Free public sector enterprises from bureaucratic control for them to become more competitive, said Prime Minister Manmohan Singh.
“The Government may own a public sector firm and exercise the normal rights of ownership. But this does not mean that it should shelter the firm from competition as well. Unfortunately, government ownership inevitably brings with it a bureaucratic style of decision-making and the end result is that the enterprise cannot compete in a market populated by equals,” Singh said while inaugurating BRICS competition conference on Thursday.
He felt that the solution lies in giving public sector firms greater functional autonomy and freeing them from bureaucratic control, and not in tolerating a slip in their competitiveness and then shielding them from competition.
He also said that several possible distortions could arise because of the advantages some public sector businesses have due to their government ownership.
“Competitive neutrality, therefore, requires that the Government not use its legislative and fiscal powers to give undue advantage to its own businesses over the private sector. Going forward, our governments will, therefore, have to increasingly adopt competition neutral policies,” he added.
Singh said a competitive public procurement market can make bid-rigging more difficult. Noting that anti-competitive behaviour hurts the “poor most of all”, he said that effective competition in markets needs to be created and enforced through public policy.
“Fair and effective competition in markets is easier said than done. It has to be created and enforced through public policy. Otherwise, private barriers may simply substitute governmental barriers to trade and prevent improvements in social welfare,” he added.
According to him, there is an increasing need to recognise the complementarities between competition law enforcement and liberalisation of markets for procurement. Emphasising that public procurement forms a substantial slice of state spending, the Prime Minister said competitive procurement markets can help save valuable fiscal resources.
Meanwhile, expressing hope that BRICS would emerge as global economic powerhouses, Singh said that agreements are in the pipeline for setting up of a BRICS Development Bank and a contingency reserve arrangement for the benefit of the five nations.
Stressing the need for greater economic and political co-ordination among the member nations, Singh said they face common challenges such as in monitoring and managing capital flows in times of global uncertainties.
“Growth, development and poverty reduction are the most important challenges that our governments face,” he said.