14 - 20 June 2001
Issue No.538
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Al-Ahram Weekly Online 14 - 20 June 2001 Issue No.538 |
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Levelling the playing field
The debate on proposed legislation regulating competition and the private sector's resistance to such a law continues as the government prepares to introduce a new anti-trust law, writes Yasser Sobhi
The long-awaited draft anti-trust law is currently being discussed by the cabinet's economic group, as well as the full cabinet, in preparation for its introduction to parliament next year, Minister of Economy and External Trade Youssef Boutros Ghali told the Egyptian Centre for Economic Studies (ECES), at a recent seminar held to discuss the competition policy in Egypt. The draft law is also undergoing technical review by the Ministry of Justice, Ghali said at the seminar which was jointly organised by the Egyptian think-tank and the Australian embassy.
The new draft will be the eleventh, having undergone successive modifications since the government first introduced it in 1995. Latent resistance by prominent businessmen has been -- by their own admission -- a major reason for the delay in submitting the draft law to parliament.
"The competition law is gradualist," said Ghali. "There are laws that are issued when [economic] reforms are at an advanced phase and this is the last of them." "An economy needs to have reached a certain level of maturity to be able to accept this kind of legislation," said Ghali. Therefore, it is the context, rather than the players, which the law is directed towards.
The minister of economy said that anti-trust regulations promote intervention in order to ensure fair competition, but added that such intervention will only be welcomed if the rules for determining the existence of monopolistic practices are precise and are applied in a transparent manner.
Resistance by prominent businessmen is one factor that has delayed the introduction of the draft law, according to ECES president Taher Helmi, who participated in preparing the 1995 draft. Such was the opposition of business, says Helmi, that meeting with some of his businessmen colleagues became uncomfortable as they took offence at his involvement in drafting the legislation. He says that there is "a lot of misunderstanding about the impact of the law, although it contains safeguards and measures that are directed at fostering a good climate for business and economic growth as well as protecting the local market." The complexity of the law and the fact that its impact will be wide-ranging requires that it be carefully discussed and explained to the public, suggested Helmy.
The proposed anti-trust law will apply to all persons and entities engaged in financial and economic activities including trade, industry and services. It is directed at prohibiting monopolistic practices as rather than addressing size and mergers. Exemptions are given to "strategic entities" and organisations established for export.
Business' reluctance to embrace the law arises primarily out of fear of excessive government intervention in their activities under the guise of fighting monopolies. Another concern is that such a law might be used by firms to try to fetter a competitor by falsely accusing them of engaging in monopolistic practices.
Among the critics of the proposed law is former minister of tourism and prominent banker Fouad Sultan. "We business people feel that there are many other measures more urgent than the anti-trust laws. If you regulate a new market right from the beginning, then you kill that market." Other businessmen predicted that such a law would fetter growth and thereby make it difficult for them to compete in the global market.
Among the law's proponents are Mahmoud Mohieldin, senior adviser to the minister of the economy, who was also recently appointed to head the National Democratic Party's economic committee. Stressing the need for an anti-trust law to deal with existing and future monopolistic practices, Mohieldin suggested that such a law is urgently required in certain sectors. These are the ones related to construction, media, distribution activities and health care -- in short, sectors where authorities have often experienced "confusion" in how to deal with developments in the absence of a clear law and regulations governing these specific domains.
"Today, with the growing role of the private sector, there are allegations of anti-competitive practices, which are worthy of investigation. It is also important to have such a law to deal with the operations and behaviour of international cartels that engage in price fixing and establishing price ceilings for new entrants.
The debate over the proposed law was fierce as both parties forwarded strong and well-reasoned arguments. But throughout, there was a consensus on the need for the government to maintain and enhance its regulatory role for Egypt's increasingly market-oriented economy. "Ultimately it is the consumer who will gain," said Chairman of the Australian Competition and Consumer Commission Allan Fels. "The business which breaks the law usually fights the regulator with every means at its disposal. No one likes the blowtorch of competition to be applied to themselves. They only want it applied to their competitors," he concluded.
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