RI need to draft competition policy, say analysts
RI need to draft competition policy, say analysts
JAKARTA (JP): Indonesia has undergone substantial trade reform
and deregulation and now needs to draft competition policy to
give it a more competitive economic structure, experts said here
yesterday.
Mari E. Pangestu of the Centre for Strategic and International
Studies said at a seminar here that there was increased domestic
and international pressure to address issues related to
competition policy.
Competition in the domestic market due to trade
liberalization, relaxation of foreign investment restrictions,
removal of entry and exit barriers and privatization was not
sufficient to ensure market power was not abused, she said.
"In fact trade liberalization without safeguards for fair
competition could indeed cause increasing concentration in some
industries which may in turn affect the structure of
competition," Mari said.
She said trade reform measures were historically more
concerned about national producers than consumers.
Liberalization in trade in goods and investment was not
accompanied by liberalization in services, especially
distribution, which remained anti-competitive behavior, Mari
said.
Edward M. Graham from the Institute for International
Economics, Washington D.C., told the meeting that while tariff
and non-tariff barriers had been dismantled, the so-called
"behind the border" barriers to cross-border trade were still
there.
Such "behind the border" barriers included government measures
to discriminate against foreign trade, private measures to block
market access by foreign firms and intrinsic economic factors
barring the entry of foreign firms, Graham said.
"To further global economic integration and efficiency, these
barriers must be addressed to make markets more 'internationally
contestable'," Graham said.
But there is still a lack of consensus at the World Trade
Organization (WTO) to address such "behind the border" barriers
through competition policy.
Indonesia opposes multilateral negotiations under the WTO.
Because of the lack of consensus, the WTO has assigned a working
group on trade and competition policy to study the issue and make
recommendations.
The working group has not yet started work, but Graham
predicted it would address issues related to cartel arrangements
in international trade, anti-dumping reform and other market
access issues like vertical restraints and global mergers and
acquisition policies.
Warning
Mari said that although the WTO had not set a clear definition
of what would be the scope of competition policy, Indonesia
should not develop its own brand of policy in isolation of these
international developments.
She said that globalization through foreign investors and
multinational firms would lead to common principles and
enforcement of competition policies.
She said competition policy should be viewed in a broader
perspective, not just as competition law.
"Comprehensive competition policy should include trade reform
and deregulation, consumer protection law, transparency and
accountability measures," Mari said.
She said that Indonesia's current legislation did speak about
competition, albeit infrequently.
The 1993 State Policy Guidelines, for instance, describe
monopoly, oligopoly and monopsony as inimicable to social justice
and said steps should be taken to guard against "unfair and
unhealthy competition".
The 1995 Company Law and the 1995 Small-Scale Business Law
also address competition. The company law regulates mergers,
consolidation and takeovers, while the business law assigns the
government to adopt pro-competition policies to cultivate a good
business climate for small firms.
Ministry of Industry and Trade secretary-general Aidil Juzar
said the government was considering including competition
elements into the trade bill currently being prepared.
But Indonesia still needs a comprehensive and effective
competition policy to ensure there is fair and open competition.
This in turn leads to maximizing outcome in terms of efficiency
and productivity, encouraging innovation and entrepreneurship and
providing consumers with the widest choices of goods at the
lowest price, Mari said.
But formulating a competition policy in Indonesia would not be
a straightforward exercise, she said.
"Policy makers and the general public should consider
carefully the type and scope of competition policy, and the
process of introducing such a policy," Mari said.
She said if competition policy were prematurely introduced the
benefits could be undermined by improper implementation and
enforcement, and power abuse. (rid)