State of competition in Pakistan Syed Asad Hussain

To meet the challenge of maintaining buoyant economy and well being of consumers, promotion of concept of free economy is a must. Domestic markets which form the basis of the economy must be ready to compete at home for integrating effectively in global markets. Ironically, factors limiting competition in domestic markets are growing in size thus case of effective enforcement of competition laws becomes more important in Pakistan. Broadly speaking, in the absence of effective competitive environment, Pakistani firms are apparently slow to adjust, yield low levels of productivity, lack energy to innovate and are painfully highly concentrated ones which have led to anti-competitive behaviors on the part of firms. In recent past, the Competition Commission of Pakistan (CCP) has conducted a number of investigations into alleged cases of anti-competitive behavior on the part of firms. These cases mostly belonged to firms operating in sugar, cement, vegetables ghee, poultry, aviation, banking, automobiles and telecom sectors. If Pakistani firms want to be sturdier, healthy and better, they must demonstrate high level of efficiency, innovate aggressively and improve firm-level productivity-all are prerequisites to prepare for the global competition. Large sized private firms and the SMEs represent the seeds for growth for Pakistan economy and hence should be the centerpiece of every policy framework. That said, governments role becomes even more important if Pakistan wants to go globally. Policymakers primary focus should be on increasing efficiency of factor markets, market governance and infrastructure services. As a consequence, we expect thriving markets which reward innovation and punish inefficient firms engaged in anti-competitive behaviors. To deepen the competition level in Pakistan, active policy formulation and its implementation along with institutional reform is the need of the hour. Governments role should become limited to facilitating rather than regulating the markets. The robust and modern structure of the CCP in partnership with active and independent judiciary can help ensure protection of competition. The flaws in

judicial system should be improved which is a major barrier in punishing the culprits and straightening markets. The CCP claims to have fine Rs 7.3b on various firms for violating anti-competitive laws but they yet to receive single penny due to flaws in our judicial system. The alleged firms are given stay-orders by courts when are fined by the CCP; hence around 140 cases are pending in the courts. The era of heavy protection regime (for example automobile, aviation and textiles sectors), subsidies and tariff concessions has to go if Pakistani businesses want to compete both nationally and internationally. Indeed much has been said and written about giving MFN status to India but I think if Pakistani businesses were efficient, innovative and able to produce at lower costs, then huge market of 1.2 billion Indian consumers awaits us. To be able to compete in Indian markets, cost of doing business at home has to be lowered in the first instance. A World Bank survey of Ease of Doing Business placed Pakistan at the 96th position (out of 183 economies) in 2011 which has now slipped to 105th position in 2012. Higher barriers such as dealing with construction permits (104), getting electricity (166), paying taxes (158) and registering property (125) are some kick-starters which needed to improve to help make the entry of new firms easier and markets competitive. Pakistani businesses can only compete globally if domestic markets encourage competition and innovation; businesses demonstrate high level efficiency and equal opportunities are provided to all the players. (The author is an Islamabad based freelance contributor, researcher and a trainer. He can be reached at syed311@hotmail.com .)