FOCUS GROUP

One of the greatest benefits that would result from the effective implementation of competition law in developing economies, particularly the UAE, is the attraction of foreign direct investment (FDI), which would promote economic growth and development. In a similar way, altering trade tariffs between countries makes it easier for firms in different jurisdictions and regions to move their goods and services around the world. This can only happen in countries that have strong institutional policies and mechanisms that would be able to guard the right to property ownership469, not just as a fundamental right but also as an initiative to encourage the honest pursuit of ownership of property.

As the UAE has adopted and open-door policy with foreign investments, the adoption of a proper competition law will ensure fairness in the market and prevent any anti-competitive behaviour that are likely to exist. In addition to the current consumer law, there has been an excessive need for a regulation that aims to control the market giving a sufficient protection for the market players.

There should be laws that guide and regulate competition between firms, including granting foreign firms a level playing field to operate in the developing economies without adversely harming the infant industries.470 These laws are assumed to be existed in any developing economy involved. However, if such laws are not clearly spelled out as competition laws, the enforcement agencies will find it hard not only to understand but also to enforce such laws.

It has been argued that there is particular economic and political importance to having Foreign Direct Investment (FDI) in developing economies.471 However, Dabbah argues that developing economies do not have an unconditional, open door policy for the ‘welcomed’ FDI. Rather, they are subject to 'strict conditions laid under the law, such as are required to lead to development in technologies, sustainable development, economic

468 Sullivan, L. A & Grimes, W. S Op. cit. p. 34.

469 Kokkoris, I. & Lianos, I. The reform of EC competition law: New challenges. London: Kluwer Law International. 2010, pp. 334- 337.

470 Such laws should also be able to guard the freedom of movement in terms of business operations and also association in terms of the kinds of firms an individual can associate him or herself with. See: Page, S. How developing economies trade: The institutional constraint. London. 1994.

471 De Mello, L. R. Foreign Direct Investment in Developing Economies and Growth: A selective Survey. Journal of Development Studies. 1997. 1.

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growth and the quality enhancement of products.472 Moreover, some developing economies might have stricter conditions to ensure that foreign firms do not get involved in a monopolistic position in their local market.473

Borissova believes that, when such policies are effectively implemented, they put a nation in a better position for attracting FDI.474 This is because, firstly, multinational companies will be in the position of identifying the way these laws operate and dealing with several concerns within different business processes. Secondly, multinational organisations usually expect authorities to establish a level playing field between domestic and foreign companies, as well as among the Multinational Corporations (MNCs) themselves.475

This implies that developing economies which have effectively implemented competition laws have a higher chance of creating a favourable economic environment to invite foreign investors.476 Over the past several years, developing economies have implemented macroeconomic reform programmes, which significantly relied on the market instead of state intervention.477 Noticeably, there has been a renewed confidence that individual consumers and market forces can contribute greatly to social and economic development compared to a centralised economic system. In the UAE, the FDI has contributed to the enhancement of the economy with $9.6 billion.478

Competition laws have been known to enhance competition and create a level playing field for all companies. However, it would be difficult to realise some potential benefits when it comes to a market oriented economy, if companies are forced to enact some measures that are intended to restrict competition. Thus, competition authorities should critically analyse competition laws to ensure that organisations do not take advantage of their current dominant position in the market. This includes state-owned enterprises that managed to establish ‘natural monopolies’ and this calls for competitive

472 Dabbah, M. International and Comparative Competition Law. Op. cit. pp. 298-300. 473 Ibid.

474 Borissova, L. Regulatory Policy and Creation of Regulatory Authorities in the Telecommunications Sector in Central and Eastern Europe. European Journal of Law Reform. 2002. 4.2, p. 462.

475 Ibid. 476 Ibid.

477 Some of the fundamental changes pertain to reduction of tariff barriers, lowering of subsidies to domestic firms, elimination of several qualitative import restrictions, privatisation of public enterprises, encouragement of foreign direct investments, and easing of foreign exchange controls. See: Evenett, S.J. Study on Issues Relating to a Possible Multilateral Framework on

Competition Policy, Report prepared for the Secretariat of the World Trade Organization (WT/WGTCP/W/228). 2003, p. 72.

478 Emirates News Agency (WAM), UAE Foreign Direct Investment increase by 2.5% to $9.6b, Gulf news, [Online] 27 June 2013. Available from: http://gulfnews.com/business/economy/uae-foreign-direct-investment-increases-by-25-to-9-6b-1.1202794 [Accessed: 2nd July 2013].

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authorities to analyse their competitive practices so as to establish a competitive market. Additionally, a robust economic policy must be implemented if a country needs to establish an effective economic reform. Chen and Lin emphasise that price liberalisation that is carried out in the absence of competition laws can lead to a significant increase in prices and thus reduce the general benefit of the entire economy.479 Whenever monopolistic organisations are allowed to carry out their activities without an effective regulation, the economy will not bear any fruit from price liberalisation. Evenett highlights that, in any developing economy that wants to open up its markets through FDI competition and import competition, authorities must put in place some safeguards to ensure that foreign organisations do not engage in anti-competitive behaviour or take advantage of their dominant position.480 This calls for a strong and effective competition law, which will lead to an end to anti-competitive behaviour and thus enhance net public benefits. Thus, it could be said that implementing a strong and effective competition law will lead to the enhancement of the economy through providing a safeguard for foreign investors and their local competitors.