By James Wallar
Provisions on competition policy have increasingly been embedded in regional trade agreements. So it was no surprise last September when negotiators for the Regional Comprehensive Economic Partnership (RCEP) – a free trade agreement currently negotiated between ASEAN and Australia, China, India, Japan, New Zealand, and South Korea – were invited to hear Rod Sims, chairman of the Australian Competition and Consumer Commission, speak on the economic benefits of competition provisions in Brisbane, Australia.
Sims stressed that competition provisions will increase regional economic integration, underpin foreign investment in the region, and further fuel economic growth. His message was clear: competition policy would be good for both domestic markets and foreign investors.
A strong economy is contingent on an efficient allocation of resources, which could then lead to greater innovation, productivity and welfare for all. Both consumers and producers benefit from competition, the former through lower prices and more choices of products, and the latter through lower supply costs and higher efficiency. In contrast, putting a spanner in competition policy results in inefficiency – or “deadweight loss” — in the economy.
Sims’ message has not been lost on the leaders of ASEAN. Fifteen years ago no ASEAN economy had a competition law; now five have one: Indonesia (1999), Malaysia (2012), Singapore (2004), Thailand (1999), and Vietnam (2005).
The track record in enforcement is noteworthy. Collusive bidding and tenders in government procurement accounted for 85 percent of the 237 anticompetitive actions initiated by the competition authority in Indonesia during 2000-2010. Unfair business practices also featured prominently with 96 investigations undertaken and 83 decisions made in Vietnam between 2006 and 2011, compared to 6 investigations and 2 decisions on competition restriction conduct such as cartel formation and abuse of market dominance. The 119 enforcement actions in Singapore during 2007-2012 involved anticompetitive agreements (51 cases), prohibited mergers and acquisitions (36 cases), and abuse of dominant position (32 cases).
Recent cases include actions against the Vietnam Air Petrol Company for setting different prices, abusing its monopoly position and against price fixing by some Vietnamese insurance firms; penalties against bid-rigging by motor vehicle traders in Singapore; fines on Megasteel in Malaysia for abuse of dominance: and findings against a tying arrangement in Thailand that forced buyers to acquire a fixed ratio of beer for every quantity of whiskey ordered.
Economic ministers from these countries have urged the remaining five member economies to establish competition laws ahead of the planned ASEAN Economic Community (AEC) in 2015. Potential gains from having a competition policy are huge; by one estimate in Realizing the ASEAN Economic Community: A Comprehensive Assessment, an effective competition policy in ASEAN could boost per capita GDP in Indonesia, Malaysia, Thailand, and the Philippines by 3 to 15 percent over 10 years.
The ASEAN Experts Group on Competition (AEGC), a group of representatives from the 10 ASEAN countries working to ensure a level playing field and fair business competition ahead of the AEC, has received technical support from several external partners. The U.S. Federal Trade Commission assisted the group with drafting the ASEAN Regional Guidelines on Competition Policy. In November, with support from Germany, the AEGC launched an official website — www.aseancompetition.org — in an effort to bolster advocacy efforts through educating the public on the benefits of competition policy and laws.
While these efforts are important, they are likely to be insufficient. Many studies have highlighted the benefits of competition policy, but concrete examples are harder to come by. In addition, there is no strong consensus on whether competition policy can benefit developing economies that lack sound legal, judicial, and infrastructure systems.
This presents a challenge to ASEAN policymakers who wish to make the case for passing and enforcing a competition policy in their countries and develop collaborative ASEAN approaches. After all, they will have to take on deeply vested interests accustomed to conducting commerce on the basis of personal relationships rather than open and transparent markets.
Against this backdrop, ASEAN could, as a starting point, undertake assessments of a few key sectors important to consumers and producers such as finance, electricity, transport, and information and communications technology to illustrate how ASEAN citizens could benefit meaningfully from more effective competition. This would help give politicians the boost they will need to overcome the challenges associated with implementing effective competition laws in the future.