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Competition Policy – the asian perspective

Asia, taken as a whole, but excluding the Middle East, i.e., the countries stretching from Afghanistan and Pakistan in the West to Korea and Manchuria in the North East (which is how most people think of Asia) is geopolitically — and in every other respect — fairly heterogeneous. It is, in fact, a lumping together of several sub-continents, which, of course, does not in any way suggest that each of these sub-continents is homogeneous. And, insofar as the existence of an institutional structure to ensure adherence to recognized principles of competition law and policy is concerned, Asia is, again, a mixed bag.

If one were to — in perspective — sweep the eye across Asia, one would clearly see Japan and Korea as having very serious and effective competition regimes, carefully crafted and refined to meet their economic circumstances. On the other hand, India and Pakistan have had somewhat ineffective and moribund competition structures in place since the late sixties which they are currently in the process of modernizing and if it all proceeds according to plan, these countries, hope to achieve close to global standards in the near future. Taiwan also has a robust competition regime and so does Singapore but only since 2005. Also, Indonesia has had a competition agency since 1999 that is heroically struggling against all odds to implement a fairly modern competition policy. Vietnam, too, has a competition administration of some kind in effect since 2005 and it was as recently as August 1, 2008 that China’s anti-monopoly law finally became effective.

The rest of both East and South Asia — and this includes Hong Kong, Malaysia, the Philippines, Thailand, Bangladesh, Nepal, and Bhutan — have, as yet, a somewhat fragmented approach to competition and restraint of trade essentially in the context of industrial and trade policies. Some of these jurisdictions, like Hong Kong, Malaysia, Bangladesh, and Nepal are giving active consideration to the formulation of a modern competition law and the concomitant mechanism to implement it. Apparently, SriLanka has retrogressed and its law was reconstructed in 2003 to largely focus on consumer protection.

I might mention in the passing that while the behavioral dimension is addressed through competition legislation and its enforcement, fundamentals such as sound investment and trade policies, appropriate laws and regulations including a fair basis to enforce contracts, adequate infrastructure, both physical and IT-related etc., — in other words, a healthy investment climate — cannot be ignored if the goal of competitive and contestable markets is to be realized in an optimal fashion. In this regard as well, Asia presents a varied picture with “the good, the bad and the ugly” all present in Asia.

Notwithstanding the fact that large swathes of Asia have either been socialist for considerable periods of time or have flirted shamelessly with socialism, the outlook and approach in Asia i.e., the Asian ethos, is remarkably feudal. Asians are not fazed at all by abuse of dominance, collusive behaviour, exploitation etc., albeit they would consider it shocking if those with wealth and power were not charitable and generous towards the needy and the dispossessed. This is the way the cookie crumbles in Asia — this is the Asian paradigm. Robber Barons are generally speaking acceptable in Asia as long as they are the “giving” sort!

Both in East Asia as well as South Asia, most people appear to take anti-competitive behaviour in their stride and consider it a part of life. Thus, competition or anti-trust enforcement does not come naturally to Asians. And I am not surprised that, for the most part, Asia appears to be lagging behind other regions, excluding perhaps, sub-Saharan Africa, in the matter of anti-trust enforcement.

Apart from the cultural aspect to which I have alluded earlier, there are a number of other factors which have prevented developing Asian countries, particularly those in South Asia with which I am more familiar, from pursuing a well-defined, holistic, and robust competition enforcement policy.

First, it is recognized that to properly enforce anti-trust norms, the competition agency must be autonomous. However, even if the agency’s independence is in some shape or form enshrined in the law, governments in Asia find it very difficult to truly and genuinely accept the competition agency’s autonomy and the agency is constantly fighting a rear-guard battle to remain independent.

Second, despite being fully aware of the importance of competition law enforcement for the promotion of economic efficiency and the public weal, the political will to support the competition agency discharge its responsibilities is weak in South Asia — it is vague and indeterminate. In fact, it is consciously or unconsciously undermined by other, perhaps conflicting priorities, cronyism etc.

Third, most competition agencies in Asia do not have access to tied and secure sources of funding and they are often without the resources to implement a credible enforcement or advocacy programme. There is also very little support from government for the agency’s efforts to raise the required resources.

Fourth, the judicial system just does not work in most Asian countries thereby weakening the competition agency’s ability to enforce. Unpredictability, inordinate delays, and ineptitude are the hallmark of the judiciary in many Asian countries. Obviously, this affects adversely — in fact, often upsets — the work of the anti-trust agency.

Fifth, instead of coordinating with the competition agency and acting in its aid, sector-specific regulators and government agencies often act contrary to the spirit of the competition law, if not outright violate its letter. This poses an enormous hurdle for the competition agency.

Sixth, a competition agency needs high quality and competent micro-economists, forensic accountants, and lawyers for effective monitoring, investigation, and enforcement. In addition, a competition agency would need excellent analysts, IT experts, and PR people. All these skills are in short supply in Asia, particularly South Asia, and building as well as sustaining an agency with credible capacity to deliver is a huge challenge in most Asian countries.

You will appreciate that in such a formidable environment, the competition agency does not really have the luxury of adopting a holistic “integrated compliance strategy” or an over-arching problem-solving approach based on identified concentrations, vulnerabilities, and patterns of non-compliance. Of necessity, most Asian agencies would have to take a reactive approach dealing with whatever “comes through the door.” It is only in some of the more sophisticated jurisdictions — certainly not in South Asia — that the agency may have graduated to “picking important problems and fixing them”.

This article has been adapted from a speech delivered at DFID’s Competition Policy Brainstorming Seminar on January 8-9, 2009)

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