cartels could boost household purchasing power by 1.7 percent and cut poverty by 0.7 percentage points. Moreover, competition advocacy, non-enforcement activities aimed at shaping policy, yielded over $4 billion in consumer savings across multiple jurisdictions.

Yet, enforcement alone is insufficient. The report calls for a whole-of-government approach to competition policy. It argues for embedding pro-competition principles across public procurement, industrial policy, and regulatory frameworks. Tools like the Market Competition and Policy Assessment Tool (MCPAT) can help countries design phased, data-driven reforms tailored to their institutional capacities. For low-income countries, embedding competition in procurement and trade policy may be the first step. For middle-income nations, the focus should shift toward law enforcement, regulatory reform, and curbing distortive business incentives.

The report is not just a technical analysis, it is a policy manifesto for governments, regulators, and development partners. In an era of rising concentration and state activism, the report makes a compelling case that vibrant, open, and fair markets are indispensable to building inclusive and resilient economies.