1. 1 Achieving the Goals of the ASEAN Economic Community: The Role of Regional Competition Policy and Law Professor Mark Williams 15-16 November 2009

2. The Goal of ASEAN Economic Community  The ASEAN Economic Community (AEC) shall have the goal of regional economic integration by 2015.  AEC envisages the following key characteristics:  (a) a single market and production base,  (b) a highly competitive economic region,  (c) a region of equitable economic development, and  (d) a region fully integrated into the global economy.  The AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.

3. Role of Regional Competition Policy  Establishing a free trade area for goods and services involves the removal of legal barriers at the border or inside the country that discriminate on grounds of national origin.  Once liberalization of these rules has been achieved and implemented, the foreign goods and services should have greater access to the domestic markets of member countries within the FTA.  However, removing the legal/regulatory restrictions at the border does not mean that new players can necessarily enter or succeed in new markets.  Regional competition policy seeks to encourage a more competitive market within the FTA that will give all FTA consumers more choice of goods and services and hopefully ensure better quality and lowest competitive prices.  However, local market structures, within national boundaries, and the behaviour of dominant national firms and agreements between incumbents can frustrate the attainment of the goal of more competitive regional market by attempting to retain national pre- eminance.

4. Role of regional competition law  A regional competition law will seek to prevent the partitioning of the FTA along national boundaries and encourage the creation of single internal regional market.  The law will take a regional perspective, not a national one.  The enforcement agency will be guided by regional considerations, not national ones, that might conflict with the market integration objective.

5. Role of National Competition Law  If a government accepts that a more competitive domestic market will increase consumer choice, improve the quality of goods and services available and ensures that only competitive prices prevail, private restrictions on competition through unilateral abuse of market power, anti- competitive agreements and overly concentrative mergers must be tackled.  This is usually achieved through the adoption of a competition law that provides for the investigation of abuses and provides suitable remedies to punish, prevent and deter similar anti-competitive conduct.

6. The EU Model  The EU is often thought to be the best example of a successful regional economic integration policy  Regional competition policy was one of the tools used to help create a single EU market.  In addition to the removal of trade restrictions at national borders, the EU developed an active regional competition policy and law and restrictions on national government subsidies to national industries (state aides) that distorted the regional market.

7. EU’s regional economic integration model  Regional community founded on the Treaty of Rome  Treaty provided legal rules enforceable by states and private citizens in national courts and at the regional court  Regional law regarded as superior to national law  Member states obliged to accept rulings adverse to their policies  The Four Freedoms – goods, services, labour and capital seem as fundamental to establishing the internal market

8. Competition policy and law at EU level  Regional law provisions to help establish a single internal market for goods and services by progressively reducing regulatory barriers to market entry  Competition law and prohibition of ‘state aides’ seen as a essential complement to free movement, so allowing a level playing field, for market competition  The EU competition policy and law attempts to prevent the erection of private (firm-level) barriers to entry to markets (exclusionary abuses) and anti-competitive activities (hard-core cartel activities) that undermine the benefits of competition especially where such actions maintain or strengthen the status quo in national markets and so preventing regional market integration.

9. Attributes of EU competition law enforcement  Strong regional competition authority that acts independently of the member states  Adequate financial and human resources to investigate breaches of the law  Enjoys police powers of investigation – search and seizure of evidence, interrogation of witnesses etc  Power to apply financial punishment in respect of offences and impose injunctions (cease and desist orders)  A regional court of justice to hear appeals from the Commissions decisions and interpret the treaty and regional laws  Devolution of power to national authorities in 2004

10. Reasons for EU Competition policy success  Member state commitment to the benefits of a single EU market  Rule of law – framework and implementation  Institutional strength  Sufficient resources  Clear market integration objective  Development of capacity of national agencies  Creation of good inter agency cooperation

11. AEC steps toward economic integration  Free trade area for goods – removal of tariffs and non-tariff barriers, adopt unified rules of origin and customs procedures by 2015  Liberalisation the trade in services – establishment and offering of services – professional services  Liberalise cross-border investment – free and open investment by 2015  Freer movement of capital – strengthen, integrate and develop capital markets and movement of capital  Freer movement of skilled labour

12. How can regional competition authorities in small and developing economies work effectively? See Gal & Wassmer, Regional Agreements of Developing Jurisdictions: Unleashing the Potential in Competition Policy and Regional Integration in Developing Countries Bakhoum et al Eds, Edward Elgar (2012).

13. Small and Developing Economies: Constraints on implementation of national competition law  Developing countries with new competition laws often face considerable problems in implementing the law effectively which include:  Enforcement resource constraints – human and financial  Enforcement capability constraints – evidence gathering esp. in international cases, being a credible threat to MNCs, level of available sanctions  Public choice limitations – political pressure from interests groups and government  Weak competition culture  Ensuring certainty and predictability of decisions and comparability with neighbouring countries

14. Benefits of a Regional Competition Agency  Reduce resource constraints by encouraging pooled or shared resources  Improve effectiveness in cross border investigations, provide a credible threat to MNCs especially in terms of sanctions  Mitigate direct political pressures on national agencies  Enhance competition culture on a regional basis  Assist in enhancing regional consistency and predictability of decisions

15. Conditions required for the success of regional competition law  Member states accept that each of them will benefit from national and regional competition policy  Acceptance of direct costs – institutional set up and operational costs  Acceptance of indirect costs – limits to sovereignty and that specific decisions of the regional authority might be adverse to the interest of a particular member state

16. Further issues that can affect success  Equal distribution of benefits of a pro- competition system  Difference in competition culture  Cession of enforcement powers  Differences in market structures  Political-economy influences

17. Additional obstacles to success  Sequencing and monitoring  Poor institutional design  Relationship between national and regional agencies  Poor design of jurisdictional reach and powers of detection and punishment

18. Hints for success  Clear objectives  Solve problems of taking effective collective action  FTA limited to similar economies (so enabling all to benefit equally from pro-regional competition policy)  Modes of cooperation  Enforcement priorities

19. Contd.  Hierarchy of legal procedure  Monitoring and enforcing collaboration  Conflict resolution process  Agency capabilities must fit functions  Review and improvement mechanism

20. ASEAN Economic Community  AEC has several priority integrationareas  Agricultural products  Transport – air, land and sea  Telecommunications – telephony and internet  Energy – oil, gas  SME enhancement Each of these sectors may well have competition-related issues that both national and regional authorities may have to address. http://www.aseansec.org/5187-10.pdf

21. Benefits of successful regional and national competition policy and law  Allows consumers and business access to a greater range of products and services  Setting of competitive prices  Encourages economies of scale and scope across national boundaries, reducing unit costs of production and so challenging MNCs  Improves national and regional competitiveness  Reduces national rent seeking behaviour and possibilities for national-based corruption ( for example in making bids for public works contracts more transparent and available to a wider rage of contractors)

22. Conclusion  Regional competition policy and law has clear advantages and benefits for improving national and regional competitiveness  Integrating regional markets is not a simple or an easy task and demands:  Political will and determination  A well-thought out regional legal structure  Robust and well resourced regional institutions that are independent of national political interference  A transparent decision-making process  Judicial review  Proper and effective implementation of decisions

23. Thank you! Professor Mark Williams afmarkw@polyu.edu.hk