3.1 Introduction
South Asia, as demarcated for the purposes of the South Asian Association for Regional Co-operation (SAARC)Footnote 1 and the South Asian Free Trade Area (SAFTA)Footnote 2 includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.Footnote 3 These countries are not only at similar stages of economic development and have comparable relationships with multi-lateral agenciesFootnote 4 but are also connected to each other through their geographies and parallel and sometimes overlapping histories.
Around the time that India and Pakistan adopted modern competition legislations in 2002 and 2007 respectively, the remaining South Asian countries were also taking steps towards adopting modern competition regimes for their own contexts. Among them Bangladesh, Nepal, Sri Lanka and more recently Maldives, have already enacted competition legislation, Bhutan has a competition policy and even Afghanistan was until recently evaluating its options in this regard. This chapter charts the progress of the competition regimes of the remaining six South Asian countries (the South Asian Six) along the deliberation-enactment-implementation continuum,Footnote 5 and analyses the motivations, mechanisms, and institutions engaged by each of them in this regard to evaluate the extent and quality of compatibility and legitimacy created or likely to be generated in the adoption process.
To this end this chapter is organised as follows: Section 3.2 examines the progress each of the South Asian Six have made along the deliberation-enactment-implementation continuum and describes where these are presently located; Section 3.3 examines the pre-conditions of transfer in each of these countries legal and political institutional landscape at the time they engaged with modern competition legislation and their motivations and strategies for engaging with these laws; Section 3.4 identifies the transfer mechanisms employed by each of these countries; Section 3.5 explores the compatibility and legitimacy generated or likely to be generated in the course of adoption for each of the South Asian Six and predicts their likely progress the implementation stage.
3.2 A Competition Tour of the South Asian Six
Each of the South Asian Six have made progress towards adopting some version of a modern competition legislation. This section organises these countries according to the progress they have made towards adoption and examines the present state of their competition regimes to understand the overall picture of adoption of competition regimes in South Asia.
3.2.1 Countries That Have Completed the Adoption Stage
Four out of the South Asian Six – Sri Lanka, Nepal, Bangladesh, and Maldives – have already adopted competition legislation and have therefore completed both the deliberation and the enactment phase of the adoption stage.
3.2.1.1 Sri Lanka and the Consumer Affairs Authority Act 2003
Sri Lanka was the first among the South Asian Six to adopt a competition legislation by enacting the Consumer Affairs Authority Act 2003 (‘the Sri Lankan Act’).Footnote 6 The Sri Lankan Act provides for the establishment of the Consumer Affairs AuthorityFootnote 7 and the Consumer Affairs Council,Footnote 8 that together have the mandate inter alia to promote effective competition, protect consumers, and regulate internal trade.Footnote 9 Both the Authority and the Council are semi-autonomous, collegiate bodies,Footnote 10 and the government has the power to appoint as well as remove their members.Footnote 11 The Sri Lankan Act, does not regulate mergers and acquisitions and focuses only on ‘anti-competitive practices’.Footnote 12
The Act confers wide-ranging regulatory, investigative, and advocational powers on the AuthorityFootnote 13 but limits its enforcement powers. For instance, in respect of anti-competitive practices,Footnote 14 the Authority’s powers are primarily investigative and advisory.Footnote 15 If, upon completing its investigation, the Authority is of the view that there is a case to be tried, it may refer the matter to the Council for adjudication.Footnote 16 The Council has the power to terminate the anti-competitive practice or seek its modification, provided it is of the view that the practice is contrary to the ‘public interest’.Footnote 17 Although the Act does not define ‘public interest,’ it requires the Council to ‘take into account all matters which appear to [it] to be relevant’ particularly those that may affect ‘competition between persons supplying goods and providing services’, ‘the price and quality of such goods and services’, and ‘development of new techniques and products, and facilitating the entry of new competitors into existing markets’ in making a judgment in this regard.Footnote 18 The Act is silent as to whether the orders of the Council may be appealed or as to the forum to which the appeal may lie.
3.2.1.2 Nepal’s Competition Promotion and Market Protection Act 2063, 2007
Nepal enacted the Competition Promotion and Market Protection Act 2063 in January 2007 (hereafter ‘the Nepalese Act’).Footnote 19 The avowed aim of the Act is to make the ‘national economy more open, liberal, market-oriented and competitive’; to enhance ‘national productivity by developing the business capacity of producers or distributors’; and to maintain ‘the economic interests and decency of the general public by doing away with possible unfair competition in trade practices’.Footnote 20
In addition to the usual prohibitions on ‘anti-competitive agreements’,Footnote 21 ‘abuse of dominant position’,Footnote 22 and ‘mergers or amalgamations with intent to control competition’,Footnote 23 the Act specifically prohibits ‘bid-rigging’,Footnote 24 ‘exclusive dealing’,Footnote 25 ‘market restriction’,Footnote 26 tied-selling,Footnote 27 ‘misleading advertisement’,Footnote 28 and provides for the regulation of ‘abuse of intellectual property’.Footnote 29 However, the Act limits its expansive ambit by exempting several industries, activities, and products (including cottage and small industries, the procurement of raw materials, export business, collective bargaining, research and development, management collaboration, collaboration for organisational and procedural improvements intended to enhance trade capacity and agricultural products)Footnote 30 and by empowering the government to grant further exemptions if appropriate.Footnote 31
The Act also provides for a Board, with powers of ‘formulating policies’, ‘reviewing laws’, and ‘raising awareness’ ‘to enhance fair competition in market by protecting the market’.Footnote 32 In terms of the Act, the Board comprises senior government officials, and nominees from industry and consumer rights’ organisations, that may be appointed and removed by the government.Footnote 33 The Act also requires the government to appoint a ‘Market Protection Officer’.Footnote 34 In terms of the Act both the Board and the Market Protection Officer are authorised to receive complaints from the publicFootnote 35 as well as to carry out investigations into alleged violations of the Act,Footnote 36 however, the power to adjudicate upon these matters vests exclusively in the courts.Footnote 37 Further only the Market Protection Officer has the power to bring a case before the court,Footnote 38 while the responsibility for handling the case vests entirely in a ‘government attorney’.Footnote 39 The Act also allows a party aggrieved by a violation of the Act to directly approach the courts for compensation.Footnote 40
3.2.1.3 Bangladesh Enacts the Competition Act 2012
Bangladesh enacted its Competition Act in June 2012 (‘the Bangladeshi Act’)Footnote 41 with the aim of enhancing economic development and eradicating anti-competitive practices.Footnote 42 This Act provides for the establishment of the ‘Bangladesh Competition Commission’ as an independent statutory body with perpetual succession,Footnote 43 comprising a chairperson and not more than four members. The Act requires members of the Commission to have at least fifteen-years experience in ‘economics, matters relating to market, or public administration or similar subjects or legal profession or legal affairs activities in different public–private institutions or any other field deemed relevant by the government’. All members are to be appointed by the government in accordance with rules made for this purpose.Footnote 44 The government also has the power to remove members on specified grounds albeit after affording them an opportunity of being heard.Footnote 45
The Commission has the power to review ‘anti-competition agreements’,Footnote 46 abuse of dominant position,Footnote 47 and mergers.Footnote 48 However, ‘goods or services … controlled by the Government’ may be excluded from the ambit of the Act if it is in the ‘interest of the national security’ to do so and if the goods and services are ‘not open for private sector’.Footnote 49 The Act also authorises the Commission to adjudicate upon anti-competitive agreements, abuse of dominant position or mergers, while offences (including interfering in, contravening or failing to comply with an order of the Commission) under the Act are to be tried by a Magistrate. Persons allows persons aggrieved by the orders of the Commission may approach it for a review of its orders or to appeal against these to the government. It is not clear, however, whether there is a further right of appeal from the review orders of the Commission or of the appeal orders of the government.Footnote 50 Appeals from the orders of the magistrateFootnote 51 lie to the Court of Sessions, whose orders are to be final.Footnote 52
3.2.1.4 Maldives’ Competition Act 2020
Maldives adopted a competition legislation only recently: the Maldives parliament approved the Competition Act 2020 on 18 August 2020 (hereafter ‘the Maldives Act’) which was ratified by the president on 21 August 2021,Footnote 53 to come into effect on 1 March 2021. The Act is to be administered directly by the government through the relevant ministry and will apply to all commercial transactions ‘carried out by enterprises’ in the Maldives as well as those that are ‘carried out overseas but that impact the competitiveness of any market in the Maldives’. The Act provides for checking anti-competitive agreements in relation to goods and services, excluding agreements within a single group of companies, and agreements with a public interest dimension. The Act also prohibits abuse of dominant position and mergers that result in ‘substantial reduction in competitiveness in any market’ but excludes mergers ‘finalised between two government companies, and mergers that provide services which serve public economic interests’ provided these have been approved by the minister in accordance with the Act. The Act also exempts mergers which though result in substantial reduction in competitiveness provide significant other economic benefits.Footnote 54
The Act mandates the relevant ministry to establish a mechanism to address complaints regarding contraventions of the Act and allows parties aggrieved by decisions of the ministry to file appeals before the courts.Footnote 55
3.2.2 Countries still in the Adoption Stage
Of the South Asian Six, Afghanistan and Bhutan have still to adopt a competition legislation. However, while Afghanistan has a draft competition act which indicates its intention to adopt such legislation, Bhutan believes that a competition policy is sufficient for its purposes.
3.2.2.1 Enactment Interrupted: Afghanistan and the Draft Competition Act
The draft Afghanistan Competition Act prepared as far back as 2011 (hereafter ‘the draft Afghan Act’)Footnote 56 aims to establish an independent ‘Competition and Consumer Authority’ (section 10) comprising five members, to be appointed by the government.Footnote 57 The government also has the power to remove members, albeit on specified grounds and after an inquiry.Footnote 58 The proposed Authority is embedded in the Ministry of CommerceFootnote 59 which has the power to supersede the Authority in specified circumstances.Footnote 60 The draft Act confers on the Authority the power to investigate and sanction anti-competitive agreements and abuse of dominant position, to regulate combinations, and to check hoarding.Footnote 61 The Act allows appeals from certain orders of the Authority to lie to a specially designated bench of the Commercial CourtFootnote 62 and from certain other orders to lie to a especially designated Competition Court.Footnote 63 Appeals from orders of the Competition Court are to lie to the Supreme Court.Footnote 64
3.2.2.2 Bhutan: To Enact or Not to Enact?
Bhutan claims not to need a competition legislation largely due to the smallness of its economy. In 2015, however, Bhutan adopted its first comprehensive competition policyFootnote 65 which envisaged establishment of a ‘National Competition Council’ to ensure that competition principles was followed across the government.Footnote 66 In 2020, Bhutan revised and updated this Policy (hereafter ‘the Bhutanese Policy’)Footnote 67 with the aim to allow Bhutanese citizens the right to practice any lawful trade and to foster private sector development through fair competition and by preventing commercial monopolies.Footnote 68 The Policy prohibits monopolies, abuse of dominant position, cartels, anti-competitive mergers, and deceptive marketing practicesFootnote 69 and applies to government organisations and business entities.Footnote 70 The Policy excludes from its ambit economic activities that are in the interest of national security or have strategic importance.Footnote 71 The Office of Consumer Protection, established under the Bhutan Consumer Protection Act 2012,Footnote 72 has the power to review and monitor the implementation of the Policy.Footnote 73
3.2.3 Adoption of competition laws in the South Asian Perspective
The review of the adoption of competition legislation across South Asia paints a very positive picture: six out of eight South Asian countries have completed the successive deliberation and the enactment phases of the adoption stage and have acquired some version of a modern competition legislation. Only Afghanistan and Bhutan are still to adopt a competition law and while Afghanistan has a draft legislation which may be enacted at a future date, Bhutan has not made any commitment in this regard (Figure 3.1).
However, a closer look at the competition legislation that these countries have adopted, or propose to adopt, reveals considerable variations amongst them. While some of these legislations provide for the establishment of independent, autonomous competition authorities, others fully embed competition enforcement in the country’s pre-existing executive framework. Further, certain competition laws allow the competition authorities to take enforcement actions, while others envisage these authorities as intermediaries between the public and the courts. The greater number of these legislations vest the power of appointment and removal of members of their competition authorities or boards entirely in the government, thereby giving the government exclusive control over their composition. These legislations also experiment with different competition enforcement pathways: the legislations in certain countries allow appeals from the orders of the competition authority to lie to independent, specialist tribunals, and from orders of the tribunals to lie to the general courts pre-existing in the country, while in others, the aggrieved party may only approach the government for redress (Table 3.1).
| COUNTRY (in the order of adoption) | Competition Authorities | Competition Enforcement Pathway | ||
|---|---|---|---|---|
| Structure | Mandate | Composition | ||
| India |
|
|
|  |
| Sri Lanka |
|
| Members to be appointed and removed by the government. |  |
| Nepal |
|
| Government has exclusive power to appoint and remove members of the Board. |  |
| Pakistan |
|
|
|  |
| Bangladesh |
|
|
|  |
| Maldives | No independent authority. |
| Not applicable. |  |
| Afghanistan |
| • Authority had the power to review and regulate
|
|  |
| Bhutan |
| • Prohibits:
• Economic activities in the national interest excluded. | Office of Consumer protection established under the Ministry of Economic Affairs and comprises government Officers. | No implementation trajectory specified. |
3.3 Pre-conditions of Transfer and the Adoption Process in the South Asian Six
The variations in the substance of the competition legislation adopted by the South Asian Six and the enforcement authorities they create are largely attributable to the contexts and the adoption strategies that shaped them. This section groups the South Asian Six in accordance with their governance models and examines their individual pre-existing conditions of transfer, their respective motivations for adopting or engaging with adopting modern competition legislation, and the interplay of their institutions in the adoption process.
3.3.1 Democracies and the Adoption of Competition Legislation
Of the South Asian Six, Sri Lanka and Bangladesh are both former British colonies. Sri Lanka achieved dominion status under the Ceylon Independence Act 1947 and, since then, has adopted two constitutions – in 1972 and 1978. The 1978 Constitution has been amended twenty times but has never been suspended.Footnote 74 Bangladesh on the other hand was part of Pakistan until 1971 when it declared independence, prior to which it was part of India until 1947. Bangladesh adopted its first constitution in 1972 which has been amended eighteen times and was suspended once between 1982 and 1986.Footnote 75 In 1995 both Sri Lanka and Bangladesh joined the WTO.Footnote 76
3.3.1.1 The Sri Lankan Context
Sri Lanka was motivated by both domestic needs and external pressure to consider a modern competition legislation. In 1977 Sri Lanka had embarked upon a programme of economic liberalisation and had enacted the Fair Trading Commission Act 1987 with the aim of curbing monopolies, preventing anti-competitive practices, and regulating mergers contrary to the public interest.Footnote 77 However, the Fair Trading Commission, established in pursuance of the Act, did not have the power to hear competition cases or to impose sanctions.Footnote 78 Soon after Sri Lanka joined the WTO, the WTO Secretariat carried out a trade review of its policies and practices and noted that it was necessary to further liberalise the Sri Lankan economy to ensure its competitiveness.Footnote 79 Sri Lanka first responded to this observation by supplementing its Fair Trading Act with sector-specific regulation, however, after a change of government in December 2001 and with the support of the World Bank and the United States,Footnote 80 it gradually moved towards an integrated and holistic trade and competition regulation regime, replacing the Fair Trading Act by the Consumer Affairs Authority Act 2003 (or the Sri Lankan Act as earlier defined).Footnote 81 It is not known whether and to what extent Sri Lanka consulted foreign competition legislation or domestic stakeholders in drafting the Sri Lankan Act. However, the fact that the Act was enacted through the parliament in accordance with the legislative procedures prescribed in the Sri Lankan constitution, suggests that there was a degree of consultation with stakeholders with regard to the content of the legislation which further suggests they had at least constructively consented to the enactment.
3.3.1.2 Bangladesh’s Efforts to Adopt an Enlightened Legislation
At the time of its independence from Pakistan in 1971, Bangladesh inherited the laws prevailing in Pakistan,Footnote 82 including Pakistan’s Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance 1970.Footnote 83 However, Bangladesh’s immediate economic priority at the time was enhancing its GDP rather than regulating monopolies,Footnote 84 and therefore, the Ordinance was not implemented.Footnote 85 Further Bangladesh espoused socialist policies shortly after independence which brought industrial production in the country nearly to a halt.Footnote 86 By 1973, the government gradually started revising its nationalisation policy and in 1979 replaced it with a nineteen-point program that emphasised greater productivity and efficiency. The government also returned many state-owned enterprises to the private sector.Footnote 87 The growth of the Bangladeshi economy from 1980 onwards was attributed to these policies.Footnote 88
Soon after joining the WTO in 1995, Bangladesh once again considered the idea of regulating monopolies and to this end, adopting a modern competition policy. In a 2002 statement submitted at a regional meeting of the WTO Competition Working Group,Footnote 89 the Bangladesh Minister of Commerce noted that while there was growing awareness in Bangladesh of the need to ‘control anti-competitive conduct by firms and multi-national companies’ it was important to ‘keep in the perspective the special needs of LDCs such as Bangladesh’ especially the potential of ‘enterprise behaviour’ to give rise ‘to problems in international trade relations’, and to extract gains out of the economy.Footnote 90 The minister was particularly concerned about Bangladesh becoming ‘trapped in an agreement which [it was] not fully prepared to negotiate and in which the dispute settlement mechanism would be mainly used against the weaker and upcoming countries’.Footnote 91 He therefore urged Bangladesh to take ‘a cautious view to the whole issue of competition policy’,Footnote 92 and emphasised the importance of building capacity before adopting competition legislation. He also urged that competition laws designed for countries such as Bangladesh ‘not only be effective’ but also ‘equitable’.Footnote 93
Throughout this period UNCTAD engaged extensively with Bangladesh to raise awareness of and build capacity for addressing competition issues.Footnote 94 By 2004, even though competition was no longer on the WTO agenda, a Bangladeshi thinktank, in partnership with an Indian thinktank and with support from the UK Department for International Development (DFID), launched a project to raise competition awareness in the country.Footnote 95 The project report, issued in 2005, noted that ‘a healthy competition policy and Law [was] a necessity for the economic advancement of developing countries’,Footnote 96 and that a survey carried out as part of the project showed that there was ‘a consensus among stakeholders for an urgent need to regulate the market in terms of anti-competitive practices, to institute a mechanism to implement the law, and finally to develop the capacity of the stakeholders, empowering them to create an enabling environment where competition can flourish, benefiting both consumers and businesses’.Footnote 97 To this end, the report called for the establishment of ‘a modern, independent, and transparent Competition Authority’Footnote 98 and for the enactment of an overarching competition law for Bangladesh, through consultations with all stakeholders.Footnote 99 Also the 2005 Poverty Reduction Strategy paper, prepared by Bangladesh in consultation with the International Monetary Fund (IMF) and the World Bank,Footnote 100 identified effective competition policy as an important factor in accelerating poverty reduction in the country,Footnote 101 and announced that it had sought technical assistance from the World Bank to draft a competition law.Footnote 102
In 2008 Bangladesh produced its first draft competition law. However, this draft could not be enacted due to resistance by the business community that viewed is the law as a foreign intervention and an attempt on the part of the government to intimidate the community.Footnote 103 Despite these reservations, in June 2012 Bangladesh, with the support of the DFID and the International Finance Corporation (IFC), enacted a Competition Act (earlier defined as the Bangladeshi Act) as part of a wider programme of technical assistance for enhancing its investment climate.Footnote 104 Interestingly, however, contrary to the expectations created by the Bangladeshi stance before the WTO, the Act spoke only of economic development and sanctioning anti-competitive practices and made no reference to inclusivity or eradication of poverty.Footnote 105 The Act also had strong Indian overtones,Footnote 106 albeit intermixed with certain features that related specifically to the Bangladesh context.Footnote 107
3.3.2 Adopting Competition Laws in Former Monarchies
Both Nepal and Maldives had been traditional monarchies before becoming independent constitutional monarchies in 1948 and 1968 respectivelyFootnote 108 Also, although the countries were never fully colonised, they had remained under British influence for significant periods of their histories.Footnote 109 Since its independence in 1948, Nepal had adopted seven constitutions the latest in 2015,Footnote 110 while Maldives had adopted three constitutions, the latest in 2008.Footnote 111 The modern constitutions of both countries prescribed separation of powers and vested the power of governance in the elected government while retaining the monarch as the titular head of state.Footnote 112 Nepal joined the WTO in 2004 while Maldives has been a member since 1995.Footnote 113
3.3.2.1 The Context in Nepal
Shortly before joining the WTO in 2004, Nepalese thinktanks, in conjunction with an Indian thinktank and the DFID had already started investigating the state of competition in the Nepalese economy and participating in forums organised by UNCTAD to build domestic competition capacity.Footnote 114 Subsequently in its discussions with the WTO, the Nepalese government made a voluntary commitment to adopt a competition law and in 2007, well after the subject of competition had been dropped from the WTO agenda,Footnote 115 Nepal followed through with this commitment and adopted the Nepalese Act.Footnote 116
When the Act was enacted on 14 January 2007,Footnote 117 Nepal was governed directly by the King who had dissolved the parliament in 2002Footnote 118 and was only one day away from re-instating the parliament under the Interim Constitution 2007.Footnote 119 The parliament, therefore, had no role in the adoption of the Act. Certainly, some features of the Act, particularly the structure of the Board and the enforcement pathway, echo the approach adopted by Nepal in other comparable laws such as the Consumer Protection Act that was in force in the country at the time,Footnote 120 others reflect the recommendations made in deliberations between Nepalese and Indian thinktanks and multi-lateral agencies.Footnote 121
3.3.2.2 Maldives and Competition Legislation for a Small Economy
The smaller, though wealthier and more developed Maldives seems to be an unlikely candidate for competition reform.Footnote 122 However, since its independence Maldives had maintained a close relationship with multi-lateral agencies and bodies which is likely to have motivated it to take action in this regard. After becoming a member of the World Bank in 1978 Maldives had long standing implemented thirty-two projects (with over $295 million in support) across many development areas;Footnote 123 the United Nations Development Programme (UNDP) also had a presence in Maldives since 1978 and had partnered with the government and non-governmental agencies in several projects relating to the environment, climate change, and governance.Footnote 124 In 1993 Maldives had become a member of the General Agreement on Tariffs and Trade (GATT) and in 1995 of the WTOFootnote 125 Since 1999 Maldives had also been worked closely with the IMF.Footnote 126 From 2000 onwards, Maldives had embarked upon a long-term plan to re-organise the Maldivian economy and political system. To this end in 2008 Maldives adopted a new constitution, which not only strengthened constitutional checks and balances in the country but also established the country’s first Supreme Court.Footnote 127 In 2012 Maldives had implemented the Asian Development Bank’s ‘Inclusive Micro-, Small-, and Medium-Sized Enterprise Development Project’ with a particular focus on enhancing its business environment and business support infrastructureFootnote 128 and had committed to adopting a competition law. In 2016 Maldives first circulated a draft competition bill for consultation. However, this bill was not enacted into law.Footnote 129 Multi-lateral agencies, nevertheless, kept the issue alive in the Maldivian reform agenda.Footnote 130
It was finally in 2019 that the Maldives government, with the assistance of the United Nations Development Programme (UNDP), pulled together the various projects it was pursuing with different multi-lateral partners to create a holistic Strategic Action Plan 2019–23Footnote 131 in which it identified Maldives’ economic, social, and governance reform priorities, the steps needed to accomplish these,Footnote 132 and the mechanisms for their delivery.Footnote 133 As part of this plan, Maldives recommended the adoption of competition legislation by 2020 to ‘facilitate a conducive business environment’ and to ‘ensure a business environment that is safe, fair and transparent with emphasis on strengthening consumer protection and promoting intellectual property rights’.Footnote 134 In September 2020 Maldives finally adopted the Maldives Act in pursuance of this agenda.Footnote 135
3.3.3 Competition in Hard Places: The Context in Afghanistan and Bhutan
The two remaining South Asian Six – Afghanistan and Bhutan – have not adopted competition legislation, at least not yet. However, these countries are not only at very different stages of preparation in this regard – Afghanistan has already prepared a draft competition law while Bhutan contends that it does not need a competition law and a competition policy is sufficient for its purposes – but also have very different political and economic environments which are likely influence the future of competition. Bhutan, though not a parliamentary democracy, has enjoyed a reasonably stable political environment and has developed a development management system founded on the principle of Gross National Happiness (GNH).Footnote 136 Afghanistan’s history on the other hand is a saga of decades of wars, civil strife, and constitutional instability: Afghanistan was a traditional monarchy until 1964 when it became a constitutional monarchy before being declared a Republic in 1973.Footnote 137 From 1978 until 2000 the Republic was embroiled in conflict, first with the Soviets and then with the Taliban.Footnote 138 In 2001, Afghanistan adopted an interim administrative framework under the Bonn Agreement brokered by the UN, which was replaced in 2004 by the new Constitution of Afghanistan.Footnote 139 In 2016 Afghanistan also became a member of the WTO.Footnote 140 At the time of writing, Afghanistan had once again fallen into the hands of the Taliban and the fate of its constitution as well as its engagement with multi-lateral agencies was once again rendered uncertain.Footnote 141
3.3.3.1 Afghanistan: Between the Draft and its Enactment
Afghanistan’s 2004 Constitution had been in place for only about six years when it commenced deliberations for the adoption of a competition law. According to contemporaneous news reports, the Afghan government considered adopting this law due to fear on the part of the ‘government and international organisations that as Afghanistan’s markets opened, its valuable state assets would be vulnerable to oligarchs who would move quickly to secure monopolies over them’.Footnote 142 The deliberation phase in Afghanistan was funded by the DFID, that commissioned a UK thinktank to draft a competition regime for the country. This UK thinktank, in turn, engaged an Indian law firm to assist in deliberating and drafting appropriate competition legislation for the country. In drafting the law, the Indian law firm met with Afghan government officials to understand ‘the kind of concepts Afghanistan needs’ and incorporated these in the draft law modelled on UNCTAD and Organisation for Economic Co-operation and Development (OECD) templates.Footnote 143
3.3.3.2 Bhutan: Too Small for Competition?
Bhutan’s small economy is based on agriculture, forestry, and hydropower and is defined by its close relationship with India. Agriculture and forestry are primary sources of livelihood for more than half of Bhutan’s population while hydropower comprises 40 per cent of its total exports and 25 per cent of its total revenue.Footnote 144 India is also the financier and buyer of Bhutan’s hydropower projects and in 2008 agreed to build twelve new hydropower dams in Bhutan by 2020. In 2017 Bhutan signed a memorandum of understanding with Bangladesh and India to jointly construct a new hydropower plant for exporting electricity to Bangladesh.Footnote 145 Bhutan also shares a close economic relationship with India: 80 per cent of Bhutan’s imports come from India; the Bhutanese currency is pegged to the Indian rupee, and India is also Bhutan’s primary source of foreign aid.Footnote 146
Given the close economic relationship between India and Bhutan it is not surprising that in 1992, just as India was opening up its economy, the Bhutanese government also initiated a process of de-monopolisation, generating greater competitiveness and enhancing consumer choice in the country by requiring companies supplying goods to the country, to engage with more than one dealer.Footnote 147 In the years that followed, the Bhutanese government adopted several policies and laws to create an enabling environment for the private sector including a Companies Act, Commercial Sale of Goods Regulation, Industrial Property Regulation, and De-monopolisation policy, and so on.Footnote 148 By 1999 Bhutan had also created sectoral regulators, for instance in the telecom sector,Footnote 149 and by 2001 it was contemplating consumer protection legislation to pursue the dual aims of promoting consumer welfare and competition in the country.Footnote 150 In 2012, Bhutan adopted a Consumer Protection Act,Footnote 151 (intended to be a hybrid consumer and competition instrument), on the basis of a report prepared by an Indian research organisation,Footnote 152 however, the Act that resulted from this exercise was more in the style of a sales of goods act than a competition law.Footnote 153 In 2015 Bhutan finally adopted its first competition policy drafted by an Indian consultant on the basis of a report commissioned by UNCTAD. In 2020 it updated this policy.Footnote 154
3.4 Transfer Mechanisms and Patterns across South Asia
A review of the contexts and institutions engaged by the South Asian Six in adopting their competition legislations reveals that despite the variations in their histories, governance structures, and the size of their economies there are interesting parallels not only in the transfer mechanisms and institutions through which they adopted their competition legislation but also with the adoption processes of India and Pakistan.
Sri Lanka’s primary motivation for adopting the Sri Lankan Act was external.Footnote 155 However, rather than simply resorting to emulation to adopt a competition law aligned with Western precedents, Sri Lanka engaged in socialisation of competition principles and adapted these to suit its context and its economic priorities. It also enacted the law through the parliament, which while often besieged by constitutional crises, has been functioning since 1948. In doing so, Sri Lanka, at least in theory, aggregated knowledge but also obtained the constructive consent of stakeholders. Interestingly, the Sri Lankan Act that results from this exercise, while uniquely Sri Lankan in scope and purpose, prioritises consumer protection and public interest, relegating competition regulation to an adjunct to these primary goals thereby reflecting domestic capacity and priorities rather than external recommendations.
Nepal, perhaps more so than Sri Lanka, was motivated, if not urged, by multi-lateral agencies to adopt a modern competition legislation. Like Sri Lanka, Nepal too engaged domestic institutions at the deliberation phase, however, unlike Sri Lanka, Nepal did not have a stable constitutional or parliamentary history and therefore was unable to meaningfully aggregate input and knowledge from the domestic context. In fact, at the time Nepal adopted its competition legislation it was governed directly by the King who was under no legal obligation to aggregate knowledge from stakeholders. However, the legislative exercise in Nepal was informed by reports of Nepalese thinktanks that had been prepared in consultation with their Indian counterparts and multi-lateral agencies. The Nepalese adoption strategy may therefore be deemed to be a mix of coercion and socialisation albeit delivered through top-down, exclusive institutions belonging entirely the executive (Table 3.2).
| Countries | Motivation | Mechanisms | Institutions |
|---|---|---|---|
| India | Internal with some international factors. |
|
|
| Sri Lanka | External more than internal. |
|
|
| Nepal | External. No evidence of internal motivation. |
|
|
| Pakistan | External. Limited and weak evidence of internal demand. |
|
|
| Bangladesh | External. Limited and weak evidence of internal demand. |
|
|
| Maldives | External |
|
|
| Afghanistan | External | Dominant: Coercion |
|
| Bhutan | External | Dominant: Coercion Others: Socialisation. |
|
The mechanism of coercion appeared to be predominant in Bangladesh also. Bangladesh, like Sri Lanka and Nepal before it, had been motivated by the WTO and other multi-lateral agencies to adopt a competition law. However, unlike Nepal (but somewhat like Sri Lanka), it had resisted doing so for several years, in part because it was not convinced that a modern competition law was compatible with Bangladesh’s more pressing economic needs of eliminating poverty and ensuring inclusive growth. During this period, non-governmental thinktanks operating in Bangladesh had liaised with Indian thinktanks to understand the competition regulation model most appropriate for Bangladesh and to create domestic awareness of the importance of competition regulation. It is not clear, however, whether these efforts had any impact on the content of the Bangladeshi Act, which despite being enacted by the parliament reflected the recommendations of the multi-lateral institutions rather than addressing the context specific concerns that had been expressed prior to its adoption. In a testament to the influence of the Indian think tanks the language of the Bangladeshi Act also mirrored that of the Indian Act. Maldives, like Bangladesh, had been working closely with multi-lateral agencies for the adoption of its competition law and the substantive provisions of the Maldives Act largely conformed to the Western competition principles on which they were based. However, Maldives had succeeded in generating greater acceptance for the proposed legislation by issuing the Strategic Action Plan prior to adopting the competition legislation and by outlining the rationale for doing so. Therefore, while Maldives may also be deemed to have adopted its competition law through a mix of coercion and socialisation, it is likely to have struck a better balance between the two, due in part to the nature of its relationship with multi-lateral agencies and its indigenous efforts in creating awareness.
Afghanistan and Bhutan, the two South Asian countries that have yet to adopt a competition law, have both been coerced by DFID and UNCTAD respectively to engage with competition principles. In both Afghanistan and Bhutan, the drafting of the competition law and policy respectively was outsourced to Indian consultants, albeit in Afghanistan indirectly through a UK-based thinktank. While in the case of Bhutan there is some evidence of socialisation in the linking of competition to the values of GNH, there is no evidence of a comparable attempt in Afghanistan.
This review also reveals two important commonalities among all South Asian countries: first, that with the exception of Bhutan, all South Asian countries have been motivated to adopt their competition legislations, due to their engagement with the WTO albeit to varying degrees. Second, that with the exception of India, even when these countries have adopted their competition legislations through their constitutional legislative institutions, these institutions have lacked the experience and the expertise meaningfully aggregate either local knowledge or consent. The combination of these two factors makes these countries particularly susceptible to coercion from multi-lateral agencies, and in respect of Bangladesh, Nepal, Bhutan, and Afghanistan, also from India. The effect of coercion is mitigated to some extent due to the opportunity to socialise and adapt the proposed legislation to the context provided by the engagement of domestic thinktanks (in Nepal and Bangladesh) and the enactment of competition laws through democratic institutions (in Bangladesh, Maldives, and Sri Lanka). However, the question remains whether this exercise also generates compatibility and legitimacy for the adopted laws and thereby facilitates their subsequent implementation.
3.5 Compatibility, Legitimacy, and the Potential for Success of the adopted legislation
As in the case of India and Pakistan, the extent of compatibility and legitimacy of modern competition legislations in the South Asian Six may not be measured directly and may only be deduced from the mechanisms and institutions employed by these countries in the adoption process.Footnote 156 As discussed in Chapter 1, a law is more likely to be compatible with the context for which it is intended, if it is adopted through bottom-up, participatory, and inclusive institutions that have the capacity not only to aggregate local knowledge but also to utilise it in adapting the law to the context. The adoption through bottom-up, participatory, and inclusive institutions is also likely to generate greater legitimacy for the laws: although laws may enjoy formal legitimacy simply for having been introduced through institutions that have legality and authority in the country, a more substantive legitimacy is only possible if there is a degree of public consent, whether actual or constructive, to the law being adopted. The greater the compatibility and legitimacy of the adopted law, the greater its chances of being understood, accepted, and utilised in the adopting country and of enjoying a productive relationship with other elements in the legal system of the host country. This, in turn, is a critical factor in ensuring that the adopted law is translated from being a law in the books to law in action and steadily integrates into the host country’s pre-existing legal system.
In order to understand the extent of compatibility and legitimacy generated in the course of adoption in Bangladesh, Maldives, Nepal, and Sri Lanka that have actually adopted competition legislation, it is important to consider the nature of their relationship with the WTO and other multi-lateral agencies; the branches of state that they engaged in the deliberation and enactment phases; and finally, the capacity of the institutions employed by them in the deliberation, rather than only in the enactment phase, to aggregate both tacit local information and consent. It is evident even from a cursory review of the adoption processes in Sri Lanka, Nepal, Bangladesh, and Maldives,Footnote 157 that as in Pakistan, the influence of the WTO and other multi-lateral agencies was a significant motivation in the adoption of competition laws.Footnote 158 It is further evident that Sri Lanka and Bangladesh, like India, have enacted their competition legislations through their parliaments, which are designed in terms of their constitutions, as bottom-up, participatory, and inclusive institutions, while Nepal adopted its legislation in a period when executive power was being exercised directly by the King. Given that compatibility and legitimacy derive from the institutions rather than the motivations through which laws are adopted, it may be argued that the competition legislation in Bangladesh, Maldives, and Sri Lanka, is likely to have the same degree of compatibility and legitimacy as the Indian Act has in the Indian context, while the extent of compatibility and legitimacy in Nepal is likely to be commensurate with that of Pakistan.
However, a closer look at the adoption processes in Bangladesh, Maldives, Nepal, and Sri Lanka suggests that such a conclusion is superficial because even though the impetus to adopt modern competition legislation came from external sources, the relationships between these countries and these external sources was not uniform: Among them, Maldives and Nepal appear more aligned with the vision of the multi-lateral agencies for their economies, while Sri Lanka and Bangladesh appear to insist on a competition legislation specifically tailored to their contexts. Further, in respect of the institutions engaged by these countries in the deliberation phase, only Maldives seems to have attempted a broad-based consultation by developing a holistic Strategic Action Plan prior to enacting its competition legislation. There is little evidence of a similar exercise in Sri Lanka, Nepal, or Bangladesh: there is no information of a governmental committee (like the Raghavan Committee in India), or a team formed and led by multi-lateral agencies (like the World Bank team in Pakistan), having been established in any of these countries to investigate the appropriateness of competition legislation and to inform the government and the parliament of its findings and recommendations. However, there is information that thinktanks based in each of these countries had produced some discussion and proposals for the legislation which are likely to have informed the substance of the adopted competition legislations. For all these countries, therefore, it may be argued that the deliberation phase generated limited compatibility and even lesser stakeholder consent and legitimacy.
Further although these countries engaged their parliaments in the enactment phase, the actual capacity of these parliaments to aggregate local knowledge and to apply it to the legislation proposed to be adopted, or to garner meaningful consent from stakeholders is limited due to their deference to the executive and multi-lateral agencies, their lack of historic depth and, their limited experience of legislating. In Nepal, the law was adopted before the parliament had even been re-instated and therefore the possibility of debates in parliament or through its committees does not arise. Even in Sri Lanka and Bangladesh the parliamentary system had been under considerable pressure due to long-standing civil strife and therefore was not equipped for or most likely even focused on fully engaging with the proposed legislation. Maldives, the most stable country from a governance point of view, had a long history of monarchy as well as an overt and accepted dependence on multi-lateral agencies for economic advice which it is not likely to have challenged.
This complex picture returns mixed results for compatibility and legitimacy of competition legislation in these countries. Although the input of the governments of these countries in respect of competition principles proposed by multi-lateral agencies creates some compatibility, and the adoption of these laws through the parliament confers authority and legality on them, these laws retain the unmistakeable stamp of their Western multi-lateral origins (especially the Bangladeshi and Maldives Act) and are only awkwardly socialised for context (for instance, the Nepalese Act). At times this manifests in the repetition in the content and the overall lack of conceptual clarity and at others in an ill-defined enforcement trajectory (for instance, in the Sri Lankan and the Nepalese Acts). Similarly, the legitimacy of the adopted competition legislations is undermined due to these having been enacted without a broad-based consultation with indigenous stakeholders beyond the limited formal debates in parliament. The absence of such consultation also suggests another missed opportunity to enhance the compatibility of the adopted laws with context.
The consequent superficial compatibility and legitimacy of the adopted competition legislation is likely to have a negative impact on the extent to which these laws may be understood, applied, and utilised in these countries and on the productivity of their interactions with the pre-existing legal system of the countries. This in turn is likely to adversely affect the extent to which these laws are translated from being laws on the books into laws in action and at the pace and extent to which they may become integrated in the pre-existing legal systems of the adopting countries. Although Afghanistan and Bhutan have not adopted competition laws, the conclusions regarding compatibility and legitimacy are equally likely to hold true for their draft law and policy respectively, given that both countries have engaged with competition legislation due to the persuasion of Western, multi-lateral agencies rather than in response to an internal demand and have had little (in the case of Bhutan) or no (in the case of Afghanistan) domestic input in the policy adopted by or the law proposed for them.
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