To meet the challenge of maintaining a buoyant economy and well being of consumers, promotion of the concept of free economy is a must. Domestic markets which form the basis of the economy must be ready to compete at home for integrating effectively in global markets. Ironically, factors limiting competition in domestic markets are growing in size thus the case of effective enforcement of competition laws in this setting becomes more important in Pakistan. Broadly speaking, in the absence of effective competitive environment, Pakistani firms are apparently slow to adjust, yield low levels of productivity, lack energy to innovate and are painfully highly concentrated ones which have led to anti-competitive behaviours on the part of firms.
In the recent past, the Competition Commission of Pakistan (CCP) has conducted a number of investigations into alleged cases of anti-competitive behaviour on the part of firms. These cases mostly belonged to firms operating in sugar, cement, vegetables ghee, poultry, aviation, banking, automobiles and telecom sectors. If Pakistani firms want to be sturdier, they must demonstrate a high level of efficiency, innovate aggressively and improve firm-level productivity. These are all prerequisites to prepare for global competition. Large sized private firms and SMEs represent the seeds for growth for the Pakistan economy and hence should be the centerpiece of every policy framework.
That being said, government’s role becomes even more important if Pakistan wants to compete globally. Policymakers’ primary focus should be on increasing efficiency of factor markets, market governance and infrastructure services. As a consequence, we expect thriving markets which reward innovation and punish inefficient firms engaged in anti-competitive behaviour. To deepen the competition level in Pakistan, active policy formulation and its implementation along with institutional reform is the need of the hour. Government’s role should become limited to facilitating rather than regulating the markets. The robust and modern structure of the CCP in partnership with active and independent judiciary can help ensure protection of competition. The flaws in judicial system should be improved which is a major barrier in punishing the culprits and creasing out market irregularities. The CCP claims to have imposed fines of up to Rs7.3b on various firms for violating anti-competitive laws but they are yet to receive single penny due to flaws in our judicial system. The alleged firms are given stay-orders by courts when they are fined by the CCP; hence around 140 cases are pending in the courts.
The era of heavy protection regime (for example automobile, aviation and textiles sectors), subsidies and tariff concessions has to go if Pakistani businesses want to compete both nationally and internationally. Indeed much has been said and written about giving MFN status to India but I think if Pakistani businesses were efficient, innovative and able to produce at lower costs, then the huge market of 1.2 billion Indian consumers awaits us. To be able to compete in the Indian market, cost of doing business at home has to be lowered in the first instance. A World Bank survey of ‘Ease of Doing Business’ placed Pakistan at the 96th position (out of 183 economies) in 2011 which has now slipped to the 105th rank in 2012. Higher barriers such as dealing with construction permits (104), getting electricity (166), paying taxes (158) and registering property (125) are some kick-starters which need to be improved to enable the entry of new firms easier and markets competitive.
Pakistani businesses can only compete globally if domestic markets encourage competition and innovation; businesses demonstrate high level efficiency and equal opportunities are provided to all the players. The author is an Islamabad based freelance contributor, researcher and a trainer. He can be reached at [email protected]
