Transcript COMPETITION LAW & POLICY, ECONOMIC GROWTH & DEVELOPMENT: AUSTRALIA & INDONESIA A Brief Discussion Rafaelita M.

COMPETITION LAW & POLICY,
ECONOMIC GROWTH & DEVELOPMENT:
AUSTRALIA & INDONESIA
A Brief Discussion
Rafaelita M. Aldaba, PIDS
15 November 2011
Bali, Indonesia
Australia & Indonesia: competition gains
• Very different countries: stage of development,
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institutions, history, culture
ACCC: relatively long history of competition law; KPPU in
its nascent stage; objective is to enhance national welfare
& efficiency
Benefits from competition law & policy esp. reduced
prices for utilities & basic commodities
Australia: efficiency gains: 2.5% of GDP or $20B/year
Indonesia: consumer savings from reduced prices of
basic commodities & mobile telecommunications
Australia: evolving nature of competition law & policy in
response to business behavior & economy
Debate on merits of competition law
continues: main arguments
• Missing markets: financial markets, investments can only
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be financed by retained profits, eroded by unfettered
competition
Achieve a certain size to compete in world markets:
implications for conduct of reviews of mergers
No need for government to promote rivalry in markets
where innovation is principal source of competition;
monopoly profits are incentives for firms to innovate
Maximizing rivalry leads to inefficient outcomes in natural
monopolies & some network industries
Philippines, no comprehensive competition law, same
arguments raised by skeptics
Philippines: a study in contrast
Gross Domestic Investment
as % of GDP
in percent
ASEAN5 GDP Gowth Rate: 19612009
20
10
40
20
0
-20
Thailand
Singapore
Malaysia
Indonesia
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Cambodia
Philippines
• Shallow, hollow, & lagging growth; failed
to create jobs
• Gross domestic investment has been low
& declining from 25% in ‘97 to 14% in ‘09
• Phils 16.5% (average) lagged behind
Indonesia 25%, Malaysia 22%, Thailand
26% VN 36%
• Phils 1.4% & Indonesia 0.52% lagging,
Malaysia & Thailand 3%, Cambodia 4.7%,
Viet Nam 5.5%
Foreign Domestic Investment as
% of GDP
15.00
10.00
5.00
0.00
-5.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-10
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0
Indonesia
Malaysia
Philippines
Thailand
Viet Nam
Cambodia
Why has the Philippines lagged
WB Ease
in attracting investment?
of Doing
2010
2011
SING
1
1
THAIL
16
19
MAL
23
21
CHINA
78
79
VIET
88
78
BRU
117
112
INDON
115
121
• Weak institutional & regulatory mechanisms
PHILS
146
148
• Poor infrastructure
CAM
145
147
• Weak competition
LAO
169
171
MAL
Growth
Competitiveness Index
‘04
‘10
29
24
Macro
Public
EnvironInstitution
ment Index Index
‘04
‘10
‘04
‘10
27
42
34
43
THAIL
32
36
26
22
37
60
PHILS
66
87
60
76
85
113
INDO
72
54
64
52
76
58
Business
• Weak competitiveness of Philippine industries, low productivity,
& low trade gains (exports as % of GDP rose 82% in ‘90s to
97% in ‘00s; imports 44% to 50%; unfavorable trade balance )
Competition issues in vital industries: rising
prices, high cost & low quality services
• First country in Asia to enact competition law (1925); not
effectively implemented; since 1980s attempts to legislate
• Cement cartel: controlled by the world’s big 3, prices continued
to rise even during the GFC, government eliminated tariffs in
‘08-’09 but to no avail
Telecommunications
PLDT-Digitel
Globe
Fixed lines
61%
16%
Mobile services
68%
32%
CMTS frequencies
47%
21%
3G (90 MHz)
70 MHz
10 MHz
Cable landing facilities (6)
4
2
• Interconnection
issues
• Merger took
place, duopoly
• Strengthened
incumbent’s
market
dominance
• High entry barriers: congressional franchise, 40% foreign equity limit
• Merger can endanger competition & welfare improvement arising from the deal
Other competition problems & major
lessons from Australia & Indonesia
• Shipping cartel & inefficient ports: lack of regulatory independence &
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credibility; uses its power to protect its own ports against competition from
privately-owned ports (conflict of interest)
Low quality of service, high logistics & shipping costs affecting
competitiveness: one of the longest duration & high cost for port &
terminal handling in Asia (exports: 3 days/$270; Indonesia: 2 days/$165 )
Australia & Indonesia: greater competition leads to welfare gains &
benefits
Philippines: weak competition has led to poor economic performance,
lack of investments, low competitiveness
Done quite a lot of liberalization but not efficient institutions/regulatory
Liberalization & shift to more open economy requires changes in
legislations & policies, building efficient institutions & good infrastructure
to support reforms, generate supply side responses & reap gains in terms
of employment & growth