Competition Law and Policy Competition Law and Policy in Vietnamin Vietnam

The focuses of this presentation :The focuses of this presentation :

1.1. The current competition situation in The current competition situation in VietnamVietnam

2.2. Perspectives on competition policyPerspectives on competition policy

1. The current 1. The current competition situation in competition situation in VietnamVietnam

a) Some major features of Vietnamese a) Some major features of Vietnamese EconomyEconomy

b) The competition policy in Vietnamb) The competition policy in Vietnam

c) Market structure and competitionc) Market structure and competition

1.a. Some major features of 1.a. Some major features of Vietnamese EconomyVietnamese Economy

In the transition to the market economy In the transition to the market economy since 1986;since 1986;

In 1990s, because the economy was at a In 1990s, because the economy was at a very low starting point and with the very low starting point and with the participation of private and foreign participation of private and foreign invested sectors, the high growth rate of invested sectors, the high growth rate of GDP has been reached;GDP has been reached;

The competitiveness is still low;The competitiveness is still low;

1.a. Some major features of 1.a. Some major features of Vietnamese Economy (Con’t)Vietnamese Economy (Con’t)

The economy is actively integrating into The economy is actively integrating into the world and regional economy, the world and regional economy, however it is still defined as a non-market however it is still defined as a non-market economy. Among many comments, some economy. Among many comments, some are:are:

11) The VND is not freely convertible; ) The VND is not freely convertible; 2) The SBV remains under state control; 2) The SBV remains under state control; 3) The competition Law was not be enacted until 3) The competition Law was not be enacted until October of 2003;October of 2003;4) The government owns all the land and does not 4) The government owns all the land and does not recognize private property rights;recognize private property rights;5) The State sector accounts for about 40% of GDP;5) The State sector accounts for about 40% of GDP;

1.a. Some major features of 1.a. Some major features of Vietnamese Economy (Con’t)Vietnamese Economy (Con’t)

6) 70% of bank lending went to SOEs in 2001, 6) 70% of bank lending went to SOEs in 2001, thus severely restricting the credit available to thus severely restricting the credit available to private enterprises;private enterprises;7) The Government Pricing Committee directly 7) The Government Pricing Committee directly sets prices in many industries;sets prices in many industries;8) The SBV controls the 4 state-owned 8) The SBV controls the 4 state-owned commercial banks, which comprise 80% of the commercial banks, which comprise 80% of the banking sector;banking sector;8) The rule of law is underdeveloped, and so on.8) The rule of law is underdeveloped, and so on.

1.b. The competition policy in 1.b. The competition policy in VietnamVietnam

Before Nov. 2004, there was no the Before Nov. 2004, there was no the competition law in Vietnam;competition law in Vietnam;

However, the competition regulations have However, the competition regulations have been embodied in various policies and laws been embodied in various policies and laws (e.g., the 1992 Constitution, the commercial (e.g., the 1992 Constitution, the commercial law, criminal code).law, criminal code).

The level playing field is still not created for The level playing field is still not created for market players: SOEs are given more market players: SOEs are given more preferential treatments (see Example 1);preferential treatments (see Example 1);

The establishment of GCs has restricted the The establishment of GCs has restricted the competition.competition.

Example 1Example 1

The realized capital investment under The realized capital investment under the preferential treatmentthe preferential treatment

The jobs createdThe jobs created

Total numberTotal number(Billion VND)(Billion VND)

ShareShare Total numberTotal number ShareShare

In the whole countryIn the whole country 42,00142,001 100%100% 331,354331,354 100%100%

In the SOE sectorIn the SOE sector 25,75725,757 61.3%61.3% 96,36596,365 29.1%29.1%

In the private sectorIn the private sector 16,24416,244 38.7%38.7% 234,989234,989 70.9%70.9%

1.c. Market structure and 1.c. Market structure and competitioncompetition

State sector dominates in the production of goods State sector dominates in the production of goods viewed as natural monopoly and of strategic goods; viewed as natural monopoly and of strategic goods;

Non-state sector dominates in the production of Non-state sector dominates in the production of necessity goods;necessity goods;

Foreign invested sector dominates in the production Foreign invested sector dominates in the production of goods with the higher technology level;of goods with the higher technology level;

The dominant position in production of some goods The dominant position in production of some goods has changed from one sector to another;has changed from one sector to another;

The import of consumer goods is restricted, so The import of consumer goods is restricted, so consumption goods produced domestically have not consumption goods produced domestically have not to compete much with imported goods.to compete much with imported goods.

2. Perspectives on Competition 2. Perspectives on Competition PolicyPolicy

a)a) Background and MethodologyBackground and Methodology

b)b) Field survey resultsField survey results

c)c) The main findingsThe main findings

2.a. Background and 2.a. Background and MethodologyMethodology

3 types of questionnaires were designed for 3 3 types of questionnaires were designed for 3 types of respondents: officials, enterprises, and types of respondents: officials, enterprises, and customers.customers.

The list of 50 respondents for each types was The list of 50 respondents for each types was randomly selected before the questionnaires randomly selected before the questionnaires were sent to themwere sent to them

The sample size was too small, so Hanoi was The sample size was too small, so Hanoi was chosen as a place for the survey and the direct chosen as a place for the survey and the direct interviews were carried out in the second interviews were carried out in the second round.round.

2.b. Field survey results2.b. Field survey results

Many concepts related to the competition policy Many concepts related to the competition policy and law seem to be new in the transition country and law seem to be new in the transition country like Vietnam.like Vietnam.

The majority of respondents feel that unfair The majority of respondents feel that unfair practices are prevalent in many business practices are prevalent in many business activities; the level playing field is only in paper.activities; the level playing field is only in paper.

Many respondents (enterprises and customers) Many respondents (enterprises and customers) said about the existence of the anti-competitive said about the existence of the anti-competitive practices, but they could not describe them in practices, but they could not describe them in detail.detail.

Many respondents (officials and enterprises) said Many respondents (officials and enterprises) said that the competition policy and law alone cannot that the competition policy and law alone cannot solve the unfair aspects in doing business. solve the unfair aspects in doing business.

2.c. The main findings2.c. The main findings

1.1. The perception about the prevalence of anti-The perception about the prevalence of anti-competitive practices is different among three competitive practices is different among three types of respondents. types of respondents.

2.2. Many respondents think that resale price Many respondents think that resale price maintenance is prevalent, but it should not be maintenance is prevalent, but it should not be considered as the anti-competitive practice. considered as the anti-competitive practice.

3.3. The prevalence of anti-competitice practices The prevalence of anti-competitice practices depends on the market conditions. depends on the market conditions.

4.4. The long-run effect of anti-competitive The long-run effect of anti-competitive practices should be compared with their practices should be compared with their short-run effect. short-run effect.

2.c. The main findings (Con’t)2.c. The main findings (Con’t)

5.5. Many respondents said that the dominance Many respondents said that the dominance position may have both the positive and position may have both the positive and negative effects. However, they didn’t know negative effects. However, they didn’t know how to determine and when the dominance how to determine and when the dominance position is defined as abused.position is defined as abused.

6.6. Some respondents suspected about the Some respondents suspected about the efficient implementation of the competition law.efficient implementation of the competition law.

7.7. The capacity building on the competition law The capacity building on the competition law and policy is very necessary.and policy is very necessary.

Thank you very much for your Thank you very much for your attentionattention