ADB supports SMEs

"Asian Development Bank backs support for MSMEs in Phl"

by Ted Torres

Published 21 July 2011, The Philippine Star

(Original article available online here).

"MANILA, Philippines - The Asian Development Bank (ADB) said the Philippine government should redirect its support to the micro-, small and medium enterprises (MSMEs) instead of continuing to favor large corporations.

In a report, the ADB also said the Aquino government should continue to pursue the Public-Private Partnership (PPP) program, especially in the infrastructure sector.

The ADB report highlighted that one of the constraints for growth is the “disconnect” between large companies and the MSMEs.

“One constraint is the bias for large companies (mostly in the export industry) and domestic SMEs, many of which do not prosper due to lack of capital, unreliable supply chains, and weak demand for their output,” it said.

The report urges the government to help MSMEs by lowering the cost of doing business. This can be done by improving infrastructure; streamlining and removing excess administrative procedures; and creating a fair competitive environment through anti-trust laws and good business practices.

“The inability of MSMEs to provide efficient and cost-effective support to large firms on the one hand, and the lack of demand from large firms for such support from MSMEs, on the other hand, present a vicious cycle that debilitates the sector,” the report said, adding that the vertical integration of MSMEs into large enterprises has been less successful in the Philippines than in countries like Germany and Japan.

The report also said the Philippines critically needed better infrastructure as well as technical expertise to help move the economy.

Socioeconomic Planning Secretary Cayetano Paderanga, a former professor at the University of the Philippines’ School of Economics and author of the report, said the PPP program in the Philippines have typically been shunned by business because of unclear policy and regulatory frameworks, a cumbersome government approval process, and a lack of bankable projects. Other impediments, such as controversial judicial decisions, have also constrained PPP growth.

To encourage partnerships, the government should improve transparency in PPP project selection, provide better accounting of revenues and expenditures, and have a higher-profile anti-corruption drive, he added.

“The success of reforms in both rules and administrative processes and infrastructure support is expected to result in higher foreign direct investments and an increase in fixed capital,” the report added.

Meanwhile, ADB country director for the Philippines Neeraj Jain said it makes concrete proposals to realize the potential contribution of the private sector to inclusive economic growth in the Philippines.

“We are gratified that these proposals have contributed to the policy directions embedded in the Philippine Development Plan for 2011-2016,” Jin said."

Anti-trust crusaders hail EO45

"Anti-trust crusaders hail Aquino order"

Published 12 July 2011 in Malaya

(Original article available online here).

"The Young Lawyers in Support of Antitrust Law, together with a number of Filipino distributors and lawyer-anti-trust crusader Lorna P. Kapunan, hailed the signing by President Aquino of Executive Order No. 45 which gives full jurisdiction to the Department of Justice (DOJ) over matters related to competition and fair trade practices.

"President Aquino assured Filipinos that the matter of monopolies and corporate bullying tactics was one of the first issues that he would look into. By signing this executive order, he has shown that he is taking active steps to back up that promise," Kapunan said.

EO 45 creates the Office for Competition (OC) whose mandate is to investigate and prosecute all anti-trust violations. 

The OC is also tasked to "enforce competition policies and laws to protect consumers" and "supervise competition in the markets by ensuring that prohibitions and requirements of competition laws are adhered to." 

The OC must likewise "monitor and implement measures to promote transparency and accountability in markets" and "prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers."

Kapunan said with EO 45, "Filipino entrepreneurs beleaguered by unfair business practices of giant conglomerates will now know exactly where they should seek help." 

"Now that it is clear which agency has jurisdiction, I am certain that more Filipino distributors will take action against exploitation by multinationals," she said. 

A number of pending legislative bills are in collaboration with EO 45, most of which are intended to improve current laws on monopolistic behavior, predatory pricing, and the restraint of trade. 

There is Senate Bill No. 1 ("The Competition Act of 2010") authored by Senate President Juan Ponce Enrile, and Senate Bill No. 123 ("The Fair Trade Act of 2010") authored by Sen. Sergio Osmeña. 

There are 12 anti-trust bills in the House of Representatives, among them House Bill No. 4835 ("The Philippine Fair Competition Act of 2011") authored by Rep. Rufus Rodriguez."

Lawyer's take on the new competition authority

"Why a new competition authority out of the blue?"

by Francis Ed Lim

Published 07 July 2011, Philippine Daily Inquirer

(Original article available online here)

"Last June 19, President Aquino signed Executive Order No. 45 designating the Department of Justice as the Competition Authority for the Philippines.

The EO creates the Office for Competition (OC) under the Office of the Secretary of Justice and tasks it to exercise vast powers and responsibilities relating to antitrust matters. It was issued pursuant to the President’s “power and control over executive departments, bureaus and offices,” as well as his “continuing authority under existing laws to reorganize such executive departments, bureaus and agencies.”

The EO comes in the wake of several bills now pending in Congress to revamp our present laws on monopolies and combinations in restraint of trade. There are several bills in the Senate, among which are Senate Bill No. 1, authored by Senate President Juan Ponce Enrile, otherwise known as the Competition Act of 2010, and Senate Bill No. 123, otherwise known as the Fair Trade Act of 2010, authored by Sen. Sergio Osmeña.

There are also 12 antitrust bills in the House of Representatives, among which is House Bill No. 4835, otherwise known as the Philippine Fair Competition Act of 2011, authored by Rep. Rufus Rodriguez.

Senate Bill No. 1 is basically the same as the antitrust bill passed by the Senate in the last Congress. The House versions of the bill are now in their advanced stage. The committees on trade and industry and on economic affairs are now preparing a substitute bill to the 12 antitrust bills filed in the House of Representatives.

My two cents’ worth

Under the present setup, the delineation of powers and responsibilities on antitrust matters is clear. The DoJ takes care of criminal prosecution while the different implementing agencies take care of regulation.

EO 45 appears to radically change this setup. It creates the OC as the super body for antitrust matters. Thus, aside from giving the OC the power to investigate and prosecute violations of our antitrust laws, EO 45 empowers it to “[e]nforce competition policies and laws to protect consumers” and “supervise competition in the markets by ensuring that prohibitions and requirements of competition laws are adhered to.” It also mandates the OC to “[m]onitor and implement measures to promote transparency and accountability in markets” and “[p]repare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers.” Consistently, the EO empowers the OC to “call on other government agencies and/or entities for submission of reports and provision for assistance,” thereby apparently relegating the other agencies to assisting the OC in the performance of its task under the executive order.

The creation of this superbody by an executive order, however, gives rise to more questions than answers. For example, there are matters relating to monopolies and combinations in restraint of trade that are currently under the regulatory jurisdiction of other government agencies. Things that readily come to mind are sale of assets (which include shares of stock) of corporations, corporate mergers and voting trust agreements, all of which must comply with our laws against monopolies and combinations in restraint of trade. These matters are governed by the Corporation Code, which is being implemented and enforced by the SEC. Another example is the Downstream Oil Deregulation Act (RA 8479), which mandates the Department of Trade and Industry and Department of Energy to prevent cartelization, monopolies, combinations in restraint of trade. A live example is the reported P74.1-billion acquisition by PLDT of 51.55-percent shareholding in Digitel, which the NTC is reviewing in the exercise of its powers under the law.

Since EO 45 is silent as to the operating relationship between the OC and government agencies with antitrust powers, the question then is: Should these government agencies now stop exercising their antitrust powers in light of the creation of the OC as the superbody for antitrust matters? Alternatively, should the OC now supervise the various implementing agencies in the way they discharge their antitrust powers and responsibilities? If so, is this just another bureaucratic hurdle that will further complicate doing business in the Philippines? In this regard, “supervising” competition could lead to legal challenges from the private sector.

For another, in the United States, there is no single authority for antitrust matters. The prosecution for antitrust violations is left to the DoJ while the regulatory side is left to the Federal Trade Commission. This model is followed by other countries such as the United Kingdom and other Asean countries.

In other words, the enforcement authority for the antitrust law is a policy matter to be determined by Congress in the exercise of its legislative powers under the Constitution. In fact, a cursory examination of the pending bills in Congress indicates different policy approaches to the matter. On the one hand, Senate Bill No. 1 designates the DoJ as the main implementing agency for the new competition law. On the other hand, Senate Bill No. 123 proposes to create a Fair Trade Commission. The same approach is being proposed by the House of Representatives, which proposes to create the Philippine Fair Competition Commission (PFCC).

More importantly: Why is there a new Competition Authority all of a sudden? Why not just wait for the new antitrust law, a priority bill that President Aquino promised in his first State of the Nation Address? Is the Aquino administration sensing an uphill battle in the enactment of a new antitrust law? Is this a genuine effort to level the playing field pending the passage of a new antitrust legislation? Is this a word of warning to our big business groups that are trying to outdo one another in acquiring businesses? Will the new authority exercise regulation on the antitrust issues raised on PLDT’s acquisition of Digitel?

Your guess is as good as mine!"

Office of Competition rules nearly ready

"Office of Competition rules nearly ready"

Published in BusinessWorld Online, 04 July 2011

Hit the stands on 05 July 2011

(Original article available online here)

"THE JUSTICE DEPARTMENT expects to soon begin tackling competition issues with guidelines implementing the Palace-ordered mandate likely out next week, a Cabinet official yesterday said.

Justice Secretary Leila M. de Lima said the rules that will govern the planned Office for Competition under her department are still being finalized.

“We are still discussing the guidelines. We hope to release it by next week,” Ms. de Lima said.

Among the issues the competition office will study is Philippine Long Distance Telephone Co.’s (PLDT) planned purchase of rival Digital Telecommunications Philippines, Inc. (Digitel).

“[T]here are [alleged] anti-trust issues in the deal,” Ms. de Lima said.

Executive Order 45, signed by President Benigno S.C. Aquino III on June 9, designated the Justice department as the country’s Competition Authority. It was tasked to investigate violations of competition laws and prosecute violators; “supervise competition in markets” by enforcing such laws; as well as prepare, publish and disseminate studies and reports on competition to inform and guide industry and consumers. It will target monopolies, cartels and other “combinations in restraint of trade”.

The order also formed an Office for Competition under the Justice secretary’s office to carry out the Competition Authority’s functions.

Ms. de Lima said the guidelines, which are being deliberated by an internal panel composed of herself, Justice undersecretaries and assistant secretaries, among others, will adhere to the provisions of Mr. Aquino’s directive.

“We also had to keep in mind that for this year, the budget [for the competition office] will come from the DoJ (Department of Justice) budget and it will only be next year that a full allocation will be made for the office,” she added.

Ms. de Lima has said that the competition office , likely to be staffed by current state lawyers, would also engage the services of technical consultants and advisers from the private sector."

Previous related BusinessWorld post here.

DOJ formulating guidelines for competition office

"DOJ to formulate guidelines on competition authority"

Published in Positive News Media, 23 June 2011

(Original article available online here)

"MANILA, June 23 (PNA) – Department of Justice (DOJ) Secretary Leila De Lima will meet all the officials of the Department of Justice (DOJ) to formulate guidelines in investigating all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade. 

“We need to come up with guidelines on competition authority, the unit that will handle anti-trust cases because of Executive Order 45,” De Lima said.

Under E.O. 45, the DOJ is empowered to act as “Competition Authority” that would “investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade.”

The DOJ is also mandated under E.O. 45 to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices and monitor and implement measures to promote transparency and accountability in markets.”

Likewise, the DOJ is also tasked to “supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and, to this end, call on other government agencies and/or entities for submission of reports and provision for assistance.”

The DOJ under E.O. 45 carries the responsibility to “prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.” (PNA)"

Competition office to deal with monopolies

"Monopoly madness"

Published in People's Journal Online, 23 June 2011

(Original article available here).

"Bigness, as the old saying goes, is badness.

Monopolies stifle innovation because it diminishes, if not eliminates, competition. The result: poor-quality products or shoddy services.    

They are, therefore, inimical to the public interest, particularly consumer welfare.

A monopoly in the telecom sector is one such scenario.

Earlier, Globe Telecom raised the bogey of a return to the bad, old days of monopoly in the telecom sector.

Globe’s fears about the Philippine Long Distance Telephone Co. gobbling up of Digital Telecommunications, resulting in a vast “control of spectrum,” a scarce resource that is crucial to the delivery of services in the telecommunications highway, are understandable .

This spectrum is at the heart of the argument of Globe in protesting what it said was the vesting of a wide swath of the roadway to PLDT after it devoured Digitel.

The spectrum is much like the lanes at the North Luzon Expressway. By letting PLDT control more than the majority of the lanes, Globe argued that it would be put at a disadvantage in the face of considerable costs just to stay afloat since the very lifeblood of the telecom business -- the spectrum -- is in the hands of the telecom titan.

Globe hearkened to the dark days of the monopoly which deprived the country of a magnet for foreign investors. Why? Because the mighty PLDT refused to give access to other telecom carriers.

As a result, the telecom sector endured the dark days when 98 percent of the population were waiting for a telephone line and the other two percent were waiting for a dial tone.

Quite thankfully, the Ramos administration took pains to implement a vibrant business model for the telecom sector, paving the way for the entry of new players. 

But here’s a whiff of good news: Justice Secretary Leila De Lima said she would meet officials of the Department of Justice to formulate guidelines for the investigation of cases involving violations of competition laws.

De Lima  wants to prosecute violators of these laws in a bid to crack down on monopolization, cartels, and the restraint of trade.

“We need to come up with guidelines on competition authority,” De Lima was quoted by a major broadsheet as saying. “The unit will handle anti-trust cases under Executive Order 45,” she said.

EO 45 empowers the DoJ to investigate all cases involving violations of competition laws and prosecute violators.

Under the latest EO, the Justice department is also mandated to “enforce competition policies and laws to protect consumers from abusive, fraudulent or harmful corrupt business practices.”

It is likewise tasked to supervise competition in markets by ensuring that prohibitions and requirements of competition laws are followed. Thus, the DoJ requires government agencies and other entities “to submit reports and provisions for assistance.”

The department also has the responsibility to “prepare, publish, and disseminate studies and reports on competition” to inform and guide the industry, and consumers about their rights and responsibilities."

DOJ hopefully puts teeth in competition office

"Justice department to put teeth into anti-monopoly guidelines"

by Tetch Torres

Published 22 June 2011, INQUIRER.net

(Original article available here).

"MANILA, Philippines—Justice Secretary Leila De Lima will meet officials of the Department of Justice (DoJ) to formulate guidelines for the investigation of cases involving violations of competition laws.

The secretary wants to prosecute violators of these laws in a bid to crack down on monopolization, cartels and the restraint of trade.

“We need to come up with guidelines on competition authority,” De Lima said. “ The unit will handle anti-trust cases under Executive Order 45,” De Lima said.

EO 45 empowers the DoJ to investigate all cases involving violations of competition laws and prosecute violators of these laws.

Under the latest EO, the DoJ is also mandated to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices.”

The DoJ is likewise tasked to supervise competition in markets by ensuring that prohibitions and requirements of competition laws are followed. The DoJ, thus, requires government agencies and other entities “to submit reports and provisions for assistance.”

The DoJ also has the responsibility to “prepare, publish and disseminate studies and reports on competition” to inform and guide the industry, and consumers about their rights and responsibilities."