Competition: A whole-of-government effort

MILLENIALS and succeeding generations will not be able to recall a time when Philippine businesses and consumers had no choice but to engage in a highly concentrated market characterized by the absence of any significant competitive pressure. The State held inefficiently run monopolies of vital sectors and virtually controlled the entry and expansion of new players through regulations that protected and entrenched dominant players.

These misguided policies inevitably led to the weakening of our global competitiveness, curtailed market dynamism, starved the country of foreign direct investments, limited the growth of productive employment, and deepened inequality in the distribution of incomes and opportunities. Fortunately, economic reforms through trade liberalization, deregulation, and privatization gained some momentum in the 1980s and in the decades that followed. This led to an influx of market players and the much-needed adoption of more efficient technologies and business processes, which, in turn, lowered prices, expanded consumer choices and enhanced product quality.

Today, the upward growth trajectory of our economy suggests that we are reaping the benefits of these reforms. However, we remain hampered by the legacy and unintended consequences of state-instituted and state-enabled controls, including those governing state-owned enterprises (SOEs). Indeed, various anticompetitive acts and practices in key sectors of the economy have their roots in these state-enabled controls and regulations.

To sustain the growth of our economy in the long term, we need to deepen policy and institutional reforms, including the reform of SOEs.

In 2015 Congress enacted the Philippine Competition Act, which gives the Philippine Competition Commission (PCC) a very broad mandate covering all businesses and sectors, including SOEs. Cognizant of the pressing need to deepen industry reforms, legislators designed the PCA to empower the PCC with a gamut of advocacy and advisory functions. Indeed, the Philippine Development Plan (PDP) 2017-2022 reinforced this notion by recognizing competition policy as part and parcel of the government’s strategy toward sustained economic development.

Early on, the PCC recognized that its unilateral pursuit of pro-competitive reforms will yield very little by way of achieving desired results. Being a new competition authority in a largely oligopolistic economy, it recognized that effective coordination and advocacy is key to mainstreaming a culture of competition. This means enlisting competition champions within the government policy-making architecture and obtaining the support of established line-agencies and sector regulators. 

Since its inception, the PCC has been active in reviewing economic and administrative regulations. It has advised the Executive branch on the competitive implications of its policies and programs. PCC lawyers and economists regularly attend legislative hearings to provide comments on bills that may influence the competitive behavior of firms in a market. These efforts guarantee that the competition lens will be considered in the crafting of policies and laws.

To avoid jurisdictional conflicts and to harness administrative synergies, the PCC has been coordinating with sector regulators and has executed memoranda of agreement with regulatory bodies, such as the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas and the Insurance Commission. These agreements include provisions for policy coherence, the streamlining of procedures, and the sharing of information and technical expertise.

Of course, the PCC is aware that many government policies and programs were institutionalized to achieve a desired objective beyond the promotion of market efficiency. These may include the equitable distribution of incomes, attaining development objectives through industrial policy, or protecting the environment. This is why competition advocacy can work by having policy-makers utilize the least anti-competitive instrument that meets the policy objective—a potentially win-win situation.    

Perhaps, most important, the PCC has been assisting the National Economic and Development Authority  in the formulation of the National Competition Policy. The NCP, targeted to be adopted within the year through an executive order, will be a comprehensive framework that steers regulations and administrative procedures to promote effective competition. When adopted, this will be a leap forward in ensuring that businesses and consumers will reap the benefits of market competition.

Sustaining our growth through critical economic reforms will be the country’s key policy challenge in the coming years. Correcting the many inefficiencies caused by highly distortive policies is crucial to leveling the playing field, strengthening the private sector, attracting more investments and encouraging greater innovation.

Indeed, we have come a long way toward unwinding the intricate web created by the misinformed policymaking of decades past.

This herculean task requires nothing less than a whole-of-government effort.

 

Dr. Arsenio M. Balisacan is the chairman of the Philippine Competition Commission and a professor of economics (on secondment) at the University of the Philippines. Prior to his appointment to the Commission, he served as socioeconomic planning secretary and, concurrently, director general of the National Economic and Development Authority. He also served as dean of the School of Economics in UP Diliman.

 

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