South Asia Watch on Trade, Economics & Environment (SAWTEE)

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Towards a healthy competition culture
Published: The Kathmandu Post, 27 December 2003
By: Neelu Thapa

In the modern economic era, market plays a critical role not only through price signal, but also by ensuring proper allocation of resources. The functioning of market is important for the interests of both the producers and the consumers. Striking a balance between the interests of these stakeholders and creating a perfect market are, however, not as easy as they seem.

Many countries, especially the developing ones, have failed to develop a functional market mechanism. And, in the absence of such a mechanism, anti-competitive practices have become rampant. Unfortunately, it is often the unorganised consumers, who become the victims of such practices. For example, in the case of Nepal, many anti-competitive practices like tied-selling, limited market contestability, cartel, syndicate system, predatory pricing and collusive bidding are rampant. One such example is the local syndicates of the transport entrepreneurs, which do not allow other than syndicate members to run their vehicles on long routes.

Likewise, a number of business trade associations have engaged themselves in collective price fixing, which is an anti-competitive practice. The Colour Photographers Association, the Association of Brick Industries, the Liquor Manufacturers Association of Nepal, the Gas Dealers Association of Nepal etc. are few to name.

Unless and until these practices are checked, consumers’ welfare will remain a pipe-dream. The producers must be able to understand that their conscious efforts to enhance consumers’ welfare will help them generate higher profit in the long run. In Nepal, lack of an effective competition policy and law seems to be the major deficiency.

However, it is encouraging to note that the officials at the Ministry of Finance as well as the Ministry of Industry, Commerce and Supplies are busy in finalising the competition law. This is expected to promote a competitive environment in the Nepalese market. Moreover, such an effort is also expected to address the competition problems that Nepal is likely to face after its membership of the World Trade Organisation (WTO).

Now, the country is not merely limited to the bilateral or regional trading arrangements but is also open to the multilateral trading system, where competitiveness is a key factor to secure a favourable position in the world trade. Other developing countries have also realised the need of the competition policy and law. Most of them are either reviewing the policy or are in the process of formulating a new one. Sixteen developing countries had a competition law till 1990, 50 countries completed such a legislation in the 1990s and a further 28 are currently in the process of adopting such a law.

The basic structure of competition is built upon an efficient market system. It protects the consumers as well as the producers and leads to efficient allocation of resources, efficiency within the enterprises and provision of quality goods and services at the least possible cost. Competition policy creates a suitable environment for new entrepreneurs to start new businesses thus leading to growth and employment generation in the economy and consumer welfare. Competition law creates an environment for the effective implementation of competition policy.

No matter what the benefits are and no matter how ideal a competition law we bring forward, without building a competition culture among the stakeholders, the effectiveness of such a law is always questionable. History has proved that if there is no feeling of belonging and responsibility among the stakeholders, no law is going to work as expected.

In an environment like ours where we are just trying to ape the western models of development, addressing our local problems is always a matter of concern. The development of our own culture is, therefore, a must. We have modern facilities of traffic lights and zebra crossing but how many of us actually follow it? We have a tendency to throw litter on the road when we have dustbins within a short distance. To ensure that competition rules do not go through the same fate, it is important that we work towards building a competition culture now.

But, challenges are many in the process. Competition culture means “an awareness on competition issues among the public at large and economic actors in particular”. The level of awareness on this is, however, extremely low. Neither the producers nor the consumers have conceptualised the importance of competition culture. Government agencies and civil society groups have also failed to recognise its importance.

People have largely failed to realise that one of the core factors that has made them suffer from anti-competitive practices is the lack of competition culture among them. For example, consumers know that they have been suffering from certain anti-competitive practices in the country but they have not developed a culture to unitedly echo their concerns. Knowing the faults and remonstrating against such faults for the rectification are two different things. Awareness raising activities should be carried out at different levels; and competition issues should be involved in school curriculum.

Lack of awareness on competition culture at the bureaucratic level, particularly among the competition authorities is also a problem. In the case of Pakistan, competition law was enacted because of growing concentration of wealth in a few hands which was a result of special incentives being given to private sectors at an extraordinary rate. The objectives of the law were to restrict undue concentration of individual economic and monopoly power, and prevent restrictive trade practices. Nevertheless, even after 25 years of its existence, there are various shortcomings plaguing the Competition Authority. As a result, it has remained ineffective after all these years. One of the main reasons for the failure is that the Authority has failed to communicate its importance to the general public and build up partnership with similar types of organisations working for public interest. Had it been well aware of the competition culture, the situation would have been different. Similarly, in Zambia, though the Zambia Competition Commission is better resourced, people at the grassroots level have yet to experience any substantial benefits. Anti-competitive practices are still rampant and there is no competition culture among the stakeholders.

Nepal should learn from such experiences and take precautionary measures before it becomes too late. Along with the effort to prepare a competition law, it is imperative that various extensive advocacy and public awareness campaigns, highlighting the need and benefits of competition culture, be launched in different regions of the country. In fact, competition law should itself include competition culture as its important element and ensure its proper implementation. This will significantly contribute towards building up a competition culture among the stakeholders. The authorities must develop a mechanism in its policy to conduct awareness campaigns, and education and training programmes for the people at large that include representatives from government agencies, business and private sector, consumer groups, civil society and media.

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