World Bank urges Pakistan to check cartel formation

ISLAMABAD — Pakistan has been urged by the World Bank to effectively check cartel formation in cement, banking, sugar, automobile and pharmaceutical sectors to save consumers from unchecked price hikes in the country.
Informed sources said that the bank wanted the government to act on the recommendations made by the Pakistan Business Council, Overseas Chamber of Commerce and Industry, Institute of Chartered Accountants (ICA) and Management Association of Pakistan to break the cartels.
Elements in the bureaucracy serving “powerful business interests” were blamed for the unchecked growth of the cartels. However, sources said World Bank has taken up the issue with the new elected government in Pakistan. It warned that if certain action was not taken against the cartels, the Bank would be constrained to link its annual assistance especially being offered to the Competition Commission of Pakistan (CCP). The World Bank was providing financial assistance for the capacity building of CCP to ensure prudent business practices.
The rising international prices including that of food was causing growing problems and spreading unrest across the globe. However, it was becoming more serious in the developing countries like Pakistan, therefore, needed to be addressed by the new government, the sources said.
The bank wanted the government to fully empower the CCP to deal with issues concerning cartels. It also asked the government to implement the competition law due to which CCP could not play its due role effectively to check restrictive trade practices by the cartels.
When contacted the chairman CCP said that he was working under a “cardinal principle” of unearthing cartels and act in accordance with law without fear or favour. “We will take action wherever we feel any anti-competition activity”, he assured.
Responding to a question, Mirza said that he was performing a difficult task to check the vested interests of the powerful business groups in the country. He regretted that since the government has not so far implemented the competition law, it was not easy to check restrictive trade practices. In this regard, he referred to “tied sourcing of funding” that has not been provided to CCP by the previous and now by the elected government.
The previous government had promulgated a very good law and instated an excellent team of members. However, they did not seem serious about implementing the law which included making available of sources of funds to the CCP which are independent of the federal budget.
“This has been already provided for in the law itself. Its now simply a matter of implementing this part of the law”. The new government, which has all the political will for reforms, should implement the law and hence provide the necessary resources to the CCP to expand its operational capacity, effectively improve competitive environment and influence the behaviour of firms so that they do not form cartels and engage in abuse of dominance to the detriment of business and industry.
“This in turn would have an indirect positive impact on essential commodity prices. This price impact will trickle down and benefit the masses,” he said. He said the commission needed tied sources of funding to run its day to day affairs and that this could be possible if the competition law was implemented in letter and spirit.
He said that salary structure of the CCP members has not been finalised so far.
In reply to a question, he said the consultative process with the stakeholders initiated by the CCP immediately after coming into being about four months back has proved highly productive. The innovative and non-bureaucratic approach adopted by the CCP, perhaps for the first time in Pakistan of mutual discussions and consultation, in a free and frank atmosphere with professionals and business community, has helped CCP in gaining their confidence.
“They are no more apprehensive about CCP. It is now felt that CCP is there to facilitate them by providing a level playing field for all undertakings and ensuring a fear and healthy competition regime in the country,” he added.
To a question, he said, the demand for converting the “toothless” monopoly control authority into an effective organisation was first made by Naveed Qamar, presently Minister for Privatisation, a few years back in the National Assembly as a member representing the opposition branches. Qamar wanted to move a bill in this regard. The bill was, however, not moved on the assurance given to the house by the government that the government itself would table a bill in the matter.
This was the idea which after a lapse of about two years developed into the Competition Commission of Pakistan (CCP) Ordinance 2007. The CCP which replaced Monopoly Control Authority has been set-up to improve business practices through competition and discouraging cartels and cartel like behaviours by industrial sector, he said.