GREETINGS TO DELEGATES AT THE TRAINING WORKSHOP ON COMPETITION POLICY AND LAW

PHNOM PENH

10 MARCH 2006
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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
Copyright - Dr. S. Chakravarthy 2

LPG PARADIGM
PRE - 1991 POST - 1991

LICENSING

LIBERALISATION

PLANNING

PRIVATISATION

GOVERNMENT

GLOBALISATION
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Copyright - Dr. S. Chakravarthy

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
Copyright - Dr. S. Chakravarthy 4

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
Copyright - Dr. S. Chakravarthy 5

PRE - REQUISITES FOR COMPETITION POLICY

INDUSTRIAL POLICY SMALL SCALE INDUSTRIAL SECTOR POLICY PRIVATISATION AND REGULATORY REFORMS TRADE POLICY STATE MONOPOLIES POLICY LABOUR POLICY
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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
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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

Copyright - Dr. S. Chakravarthy

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
Copyright - Dr. S. Chakravarthy 9

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

Copyright - Dr. S. Chakravarthy 10

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
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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
Copyright - Dr. S. Chakravarthy 12

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
Copyright - Dr. S. Chakravarthy 13

FDI INFLOWS INTO INDIA (1991-2002)

Copyright - Dr. S. Chakravarthy

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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

Copyright - Dr. S. Chakravarthy

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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 COUNTRYS STRENGTHS, WEAKNESSES, SYSTEMS, GOALS, ASPIRATIONS ETC NEED TO BE FACTORED IN WIDE CONSULTATIONS WITH ALL STAKEHOLDERS
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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

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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
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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
Copyright - Dr. S. Chakravarthy 19

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
Copyright - Dr. S. Chakravarthy 20

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
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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
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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
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THANK YOU FOR YOUR KIND ATTENTION

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