Sound competition policy vital for growth

The Jakarta Post ,  Jakarta   |  Thu, 06/15/2006 1:06 PM  |  Opinion

Soy Martua Pardede, Jakarta

One of the greatest lessons ASEAN countries, especially Indonesia, have drawn from the 1997 East Asian economic crisis is that anti-competition policies and bad corporate governance practices are inimical to sustainable economic growth.

Anti-competition such as the abuse of market power and numerous other bad corporate governance practices such as corruption, nepotism and collusion had in fact been the hallmarks of Indonesia's economic management under Soeharto's authoritarian rule and centralized government.

Conspiracies among companies or collusion between businesses and government officials to rig what were supposed to be competitive bids were common practices to win government contracts.

But Indonesia was also one of ASEAN's member countries that had realized early on the vital importance of an anti-trust law and competition policies to bolster growth. About one year after the fall of the Soeharto administration, the government enacted the 1999 Antimonopoly Law and established in 2000 the Business Competition Supervisory Commission (KPPU) which in many developed countries is commonly known as the fair trade commission.

Indonesia also had realized that the implementation of the ASEAN free trade area could be hindered without the enforcement of competition laws and policies in all its member countries, especially because some member countries have yet to fully adopt the principles of a market economy.

It was within this context that Indonesia took the initiative in 2003 to promote ASEAN understanding and awareness of the importance of competition policies and laws to prevent restrictive trade practices and the abuse of dominant market power.

ASEAN countries need to have a common perception that sound market competition is a prerequisite to wooing investment, which in turn is a key to accelerating economic growth.

The KPPU organized the 1st ASEAN Conference on Fair Competition Law and Policy in the ASEAN Free Trade Area in Bali in early March, 2003 which concluded that competition law and policy is one of the most important components of the basic policies for regional trade liberalization and economic integration.

The meeting also emphasized the need for an exchange of views and experiences on the problems of competition law and policy which later was translated into the establishment of ASEAN Consultative Forum for Competition (ACFC) in October, 2004.

Indeed as AFTA is making steady, significant progress toward economic integration and eventually the creation of an ASEAN Economic Community in 2015, ASEAN countries need to agree on the principles of compatible competition law and policy.

The AEC concept aims at deepening and broadening economic integration in the region with the objective of developing a highly competitive regional economy where there is a free flow of goods, services, capital and labor.

As a single market, the ASEAN region with almost 500 million people and a market size of more than US$700 billion will become quite attractive for investors as a production base.

However, this advantage could be nullified if the grouping or several ASEAN member countries still allow monopolistic practices and other forms of anti-competition practices.

Hence, the process of trade liberalization and economic integration requires, at a regional level, an effective mechanism of protection against unfair competition. This is again the central theme of the 2nd ASEAN Conference on Competition Law and Policy that opens in Bali today (Wednesday) which will be followed immediately by the 2nd annual meeting of the ASEAN Consultative Forum on Competition.

The conference is designed to accelerate the process of the establishment of competition laws and policies in member countries, to follow up the initiatives already taken by the ACFC at its first meeting in 2004 and expand the agenda of action among member countries in the field of competition law and policy.

Since the meeting also will be attended by experts from international organizations and several developed countries, the conference will become an effective forum for discussing technical assistance for ASEAN countries to build up their institutional capacity to implement competition law and policy.

The participation of experts from such organizations as the World Bank, Asian Development Bank, United Nations Conference on Trade and Development, the Organization for Economic Cooperation and Development and representatives from well-experienced competition-watchdogs in the U.S., Japan and South Korea will broaden the exchange of views and experiences in dealing with unfair competition practices.

The writer is a commissioner at KPPU and the Chairman of the steering committee of the 2nd ASEAN Conference on Competition Law and Policy.

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