How has the pandemic changed the global competition landscape, especially in Vietnam?
|Ruben Maximiano, a senior competition expert at the Organisation for Economic Co-operation and Development (OECD)|
It is still too soon to say. Even though in 2020 Vietnam experienced one of the highest growth rates in the world, last year it was forecast lower.
OECD data shows that, worldwide, we have seen significant merger and acquisition (M&A) transactions in 2021, with a significant rebound in foreign direct investment equity inflows as compared to 2020, to pre-pandemic levels in the second half of the year.
This has also been the case in Vietnam, where there are reports of higher M&A in 2021 than pre-pandemic. We also saw numerous big deals being announced, such as in the consumer financing sector.
Traditional business is struggling, while online is booming. How can authorities foster healthy and sustainable development?
Vietnam needs to continue to apply its competition laws with the same level of strictness during a crisis as without a crisis. There is ample evidence to show that by lowering standards, there are medium- to long-term effects on markets, as applying less strict rules will lead to more market power in a market and ultimately across the economy.
Practices and transactions by dominant enterprises to exclude competitors need to be scrutinised – as do cartels or agreements that may be about ensuring competitors stay in the market, but which ultimately lead to long-term cartelisation.
It is also a moment when competition authorities may be proposing to governments ways in which to reduce regulatory burdens, helping governments make regulations smarter and better – still achieving policymakers' objectives whilst reducing costs for companies, as otherwise they will exit or not even enter the market.
How should Vietnam adjust its regulatory framework to boost M&A activities?
Vietnam has recently upgraded its merger control system, with a new competition law having come into force in 2019. This essentially follows international best practices, adopting an effects-based approach, as was recommended by the OECD in 2018.
M&A activity, from the perspective of competition policy, is boosted by having an economic and legal framework that is fostering investment and conditions for market entry among domestic as well as foreign players.
From the specific perspective of competition law, it is about making merger control applicable only to mergers that realistically have a prospect of leading to malfunctioning markets in Vietnam (Vietnam uses both market share and turnover and asset values to decide whether to review mergers), as well as well accepted technical grounds for deciding whether a transaction should be prohibited or not.
Guidelines can therefore be helpful so businesses understand how in practice analysis is applied. This leads to lower costs for businesses in terms of uncertainty as to whether a deal a company is looking into requires notification, and whether it will ultimately be considered anti-competitive and therefore be blocked.
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