"Being in-charge of Ministry of Finance I direct the commission (CCP) to see what mechanism should be adopted to check such activities where benefit of a major reduction in petroleum prices has not been passed on to consumers of general commodities. The CCP should look into this particular aspect," said Dar while addressing a seminar in connection with World Competition Day.
It was organised by the CCP here on Friday. When petroleum prices increase, prices of all commodities, including transport fares and daily use items along with staple food go up. Contrary to this, when the government has made a substantial decrease in POL prices, the impact has not been passed on to consumers proportionately. Citing the example of staple food, he said the CCP should not limit its enforcement mandate to the industrial sectors like cement, but also look into the daily commodities being used by consumers such as potato and other food items for consumer protection.
Referring to a litigation in courts, he said that all orders of the CCP have been challenged in courts. Therefore, the commission has a great responsibility to work harder to handle the invisible impact. CCP has been working hard but has not reached out to as many sectors as the government wants, eg, staple food items like potato. Before Ramazan there was cartelization and the commodity prices reached as high as Rs 200 per kg, however government intervened by withdrawing taxes and after that prices came down to Rs 70 per kg. He further said that Pakistan lacks consumer protection societies. Dar said that competition results in lower prices and more choices for consumers; it fosters innovation, promotes entrepreneurship and helps prepare domestic firms for international competition. He added that he was impressed by the progress CCP has made in creating a pro-competition environment.
"Competition also sends a positive signal to foreign investors. When foreign investors observe that the government is serious in implementing the competition regime, ie, it will not be providing domestic entities with preferential treatment over others they will be confident in investing in Pakistan, the Minister said adding that the CCP had the support of the Government in discharging of its statutory obligations, he said while congratulating the CCP for organising the seminar.
The government has initiated a plan to review all SROs and to phase out gradually in three years period. The government is fully cognisant that certain SROs, whereby preferential and/or concessionary rate of duty on imports and other regulatory duties are slashed for certain parties, which creates an uneven field and distorts competition. The loss to the industry through such preferential treatment is far graver than the benefit to any individual. He further said that the government has already phased out some SROs, in the budget 2014-15; some would be phased out in the budget of 2015-16 while the remaining would be eliminated in the budget 2016-17.
He further said that country's economic indicators are improving as growth rate is up from the average 3 percent to around 4 percent while the government has projected it at 5 percent for the current fiscal year. Further, budget deficit decreased but without any cut in development expenditure and social sector. The government earmarked Rs 425 billion for development spending and released Rs 421 billion for the last fiscal year. He further said that government abolished secret funds of 32 institutions and ministries out of 34 except ISI and IB, keeping the sensitivity of these institutions; however, high-level audits of these institutions were being carried out. He further said that the foreign exchange reserves reached the lowest ebb of dollar 7.7 billion, which have now improved to around 14.5 billion.
He further said the decline in POL prices and political instability affected the OGDCL transactions and the government received less response against 52 percent shares and resultantly the process was postponed. He further said the threshold of 60 percent in public debt was crossed last year and it touched 64 percent; however, the government is working to bring it to 57 percent in the next three years. He further said that parliamentarians would be asked to formulate a charter of economy to put the country on a path to development.
The government has received an enormous response to the international Islamic bond market with the issuance of US dollar-denominated Sukuk. The government received very high investors' interest who made subscriptions of US $2.3 billion - nearly five times of the target amount. But the government decided to accept offers of US $1 billion at a profit rate of 6.75 percent.
He said that given Competition law is still new in Pakistan it is very important to create awareness about this law and the benefits of competitive markets to the economy as a whole. In this globalise world, where nation states are interdependent both politically and economically it is not possible to survive and sustain without competition with other nation states. Promulgation and effective enforcement of Competition laws is Pakistan's international obligation under the GATS, the SAFTA, the UNCTAD and a host of other bilateral trade agreements.
In the international context, as national economies become highly integrated through trade the buzz word seems to be competitiveness and there is no doubt that our products cannot be competitive in the international market without free and fair competition domestically, he said.
According to him, competition also sends a positive signal to foreign investors. When foreign investors observe that the government is serious in implementing the competition regime ie it will not be providing domestic entities with preferential treatment over others they will be confident in investing in Pakistan, Dar added. He further said that under the Competition Act, 2010 the Competition Commission of Pakistan is mandated to ensure free competition in all spheres of commercial and economic activity; enhancing economic efficiency and protecting consumers from anti-competitive behaviour. A difficult task indeed, and one that cannot be fulfilled without the support of the government. The government support would mean ensuring independent functioning and autonomy to CCP.
He further said that enhancing consumer welfare and poverty reduction requires a holistic approach. For example, our monetary policy may aim to manage the rate of inflation; however the efficacy of this policy would be impacted by cartelization in certain sectors which would artificially raise prices for consumers. Therefore, it is important that the Competition watchdog be empowered to fulfil its constitutional role, he added. Dar said that harmonisation between government policies and competition law is also important and we must work with CCP to ensure that our policies are pro-competition or at least competitive-neutral. Pro-competitive government policies would in turn encourage foreign investment, the finance minister maintained.