The Harmonisation of ASEAN
Competition Laws and Policy from an Economic Integration Perspective

By Dr. Lawan Thanadsillapakul *

I. - INTRODUCTION

The Association of Southeast Asian Nations (ASEAN) (1) is an economic group comprised of the countries of Southeast Asia. (2) ASEAN and Asia Pacific has been the most dynamic and fastest growing region in the world. (3) But the 1997 Asian crisis sent the "Asian Tigers" into turmoil. The rise and fall of Asia clearly reflects both the interdependence of the East Asian countries and the world economy, on the one hand and the impact of the changing global legal and economic environment on these countries, on the other hand. The ASEAN countries have gone through a volatile period and in response have embarked on a process of deeper integration to strengthen their regional economic self-reliance while committing themselves to an open market orientation. A new direction for ASEAN, dubbed "Open Regionalism", will balance regional integration and global liberalisation. The ASEAN countries need to develop their sustainable regional market to replace the current separate national ASEAN markets, and to do so need to regionalise ASEAN laws and regulations, especially those relating to trade and investment, in order to facilitate the free flow of goods, capital, services and labour. A more liberalised trade and investment regime in ASEAN will enhance their free economies and create a more favourable trade and investment climate in the region.

Consequently, the ASEAN countries need to develop effective legal systems to encourage and oversee increasingly competitive business activities in the region. The necessity of eliminating barriers to trade and investment sparks a need to provide, at regional level, effective protection against unfair competition (4) to govern the economic activities and transactions of transnational corporations (TNCs) located in the ASEAN region. As more liberal trade and investment regimes are established in the ASEAN countries, competition rules are required to regulate competition among business players and to supervise their conduct. (5) Valentine KORAH has stated that there would be very little point in removing the various internal barriers and national boundaries imposed by Governments if these governmental restraints were replaced by concentrations and other restrictive business practices as well as concerted practices among private firms. (6) Since the rationale for a regional competition law is to strengthen economic integration in the ASEAN region, it is important that any agreements restricting competition as well as abuse of dominant market positions should be controlled (7) by effective competition laws. This means that the removal of internal barriers should not be allowed to result in companies creating territorial exclusivity through cartels or the abuse of dominant position. Control of restrictive business practices in the process of liberalisation is a key element in the new approach to positive integration. (8) This approach is unlike neo-liberalism, which tends to assure that the free market needs no control, regulation or restriction, either by government or public bodies.

This article analyses the rationale, scope and basis for a comprehensive competition law in ASEAN to enhance the implementation of economic integration in the region. This includes a discussion of the complementarity between competition law and policy, liberalisation of trade and investment intra and extra ASEAN and regional economic integration, as well as the interaction between industrial / investment policy and competition policy and law, especially the way in which competition law and policy reinforces the liberalised investment regime in the region. Also, an effort has been made to provide optional models of regional competition law and policy in ASEAN.

Following a brief introduction, Section II focuses on competition law and policy as a tool to reinforce the ASEAN investment regime and regulations. Since ASEAN is committed to developing its integrated regional market, it requires a regulatory regime that can facilitate free movement of trade and investment intra-ASEAN. Competition law is compatible with "open regionalism" (9) because it is basically neutral and non-discriminatory. Moreover, the development of a regional competition law and policy that enhances fair competition among firms doing business in the region might also provide a basis for evaluating the economic benefit to ASEAN of entry by a foreign investor on competitive grounds rather than by means of the discriminatory criteria used in screening procedures. In this way, ASEAN regional competition laws and policies would play a multifunctional role, i.e. they would encourage the free flow of trade and investment, monitor the conduct of firms, and evaluate the economic role or potential dominance of extra-ASEAN TNCs in the region. Unlike the assumptions of neo-liberalism, (10) competition law and policy accepts the important role of States and good governance institutions in regulating firms' behaviour. This perspective is also more compatible with the new approach of positive integration ideology. (11) Moreover, competition law generally takes a pro-consumer policy perspective that takes into account the public good and social welfare. This ensures that the advantages of liberalisation within ASEAN resulting from economic integration would contribute directly to general public wealth through consumers. The harmonisation / unification of ASEAN competition law, rather than shaping separate, and diverse, competition laws in each ASEAN country, would ensure that competition was evaluated on a regional basis, thus maintaining the principle of open

Part 2

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* Ph.D., Lancaster University (United Kingdom); Professor of Law at Kyushu University (Japan) and Sukhothai Thammathirat Open University School of Law (Thailand).

(1) The Association of Southeast Asian Nations or ASEAN was established in Bangkok on 8 August 1967 by the five original member Countries: Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July 1995, Laos and Myanmar on 23 July 1997 and Cambodia on 30 April 1999. The ASEAN region has a population of about 500 million, a total area of 4.5 million square kilometres, a combined gross domestic product of US$ 737 billion and a total trade volume of US$ 720 billion. Recently, ASEAN launched several new economic co-operation schemes: the ASEAN Free Trade Area (AFTA), the ASEAN Framework Agreement for Liberalisation on Trade in Services (AFAS), the ASEAN Investment Area (AIA) and the ASEAN Industrial Co-operation Scheme (AICO) for implementing open regionalism aimed at enhancing economic integration and creating an open regional economic group. See THANADSILLAPAKUL, Lawan, Open Regionalism and Deeper Integration: the Implementation of AFTA, AIA, and AFAS (2000) (posted at http://www.worldbank.org.eapsocial, and in the CEPMLP Internet Journal at http://www.cepmlp.org/journal/Dundee University).

(2) The new approach to ASEAN economic integration based on "Open Regionalism", which balances intra and extra regional liberalisation of trade and investment aimed at creating a natural, de facto integrated regional market was launched by ASEAN in its new integration schemes: AIA, AFAS and (new) AFTA. This model (new paradigm) is legally based on the "Negative regional economic integration theory", unlike the conservative pattern of the European Union, which need not necessarily be followed by other regions; in fact, the EU is a model implemented by the European countries to accommodate the different strands of historical, political, social and economic backgrounds in the region. ASEAN is fundamentally different from the EU, and it has its own development. See PINDER, John, "Positive Integration and Negative Integration: Some Problems of Economic Union in the EEC", in Hodges, Michael (ed.), European Integration, Middlesex: Penguin Books Inc. (1972). See also GARNAUT, Ross, Open Regionalism and Trade Liberalisation: An Asia Pacific Contribution to the World Trade System, Institute of Southeast Asian Studies (Singapore) and Allen and Unwin (Sydney) (1996). See also ELIASSEN, Kjell A. / MONSEN, Catherine Borve, "Institutions and Networks: A Comparison of European and South East Asian Integration", paper presented in Panel F1.3 "Regional Institutions and Globalisation" at a Conference on "Non-State Actors and Authority in the Global System", University of Warwick, 31 October - 1 November 1997, and Garnaut, Ross / Drysdale, Peter / Kunkel, John (eds.), Asia Pacific Regionalism: Reading in International Economic Relations, Australia: Harper Educational Publishers (1994).

(3) See World Bank (1993a) The East Asian Miracle: Economic Growth and Public Policy. A World Bank Policy Research Report, New York: World Bank:, also see PETRI, Peter A., The Lessons of East Asia: Common Foundations of East Asian Success, The World Bank (Washington, D.C.) (1993a), and UNCTAD (various years) World Investment Report New York and Geneva: United Nations Publication.

(4) As stated by UNCTAD, the main objective of competition laws is "to preserve and promote competition as a means to ensure the efficient allocation of resources in an economy, resulting in the best possible choice of quality, the lowest prices and adequate supplies for consumers." UNCTAD (1996e), "Competition Policy and Legislation: Information Note 21". Note by the UNCTAD Secretariat to the Intergovernmental Group of Experts on Competition Law and Policy, UNCTAD document TD/B/RBP/INF.37, mimeo.

(5) The liberalisation of FDI policies can lead to an increase in competition in national or regional markets. See UNCTAD, World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy, United Nations Publication (New York / Geneva) (1997).

(6) KORAH, Valentine, An Introductory Guide to EC Competition Law and Practice, 6th ed., Oxford: Hart Publishing (1997a), 1.

(7) To control here means to check, to verify, and to vet; insubstantive rules of competition laws. It means to exercise restraint or direction on the free action of another, to command those to comply with the rules in order to keep the market open and refrain from abuse of dominant market power.

(8) PICCIOTTO, Sol, "Linkages in International Investment Regulations: The Antinomies of the Draft Multilateral Agreement on Investment", in Journal of International Economic Law, University of Pennsylvania, Vol. 19, No. 3, Fall (1998), 731-768 (at 735-8).

(9) THANADSILLAPAKUL, see supra note 1.

(10) Neo-liberalism regards regulation as an unnecessary burden; as Picciotto stated, the perspective of neo-liberal ideologues toward economic integration is that "… international integration means the creation of open markets, which requires only strong provision for the protection of property rights, the maintenance of public order, and not much else". See PICCIOTTO, supra note 7 (at 738).

(11) PICCIOTTO (supra note 7) argues that the current phase of restructuring of the global political economy needs the creation of positive linkages across regulatory regimes, to facilitate a shift from negative to positive integration. This can also be applicable to economic integration at a regional level.