KARACHI April 10: The existing anti-monopoly law is being updated and it's core principles are expected to be spelt out in the coming budget by finance minister Shaukat Aziz.
It would be designed to check cartels, monopolies and oligopolies that discourage market competition at the cost of industrial efficiency, investment and growth of private sector in general. These unfair trade practices hurt the consumers most.
In recent months, the market has seen abnormal rise in prices of cement, steel, automobile, wheat and other food items. This has induced the government to cut tariff and liberalize imports.
But the Monopoly Control Authority (MCA) has remained inactive, perhaps not to shake the newly acquired business confidence and vitiate investment environment.
The updating of the anti-monopoly law and building of professional capacity of Monopoly Control Authority was also necessary before MCA initiated any legal proceedings against errant groups. But it is clear, that the future development of a market competition cannot be made hostage to monopolies, cartels and oligopolies.
The issue has assumed national importance as indicated by public criticism against soaring prices. Amendments were moved by a PPP member Naveed Qamar in the monopoly law before the Parliament to check what he called manipulations particularly of cement, sugar and steel prices.
Parliamentary finance secretary Omar Ayub responded by saying that the government was aware of the need to make changes in the monopoly law and to make MCA effective. Finance Minister Shaukat Aziz told this scribe that the law would be updated and unveiled in the next national budget.
Perhaps, a big challenge that policy makers face in preventing monopolies is the manner in which the privatization of major state enterprises comes about.
The government recently has set up a committee of senior officials to examine how to privatize PTCL, conscious of the fact that if the company is sold to a single strategic investor, it would be a giant monopoly in the private sector. To some extent, the state enterprises are subject to social controls which go away with privatization. Regulatory authorities often become ineffective in dealing with powerful corporate entities as recent fiascoes in the United States and Europe demonstrate.
Currently, the sensitive strategic assets, nationalized in early 1970s, are being privatized. Apart from PTCL, these include Pakistan State Oil. Former minister for petroleum Aminuddin is believed to have advised the government that PSO assets should be split so that 75 per cent or more market share commanded by the company, along with its massive strategic assets, was not sold to a single group of buyers.
With a market share in the region of 30 per cent in Pakistan, Shell had then indicated its interest in buying PSO assets which did not duplicate its own operating assets, in case government decided to split the company for privatization.
Sources in Shell, a global company with world wide experience, say that the company was never interested in buying PSO. The reason was simple. It would have created a monopoly with 90 per cent market share. The company would have got all the blame for everything that went wrong.
Officials, in the government, were then of the view that splitting the company assets would create a lot of complications specially with the shareholders that could include litigations. The Privatization Commission and the government rejected the idea of splitting of assets.
Of course, there is also a point of view that such strategic assets like PSO and PTCL should not be privatized.
The market perception is that Pakistan may call fresh bids for sale of PSO as the economy has improved and it may be able attract more buyers at better price.
Yet, it would be advisable for the government to ensure that privatization would not proceed in a manner to create monopolies and cartels. It is as important as an updated monopoly control law and an effective MCA.
