CUTS Centre for Competition, Investment & Economic Regulation (C-CIER) is implementing a two-year project entitled ‘Advocacy and Capacity Building on Competition Policy and Law in Asia’ (7Up2), supported by the State Secretariat for Economic Affairs, Switzerland (SECO), the Swiss Competition Commission (COMCO) and the Department for International Development (DFID), UK. The project endeavours to accelerate the process towards a functional competition policy and law for selected countries (Cambodia, Lao PDR, and Vietnam in Southeast Asia, and Bangladesh, Nepal and India in South Asia), and advance an enabling environment for the law and policy to be better enforced.
The project is undertaken in partnership with renowned institutions in each of the project countries. Details of the project are available at http://www.cuts-international.org/7up2.htm

1. A general one about the competition scenario in Vietnam, as per the research findings of the project, together with specific recommendations, made by Mr. Pham Hoang Ha, CIEM expert and author of the Vietnam Advocacy Document;
2. A presentation on the Competition Law 2004 of Vietnam, made by Mr. Tran Anh Son, Deputy Director of the Vietnam Competition Administration Department VCAD, Ministry of Trade, Vietnam;
3. A presentation on consumer protection and competition policy and law in Vietnam, made by Mr. Do Gia Phan, Vice President, Vietnam Standard and Consumer Association (VINASTAS); and
4. A presentation on training and education on Competition Policy and Law in Vietnam made by Mr. Pham Duy Nghia, Head of the Law Faculty, Hanoi Law University.

Cambodia Aims to Move Beyond Textiles
The first Cambodian Expo Exhibition (EXPO) 2005 was organised by the Ministry of Commerce from 24-27th March 2005. The concept of this exhibition was to display in a simulated showroom way a wide range as possible of the various existing Cambodian products and services. The event also served to ‘raise awareness’ with the donor community and the civil society that there could be more Cambodian products existing than they might have thought. Thus, in accordance with each product’s or service’s peculiarities and potential, donors could be lobbied to provide technical assistance for specific product/service improvement projects through a more comprehensive assessment study to be conducted at a later stage.

With a population of 13 million, Cambodia is unlikely to be able to develop another major industry, like it has done with the garment sector. Garments account for about 80% of the country's exports, and now that the US has dropped its restrictions on Chinese-produced clothing, Cambodia's garment industry looks extremely vulnerable.

The tourist trade is booming, thanks to the temples of Angkor, but other options are urgently needed as the country's growth rate is slowing down. As an eye-opener for local and overseas investors, the Expo served its purpose, but there is an overall need to find ways to drive the Cambodian economy forward.

(BBC News, 29.03.05)

New Labour Law Tougher for Garment Workers
About a quarter of a million people work in Cambodia's garment factories, and each one of them supports an average of five people with wages that start at US$45 (£25) per month.

The recent launch of a guide to the Labour Law in Cambodia turned into a heated debate, with union leaders from this sector taking to the floor to vent their anger at the Labour Minister.

The Garment Manufacturers' Association of Cambodia, (GMAC), has drawn up a list of suggested changes to the Labour Law. They include the closure of workers' crèches; cuts in leave entitlement and extra pay for nightshift workers, and restrictions on the recognition of unions. GMAC argues that factory owners in neighbouring countries like Vietnam and Thailand do not have such generous provisions for garment workers.

Cambodia cannot compete on price against giant producers like China, but its commitment to labour standards has given its garment industry a good chance of surviving the post-quota era. But the new Labour Law could make work tougher for garment workers.

One of the speakers, Chuon Mom Thol, the leader of the Cambodian Confederation of Trade Unions said, “The employers are just thinking about finding buyers, rather than working conditions”. The International Confederation has also been critical, issuing a report suggesting that workers' rights were being infringed. Although the International Labour Organisation (ILO) monitors working conditions, the head of their Cambodian factories project, Ros Harvey, admitted that some things were beyond their control.

How to address the concerns of the factory owners while maintaining Cambodia's reputation as a safe haven for buyers is a balancing act that the government cannot afford to get wrong. About 30,000 garment factory jobs have gone so far this year. One way or another, the policy-makers' next move could have serious consequences for the whole country.

(BBC News, 30.05.05)

India

Does Competition Law Help the Poor?
Many think that competition policy and law are the tools for the rich and urban society, while some believe that one doesn’t need any competition rules at all. They are naïve. Another question, which is often raised, is how competition law would help an illiterate and poor society. For example, the agricultural marketing system in India itself is so anti-competitive that even small farmers do not get the full value of their produce, which is usually cornered by middlemen.

This is aided by archaic laws, which the state governments in India are unenthusiastic to modify, probably to satisfy some vested interests. A recount of the tale of a poor peasant widow, who used the law to get redressal against another scourge of our society, the moneylender, and the collusion, which prevails, would be illustrative in this regard.

Rukmini Devi, a poor elderly illiterate widow, lives in a village near Chittorgarh in Rajasthan. She had to sow her unirrigated 5-bigha farm in time, but did not have the resources to buy the seeds, fertiliser, etc. Fortunately, soft loans were available at the local co-operative bank situated at Rashmi, the sub-divisional headquarters under the Government’s integrated rural development scheme.

In view of the frauds, who are ubiquitous, illiterates are required to affix two passport-size photographs to the loan documentat. Rukmini approached one of the two studios to get her photo taken. When she went to collect the pictures, she was given one reason or the other for non-delivery.

The other studio did not help, when approached. This meant that she could not obtain the soft loan. As a result, she was forced to go back to the usurious moneylender to get the money, because the rain Gods would not have waited for her loan. Both the studios acted in cahoots with the moneylender.

Through a local consumer activist, she complained to the local district forum under the Consumer Protection Act against the restrictive trade practice and the cartelised activity that the two studios were engaged in. She won the case and collected damages from the studio and the cartel was broken.

This real life example shows how cartels can operate at all levels in India and sap the people and the economy. It also shows that the poor do benefit from action against competition abuses, if they can access justice.

The same situation can be projected onto the larger national canvas. But new laws such as the new Competition Act, 2002, alone cannot break cartels; we need policies to be amended to ensure that competition prevails, and the people benefit. Policies include trade policy, regulatory policy, etc.

On another occasion, a poor villager complained that he can now get a good dry cell for Rs 2 each, which he had been purchasing for Rs6, and felt very indignant. These cells were of Chinese make, and these are now available in India because we have had free imports of consumer goods.

This was due to a trade policy measure that enabled prices to come down. A counter argument often heard is that the small units making such consumer goods are closing down as they cannot compete against the cheaper imports, thus workers are getting thrown out of jobs. In fact, if one looks at government data, the number of small-scale units, and the resultant employment and exports, has actually been on the rise.

Indeed, some units will shut down due to attrition, while many new ones will continue to be set up, perhaps in newer areas. If we just take a look at the ballpoint pen industry, then we can see the change, which has been brought about. True, many small and tiny units making shoddy and leaky ballpoint pens have shut down, while big brands have now occupied the scene. But aren’t ball point pens purchased by the poor also?

So much about the goods sector. Let us look at the services sector. Independent regulatory policies in the utility sector is a good example of a competition policy measure meant to protect the interest of poor consumers. It does several things for the benefit of the poor, such as universal supply obligation enabling firms to supply its services to the poor, even in far-flung areas. Alternatively, it provides for budgetary support for the poor.

The policies are required to oversee consistent supply at benchmarked quality and quantity and provide a window for public participation in policy formulation and tariff-setting. This in turn, will reduce corruption and make available an easy redressal system for the poor to resolve their grievances.

To sum up, the policies are required to increase overall efficiency, thus furthering welfare gains. Indeed much more needs to be done as far as the regulatory and supply situation of our utilities, but one cannot argue against the utility of the framework.

(Pradeep S. Mehta, The Economic Times, October 28, 2005)

Lao PDR

Quality Essential for Greater Market Share
Six industrial companies in Vientiane plan to upgrade their quality control in all areas of production and service in line with the international standards set down by ISO9000, said Senekham Vongvoralath, Deputy Director General of the Industry Department.

He said that the improvements would enable products to compete with both locally produced and imported goods, as well as in the export market. The improvements included total quality management, knowledge management, benchmarking, productivity measurement, factory automation, industrial engineering and information and communication technology.

The six companies are Vientiane Steel Industry Company, Pan Motor Electric Industry Company, Phetlaiphone Concrete Company, Pharmaceutical Factory No 2, an animal feed factory and a Lao furniture company.
Phetlaiphone Concrete Company Director, Mr Pheth Vongkhanty, said, “We thought that management in our company was good, but when the UNV Japanese technicians visited us, we learned otherwise”.

Mr Pheth said what needed most improvement were the work styles of employees, especially their working methods in areas such as filing, record keeping, note taking and cleaning.The project will take about six months. Next year some of the companies will be selected to present their changes in quality control to a panel in Japan. “Every company must improve; if not, it may not survive in the future”, observed Mr Pheth

(Vientiane Times, 21.09.05)

Coffee Group Restructures
The ‘Lao Coffee Association’ came into existence by modifying the old ‘Lao Coffee Export Association’ with the consensus of coffee growers and others involved in the business of coffee.

The change would bring farmers, technical advisors and businessmen together, making all steps in the cultivation and export of coffee easier and more efficient, said Mr. Sisanouk Sisombat, Director of Lao Commodities Export Company Limited, the newly-elected chairman of the association. “It will open the doors to full participation by all those involved in coffee production and export” he added. Coffee producers, exporters and buyers would work together and the whole process will be much easier when negotiations are called for.

Vice-Chairman of the Lao Coffee Association, Mr Hounla Manichanh, said that the structure of the previous association involved only exporters. “When everyone works together in a group, it will centralise the production process”, Hounla opined.

Before the change in the association, around 18 businessmen were registered as members. Sisanouk said that he was now waiting to learn how many people would become new members.

Coffee is one of several Lao products exported to international markets and a lot of overseas buyers are well aware of the excellent taste of Lao coffee. Many countries would like to buy more, but the crop is difficult to grow and producers cannot meet demand.

Most coffee is grown in the three southern provinces of Champassak, Xekong and Saravan, on land covering more than 44,000 hectares. In the first six months of this year, these provinces have exported 6,800 tonnes of coffee beans, generating about US$5.5mn.

(Vientiane Times, 30.09.05)

Lao’s Emerging Cooking Oil Market
Laos is emerging as a producer of organic cooking oil. The country's first organic cooking oil factory will be run by Wilaikul International Company, and will start production next year. The factory will be capable of producing 34,700 litres of oil, and use 288 tonnes of soybeans per day. The company will target the overseas market.

Wilaikul is in the process of promoting soybean cultivation using organic methods and has provided soybean seeds and rhizobium (a chemical-free fertiliser) along with technical training to farmers.

On the other hand, a local cooking oil company, the Sengsavang Food and Plastic Production (SFP) plans to take an 80 percent share of the domestic market next year, ousting imported oil, which currently has a 40 percent share. Its Chief Administrator, Mr Santi Louangsuvannavong, said, “Later this year we will have a 50 percent market share and feel confident that we can increase our share to a further 30 percent next year if sales continue to expand at the same rate”.

The company also plans to import a machine, which will make 18-litre tin containers for the oil, which the company currently imports. The machine will have the capacity to produce 300 containers per hour, but the raw materials necessary to make them will have to be imported.

Santi said that the company has put on hold its plans to grow palm and soybean as raw materials so that it would no longer need to import them, as this has been assessed to be too expensive at present.

SFP imports bulk cooking oil from Malaysia and Thailand. It filters the oil and fills its own-labelled containers, making its bottles from Thai plastic. The company also makes and supplies drinking water bottles for the Lao Brewery Company.

(Vientiane Times, 30.09.05)

Nepal

Sustaining Reforms in Nepal
The World Bank recently signed two grant agreements with His Majesty’s Government of Nepal in Kathmandu, totalling US$35mn.

The first grant of the US$32mn signed will finance essential road infrastructure in rural areas. The Rural Access Improvement and Decentralisation Project hopes to address one of Nepal’s main constraints to economic growth and poverty reduction: the poor access to markets and services needed by residents in remote, rural and hilly areas of the country.

The project will be implemented in 20 districts across the country through two components: (a) rural transport infrastructure improvement in participating districts; and (b) capacity building and advisory services to the Department of Local Infrastructure and Agriculture Roads (DOLIDAR) and the participating District Development Committees (DDC).

A second grant of US$3mn signed will help finance the technical assistance needs of Nepal’s comprehensive reform agenda. The Economic Reforms Technical Assistance Project is structured to provide flexibility in the use of funds, and can be used to finance the hiring of skilled professionals, consultants and trainers, with a particular focus on using qualified Nepalese personnel from the public and private sectors, as well as the diaspora.

“The World Bank believes that these two new projects are consistent with the innovative development approach Nepal has pursued in the last few years and hence it believes that providing financial support to them is appropriate”, said Ken Ohashi, the World Bank Country Director for Nepal, in a statement released after the signing. “Whether the Bank can continue to provide strong financial support in the coming months will depend heavily on the demonstration of political leadership in reinvigorating the pace of reform”, he added.

(World Bank News Release, 01.08.05)

Export of Carpets Increase
The export of Nepalese carpets, one of the major foreign currency earners, has increased in terms of exported quantity and price from mid-August to early September 2005 as compared to the same period the last year.

According to the statistics of the Carpet and Wool Development Committee (CWDC), the export of carpets grew by 2.15 percent, while the price increased by 4.63 percent this year as compared to the same period the previous year.

A total of 159,359 square meters of carpet was exported to Europe and America during the period while it was 156,013 square meters last year. Likewise, the amount increased to US$8,445,311 up from US$8,071,783 compared to the two periods.

The Executive Director of the CWDC, Gehendra Bahadur Bajracharya, said that the export could further rise in the future as the season of export of carpets started recently. He informed that the rise was due to the rise in the export of high quality carpet to America and Canada.

(www.nepalnews.com, 19.10.05)

Vietnam

MPT to Investigate Sofitel Plaza Saigon for Overcharging on Calls
The Ministry of Post and Telematics of Vietnam would establish an inter-sectoral inspection team to look into allegations that the Sofitel Plaza Saigon overcharged clients on international calls to the tune of VND 1bn.

The inspection team would include representatives of the Ministry of Finance (MoF), the General Department of Taxation (GDT) and the Vietnam National Administration of Tourism (VNAT).

The group would continue its investigation, though the HCM City People’s Supreme Court of Appeals on September 12, 2005 overturned the confiscation of over VND1bn that the hotel illegally collected from its clients.

According to the HCM City People’s Court of Appeals, on June 7, 2004, the Chief inspector of the Ministry of Post and Telematics issued a decision on confiscating over VND1bn that Sofitel Plaza Saigon collected illegally from its clients. However, the amount of money in question was not defined exactly, prompting the court to halt the case temporarily.

In their investigation, MPT officials directly checked 41,200 invoices containing the charges in question, but limited their work to direct international calls (IDD). Also examined were HCD (Home Country Direct) international phone calls, for which, investigators discovered, the hotel set its own charges, contrary to the laws.

Left out of the investigation were local, inter-provincial and mobile calls, all of which would be included in a closer scrutiny pending a decision by the appeals court.

(VietNamNet, 20.09.05)

Shipping Agencies Propose Hike
Representatives of over 120 cargo carriers and marine transport associations chalked out a plan to increase cargo fees on key routes for tackling financial difficulties caused by the sudden increase in petroleum prices.
According to the plan, to be submitted to the Government soon, maritime carriers have proposed to increase charges by VND15,000 (US$0.9) per tonne on the key Hai Phong-Da Nang-Quy Nhon route, VND22,000 per tonne on the Hai Phong-Nha Trang-Sai Gon route, and VND35,000 per tonne on the Can Tho-Sai Gon-Hai Phong route.

Transport enterprises were also planning to seek an extension of 9to 13 years on repayment of ship building loans from banks, according to the Thai Thuy Maritime Transport Association of the northern Thai Binh Province.
Nguyen Duc Nghien from Thanh Hoa Province's Hoang Hoa Transport Cooperative said that many cargo carriers would have to stop their services if transport charges are not hiked in the near future.

However, businesses would find it difficult to implement the proposed new fares, as cargo rates vary for goods and are not charged uniformly by by shipping agencies.

According to Pham Thi Thuy, chairwoman and on the board of directors of the Huyen Trang Joint-stock Company, , increasing fees was not the best way to tackle financial difficulties of the maritime transport sector as there was no ceiling on cargo fees. “It's necessary to set ceiling prices before levying a surcharge”, Ms Thuy said.

Unhealthy competition among private cargo carriers through arbitrary reduction in transport fees would also make it unfeasible to increase charges, she added.

(VietNamNet, 08.09.05)

Promotion or Predatory Pricing: Does Viettel Violate the Competition Law?
Viettel, a newcomer in the market for mobile phone services in Vietnam, recently launched a huge promotional programme in September 2005, one never undertaken in the country before. To celebrate its one-year operation, the army-run mobile service provider offered unlimited free first calls within the network every day. The number of such calls during the promotion, from September 20 to November 3, has been estimated to reach up to 55 mn with billions of 6 - second blocks.

Viettel has also offered free connection services for new post-paid subscribers and doubled the account value for new pre-paid subscribers. Viettel also cut mobile phone subscription fees by VND10,000 to VND59,000 per month starting October 1, 2005. The corporation management board even announced that it would also keep the subscription fees 10 to15 percent lower than other mobile phone networks.

Many subscribers have warmly welcomed this move of Viettel. Others, however, remained sceptical that the quality of services might not match the largeness of the promotions. Analysing from the angle of the Competition Law 2004 of Vietnam, many also asked whether such a promotion constituted an act of predatory pricing – a violation under this law.

The Ministry of Information and Telematics (MIT) said that it does not encourage competition by reducing service charges, but companies should take part in sustainable competition to develop and hold increasing market shares. They should compete by improving the quality of services, and providing services in packages suitable to different groups of customers.

Le Nam Thang, Deputy Minister of Information and Telematics, stressed that the ministry encouraged businesses to compete by reducing production cost and raising productivity. If businesses only strive to win the race in reducing charges, they will be unable to develop and compete with foreign businesses when Vietnam opens the door to this market.

Do Thang Hai, Deputy Director of the Trade Promotion Department, Ministry of Trade said, according to the current Law on Commerce (not the amended Law on Commerce which will be effective from January 1, 2006), promotions for a product/service could not exceed 30 percent of its market price. Even the amended Law on Commerce only allowed a promotion rate of 50 percent compared to a product/service’s market price. Viettel’s promotional programme is, therefore, a violative act under the Law on Commerce of Vietnam.

On the other hand, Tran Anh Son, Deputy Director of the Competition Administration Department under the Ministry of Trade of Vietnam, opined that Viettel’s offer of free connection services for new post-paid subscribers was in line with Section B, Article 181 of the Law on Commerce, and that the competition law does not prohibit such promotions. Answering questions whether Viettel’s move might be an unfair competition practice to attract competitors’ clientele, or a predatory pricing conduct, Mr. Son said that the provision of the competition law on predatory pricing only applied to dominant enterprises with more than 30 percent market share, while Viettel controlled only 10 percent of the market at the time. He stressed that Viettel’s pricing behaviour was not predatory and did not violate the Competition Law.

(VietNamNet, 24.09.05)