Competition
Law, Part 3
In
addition, competition law and policy enables small and medium sized enterprises
to enter the market, therefore it can be implemented as an alternative
to industrial policy based on strategic policy, which has been regarded
as non-neutral government intervention. Hence, competition law not only
enhances consumers' interest, it also helps small and medium sized firms
to compete equally with other firms in the regional economy, again while
complying with the principles of liberalisation on a non-discriminatory
basis. Additionally, the state still plays an important role in preventing
market failure so that ASEAN countries may feel confident in their roles
of monitoring the behaviour of the private sectors as they still prefer
to play their part in overseeing economic transactions, and do not leave
the private sectors alone to interact with each other as in neo-liberal
ideology. Therefore, since ASEAN countries generally lack national competition
laws (as will be discussed in section1.2), it would be advantageous for
ASEAN countries to launch an effective comprehensive competition law into
the region, in parallel with the implementation of the trade and investment
liberalisation process.
As
regards foreign investment, the implementation of competition laws in
ASEAN countries would ensure the realisation of more advantages from liberalising
the entry, establishment, and operation of foreign investors, because
competition laws would regulate and control mergers and acquisitions and
the abuse of dominant market power in the ASEAN economy. The fear of economic
conquest by powerful foreign TNCs might be better dealt with in this way
rather than by the investment screening process employed by all ASEAN
countries until now. The implementation of competition laws and policies
in the ASEAN region could essentially help to eliminate the currently
somewhat restrictive investment laws and regulations, even though actually
some investment restrictions are in fact employed in almost if not all
countries (Geist, 1995: 673-717)(7), not
only in ASEAN. The implementation of competition laws in ASEAN countries
along similar lines to those implemented in other countries may help bring
their laws into alignment with a possible future general agreement on
the regulation of foreign direct investment(8).
1.1.2
The Interaction between Competition Laws and Investment Laws of ASEAN
Countries
Currently all ASEAN countries have employed a screening process and applied
pre-entry requirements to all foreign investors. There are also some regulations
to control foreign investors/firms from being a dominant firm in the economy,
for instance, limitations on foreign equity/ownership, and divestment
requirements. These laws and regulations can be used to prevent foreign
investors from merging with or acquiring a local firm, as they cannot
own shares above a specified limit(9).
Foreign firms also cannot merge with or acquire other foreign firms if
their equity in the new company is beyond the equity ratio set by the
laws. Obviously, under this condition, ASEAN countries need competition
law to control mergers & acquisitions. Even though ASEAN countries
have been relaxing some regulations concerning the equity ratio of foreign
investors, this has been applied on a case-by-case basis under specific
conditions. Nevertheless, these regulations do not control local firms,
or prevent them from merging with or acquiring other local or foreign
firms.
Part
4
_____________________________________________________________
(7)
Geist surveyed national investment laws in 11 countries from every region
of the world and found that every country, including the US and the UK,
which are most liberal, employ common restriction on entry of foreign
investors in specific areas that affect economy or security of the country:
restricted industries. Geist further found that the convergence of FDI
policy has led to significant similarities in the standards and procedures
applied to the admission of FDI internationally. The countries surveyed
have adopted general policies of permitting FDI subject to certain exceptions.
The almost uniform uses of a notification and/or prior approval procedure
are widely used.
(8)
Geist, 1995: part III the framework for a General Agreement on the regulation
of foreign direct investment.
(9)
Generally foreign ownership or share equity cannot excess 49% of the total
share, except in the case that the company is granted promoted status
under promotion scheme. |