1 Restrictive Product and Factor Market Regulations as Major Barriers to Competition The case of Ethiopia

2 1. Background: What the paper is about Competition policy an essential aspect of the legal infrastructure of the transition (economic reform) The challenge of establishing a competitive market – barriers to competition: private & government –Competition policy/law and its applicability Restructuring incomplete-competition policy not fully addressed Competition law much room for discretionary decision Conflict of interest: a newly emerging phenomenon arresting competition Aim of the paper: show that barriers to competition are largely gov’t policy induced rather than private sector practices

3 2. Evolution of Economic Policy 2.1 Ethiopia under central planning Marginalizing private sector & regulating market – hence no market competition, however, –The merit of competition acknowledged - Controlled contest –But Failed to introduce entrepreneurship, technological capability building, consumer welfare 2.2 Restructuring the economy (under SAP) Deregulating markets & reinstating the private sector Financial policy Trade policy Investment policy Privatization

4 3. Major barriers to competition 3.1 Pubic sector dominance Natural monopolies and heavy dominance Structure of the economy and competition –non-marketed GDP = 35% –Marketed under state monopoly & dominance = 17% –marketed – potential competition = 48% However, regulatory distortions & sectional interest limits competition even in the latter case - 48%. 3.2 Labor market distortion 3.3 Lack of property rights for land 3.4 Distorted financial market

5 3. Major barriers to competition 3.5 Lack of transparency 3.6 Sectional interest and weak enforc’t of contracts 3.7 Unfair competition from party-affiliated enterprises 3.8 Discriminatory regional investment policy 3.9 Double standard in housing sector policy

6 4. The Trade Practices Proclamation 4.1 Key elements of the proclamation and the gaps: not exclusively on competition law - includes anti- competitive practices, abuse of dominance, unfair competition trade policy, anti-dumping, and price regulations Anti-competitive practices: –Vertical agreement/restraint not articulated –Discretionary decisions left for MOTI Abuse of dominance: Not clearly defined Unfair competition: it includes trade laws, price regulations, etc. Exclusions: –mergers, takeovers, & other forms of concentrations –Cross-boarder, consumer protection, environment

7 4. The Trade Practices Proc. Cont … 4.2 Institutional structure The structure of the competition authority –MTI is the highest decision making body –Investigation Commission under MTI established Commission is a department under MTI, hence has no separate budget of its own, no secretariat Commission entrusted with day to day activity, and submits its decision to MTI – MTI can accept Commission decision, partially or fully, or reject totally Have no final say on competition matters

8 4. The Trade Practices Proc. Cont … –MTI decision can be challenged; appeal can be made to the Federal High court 4.2 Composition of the Commission According to the proclamation: Government, Private sector and Consumer Society In practice: Five high level government officials make up the Commission Chair person appointed by the PM

9 4. The Trade Practices Proc. Cont … 4.3 Reconsiderations required of the structure and composition of the Commission Structural independence of the Commission Inclusiveness of the Commission at least as per the Proclamation Commission independence from MTI for budget and secretariat Commissioners have to be appointed by parliament (as all the rest) and report to parliament Consumer society and organized private sector (Chamber) should be able to lodge suits Decision of the Commission should be public (announced and printed)

10 5. Competition advocacy and the role of civil society Consumer Society must have a role in the formulation and enforcement of Competition law Commission not clearly mandated to make advocacy, though it might do so in line with other articles of the proc However, Commission is not well structured to handle concerted advocacy program on its own Advocacy needs inclusiveness: private sector, Consumer society, other civil society (EEA), labor, etc.

11 The legacy: Central planning & section interest Essential measures: –Relinquish sectional interest for national interest –Privatize critical means of production: land, large firms, housing –Open up state monopoly for private: telecom, power, etc. –Revise the competition law as suggested above 5. The way forward

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