The Necessity of ASEAN Competition Law: An Idea

1
The Necessity of ASEAN Competition Law An Idea

• By
• M. Udin Silalahi
• Researscher Centre for Strategic and
  International Studies, Jakarta

2
The Necessity of ASEAN Competition Law an Idea

• Introduction
• Economic Integration
• Market Economy System
• Competition Law for the Benefit of ASEAN
• Conclusion

3
Introduction

• Globalisation and Liberalisition of Economy cant
  be stoped any more.
• We must use its advantages and its chance to
  improve our national economic development.
• ASEAN will also take part in Globalisation of
  Economy.
• ASEAN countries have come to a decisition to
  integrate its economy.
• Since January 2003 ASEAN Free Trade Area (AFTA)
  is valid
• By the implementation of AFTA, ASEAN countries
  endeavor to determine a fair competition.

4
Introduction

• To create a fair competition, does ASEAN need a
  competition law?
• The answer is not easy, because the ASEAN
  countries have still sundry thought about the
  necessity of a competition law.
• At the ASEAN Conference on Fair Trade Competition
  Law and Policy in Bali on March, 2003 and the 2nd
  ASEAN Conference on Competition Policy and Law in
  Bali on June, 2006 there was no conclusion about
  it. Even they didnt talk about it.
• But the ASEAN countries have the same conception
  that in ASEAN sooner or later a competition law
  is necessary.
• It means that we should think seriously about an
  ASEAN competition law
• Why?

5
ASEAN Economic Integration

• ASEAN is established on August 8, 1967
• The objective is to create peace and security of
  community in the region.
• The cooperation of ASEAN countries is not only in
  the field of politics and security but also in
  the field of economy.
• This had began since at the end of 1980.
• It was caused by the basic changing of world
  trade, namely through the signing of Multilateral
  Trade Negotition (General Agreement on Tariffs
  and Trade/GATT), which more known as Uruguay
  Round and with the new name, World Trade
  Organization (WTO).

6
ASEAN Economic Integration

• In the part of the world was established
  community of economy as European Economic Economy
  in West Europe and North American Free Trade
  Area (NAFTA) in North American.
• Since that the tendency for establishment of
  Economic Integration in the sundry region is
  increased.
• ASEAN Countries have also no other choice unless
  to establish such economy community.
• At the ASEAN Conference on January, 1992 in
  Singapore ASEAN Free Trade Area (AFTA) was agreed
  which its settings up was planed in year 2008.
• But on January, 1993 AFTA was established. It was
  earlier than the schedule.
• Since January 1994 AFTA is valid in ASEAN.
• The pillar of AFTA is the Scheme of Common
  Effective Preferential Tariff (CEPT).

7
ASEAN Economic Integration

• The objective of CEPT is to reduce tariff from
  0-5 per cent.
• Through the scheme of CEPT, the import tariff
  will be reduced to 5 per cent to the early of
  2008.
• But this was already impelmented at the beginning
  of January 2003 base on the agreement of the
  chief of ASEAN countries in 1996, unless Vietnam
  is valid since 2004, Laos und Myanmar in 2006
  and Cambodia in 2008, because these countries
  entered ASEAN later.
• The establishment of AFTA is an obligation of
  ASEAN countries to establish the economic
  integration which is the vision of ASEAN
  countries in 2020.

8
ASEAN Economic Integration

• This was determined by the leader of ASEAN
  countries at the ASEAN Meeting in Bali on October
  2003.
• The requirement of ASEAN economic integration in
  2020 has been laid down.
• The goal is to implement ASEAN Economic
  CommunityAEC in 2020 which will be implemented
  in 2015, five years earlier than the schedule.
• It shows the AEC is one of the instruments to
  increase the ASEAN competitiveness and to take
  part in the global economy.

9
ASEAN Economic Integration

• The Bali Declaration 2003 to AEC contain as
  follows
• AEC is the realization of the end-goal of
  economic integration as outlined in the ASEAN
  Vision 2020 (forward to 2015), to create a
  stable, prosperous and highly competitive ASEAN
  economic region in which there is a free flow of
  goods, services, investment and a freer flow of
  capital, equitable economic development and
  reduced poverty and socio-economic disparities in
  year 2020
• AEC shall establish ASEAN as a single market and
  production base, turning the diversity that
  characterises the region into opportunities for
  business complementation making the ASEAN a more
  dynamic and stronger segment of the global supply
  chain

10
ASEAN Economic Integration

• ASEANs strategy shall consist of the integration
  of ASEAN and enhancing ASEANs economic
  competitiveness.
• In moving towards the AEC, ASEAN shall, inter
  alia, institute new mechanisms and measures to
  strengthen the implementation of its existing
  economic initiatives including the ASEAN Free
  Trade Area (AFTA), ASEAN Framework Agreement on
  Services (AFAS) und ASEAN Investment Area (AIA)
• Accelerate regional market integration in the
  priority sectors
• Facilitate movement of business persons, skilled
  labour and talents and
• Strengthen the institutional mechanisms of ASEAN,
  including the improvement of the existing ASEAN
  Dispute Settlement Mechanism to ensure
  expeditious and legally binding resolution of any
  economic disputes.

11
ASEAN Economic Integration

• The purpose of this agreement is
• to unite the ASEAN economic power and achieve its
  advantages in the region
• to raise the investment within ASEAN
• awarding of incentives for manufacture activity
  in ASEAN region
• to give the investment priority of raw material
  within ASEAN and
• to develop the incentives of the goods and
  services made in ASEAN

12
ASEAN Economic Integration

• Base on this Bali Declaration, the improvement
  and the establishment of commercial law in ASEAN
  is important, if ASEAN want to set a fair and
  effective competition.
• One of the outline conditions of a fair and
  effective competition is the existing of the
  competition law which rules a fair competition
  and the establishment of Antimonopoly agency
  which supervises the competition in the ASEAN
  region.
• The competition law is compatible with open
  regionalism because it is basically neutral and
  non-discriminatory.

13
ASEAN Economic Integration

• Does ASEAN need a competition law?
• ASEAN needs a competition law
• since ASEAN aims to strengthen economic
  integration in the region, it needs laws and
  institutions to support the implementation and
  elaboration of trade and investment
  liberalization within ASEAN market.
• in an emerging ASEAN free market economy,
  monopolies and restrictive business practices are
  viewed as undesirable because they are likely to
  distort prices and the efficient allocation of
  resources.
• the competition law and policy enables small and
  medium sized enterprises to enter the market,
  therefore it can be implemented as an alternative
  to industrial policy based on strategic policy,
  which has been regarded as non-neutral government
  intervention.

14
Market Economy System

• Most of the ASEAN countries, the economy system
  is based on the market economy system.
• Even Vietnam, Laos, Cambodia und Myanmar lead
  their economy base on market economy system.
• It was proved that the market economy system is a
  system which can adopt the development of the
  economy in all the time.
• And it was proved that the country which has the
  concentration market system which could not give
  the solution to the economy problem.
• For instance the collapse of Soviet Union and
  East European country brought their market
  economy system from concentration system to the
  market economy system

15
Market Economy System

• To support the market economy system, it is
  needed commercial law, e.g. Bankruptcy Law,
  Patent Law, Antimonopoly Law etc.
• ASEAN countries also need to develop the
  effective legal systems for encouraging and
  overseeing increasingly competitive business
  activity in the ASEAN region.
• In the market integration, like AFTA needs
  especially a competition law which rules the
  horizontal and vertical agreement, dominant
  position and the abuse of dominant position and
  as well as merger control.

16
Market Economy System

• But the ASEAN countries have different opinion
  about the necessity of competition law in ASEAN
  for each country has its own idea and conception
  how to implement a competition law in a regional
  market.
• This sundry opinion will be influenced by the
  conditions of each country.
• Chadwick, market analyst the trade and industry
  ministry of Singapore, has written in his paper
  that competition law may be necessary if
  deregulation policies do not bring about expected
  efficiencies due to collusion or exclusionary
  conduct by an incumbent with considerable market
  power.
• He believes that economy efficiency can be
  achieved through deregulation of trade and
  economy, especially for the improvement of
  economic growth.

17
Market Economy System

• While Myanmar was more optimistic which was
  represented by Khin Ohn Thant and he said that a
  competition law and policy should be adopted in
  ASEAN.
• In the beginning of his paper is written that
  ASEAN needs a Competition Policy to be relevance
  in the world economy. So if we do not start now,
  then when?
• The representative of Myanmar is so optimistic
  because he can distinguish that the economy
  development of his country was better after the
  implementation of economy market system.
• After Myanmar has opened its economy to external
  world, its economy was growing 7,5 per cent per a
  year from 1992 to 1995.

18
Market Economy System

• The conclusion of the 2nd ASEAN Conference on
  Competition Policy and Law in Bali on 14-16 June,
  2006 has acknowledged that at the present, there
  is no single uniform model of competition to be
  applied at the regional level.
• It means indirectly, we need a competition law at
  the regional level, even every ASEAN country has
  different level of competition laws and policies
  development.

19
Market Economy System

• Even though there are sundry opinion among ASEAN
  member countries about the necessity of a
  competition law, the competition law and
  antimonopoly agency sooner or later in ASEAN is
  needed, because
• a competition law and policy rule the behavior of
  the business player in the region. The
  competition law rules the activity of the
  business player both horizontal and vertical
  agreement, dominant position and the abuse of
  dominant position and also determine how to
  implement merger and acquisition.
• a competition law rules the role of the states as
  a regulator and facilitator. The state is not a
  business player any more, but as a regulator,
  facilitator and controller which control the
  behavior of business player. That is why, the
  ASEAN countries are willing to give the
  antimonopoly agency to control the competition in
  ASEAN region.
• through the existing of competition law, it will
  be more fair and effective competition in ASEAN
  region.

20
Competition Law for the benefit of ASEAN

• In principal, monopoly and economics protection
  are against market economy system.
• The monopoly practices and awarding of economics
  protection in the trade hinder a fair
  competition.
• ASEAN must improve and enact its economic law so
  that ASEAN market has more competitiveness,
  especially on the schedule time of ASEAN Economic
  Community in 2015,
• the ASEAN competition law should be already
  enacted and implemented.

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Competition Law for the Benefit of ASEAN

• What is the contribution of the competition law
  for the economic development in ASEAN?
• It can support the economic reform, ensure legal
  certainty and provide a fair competition for all
  business actors.
• To make ASEAN attractive, ASEAN needs an
  effective law namely cartel law which rule cartel
  prohibition, dominant position, the abuse of
  dominant position, merger control etc.

22
Competition Law for the Benefit of ASEAN

• The competition law will ensure the legal
  certainty to the economic participant and through
  it the interest of ASEAN and foreigner investor
  will increase.
• Therefore, the ASEAN competition law plays a
  multifunctional role, e.g. to encourage the free
  flow of trade and investment, to monitor the
  behaviour of firms, and to evaluate the economic
  role or potential dominance of extra-ASEAN TNCs
  in the region and as well as to control merger
  and acquisition.

23
Competition Law for the Benefit of ASEAN

• The question is whether ASEAN countries have
  knowledge to establish ASEAN competition law and
  Antimonopoly agency?
• The answer is yes.
• Now, it depends on the political will of the
  Leader of ASEAN Countries.
• Actually the leader of ASEAN countries and the
  scholar have acknowledged the necessity of
  competition law and antimonopoly agency.

24
Competition Law for the Benefit of ASEAN

• ASEAN countries have pay attention to understand
  the competition law, especially since European
  Union at the WTO Conference on January 1997 in
  Singapore that suggested
• 1) to establish a working group on exploratory
• 2) all states should enact their own competition
  law, in establishing the structure for the
  execution and to enable the information
  interchange among antimonopoly agency.
• Since that, ASEAN countries make an effort how to
  provide a fair and effective competition in their
  own country

25
Competition Law for the Benefit of ASEAN

• ASEAN countries accepted the assistance of the
  competition course from the developed countries
  like United State of America, European Union,
  Germany, Japan, Australia and from international
  institution like UNCTAD, OECD, WTO and World
  Bank.
• As a result, Indonesia and Thailand have enacted
  their own competition law.
• Singapore and Vietnam have also enacted their
  competition law in 2004 and has become effective
  since July 2005.

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Competition Law for the Benefit of ASEAN

• Even though some of ASEAN countries do not have
  competition law, but actually they have planned
  to establish their own competition law.
• Laos has prepared to establish its own
  competition law.
• That is why for the establishment of the ASEAN
  competition law can be started by the leader of
  ASEAN countries as a principle of market
  efficiency and welfare of consumer.

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Conclusion

• Economic integration in ASEAN has been driven by
  globalizing market forces rather than government
  direction.
• To establish an ASEAN economic community (AEC)
  does not need only infrastructure for the
  economic development but also legal
  infrastructure which provides legal certainty to
  the business actors.
• If ASEAN countries are willing to realize the
  ASEAN Economic Community in 2015, they should sit
  together to make the draft of business laws e.g.
  the ASEAN competition law, or to make an
  agreement on principal of competition to private
  sectors, and technical assistance cooperation.

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Conclusion

• There is no end without start. Starting is the
  beginning of success.
• The ASEAN countries should start sitting together
  to plan and discuss whether they need an ASEAN
  competition law or not.
• If they do not start now, so when? as Khin Ohn
  Thant said.

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• Thank you