Competition Neutrality Advance Copy ACKNOWLEDGEMENTS This report is prepared and published within the UNCTAD MENA Programme on Regional Economic Integration through the Adoption of Competition and Consumer Protection Policies (2014-2018), which was funded by Sweden. This report is drafted by Mr. Philipp Brusick, consultant and former Head, Competition and Consumer Policies Branch, UNCTAD under the overall guidance and supervision of Ms. Teresa Moreira, Head of Competition and Consumer Policies Branch. Mrs. Ebru Gökçe Dessemond and Ms. Elona Lazaj provided valuable insight and comments. ii ABBREVIATIONS ADE L'Algérienne des Eaux AMDI Moroccan Agency for Investment Development ANPME National Agency for the Promotion of Small and Medium-Sized Enterprises ANRT National Telecommunications Regulatory Authority ARTP Autorité de régulation des télécommunications et des postes BCC Banking Control Commission BH Habitat Bank BNA Agricultural National Bank BOP Bank of Palestine BOT Build-Operate-Transfer BSE Beirut Stock Exchange CAPW Construction Authority for Potable Water and Wastewater CDG Deposit and Management Fund CEGCO Central Electricity Generating Company CMA Capital Markets Authority CN Competitive Neutrality DfiD United Kingdom Department for International Development DISCOs Distribution companies EDCO Electricity Distribution Company EdL Electricité du Liban EEHC Egyptian Electricity Holding Company EEPG Egyptian General Petroleum Corporation EET Énergie électrique de Tahaddart EFF Extended Fund Facility EHCAAN Egyptian Holding Company for Airports and Air Navigation EIT Emirates International Telecommunications ERBD European Bank for Reconstruction and Development EWRA Egyptian Water Regulatory Agency FDI Foreign Direct Investment FIPA Agence de promotion de l’investissement extérieur GAFI General Authority for Investment and Free Zones GDP Gross Domestic Product GICA Groupe industriel des ciments d’Algér GMPCS Global Mobile Personal Communication by Satellite GST General Sales Tax HCWW Holding Company for Water and Wastewater ICT Information Communication Technology IDAL Investment Development Authority of Lebanon IDECO Irbid District Electricity Company IFG General Inspectorate of Finance ILO International Labour Organization IMF International Monetary Fund INT Instance Nationale des Télécommunication ISPs Internet Services Providers JLEC Jorf Lasfar Energy Company JMPC Jordan Phosphate Mines Co. Ltd JTC Jordan Telecommunications Company JVA Jordan Valley Authority LRA Litani River Authority MENA Middle East and North Africa MIDOR Middle East Oil Refinery MITS Ministry of Industry, Trade and Supplies MoEW Ministry of Energy and Water MOJL Ministry of Justice and Liberties MoNE Ministry of National Economy MTIT Palestinian Ministry of Telecommunication and Information Technology MVC Municipality and village councils’ iii NEPCO National Electrical Power Company NOPWASD National Organization for Potable Water and Sanitary Drainage NRTA National Telecommunications Regulatory Authority NWC National Water Council OECD Organization for Economic Cooperation and Development ONAS Tunisian National Sanitation Agency ONEE National Electricity and Water Board ONICL National Interprofessional Cereals and Pulses Board PADICO Palestine Development and Investment Company PalTel Palestine Telecommunications Company PENRA Palestinian Energy and Natural Resources Authority PERC Palestinian Electricity Regulatory Council PETL Palestinian Electricity Transmission Company Ltd PIEFZA Palestinian Industrial Estate and Free Zone Authority PIF Palestine Investment Fund PIPA Palestinian Investment Promotion Agency PMA Palestine Monetary Authority PNA Palestinian National Authority PPP Public private partnership PWA Palestinian Water Authority RAM Royal Air Maroc ROR Rate of Return SMEs Small and Medium Enterprises SNCF French National Railway Company SNI National Investment Company SOEs State Owned Enterprises Sonatrach Société Nationale pour la Recherche, la Production, le Transport, la Transformation, et la Commercialisation des Hydrocarbures s.p.a. SONEDEDE Sociéte Nationale d'Exploitation et de Distribution des Eaux Sonelgaz Société nationale de l’électricité et du gaz STEG Tunisian Electricity and Gas Company STP Tunisian Bank Society TGR General Treasury of the Kingdom TGV High-speed rail service TPR Trade Policy Review TRC Telecommunications Regulatory Commission UNCTAD United Nations Conference on Trade and Development VAT Value added tax WAJ Water Authority of Jordan WB World Bank Wes Water Establishments ZFT Tangiers Free Zone iv TABLE OF CONTENTS ACKNOWLEDGEMENTS ............................................................................................................................................... i ABBREVIATIONS ........................................................................................................................................................... iii EXECUTIVE SUMMARY ............................................................................................................................................. 1 INTRODUCTION ............................................................................................................................................................ 3 Economic reforms, definition and objectives of competitive neutrality (CN) .................................... 3 CHAPTER I: COMPETITION LAW AND POLICY, COMPETITION NEUTRALITY AND SOEs 6 Statutory monopolies.................................................................................................................................................. 7 SOEs in competitive markets .................................................................................................................................. 8 Competition-distorting privileges of SOEs ....................................................................................................... 9 Efficiency grounds for competitive neutrality policies .............................................................................. 10 CHAPTER II: COMPETITIVE NEUTRALITY IN MENA PROGRAMME COUNTRIES ...... 12 Algeria ............................................................................................................................................................................. 12 Egypt ................................................................................................................................................................................ 19 Lebanon ........................................................................................................................................................................... 33 Morocco .......................................................................................................................................................................... 38 State of Palestine .......................................................................................................................................................... 46 Tunisia ............................................................................................................................................................................. 53 CHAPTER III: SPECIFIC RECOMMENDATIONS FOR COMPETITION NEUTRALITY POLICIES ......................................................................................................................................................................... 61 Streamlining the operational form of government business .................................................................... 61 Identifying the direct costs of any given function ........................................................................................ 62 Achieving a commercial rate of return ............................................................................................................. 63 Accounting for public service obligations ....................................................................................................... 63 Aiming at tax neutrality .......................................................................................................................................... 64 Aiming at regulatory neutrality ........................................................................................................................... 64 Ensuring debt and outright subsidy neutrality ............................................................................................. 64 Ensuring public procurement neutrality ......................................................................................................... 65 Establishing a CN transparency and redresss procedure ........................................................................ 66 CONCLUSIONS AND RECOMMENDATIONS ............................................................................................ 67 FOR UNCTAD MENA PROGRAMME COUNTRIES ................................................................................ 67 Bibliography .......................................................................................................... Error! Bookmark not defined. v EXECUTIVE SUMMARY This report is based on a range of sources, including the 2015 UNCTAD MENA Programme Inception Report; Competitive Neutrality and Its Application in Selected Developing Countries, an UNCTAD Research Partnership Platform 2014 publication;1 and exchanges with offcials and experts in the MENA region; OECD work establishing the basic principles of Corporate