May 2, 2015
– By this time, Vietnam should come up with an independent agency for competition management to create a favorable business environment.
Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc is holding a special plan in his hands.
He believes once implemented this plan will help create a new impetus for the economy, in the same manner as the recently issued Resolution 19 of the Government. “It’s time for us to revise the Competition Law, and VCCI will soon petition the National Assembly (NA) for amending this law in accordance with the 2013 Constitution,” Loc said.
The Competition Law, which was passed more than a decade ago, exists as a token, rather than a tool for promoting competition, the fundamental factor that a market economy, which Vietnam is aiming to be, should have. The campaigns to project Vietnam as a market economy internationally recognized are often undertaken through the diplomatic channel, whereas quite a few domestic markets remain structurally distorted and difficult to regulate due to the dominance of State-owned enterprises (SOEs). This law is rarely invoked or used to impose financial sanctions for anti-competition behaviors and unfair competition.
The Competition Law offers definitions of an enterprise or a business group with a dominant market position, and of an enterprise establishing monopoly, and it prohibits the abuse of such dominant and monopolistic positions.
In fact, the State sector, primarily State corporations, is dominating key industries of the economy as it takes up 99% of fertilizer manufacturing, 97% of coal mining, 94% of power and gas production, 91% of communication, and 88% of insurance, as estimated by the Central Institute for Economic Management (CIEM). It is not hard to name one or two particular SOEs with dominant and monopoly positions on the market, which have abused their power but were not given any punishment as stipulated by the Competition Law.
It is not due to the absence of specific laws, but to lax law enforcement. Vietnam Competition Authority (VCA), the State agency responsible for competition management, is placed under the umbrella of the Ministry of Industry and Trade, which is also the governing body of most of the major State corporations mentioned above.
VCCI’s Lawyer Tran Huu Huynh said he had met many officials from VCA and felt their dilemmas. “Many of them told me that they were really concerned, but their positions did not allow them to impose sanctions,” he said. How could a department-level officer dare to fine Electricity of Vietnam Group (EVN), or certain SOEs, for abuse of monopoly, given that such enterprises are always protected by ministerial leaders who are the bosses of VCA? Huynh said when the Competition Law was drafted, he and many experts had suggested the agency in charge of competition management should be independent. However, their suggestion was not approved.
Truong Dinh Tuyen, one of those advocates of free competition, shows his regret for not making VCA an independent unit when he was still the minister of trade. “When I was minister, I already realized the downside of VCA being placed under the Ministry of Industry and Trade. However, at that time, this agency could not be separated considering the Government’s policy on restricting the establishment of new bodies,” he explained in a recent CIEM meeting. Now, he agrees that an independent competition agency should have been born.
This statement has clearly stimulated many people. In his speech before hundreds of delegates who are government officials and businesspeople at a recent conference on implementation of Resolution 19, Loc said, “VCA should be an independent agency, not a unit under the Ministry of Industry and Trade, the governing body of many large SOEs including those exercising monopoly. As long as the minister remains the owner of the major and monopolistic SOEs, VCA would never have any voice in anti-monopoly.” He proposed abandoning the administering-body regime, meaning ministries should only perform the task of State management, not the supervision of SOEs. Only then can a fair environment for competition exist, he said.
A structurally distorted market is a direct result of a lack of competition. Competition management has caused the State to suffer from a hard time in explaining the increase in prices of essential goods. “The way prices are now curbed is inefficient and would be in vain,” said Tuyen. “The cost for price control is much larger than what we may obtain.” This view is shared by CIEM President Nguyen Dinh Cung, who remarked the market was now badly distorted yet the Ministry of Industry and Trade had always protected EVN’s proposal for price increase, instead of protecting the interest of consumers. The ministry should have monitored the monopolistic status of EVN by reviewing and evaluating their production costs in an independent way, seeking the opinions of relevant parties to see if the price hike proposed by EVN is justified, rather than insisting on protecting such proposal.
The Ministry of Finance and the Ministry of Transport have asked transport businesses to reduce their charges for fuel price drops, but has failed. Cung said the way of management must be changed, in which the underlying cause is the supply-demand imbalance in the short term and a market short of competition. The barriers to market entry are so high that businesses cannot joint it instantly, and thus little competition pressure exists. The structure of this market prevents supply from quickly changing to meet with demand. Several financial sanctions even lead to a decline in supply, rather than increase, while the level demand of the people remains high. The more interference is tolerated on the market, the more distorted it will become.
“The problem here is market structure distortions and monopoly control, not price control and inspection, nor intervention and administrative orders,” Cung said. “The agency in charge here should be VCA, not the Price Management Department.” Still, the mechanism in force has eliminated VCA from the game.
Will market distortions be remedied to create a favorable business environment which will keep the country from lagging behind? Loc remains enthusiastic as he asserts that his plan will be brought forward to the next NA session.
(By Tu Giang – The Saigon Times)