Achieving the Goals of the ASEAN Economic Community:
The Role of Regional Competition Policy and Law
Professor Mark Williams
15-16 November 2009
1
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.
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 preeminance.
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.
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, anticompetitive 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.
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.
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
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.
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
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
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
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).
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
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
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
Further issues that
can affect success
Equal distribution of benefits of a procompetition system
Difference in competition culture
Cession of enforcement powers
Differences in market structures
Political-economy influences
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
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
Contd.
Hierarchy of legal procedure
Monitoring and enforcing collaboration
Conflict resolution process
Agency capabilities must fit functions
Review and improvement mechanism
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
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)
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
Thank you!
Professor Mark Williams
[email protected]