Transcript Political and Institutional Imperatives for an East Asian Free Trade

Unfair Trade Practices –
Philippine Experience
Josef T. Yap
11 March 2011
Some data on the Philippine
Economy
Competitiveness Indicators
Ease of Doing Business
Economy
2010 Rank Out of
183
Singapore
1
Thailand
12
Malaysia
23
China
89
Viet Nam
93
Brunei
96
Indonesia
122
Philippines
144
Cambodia
145
Lao PDR
167
Source: World Bank Doing Business Report 2010.
Lack of Economic Transformation
Table 3: Share of Manufacturing in GDP (%)
China
Indonesia
Malaysia
Philippines
Thailand
Viet Nam
1980
43.9
13.5
21.6
25.7
21.5
16.1
1985
37.0
18.1
19.3
25.2
21.9
16.4
1990
35.5
23.0
22.8
24.8
24.9
12.3
1995
40.6
26.6
24.7
23.0
28.7
15.0
2000
40.7
27.7
29.9
22.2
33.6
18.6
2006
43.1
27.5
29.0
22.9
35.1
21.2
2007
43.0
27.0
27.4
22.0
35.6
21.3
Source: UN Statistics Division. [http://unstats.un.org/unsd/snaama/dnltransfer.asp?fID=16 ; accessed, 23 Nov 2009]
2008
42.8
27.3
25.8
22.6
37.6
21.1
Explaining the Performance
of the Philippine Economy
Low Investment Rate a Key Factor
Gross Domestic Investment (% of GDP)
Indonesia
Korea
1994
31.1
37.0
1995
31.9
37.7
1996
30.7
38.9
1997
31.8
36.0
1998
16.8
25.0
1999
11.4
29.1
2000
22.2
31.0
2001
22.0
29.3
2002
21.4
29.1
2003
25.6
30.0
2004
24.1
30.4
2005
25.1
29.7
2006
25.4
29.9
2007
24.9
29.4
2008
27.8
31.2
2009
31.0
25.9
Source: ADB, Asian Development Outlook
Malaysia
41.2
43.6
41.5
43.0
26.7
22.4
26.9
24.4
24.8
22.8
23.0
20.0
20.5
21.7
19.1
14.0
Philippines
24.1
22.5
24.0
24.8
20.3
18.8
21.2
19.0
17.7
16.8
16.7
14.6
14.5
15.4
15.2
14.0
Thailand
40.3
42.1
41.8
33.7
20.4
20.5
22.8
24.1
23.8
24.9
26.8
31.4
28.3
26.4
28.9
21.9
Literature
• Toward a National Competition Policy for the
Philippines. Edited by E. M. Medalla. PIDS:
2002.
• “Assessing Competition in Philippine
Markets,” by R. M. Aldaba. PIDS Discussion
Paper 2008-23 (September 2008).
• “The Role of the Private Sector in Regional
Economic Integration: a View from the
Philippines,” by M. D. Rosellon and J. T. Yap.
PIDS Discussion Paper 2010-23 (October 2010).
Q: Is the private sector its own
enemy?
• Resistance to reform
• Two groups in the private sector (Bocchi
2008)
• Several examples of unfair trade practices:
cement, airlines
• Oligarchy and weak institutions are related
• How to reform an oligarchy?
Example of Unfair Trade
Practices
• Cement - only 3 big firms and what they usually do
is schedule their plant maintenance at the same
time which affects the flow/delivery of cement.
• Drugs - most mainstream physicians prescribe
and support expensive branded drugs over the
more affordable, but poorly perceived generic
medicines. This tendency has been reinforced by
the high promotion and gift-giving practices by
drug companies to promote expensive branded
medicines to physicians and pharmacists. This
gift-giving behavior seems to be anti-competitive.
Example of Unfair Trade
Practices
• Airline
 PAL has exclusive use of one terminal
 PAL does not payment take-off and landing fees
 PAL pays franchise tax of 2% of gross revenues,
other airlines pay 5%
• Ports – Philippine Ports Authority (PPA) has
multiple roles—developer, operator, regulator—
and this has resulted in conflict of interest
Regulatory Framework
• Republic Act 3815 (1930): Revised
Penal Code
Article 186 – defines and penalized
monopolies and combinations in
restraint of trade
Article 187 – penalties
Regulatory Framework
• Republic Act 386 (1949): Civil Code of
the Philippines
Allows collection of damages arising
from unfair competition in agricultural,
commercial, or industrial enterprises or
labor
Civil code does not define unfair
competition and merely lists the means
by which it can be committed: force,
intimidation, deceit, etc.
Proposed Legislation
• 13th Congress (2004-07)
Philippine Anti-Trust Act of 2004
Fair Trade Act of 2004
• 14th Congress (2007-2010)
Competition Act of 2009
Anti-Trust Act of the Philippines
• 15th Congress (2010 to present)
Competition Act of 2010
Fair Trace Act of 2010
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