Friday 26 / July / 2024
Muscat: The Sultanate of Oman, represented by the Competition Protection and Monopoly Prevention Centre at the Ministry of Commerce, Industry, and Investment Promotion (MoCIIP), progressed by 0.53 points in the field of competition laws and enforcement, as well as adherence to international trade agreements signed between the Gulf Cooperation Council (GCC) countries and the Republic of Singapore in 2023.
This is part of the annual assessment conducted by ESCWA on the legislative frameworks for the business environment in Arab countries, including competition protection, covering a total of 22 Arab nations.
The business environment is a key factor that affects the sustainability and development of the economy, and government policies and legal regulations play a crucial role in determining the country’s attractiveness for investment and stimulating innovation.
Nasra Al Habsi, the Director General of the Competition Protection and Monopoly Prevention Centre at the MoCIIP, stated that the evaluation published by ESCWA in the field of competition law relied on specific indicators based on international best practices.
“It aims to highlight strengths and weaknesses in legislation related to establishing fair practices in the market, protecting consumer rights, providing a transparent business environment favourable to investors, enhancing corporate governance, and enabling strategic reforms contributing to improving the business environment and increasing economic growth,” Al Habsi said.
Al Habsi explained that the assessment was based on these indicators used to evaluate the legal framework in each country.
The results measurement mechanism starts with a value of (0), indicating weak, and ends with a value of (7), indicating very strong.
The higher the points, the greater the alignment with ESCWA’s system and international standards. The research also classified countries in the region, enhancing the analysis of regional trends and ensuring a comprehensive evaluation of legislative frameworks.
Significant improvement in law enforcement
Al Habsi clarified that the Sultanate of Oman, represented by the MoCIIP, has shown tangible progress in enforcing competition laws, as evidenced by the report.
The enforcement index increased from 4.67 in 2020 to 5.09 in 2023, highlighting the government’s commitment to enhancing competitiveness and supporting the private sector.
The component assessing competition law enforcement practices focuses on their effectiveness, examining legislative provisions, penalties for violations, and the independence of regulatory bodies responsible for ensuring compliance. Several Arab countries have made progress in this area, maintaining an overall regional ranking of ‘developed,’ with some, like Syria and Iraq, establishing independent competition authorities with various powers. Nevertheless, gaps persist in other countries.
Improvement in combating dominance
The Director General of the Competition Protection and Monopoly Prevention Centre also highlighted improvements in combating dominance. The index increased from 5.44 in 2020 to 5.6 in 2023, indicating earnest efforts to address market dominance and anti-competitive behaviors. She noted that the MoCIIP issued the executive regulations for the Competition Protection and Monopoly Prevention Law (Decree No. 18/2020), significantly contributing to enhancing the legislative framework evaluation index in Oman. These regulations consider factors such as a person’s ability to impact prices or product quantities in the relevant market, actual or potential competition, market share, potential expansion of existing competitors or entry of new ones, access to necessary production materials or distribution channels, sales, business behavior in the market, and the impact on product availability and diversity, as well as the effect of market entry, expansion, or exit on product prices or supply volume for the person in the relevant market.
Overall improvement in Arab countries’ ranking
Al Habsi pointed out that the component of combating dominance and monopolies focuses on preventing institutions from controlling or influencing the market. She clarified that from 2020 to 2023, the overall ranking of the Arab region in this component improved from average to developed. This improvement is a result of efforts made by Arab countries to enhance legal frameworks addressing market control behaviors. Several countries in the region have made significant progress in this area. Despite this positive trend, notable differences persist in the level of detail covered by laws and enforcement mechanisms, emphasizing the need to continue refining and improving these laws.
Combating cartels and arrangements
Al Habsi indicated that regarding the component of combating cartels and anti-competitive arrangements, there was a slight improvement in Oman’s evaluation. The index increased from 3 to 3.5 from 2020 to 2023, assessing the legal framework for combating cartels and anti-competitive behaviors. It focuses on the effectiveness of laws in addressing these practices and the prescribed penalties to maintain fairness and efficiency in markets. The Arab region has taken notable steps in this regard, with a growing trend in the legislation of countries in the region to combat collusion in price fixing, market sharing, and other forms of collusion. However, legislation often lacks clear definitions of cartels and robust mechanisms to counter them, resulting in potential limitations in effectively addressing anti-competitive practices.
International trade agreements component
As for the international trade agreements component, the index increased from 2.8 in 2020 to 4.2 in the Sultanate of Oman in 2023, highlighting a focus on facilitating international trade and enhancing integration into the global economy. This component assesses compliance with international trade agreements and global standards for competition policies, emphasizing adherence to international best practices in competition laws. The Arab region recorded an ‘average’ ranking in this component. Examples include the arbitration mechanism for the Free Trade Agreement between the Gulf Cooperation Council countries and Singapore, and Egypt’s policy coordination with COMESA requirements. Despite these steps, gaps persist, such as the lack of specific competition legislative provisions in Yemen’s commitments with the World Trade Organization and the need for clearer definitions of competition and dispute resolution mechanisms in Libya’s agreement with COMESA. This diversity underscores the momentum in achieving competitive markets while emphasizing the necessity of aligning competition policies and incorporating them in trade agreements comprehensively.
Market liberalisation component
As for the market liberalization component and interventions related to competition, there was stability in the market liberalization component, with the index remaining at 3.5 in 2020 and 2023. This indicates a continuity in maintaining previous efforts. This component aims to balance market liberalization and interventions related to competition in vital sectors. It assesses how authorities monitor and enforce market liberalization processes, considering the impact of exceptions on the competitive environment. Arab countries showed varied progress in this component, ranging from ‘initial’ to ‘average.’ Saudi Arabia made some advancements with its new privatization law, encouraging private sector participation. However, Oman, Bahrain, and Kuwait remained at an ‘average’ rank due to legal restrictions on private sector involvement in certain activities. Egypt showed progress with initiatives like public-private partnerships, promoting competitive neutrality. Meanwhile, Lebanon, ranking ‘very weak,’ faces significant challenges, including the need for more effective competition laws, particularly regarding the dominant role of state-owned companies in strategic sectors.
Labour protection component
Regarding the labor protection component, the data indicates an improvement in labor protection in the Sultanate of Oman. The index rose from 2.33 in 2020 to 3 in 2023, reflecting responsiveness to improved working conditions and workers’ rights. This component assesses how competition policies incorporate protective measures for workers, focusing on non-competition conditions and mechanisms for addressing violations related to workers. The overall ranking for the labor component remains basic in 2023. GCC countries have implemented some protective measures for employees in cases of mergers and acquisitions, but broader guarantees, such as non-competition conditions, are lacking, except for Oman. Middle-income countries provide only symbolic guarantees, with significant gaps, including the absence of non-competition conditions in many of these countries. The least developed countries offer limited guarantees despite Mauritania prohibiting non-competition conditions to protect employees.
Merger Framework Component
The Director General of the Competition Protection and Monopoly Prevention Centre stated: “As for the Merger Framework Component related to economic concentration, Oman has shown improvement, with the index rising from 5.83 in 2020 to 7 in 2023. This component evaluates the effectiveness of regulatory frameworks for merger transactions, focusing on legislative provisions and procedures for reviewing and approving mergers and acquisitions. The overall result for the Arab region remains ‘Advanced,’ indicating a general commitment to overseeing economic concentration and maintaining market competitiveness. Oman, Saudi Arabia, Egypt, and several Gulf countries topped the ‘Very Strong’ ranking, reflecting improvement in Oman’s readiness to facilitate merger and acquisition operations and enhance investments. This is primarily due to detailed requirements for prior notification of merger transactions and clear criteria for merger assessments. In contrast, less developed countries such as Mauritania and Djibouti are still in their early stages, requiring the development of guidelines and standards regarding economic concentration facts.
Al Habsi confirmed that competition laws in the Arab region have seen a slight improvement, with the region achieving an “Advanced” ranking in 2023. This improvement is the result of efforts at the regional level to enhance competition frameworks and address inefficiencies in markets. However, progress varies across the region, with results differing from one group of countries to another.
The diverse paths taken to develop competition laws between 2020 and 2023 reveal variations across Arab countries. Oman, Lebanon, Sudan, Kuwait, Egypt, and Saudi Arabia achieved significant progress, adopting new laws and reforms, bringing them closer to international best practices. In contrast, some countries, such as Iraq, experienced declines. Palestine and Somalia ranked very poorly due to the lack of competition laws. Future efforts should focus on supporting all Arab countries in establishing robust competition frameworks, with attention to those lagging behind, aiming for a fair and conducive economic environment for sustainable growth, she added.
Great progress in legislation
There has been significant progress in competition-related legislation across the Arab region. The average points for the region increased from “Average” to “Advanced,” reflecting the adoption of new laws and amendments by some countries. This improvement is evident in the increase in the region’s points, moving from an average rank in 2020 to an advanced rank in 2023, said al Habsi.
Points for GCC countries improved from “Advanced” to “Very Strong,” while points for Middle-Income Arab countries improved from “Average” to “Advanced.” On the other hand, points for conflict-affected countries remained at “Average,” and points for the least developed Arab countries declined from “Low Growth” to “Basic,” indicating a pressing need for support and capacity building.
Legislation quality has improved
Overall, there has been a general increase in the assessment points for various components of competition laws in 2020, showing some improvement in the quality of legislation, especially in enforcement practices and the implementing rules of merger operations. The region’s engagement in international trade agreements, such as the Common Market for Eastern and Southern Africa (COMESA), has contributed to this progress. However, the region’s points have not exceeded an advanced rank in any of these components, indicating the ongoing need for significant progress across the region. No progress has been made in some components, such as labor protection, cartels and anti competitive arrangements, market liberalization, and competition-related interventions. This suggests that these components require more attention, and exemptions granted to state-owned companies are widespread, emphasizing the need to embed principles of competitive neutrality in competition-related legislation, she added.
Recommendations
The Director General of the Competition Protection and Monopoly Prevention Centre noted that the report recommended the Sultanate of Oman to make significant amendments to the legislative frameworks for the business environment, including the Competition Law, by providing more definitions for unfair competition practices such as collusion, vertical and horizontal agreements, and changes in control. The recommendations also include ensuring the independence of the Competition Protection and Anti-Monopoly Center from the Ministry of Commerce, Industry, and Investment Promotion, reviewing temporary exemptions and exceptions, establishing strict and clear conditions with penalties for companies violating conditions after obtaining an exception, setting benchmark ceilings for the regulatory framework, and liberalizing the market for some vital sectors, especially those operated by state-owned enterprises, while linking state intervention to specific conditions.
Al Habsi emphasised that efforts will continue to achieve further progress and make the market more attractive for investment. She pointed out that these efforts will be followed by regular updates and improvements to ensure the effectiveness of competition laws and policies, adapting to economic shifts and technological developments such as the rise of the digital economy and artificial intelligence. This aims to ensure that the legislation is capable of addressing emerging challenges without hindering innovation, and to appropriately reshape it to meet the requirements of the current and future era.
