Competition Scenario in the Lao PDR

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Competition Scenario in the Lao PDR

• CUTS-NERI
• Advocacy and Capacity Building on Competition
  Policy and Law in Asia
• (7Up2 Project)
• Presented by Dr. Leeber Leebouapao

Workshop in Hanoi(16-17 Aaugust 2005)
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GENERAL BACKGROUND

• Characteristics of the Country
• Landlocked and mountainous country
• Geographical Location
• South East Asia
• Country Area
• 236.800 km2
• Population(2005)
• 5.6 million people
• Economic System
• Transition from the centrally planed economy to
  a market oriented economy since 1986
• Economic Integration
• 1997 Member of ASEAN
• Currently Preparation for Joining WTO

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MACROECONOMIC PERFORMANCE
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GDP per capita 1996-2004 in US
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Share in GDP by Sectors in 2004
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Export and Import Value(million US) between
1992-2004
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Competition Policy/Regulation Regime

• The NEM (1986)
• IV th Party Congress Moving from the Centrally
  Planned Economy to A Market Oriented Economy
  since 1986
• Party Congresses(V 1991, VI 1996, VII 2001)
  stress the importance of multi-economic sectors
  including private sector.
• The Constitution (1991)
• The state protects and expands all forms of
  state, collective and individual ownership, as
  well as private ownership of domestic capitalists
  and foreigners who make investments in the Lao
  Peoples Democratic Republic. The state
  encourages all economic sectors to compete and
  cooperate with one another in expanding their
  production and business. All economic sectors are
  equal before the law. (Article 14. )
• The Business Law (1994)
• All types of operations conducted by
  enterprises in all economic sectors are
  inter-related and competing on an equal footing
  before the law. (Art.5).

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Competition Policy/Regulation Regime (Cont.)

• The Decree No. 15/PO on Trade Competition
  (2004)
• The objective of the Decree is to define rules
  and measures to regulate monopolisation and
  unfair competition in trade of all forms, aiming
  to promote fair trade competition, protect the
  rights and legal interests of consumers and to
  encourage business activities in the Lao PDR to
  function efficiently in the market economy
  mechanism as determined by the Government of the
  Lao PDR (Art. 1 Objectives).
• All types of operations conducted by
  enterprises in all economic sectors are
  inter-related and competing on an equal footing
  before the law (Art.5). This principle is
  further reflected by the Decree in that Business
  activities of all sectors are equal under the
  law they cooperate and compete with each other
  in a fair manner in compliance with this Decree
  and concerned laws and regulations (Art.3
  Fundamental principle in competition). .

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Competition Policy/Regulation Regime (Cont.)

• Industrial Policy
• Decree No. 19/PO(1988) on Management and
  Administration of SOEs
• - Autonomy of SOEs.
• - Elimination of subsidy system
• The Party Resolution(1988) , the
  Constitution(1991), the Business Law(1994)
  encourage private sector development
• Decree No.42/PO on Promotion and Development of
  Small and Medium-sized Enterprises (SMEs) (2004)
  identifies as priority areas
• (i)  Creating an enabling regulatory and
  administrative environment for SMEs
• (ii)   Enhancing competitiveness of SMEs
• (iii)  Expanding domestic and international
  markets for SMEs
• (iv)  Improving access to finance by SMEs
• (v) Encouraging and creating favourable
  conditions for the establishment of business
  organisations and
• (vi) Encouraging entrepreneurial attitudes and
  characteristics within the society

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Competition Policy/Regulation Regime (Cont.)

• Trade policy
• Domestic Trade Liberalization
• Decree 12/PO(1987) on Promotion of goods and
  money circulation One market, one price
  principle, e.i elimination of the dual price
  system
• Decree No. 14 /PO( 1988) on goods price
  determination,
• prices of most goods determined by market,
  except
• for logs, basic utility and mineral prices

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Competition Policy/Regulation Regime (Cont.)

• External Trade Policy
• Decree 18 on State monopoly on strategic
  export and import goods
• - Reduction of restricted items, private
  sector participation in export/import, abolition
  of quantitative restrictions of import goods in
  substance
• Order/PO No. 24,(2004) on the facilitation for
  exportation and
• importation
• To establish one stop services at border points
  and to abolish export-import licenses, except
  gold and copper export and except vehicles,
  spare parts, petroleum, gas and diamond and
  other prohibited goods
• Lao PDRs integration into the regional and
  global markets(AFTA, AFTA1, 2, 3, preparation
  to Join WTO by 2008, )

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Competition Policy/Regulation Regime (Cont.)

• Privatization Policy
• Decree No.17/PO on Privatization of SOE
  (1990)
• ( Current situation by 2003 there are only
  round 93 wholly
• SOEs of which 32 are considered strategic)
• Investment Policy
• Foreign Investment Law of 1988
• (amended in 1994)
• Domestic Investment Law of 1994
• Governments Yearly and Five Years Plans for
  Socio-Economic Development
• Promotion of Private Investment

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Other Sectoral Laws/Regulations Related to
Competition

• Enterprise Accounting Law
• Labor Law
• Business Law
• Custom Law
• National Budget Law
• Law on Bankruptcy
• Secured Transaction Law
• Law on Government of the Lao PDR
• Law on the Military Service
• Law on -Promotion of Domesti Investment
• Tax Law
• Law on The Bank of the Lao PDR
• Forestry Law
• Water and Water Resources Law
• Electricity Law

16. Road Transport Law 17. Mining Law 18. Law on
Agriculture 19. Law on the ProcessingIndustry 20.
Environmental Protection Law 22. Urban Planning
Law 23. National Road Law 24. Law on Drugs and
Medical Products 25. Road trafficking Law 26.
Education Law 27. Law on Hygiene, Prevention and
Health Promotion 28. Telecommunications Law 29.
State Assets Law
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Policy/Law Related To Consumer Protection
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Market Structure and Competition

• Market structure and competition
• Manufacturing Sectors
• Services and Utilities

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Market Structure and Competition(Cont.)
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Market Structure and Competition(Cont.)
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Market Structure and Competition(Cont.)
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Market Structure and Competition(Cont.)

• Barriers to competition
• Barriers by Law/Policy/Regulation
• Barriers by private anticompetitive behaviours
• Barriers by Nature

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Anti-competitive Practices
Market Structure and Competition(Cont.)

• Transformation of public monopoly into private
  monopoly
• Price fixing and other cartel arrangements
• Bid rigging
• Tied selling
• Predatory behaviours by dominant enterprises

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Perspectives on Competition Policy

• Field Survey Results

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• Findings of SME survey (72 manufacturing
  enterprises 42 food processing enterprises and
  30 non-food) in the Vientiane Municipality
• 12.7 of the surveyed enterprises thought that
  they dont have any competitor in the city
• 28.2 said they have some competitor
• 59.1 said they have many competitors.
• 66.2 of the surveyed enterprises thought that
  the number of competitors is on the increase,
  i.e. the market structure becomes more
  competitive
• 5.6 though that there are now less competitors.
• 28.2 thought there have been no changes.
• A majority thought that competition from
  domestic rival enterprises is strongest, rather
  than competition from Thai, Chinese and
  Vietnamese products.

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THE WAY FORWARD

• Establishing the Trade Competition Commission
• Building capacity of national stakeholders
  (Business Sector, Consumer, Government, Academic
  Research Institutes, NGO, Donors ) to understand
  the concept of competition and effectively
  implement the Decree on Trade Competition
• Discussing the possibility of transforming the
  Decree on Trade Competition to a competition law(
  5 year plan(2006-2010), draft ).

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• Thank You
• For
• Your Attention