Competitive Neutrality in the Presence of State Owned Enterprises

Transcription

1 Cmpetitive Neutrality in the Presence f State Owned Enterprises BIAC Submissin t the OECD Crprate Gvernance Cmmittee 16 Nvember BIAC is pleased that the OECD is undertaking a wrk prgramme n the anticmpetitive challenges that can arise when a State-Owned Enterprise (SOE) and private sectr entities are in cmpetitin. BIAC appreciates having been able t cnsult with the OECD Wrking Party n State Ownership and Privatisatin Practises n 19 Octber As a fllw-up t ur ral remarks n 19 Octber, BIAC wishes t submit the fllwing written cmments n the OECD dcument Cmpetitive Neutrality in the Presence f State Owned Enterprises (dcument DAF/CA/PRIV(2010)1). 2. Ensuring cmpetitive neutrality f SOEs is highly imprtant t the OECD business cmmunity. Mre and mre, private sectr cmpanies perating in glbal markets find that they are in cmpetitin with SOEs, and that the terms f this cmpetitin are neither fair nr equal due t purpseful interventin by gvernments t cnfer an unearned and sustained cmpetitive advantage fr their SOEs ver private sectr cmpetitrs. The gvernments and public authrities that engage in such interventin are n lnger in their apprpriate psitin f cmpetitive neutrality in relatin t the market. These gvernments cmprmise their ability t fulfil their respnsibility t prtect the cmpetitive prcess, which is critical t market efficiency. 3. Interventin f this srt is trubling when the private sectr is cmpeting in an SOE s hme market, but increasingly SOEs are als investing and perating abrad - making this prblem mre cmplex, significant, and urgent. We als nte that many emerging nn-oecd cuntries view the ecnmic mdel ften described as state capitalism as an appealing mdel. They ften find inspiratin in the way sme Asian cuntries manage natinal SOEs. 4. BIAC recgnizes that gvernment invlvement in the ecnmy is inevitable. Hwever, such invlvement shuld be as limited as pssible, particularly if the gvernment is nt perfrming gvernmental functins, r is prviding gds r services n a cmmercial basis thrugh the wnership and peratin f SOEs. In general, BIAC believes that cnsumer welfare is maximised thrugh cmpetitin and cmpetitive markets, which is mre likely when the market participants are primarily privately held. Our general view is that increased privatisatin, where pssible, Business and Industry Advisry Cmmittee t the OECD Tel. +33 (0) /15 Chaussée de la Muette Fax +33 (0) Paris biac@biac.rg France

2 shuld prceed. In ther cases, crpratisatin f SOEs as well as cnclusin f Public-Private Partnership (PPP) type cntracts is desirable. 5. BIAC finds the OECD paper t be an excellent initial pint f departure, as it includes a stcktaking f cncerns abut cmpetitive neutrality, different cmpetitive neutrality framewrks, remedies available t cunteract anti-cmpetitive behaviur, reasns why SOEs may perate n an uneven playing field, and a discussin f the relevance f the OECD SOE Guidelines that supprt cmpetitive neutrality. Sectin One, n pages 5 t 8, makes a gd start at identifying sme f the anti-cmpetitive measures used by gvernments r public authrities which preclude r subvert a level playing field fr private sectr business. 6. As the OECD paper pints ut and illustrates n page 7, the mere presence f state wnership itself, even where the state plays nly a passive rle, can cnfer and deliver advantages t SOEs. Thanks t state wnership, SOEs ften need nt prvide any return t sharehlders nr have any cncern fr share price, are impervius t the disciplining effects f capital markets, are ften exempt frm bankruptcy rules, and can engage in exclusinary pricing and generate lsses withut fear f ging bankrupt. 7. BIAC is als cncerned with gvernments active anti-cmpetitive behaviur that favurs their wn SOEs and threatens cmpetitive neutrality. These actins include: utright r discriminatry subsidisatin, cncessinary financing, lcal cntent requirements, public prcurement preferences, exemptin frm antitrust and cmmn fiscal rules and rigrus applicatin f cstly regulatry regimes that apply t their private sectr cmpetitrs. Als, ther preferred treatment such as requirements that business partners f SOEs transfer technlgy, r tleratin by gvernments f intellectual prperty infringement by SOEs are examples f such actins. 8. BIAC wuld highly encurage the OECD t extend the paper with a study identifying the mst successful measures, frmal mechanisms and individual cuntry appraches that best wuld achieve a level playing field, and thse which inhibit such achievement. 9. The study shuld als map the anti-cmpetitive practices identified in the OECD paper t the existing OECD Guidelines fr SOEs, t determine the extent t which the existing SOE Guidelines cver thse practices that breach cmpetitive neutrality. This suggestin is based n the fact that the paper itself states n pages that the full applicatin f the SOE Guidelines, which grew ut f the OECD s crprate gvernance wrk, will nt achieve cmpetitive neutrality. 10. The SOE Guidelines d nt address the issues raised by purpseful gvernment interventin favuring dmestic SOEs. The study shuld address measures such as the nes mentined in paragraph 7 abve and in the OECD paper n pp It shuld equally address the cmpetitive neutrality principles discussed n pp , as well as technlgical neutrality. The list f elements just mentined is nt an exhaustive list, but underscres the pint that BIAC is primarily cncerned with the 2 P a g e

3 behaviur f gvernments in relatin t their SOEs, and SOEs behaviur respnding t gvernment interventin. 11. As a matter f principle, rles and bligatins applied t SOEs acting in a market shuld be the same as fr private entities. In particular, this shuld be the case fr fiscal bligatins, accunting, transparency, reprting, public service bligatins, human rights etc. Operating cntracts r licenses can include these kinds f bligatins. There are many examples where this is dne when the private sectr is cncerned. Als, there are examples where SOEs are suppsed t respect these kinds f bligatins but in practice d nt, thereby weakening r invalidating cmpetitive situatins. 12. The OECD paper als ntes anther gap in the SOE Guidelines. As paragraph 66 admits, the key recmmendatin in SOE Guideline I, that gvernments maintain a level playing field in markets where SOEs and private sectr cmpanies cmpete, des nt apply t markets where SOEs and private sectrs d nt cmpete. The paper finds that if incumbent SOEs are s heavily favured that n private enterprise perceives a market pprtunity, then it is a distrtin f cmpetitin which is nt cvered by the SOE Guidelines. BIAC agrees fully with this statement and wuld encurage the study t include and develp this issue. 13. The distrtins caused by SOE behaviur, and by gvernment interventin fr and thrugh SOEs, als g beynd hrizntal cmpetitin in the same market. SOEs als affect their suppliers thrugh requirements t use dmestic gds r services, r requirements t transfer technlgy, r adptin f standards that effectively exclude freign technlgy r freign suppliers. These actins are als f cncern t BIAC, and the study shuld therefre als address such vertical cncerns. 14. The OECD and its member cuntries shuld als further develp and prmte transparency f SOEs, as a first step tward determining and addressing anticmpetitive advantages cnferred n SOEs. Full transparency regarding direct and indirect relatinships between SOEs and the state, the respective rles f each, relatinships and influences (visible as well as invisible, such as market preferences fr SOEs, prcurement preferences, and directin f SOEs by gvernment r public authrities), bard/senir management appintments, bard decisin making, and the cst f, and cmpliance with, state service/scial bligatins is vital t the cncept f cmpetitive neutrality. The same is true when SOEs are perating abrad and engaging with business cunterparts in thse cuntries. 15. It wuld be wrthwhile fr the study als t include state assistance, such as specific frms f state aid t industries. A thrugh stcktaking f such measures wuld give a brader picture f SOE incentives and the distrtin t cmpetitive neutrality. 16. Additinal prblem areas in relatin t the issue f cmpetitive neutrality fr SOEs include cases where states have a significant share wnership in a "cmmercial" jint-venture r when the SOE becmes the client and/r regulatr f a service that has been cntracted ut t a private peratr. Such areas culd als cnstitute avenues fr further explratin in the study. 3 P a g e

4 17. As fr the three suggested curses f actin prpsed in paragraph 74 n page 31: BIAC believes and urges that the OECD shuld adpt the first ptin f extending the wrk prgramme s as t reach a cnsensus psitin n the key elements f cmpetitive neutrality as a path fr future wrk. The study suggested in paragraphs 5 t 13 abve wuld be an essential first step. The paper als prpses establishing a brad mnitring mechanism fr applicatin f the SOE Guidelines. Hwever, many f the mst urgent cncerns ccur with SOEs frm nn-oecd cuntries, which wuld nt participate in such mnitring. Effrts n mnitring must nt cme at the expense f wrk n develping a cmmn definitin f cmpetitive neutrality, althugh they culd cmplement such wrk. As fr the third ptin, BIAC ntes that sme OECD agenda wrk takes place between member cuntries, while ther activities include utreach cuntries. We recmmend that wrk n defining cmpetitive neutrality first seek agreement amng OECD cuntries, befre including any thers. 18. Furthermre, it is BIAC s impressin that in emerging ecnmies, where ften the state wns and perates a large prprtin f cmmercial entities, the SOE Guidelines are nt well knwn r understd at either the natinal r sub-natinal levels. Mre must be dne t prmte the SOE Guidelines, keeping in mind that the actins f bth natinal and sub-natinal levels f gvernment can adversely impact cmpetitive neutrality. 19. BIAC wishes t call attentin t the paper Australian Gvernment Cmpetitive Neutrality Guidelines fr Managers, which describes specific cnditins that, in Australia s system, must be met in rder t sustain cmpetitive neutrality, such as taxatin neutrality, debt neutrality, regulatry neutrality, etc. This list f minimum cnditins effectively helps t set parameters that wrk t transfrm mnplistic market agents int cmpetitive market agents. Such educatin f managers within SOEs is critical, and parallels the extensive antitrust and regulatry cmpliance prgrams many majr cmpanies have in place t instruct their wn management teams. SOE managerial training f this type wuld be an imprtant best practice fr the OECD t identify in its expanded paper n cmpetitive neutrality. 20. In the lnger run, the OECD culd develp a guide n best practices, t identify and share with gvernments and the public the measures that have prven t be the mst effective in relatin t btaining cmpetitive neutrality. 21. Finally, while the OECD discussin t date has been n SOEs, increasingly the same cmpetitive neutrality cncerns arise in relatin t state assisted enterprises, where the state directly r indirectly prvides advantages t certain private enterprises at the expense f thers, in attempt t develp and prmte natinal champins. It may be useful t frame the cmpetitive neutrality cncerns ging frward in a brader cntext. 4 P a g e

5 22. BIAC lks frward t wrking with the OECD n this imprtant plicy area, and suggests that the OECD crdinate its resurces, and the high-quality expertise f the OECD Crprate Gvernance Cmmittee and the Wrking Party, with thse f ther relevant OECD Cmmittees. 5 P a g e