Download on the road to private sector led growth – ethiopia next

Restrictive Product and Factor
Market Regulations as Major
Barriers to Competition
The case of Ethiopia
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1. Background: What the paper is about
• Competition policy an essential aspect of the legal
infrastructure of the transition (economic reform)
• The challenge of establishing a competitive market –
barriers to competition: private & government
– Competition policy/law and its applicability
• Restructuring incomplete-competition policy not fully addressed
• Competition law much room for discretionary decision
• Conflict of interest: a newly emerging phenomenon arresting
competition
• Aim of the paper: show that barriers to competition are
largely gov’t policy induced rather than private sector
practices
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2. Evolution of Economic Policy
2.1 Ethiopia under central planning
•
Marginalizing private sector & regulating market –
hence no market competition, however,
–
–
The merit of competition acknowledged - Controlled contest
But Failed to introduce entrepreneurship, technological
capability building, consumer welfare
2.2 Restructuring the economy (under SAP)
•
Deregulating markets & reinstating the private sector
•
Financial policy
•
Trade policy
•
Investment policy
•
Privatization
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3. Major barriers to competition
3.1 Pubic sector dominance
• Natural monopolies and heavy dominance
• Structure of the economy and competition
– non-marketed GDP = 35%
– Marketed under state monopoly & dominance = 17%
– marketed – potential competition = 48%
• However, regulatory distortions & sectional interest limits
competition even in the latter case - 48%.
3.2 Labor market distortion
3.3 Lack of property rights for land
3.4 Distorted financial market
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3. Major barriers to competition
3.5 Lack of transparency
3.6 Sectional interest and weak enforc’t of
contracts
3.7 Unfair competition from party-affiliated
enterprises
3.8 Discriminatory regional investment policy
3.9 Double standard in housing sector policy
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4. The Trade Practices Proclamation
4.1 Key elements of the proclamation and the gaps:
• not exclusively on competition law - includes anticompetitive practices, abuse of dominance, unfair
competition trade policy, anti-dumping, and price
regulations
• Anti-competitive practices:
– Vertical agreement/restraint not articulated
– Discretionary decisions left for MOTI
• Abuse of dominance: Not clearly defined
• Unfair competition: it includes trade laws, price
regulations, etc.
• Exclusions:
– mergers, takeovers, & other forms of concentrations
– Cross-boarder, consumer protection, environment
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4. The Trade Practices Proc. Cont …
4.2 Institutional structure
•
The structure of the competition authority
– MTI is the highest decision making body
– Investigation Commission under MTI established
• Commission is a department under MTI, hence
has no separate budget of its own, no secretariat
• Commission entrusted with day to day activity,
and submits its decision to MTI
– MTI can accept Commission decision, partially or
fully, or reject totally
• Have no final say on competition matters
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4. The Trade Practices Proc. Cont …
–
MTI decision can be challenged; appeal can
be made to the Federal High court
4.2 Composition of the Commission
•
According to the proclamation: Government,
Private sector and Consumer Society
•
In practice: Five high level government officials
make up the Commission
•
Chair person appointed by the PM
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4. The Trade Practices Proc. Cont …
4.3 Reconsiderations required of the structure and
composition of the Commission
• Structural independence of the Commission
• Inclusiveness of the Commission at least as per the
Proclamation
• Commission independence from MTI for budget and
secretariat
• Commissioners have to be appointed by parliament (as
all the rest) and report to parliament
• Consumer society and organized private sector
(Chamber) should be able to lodge suits
• Decision of the Commission should be public
(announced and printed)
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5. Competition advocacy and the role of civil
society
• Consumer Society must have a role in the formulation
and enforcement of Competition law
• Commission not clearly mandated to make advocacy,
though it might do so in line with other articles of the proc
• However, Commission is not well structured to handle
concerted advocacy program on its own
• Advocacy needs inclusiveness: private sector, Consumer
society, other civil society (EEA), labor, etc.
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5. The way forward
• The legacy: Central planning & section interest
• Essential measures:
– Relinquish sectional interest for national interest
– Privatize critical means of production: land, large
firms, housing
– Open up state monopoly for private: telecom, power,
etc.
– Revise the competition law as suggested above
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THANK YOU
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