Competition Policy Issues in
Regional Cooperation Arrangements
The Case of SAARC
Malathy Knight-John, Institute of Policy Studies
&
Ratnakar Adhikari, UNDP Asia Pacific Regional Centre
State of economies in the SAARC region
Seven countries: Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan, Sri Lanka. Eighth country (Afghanistan
in the process of membership)
Relatively closed economies until the end of 80s (except
for Sri Lanka)
Since early 1990s started policy of economic reform
– Deregulation
– Privatisation
– Financial sector reform
– External sector reform
Reduction in tariffs and QRs
Removal of regulations on foreign investment
Regional trading agreements
– within SAARC Framework
Preferential trading arrangement (SAPTA) entered into force
in December 1995; proven a non-starter due to “positive
list” approach for the liberalization of tariffs
Free trade agreement (SAFTA), to enter into force from July
2006
– Shallow integration arrangement with a commitment to fully
liberalize trade in goods by 2016
– Talks on services and investment yet to begin
– Lengthy sensitive lists (upto 1,335 items at six digit level)
mean that protectionist tendency is widely prevalent
– Trade liberalization under SAFTA unlikely to promote
competition
Regional trade agreements –
outside SAARC Framework
Trade agreement with Thailand and Myanmar
– Five countries of the region (except Maldives and Pakistan) are
part of a trans-regional trade agreement called Bay of Bengal
Multi Sectoral Technical and Economic Cooperation (BIMSTEC)
– Shallow integration arrangements with a commitment to
liberalize goods, services and investment by 2017
Bilateral trade agreements
– e.g., India-Sri Lanka; India-Nepal; Pakistan-Sri Lanka
– Shallow agreements with liberalization of goods only
– India and Sri Lanka moving into a relatively deeper integration
arrangement through Comprehensive Economic Partnership
Agreement
Country-wise status of
competition policy
No well defined competition policy
Competition laws – limited experience
India, Pakistan and Sri Lanka
– Some experience with the implementation of competition laws
– New laws are in the various stage of preparation/
implementation
Bangladesh prepared a draft but has not move far enough
Nepal made a “voluntary” commitment to enact a competition
law at the time of its accession to the WTO, but missed the
deadline; draft ready
Bhutan is mulling over a combination of competition and
consumer protection law
Maldives is not making any plans
Competition concerns within the Region
Cross cutting
–
–
–
–
Cartel
Bid-rigging
Price discrimination
Exclusive dealing
Country specific
– Public monopoly transforming into private monopoly – (e.g.,
Sri Lanka, Nepal)
– Syndicate (e.g., Nepal and India – trucks and public
transportation)
– Tied selling (e.g., Nepal and India – school uniform)
– Predatory pricing (e.g., Nepal – airlines, newspapers)
Cross border competition concerns
International/regional cartels (like infamous vitamin, heavy
electrical equipment and graphite electrodes cartels)
Export cartels (which provides immunity in many
jurisdictions including India and Pakistan)
Cross-border mergers and acquisitions
Spill-over effects (mainly due to huge informal trade)
Dumping (alleged dumping of battery and FMCGs)
Abuse of market power by foreign investors (e.g, Unilever
in Bhutan)
Regional approaches
South Asia at crossroads – I
Regional competition policy helps…
International/regional competition abuses require
regional solutions due to limited capacity to
prosecute them, acting individually
Rapid learning possibility
Cooperation possible either through sharing of
information or positive comity
Cost effective – pooling of resources and expertise
“Direct effect” – access to regional law to challenge
domestic competition abuses (e.g., UEMOA and
Andean) – as an interim solution, for example, in
South Asian LDCs not having domestic laws
Regional approaches
South Asia at crossroads – II
…However, there are problems too
– Shallow regional integration means that regional
competition policy appear neither necessary nor feasible
(like the EU)
– Limited national capacity (like CARICOM, COMESA)
– National laws either non-existent or evolving
– Issue of sovereignty
– Development dimension is a matter of concern
particularly for LDCs
– Critical constituency for regional competition framework
non-existent
The way forward – I
Feasibility study on regional competition law
taking into account
– Cost-benefit analysis of models ranging from “best endeavour
clauses” to binding supra-national enforcement and dispute
settlement mechanism
– Inclusion of special and differential treatment provisions such
as transition period, technical assistance, training and capacity
building
– Incorporation of “development dimension” – such as
exemption to energy, agricultural sector and SMEs for a limited
period
– Focusing on cooperation and sharing of information and
expertise
The way forward – II
In the interim
– Enactment of national competition laws
– Incorporating competition provisions in bilateral trade
agreements
– Allowing smaller countries to have access to competition
authority of a bigger neighbour (e.g., Nepal and Bhutan
using Indian competition authority)
– Gradual learning process
– Cooperation on training and capacity building
– Creating critical constituency in favour competition
issues