Lessons Learned from APEC Training Program

Few days ago, APEC in coorporation with Japan Fair Trade Commission (JFTC) and Komisi Pengawas Persaingan Usaha (KPPU) helds APEC Training on Competition Policy. This event took place in Sanur Paradise Hotel & Resort, Bali and attended by representatives of several competition policy agency from Rusia, Japan, Mexico, Chile, Peru, Taiwan, Singapore, China, Vietnam, Thailand, Malaysia, and Chinese Taipei. Here are discussion pointer:

• there are two kind of definition regarding industrial policy which are narrow and broad definition. the narrow definition of industrial policy is policy to promote the economic interests of a particular domestic industry or firm, SOE or private, by providing protection from competition, preferential access to factors of production or to a market for its product or services. otherwise, the broad definition is all the previous policies but to include wider social or infrastructure investment to promote economic development and the welfare of a firm or industrial sector that ultimately leads to increased social welfare.
• the objects of industrial policy are SOEs or private firms may be promoted as ‘national champions’. Some protection may be provided for ‘infant industries’ or for ‘weak firms’ especially in developing countries. SME sector may gain preferential treatment and professional service providers make seek or gain similar protection.
• Several questions arises when industrial policy takes into account. It has to be some mechanism is used to select the objects of protection or privilege. Is a cost/benefit analysis conducted or Is the protection provided time limited has to be addressed. For instance, there has to be assessment regarding justification of national champion policy and the consideration of its objectives.
• It also provides for success assessment tools by composing checklists. First, Is an objective periodic review conducted to benchmark success or failure of the policy? Second, When does government decide that the industrial policy objective has been achieved or is the policy continued indefinitely? and third, Are all the ongoing direct and indirect economic costs fully taken into account?
• Besides above checklists, there has to be mechanism to managing conflicts similar to dispute resolution mechanism. Aspects of industrial policy may conflict with competition policy. Specific exemptions may be granted and special provisions may be invoked to assess mergers in particular sectors. therefore special mechanisms need to be created to ensure regulators and the competition agencies co-ordinate policy.

Each representatives of all guest economies presented their experiences concerning the implementation of industrial policy and their management regarding balances with competition policy.

• China has a policy imperative to consolidate fragmented SOEs to improve their competitiveness and efficiency. Competition policy operates under a new law and three competition regulators are coordinated under a high level committee. Other sector regulators and agencies will be involved n decision making. Implementing regulations are being created and national security review process being developed.
• Japan historically famed for an extensive industrial policy that took priority over competition issues for decades. However, in many cases the outcomes expected by government did not occur. The economic crash of 1990 and external pressure caused a major policy change over the next decade. Therefore strengthened competition laws and more vigorous enforcement have followed.
• Malaysia are extensively use of industrial and national champion policies for decades. There are no comprehensive competition law in Malaysia yet. Internal discussion on introduction of a general competition law continues. Proposed competition law will be limited with extensive carve outs then significant concern amongst industrial ministries and various business actors about impact of any new law.
• Mexico are historically extensive industrial and import substitution policies. Crisis in 1980s caused a reversal of policy including privatization, deregulation and the promotion of competition. Process of increasing powers, institution independence and authority of the competition agency over 15 years. New powers to require federal government to act or not act in the interests of promoting competition. New powers increase transparency in policy making and better appreciation of anti-competitive outcomes.
• In Peru, Until 1980s, there are import substitution and extensive government industrial policies. Since then substantial privatization, deregulation and introduction of competition policies Peru relatively adopted new institutional arrangements.
• Russia experienced huge change in industrial policy in the last 20 years. Recent changes and have strengthened enforcement in practice. Mergers in all sectors are treated in the same way with no special treatment for SOEs.
• Chinese Taipei also experienced major change in industrial policy in 1980s as a result of awareness of need to change economic direction due to bottlenecks and external pressure. Part of the restructuring process included the introduction of competition law. On introduction of competition law a 5 year ‘sunset clause’ was granted to protected sectors. Besides that, Strong advocacy role for agency with government and externally, regulatory effect audits undertaken, advocacy/education role with sector regulators. Examples of successes and resistance Stress on the need for high level political support.
• Thailand focusing on general policy of infrastructure improvement and regulatory update to assist industry to become more competitive. Competition policy implementation still at an early stage.
• In Vietnam, Competition policy was introduced as part of the package of measures to prepare for WTO entry Special exemptions from the law for some SME practices, export cartels, acts to improve international competitiveness. Some conflicts do exist between sector policies and competition policy. Vietnam still on early stage of implementation

Considering the implementation experience from all economies above, there are several conclusion could be derived which are,

• There are potential tensions exist between competition policy and industrial policy
• Clarity of policy objectives assists in resolving conflicts
• Operational measures needed to reduce conflicts and to coordinate policy formation, review progress and improve implementation
• Objective periodic assessment of national objectives is needed especially when circumstances change, for example as the result of the current financial/economic crisis.