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Vanuatu | 12 February 2020

With a More Competitive Private Sector, Everybody Wins

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By Lotte Schou-Zibell

Competition in the marketplace is healthy for a country’s economy—everybody benefits. In competitive markets, consumers get better value for their money; producers offer more choices; suppliers produce goods and services more efficiently and innovate by developing new or better ones; and businesses, particularly smaller businesses, have a fair opportunity to enter the market and grow. This makes competitive markets vital to private sector growth and crucial to economic growth.

Supporting private sector development is a key priority of the Asian Development Bank, so we applaud the Council of Ministers’ recent endorsement of Vanuatu’s National Competition Policy. This is an important step toward the development of competitive markets in Vanuatu and will help the Government of Vanuatu to make changes that are needed to encourage competition.

The economy and consumers of Vanuatu have already benefited from greater competition in telecommunications. The liberalization of the telecommunications industry in 2009 saw a significant increase in access to, and use of, telecommunications, particularly in rural areas. Those reforms saw mobile network coverage expand, consumer prices fall, and a competitive retail market for internet services emerge. The National Competition Policy aims to extend similar gains to all sectors of the economy.

Through the new policy, the government has committed to a progressive review of existing laws and practices to eliminate unnecessary constraints on the development of competition. This includes changes to legislative, regulatory, and administrative procedures; improving consumer protection mechanisms; and repealing rules that unnecessarily limit competition.

The policy also requires the government to consider how its own spending can affect competition. This means the government will develop a process to identify and manage the risk of competition being lessened in any sector by it engaging with a business. Any businesses the government owns, such as state-owned enterprises, will also be subject to the policy. This will ensure that all markets are truly competitive as all firms in the market will be subject to the same rules.

The National Competition Policy was prepared with support from the Pacific Private Sector Development Initiative, a regional support program implemented by the Asian Development Bank in partnership with Australia and New Zealand. The next step to delivering the benefits of competitive markets to Vanuatu’s economy and people will be to implement these reforms in a practical way.

This process will not be without challenges. Implementation of the policy will need to overcome competing demands on the country’s budget, limited access to staff skilled in this area, and the private sector’s lack of familiarity with these kinds of policies and rules. While these challenges do not outweigh the need for the implementation of pro-competitive reforms, they must be considered when determining implementation priorities and timeframes. Throughout this process, PSDI stands ready to help.

It is also important to recognise that the new policy will not by itself deliver the benefits associated with competitive markets. For competition policy and law to be truly effective, they must work together with other policies, laws, and institutions—the very foundations of a sound economy. Ongoing efforts by the government to improve business access to finance and compliance with international financial regulation commitments—initiatives PSDI is also supporting—will complement the development of a competition framework and help create a more productive, sustainable, and inclusive economy.

Vanuatu is just the second ADB member country in the Pacific to pass a competition policy. This demonstrates the government’s commitment to progressing reform in this area, and highlights what can be achieved when national objectives are paired with regional support initiatives.

Lotte Schou-Zibell is the Regional Director of the Asian Development Bank’s Pacific Liaison and Coordination Office.

Originally published here.