世界发展银行-Promoting-Competition-and-Creating-Contestable-Markets-in-Armenia_32页_953kb

Summary of "Promoting Competition and Creating Contestable Markets in Armenia"

Core Content

This policy note, produced by the World Bank Group (WBG) in June 2019, focuses on identifying key constraints to competition in Armenia and proposes actionable reforms to promote market contestability and competition in key sectors. The analysis is based on a comprehensive assessment of regulatory frameworks, market dynamics, and policy perceptions, including input from the Government of Armenia (GoA) and various international institutions. The goal is to support the GoA in creating a more competitive and efficient private sector, which is essential for economic growth and development.

Main Viewpoints

• Competition and Growth: Market competition drives productivity and growth by reallocating resources, improving firm efficiency, and enhancing competitiveness in downstream sectors. However, in Armenia, competition is hindered by anticompetitive practices, informal advantages, and weak enforcement of competition laws.
• Investor Perceptions: Investors perceive significant risks in the Armenian competition environment, including vested interests, cronyism, and unfair practices, which may explain the decline in foreign direct investment (FDI) inflows since 2009.
• Market Concentration: Many Armenian markets are highly concentrated, with 83% of manufacturing markets being monopolies, duopolies, or oligopolies. This concentration limits the ability of new entrants to compete effectively and hampers market development.
• Need for Holistic Competition Policy: A holistic competition policy framework is necessary to address both firm-level and government-level anticompetitive behavior. This framework includes three pillars: opening markets through pro-competition sector regulation, promoting a level playing field, and ensuring effective enforcement of competition laws.

Key Findings

Pillar 1: Opening Markets through Pro-competition Sector Regulation

• Rail Transport: The South Caucasus Railways (SCR), a Russian-owned concessionist, operates the rail infrastructure with a 30-year concession (extendable to 40 years). SCR has not yet published access charges or allowed new competitors to enter the market, leading to inefficiencies and higher costs for importers. There is a need for vertical separation between infrastructure management and service provision, as well as clearer access rights to promote competition.
• Air Transport: The Armenian air transport market has historically been dominated by the national carrier Armavia, which influenced regulatory decisions and had exclusive rights for a decade. Despite recent liberalization efforts, including the signing of 60 Air Service Agreements (ASAs) and the EU-Armenia Aviation Agreement, the market remains limited, especially for European routes. High fuel costs and airport fees are major challenges for profitability.

Pillar 2: Promoting a Level Playing Field

• Regulatory Reforms: The GoA has made progress in improving tax and customs administration, strengthening procurement laws, and incorporating competition considerations into Regulatory Impact Assessments (RIAs).
• State Aid and Procurement: There is a need to develop a state aid inventory and guidelines to ensure competition is embedded in public procurement.
• Market Concentration: The high concentration of markets in manufacturing and services indicates a lack of competition and the need for policy reforms to address this.

Pillar 3: Ensuring Effective Competition Policy Enforcement

• Competition Law: The amended Competition Law provides a legal basis for addressing anticompetitive actions by public bodies, but implementation remains weak.
• Enforcement Gaps: There are gaps in the enforcement of the Law on the Protection of Economic Competition, including a lack of regulation on standards and performance, and no penalties for non-performance.
• Penalties and Deterrence: Developing a methodology for determining appropriate penalties is essential to deter anticompetitive behavior and ensure compliance with the law.

Proposed Approach

The policy note suggests a coordinated approach to foster competition across sectors, including:

• Strengthening the capacity of the Public Services Regulatory Commission (PSRC) and the National Centre for Legislative Reform (NCLR) to implement pro-competition regulations.
• Reviewing the economic strategy with a competition and level playing field perspective.
• Developing a National Competition Policy (NCP) to ensure a unified and coherent approach to competition reform.
• Improving the enforcement of the Competition Law through better monitoring and penalties.
• Implementing vertical separation in the rail sector to allow for fair access and competition.

Cross-cutting Themes

• The development of a National Competition Policy (NCP) is recommended to provide a structured and coordinated approach to competition reform.
• Regulatory Impact Assessment (RIA) should be used to ensure that new regulations do not inadvertently restrict competition.
• The World Bank Group (WBG) is positioned to provide technical support to the GoA in implementing these reforms, based on the findings of this policy note and subsequent discussions with key stakeholders.

Key Information

• FDI Inflows: Armenia's FDI inflows have declined since 2009, with the country having one of the lowest FDI-to-GDP ratios in its comparator group.
• Market Risks: According to the EIU Risk Tracker, business risks related to weak competition policies are among the highest in the region.
• Regulatory Tools: The use of the OECD Product Market Regulation Indicators and the WBG's Markets and Competition Policy Assessment Toolkit has informed the analysis.
• Sectoral Priorities: Transport (rail and air) and agribusiness are identified as key sectors for reform due to their importance for connectivity and export diversification.

Conclusion

To improve market contestability and promote economic growth, the GoA needs to implement comprehensive reforms that address market concentration, regulatory barriers, and enforcement gaps. These reforms should be supported by a coordinated National Competition Policy and enhanced regulatory frameworks. The WBG is ready to assist in this process through targeted technical support.