Assessment of the socio-economic implications of the Uganda’s DRAFT competition law: addressing challenges at national and regional levels. BY DR M KAGGWA BIEAC REGIONAL WORKSHOP ON MAY 2010 NAIROBI - KENYA

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

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

OBJECTIVES OF THE STUDY  Elucidate on competition policy and its relationship to development and poverty reduction  Assesses the socio-economic implications of the Uganda’s Competition Law  Assess the complimentary role of the EAC Competition policy and law to the Uganda’s competition Law  Recommend on pro-development national competition policy law for Uganda and by proxy for the EAC region

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

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

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)

How developmental is Uganda’s 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 country’s 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(???)

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

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.

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

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 “