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

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The Need and Rationale for Competition Law and
Policy in CambodiaTraining Workshop on
Competition Policy and Law Implementation for
CambodiaPhnom Penh10 March 2006

• Deunden Nikomborirak
• Thailand Development Research Institute

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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

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1. Idea and Principles of Economic Competition

• Economics Perfect competition will yield most
  efficient allocation of resources and outcome
• Business Michael Porter
• A Firms 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.

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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

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2. Definition of Competition Policy

• Policy to promote free and fair competition in
  the market.

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Competition in a Market
Imported products
Locally made products
Foreign
SOE
Trade Policy
Domestic
Investment Policy
Privatization Policy
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Competition Policy Law
Competition policy
Privatization Policy
Trade investment policy
Competition law
Regulatory policy
Competition Advocacy
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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

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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.

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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

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Competition Law in ASEAN

• Thailand 1999
• Indonesia 1999 (effective 2000)
• Vietnam (2005)
• Singapore (2005)
• Lao PDR (Competition Decree - effective August
  2004)

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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.

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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

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4.2 Geographical Market
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4.3 Competition Problems between farmers and MNCs
in Agriculture
FARMERS
MNCs
COST
Chicken breeding
Chicken feed
Chicken farming
Chicken farming
Margin squeeze
PRICE
Chicken eggs
Chicken eggs
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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

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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.