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«COMPILATION OF THE RESPONSES TO THE UNCTAD QUESTIONNAIRE Part I: Public Monopolies, Concessions and Competition Law and Policies COMPILATION OF THE ...»

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With Hungary’s accession to the European Union (after 01.05.2004) new instruments have been established in the concessions’ regulation, as the result of the harmonization of laws. With the amendment of the law on public procurement (No.

CXXVIX of 2003) the concept of “construction concession” has been introduced to the concession’s legal institution for the public procurements in the value above the given threshold. As a result it is possible to grant concessions for highway or even a sports hall constructions and facility management.

Above this, in cases over the national value limit the Hungarian public procurement act defines the “service concessions”.

3. Were competition concerns taken into account at the time of granting a concession? What are the competition concerns or issues that have arose from concessions in your country? Was special protection in regard to dominance, entry or price control granted to concessionaires at the time of granting a concession?

Before granting the first concessions there were professional discussions between the ministry supervising telecommunications and the competition authority. It was decided that time that not only the incumbent provider would receive the wired telecommunication’s service rights, but several other, regional providers would be allowed to enter the market. Although this way regional monopolies have been established, but this provided the basis for a competing market in the future. This situation was constantly criticized because of the difficulties to achieve economies of scale, efficient operation. As the providers held excessive rights in a certain geographical area, their prices were capped by the contracts, in order to avoid the abuse of their dominant position and to incite them to increase efficiency.

At the market entry of the first GSM providers there was no debate about the fact that at least two providers were needed and after a few years – as announced in the call for tenders – a third provider may enter the market as well. The three mobile concession owners had been competitors, but as the consumer prices had not decrease as expected, the Hungarian Competition Authority initiated a cartel investigation.

4. Which sectors from your economy are exempted from competition law? Which sectors or what type of concessions are under a specific regulatory oversight?

Are concessions subject to the national competition law?

Exempted from competition law are the public education and the public health services financed by the state budget, thus not the entire education and health sector is exempted. Special regulation is applied in the telecommunication and energy sector, but it does their complete exemption from the competition law. In order to prevent their abusive behaviour, stricter conditions are applied for service providers with “significant market share - this assessment is annually made by the regulatory authority.

New concessions will be not granted in the future in the above-mentioned sectors. The market entry is regulated by the licensing conditions.

Generally the principal rule is that concession’s winner is not exempted from competition law. The contract however may contain special behavioural rules, which may limit the companies scope for action, independence in taking decision, but these options have to be examined case by case.

5. Is there evidence in your country that concessions have brought about benefits for consumers in terms of greater infrastructure, diversification, higher quality, better prices; overall consumer welfare?

The telecommunication concessions may be considered as good examples. As a result, the telecommunication infrastructure and service quality improved fast and significantly, and the lack of offers ended. The telecommunication sector’s improvement encouraged the investors’ appearance in other segments. However, the decrease of service prices could have been more intense than experienced, if the state would have taken more distinct actions, applied the price regulation more consequently.

Indonesia

6. How many and what type of concessions have been granted in your country?

What is the typical/average duration of a concession?

The right to procure concessions in Indonesia was given to public utility sectors, which included all natural resources management sectors, such as water supply, electricity, geothermal, forestry, oil and natural as, minerals, coal, etc. The average duration for each concession revolve around 20 to 30 years, it depends on the agreement that was agreed beforehand between the government and the private company.

7. What were the modalities for creating a concession (Public offering/tender, decree, etc.)? Is there a law in your country for the granting/termination of concessions? Are there provisions in concession agreements which allow the government to terminate the concession?

The selection process of the private company that will co-operate with the government in the concession was determined through public offering/tender.

Through this kind of method, the government would be able to obtain the most efficient private company as a partner, which offered the lowest production rate and gave the best service. The conduct of the tender implementation was arranged in the Presidential Regulation No. 67 Year 2005 concerning “Cooperation between the Government and the Private Company in the Infrastructure Procurement” and Presidential Decision No. 80 Year 2003 concerning “The Implementation Guide of the Procurement of Government’s Products and Services”. As for the conduct to create a concession agreement was arranged in each related sectors regulation. For example, the concession establishment in oil and natural gas sector was determined through Law No. 22 Year 2001 concerning “Oil and Natural Gas”, especially in Chapter IV (Upstream Activities) and Chapter V (Downstream Activities). If there was a violation occurred against the agreement provisions that were stated before in the concession agreement, the government then had the right to carry out renegotiation with the related company. If the violation continued to happen after the renegotiation process, the government then had the right to terminate the concession agreement. For example, article 25 Law No. 22 Year 2001 concerning Oil and Natural





Gas states that:

–  –  –

8. Were competition concerns taken into account at the time of granting a concession? What are the competition concerns or issues that have arose from concessions in your country? Was special protection in regard to dominance, entry or price control granted to concessionaires at the time of granting a concession?

Yes. Through the Presidential Regulation No. 67 Year 2005 concerning the “Cooperation between the Government and the Private Company in the Infrastructure Procurement” was arranged about competition in each process of the making of concession agreement. This regulation arranged the tender implementation as a method to choose the private sector that will get the right of concession. This regulation also arranges the ban of collusive tender and abuse of monopoly tender.

9. Which sectors from your economy are exempted from competition law? Which sectors or what type of concessions are under a specific regulatory oversight?

Are concessions subject to the national competition law?

Law No. 5/1999 Article 50 state that excluded from the provisions of this law shall be

the following:

a) actions and or agreements intended to implement applicable laws and regulations; or

b) agreements related to intellectual property rights, such as licenses, patents, trademarks, copyright, industrial product design, integrated electronic circuits, and trade secrets as well as agreements related to franchise; or

c) agreements for the stipulation of technical standards of goods and or services which do not inhibit, and or impede competition; or

d) agency agreements which do not stipulate the resupply of goods and or services at a price level lower than the contracted price; or

e) cooperation agreements in the field of research for the upgrading or improvement of the living standard of society at large; or

f) international agreements ratified by the Government of the Republic of Indonesia; or

g) export-oriented agreements and or actions not disrupting domestic needs and or supplies; or

h) business actors of the small-scale group; or

i) activities of cooperatives aimed specifically at serving their members.

Article 51 stated that monopoly and or concentration of activities related to the production and or marketing of goods and or services affecting the livelihood of society at large and branches of production of a strategic nature for the state shall be stipulated in a law and shall be implemented by State-Owned Enterprises and or institutions formed or appointed by the Government.

There is no specific sector that exempted by the Law No. 5/1999. Exemption regulated by Article 50 and 51 above tends to be general and did not define a certain sector to be exempted. Under those circumstances, an exemption is only provided to certain market structure and agreement, and not to certain behavior or to any sector in Indonesia. Which means, this condition also valid for concession.

10. Is there evidence in your country that concessions have brought about benefits for consumers in terms of greater infrastructure, diversification, higher quality, better prices; overall consumer welfare?

Not yet. Up to now, KPPU already carried out some studies toward several concessions in Indonesia from the aspect of product price and quality that was produced. From the studies could be concluded that there were no direct proof which could showed that the existence of the concession increased the welfare of Indonesia consumer.

Japan

1. How many and what type of concessions have been granted in your country?

What is the typical/average duration of a concession?

a) In Japan, most of infrastructures such as electricity, gas, fixed-line telecommunication and railway are owned by private firms. The socalled scheme of concessions, that is, to grant private firms rights to operate and manage infrastructures owned by the government and to receive fees for usage, are not often used.

b) The Private Finance Initiative (PFI) is a similar scheme to Concessions. It utilizes private sector capital, management skills and technical capabilities in the sector of construction, maintenance and management of public facilities, etc.

2. What were the modalities for creating a concession (Public offering/tender, decree, etc.)? Is there a law in your country for the granting/termination of concessions? Are there provisions in concession agreements which allow the government to terminate the concession?

N/A

3. Were competition concerns taken into account at the time of granting a concession? What are the competition concerns or issues that have arose from concessions in your country? Was special protection in regard to dominance, entry or price control granted to concessionaires at the time of granting a concession?

N/A

4. Which sectors from your economy are exempted from competition law? Which sectors or what type of concessions are under a specific regulatory oversight?

Are concessions subject to the national competition law?

a) In Japan, the exemptions to competition law are based on the provisions of the Antimonopoly Act (AMA) itself or on the provisions in other individual laws.

b) Exemptions under the AMA itself are stipulated in Article 21 (Exercise of intellectual property rights), Article 22 (Acts of a partnership which conforms to the requirements such as the purpose of the partnership in mutual support among small-scale entrepreneurs or consumers) and Article 23 (Resale price maintenance (RPM) contracts on a commodity designated by the Japan Fair Trade Commission (JFTC) and the copyrighted works).

c) Provisions for the JFTC’s involvement are stipulated regarding exempted cartels based on individual laws. In general, the formation of

–  –  –

5. Is there evidence in your country that concessions have brought about benefits for consumers in terms of greater infrastructure, diversification, higher quality, better prices; overall consumer welfare?

N/A Korea

1. How many and what type of concessions have been granted in your country? What is the typical/average duration of a concession?

Most of the Private Participation in Infrastructure (PPI) projects in Korea come in a BTO(Build-Transfer-Operate) or a BTL(Build-Transfer-Lease) type, and their average duration is 20 to 30 years.

–  –  –

Method of Conducting Private Investment Project BTO(Build-Transfer-Operate) type: Ownership of the infrastructure facilities shall be transferred to the State or a local government upon the completion of construction, and the concessionaire shall have the right to operate the infrastructure facilities for a specified period of time;

BTL(Build-Transfer-Lease) type: Upon the completion of an infrastructure facility, the ownership of the concerned infrastructure is transferred to the State or local governments and the operational rights are granted to a concessionaire for a set period of time, but the concessionaire leases the facility to use or benefit from it for a period set out in the agreement by the State or local governments.

BOT(Build-Operate-Transfer) type: The concessionaire shall assume ownership of the infrastructure facilities for a specified period of time after the completion of construction, and the ownership shall be transferred to the State or a local government upon the termination of the concession period;

BOO(Build-Own-Operate) type: The concessionaire shall operate and control the infrastructure upon the completion of construction.

2. What were the modalities for creating a concession (Public offering/tender, decree, etc.)? Is there a law in your country for the granting/termination of concessions? Are there provisions in concession agreements which allow the government to terminate the concession?



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