Strengthening Constituencies for Effective Competition Regimes in Select

Strengthening Constituencies for Effective Competition Regimes in Select West African Countries Highlights of Preliminary Country Paper: The Gambia Presented by: Omar Ousman Jobe National Reference Group Meeting (NRG-I) 26 th September 2008, Banjul, The Gambia, 1 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

General Country Background: The Gambia: one of the Least Developed Countries Ranked 155 out of 177 countries according to the UNDP Human Development Index (2006). Small Population (about 1. 5 million) with a predominantly agricultural economy with little potential for value addition – The country is still a groundnut garden An industrial sector that is struggling to emerge due to numerous structural and financial constraints and a vibrant service sector. Small domestic market size – role of the re-export trade (Strategic positioning: disparities in currencies, tax regimes etc) The country’s economy is largely tax-based (around 85% of GLF) 58% of the population are considered poor (PRSP) Reached HIPC completion point in January 2008 and is now eligible for debt relief 2 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

General Country Background (Cont’d): The Gambia is in the middle ranking of the widely used indicators of business climate and competitiveness. In the 2007 World Bank Doing Business Indicators, The Gambia is ranked 113 th out of 175 th countries, performing better than most of its West African neighbors, (except Ghana and Nigeria), in terms of ease of dealing with licenses and permits, and for enforcing contracts and on labor regulations. 3 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Social & Economic Policies affecting Competition The structural adjustment programmes of the 1990 s paved the way for the liberalization of the economy and the Gambia government is committed to free market policies and a vibrant private sector-led growth (Vision 2020 blueprint) • Second Poverty Reduction and Strategy Paper (PRSP II) covering an implementation period of 5 years (2007 – 2011), outlines The Gambia’s overall policy framework for Growth and Poverty Reduction. This second PRSP focuses on the needs to eradicate poverty in The Gambia and serves as main reference for policy and programme designers in public and private sector and development partners 4 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Social and Economic Policies Affecting Competition (cont’d): The Gambia’s choice of economic ideology is based on free market principles. The Gambia has various laws governing trade and customs regulation: The Gambia Free Zone act (2001); The Gambia Investment Promotion act (2001); The launching of the Gambia Gateway Project funded by the World Bank (2002) The government set up The Gambia Investment Promotion and Free Zones Agency (GIPFZA), whose primary task is to establish and manage Free Economic Zones (FEZs) GIPFZA is a one-stop-shop for investment 5 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Background (Cont’d): Other laws affecting business and investment are the Companies Act of 1955 and the Business Registration Act of 2005. The judicial system upholds the sanctity of contracts Market forces determine exchange rates There are no restrictions on the transfer of funds by investors into and out of The Gambia Investment Promotion Act of 2001 provides the legal ground for transfer of funds. Protection of intellectual property rights is guaranteed; A Government procurement Act is also in place. There are no limits on foreign ownership or control of businesses except in the television broadcasting and defense industries which are closed to private sector participation. There are no laws or regulations that limit or prohibit foreign investment, participation or control. 6 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Measures already taken: Reducing the extent of state ownership of public enterprises Elimination of price controls The adoption of a divestiture policy The establishment of a Divestiture Agency The creation of a system of licensing the public utilities (with the expectation of greater private sector involvement) Trade liberalization programmes 7 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Regulatory Mechanisms: The Central Bank of The Gambia Divestiture Agency (2001) – set up to carry out the government's divestiture program in several sectors such as energy, communication, transportation, agriculture, pension funds, and housing finance The Public Utilities Regulatory Authority (2004) set up to regulate the activities of providers of certain public utilities such as electricity, water and sewage services, petroleum and gas, telecommunications, broadcasting, and postal services The Commonwealth Secretariat is currently helping in the setting up of the Competition Commission 8 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

The Competition Act of 2007 was assented to by the President on the 5 th day of October and gazetted the 19 th October, 2007. The Overall Objective of the act is to foster a viable competition culture that favours investment, fair trade, growth and poverty reduction. 9 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

The Specific Objectives of the act: To promote competition in the supply of goods and services by among other things: Prohibiting collusive agreements and bid rigging; Providing for investigation and control of other types of restrictive agreements. To promote and protect the free functioning of the markets that are open to competition, including the markets previously subjected to restraints imposed by government. To give confidence to those wishing to invest in the Gambia To demonstrates the government’s commitment to a free-market economy To guard against the risk that enterprises with dominant market power will choose to erect private barriers to competition and exploit customers 10 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

The Regulatory Authority: The Public Utilities Regulatory Authority (PURA) was established by Government (in 2004) to provide the legal framework to regulate the activities of providers of public utility services. PURA now concentrates on the Telecommunications, Electricity and Water utility sectors. 11 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

IV. Sectoral Policies The National Water and Electricity Company (NAWEC) enjoys a monopoly in the generation of electricity But this is being relaxed with the introduction of an Independent Power Producer with an installed capacity of 25 megawatts. The provision of potable water services rest entirely with NAWEC The emergence of a third GSM operator: Comium led to interconnection issues among telecom operators that warranted the interventions of PURA Since May 2007 all telecommunication service providers – GAMTEL, GAMCEL, AFRICELL and COMIUM were obliged to sign interconnection agreements with each other, 12 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Promoting a Healthy Competition Culture: The telecommunication sector: the emergence of Africel and later Comium brought to an end the monopoly enjoyed by Gamtel, the national operator (misused its market power, charging excessive prices, etc) Benefits to consumers: slashing of product cost, elimination of validity, better services, lower rates etc. 13 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

V. Anti-Competitive Practices in The Gambian Economy Direct Government policies 14 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Direct Government Policies Lack of clear policies to curb the desire by private sector operators to maximize profit at the expense of the state and other competitors. Certain policy issues such as the granting of tax holidays and development certificates to institutions within an economy could lead to anti-competition (e. g. . TAF construction was given a development certificate by The Gambia government) The refusal by DOSCIT to grant licenses to interested parties to have their own TV stations is anti-competitive. 15 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Direct Government Policies: The non- existence of a Telecoms bill in the industry has given rise to anti-competitive tendencies in the Gambian economy. The divesture program of Government of key institutions was carried out without going through an international bidding process. This could have led to “arrange buying” with a view to dominating the market. The existence of government monopolies (like NAWEC) which are poorly run are by anti-competitive. In the absence of alternatives, the consumers may not be getting the best value for their money 16 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Vi. Anti-Competition Issues in The Gambian Economy Interplay of Operators Within The Gambian Economy 17 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Interplay of Operators Within The Gambian Economy Instances of market failures in The Gambia include: the development of cartels. Collusive horizontal agreements involving collusion between businesses operating in the same market and hence normally competitors) Example: In the commodity sectors of Rice, Onion, Irish potatoes and Flour in The Gambia, there exists a strong collusive agreement in the selling price. The main importers concur to fix prices, thus leading to the hike in retail price in the shops. Examples: Vertical agreements between importers and distributors - The consumers goods sector like Rice, Cooking Oil and Sugar The rigging of Bids is a reality in both State and non-state actor spheres. Procurement Procedures are not always followed due to vested interest! 18 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Examples of anti-competitive practices Private doctors having their own clinics and prescribing medicines which patients may not need and which they must sell or loose money Schools urging students to buy uniforms and other products from them at a price that may be above that of the market is not competitive. A telephone operator: Comium – making its telephone handset incompatible with SIM cards issued by other operators 19 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Cont’d: The rice and cement market are extremely concentrated in the hands of a few, making it practically impossible for a new entrants to penetrate these markets. 20 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Cont’d: Monoploy in the energy sector gives the consumer no room for an alternative. Consumers have to put up with whatever conditions laid down by NAWEC. Tied-selling: A wholesaler interested in Sugar has to buy sugar on credit from the importer then he has to buy rice in order for the importer to continue trading with him on credit in sugar. The same system is replicated between the wholesalers and the retailers 21 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Cont’d: Political and commercial interests are inextricably linked, making the promotion of public interest rather difficult Vested interest, corruption and political patronage often override the protection of public interest It is therefore the responsibility of The Gambia government and regulatory agencies like PURA and the would-be Competition Commission to protect the consumers, particularly the poor 22 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Challenges: Lack of expertise in competition administration Weak institutional environment that hinder the implementation of a regulatory regime; Capacity building and human resource development is necessary to ensure that regulatory agencies can fulfill their mandate effectively Need for a regional approach involving R. E. Cs and the development of regional standards Absence of consumer awareness and consumer groups to contribute to the regulatory process and the presence of stakeholders who are ill-prepared to accept the rules of engagement. Insufficient funding for regulatory activities and the lack of sector specific laws for the telecommunication and the water sectors. 23 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

Challenges (Cont’d) The lack of sector specific (telecommunications and the water) laws continues to inhibit our regulatory effectiveness in those sectors. These legislations are required to supplement the PURA Act by giving it the specific mandate within the sectors and delineate the complementary policy and regulatory roles and responsibilities of all stakeholders. Donors such as the World Bank are not keen to commit funds to a sector that does not have any legal framework. 24

Challenges (Cont’d) Sector regulators like PURA and officers of the emerging Competition Commission need to be shielded from undue interference by policymakers, lobby groups, political clients and other actors driven by their vested interest. 25

The Way Forward: The setting up of the Competition Commission Finalization of the Competition Policy Building capacity of National Stakeholders (With Technical Assistance from CUTS International) That strengthening of regulatory institutions: The Divestiture agency, The Central Bank and the Public Utilities Regulatory Authority (PURA), the Competition Commission etc The promotion of a strong political will to foster a healthy Competition Culture The development of a Consumer Policy Constructive competition and consumer advocacy engagements with State and non-State actors PURA intends to develop consumer codes, which will establish minimum acceptable standards of service provision. These are geared towards ensuring that consumers get the services they are paying for. 26 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219

THANK YOU FOR YOUR ATTENTION ! ! 27 Garba Jahumpa Road, Bakau, K. S. M. D. The Gambia. * Tel: (220) 494338 Fax: (220) 494219