1 GREETINGS TO DELEGATES AT THE TRAINING WORKSHOP ON COMPETITION POLICY AND LAW PHNOM PENH 10 MARCH...

1

GREETINGS

TO

DELEGATES AT THE

TRAINING WORKSHOP ON

COMPETITION POLICY AND LAW

PHNOM PENH 10 MARCH 2006

Copyright - Dr. S. Chakravarthy 2

ECONOMIC REFORMS AND COMPETITION LAW IMPLEMENTATION

IN DEVELOPING COUNTRIES

Dr. S. CHAKRAVARTHY

(Profession : Civil Servant)

Formerly, Member, Monopolies and Restrictive Trade Practices Commission, Member, High Level Committee on Competition Policy and Law And Member of Committee for

Drafting the Law.Presently, Adviser/Consultant Competition Policy and Law

HYDERABAD, INDIA


LPG PARADIGMPRE - 1991 POST - 1991

• LICENSING

• PLANNING

• GOVERNMENT

• LIBERALISATION

• PRIVATISATION

• GLOBALISATION


L P G PARADIGM( POST - 1991 )

RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:

• DEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURES

• EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS

• NEW ECONOMIC ADJUSTMENT MEASURES

• DIVESTITURE AND SALE OF GOVERNMENT ASSETS

• GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTOR

• PRIVATISATION

• ENCOURAGING COMPETITION


COMPETITION REGIME

• ONE OF THE ECONOMIC REFORMS PACKAGE IS TO PUT IN PLACE A COMPETITION REGIME

• THIS INVOLVES FORMULATION OF A COMPETITION POLICY AND A COMPETITION LAW

• COMPETITION POLICY ENVELOPS ALL EXECUTIVE POLICIES OF THE GOVERNMENT

• EXECUTIVE POLICIES NEED TO CONFORM TO COMPETITION PRINCIPLES


PRE - REQUISITES FOR COMPETITION POLICY

INDUSTRIAL POLICY SMALL SCALE INDUSTRIAL SECTOR

POLICY PRIVATISATION AND REGULATORY

REFORMS TRADE POLICY STATE MONOPOLIES POLICY LABOUR POLICY


INDUSTRIAL POLICY

INDUSTRIES DEVELOPMENT AND REGULATION POLICY

DURING PRE-REFORMS LPG ERA LICENSING PREDOMINATED DURING POST-REFORMS LPG ERA 1. LICENSES REQUIRED ONLY FOR A FEW SELECT INDUSTRIES (CORE INDUSTRIES AND DEFENCE ENTERPRISES) 2. GREATER AUTONOMY FOR PEs 3. GREATER PRIVATE SECTOR OWNERSHIP


SMALL SECTOR PROTECTION

• POLICY - ENCOURAGE AND PROMOTE SMALL, COTTAGE AND HANDLOOM SECTORS

• RESERVATIONS FOR THE SMALL SCALE SECTOR• THEY SUFFER FROM OLD TECHNOLOGY, LACK OF

RESOURCES AND MANAGEMENT, HIGH COST OF PRODUCTION AND SALE

• GLOBAL COMPETITION CAN EXTINGUISH THE SMALL SCALE AND COTTAGE SECTORS

• COMPETITION LAW COULD EXEMPT SMALL SECTOR FOR A SPECIFIC PERIOD OF TIME TO ENABLE IT TO BRACE ITSELF TO MEET THE CHALLENGE OF COMPETITION


PRIVATISATION AND REGULATORY REFORMS

IN MOST DEVELOPING COUNTRIES FIRST GENERATION REFORMS UNDER IMPLEMENTATION

SECOND GENERATION REFORMS BEING FORMULATED AND IMPLEMENTED

REFORMS POLICIES NEED TO INHERE COMPETITION PRINCIPLES

NEED FOR FLEXIBILITY TO PROVIDE FOR NEEDS, ASPIRATIONS AND GOALS OF THE COUNTRY


TRADE POLICY

THIS INCLUDES (ESSENTIALLY WTO – RELATED)

TARIFFS QUOTAS SUBSIDIES ANTI-DUMPING ACTION DOMESTIC CONTENT REGULATIONS

EXPORT RESTRAINTS TRADE POLICY NEEDS TO CONFORM TO

COMPETITION PRINCIPLES


STATE MONOPOLIES POLICY STATE MONOPOLIES AND PUBLIC ENTERPRISES - AGENTS OF GOVERNMENT WITH SOCIO ECONOMIC POLITICAL GOALS

BUT SUCH ENTERPRISES SHOULD ALSO BE IN COMPETITION TO SUBSERVE CONSUMER INTEREST

APPROPRIATE BLEND OF COMPETITION PRINCIPLES AND GOVERNMENT POLICIES TOWARDS STATE AND OTHER MONOPOLIES COMPETITION LAW SHOULD APPLY TO ALL UNDERTAKINGS INCLUDING PUBLIC ENTERPRISES AND STATE MONOPOLIES AND THEREFORE CAN PREVENT RTPs, UTPs & MTPs ON THEIR PART


LABOUR POLICY LABOUR LEGISLATION PROTECTS

LABOUR INTEREST SOME LEGISLATIONS DO NOT PERMIT ENTERPRISES DESIRING TO EXIT TO DO SO

EASILY UNVIABLE UNITS IMPOSE HEAVY PRICE ON

THE SOCIETY COMPETITION DEMANDS CONTESTABLE

MARKET (EASY ENTRY, EASY EXIT) LEGISLATION NEEDS AMENDMENTS TO

PROVIDE FOR EASY EXIT SUBJECT TO PROTECTION OF LEGAL OBLIGATIONS AND LIABILITIES DUE TO THE LABOUR


GOVERNMENTAL POLICIES ON FDI(INDIA)

AFTER INDEPENDENCE (1947) – STRATEGY OF IMPORT SUBSTITUTION AND LOCAL CAPABILITY IMPROVEMENT – FDI WELCOMED

LATE 60s AND 70s – RESTRICTIONS ON FDI ON ROYALTY PAYMENTS, DURATION AND CAP ON FOREIGN EQUITY

DURING 80s – FDI POLICY LIBERALISED – IMPORT OF CAPITAL GOODS AND TECHNOLOGY EASED, TARIFFS REDUCED, EXPORT ORIENTED UNITS EXEMPTED FROM FOREIGN EQUITY CAP

POST – 1991 LPG ERA – MAJOR TRACK CHANGES, LIBERAL TRADE POLICY, CAPITAL MARKET REFORMS, FOREIGN EXCHANGE CONTROL RELAXED AND CONSIDERABLE INCREASE IN FOREIGN EQUITY CAP, MORE INDUSTRIES OPENED FOR FDI AND NATIONAL TREATMENT TO FOREIGN COMPANIES


FDI INFLOWS INTO INDIA (1991-2002)


INFERENCES FROM DATA ON FDI(INDIA)

INCREASE IN FDI INFLOWS PARTLY DUE TO POST – 1991 ECONOMIC REFORMS

THIS IS ALSO ATTRIBUTABLE TO SHARP EXPANSION IN THE GLOBAL FDI OUT FLOWS

MACRO – ECONOMIC FUNDAMENTALS OF INDIA ARE RESPONSIBLE PARTLY

INDUSTRIAL GROWTH RATE AND FDI INFLOWS HAVE A CORRESPONDENCE

SERVICES SECTOR IS RECEIVING MORE FDI NOW THAN A DECADE AGO

GOVERNMENTAL POLICY INFLUENCED THE EFFECT OF FDI ON DOMESTIC INVESTMENTS (MARUTI CAR)

40 % OF THE FDI INFLOWS ARE IN THE FORM OF MERGERS AND ACQUISITIONS - GREEN FIELD INVESTMENTS ARE LESS NOW


IMPLEMENTATION BLUES A

• DESIGNING COMPETITION LAW IS A CHALLENGE FOR MANY DEVELOPING COUNTRIES

• NO ONE SIZE FITS ALL COMPETITION LAW• UNIVERSAL COMPETITION LAW IS NEITHER

PRACTICAL NOR DESIRABLE• COUNTRY’S STRENGTHS, WEAKNESSES,

SYSTEMS, GOALS, ASPIRATIONS ETC NEED TO BE FACTORED IN

• WIDE CONSULTATIONS WITH ALL STAKEHOLDERS


IMPLEMENTATION BLUES B

• COMPETITION CULTURE LACKING IN GOVT,BUSINESS AND GENERAL PUBLIC

• LEVEL OF AWARENESS OF POTENTIAL BENEFIT OF COMPETITION IS INADEQUATE IN MOST DEVELOPING COUNTRIES


IMPLEMENTATION BLUES C

• COMPETITION AUTHORITIES IN DEVELOPING COUNTRIES FOCUS MORE ON STRUCTURE THAN BEHAVIOUR OF ENTERPRISES

• STRUCTURE ANALYSES ARE IMPORTANT BUT BEHAVIOUR ANALYSES ARE MORE IMPORTANT

• BEHAVIOUR ANALYSES REQUIRE BETTER EXPERTISE AND MORE RESOURCES


IMPLEMENTATION BLUES D

• COMPETITION LAW ENFORCEMENT IS HARDLY A PRIORITY ITEM FOR GOVTS

• BUDGETARY ALLOCATION IS POOR, IF NOT DISMAL

• COMPETITION CULTURE AND BUDGETARY ALLOCATION GO HAND IN HAND


IMPLEMENTATION BLUES E

• PERSONNEL CONSTRAINTS HINDER ENFORCEMENT

• COMPETENT AND QUALIFIED STAFF ARE NEITHER AVAILABLE OR ARE DIFFICULT TO RETAIN

• MULTI-DISCIPLINARY APPROACH IS REQUIRED BUT IS LACKING

• TRAINING FACILITIES ARE INADEQUATE


IMPLEMENTATION BLUES F

• COMPETITION AUTHORITY NEEDS TO BE

MANNED BY PERSONS WITH EXPERTISE AND KNOWLEDGE IN COMPETITION, ADJUDICATION.

• DEVELOPING COUNTRIES DO NOT FIND SUCH PERSONS IN ADEQUATE NUMBERS.

• QUALITY OF ADJUDICATION AND ENFORCEMENT SUFFERS FROM INADEQUATE BUDGETARY ALLOCATION.

• INDEPENDENCE OF COMPETITION AUTHORITY IS UNDERMINED BY EXCESSIVE GOVERNMENTAL CONTROL


IMPLEMENTATION BLUES G

• CONSUMER MOVEMENT IS WEAK IN DEVELOPING COUNTRIES

• CONSUMER ORGANISATIONS AND NGOs ARE NEEDED FOR CONDUCTING RESEARCH AND BRINGING FORWARD COMPLAINTS BEFORE THE COMPETITION AUTHORITY

• CONSUMER EDUCATION IS LACKING


COMPETITION ADVOCACY

• TO OVER COME THE IMPLEMENTATION BLUES, DEVELOPING COUNTRIES WOULD DO WELL IN TAKING UP STRONG ADVOCACY MEASURES

• THEY SHOULD HAVE A STRONG POLITICAL WILL TO ENFORCE COMPETITION POLICY AND LAW

• COMPETITION AUTHORITY SHOULD BE A COMPETITION ADVOCATE


THANK YOU

FOR YOUR

KIND ATTENTION

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1 GREETINGS TO DELEGATES AT THE TRAINING WORKSHOP ON COMPETITION POLICY AND LAW PHNOM PENH 10 MARCH...

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