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“Nexus between Competition Regime and Trade and Investment”

“Nexus between Competition Regime and Trade and Investment”. Joseph Wilson Member, Competition Commission of Pakistan 3 RD International Conference Islamabad, 29 th May 2013. Objective Competition Policy.

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“Nexus between Competition Regime and Trade and Investment”

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  1. “Nexus between Competition Regime and Trade and Investment” Joseph Wilson Member, Competition Commission of Pakistan 3RD International Conference Islamabad, 29th May 2013

  2. Objective Competition Policy • Competition policy aims to promote rivalry among business and allocation of resources in which consumer welfare is maximized. • Consumer welfare as defined by Judge Robert Bork, means all things that are good for consumers, such as low prices, innovation, and choices.

  3. Objective Trade Policy • Trade policy objectives are to reduce protection, increase market access for exports and greater global integration. Trade and investment liberalization is seen as contributing to economic efficiency, competitiveness and export-led growth.

  4. International Trade, FDI and Competition policy • Professor Kennedy has described the relationship between international trade, foreign direct investment and competition policies: “These three policies can be mutually reinforcing when pursued with the common goal of encouraging cross-border competition. For example, a liberal trade policy has as its goal the elimination or lowering of barriers to trade in goods, opening foreign markets to goods from abroad, and bringing competition to bear on domestic producers.

  5. Promoting Competition • PTA shall ensure that “fair competition in the telecommunication sector exists and is maintained (Sec. 6(e)) • Pemra shall ensure that open and fair competition is facilitated in the operation (Sec 23(2)) • OGRA shall ensure that open and fair competition is facilitated in the operation (Sec 6(g)) • CCP Shall prevent – preventing, restricting or reducing of competition.

  6. Liberalization of Telecom Sector in Pakistan • Telecom Deregulation Policy, 2003 The Telecom Deregulation Policy paved the way for bringing competition in the fixed telephony. • Mobile Cellular Policy, 2004 •  objectives, among others, are to: • increase choices for customers of cellular mobile services at competitive and affordable price; • encourage private investment in the cellular mobile sector;

  7. Cellular Mobile Market & FDI

  8. Total FDI and FDI in the Telecom Sector

  9. FDI in the Telecom Sector

  10. PTA’s Mandate • PTA shall ensure that fair competition in the telecommunication sector exists and ismaintained • How do one maintain competition? • Availability of Choices is an element of a competitive market • Choices are dynamic linked to innovation • Introduction of 3G services through timely auctioning of 3G Spectrum • CCP recommended Parliamentary Standing Committee to auction 3G spectrum ASAP

  11. FDI in the Telecom Sector had 3G Licenses Were auctioned in 2010 Had 3G licenses were issued More invested in software, mobile etc.

  12. Comparison: Actual & Projected FDI in Telecom

  13. Impact on Trade through Increased Investment and Competition:Total International Traffic

  14. High Incoming vs. Low Outbound • the data reflects • Competitive rates for incoming calls as opposed to for outgoing • Highly competitive markets are also prone to tilting towards monopolistic market through cartelization

  15. LDI Operators: International Clearing House • 14 LDI filed an exemption application (Sept. 2011) under Section 5 of the Competition Act, 2010 for establishing ICH. • The ICH agreement in essence: • (i) was giving PTCL the monopoly to receive all incoming international traffic • (ii) having a single rate for incoming international traffic and • (iii) dividing the market share of incoming international traffic • Application was later withdrawn (as modalities for ICH could not be worked out)

  16. Policy Directive by MoIT • The Ministry of Information Technology (MOIT), issued a policy directive dated 13 August 2012 to PTA for establishment of International Clearing House Exchange ; • On 28 August 2012 the Commission issued a policy note, highlighting competition concerns, and advising against the establishment of ICH • Litigation – resulting in Commission order of 30 April, 2013 declaring the ICH null & void

  17. Monopolist Market: Impact on TradePre and Post ICH Incoming Traffic

  18. Concluding Remarks • There is a positive correlation between competition policy, trade and investment • Where a country enacts Competition law and creates a competition agency, it sends a signal to all players, locally and international, that it is serious about enforcing competition policy • Just as a competition agency has a positive obligation of advocacy with the government, all government ministries/departments whose policies affect commercial activity and free trade must consult with competition agency before issuing such policy.

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