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Competition Policy, Market Power and Trade Performance :
"The State of Competitiveness in Malaysia's Manufacturing Industries"

    
Speaker : Professor Dr. Rajah Rasiah
First Holder of Khazanah Nasional Chair
Date : Wednesday, 27 February 2013
Time : 3.00 pm – 5.00 pm
Venue : Lecture Hall 3,
Faculty of Economics & Administration,
University of Malaya
Fee : Free Admission (RSVP before 22 February 2013)

 
ABSTRACT

Competition policy, hinged on competition and anti-monopoly legal instruments, have acted as key regulatory measures in several developed countries to ensure that undesirable business practices arising from market power do not undermine competitiveness of particular industries and eventually result in deadweight losses in consumer benefits. Recognizing its role in influencing economic competitiveness and to protect consumer welfare the Malaysian government enacted the Competition Act in 2010. Because of the presence of scale economies in some industries, competition policy instruments generally seek to stimulate actual or potential rivalry among firms in the marketplace for the patronage of customers, but strictly prohibit economic agents from using unfair trade practices that can reduce consumer welfare. In doing so, competition policy discourages the abuse of market power that creates destructive asymmetries against customers. The lecture takes the view that both policy and non-policy influences affect both concentration and competition, and hence, analyzes in addition, institutional influences on ownership, promotional instruments and grants and incentives to stimulate export, and technological upgrading. Competition policy thus, seeks to stimulate competition so as to positively impact on the business environment so that fair trade practices are not compromised in the entry of new business, exit of firms, prices, licensing, technology, among other factors. It is in this context that this public lecture analyzes changes in concentration levels and its impact on trade performance. We deploy a set of quantitative methodologies to estimate the Herfindahl-Hirschman (HH) index and the rivalry index (RI) as the proxies of concentration, while trade performance is estimated using the proxies of Grubel-Lloyd (GL) index, Scherer-Huh (SH) index and revealed comparative advantage (RCA) to examine changes in both sets of variables, and the relationship between concentration, and the trade performance variables over the census years of 2000 and 2005. The results show that most manufacturing industries face concentration levels less than 60% market (based on CR4). However, there are some industries that faced high concentration levels. For example, in 2005, the concentration level in tobacco was extremely high, while in textiles, leather products, transport equipment, and scientific and measuring equipment it was high. The trade indices of GL showed that the competitive industries rose from 706 in 2000 to 836 in 2011. While the improvement in the share appears good, a large share of manufacturing industries have remained not very competitive (79%). Meanwhile, the relationship between HH and RI and GL and SH showed a trend rise in the period 2000-2005 before falling over the period 2005-2010. The evidence also shows that the regulatory framework facing electronics firms has not offered the motivation for firms to upgrade significantly to higher value added activities. These results call for a more in-depth scrutiny of the Malaysian economy to unravel the economic instruments essential to stimulate competitiveness in the main manufacturing industries.

Programme Outline

3:00 pm
Arrival of guests and registration
3:15 pm
Arrival of YBhg Tan Sri Dr. Ghauth Jasmon,
Vice Chancellor, UM & Chairman of the Board of Trustees,
Khazanah Nasional Chair
3:30 pm
Welcome speech by YBhg Tan Sri Dr. Ghauth Jasmon
3:45 pm
Introduction of speaker
lecture entitled “Competition Policy Market Power and Trade Performance: THE STATE OF COMPETITIVENESS IN MALAYSIA’S MANUFACTURING INDUSTRIES” by Professor Dr. Rajah Rasiah,
First Holder of Khazanah Nasional Chair

Q & A Session
5:00 pm
Refreshments
 

 
Kindly RSVP before 22 February 2013 (Email: umcors@um.edu.my or Tel: 03-2246 3369/3370/3372/3368. For further information please do not hesitate to contact Nurin Hanani at the number above or email to nurin@um.edu.my. We look forward to your participation.