I'm no teacher nor an experienced pianist.
But I can say that if a person would like to enter in a competition and their head is in the right place, you should let them go for it.
Some people are just more competitive then others, some don't care at all.
I personally think it is something good, it gives more motivation, an extra goal to the practice and it can be a really great experience.
They should be aware of the downside for if things go wrong that they won't be discouraged.
I would never push someone in to it, but encourge if they do.
Hope this helped a bit.
Carl