Competition law policy economic growth development australia indonesia
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Competition law & policy, economic growth & development: Australia & Indonesia. A Brief Discussion Rafaelita M. Aldaba, PIDS 15 November 2011 Bali, Indonesia. Australia & Indonesia: competition gains. Very different countries: stage of development, institutions, history, culture

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Competition law policy economic growth development australia indonesia

Competition law & policy, economic growth & development: Australia & Indonesia

A Brief Discussion

Rafaelita M. Aldaba, PIDS

15 November 2011

Bali, Indonesia


Australia indonesia competition gains

Australia & Indonesia: competition gains

  • Very different countries: stage of development, institutions, history, culture

  • ACCC: relatively long history of competition law; KPPUin its nascent stage; objective is to enhance national welfare & efficiency

  • Benefits from competition law & policy esp. reduced prices for utilities & basic commodities

  • Australia: efficiency gains: 2.5% of GDP or $20B/year

  • Indonesia: consumer savings from reduced prices of basic commodities & mobile telecommunications

  • Australia: evolving nature of competition law & policy in response to business behavior & economy


Debate on merits of competition law continues main arguments

Debate on merits of competition law continues: main arguments

  • Missing markets: financial markets, investments can only be financed by retained profits, eroded by unfettered competition

  • Achieve a certain size to compete in world markets: implications for conduct of reviews of mergers

  • No need for government to promote rivalry in markets where innovation is principal source of competition; monopoly profits are incentives for firms to innovate

  • Maximizing rivalry leads to inefficient outcomes in natural monopolies & some network industries

  • Philippines, no comprehensive competition law, same arguments raised by skeptics


Philippines a study in contrast

Philippines: a study in contrast

  • Shallow, hollow, & lagging growth; failed to create jobs

  • Gross domestic investment has been low & declining from 25% in ‘97 to 14% in ‘09

  • Phils 16.5% (average) lagged behind Indonesia 25%, Malaysia 22%, Thailand 26% VN 36%

  • Phils 1.4% & Indonesia 0.52% lagging, Malaysia & Thailand 3%, Cambodia 4.7%, Viet Nam 5.5%


Why has the philippines lagged in attracting investment

Why has the Philippines lagged in attracting investment?

  • Weak institutional & regulatory mechanisms

  • Poor infrastructure

  • Weak competition

  • Weak competitiveness of Philippine industries, low productivity, & low trade gains (exports as % of GDP rose 82% in ‘90s to 97% in ‘00s; imports 44% to 50%; unfavorable trade balance )


Competition issues in vital industries rising prices high cost low quality services

Competition issues in vital industries: rising prices, high cost & low quality services

  • First country in Asia to enact competition law (1925); not effectively implemented; since 1980s attempts to legislate

  • Cement cartel: controlled by the world’s big 3, prices continued to rise even during the GFC, government eliminated tariffs in ‘08-’09 but to no avail

  • Interconnection issues

  • Merger took place, duopoly

  • Strengthened incumbent’s market dominance

  • High entry barriers: congressional franchise, 40% foreign equity limit

  • Merger can endanger competition & welfare improvement arising from the deal


Other competition problems major lessons from australia indonesia

Other competition problems & major lessons from Australia & Indonesia

  • Shipping cartel & inefficient ports: lack of regulatory independence & credibility; uses its power to protect its own ports against competition from privately-owned ports (conflict of interest)

  • Low quality of service, high logistics & shipping costs affecting competitiveness: one of the longest duration & high cost for port & terminal handling in Asia (exports: 3 days/$270; Indonesia: 2 days/$165 )

  • Australia & Indonesia: greater competition leads to welfare gains & benefits

  • Philippines: weak competition has led to poor economic performance, lack of investments, low competitiveness

  • Done quite a lot of liberalization but not efficient institutions/regulatory

  • Liberalization & shift to more open economy requires changes in legislations & policies, building efficient institutions & good infrastructure to support reforms, generate supply side responses & reap gains in terms of employment & growth


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