By Baker Mugaino
In 2010 the East African Community became a Common Market with one of the objectives being that single a market will increase competitiveness.
This in turn would make the existence of monopolies difficult and thus greater benefits to consumers. Under the Common Market, inter-regional trade has consistently been liberalized with the aim of achieving zero tariffs among member states. By opening up her boarders, Uganda increased its trade competitiveness in the EAC which has increased regional trade and pressure on the local firms to be production efficient. This may in future lead to high quality, low priced goods for both regional and domestic consumers.
Notably also the EAC is in the process of signing free trade agreements with America and the European Union. This means the opening up of Uganda’s boarders to the more advanced and efficient firms of the west. The question then becomes not whether Uganda’s firms may compete, but if its economy is protected from the effects arising from offshore anti-competitive practices that may arise.
It therefore, needs no mention that having a competition policy will enable Uganda enjoy the benefits of regional and global trade liberalization.
What is competition law?
Competition law is a set of rules and remedies that governments may adopt to prohibit and challenge practices by private enterprises and public authorities that restrict or distort the contestability of a territorial market. For example……
On the other hand, anti-competitive practices refer to a wide range of business practices in which a firm or group of firms may be engaged in order to restrict inter-firm competition to maintain or increase their relative market position and profits without necessarily providing goods or services at lower costs or of higher quality. These practices include price fixing, cartel formation, monopoly and abuse of dominant positions.
How the competition policy can help
A competitive legal regime helps in regulating these anti-competitive practices to satisfy consumer welfare. This creates social stability by protecting the lowest class from economic power.
In Uganda the government policies of privatisation and trade liberalisation are evidence of government’s intentions to promote competition and non-interference in the market. However, there is no comprehensive policy and law that addresses anti-competitive trade practices, although a bill is being prepared.
Uganda also has a series of statutory monopolies in the utility sector that set their own prices subject to approval of the relevant minister. There is no professional central investigative authority to monitor and coordinate their activities. Yet the existence of anticompetitive practices in essential commodities increases the cost of living and poverty. The policy would….
The existence of international cartels in the cement industry, a vital construction ingredient, increases government’s cost of providing infrastructure such as roads and hospitals. This infrastructure is essential for attracting investment (consequently) increasing the countries competitiveness in the region. With a competition policy in place….
Competition regime also increases the effectiveness of government procurement through its control of collusive tendering. This leads to the efficient use of the limited government funds in the provision of infrastructural services.
However, the absence of competition policy may also attempt firms to engage in multinational anticompetitive practices that distort Uganda’s market leading to not only to higher cost of commodities but also reducing the potential of local firms to export to the liberalised regional market.
That aside research has shown that foreign firms are most likely to invest in developing countries with competition legislation. This is because competition policy provides foreign investors with level playing field and creates stable and predictable markets.
Worse still, although Uganda’s investment policy aims at attracting foreign capital to boost the industrial base, such foreign direct investments without regulation may lead to market distortions that retard developmental projects.
Therefore, without competition law and policy, Uganda’s aspiration of successful export strategies is debatable because other EAC countries are a better alternative to the attraction of capital that is essential for industrialization. In order to gain from her investment policy, Uganda needs a competition policy to regulate the opened up regional EAC market, increase certainty, protect her infant countries, attract capital and improve efficiency in direct investments.
Baker Mugaino is the Principal Legal Officer at the Ministry of East African Affairs