CPL AND DEVELOPMENT-THE CASE OF THE COMESA REGION

1. CPL AND DEVELOPMENT-THE CASE OF THE COMESA REGION By Peter Muchoki Njoroge Chairperson COMESA Competition Commission

2. CHARACTERISTICS WITH REGARD TO COMPETITION IN THE COMESA REGION ■ Government involvement in many sectors. ■ Reliance on Governments to provide essential services for the majority: education, health, water etc. ■ Supremacy of the Executive vis a vis other government arms. ■ Lack of Strong Competition Culture

3. CHARACTERISTICS OF COMESA STATES contd • Generally there is weak regulation. Probability of regulatory capture is high[ both industrial and political]. • High poverty levels [ associated T/Os]. • Policy Makers are also BO’s or are highly intertwined with BO’s. Vested interests have high propensities to converge. • High Concentration of economic power. • Lack of CPL in most countries eg in the COMESA region out of 19 member states there are only 2, 3 or 4 fairly active CAs. CL has been promulgated in about 7 States.

4. EXAMPLES OF RTPs IN THE COMESA REGION • Trade agreements [ geographical market sharing, price fixing, economies of scope provisions, production quantities provisions ets]. • Cartelization through trade associations. • Refusal or discrimination in supply. • Predatory practices to repress competition. • Collusive tendering [BR]. • Collusive bidding at auctions [BR]

5. NEED FOR CPL IN THE COMESA REGION • The environment is conducive for proliferation of RTPs. • RTP will spawn transparency and accountability which will go a long way towards controlling corruption. • Promotion of good governance by introduction of enforceable rules. As already stated governments are involved in many sectors of the economy. • As the majority of the people are poor, CPL will speak on their behalf. Consumer Welfare will be enhanced.

6. NEED FOR CPL contd. • Trade Associations are used to promote RTPs in key sectors such as Insurance, Banking, Manufacturing, Oil, Construction, Pharmacy, Medical etc. Some claim to embrace safety and best standards. CPL is needed to tame them. • As stated earlier vested interests control many sectors of COMESA States’ economies. CPL is needed to tame these interests

7. NEED FOR CPL contd. • Enterprises, especially Multinationals, abhor adverse publicity. Any indication, therefore, that a Public Agency is investigating them spawns positive effects. The enterprise being investigated, and other enterprises, will desist from conduct involving RTPs. • Competition Policy may be more important in developing countries than in developed countries. In many developing and least developed countries, many people subsist on less than one dollar per day.

8. NEED FOR CPL contd • That dollar when taken away, through uncompetitive practices, from the poor person disproportionately affects him more than it would affect people from richer countries. • In situations where public funds are involved, for example in bid-rigging and collusive tendering, the dollar which would go to assist the poor in state provision of medicine or in providing universal primary education ends up in private pockets. This is anti-development.

9. OVERARCHING NEED FOR CPL • We subscribe to the view that Competition Policy may be more important in developing countries than in developed countries. In many developing and least developed countries, many people subsist on less than one dollar per day. That dollar when taken away, through uncompetitive practices, from the poor person disproportionately affects him more than it would affect a better-off person.

10. OVERARCHING NEED cont • In situations where public funds are involved, for example in bid-rigging and collusive tendering, the dollar which would go to assist the poor in state provision of medicine or in providing universal primary education ends up in private pockets. This is anti-development.

11. OVERARCHING NEED contd • Enterprises, especially Multinationals, abhor adverse publicity. Any indication, therefore, that a Governmental Agency is investigating them spawns positive effects. The company being investigated, and many other such companies, will desist from conduct involving RTPs.

12. REGIONAL COMPETITION AUTHORITIES • Will capture extra territorial violations on behalf of regions in more effective and coordinated methods. • Treaties establishing regional economic cooperation initiatives normally have competition adherance provisions. Regional CAs are best placed to enforce obligations arising out of such provisions especially with regard to member states lacking CAs. • Regional CAs have competition advocacy provisions within apposite regions e.g COMESA, EAC rules. • Regional CAs may be less amenable to Industrial and Political capture.

13. CONCLUSION • CPL promotes development whether at regional or national levels. • The characteristics (broached in Slide 1 etc) require taming by effective enforcement of CPL. • CPL may be required more urgently in the COMESA region ( and in other comparable regions) than perhaps would be required in more developed regions. Money saved through enforcement of CPL will go into important services such as water, health and education.