Competition scenario in the Lao PDR

CUTS-NERIAdvocacy and Capacity Building on Competition Policy and Law in Asia (7Up2 Project)Alice Pham-Saykham Vodalet

Introduction

Geographical location, population and other geographical characteristics

Economic performance, structure and other characteristics- The launching of the New Economic Mechanism

(NEM) in 1986- GDP growth rate- Other economic indexes

Economic policies: Industrial policy, trade policy, Privatisation policy, investment policy

Industrial policy

State-Owned Enterprises (SOEs) vs. private sector development

Small and Medium-sized Enterprises (SMEs) development policy

Encouragement of import-substitution industries

Implications for competition

Trade policy

Domestic trade liberalisation- Decree 12 on “Promotion of goods and money circulation”- “One market, one price” principle

External trade policy- Decree 18 on “State monopoly on strategic export and

import goods”- Tariff regimes after liberalisation- Laos’ integration into the regional and global markets

Bearings on competition

Privatisation policy

Decree 17 of 1990 on the Conversion of SOEs to Other forms of Ownership

The “Disengagement plan” Current situation: by 2003 there are only

round 93 wholly SOEs (of which 32 are considered strategic)

Separate negotiation vs. competitive bidding Competition?

Investment Policy

Foreign Investment Law of 1988 (amended in 1994)

Domestic Investment Law of 1994 Intended overhaul Implications on competition

Importance of competition in the economic policy regime The NEM The 1991 Constitution of Lao PDR Article 14. The state protects and expands all forms of state,

collective and individual ownership, as well as private ownership of domestic capitalists and foreigners who make investments in the Lao People’s Democratic Republic. The state encourages all economic sectors to compete and cooperate with one another in expanding their production and business. All economic sectors are equal before the law.

The Business Law No. 03/NA dated 18 July 1994 “All types of operations conducted by enterprises in all

economic sectors are inter-related and competing on an equal footing before the law.” (Art.5).

Market structure and competition Market structure and competition

- Manufacturing sectors- Services and Utilities- Restructuring trends

Barriers to competition- Administrative and other policy-induced barriers- Barriers to competition by private anticompetitive

behaviours

Market structure and competition Monopolistic sectors: Beer, insurance, domestic aviation, electricity, water,

etc Oligopolistic sectors: Telecommunications, petroleum, international

aviation, banking, logging, cement Sectors with competitive market structure: Textile and garment, tobacco, steel,

pharmaceuticals, etc.

Sectoral policies

Electricity: EdL Telecommunications: LTC, ETL, LAT, and Millicom Banking: State-owned commercial banks and

foreign branches Forestry: 03 SOEs and small sawmills Pharmaceuticals: Class I, Class II, Class III

pharmacies- Licensing- Pricing- Operational standards

Consumer Policy Laws and institutions

- No comprehensive legislation on consumer protection- The Prime Minister’s Decree on Goods Price Control (October 2001)- Issues related to standards, quality, testing and metrology- Food safety

The state of consumer welfare in Lao PDR in the framework of 08 fundamental rights: The right to satisfaction of basic needs The right to safety The right to be informed The right to choose The right to be heard The right to redress The right to consumer education The right to a healthy environment

Anticompetitive practices

Cartels- Definition- Examples- In Lao PDR

Restrictive trade practices (RTPs) Abuse of dominance Unfair trade practices (UTPs)

Perspectives on competition policy amongst stakeholders in the Lao PDR

Survey results presented by Dr. Saykham Vodalet (NERI)

Competition Law

The Prime Minister’s Decree on Trade Competition 2004- Objectives- Principles- Scope of application- The Trade Competition Commission

Some critical views

The Way Forward

Establishing the Trade Competition Commission

Building capacity of national stakeholders to effectively implement the Decree

A hybrid approach for both competition and consumer protection