Competition Policy and Law and ASEAN’s Economic Integration Agenda

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SYDNEY: 22 May 2013 - The Association of South East Asian Nations (ASEAN) has undergone significant developments since its original inception in 1967 primarily as a regional security bloc.  The year 2007 is particularly important in ASEAN’s history, which saw a blueprint of the ASEAN Economic Community (AEC) affirming ASEAN’s goal of regional economic integration by 2020.  The intended goal has been accelerated five years for the establishment of the AEC by 2015.  Towards this, Competition Policy and Law (CPL) have been identified as a vital vehicle to forward the region’s goal for economic integration.  The aim of this article is to provide an update of the progress made thus far and highlight the challenges faced in this ambitious endeavour which recognises the importance and benefits not only of intra ASEAN trade but also external trade between ASEAN with the international community.

On this basis, the AEC has been premised on four main pillars; first for a single market and production base, secondly for ASEAN to be a highly competitive economic region, thirdly for equitable economic development for the region and finally for ASEAN to be fully integrated into the global economy.  CPL is integral to all four pillars in providing a foundational key to competitiveness towards the creation of a single market easing a free flow of goods, services, investment, capital and skilled labour.  Through this process the benefits of competition can be equitably distributed among consumers and producers in the region and among member states.  It has been visualised that when member states are competitive, ASEAN as a region can compete internationally and be fully integrated into the global economy.

CPL has been developing incrementally in the ASEAN region.  Of the ten ASEAN Member States (AMSs), five have national competition laws with Thailand and Indonesia first introducing them in 1999 which was followed by Singapore and Vietnam in 2005 (both Acts were enacted in 2004). Malaysia is the latest jurisdiction having passed the Competition Act 2010 which came into force last year on 1 January 2012.  The other five AMSs (Philippines, Cambodia, Laos PDR, Myanmar and Brunei) are at various stages of drafting their competition legislation to be ready for the 2015 deadline. The Philippines is likely to be the next jurisdiction having established the Office for Competition within its Department of Justice in 2011 and is currently chair of the ASEAN Experts Group on Competition (AEGC), a regional forum endorsed by the ASEAN Economic Ministers to discuss and cooperate on CPL. 

The content of the competition legislation adopted by the five AMSs while encompassing the main framework for competitiveness varies in different degrees.  Except for Malaysia that does not provide for merger control, all five legislation provide for prohibitions on restrictive agreements and abuse of dominance.  The formula and threshold test as well as the penalty for infringement of these prohibitions also differs.  The coverage of the legislation as well as exclusions and exemptions allowed are unique to each jurisdiction depending on the socio political and economic needs of each member state.  This reflects the diversity in ASEAN; by geographical size (Indonesia as compared with Singapore), historical and legal origins (common law and civil law) and the different pace of economic development (Singapore’s has the highest GDP per capita of US$49, 271 as compared with Cambodia GDP per capita of US$852 (source: Global Competitive Report 2012/2013)).  This is a continuing challenge and a reason for scepticism of the reality of ASEAN achieving regional integration by 2015.

However, despite the seemingly bleak outlook, CPL has achieved a fair measure of outcome in building competitiveness. In particular, Indonesia and Singapore have enforced their competition laws quite successfully.  The Indonesian Commission for Supervision of Business Competition (better known as ‘Komisi Pengawas Persaingan Usaha (KPPU)’) has been active in investigating and has handed down many decisions including decisions against big industry players such as Indonesia’s petroleum industry.  The Competition Commission of Singapore has issued seven decisions for infringement of the anti-competitive agreement provision.  Two decisions were appealed and the Competition Appeal Board has affirmed the Commission’s decision on liability and varied the financial penalties imposed.  The Commission’s only decision on abuse of dominance is significant as it involved a state owned enterprise (the SISTIC.com Pte Ltd case).  The Malaysian Competition Commission has within a year of its establishment made its first decision on 6 December 2012 against a floriculturist association for price fixing.  Competition law has developed gradually in Vietnam with four decisions made in the years 2007 to 2010.  This is a contrast to the position in Thailand which has not succeeded to enforce its competition law. 

At a regional level, efforts have been made to facilitate the establishment of competition regimes with AEGC’s publication of the ASEAN Regional Guidelines on Competition Policy and the Handbook on Competition Policy and Law in ASEAN for Business.  The most recent publication is the Guidelines on Developing Core Competencies for use by staff of competition-related agencies.  Although these documents are not legally binding on the AMSs, they provide a useful starting point to engage on ASEAN CPL and whether it may lead to harmonization or only collaboration and coordination. 

Challenges remain as the lead up time to the proposed regional integration by 2015 draws nearer.  Besides the diverse characteristics of the ten AMSs resulting in competing national interests vis-a-vis a regional interest, common challenges exist in creating awareness of and inculcating competition culture.  Most AMSs also face a general lack of resources and expertise to implement competition policy and enforce the law.  

While there is a general scepticism as to whether and to what extent ASEAN regional economic integration can be achieved by 2015, ASEAN has always prided itself on ‘the ASEAN Way’ of doing things.  In the meantime, more developments can be expected pre and post 2015 as ASEAN forges ahead to be fully competitive in Asia as well as in the international community.