Assessment of the socio-economic implications of the Uganda

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Assessment of the socio-economic implications of
the Ugandas DRAFT competition law addressing
challenges at national and regional levels.

• BY DR M KAGGWA
• BIEAC REGIONAL WORKSHOP ON
• 27-28 MAY 2010
• NAIROBI - KENYA

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INTRODUCTION

• Parallel processes taking place in the EAC
  region
• Finalisation of formation of the EAC Common
  Market
• EAC, SADC and COMESA discussion on integration of
  the three economic blocs
• Economic Partnership Agreement (EPAs) with the EU
  negotiations
• Efforts to formulation of policies at national
  and at regional level to complement these
  developments in quest of sustainable economic
  growth and development.
• Competition law important in realisation of
  envisaged regional development of the above
  processes it has implications on market
  performance and prodn efficiency

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INTRODUCTION

• Specific to Uganda
• Explicit interest in the market competitiveness
  fairly new phenomenon
• Last 20 years, government has consistently
  reduced direct involvement in economic activities
  created bigger space for the private sector to
  operate
• Because markets are seldom perfect, govt slowly
  changing focus to market regulation so as not
  compromise on envisaged consumer benefit from
  liberalisation
• A draft competition law (drafted almost
  unliterary)
• Law beneficial but can have skewed
  benefits/unintendedconsequences
• Opportunity and need exist to assess the draft in
  terms national development imperatives and
  consumer welfare

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OBJECTIVES OF THE STUDY

• Elucidate on competition policy and its
  relationship to development and poverty reduction
• Assesses the socio-economic implications of the
  Ugandas Competition Law
• Assess the complimentary role of the EAC
  Competition policy and law to the Ugandas
  competition Law
• Recommend on pro-development national
  competition policy law for Uganda and by proxy
  for the EAC region

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COMPETITION POLICY, DEVELOPMENT AND POVERTY
REDUCTION

• The policy opens market for competition (ideally)
  leading to
• Promotion of domestic market liberalisation
• Increased trade
• Increased inward investment
• Efficiency in making economic decisions and
  innovation
• Maximisation of consumer surplus
• Subsequently job creation and general improvement
  in the standards of living

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COMPETITION POLICY in multilateral negotiations

• Policy has and is still on the agenda of
  multilateral negotiations (Part of the Singapore
  Issues)
• Difference of opinion between developed and
  developing countries delayed finalisation
• Policy currently implicit in most of trade
  agreements

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COMPETITION in the Ugandan market

• The Ugandan market is replete with
  anticompetitive practices (Consent Survey, 2003)
• Restrictive business practices Acquisition and
  vertical restricting agreements in beer and soft
  drink sectors
• Price cartels/artificial price fixing - Public
  utilities sector (Water and electricity)
• Market sharing behaviour Passenger transport
  sector (Buses and Taxis)

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How developmental is Ugandas draft competition
law

• Intention good Foster and sustain competition
  in the Ugandan market to protect consumer while
  safe guarding freedom of economic actions
• The draft is sensitive to the countrys
  development need by way of exemptions
• However
• Exemptions are so generic/vague - hence
  vulnerable to omission or misinterpretation. E.g.
  Exemption from full compliance is provided for
  enterprises dealing with national security or
  public interest(???)

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the draft law and agricultural sector

• Sector importance in poverty alleviation not
  explicitly addressed (NB 70 of nationals
  depend on the agriculture sector)
• There is need for flexibility for the draft to be
  supportive to the sector given the unique
  agricultural market characteristics
• Information asymmetry market information not
  readily available to farmers
• Seasonality
• Lack of storage facilities
• Low price transmission from final produce
  buyer to farmers
• No clear quality standards
• Exploitative middlemen

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Observations/implementation challenges

• Appointment of Commissioner and Members a
  political - potential implementation delays and
  not appointing best people
• Initiation of complaints requires understanding
  of the competitive law beyond the understanding
  of an average consumer
• Keeping a look out and reporting on uncompetitive
  practices has a cost that consumers may not be
  willing to incur outcome(s) being a public
  good/service
• Implementation of the law is information
  intensive. Yet success dependent on participants
  having enough information of the market.

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Recommendations on the draft law

• Partial exemptions of some sectors e.g.
  agriculture from full compliance
• Strategic support of mergers among local firms to
  enable them compete with foreign firms
• Clear articulation of the relationship between
  the draft competition law and other national
  policies especially the industrial policy
• Harmonisation of sector regulations which have a
  bearing on competition and the draft competition
  law
• Ensure the independence of the competition
  commission
• The competition law should be flexible
  and dynamics take into account level development
  and able to respond to changing development.
  Should maintain not restrict existing policy
  space

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Way forward

• Intensify stakeholder awareness on the importance
  and relevancy of competitive markets in the EAC
  region
• Put in place a coordinated mechanism to monitor
  and report on uncompetitive behavior in the
  market when the competition law(s) are force
• Have a strong and informed body to safeguard
  against state capture in the implementation of
  the competition policy.
• Lobby for and support to EAC governments to
  devote adequate resources to competition aspect
• A regional entity, recognised by all EAC member
  states, to coordinate/support activities of
  national CSOs as regard market competition issues
  would be relevant

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• THANK YOU