New Competition Commission already under fire

Myanmar’s professed commitment to competition reform has come under fire after the government packed the new Competition Commission with bureaucrats serving under a minister.

Six out of the 11-member body, including the chair, are government officials, while only one identifies as an economist.

Appointing Commerce Minister U Than Myint as Commission chair is “questionable” since his own ministry has been called out for protectionism, said U Aung Khant, who heads a Yangon-based policy think tank.

“The Ministry of Commerce remains protectionist across many sectors, often in favour of a select group of local business elites,” he commented. A ministry official denied this.

The appointment also deviates from international best practices, where governments usually delegate this area of decision-making to technocrats, independent of vested interests and political pressures. For example, none of the competition authorities in India, Hong Kong, Singapore and the UK is headed by a politician.

But criticism goes beyond the appointees. Local business people have no idea how serious the Commission is, according to Myanmar businessman U Zaw Naing, who owns an IT firm and who supported Daw Aung San Suu Kyi in the 2015 election.

The Anti-Corruption Commission has shown commitment because they are publicly taking action against senior government figures, he said. In contrast, local businesses don’t know what the Competition Commission intends to do and “how far the body will go.”

To be fair, the Commission is “at an infant stage and the Commissioners are still studying and learning,” he said.

“If the Competition Commission were to convince business that they were a serious body, they need to tackle the high-profile issues involving government policies and activities.”

There are plenty of issues the body could deal with which are hurting consumers, according to observers and investors. These include restrictions on the use of the Yangon-Mandalay highway by freight traffic and on the import of spirits. The latter restriction has led to fake products, illicit trade and loss of tax.

However, the Commissioner membership, involving the same ministries that are maintaining these restrictions, raises questions about their willingness to tackle these issues, said Myanmar Centre for Responsible Business director Vicky Bowman.

When contacted by The Myanmar Times, the Commission said U Than Myint will not remove himself from discussions related to his department because the minister “understands fair competition”.

Capacity questioned

The new body would need to include, or draw on the advice of, qualified competition economists in their decision-making, experts say.

“A high quality competition authority is one led by an individual with a clear ‘consumers-first’ vision of how to promote competition and productivity,” commented Adam McCarty, chief economist with Mekong Economics. That person must also be supported by an international-standard team of lawyers and economists.

“By ‘international standard’ I mean overseas postgraduate degrees complemented by practical experience in trade disputes and anti-competitive practice investigations,” he went on.

While many ministers and officials “are talented and driven”, U Zaw Naing believes officials will find it difficult to champion the Commission on top of their responsibilities, apart from the conflicting roles.

“I feel that this arrangement [composition of the Commission] doesn’t work. What would the Commission be doing in the next two years? Very little, I fear.”

In response, Commissioner U Thuta Aung stressed that the body has five external appointees, including the vice chair U Than Maung, a veteran private lawyer, and that they will make decisions through consensus.

“The involvement of senior officers from the government is an advantage for our efforts to coordinate with different government bodies in seeking opinions. However each commission member votes on his or her standing and will openly share if there’s a specific ministry’s interest on a case.”

“And as we have a deputy director general from Bureau of Special Investigation as a member, even our counterpart in the Philippines was envious of our ability to effectively conduct investigations.”

The Commission will set up investigation committees which will involve “sector experts” when necessary, he added, defending this as a cost-effective approach. No such committee is set up yet, according to Quek Ling Yi, resident managing lawyer at Dentons Rodyk.

U Thuta Aung further highlighted his economist background, tapping his merger experience into the body, and calling him a “poacher turned game-keeper”. “Not all commissions around the world have in house competition economists.”

The competition regime

The National League for Democracy-led administration established the Competition Commission last October and formally launched it this month, more than three years after parliament passed the 2015 Competition Law.

“The aim of the law is to create a level-playing field for companies and fair competition within industries, thus enabling businesses to innovate and grow and the commission is expected to support this goal,” said U Than Myint at the launch.

The delay is partly due to the need to prepare the bylaws, but also reflects that competition policy is not high on the incumbent administration’s reform agenda. But investors are concerned: the World Bank’s May 2018 Myanmar Economic Monitor and the 2018 EuroCham Myanmar business confidence survey point towards perceptions of emerging protectionism for the economy.

Vice chair U Than Maung said neither the law nor commission will place additional restrictions on businesses. “We are just aiming to prevent unfair competition and protect small and medium-sized enterprises from monopolisation in the market.”

U Zaw Naing doubts the commissioners can impartially and effectively tackle cases involving government policies and companies associated or well connected with the authorities.

“Failure to do so will hurt Myanmar’s economic reform. Growth in many sectors depends on fair competition.”

He raised a potential case involving Yangon’s retail fuel market. Under Chief Minister U Phyo Min Thein, the city government has reportedly blocked the opening of new filling stations in Yangon and instead intervened to support private company Yangon Petrol Co Ltd to reduce retail fuel prices.

The government leases land in prime locations to Yangon Petrol at very low rates with the understanding that it will then sell fuel to customers at a low price. On average, Yangon Petrol’s fuel prices are around K50-K60 per litre less than other filling stations.

“Will the Commission intervene and investigate this case independently? I doubt,” said U Zaw Naing, noting both U Than Myint and U Phyo Min Thein are politicians from the same party.

What’s next

Dr Lee Jones, Reader in International Politics at Queen Mary University of London, is sceptical about the impact of the Commission or the Law will have on Myanmar’s broader economic reform.

By some estimates, he said, as much of half of the country’s economy is produced by companies owned by the military, by crony capitalism conglomerates, or businesses linked to ethnic-minority armed groups. Their profits are often heavily dependent on various forms of anti-competitive arrangements.

“Disrupting these arrangements would elicit huge resistance from these powerful forces, which could be politically very destabilising. Therefore, the Commission is likely to tread extremely carefully and, most likely, tiptoe around the most entrenched interests.”

Investors want to know if there will be merger controls and what the legal threshold of market dominance is, Ms Quek added. Other pressing questions include the market share threshold such that collaboration will be restricted and what business activities are covered under the law.

Source: Myanmar Times

To see the original article click link here

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, "Puma Energy", “MOGE”, “yangon new town”,"MECTEL", "hydropower", etc.