The Need and Rationale for Competition
Law and Policy in Cambodia
Training Workshop on Competition Policy and Law
Implementation for Cambodia
Phnom Penh
10 March 2006
Deunden Nikomborirak
Thailand Development Research Institute
Presentation Outline
1. The Idea and Principle of Economic
Competition
2. Definition of Competition Policy
and Law
3. The Need to have Competition
Policy
4. The Need for competition Law
5. Conclusion
1. Idea and Principles of Economic Competition
Economics: Perfect competition will
yield most efficient allocation of
resources and outcome
Business: Michael Porter –
A Firm’s Competitiveness depends on the
level of Competition in the market.
But competition in the market may be limited i.e.
“market failure”. Hence, this requires
economics of regulation and competition.
Economic Competition
“Whoever claims that economic competition
represents 'survival of the fittest' in the
sense of the law of the jungle, provides the
clearest possible evidence of his lack of
knowledge of economics”
George Reisman
2. Definition of Competition Policy
Policy to promote free and fair
competition in the market.
Competition in a Market
Imported products
Trade
Policy
Locally made products
Foreign
SOE
Domestic
Investment
Policy
Privatization
Policy
Competition Policy & Law
Competition policy
Trade &
investment policy
Competition Advocacy
Privatization
Policy
Regulatory
policy
Competition
law
How to ensure “Free and Fair”
Competition ?
Competition Advocacy (government rules and
regulations)
The Competition Authority
Business Associations
NGOs
Academics
Competition Law ( private practices)
Competition Authority
Competition Advocacy
Ensuring that state laws and regulations
do not restrict or distort competition in
the market -- i.e., investment incentives,
industrial standards, quota allocations,
exclusive concessions etc.
Competition Law
Ensuring that businesses – both private and
state owned – compete fairly in a market
The law prohibits
Exploitation of monopoly or market power
Collusive practices
Mergers that lead to market power
Unfair trade practices resulting from unequal
bargaining power between buyer and seller of a
product or service
Competition Law in ASEAN
Thailand 1999
Indonesia 1999 (effective 2000)
Vietnam (2005)
Singapore (2005)
Lao PDR (Competition Decree - effective
August 2004)
3. Why does Cambodia need competition Policy ?
The country is undergoing privatization of
SOEs
Regulatory regimes are not well developed.
The country is implementing many new rules
and regulations that have import implications
for the competitive environment in many
industries.
4. Why does Cambodia need a competition law ?
High risk of monopolization and collusion because
4.1 Limited size of domestic market implies potentially
concentrated markets.
4.2 Lack of transport infrastructure implies that markets
are geographically “segmented”
4.3 proliferation of “exclusive” private concessions in
order to mobilize private investment
4.4 A large agricultural sector where farmers will be
exposed to competition from vertically integrated
food MNCs.
4.5 Foreign acquisition of local businesses or business
consolidation (mergers) may lead to
monopolies/duopolies
4.2 Geographical Market
4.3 Competition Problems between
farmers and MNCs in Agriculture
MNCs
FARMERS
COST
Chicken breeding
Chicken feed
Chicken farming
Chicken eggs
Chicken farming
Chicken eggs
Margin
squeeze
PRICE
4. Why does Cambodia need a
competition law ?
High risk of “unfair trade practice”, resulting
from
4.4 Proliferation of SOEs with regulatory and
monopoly power
4.5 Unequal bargaining power between buyer
and seller – i.e., retail business or franchise
business
5. Conclude
Competition Policy = Competition
Advocacy + Competition Law is
important to ensure the
competitiveness of the economy as
well as the growth of local SMEs and
entrepreneurs.