Interview: Paulus Ain
How do practices in Papua New Guinea stack up against World Trade Organisation (WTO) regulations and guidelines on free trade?
PAULUS AIN: Our role at the ICCC is to implement and enforce WTO guidelines on behalf of the PNG government. The framework encompasses everything from eliminating trade distortions between countries, to trimming down tariff and non-tariff barriers, and phasing out subsidies. Since 2010 PNG has improved various business practices and boosted investor confidence as part of overall free trade practices. Some highlights include improvements in business registration through the Investment Promotion Authority; strengthening access to credit by adopting a new law implementing a functional secured transactions system; establishing a centralised, noticed-based collateral registry; and improving the enforcement of contracts by launching the specialised commercial track at the national court. This provides a favourable environment for private sector investment and ensures healthy competition.
How effective are current policies in fostering fair and healthy competition?
AIN: The government’s competition policy is clear, although improvements are needed in certain areas. One example is the voluntary pre-merger regime. As it stands now, there is no legal obligation to consult the ICCC before merging. To ensure a level playing field the ICCC must be involved in assessing and approving any mergers so we can deter monopolies and duopolies. There should also be an explicit national policy developed to give an overarching view on competition rules and regulations. At the moment, the ICCC Act serves as the legal mechanism to guarantee competition. A high-level national strategy on competition can help ensure other sectors are given directives to make sure industries within are organised in a manner that promotes competition. This would apply to all private and public sector companies, and would promote transparent and fair business practices. Deregulation across sectors should also be a part of the competition policy as an instrument to support economic policies in PNG.
The ICCC has a vital role to play here in assisting in the formation of further laws and policies to support economic growth, and safeguarding against those that may adversely affect a competitive market structure, business conduct or economic performance. The ICCC and the National Treasury are currently engaged in a competition framework review to address these issues. The goal is to strengthen existing legislation and to safeguard consumer welfare.
What is the ideal balance between targeted subsidies and free market policies?
AIN: Generally, subsidies tend to divert resources from more productive to less productive uses, thus reducing economic efficiency. However, subsidies can serve redistributive goals, or can help to correct market failures. As national trade volumes increase, issues such as protectionism, trade barriers, subsidies and violations of intellectual property arise due to differences in trading norms in every nation. Targeted subsidies can either address market failures efficiently or distort trade flows if they give an artificial competitive advantage to exporters or import-competing industries.
There are, however, benefits in applying subsidies to areas that create positive externalities, such as health and education, but those costs are met mainly through taxation. Continuous subsidies create dependence and foster inefficiencies, which is why we are constantly looking at ways to reduce the amount of subsidies needed. We are of the view that subsidies are not an ideal way of promotion, investment or competition.
At the end of the day, competition is the only thing that can save the economy, by reducing inefficiencies and ultimately reducing the prices of goods and services. We are very much looking forward to opening all sectors of the economy to free and healthy competition.
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