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SPEECH/03/323

Prof. Mario Monti

European Commissioner for Competition Policy

Introductory Remarks for the ICN Capacity Building and Competition Policy Implementation Working Group

Second ICN Annual Conference

Medrida, Mexico, 23-25 June 2003

Dear Colleagues

It is a great pleasure for me to present to you some reflections on our first year with the “Capacity Building and Competition Policy Implementation Working Group”. I would like to use this opportunity to express my gratitude to the working group and in particular to our co-chair, David Lewis, for the good co-operation that we have enjoyed throughout this project. It is clear that these introductory remarks are also made on his behalf.

Speaking in Mexico, I would like to start by quoting from the Monterrey Consensus:

“Globalisation should be fully inclusive and equitable and there is a strong need for policies and measures at the national and international levels, formulated and implemented with the full and effective participation of developing countries and countries with economies in transition, to help them to respond effectively to those challenges and opportunities.” (1)

When the European Commission was asked last year in Naples to take a leading role in this project, we were very glad to accept the challenge. I see the issue of capacity building as one of the most crucial ones in the wider field of competition policy. I see it, in fact, as an issue for developed and developing countries alike. We are involved in a constant process of improving our capacity to implement the competition policy provisions included in the Treaty of Rome of 1957. It has however taken us several decades to bring these provisions to full effect. It has crucially been the opening of many markets as part of our Single Market that set the stage for a comprehensive application of our competition rules.

For me, the term 'capacity building' involves not only the physical, institutional and organisational creation of the competition authority itself, as essential as these elements undoubtedly are. To be in a proper capacity to enforce its competition rules, an agency needs to acquire a credible standing with other actors that are relevant in this process.

This brings me already to the report which our working group has prepared following the Naples conference, and which you find in front of you. I do not want to dwell on the approach that we have pursued, since that is clearly set out in the report's introductory chapter. I would rather share with you some conceptual reflections that came out of our work.

I think that it is useful to begin these reflections by clarifying the terms that we have used as our working hypothesis. 'Technical assistance' and 'capacity building' are two terms that are often used in the same breath. However, the working group had two distinct, albeit closely related, concepts in mind: as technical assistance we understand the transfer of skills and know-how from one agency or jurisdiction to another. It is thus a question of external support. In contrast, the term capacity building refers to the more endogenous process of putting into place, at the national or regional level, functioning competition policy frameworks and processes. Ideally, technical assistance, by providing nutrients that may be difficult to obtain in a new authority, should make possible the nurture of the seeds in a newly established competition regime and thus form the basis from which home-grown, sustainable competition policies develop.

In order to achieve a competition policy that is capable of sustaining market forces, I think that it is critical to take account of the level of economic development into which this policy is embedded. What may work well in an industrialised country may work not so well in a developing country. The most basic challenge in this context is to build the case for competition policy to a sometimes sceptic audience. In the first chapter of our report we have tried to present a number of arguments on how their concerns may possibly be addressed which, in most cases, are rather straight-forward questions of common sense. But we also have to recognise that there are a number of genuine issues. As the report rightly notes, the link between development and competition is a complex one.

Let me give you one example of our line of reasoning. Some countries remain attached to “traditional” industrial policy in order to achieve economic development and growth. There is then a concern that the introduction of a competition regime would limit their possibilities to engage in this type of policy. We have tried to argue that, on the contrary, there are in fact many ways how these two policies can be made complementary, and indeed can be employed to pursue similar goals of competitiveness and economic development.

In fact, I should think that a thought-out industrial or entrepreneurial - policy would not require the creation of cartels, or other forms of abuse of market power. I would also argue that in several ways a competition policy has more advantageous characteristics than an industrial policy when it comes to supporting economic development. This is because the perspective of competition policy will regularly include an analysis of upstream and downstream markets as well, rather than focusing only on one particular sector. Where anti-competitive conduct leads to a reduction in the supply of goods and services, this may not only stifle innovation, but may in certain cases also diminish the opportunities for other firms and lead to harm to consumers. In this sense, a competition policy can actively support the generation of employment and growth.

Other concerns that we have tried to address relate to the benefits of consumers, to problems associated with the informal sector and the legal environment, and to the cost of establishing a competition authority.

In the second chapter, the report goes on to discuss in some detail five concrete challenges that the competition authorities in developing and transition economies often have to come to terms with. The common theme of these challenges is that they all concern the “standing” of the authority vis-à-vis other stakeholders relevant to competition policy and law. These are the government, the judiciary, civil society, the community of competition 'professionals', and the business community. We will learn more on these issues from the first panel that will be chaired by David Lewis.

The final chapter then presents an overview of technical assistance projects that have been undertaken by ICN Members. Based on their replies, we have explained where they see the greatest needs for future assistance, and have discussed how these needs could appropriately be addressed in the short and in the longer term. That chapter also suggests ways of how the ICN could conceivably contribute to this process. The second panel, to be chaired by Kirti Mehta, will present the views of both recipients and donors of technical assistance.

We have concluded the report with a summary of all those issues that seemed relevant to us in making technical assistance for capacity building a success. I see this “checklist” as a very useful inventory of those issue that merit further examination.

Five lessons for further reflection

Before beginning with our panels, I would like to use this opportunity to share with you five lessons that, in my view, came out of our work so far. I would summarise these five lessons with the following terms: our task is to find ways to make technical assistance for capacity building sustainable, comprehensive, integrated, respectful of local needs and conditions, and finally mindful of the regional dimension, where appropriate. Let me say a few words on each of these issues.

First of all, we have to find ways to ensure that the technical assistance that we deliver has a lasting, or sustainable, effect on the recipient entity. As we ourselves know all-too-well, we have to accept that capacity building projects do not yield visible results over night. They require patience, dedication and tenacity.

I tend to agree with those that argue that sustainable effects are best achieved by long-term assistance projects, rather than one-off events. A long-standing relationship between two agencies will help raise the donor's understanding of local needs and conditions, and will also help build up the mutual trust that is so essential to make this special relationship prosper. Such a long-term approach would also be in line with the good experiences that we in the European Union have made with the so-called “twinning programs” organised by the authorities of our Member States for many of their counterparts in Central and Eastern Europe.

In fact, I think that there are two levels to the issue of sustainability. On the first level, the impact of a particular assistance initiative needs to be assessed. Let me give you just one example. It is clear that the young competition authorities, like the mature ones, depend on having a sufficiently qualified staff. The report stresses that what agencies in developing and transition economies want the most is practical know-how that helps their officials handle their cases. However, if the individual official who has benefited from this training is then lured away from the authority, it inevitably looses the skills that this training is meant to provide. It is therefore a constant challenge for authorities to retain qualified staff. Are there ways to improve this situation? And what role is there to play for a developing country's intellectual infrastructure such as universities? We may want to explore to what extent they could contribute to the gradual building up of a pool of trained well-professionals.

More generally speaking, we realised when writing our report that there are hardly any methodological tools to measure the effectiveness of a technical assistance project. Only such a methodology would however provide us some guidance of what initiatives are actually the most effective. The working group's draft work plan that I would like to discuss with you suggests to reflect also in this direction.

On a second, wider level, I note that many of the mature competition agencies are faced with more and more requests for technical assistance, as new agencies are established around the world. Many donor agencies find it increasingly difficult to do justice to these demands. One possible reaction for us might be to integrate capacity building tasks into our own resource planning. However, we will always have to recognise that our resources for such assistance are not unlimited, while the demands for assistance continue to grow. To ensure that this type of agency-to-agency training remains sustainable in the long-term, I would therefore find it interesting to reflect on which other bodies could play a useful role in the training of young competition officials.

The second lesson relates to my earlier remark that the competition seed will not properly grow and prosper if set into a hostile environment. It is critical that the relevant constituencies are aware of the goals and mechanisms of competition, and of competition policy. Therefore, we were pleased to see that many modern technical assistance projects already include an advocacy component. I think that there is a lot to be said to further raise the profile of these advocacy initiatives. But which advocacy issues have worked rather well? I would find it interesting to compile and compare successful initiatives, focusing on those practices that seem particularly relevant to the background of developing countries.

It has also come out of our survey that many agencies view the need to make the judiciary more conversant with competition principles as a key challenge. Nobody would dispute the important role that the judiciary plays in the application of the competition law. However, there are clear limits to what we - as competition authorities - can do in terms of training those that are meant to oversee us. The national institutions that generally provide training to the judiciary are arguably much better placed to offer special competition modules. It may therefore be considered to assist these institutions as well.

My third lesson would be that there was a consensus in the working group that capacity building must take the prevalent local legal, institutional and socio-economical conditions as its point of departure.

In particular, for the design of technical assistance projects this means that we must begin by a proper analysis of the local needs. However, again one could ask how do we actually measure these needs? There is some interest in the working group to look more closely into this question. In this context I would find it of particular interest to study which actors should ideally be involved in this initial assessment. Maybe in some instances it would be rewarding to involve third parties such as the local academia in this type of research.

The fourth lesson relates to another key conclusion from our survey. Competition authorities do not usually command the means to fund assistance on a larger scale. In many donor jurisdictions it is the task of a development agency to provide that funding. I would therefore find it interesting to discuss with these donor agencies how our special expertise could be brought to bear more directly on the shaping of future assistance projects. In order to foster the dialogue between the competition authorities and donor agencies, the draft work plan considers to organise a dedicated workshop.

Moreover, the report points out that many of these donor agencies will only fund projects that are in line with a country's overall development strategy. Therefore, agencies in developing countries that wish to receive assistance need to persuade their governments to integrate competition among a country's developmental priorities.

The fifth lesson concerns the growing number of regional competition frameworks that are currently being created in various parts of the world. To me, this has been one of the most remarkable developments in international competition policy over the last years. I follow this trend with great interest not only because I represent a regional authority myself, or because we are assisting several of these frameworks. It is rather because I see a regional competition framework as an important facilitator in regional integration projects. I should also think that especially for smaller economies, a regional approach offers economies of scale. The working group therefore suggests to study the conditions under which these regional frameworks operate.

Conclusion

To conclude, I would see it as an appropriate next step to translate the findings of our work into more operational conclusions, or even 'best practices', where we are confident that this is appropriate. Our draft work plan already makes a number of suggestions in this direction. One of the priorities that the working group isolates, and to which I attach particular importance, would be to ensure a greater dialogue between competition authorities and other donor bodies. Another focus would be on the regional dimension of capacity building.

Finally, one particular issue that I would like to discuss is how to raise the level and intensity of developing country involvement in the ICN. I think that the sort of 'partnering' that we have enjoyed with our South African colleagues throughout this project has proven to be a very appropriate model.

As you know, development policy is a priority for the European Commission which, together with the EU Member States, provides more than 50% of international development assistance. As you know, development assistance covers a broad range of initiatives. In my view, it should not least provide concrete help in integrating developing countries into a rules-based world economy. I have found the capacity building working group to be a most interesting forum in this respect.

(1) UN General Assembly, Final outcome of the International Conference on Financing for Development (Monterrey Consensus), HYPERLINK "http://www.un.org/esa/ffd/aac257L13-E.doc" www.un.org/esa/ffd/aac257L13-E.doc


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