Sunday, December 28, 2008

Why do Countries Adopt Competition Laws-Tanzania as a case study

Since independent (1961), Tanzania had adopted three types of domestic economic policies which can be classified as; early years of post colonial era, post Arusha Declaration and free market economy; all these aimed at improving trade and enhance economic development however they had been used in line with international obligations and regional settings to influence the pattern of trade development amongst Tanzanians.

In view of the above mentioned domestic policies adopted in three regimes one can be able to come up with what transpired and what is the main reasons as to why Tanzania had been motivated to all kind of shifts from one regime to another on competition laws aiming on stimulating domestic production, promote exports, safeguarding domestic industries against dumping, national politics, security and consumer protection.

The Rationale of maintaining competition regimes from Tanzania perspective can be viewed onto three economic and political regimes;
1) Early years post colonial era (1961-1967);
This was liberal economy inherited from colonial era whereby private sector played a big role as engine of growth, export was basically unprocessed and in form of semi-processed agricultural commodities (Traditional exports) and other raw materials
a) There was free market economy though too much protectionism on the economy
b) Trade and consumer protection based on colonial laws (British)
c) Business conducts was not open, its was in favour of colonial master-British

2) During and Post Arusha declaration 1967-1985
a) Tanzania adopted socialism policy
b) There was government intervention and control over major economic resources
c) Confinement policy” adopted in 1972 to control all major economic activities including trade
d) Trade policy was based on tariffs and quantitative restrictions
e) Policy instruments used were price controls, import quotas, rationing, administrative resource allocation and the use of permit to control movement of goods and services.
f) Protectionism was imposed with import duty used as control tool
g) The was too much of state monopoly

3) During Liberalization and free market economy (1985- to date)
a). There was privatization of public investments to the private sector,
b). Tanzania adopted open door policy and structural adjustment programs
c). There was emerge of market forces; demand and supply instead of price control
d). Private sector tends to be an engine of economic growth
e). There is free market economy with less protection on the economy

III) The motivations in which Tanzania adopted its current competition laws
Due to failure of the socialism in Tanzania and its restrictive policies to achieve the desired objectives; infant Tanzania industries failed to meet even local demand caused by limited internal capacity, series of oil price increments, inadequate resource mobilization, and inefficient allocation of resources, decline private sector activity and foreign direct investment (FDI) due to nationalization of major economic sectors carried after Arusha Declaration 1967.

Consequently to that; Tanzania experienced severe macroeconomic hardship like; rising inflation rate, severe scarcity of essential goods and services, falling real GDP growth rate, widening fiscal and trade deficits, for this matter therefore Tanzania had not other best option than to adopt rescuer pills (IMF) on structural adjustment programs (SAP) including introduction of cost sharing on all social services, staff retrenchment, liberalization of imports, interest rates and exchange controls, devaluation of shilling; price decontrol, privatization and restructuring of state owned firms – to improve efficiency in domestic production

Therefore; following the mid 1980’s economic reform in Tanzania which led to state withdraw as a direct economic player (manufacturer and distributor), price controller, service provider and the like; consumers and producers have experience the shift of roles from the state monopoly to open market policies.

For instance; National distributional agencies such as National Milling Corporation (NMC), Regional Trading Company (RTC) were replaced by private companies, the former price commission during controlled economy was abolished and replaced by market forces; demand and supply; generally the government was advised not to involve itself in production as a result majority of profitable government business ventures/industries were privatized.

Rapid trade liberalization has made Tanzanians more vulnerable to shocks and removal of policies and state owned distribution and service companies. In other words; the shift caught Tanzanians unaware and unprepared with very little knowledge on how they can respond to current opportunities and threats associated with globalized economy. For instance Consumers lacked reliable and timely information; they were unaware of existing institutional mechanisms for their rights protection and at the same time; there were so many constraints which inhibited growth and competitiveness of the private sector. Therefore this is one of the factors forced Tanzania to adopt new competition law.

Moreover, human-beings are by nature very greed and when it comes to business; they exist to create a super profit with such vacuum (absence of competition law) the impact is always negative; without a well structured competition laws, unscrupulous traders will always take advantage of the situation, therefore Tanzania knowing the fact of human nature and consumer healthy and safety issues must come above corporate profit; the competition laws are vital to control and arrest the situation; for this matter. Tanzania had tried to its level best to the establishment of several sectoral regulatory authorities include ‘’Tanzania Fair Competition Commission’’, the ‘’Tanzania Bureau of Standards’’ (TBS), ‘’Tanzania Food, Drug and Cosmetics Authority’’ (TFDA), ‘’Electricity, Water and Gas Utility Regulatory Authority’’ (EWURA), ‘’Surface and Marine Transport Regulatory Authority’’ (SUMATRA), ‘’Tanzania Communication Commission’’ ‘’Bank of Tanzania’’ Tanzania Civil Aviation Commission just to mention some few

Apart from all the above; efforts by United Nations bodies such as UNCTAD, WTO, ILO, UNIDO, UNESCO, UNDP, and other international Non Governmental Organizations such as Consumers International, CUTS International, OXFAM, ISO, COPOLCO, CODEX, individual country, their grouping (EU, EAC, SADC etc), global business approach such as regional business strategy and forums such as DOHA round table, United Nations Guidelines for Consumer Protection (as expanded in 1999), and the like has catalyzed countries to adopt more fair business practices and competition laws.

In connection with the above; challenges of globalization including unfair business terms amongst nations do catalyses countries to adopt competition laws for business fairness within and in support of broader UN goals, such as the Millennium Development Goals (MDGs)-2000 aim on improvement of the quality of life and social well-being, with particular focus on the poorest and most vulnerable groups improved (e.g. education, survival, health) across geographic, income, age, gender and other groups are reduced, competition laws are there to strike the balance

Cognizant of above challenges and reforms through the world economic order-the open market economy, the government of Tanzania sought appropriate skills acquisition, and adaptation that would respond better to the new realities and needs of the emerging open market economy and at the same time promote environmentally friendly consumption, production and distribution practices to protect consumers, business and other stakeholders in Tanzania market.

IV)How do these motivations and contexts define the timing of introduction and content of the newly-adopted law

First and foremost to understand motivations on this matter we have to understand the object of Tanzania Competition law 2003, as per Part I Preliminary Provisions, subsection 3, Object of the Act, is to enhance the welfare of the people of Tanzania as a whole by promoting and protecting effective competition in markets and preventing unfair and misleading market conduct throughout Tanzania in order to:
a) Increase efficiency in the production, distribution and supply of goods and services;
b) Promote innovation;
c) Maximise the efficient allocation of resources; and
d) Protect consumers.

The contents of Tanzania Competition Law of 2003 appear to be comprehensive and well structured as shown below. It properly focuses on weakness areas such as enhancement of consumer welfare and regulates trading conducts to be fair amongst traders to promote and protect effective competition in trade and commerce to attract more foreign direct investment (FDI).

Contents of the New Tanzania competition law, Competition Act 2003
Part I; Preliminary Provisions
Part II; Restrictive Trade Practices
Part III; Misleading and Deceptive Conduct
Part IV; Unfair Business Practice's
Part V; Unconscionable Conduct
Part VI; Implied Conditions In Consumer Contracts
Part VII; Manufacturer's Obligations
Part VIII; Product Safety and Product Information
Part IX; Product Recall
Part X; Offences, Penalties and Remedies
Part XI; Appeals to the Fair Competition Tribunal
Part XII; Fair Competition Commission
Part XIII; Fair Competition Tribunal
Part XIV; National Consumer Advocacy Council
Part XV; Inconsistency with Other Laws
Part XVI; Miscellaneous Provisions
Part XVII; Consequential Amendments

The new laws contents specify three types of anticompetitive agreements, abuse of a dominant position, and anticompetitive mergers. The legal standards that apply to these three types of abuses under this document are consistent with good practice in competition law enforcement worldwide aiming to protect business and consumers from unfair, misleading market conduct to prevent the existence of cartels, monopolies and oligopolies, which hurt consumers and producers through monopolistic pricing policies.

By so doing all Sectoral Regulatory Authorities present in Tanzania are required by new competition law to support and act within their sphere of influence, sets of core values in the areas of business development, consumer and producer welfare, human rights, standards, the environment, and good business best practices.

V) What are the major developments of the new legislations or the distinguishingly different approach as compared to the old legislations?
In comparison between early years of post colonial era (1961-1967) and free market economy 1985 onwards; appears to be one and the same as both adopted capitalist ethics and principles whereby private sector is an engine of economic growth and monopolistic tendencies were somehow discouraged however the greatest distinction are; the new system adopt what is called open door policy whereby all nations, investor/s from any where in the world with comparative advantage items of capital, right skills, strategies and resources can take advantage of investing in Tanzania instead of colonial master and its allies.

Another distinction is, during post colonial era, there was what was called economic embargos including restrictive terms and conditions aiming on import control to protect domestic industries, however not in favour of domestic consumers to enable them to have a wide range of choice of goods and services from a wide variety of sources with different quality and price but only to the advantage of investors; to have ready market due to purposeful set monopolistic tendencies.

On the other hand by comparing between post Arusha declaration 1967-1985 and free market economy; both legislations were influenced by political doctrine adopted, for instance during Arusha declaration Tanzania decided to build a socialist state, whereby all major means of economy will be controlled by the state, the state tend to be the only provider of goods and services, with maximum protection of internal market and consumers at larger. All laws and policies were designed in favour of building socialism-development of the betterment of the general public and not individuals.

But due to weaknesses encountered during implementation of socialism (kindly refer section III of this document para 1, 2, and 3) Tanzania failed; instead open market economy is prevailing; to improve internal supply of goods and services restriction on imports were removed, private sector has to flourish to reduce state red-tapism,

However dealing with open market policy is a very trick phenomenon especially when it comes to consumer’s right of choice, fairness on competition, quality, standard and safety. The delicate part of the story is need of more products in the market to give consumers a wide range of choice at reasonable prices but in the process unscrupulous traders take the advantage of flooding the market with unsafe products, counterfeits, unethical trading and by using dirty tricks always are the signaling factors for a current competition law.

VI) Has the new legislative and enforcement developments successfully addressed those problems leading to the scrapping of old laws and adopting new laws?
This is the best part of all to me, as I’m Executive Director of an independent NGO consumer association known as Tanzania Consumer Advocacy Society; I had been actively and closely watching the play, despite the fact that; Tanzania has a good number of legislatures and government owned Sectoral Regulatory Authorities (SRAs) which aim at protecting consumers and business such as the ‘’Tanzania Fair Competition Commission’’, the ‘’Tanzania Bureau of Standards’’ (TBS), ‘’Tanzania Food, Drug and Cosmetics Authority’’ (TFDA), ‘’Electricity, Water and Gas Utility Regulatory Authority’’ (EWURA), ‘’Surface and Marine Transport Regulatory Authority’’ (SUMATRA), ‘’Tanzania Communication Commission’’ ‘’Bank of Tanzania’’ etc. However the problem of consumers’ abuse and violation on their rights is still on the rise and it is affecting lives of many innocent consumers and businesses.

There are severe consumer’s rights violation and unfair business conducts in Tanzania Market one can not imagine, for instance some few media evidence on the same;
a) Mwananchi, 23rd.April.2007, Swahili newspaper had a title; Fake malaria drugs; kill many Tanzanians.
b) Sunday Citizen 10th.Dec.2006, had the article with the title; Many Tanzanians not fully aware of their rights.
c) The Guardian dated 11th July2007, for example, reported that banned HIV/AIDS life prolonging drug –EMTRI 30 - 40 from India that was disqualified by the WHO and its importation banned by the Ministry of Health and Social Welfare, was still circulating in Kisarawe district, Coast region despite an outcry by anti-AIDS activists.
d) The Citizen of 28th,July.2007, had a title; ‘’In for an injection, out with a limp’’ some people come out of the injection room with a abscess only shows up several weeks later; others come out with disabilities for life.
e) The Guardian of 19.August.2007; had the title ‘’Fake goods impedes producers - Producers are deeply alarmed by the flood of counterfeit products in the local market harming quality and undercut their efforts to thrive.
f) The Guardian of 12.Sept.2007; reported that; Bulk of Kariakoo imported goods fake - about 50 per cent of all imported goods from China and sold in Kariakoo shops in Dar es Salaam are counterfeit
g) The Guardian of 04.Nov.2007; Fake Medicines Pose Big Threat-Counterfeit Medicines In Tanzania; the story continued
i. In August 1999, fake Metakelfin labeled as a genuine product from the original manufacturer, Pharmacia and Upjohn, was found in circulation in some pharmacies in the country.
ii. Laboratory analysis confirmed that the counterfeit Metakelfin actually contained paracetamol. In May 2000, counterfeit Ampicillin capsules (250mg) were found circulating in some retail pharmacies.
iii. Laboratory analysis confirmed the capsules contained potato starch. In June 2001, expired Chloroquine Injection (from an unregistered Indian company) was relabeled as Quinine Dihydrochloride Injection 600mg/2ml from a company in Cyprus.
iv. In January 2005, fake Gentrisone Cream (a product of Shin Poong, South Korea) was reported. In this case, the active ingredient was replaced with hand and body lotion.
h) The Guardian of 08.Nov.2007; had the title; Consumer awareness is no laughing matter.
i) The Business Times of 06.01.2008; had the title; Stakeholders urge for more awareness education.
j) Nipashe of 14th.March.2008; had the title; Importation of counterfeit goods is a threat to consumers. More than 80% of Tanzania consumers are not aware of their rights…
k) Uhuru, a Swahili newspaper of 4th.April.2008, had front page story with the title, ‘’Expired toothpaste chemicals were found for Tanga Sabuni Detergent’’-The chemicals were meant for making a famous toothpaste in the country – Aha
l) Guardian of 27th.March.2008; had the title; Vision 2025: Shall we achieve `Green Revolution`? The prices of fertilizers and farming implements remain higher due to cheating by the distributors of fertilizers.

Fair competition commission has been working so hard to reduce the problem of counterfeit products in the market by destroying them and giving severe punishment in accordance to the law yet still the problem is on the rise.

Despite on the rise in numbers on the acts of unethical business conducts, violation of consumer’s rights; partnership with independent Civil societies to curb the situation is almost zero and had been seen as a very new phenomenon; however this is not a new phenomenon in our country; there are a lot of government programs on child and maternal healthy, HIV/AIDs through its ministries, hospitals, commissions, agencies like TACAIDS but yet still there are NGOs such as AMREF, UMATI, Marie Stopes, SHIDEPHA, Pathfinder, Engender-Healthy, Family Healthy International (FHI) just to mention some few whom are working day and night to supplement government efforts on reducing the effect of HIV/AIDs, and unsafe motherhood that affect majority of Tanzanians.

I) The way forward.
Having Competition law in Tanzania have been seen as the end in itself, the cure of it all; but the way forward to it is to forge a strong Consumer, Private, Public Partnership with a shared commitment and efforts to achieve the intended object of the new law, all key stakeholders including government itself (in this case sectoral regulatory authorities), consumers, producers, distributors, service providers, professionals, civil societies, NGOs, consumers’ associations and others should work toward supplementing government goals of seen business act responsively to consumer’s needs and interests and at the same time there is fairness on business conducts in the end strengthening business environment for Tanzania for the betterment all key stakeholders.

Bernard Elia Kihiyo
Executive Director
Tanzania Consumer Advocacy Society
Office +255 732 991 409
Cell +255 757 170 555
+255 715 170 555

1 comment:

  1. is there implementation of the laws on consumers