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Small and developing competition agencies – Papua New Guinea ICCC – December 2017 OECD discussion

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This presentation by the Independent Consumer & Competition Commission (ICCC) of Papua New Guinea was made during Break-out Session 1: Advocacy in the framework of the discussion on “Overcoming adversity and attaining success: Small and developing competition agencies” held at the 16th meeting of the OECD Global Forum on Competition on 8 December 2017. More papers and presentations on the topic can be found out at oe.cd/sda.

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Small and developing competition agencies – Papua New Guinea ICCC – December 2017 OECD discussion

  1. 1. CASE STUDY: IMPORT BAN ON FRESH VEGETABLES ADVOCACY IN PAPUA NEW GUINEA PRESENTED BY: MR. PAULUS AIN Commissioner and CEO The Independent Consumer & Competition Commission (ICCC) of Papua New Guinea 1
  2. 2. OUTLINE OF PRESENTATION  Import Ban on Fresh Vegetables: Case Background  ICCC Investigation and Findings  Challenges Faced by the ICCC  Actions Taken by the ICCC  Outcome After Actions Taken  Lessons Learnt 2
  3. 3. CASE BACKGROUND  12th August 2015 Minister for Agriculture & Livestock (“Minister”) imposed total ban on 14 fresh vegetables  Bulb Onions, Irish Potato, Cabbage (round), Carrot, Tomato, Capsicum, Pumpkin, Peas, Zucchini, Eggplant, Pach Choi (Chinese Cabbage), French bean, Lettuce and Celery  PNG experienced severe El Nino drought conditions in 2015; therefore volume of local production decreased  Bulb onions; 83% of total vegetable imports banned, hence pricing concerns mainly for bulb onions  Due to import ban and supply shortages, there was a steep increase in prices for bulb onions in Port Moresby (PNG’s capital city)  Big supermarkets and grocery stores responded that the price increase was due to supply shortage due to the above factors (import ban and El Nino)  As a result of the public outcry, ban was partially lifted (through office of the Minister) on 12th November, 2015, however import permit given to only one importer, unlike in the past where supermarkets and grocery stores could also import  Pricing situation did not improve and there were further increases in prices, as the new arrangement created a monopolistic market condition for the import of fresh vegetables  This raised consumer and competition concerns for the ICCC 3
  4. 4. 4 ICCC INVESTIGATION AND FINDINGS  ICCC began investigations in November, 2015  Held meetings with both Government Departments and Port Moresby based supermarkets • Gather market information o Price increases of over 100%, from around K6.00/kg to K14.00/kg in Port Moresby supermarkets after the ban o ICCC findings were that local production was not sufficient to meet demand • Poor timing, as import ban implemented during a period of severe El Nino drought conditions which further reduced domestic supply and caused prices to increase exponentially  ICCC established that following 12th November, 2017 announcement by the Minster import permits were given to only one importer; and supermarkets and grocery stores were no longer importing vegetables, including bulb onions o Created monopolistic market conditions and further price increases; bulb onions reached K19.00/kg at highest  In November 2015 the process for requesting an import permit license was also changed  Prior to ban import permits were requested directly from National Agriculture and Quarantine Inspection Authority (“NAQIA”)  New arrangement was that the Minster now had to give prior approval before NAQIA granted the import permit
  5. 5. 5 ICCC INVESTIGATIONS AND FINDINGS….CONT  Attempts by supermarkets and grocery stores to get import permits were blocked by Minister  Reasons for not allowing more importers by Minster was due to bio-security concerns, however, NAQIA when asked were not aware of any such associated bio-security risks, if more importers were allowed  Even if sufficient local production was available, inefficient transport network and services meant the final price of consumers would be still higher than the price of imported bulb onions • Landed price of bulb onions from Australia or NZ to Port Moresby was K4.00, whilst from Lae to Port Moresby (domestic) was K6.00 o Government did not take into consideration reliance on Port Moresby supermarkets on imported bulb onions o Close proximity to Australia and NZ with reliable supply and quality of bulb onions meant Port Moresby supermarkets sourced majority of bulb onion supplies from these overseas markets
  6. 6. 6 CHALLENGES FACED BY ICCC  Major challenge faced by ICCC was that its competition and consumer law, the Independent Consumer and Competition Commission Act 2002 did not have explicit provision on powers of the ICCC to challenge the State or any of its departments on legislation and or policy on competition or consumer protection grounds. • ICCC could not directly challenge the vegetable ban Other challenges which faced the ICCC:  No prior public consultation done by the Government regarding the import ban • General public, businesses and the ICCC caught unaware  Outcry from consumers; steep increase in bulb onion prices over 3 month period  Need for ICCC to conduct market enquiries quickly to find out what was happening
  7. 7. 7 ACTIONS TAKEN BY THE ICCC  While acknowledging limitations, ICCC went public in all forms of media to advocate for competition that import permits should be given to others who express interest as it appeared that there were no real bio-security concerns (if so, NAQIA was not aware of any) • Media release issued on 12th January, 2016 o Next days headline on The National read ‘It’s a Monopoly’ with the ICCC media release on the front page • The National is PNG’s best selling newspaper  Following ICCC media release an ongoing public (and at times heated) debate raged in local newspapers and media, regarding this ban for a period of almost two weeks  Trade associates, chambers of commerce and general public agreed with the ICCC and raised concerns regarding the State’s decision on single import permit  ICCC also wrote to Minister on 21st January, 2016 outlining to him some of the ICCC findings and asking him to remove the ban • Prime Minister and other relevant Minsters with senior Government officials were copied in the letter  Apart from the letter to the Minster, calls and emails were made to the Department for Agriculture and Livestock to further seek information regarding this ban to further lobby for change.  The Minister, however, was adamant that it will not allow more than one importer
  8. 8. 8 OUTCOME AFTER ACTIONS TAKEN o 22nd January, 2016 the Prime Minister announced that the conditions and procedures used to issue import permits would be revised • The ban would still remain with one importer • First time Prime Minster come out publicly about the issue; good sign for ICCC o 25th January, 2016 the Minister lifted the ban totally for a period of 3 months, after which Government would review situation • Imports now opened to all importers o Minister conceded that situation had allowed for a monopoly importer and with the total removal of the ban, there would be competition in the import of fresh produce and prices should reduce o Minster also announced that Government would seek a more structured approach to assisting domestic fresh food producers and boosting the industry o The ICCC is pleased to say that Government to date has not returned the ban on fresh vegetables
  9. 9. 9 LESSONS LEARNT o The media can be a powerful tool, especially for advocacy and change; but a competition agency has to use it to its advantage o Timing is important, especially when issuing a media release or publicly advocating against Government policy • Media release for ICCC occurred when public outcry was at pinnacle o When issuing a media release, always good to give some text that newspapers or television channels can emphasize on to deliver a message o Important to offer a solution or an alternative pro-competitive Government approach with your criticism o Independence for a competition agency is important in enabling it to offer that voice of criticism to anti-competitive Government policy • Section 23 ICCC Act
  10. 10. 10 THANK YOU ALL

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