Encouraging Competition in State Enterprise Market Economy
Francis Hualupmomi
It appears that the current trend in competition in the state enterprise market economy is unable to meet increasing demand in consumers’ and state’s expectations. With emerging economic activities bourgeoning in PNG, the government will be under pressure to perpetuate open competition in the state enterprise market economy. The question is, is the government ready to encourage competition?
Let me begin this exposition be employing Merriam-Webster definition of competition as the conceptual premise of competition in market economy as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms”. Competition in the economy is strategically significant to allow two or more firms in the market to compete to secure market shares. This disposition of economic game of invisible hands constructs the propensity for firms to provide quality and affordable goods and services to consumers.
Theoretically, however, competition does not necessarily predicate advantageous in nature rather may have negative implications should it not be managed effectively and efficiently under an economic framework governed by a political and economic actor. In essence, state intervention necessitates regulated norms to ensure level playing field in the interest of relevant economic actors to maximize expected optimum output and outcome.
The political economy of state enterprise in PNG is an interesting case in point, which saw a shift from regulated market to deregulation to privatization in the market economy. Faced with domestic and external forces the state under the then leadership of Mekere’s regime provided the economic reform package in 1997 as a take-off point in an attempt to restore continued economic decline underscored by Skate’s regime.
The reform package calls for privatization in telecommunication, financial, electricity and transportation sectors respectively. The Post and Telecommunication was separated into Postal Services and PNG Telikom, PNGBC was acquired by BSP, and Air Nuigini. This reform till date still provides some economic incentives to state’s national budget.
Historical trend in public enterprise market economy in PNG evidently suggests that competition in the political economy of state enterprise remains inherently weak to meet consumer expectations and state’s economic imperatives hence, is under question. The rationale behind public enterprise privatization was twofold: poor performance or governance issues and to create competition in order to sustain the national economy through innovation in business culture. Yet, these economic actors remain at best less innovative largely due to less or weak competition.
For instance, Air Nuigini, although charging exorbitant fees, still is struggling to provide sufficient profit for the state, whilst PNG power is faced with continuous power blackouts disturbing socio-economic consumers. On the hand, PNG Telikom is also struggling to support state’s revenue base. The entry of Digicel Mobile Company has truly awakened the notion of competition in the country. More frustratingly, BSP enjoyed continuous unnecessary increase charges to clients affecting low income earners. In sum, these enterprises have enjoyed a monopolized culture consequently resulting in inefficiency and revenue loss.
With poor performance in these markets and recent boom in the economy it is imperative that the state should reconsider encouraging competition to avoid inefficiency and meet consumers’ new and diverse expectations. Competition, although is quite risky in infant economies such as PNG, it is a strategic tactic to reduce monopoly, encourages innovation in business culture and ensuring efficiency and effectiveness.
Increasingly significant, is the modernization and industrialization agenda driven by LNG projects that will require widening the size of the national economy. PNG economy is quantitatively growing in size which relatively increases and diversifies consumer base. The demand will trigger upward pressure to increase competition to meet this emerging demand. For instance, more foreign investors will spur upsurge in borderless capital transfer, which would inevitably require provision of more wide range of services in the market.
Given this unstable scenario, what should the state do as the rational actor in the national economy? The government mandated through a social contract between consumers should consider realigning its strategy by introducing competition and allowing more foreign investors to compete in the market economy.
Whilst competition is strategically vital for economic growth it is also a risky economic exercise in developing countries like PNG where the economic base is still in its infant stage. The state whilst encouraging competition to meet changing market patterns in the economy it should rationally take a cautious pragmatic approach in opening these markets.
Competition should be the way forward for PNG to avoid market distortions and increase economic wealth to attain Vision 2050’s goal as a “Middle Income Economy” by 2050.
Francis Hualupmomi studies a Master of Arts in International Relations at the Institute of International Studies, Jilin University, China. His central area of research interest is in Political Economy of East Asia and International Security focusing on Geopolitics of Energy Security. He can be reached on f.hualupmomi@yahoo.com or visit his blog: http//: asia-pacific strategic spotlight