COMPETITION COMISSION LIVES ON-AT LEAST FOR NOW

UNCLAS SECTION 01 OF 02 ISLAMABAD 000007

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EAID PGOV PK
SUBJECT: COMPETITION COMISSION LIVES ON-AT LEAST FOR NOW

REFs: A. ISLAMABAD 1784

B. ISLAMABAD 2973


1. (SBU) Summary: Since its inception in 2007 by Presidential
decree, the Competition Commission of Pakistan (CCP) has fought
collusive behavior, promoted a competitive environment in Pakistan
and made a number of enemies in the process. A law to provide a
permanent legal framework for the CCP is currently being held up in
the National Assembly, sparking rumors that powerful cartels are
trying to influence the National Assembly's decision. As with
several other ordinances, President Zardari re-promulgated the
Competition Ordinance on November 27, allowing the CCP to continue
operating until the National Assembly decides its fate. CCP staff
is confident that the bill will eventually pass, but fear that
politically-tied businessmen may sway the National Assembly to
reduce the CCP's regulatory authority. Federal Trade Commission
(FTC) support would lend tacit political support to the CCP while
providing needed technical assistance. End Summary.

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Pakistan's Trust Buster
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2. (SBU) Led by a "diligent and politically fearless chairman",
Khalid Mirza, the Competition Commission of Pakistan has over the
past two years developed a positive track record of going after
powerful cartels, winning kudos from the press and public. The
Competition Ordinance of 2007 was enacted by former President
Musharraf as part of the GOP's competitive policy framework to
improve the local investment climate and promote economic
development. The ordinance was set to expire on November 28 as a
part of the Supreme Court decision of July 31 (ref A). The CCP is
an independent structure designed to encourage economic competition
and protect consumer interests by regulating monopolies and
combating collusive practices. Since its creation, the CCP has
filed 76 cases against local businesses, including alleged cartels
in the sugar, LPG, banking and cement industries.


3. (SBU) The CCP's most recent high profile case involved the
Jamshoro Joint Venture Limited (JJVL),the country's largest LPG
producer, and the Liquefied Petroleum Gas Association of Pakistan
(LPGAP),the largest association of local LPG marketing companies.
According to the CCP's investigation, JJVL and LPGAP were involved
in price fixing, intentionally manipulating the supply and the price
of locally produced LPG in order to push LPG importers, such as
Progas, out of the market. CCP fined the companies $3.7 million for
their actions. JJVL and LPGAP are currently contesting the CCP's
ruling with the Supreme Court.

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New Law Stalled
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4. (SBU) The National Assembly Standing Committee on Finance
approved the Competition Bill 2009, the law that will provide the
legal framework for the CCP, with no amendments, but the bill
subsequently stalled in the National Assembly. For weeks, local
print media speculated that the bill would not pass because of
"interference on the part of powerful business owners with strong
political clout." As he did with the Anti-Money Laundering
Ordinance (ref B) President Zardari stepped in at the last minute,
re-promulgating the Competition Ordinance on November 27, one day
before it was to lapse keeping the CCP alive.


5. (SBU) While confident that the National Assembly would pass the
Competition Bill, CPP board member Rahat Kaunain said her biggest
concern was that the bill "would be amended to render the
organization toothless." Currently, the maximum penalty that the
CCP can impose on a company found guilty of anticompetitive
practices is 15 percent of the business' latest turnover. According
to Kaunain, one of the proposed changes to the bill includes the
criminalization of cartels; this would entail the enforcement of
jail-time for guilty parties, but would remove the CCP's ability to
levy any monetary fines on these companies. Kaunain indicated that
such changes would defeat the purpose of the bill, bogging
anti-trust cases in the courts and rendering the CCP ineffective.


ISLAMABAD 00000007 002 OF 002


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Need for Technical Support
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6. (SBU) CCP Chairman Khalid Mirza told Econoff that the lack of
adequate local training for CCP staff was hindering its
effectiveness. According to Mirza, "senior board members have to
train employees themselves; this is putting a strain on the
organization's resources." The Federal Trade Commission (FTC)
recently contacted Post, and Mirza, with its interest in providing
technical assistance to CCP beginning with an initial, on-the-ground
needs assessment of its operations to identify possible areas of
intervention. One of the proposed programs would provide the CCP
with a full-time resident adviser from FTC to facilitate staff
training. Mirza said that he welcomed the idea, adding that the CCP
ordinance was modeled on U.S. law, making it especially suited for
Federal Trade Commission training on anti-trust standards and best
practices.

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The Future of CCP
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7. (SBU) Comment: The CCP has a compelling track record of taking on
anti-competitive practices that stymie Pakistan's economy. Much of
the CCP's success is attributed to the work of its chairman. With
Mirza slated to leave the chairmanship in June 2010, the CCP's
ability to continue operating effectively will not only depend on
whether or not its powers are watered down by the National Assembly,
but on the institutional capacity of the organization Mirza leaves
behind. Post supports building on CCP's established linkages to the
FTC, whose suggested program is a practical, relatively low-cost
means to lend both technical and political support to Pakistan's
market economy. End Comment.

PATTERSON