Thailand’s competition law dead since arrival
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Thailand’s competition law dead since arrival

THAILAND was the first nation in Southeast Asia to implement an effective competition law back in 1999 when such laws were unfamiliar to most developing countries. But exactly two decades have passed and Thailand does not have a single competition case on record to show for its troubles.

This lack of enforcement can be attributed mainly to the composition of the Competition Commission in recent years. For a time, the chairperson was a politician (then-minister of commerce) and the majority of commissioners were bureaucrats and big business representatives (from the Federation of Thai Industry and the Thai Chamber of Commerce). Independent parties — academics and small business — made up only a small minority.

The absence of a functioning competition law renders the Thai market highly concentrated.  According to the Global Competitiveness Report 2018, Thailand ranked 38 out of 140 countries, but received a very low ranking of 96 for the indicator ‘extent of market dominance’. The figure is disappointing when compared to Malaysia’s rank of 24 and Indonesia’s of 51.

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According to the Credit Suisse Global Wealth Data Book 2018, Thailand also ranks highest for inequality globally. The top 1 percent of people control nearly 67 percent of the country’s wealth — stark when compared to Singapore at 33 percent, Indonesia at 47 percent and Taiwan at 28 percent.

Previous Thai governments have recognised the need to revise the composition of the Commission and make the Office of the Trade Competition Commission (OTCC) an independent body. But political and big business interests made it nearly impossible to pass amendments to the competition law.

The right time finally came after the military coup in 2014. The military government appointed a new Minister of Commerce — a former secretary with no strong political motivations. With support from the Director of the OTCC, the new minister pushed the long overdue amendment through the National Legislative Assembly in 2017 after extensive deliberations with the Council of State.

So, what changed with the new law? The competition office is now an independent body, similar to other sectoral regulatory bodies such as the Energy Regulatory Commission and the Office of Insurance Commission. Its budget is allocated directly from the Budget Office, rather than through the Ministry of Commerce as it was in the past.

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The number of commissioners was reduced to seven and all now work full-time. Politicians, bureaucrats and private sector representatives are no longer allowed to be commissioners, unless they resign from their respective positions before taking office.

The new Commission is made up of three former officials from the Ministry of Commerce, two academic economists and two businessmen with legal backgrounds. The chairperson, selected by the seven commissioners themselves, is also an economist. Despite the imperfect selection process, the new Competition Commission is a marked improvement.

In addition to changes in the institutional design of the OTCC, the new law removes criminal sanctions for unfair trade practices, mergers and ‘non-hardcore’ cartels — cartels that do not involve price or quantity fixing, market allocation or bid rigging. But criminal penalties remain for violations of dominance provisions.

Will Thailand’s ‘competition zombie’ finally come alive after this legal amendment? It is too early to tell as the Commission has yet to pass over 80 implementing regulations. Even if the new OTCC proves effective, Thailand’s monopolies and oligopolies are likely to remain simply because it is often government policies rather than business trade practices that stifle or restrict competition in the market.

For example, Airports of Thailand just granted a monopoly concession for the operation of duty-free shops at the main international airport in Bangkok, despite heavy opposition from all sectors of the community. Megaproject procurement — projects such as those involving high-speed trains and submarines — is not open to competitive bidding, but rather catered to a designated supplier.

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Several business licenses carry unreasonable conditions that serve to entrench the incumbent market power. For example, to obtain a license to produce beer, the applicant must commit to investing roughly US$3.3 million and have the capacity to produce 100,000 litres of beer per year. This proscribes the production of craft beer.

Unfortunately, the new competition act is silent on the advocacy role of the OTCC. This leaves the state of Thailand’s competition policy going forward uncertain at best. If Thai politicians and bureaucrats continue to disregard the significance of market competition, the law will have a limited impact on the economy.

Thailand still has a long way to go in building faith in the value of competition. It seems the OTCC and competition advocates face an uphill battle.

Dr Deunden Nikomborirak is a Research Director at the Thailand Development Research Institute (TDRI), Bangkok.

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