November 26, 2007	Monday	Ziqa’ad 15, 1428

THE World Bank (WB) estimates that Pakistan is losing $7.2 billion (five per cent of GDP) annually due to the non-enforcement of competition laws. It has urged Pakistan to expeditiously enforce competition laws so that the increasing losses could be curtailed effectively by discouraging the growth of cartels and monopolies.

These estimates were believed to have been made on the basis of $144 billion size of the economy, firmed up in 2006-07. The losses, the WB estimates, could be $8.1 billion keeping in view the size of the economy firmed up for the financial year 2007-08.

“I may not be giving you the exact amount of losses but they are certainly in billions and we need to check it and check it thoroughly”, said the newly-appointed chairman of the Competition Commission, Mr Khalid M. Mirza.

He said over the years some cartels had become very strong due to which the country’s overall production efficiency had gone down and was causing a huge loss to the country. The consumers are also experiencing higher prices The new competition laws have been formulated, following the international standards being practiced in the European Union (EU), Singapore and New Zealand.

“Then we have incorporated the Treaty of Rome in our mechanism to improve our competition laws”, Chairman of the Competition Commission said.

Mr Mirza told Dawn that the World Bank, which had offered roughly $8-10 million for the capacity building of the Competition Commission, was equally concerned over the growing presence of cartels.

Asked how the new competition laws could be enforced effectively to minimise the influence of cartels, Mr Mirza said the government needed to introduce heavy fines and penalties to address the issue.

“There used to be a maximum penalty of Rs0.1 million for not following the competition laws which has now been enhanced to Rs50 million over which some people are making unnecessary hue and cry”, he said, adding “the new laws have been made with the assistance of the World Bank and will be implemented in letter and in spirit.

In the developed world especially in the United States and Europe, competition laws were being strengthened further to check cartels and business monopolies. He cited an example of out of court settlement reached recently between the American Express and Visa Company in which the company had to pay $2.5 billion. Had it been decided by the court, he reckoned that the Visa Company would have been required to pay $5-6 billion for not following certain laws and regulations.

The World Bank was of the view that a fine of Rs50 million was just a peanut and should be revised upward to ensure strict compliance to avoid bad business practices in Pakistan.

Responding to the criticism being made by the business that it was not consulted on the formulation of new competition laws and on the amount of enhanced penalty, the chairman Competition Commission said: “How can you seek any advice from those who are involved in violating competitions laws”.

Mr Mirza regretted that a segment of the corporate sector was involved in promoting cartels and monopolies and it could not get away with it. “Now every thing will be according to the law”, he said, adding that there were no arbitrary powers of any member of the commission to misuse his or her authority.

“It is good to know that we have been given the quasi-judicial and quasi-regulatory powers to enforce competition laws. The commission will now be working as a real law-enforcement agency so that the interests of the consumers can be protected”, Mr Mirza added. The commission had been given the powers of a civil court and its proceedings would be like that of an effective judicial body to regulate businesses across Pakistan. Asked about the business concerns on raids on company offices, Mr Mirza said that two judicial officers who were members of the competition, had been authorised to conduct such raids strictly in accordance with the law. “But I assure you that nothing will be against the law”.

The WB, he said, believed that proven or suspected cartels had existed and many still exist in cement, sugar, ghee, auto mobile, fertiliser and other industries. The WB was of the view that cartels were the main impediment to competition and that there was a need to conduct a thorough inquiry to determine what types of anti-competitive conduct were most prevalent in Pakistan, Mr Mirza added.

However, he needs adequate funds to undertake his assignment by having proper office building and other staff. He hoped to have the full support of the government in achieving the objectives of promoting best business practices.

Special Secretary Ministry of Finance Dr Ashfaque Hasan Khan, when contacted, said that he could not immediately say how much the country was losing by not having proper competition laws. “But off course these losses are very high”, he said adding that MCA was a ‘toothless’ body that was why it had been replaced by the Competition Commission. He said Pakistan needed to have best international practices to discourage the formation of cartels which unfortunately did exist in the country. “The new commission has been given certain powers and I am sure this will prove to be an effective organisation to check the growth of cartels,” Dr Khan said.

“We desperately need anti-cartel and anti-monopoly laws and we hope to get to the bottom of the issue through the new commission”, the special secretary to the ministry of finance said.