Transcript Competition scenario in the Lao PDR

Competition policy and law
in Lao PDR
Critical Issues and The Way Forward
CUTS-NERI
Advocacy and Capacity Building on
Competition Policy and Law in Asia
(7Up2 Project)
Alice Pham-Saykham Vodalet
Lao Economy at a Glance
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LDC vs. good economic performance since NEM (1986)
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Relative macroeconomic stability
High growth rate
Stable price levels and exchange rates
Considerable increase in FDI inflows
Improved living standards for Lao people
Expanded international economic relations (US, EU,
ASEAN, WTO)
Agriculture remains the backbone of the economy (57% of
GDP in 1995, 48% in 2003), followed by industry (26%),
and services (25%).
High level of import dependence, esp. in consumer goods
In 1997/1998, about 1.56mn (30% of the population) still
lived below poverty line
Major Economic Policies
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Industrial policy:
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Small and Medium-sized Enterprises (SMEs) development policy
Encouragement of import-substitution industries
Targeting industries and specific products for promotion
Trade policy:
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Liberalisation of domestic trade via (i) price liberalisation, (ii)
removal of inter-provincial trade restrictions, and (iii) private
sector participation
Liberalisation of external trade via (i) private sector participation,
(ii) removal of State-trading monopolies, (iii) abolishment of QRs
on import goods, (iv) rationalisation of the tariff structure, (V)
abolishment of export license and relaxing the procedures for
import license
Problems: administrative intervention, QRs and NTBs
Major Economic Policies (Contd.)
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Privatisation policy
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Privatising most large except ‘strategic’ SOEs
Closing heavily loss-making SOEs
Strengthening the finance of those remain under State
control
Problems: Unprofitable privatisation (bid rigging, etc),
remaining SOEs abusing dominance and monopolies
Investment policy
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Fairly liberal (100% foreign ownership permitted,
investment incentives)
Remaining discriminatory policies between foreign and
domestic investors
Market Structure and Competition
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Monopolistic sectors:
Beer, insurance, domestic aviation, electricity, water,
etc
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Oligopolistic sectors:
Telecommunications, petroleum, international
aviation, banking, logging, cement
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Sectors with competitive market structure:
Textile and garment, tobacco, steel, pharmaceuticals,
etc.
Policy-induced Barriers to Competition
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Sectors with high market concentration level under State
protection (e.g..: State control and QRs, high tarriffs on
imported goods, stringent licensing conditions, unfair tax
policy, etc)
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Petroleum products, steel and cement, coffee, beer, vehicles,
electricity, minerals, tobacco, and timber, etc
Commercial banking
Exclusive rights to SOEs to provide services to the public
(e.g.: Electricity Law)
Complicated and lengthy enterprise registration bars
entry and increases the cost of doing business in Lao
(45-60 days in Lao against 7 days in Vietnam)
Access to capital by SMEs
Others (e.g. transport, customs, etc)
Anticompetitive Practices as Barriers to
Competition
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Monopolies
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Price-fixing and other cartel arrangements
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Construction projects and privatisation
Tied selling
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Business or professional associations
Bid rigging
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Privatised enterprises fail to infuse competition into the economy
Monopolistic elements/tendency still exist in many sectors due to
the concentrated market structure
Exclusive joint-venture agreements by the GOL
Schools and hospitals
Abuse of dominance
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Beer, passenger aviation markets
Current Legal and Institutional Framework
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Decree No.15/PO on Trade Competition (2004)
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Sectoral Regulatory Policies
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Objectives
Scope
Prohibited Practices
The Trade Competition Commission
Penalties
Current Status of Implementation
Electricity Law 1997
Telecommunications Law 2001
Prime Minister’s Decree No. 3 (1992) on the Management of
Commercial Banks and other Financial Institutions
Consumer Protection Policy
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Prime Minister’s Decree on Goods Price Control (2001)
Standards and quality
Food Law (2004)
Stakeholders’ Perception and Level of
Awareness
Project survey results presented by Dr.
Saykham Vodalet (NERI)
Critical Issues
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Great delays & no progress in implementation
An analysis across relevant stakeholder groups
reveals that there are weaknesses throughout,
leading to such consequences.
The government:
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Lack of competition culture and competition thinking due to
many years under the centrally-planned economic mechanism
Pressure of more urgent priorities
Lack of interests, resources and implementation capacity
Weak administration capacity and weak rule of law
enforcement, coupled with lack of public availability of laws
and regulations (no effective mechanism to make the laws
known to people is in existence)
Corruption
Critical Issues (Contd.)
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The business knows very little about the PM’s
Decree on Trade Competition, because:
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The Decree, not based on the ground realities of the
economy, is not relevant for application;
Inactive implementation  no compliance education
No consumer movement which is a concomitant
factor for building a healthy competition culture in
the country
Inactive and unequipped media (no reporting of
anticompetitive practices) vs. the role of the media
as a means of spreading knowledge and generating
interests
The Way Forward: An Agenda for Action
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Generating Demand and Renewing Interests
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Building the Trade Competition Commission for
Implementation
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Media and consumer training and advocacy
Hybrid approach
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Specialised training for the competition authority officials
Enhancing awareness
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Policy dialogues/Technical training for government officials
and bottom-up training activities
One law for both competition and consumer protection
One agency administering two separate laws
Regional integration with Vietnam and Cambodia or ASEAN
Maximum Consultation
More appropriate legislation