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Putting an all but end to monopoly

Workshop: No monopoly will be created or allowed in the market, whether such a position is enjoyed by state-owned enterprise (SOE) or  private party.

This is one of the objectives of the draft National Competition Policy 2014, which is being reviewed by the Gross National Happiness Commission.  The policy was presented among stakeholders at a workshop earlier this week.

Trade officer Choki Tshewang said once the policy was adopted, there would be a fair competition in the market among SoEs and people from the private sector, at least from the policy point of view.  Also, in a sector where a monopoly exists, government will encourage the entry of fresh players.

“This is expected to facilitate structural reforms and create fair competition, while reducing entry barriers for new enterprises including, in particular, cottage, small and medium enterprises,” Choki Tshewang said.

In such a situation, the trade officer said, consumer welfare is maximised, and there will be enhanced levels of innovation, efficiency and economic growth in the country.  For instance, he said consumers would benefit from the creation of fair prices of goods through a healthy competition in the market.

The policy lays down broad parameters within which the conduct, operation and practices of firms will be regulated.

It comes as good news for the private sector, which has been complaining of lack of a level playing field in the market.  One of the promoters of the Institute of Management (IMS), Tenzin Lekphel, said there was a lack of a level playing field due to the existence of SoEs, which enjoy all the advantages over private firms.

Such a situation, he said, hinders the growth of private sector. “Royal Institute of Management, for instance, hinders our growth. SoEs must exist only, where private players are not able to. But once the private sector is nurtured, they must help the private grow,” he said.

However, government may make conditional arrangements, under which it can exclude and exempt certain economic activities or firms from the ambit of the competition policy.  For instance, power generation is currently a legal monopoly though government policy proposes to open this sector to competition, but not before 2020.

Timber and sand are also legal monopolies.  The Natural Resources Development corporation limited  is the sole agency for production and supply of sand in Bhutan, except where the corporation does not operate.

“The private sector is relegated to a fringe role,” states the policy.

It states that government will continue to retain monopoly in electricity generation and, where necessary, to provide major infrastructure facilities, while at the same time opening up activities like distribution, tourism and transport to private sector.

The trade officer explained the government would weigh the pros and cons of allowing private players in such sectors. “The government will retain monopolies if the extent to which social benefits to be gained from exclusions and exemptions outweigh the costs,” he said.

With the adoption of the policy, both public sector procurement as well as allocation of scarce national resources by government or other public sector bodies will be based on market mechanisms that are transparent and non-discriminatory.  A system of competitive bidding will be incorporated.

Today, certain sectors of the economy are either under legal monopoly or de facto monopoly.  Little competition exists in these sectors and the number of competitors is small.

“Much of this has been attributed to government policy, the specific conditions prevailing in the Bhutanese market such as its size.”

In order to fulfill the objectives, institutional arrangements to review and monitor implementation of the competition policy and its related legislation will remain the responsibility of the prime minister’s office.  Each ministry will be responsible for the implementation of this policy.

By MB Subba

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