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Competition and Economic Development

Frederic Jenny

The 2nd ASEAN Conference on Competition Policy & Law

Le Meridien Hotel, Nirwana Golf & Spa ResortBali, Indonesia

14-16 June, 2006

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Overview of the presentation1) What the presentation is not about

2) The data used

- WTO written contributions from developing countries to the Working Group on Trade and Competition (55 contributions from 23 countries and 2 regionalgroupings between 1997 and 2003 available at : http://www.wto.org/english/tratop_e/comp_e/comp_e.htm ) - Database press reports on competition issues in Asian countries countries

3) What the presentation is about : relating statements by officials of developing countries on competition issues to the perceived reality in South East Asiancountries

4) Method

6) Conclusions

This presentation is adapted from a presentation by S.Evenett, F.Jenny and MichaelMeier presented in Capetown on May 2 2006 at a seminar on « The DevelopmentDimension of Competition Law and Policy, Economic Perspective »

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WTO Working Group on Trade and Competition:Competition and Trade Liberalization

Theme 1

The issue of competition is at best of secondary importance for small open economies (such as those of the least developed countries of Africa). Indeed, trade liberalization forces international competition on their economies and as trade liberalization progresses, competition increases. Therefore, there is no need for these countries to devote resources to the protection of domestic competition.

For example: “Increasing exposure to international trade consequent on trade liberalization can be relied upon to keep a check on market power and limit (static) resource misallocation”[1].

[1] WORLD TRADE ORGANIZATION WT/WGTCP/W/216, 26 September 2002 (02-5155) Working Group on the Interaction between Trade and Competition Policy COMMUNICATION FROM INDIA

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What do we learn from the data?Many anticompetitive practices are alleged in sectors sheltered frominternational competition in developing countries such as:

Local agriculture and local fishing

Local telephony

Construction

Electricity

Water

Bus and rail transportation ( Matutu, taxis, buses)

Local retail trade

Real estate

Services ( lawyers etc…)

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Taxis in the Jakarta Area

The Jakarta Land Transportation Association forced its members to comply with itsdecision to increase taxi tariffs.

The Association’s authority to set tariffs for taxi fares is based on a Ministry of Transportation decree, which allows the private association of taxi companies to set taxi tariffs.

The KPPU, with the authority given by Law Number 5 of 1999, sent a letter to the Ministry of Transportation, explaining that the Ministry’s decree would likely result in higher taxi prices for consumers and could harm competition.

Now, one finds that taxi companies are no longer implementing the same tariffs for their services.

DR. SYAMSUL MAARIF, « COMPETITION LAW IN INDONESIA: EXPERIENCE TO BE TAKEN FOR THE DEVELOPMENT OF COMPETITION LAW IN CHINA »

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A concerted action on day old Chicks in Thailand

A submission by Thailand to OECD reports a concerted action between the nation’s largest producer and supplier of day-old chicks, live birds, and fresh chicken eggs and its affiliated companies to determine the quantity of production and distribution of the said products. They also fixed compulsory conditions to small producers to buy livestock feed together with live birds or day-old chicks as well as controlled selling price of fresh chicken eggs below market price.

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WTO Working Group on Trade and Competition:Competition and the displacement of local firms in

small economiesTheme 2

Economic competition works in favor of economically powerful and rich firms to the detriment of small firms and small economies. This means that the goal of promoting competition at the multilateral level will work against the interest of local firms in developing countries because they are weaker and smaller than firms in developed countries.

For example:“With the increased opening of the economies, could welfare-creating effects of competition leak out of the economy if new entrants are foreign firms and they displace local incumbents? Because of the smallness of the economy, displacement effects could be widespread and there could be social repercussions. This concern applies within the CSME with respect to the micro-economies, and in the wider context of extra-regional and international trade”[1].

[1] WORLD TRADE ORGANIZATION WT/WGTCP/W/143, 2 August 2000, (00-3170) Working Group on the Interaction between Trade and Competition Policy COMMUNICATION FROM TRINIDAD AND TOBAGO

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What do we learn from the data?

In some sectors multinational firms have indeed displaced or attempted to displace local firms (see for example the beverage industry, the cement industry, telecommunications or transportation)

However, in many sectors in which anticompetitive practices are alleged, there isno competition between poor and weak domestic firms and powerful and richmultinational (firms) either because the sector is dominated by large multinational firms (ex:chemical products, oil) or because the sector is populatedby small local firms (ex:food , road tranportation)

Frequent victims of domestic anticompetitive practices are other small domesticfirms (ex: farmers, fishermen, small entrepreneurs) or final consumers.

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Cartel in the fertilizer market in Bangladesh

Fertilizer price hike and seed crises are seriously hitting farmers' fight to rebuild post-flood life, the MPs at a parliamentary body meeting disclosed thison Sunday. \Committee member Shah Shahid Sarwar, a BNP legislator, told the meeting that in his Mymensingh constituency some dealers did not take delivery of their quotas of fertilizers in an apparent bid to create an artificial crisis and raise prices. Committee Chairman Abdul Mannan asked the deputy to submit a writtencomplaint so that it could open an enquiry into the matter. Jatiya Party lawmaker GM Kader said a 50 kg bag of urea was selling at Taka 350, much higher than Taka 270 of present market rate and the Triple Super Phosphate (TSP) price was hiked to Taka 850 a bag from Taka 650.

BNP lawmaker Akbar Ali said that farmers were unable to buy seeds and seedlings because of high prices in Sirajganj. He said he heard of a fertilizercrisis in northern Rangpur, Dinajpur and Bogra regions.

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Cartel of Chili traders in Bengladesh

« (July edition of Agro, a monthly publication of Syngenta Bangladesh Ltd) On chilli, the Syngenta report said the price of the item has suddenly crashed to the woes of the farmers. Chilli price in Rajbari district had suddenly crashed to Tk 160 180 per 40 kg, down from Tk 500-600 a kg in the beginning of June."Growers find no logical reason for this price slump. They feel that the middlemen have created a cartel to manipulate the market," Agro said. Consumers, however, do not get the spices at cheap price ».

Daily News Monitoring service, News from Bengladesh, « Bad start for teacultivation »,FE Report, Date:7/13/2004

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WTO Working Group on Trade and Competition:Competition and Economic Growth

Theme 3In developing countries fostering economic growth is a more important goal than improving the static allocation of resources. Whereas there is no conclusive evidence of a positive link among competition, competition law enforcement and economic development, past history, particularly in countries like Japan, South Korea, Singapore, etc., suggest that industrial policy can successfully help governments accelerate economic growth. Rather than promoting competition in the domestic market, what developing economies need to achieve a faster growth rate is an active policy of concentration and protection to build up national champions able to compete on the world market.

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Example“We have also noted and are very much concerned about the potential contradiction and conflict between competition policy and our industrial and development policy objectives.” [1].

[1] WORLD TRADE ORGANIZATION, WT/WGTCP/W/227, 14 MARCH 2003, (03-1501) WORKING GROUP ON THE INTERACTION BETWEEN TRADE AND COMPETITION POLICY,COMMUNICATION FROM CHINA

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What do we learn from the data ?

Anticompetitive practices, whether domestic or international, often occur in sectors of intermediate goods or services which are vital inputs into anyproduction process.

Thus, even if economic growth is a more important objective than improving the static allocation of resources in developing countries, eliminating anticompetitive practices which decrease the competitivity of local firms and therefore their growth potential is a necessity

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Anticompetitive Practices ImpairingEconomic Development

Fertilizers : input for agriculture

Oil : input for agriculture and manufacturing

Construction and construction materials : input for manufacturing

Transportation : input for all production activites

Telecommunications input for all production activities

Banking and financial services: input for all production activities

Wholesale trade

Steel, heavy electrical equipment, aluminium etc…….

At the domestic level

At the international level

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Weak Competition in the IndonesianCement Industry1

The sale of Cemex's shares in the country's largest cement maker PT Semen Gresik (SG) to local investors is being regarded as the best possible option for the resolution of the SG problem, and the revitalization of the cement industry. "It will help create a more balanced market and a healthier business competition," saidDidik J. Rachbini, chairman of the House of Representatives Commission VI, whichoversees state-owned enterprises, and a former member of the Business CompetitionSupervisory Commission (KPPU). Didik said Indonesia's strategic cement industry had, in terms of business competition, "reached a critically low point", especially since foreign firms "took over major local cement producers" which were offered cheaply after the 1997-1998 Asian financialcrisis. "It wouldn't be a problem if this had resulted in a more fair business competition in the market, but these international cement firms are practicing a cartel, monopolizing the local market after having controlled its local industry," he said Sunday. "That's why local companies should be encouraged to buy back Cemex' shares (in SG)."

1) The Jakarta Post , Jakarta,1 May 2006

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Lack of competition in the bankingsector in Bengladesh

A competition law and policy is essential to regulate the marketbehavior of the dominant banks, says a report prepared by the Asian Development Bank recently.The report titled 'DomesticCompetition Policy in Bangladesh: Inadequacies and Remedies' saysthat in spite of the improvement in the bank and non-bank financialregulatory framework, the nature of competition, characterized by a high level of concentration and oligopolistic markets, has remainedlargely unchanged."The impact of new entry on the cost, quality and range of financial services has been limited as the establishedbanks still retain a large enough share allowing them to maintainlarge interest rate spreads. The large interest rate spreads increasethe profitability of the private sector banks with lower non-performing assets.

Feed Back, Dhaka, Friday July 2 2004,ADB ECONOMIC REPORTER

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Tacit Collusion in theTelecommunications Sector in Sri Lanka

« Various problems stem from the fact that Sri LankaTelecomLimited is the dominant player:

( among those problems) 

Two telecom operators broadly follow the prices setby SLTL as the market leader – tacit price collusion »

Andrew Perumal, Institute of Policy Studies, « Anti-Competitive Practices in the TelecommunicationsSector:The Sri Lankan Experience », Regional Conference on 'Competition Policy, Competitiveness

and Investment in a Global Economy: The Asian Experience », Colombo, Sri Lanka, May 19-21, 2004.

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Increasing Competition in the Airlines Industry in Indonesia

Airfare competition in the National Airlines industry is one example of how the competition law was effective.

Competition law forced these airlines to reduce the cost of their airfare in order to compete with other airlines.

Years ago, when the National Airlines industry was heavily regulated and still closed to new entrants, the airfare was set by the Association of Indonesia’s National Air Carrier by agreement that fixed prices between competitors.

Consumers were forced to pay high airfare costs and waive somewhat unprofessionalservices provided by the airlines.

Now, everything has changed; consumers are now able to select their preferred airlinebased on a variety of airfares and services.

Having various competitors in the airline industry has made all national airlinesfiercely compete in order to survive.

As a result of the KPPU’s recommendation to the government to revoke the Association’s authority to set the airfare scheme, the Association of Indonesia’sNational Air Carrier policy on airfare is no longer referenced on all Indonesian airlineairfare.

DR. SYAMSUL MAARIF, « COMPETITION LAW IN INDONESIA: EXPERIENCE TO BE TAKEN FOR THE DEVELOPMENT OF COMPETITION LAW IN CHINA »

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Collusive bidding by Cable and Conductor Manufacturers in Pakistan

« In mid 2002 information was received that 9 main manufacturers ofpower Cables and Conductors had been indulging in collusive bidding for providing items to a public sector electric distribution company.The information was supported with documentary evidence.(…) one manufacturer categorically admitted to the existence of a collusive bid rigging arrangement through prior mutual negotiations and understanding amongst themselves.New information along with evidence, was received in January 2004, about another instance of formation of cartel by 6 of the 9 Cable and Conductor manufacturers. They had been indulging insimilar collusive bid rigging arrangement.».

Muhammad Arshad Parwaiz, Monopoly Control Authority Islamabad « Anti-Competitive Business Conduct: Cases and Experience of Pakistan »,Regional Conference on 'Competition Policy, Competitiveness and Investment in a Global Economy: The Asian Experience », Colombo, Sri Lanka, May 19 21 2004

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Price fixing and Market Sharing in the boattransportation industry in Cambodia1

In Cambodia, boat transportation services from PhnomPhen to Siem Reap are provided by 8 private companies. Theprice for one-way travel was about US$ 10 for Cambodiannationals and around US$ 25 for foreigners. Competitionbetween boat companies, however, drove down the prices. In2005, the boat companies have entered into an agreement tofix their services prices to the above mentioned levels. Theeight companies further agreed that they would not competewith each other anymore and would share departureschedules. According to their verbal agreement, only one boatmay provide boat transportation service in a day by takingturn from one company to another. The bigger companiescan have more quotas to provide the services

1) Competition Scenario in Cambodia, « Advocacy and Capacity Building on Comptitionlaw and Policy in Asia », CUTS International , Economic Institute of Cambodia, 2005

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WTO Working Group on Trade and Competition:

Competition and Market FailuresTheme 4

Developing countries may be more prone to market failures than developed countries, among other reasons because consumers are ill informed. Therefore what is required in these countries is not so much to promote free competition but rather to correct market failures (through consumer protection).Consumer policy may also help protect consumers against abuses of dominant position.

For example :“It needs to be recognized that developing countries do not usually have the same well-functioning market economy dynamics as that which exists in developed countries. The less developed an economy, the more the likelihood of market failures. Hence, for such countries that are susceptible to instances of market failures, it would not be prudent to rely only on the dynamics of competition, especially if the sectors involved are critical.”[1]

[1] WORLD TRADE ORGANIZATION, WT/WGTCP/W/110, 16 November 1998, (98-4554) Working Group on the Interaction between Trade and Competition Policy, COMMUNICATION FROM INDIA

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What do we learn from the data ?

Market failures due to the lack of education of consumers or the incompletenessof markets can occur in small developing countries. This means that there is a need to adopt additional measures which will make markets work.

But allowing anticompetitive practices will not alleviate the problem of marketfailures. Market failure plus lack of competition is likely to be worse than marketfailure with competition.

There is ample evidence that consumers get hurt by anticompetitive practices in developing countries (see for example taxi markets, bread markets, markets for beverages etc….).

In addition, as we saw previously, a number of anticompetitive practices are found on markets for intermediate goods and services. It is difficult to argue thatsuch markets are likely to experience severe market failures.

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Anticompetitive tying arrangements in Bengladesh

In medical services, doctors insist that their patients go to particular diagnostic laboratories or hospitals while offering their services.

Educational institutions force students to purchase books from a particular stores or buy uniforms from particular tailoring shops.

Ali Taslim, Bangladesh Tariff Commission , Regional Conference on 'CompetitionPolicy, Competitiveness and Investment in a Global Economy: The Asian Experience', Colombo, Sri Lanka, May 19-21, 2004.

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WTO Working Group on Trade and Competition:Competition and International Cartels

Theme 5

International cartels which originate in developed countries (rather than in developing countries) are a major obstacle to economic development.

For example :

“By exercising market power, international cartels fixed prices above the levels that would prevail under competitive market conditions. As a consequence, importing countries, including developing countries, had to pay higher prices for the goods or services concerned. Moreover, in developing countries, the goods and services in question could often be basic needs for economic development. For these reasons, (the Indonesian) delegation is inclined to agree with the suggestion that hard core cartels created a barrier to economic development and growth by hampering trade creation and flows”[1].

[1] WT/WGTCP/M/18, 20 September 2002, (02-5069)REPORT ON THE MEETING OF 1-2 July 2002

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What do we learn from the data (and fromprevious studies) ?

There is no question that developing countries can be the victims of international cartels originating in developed countries. This has been documented in numerous previous studies ( Evenett , Suslow and Levenstein, or Jenny)( see for example shipping conference).

But, the proportion of horizontal anticompetitive practices in which a foreign firm is alleged to be involved is rather low . This suggests thata fair amount of horizontal anticompetitive practices are domestic cartels (as we have just seen in the previous slides).

Furthermore, some of the international cartels are based in devlopingcountries (see for example Cement or Beer in East Africa)

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Export Cartel in China with tradeimpact: The case of magnesia

The European Refractory Producers Federation (PRE) says that the European steel industry should expect considerable price rises in refractory products due to price increases of up to 100% for raw materials imported from China, the main producer of bauxite, magnesia and graphite.An economic boom in China, higher transport costs both within China and between China and Europe, and the set-up of a Chinese magnesia cartel at the beginning of 2004 have all contributed to price rises, the Brussels, Belgium-based PRE says.The cost of refractory bauxite in Europe has doubled in the last few months, and the cost of magnesia has risen by nearly 100% and that for graphite by more than 50%.. The Secretary General of PRE Rogier Chorus commented "These are crippling price rises that the European refractories industry can no longer be expected to bear without passing on increases to customers. The steel industry is the main sector affected and, to a lesser extent, the cement and lime, chemicals, ceramics and glass industries.

Advanced Ceramics Report, August 1, 2004

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WTO Working Group on Trade and Competition:Competition and Transnational Abuse of

DominanceTheme 6

Developing economies suffer from abusive behavior by multinational firmsbased in developed countries which provide most of the manufacturing or intermediate products to the developing world.

For example:

“ (…) Relative to other economies, the (Caricom) economies are largely open to competition through imports and foreign investment, but dominated by multinational corporations. These factors make the economies susceptible to the negative effects of anti-competitive behaviour of foreign firms, whether resident or through imports”[1].

[1] WORKING GROUP ON THE INTERACTION BETWEEN TRADE AND COMPETITION POLICY (00-3170) WT/WGTCP/W/143, 2 August 2000, COMMUNICATION FROM TRINIDADAND TOBAGO

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What do we learn from the data?There is no doubt that transnational abuses of dominance or monopolization are an important source of concern for for developing.

But allegations of abuses of dominance or monopolistic practices represent only about a small part of the allegations of anticompetitive practices, a slightly smaller proportion thanallegations of cartels or collusion.

Furthermore, only few of the allegations of abuses dominant positions or monopolistic practices refer to practices of foreignfirms (although it is possible that some of the local dominant firms are foreign-owned).

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Foreclosure in the Cement Industry in Indonesia

The Business Competition Supervisory Commission (KPPU) orders publicly listed PT Semen Gresik ( the country largest’s cement maker) to eliminate a clause prohibiting distributors from selling other cement brands in all of its agreements. The commission also imposes IDR1 billion fine on SG since the company has made agreements that violate the anti-Trust Law. The publicly listed company is also ordered to eliminate a clause in its agreement prohibiting distributors from supplying cements to permanent consumers that are not included in SG's networks. KPPU, in its ruling on the case of the violation of the Law No.5/1999 yesterday, also imposed IDR1 billion fine to ten distributor of the cement company.

KPPU also instructs the distributors to disband the consortium that they set up in distributing SG's cement. In the meantime, Saifuddin, Head of Communication Division at PT Semen Gresik, claimed that the distribution method done by SG was the same as those done by other companies.

Bisnis Indonesia, 23 March 2006

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Abuse of dominance in the Telecom sector in Cambodia1

At the end of September 2000, there were complaints fromusers of Mobitel, a major mobile phone service provider thathad 85% share of the Cambodia mobile phone servicemarket, that they could not reply to the SMS sent to thembuy users of Camshin, another mobile phone provider. It was subsequently found that Mobitel had deliberately blocked customers of Camshin from reaching the Mobitel phones.(…) The problem was later solved throught the intervention of the Ministry of Post andtelecommunications of Cambodia; however interconnectionrates between different lines are still high.

1) Cambodia Daily, 18 October 2000, quoted in « Competition Scenatio inCambodia prepared for Cuts International « Advocacy and Capacity Building on Competition policy and Law in Asia », CUTS International, 2005

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WTO Working Group on Trade and Competition:Competition and Governmental Restraints

Theme 7

Governmental restraints (which were not covered by the EU proposal in the WTO) are probably more important obstacles to competition than private restraints and therefore the WTO should concentrate on these governmental restraints.

For example:

“There is a case for this Working Group to focus priority attention on the most restrictive trade barriers and competition distortions which adversely affect the economic interests of all WTO Members. In the view of Hong Kong, China, they remain in the domain of governmental measures”[1].

[1] Working Group on the Interaction between Trade and Competition Policy WT/WGTCP/W/104 16 October 1998(98-3996) COMMUNICATION FROM HONG KONG, CHINA

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What do we learn from the data?

Our database covers private restraints and does not permit us to assess the relative importance of governemental restraints and private restraints.

However, there are a number of allegations suggesting that governmentinterferences in market mechanisms does contribute to restricting competition. In certain cases there are allegations that corruption of governement officialsleads to unnecessarily restrictive regulation of markets, reducing competitionand facilitating the exercize of market power.

Irrespective of the role of governments in restricting competition, governement officials often denounce private restraints to competition. Governement officials are thus well aware of the damage caused by anticompetitive practices and of the benefits their countries could gain fromhaving more competition.

Politicians seem to lack such awareness.

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Lobbying for Legal Protection fromCompetition

A domestic television broadcasting operator called for a protection from the government here on Monday to secure its position in the business against new comers from abroad.

"The business has now been penetrated by a number of new arrivals fromabroad, but with a government regulation that protects the domestic operatorit is hoped there will not be an unhealthy competition," the president directorof PT Indonvision, B Rudijanto Tanoesoedibjo told newsmen.

He said the government had to facilitate an equally professional platform to enable domestic operators to compete or otherwise the domestic operators would lose against new operators from abroad that had bigger capital.

"We believe the government will do it for the sake of the general public whoneed good broadcasting service in the fields of sports, education or science," he said. Rudiyanto, who was flanked by operations director Romei F Lido and senior advisor Posma L Tobing, said by facilitating the broadcasting business the government had helped it. "Without the government's support, it is fearedforeign operators could make domestic operators go bankcrupt," he said.

1 May 2006,LKBN ANTARA, Asia Pulse Pty Limited

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The Business Competition Supervisory Agency (KPPU), the nation's official antimonopoly watchdog, has urged the government to stop granting new monopolies so as to ensure equal opportunities for all business players.

KPPU member Muhammad Iqbal said Monday in Jakarta that a number of government directives, particularly presidential decrees, continued to encourage monopolies by giving exclusive rights to individual companies in particular business fields. "Such monopolistic policies need to be ended to ensure a level playing field for all those involved in business," he stressed. He said that the KPPU strongly supported a recent Supreme Court decision that annulled a ministerial decree granting exclusive rights for the production of holograms. But he added that the government needed to take the initiative itself to revoke a number of regulations that granted monopolies.

1) Govt rapped for continuing to grant new monopolies, The Jakarta Post , Jakarta, 26 April 2006

Government restraints limiting competition in Indonesia1

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Anticompetitive practices, Government Intervention and Corruption

The Corruption Eradication Commission (KPK) and the Business Competition Supervisory Commission (KPPU) entered into a collaborative arrangement Monday to eliminate corruption and unfair competition in government and state-enterprise procurements

KPPU director Syamsul expressed hope that with the signing of the MoU, his commission would be able to help the KPK eliminate corruption from government procurements. "More than 90 percent of the unfair tenders we have investigated have involved people other than business players, such as government officials and (procurement) committee members," he said, adding that the KPPU had no power to take action against non-business players.

A World Bank report found that between 10 and 50 percent of corruption cases in Indonesia involved government procurements of goods and services.

7 February 2006, The Jakarta Post

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Concentration, Banking Cartel, Abuse of Dominance by Domestic and

Transational Firms, and Corruption: The Case of Papua New Guinea

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Papua New Guinea

« Why PNG’s Economy is Going Nowhere » Canberra Times, April 18 2002

« Papua New Guinea has been on a downward spiral since 1994. (…) The official GDP for the whole economy is about $ US 3.57 billion and per capita income is only about $US 700.(…) Fewer than 300 families and individuals control the bulk of the nation’s wealth. About 40% of the population is classified as living below the poverty line, mostly in the rural areas. Semi-subsistenceagriculture remains a way of life for 80% of the population. (…) Arecent report of the ILO showed that out of 3 million adults ofworking age, only 270.000 had formal jobs. The others were part of the informal economy, including raskol activities.»

F.Jenny

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Monopolies and cartels in Papua NewGuinea

« Why PNG’s Economy is Going Nowhere » Canberra Times, April 18 2002

There are several characteristics of the economy almost never mentioned by the economists. First, it’s dominated by cartels and monopolists. A handful of companies dominate the economic landscape. Australian and multinationals dominate the resources and petroleum sector, the Malaysians dominate forestry and retail merchandise, and the mainland Chinese dominate the small kai-bar ( fast food) and sundry trade shops. In almost all categories,there is one anchor business controlling more than 40% of thebusiness category. Small businesses and start-ups find it hard, if not impossible to challenge the dominance of these big players. Second, expatriates still have the upper hand. There are few , ifany business holding a dominant position in the market placewhich are owned and operated by Papua New Guineans. Most senior positions in the private sector are dominated by expatriates.

F.Jenny

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Bank cartel in Papua New Guinea1

1) « Why PNG’s Economy is going nowhere » Canberra Times, April 18 2002

« The cost of starting or expanding a business in PNG is prohibitive. As a start, interests rates are among the highest in the region. Two years ago it was about 25% per annum. In the past year, it has fallen to about 18%, still very high by regional standards. Who is making all the money? Why, it’s the banks, of course. The spread, the difference between what the banks pay for its funds and the interest it charges its customers for loans is one of the highest in the world, about 13-14%. The banks are also notorious for providing sub-standard service. With only four banks operating in the country, its another comfortable cartel »

F.Jenny

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Break Down of Law and Order in PapuaNew Guinea1

« (…) law and order problems remain a key impediment toinvestment and expansion. Survey after survey of the private sector show that security is one of the biggest concerns forbusinesses. Armed robberies are common and most businesses expect 10 per cent of their gross takings to end up in the hands ofthe raskols. The commercial’s bank association has publicly threatened to shut down all banks in Mt Hagen should another bank robbery occur. »

1) « Why PNG’s Economy is going nowhere » Canberra Times, April 18 2002 F.Jenny

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Corruption in Papua-New Guinea1

« The private sector sees the public sector as a hindrance, not a help, in promoting the health of the economy. Many of the front-line government agencies that promote trade (…) areseen by the private sector as barriers to overcome. Government policies on trade and industry are seen as driven byspecial-interest groups.

F.Jenny

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Conclusion

1) A large number of reports of anticompetitive practices in developing countries.

2) Gap between official statements and the perceived reality of anti-competitive practices in developing countries.

3) International trade does not seem to be a strong counterweight to anticompetitive practices in developing countries ( ex. cement, beer and beverages, air transport).

4) Most of the statements on the lack of importance of competition at the domestic level for developing countries seem to contradict the reports.

5) The adoption and/or effective enforcement of competition laws by developing countries seems to be a prerequisite for development even without a multilateral framework.

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Thank You for Your Attentionfrederic.jenny@club-internet.fr