Malawi Competition Malawi Competition RegimeRegime

Malawi Competition Malawi Competition RegimeRegime

Country PaperCountry Paper

By M G TsokaBy M G Tsoka

Centre for Social ResearchCentre for Social Research

• Introduction• Policies related to competition• Competition and Consumer Protection

Laws• Competition Commission and Consumer

Protection Council• Nature of the Market• Government commitment

– Implementation of policies and laws– Budgeting for C & CP

• Conclusions

Outline

• Competition studies in Malawi are very rare– So far only CUTS supported competition and

consumer protection studies (C&CP)– Government interest drives research– Public interest also drives research– Both are conspicuously absent and the presentation

will show the side of the Government• There has been no serious resource flow for

C&CP by both government and donors in Malawi– USAID funded CAMA, a consumer rights body that

also worked together with CUTS to conduct the first ever competition study

• No choice but use findings from the CUTS-supported studies

• Has some updates on few areas

Introduction

• Following inefficient import substitution, Government introduced a host of competition enhancing policies namely (i) investment promotion (ii) integrated trade and industry (iii) micro and small enterprise (iv) micro finance policies and ultimately (v) competition.

• The Public Procurement Act promotes competition among suppliers to public sector institutions

• Some policies were followed by legislation, e.g. Competition and Fair Trading, the Consumer Protection and Public Procurement Acts

• Government has also launched the Malawi Growth and Development Strategy (MGDS) to replace MPRS and MEGS and any other

Competition Policies

MGDS and C&CP• Described as an overarching operational

medium-term strategy for Malawi• Said to build on MEGS which has C&CP yet

silent on the role of CA &CPA• Recognises lack of competition in energy

(monopoly) and road transport (association-created)

• Provides for public-private partnership in energy generation and supply but none for road transport

• MGDS does not provide for competition in general and consumer protection

• The Malawi economy is small; GDP averaged less than US$2 billion over the 2000-2004 period; US$2043 in 2006.

• In per capita terms, the average is less than US$200 per annum; US$160 in 2006

• This income includes value-added estimated for non-monetarised economic activities

• This may limit number of players in some sectors

Nature of the market (1)

• SOE and state supported enterprises effectively reduced prospects for competition although privatisation has introduced some competition

• The manufacturing sector is still inward-looking and has limited competition, diversification and inter- and intra-industry linkages despite years of reforms and privatisation

• Associations choke competition in various sectors through price fixing and market sharing, among others– Government seem to dislike some of them

despite urging for their formation originally mainly for orderly engagement

• Collusions, even outside associations, exist as the few players in sectors reach ‘gentlemen agreements’

Nature of the market (2)

• There is limited market competition in the franchise dominated sub-sectors (beer, soft drinks and motor vehicle and genuine spares sales)

• Utilities face no competition. The sale of the sole telecom company is expected to bring competition but is still not there

• There two mobile phone companies with some competition; mainly focusing on service differentiation but eventually matching

• The financial, meat processing and diary sectors have competition thanks to privatisation

• Privatisation has not benefited the sugar sector• Foreign firms offer competition in consumer

goods, edible oils, soaps and household and non-durable goods markets through imports

Sector state of competition

• In sugar, soft drinks, beer and biscuits manufacturing there is virtually one owner in each

• In telecommunications there are only two owners and one of them (recently privatised) owns ground and mobile phone companies in a three-company sector

• This state of affairs is common in many others only that the consequences of high concentration are eased by imports

Market concentration

• No major study has been done• However, the shrinking manufacturing

sector is a possible sign of lack of competitiveness

• Local firms blame it on unfair competition and unsupportive business environment

• Analysts put the blame on firms’ inefficiencies and use of obsolete technology, high import content in inputs and high interest rates

Local firms competitiveness

• The pharmaceutical sector is regulated but regulation impedes competition. Number of players and applicants is healthy.

• The financial sector is adequately regulated and monitored. Regulations may not have caused entry failure but Competition may be hampered by ‘established’ players. RBM de-licensed one CB in 2006

• The power sector is undergoing sectoral reforms. Malawi Energy Regulatory Authority has just been formed. Hopefully PPP in power follows soon

• The telecommunications sector is regulated. • Its regulatory body has been plagued by

government-opposition wrangles. It is yet to provide a license to a third mobile phone operator, three or so years after application

Regulation, C and CP

• There are no serious administrative and legislative entry barriers

• Minimum capital requirements are some entry barriers in the financial sector

• Speed of company registration is a possible entry barrier in Malawi despite efforts to shorten the period

• Lack of a sea shore and quality of human resources are ‘natural’ barriers for export-oriented enterprises

Barriers to entry

• Government enacted the Competition and Fair Trading Act in 1998 and provides for a competition authority including its powers and functions.

• The law covers critical issues of dominant firm, collusions and price fixing associations, mergers and acquisition and monopolies and oligopolies

• It does not adequately deal with cross-border trade-related anti-competitive practices like informal trade and dumping

Legislation on competition

• Consumer Protection Act was enacted in 2003 - provides for a Consumer Protection Council

• The law covers most of the key consumer protection issues including seeking compensation for the affected consumers

• The council’s functions are comprehensive but its powers are limited even in investigation.

• The Council is yet to be established

CP legislation

Govt commitment to C&CP• Policies and laws exist for C&CP• CA members appointed in 2005• MGDS not friendly to C&CP – not even

mentioned as strategies for poverty reduction

• Budgets have not provided for a fully-fledged CA secretariat since 2005

• CPA councilors not yet appointed• Attendance of country competition

meetings and workshops very poor except the Chair and some members of the CA

• ACPs exist in Malawi. They have evolved depending on policy and legislative environment

• Most of them owe their existence to poor economic policies adopted after independence and most of them owe their continued existence to the absence of an effective CA and CPA

• Malawi has policies and legislation for C&CP but lacks the will to implement them by the setting up of functioning CA and CPA

• Possible reason: Low priority accorded to C&CP by Government

Conclusions

Thanks a lot for your kind attention