What is the relationship between law and conflict? In particular, what role does law-making play in avoiding, managing, or exacerbating conflict? This chapter considers these issues in the context of Myanmar. Legal reform often occurs at moments of political conflict, crisis, and change, and this is also the case in Myanmar. Law reform may be undertaken for a range of reasons — to update, amend, or replace existing laws, to introduce a new policy, or to set a strategic direction in a particular area of reform.

Underneath these efforts at law reform in transitional contexts such as Myanmar there are often two implicit assumptions at play. First, it is sometimes assumed that law has not played an important role in Myanmar in the past. Second, it is assumed that in the post-2011 political transition era, law can and will make a more important contribution to the reform process. At the core of these assumptions is the idea that law helps, rather than hinders, conflict. I suggest that the relationship between law and conflict is more complex, and this is illustrated in the case of Myanmar.

Conflict in Myanmar is often referred to in the context of disputes over land, armed conflict between ethnic groups and the military, or violence directed against Muslims, as other chapters in this volume demonstrate (see in particular Chit Win, this volume). In this chapter, however, I examine conflict from a different angle by exploring the dual capacity of law as a tool to manage conflict, but also as an instrument that can be used to exacerbate conflict.

One way that law has been analysed in relation to conflict is in terms of the connection between law and violence. In his classic opening line, “Legal interpretation takes place in a field of pain and death”, Robert Cover (1995) focuses on the way violence is primarily evident in law through the process of interpretation. While the idea of interpretation is conceived in various ways due to the textual nature of law, this is often considered in terms of legal interpretation by the courts. The scholarship that has developed around Cover's work on law and violence includes focus on judicial interpretation and the role of judges, as well as its connection to criminal trials, practices of punishment, and torture (Cover 1995; Sarat and Kearns 1993; Sarat 2001).

In June 2012 the rape and murder of a Buddhist girl in Western Rakhine State sparked reprisals against Muslim communities. The resulting cycles of communal violence in the following months left hundreds dead, and thousands displaced. The tensions in Rakhine State continued through 2012, and by early 2013 the violence began to spread to other areas of the country. In Meiktila, in the country's central dry zone, a dispute in a jewellery store saw an escalation of violence and the burning of significant parts of the Muslim quarter, including mosques and schools. Through the rest of 2013 tensions remained high, and there continued to be isolated incidents of violence, especially in Rakhine State.

In October 2013, Mishal Husain interviewed Daw Aung San Suu Kyi on the BBC's Today programme. When asked about growing communal conflict between Buddhists and Muslims in Myanmar, Suu Kyi responded, “This is what the world needs to understand: that the fear is not just on the side of the Muslims, but on the side of the Buddhists as well. Yes, Muslims have been targeted, but also Buddhists have been subjected to violence” (BBC 2013). And when finally asked pointedly whether she condemned the anti-Muslim violence, she replied that, “I condemn any movement that is based on hatred and extremism” (BBC 2013).

Over the next few days, Suu Kyi was heavily criticized by the Western media for supposedly defending Buddhist extremism. Daily Telegraph reporter David Blair said that the interview had “sent a shiver down my spine” and that her attitudes toward Muslims were “deeply disturbing” (Blair 2013). Others described the interview as a “fall from grace” from the democracy icon (4News). One commentator even suggested that Suu Kyi should now be “shunned by the international community” (4News). While this condemnation was focused specifically on Aung San Suu Kyi, it was representative of a shift that was also taking place in the attitudes of the international aid community toward the democracy movement.

Previously, like Suu Kyi, democracy activists and opposition leaders had been considered allies of Western aid organizations’ interests in the country. Yet this perception shifted dramatically with the contrasting reactions to reports of violence against Muslims.

Introduction

Public policies often have differing objectives. In an ideal world, these different goals would be compatible and complementary, fitting neatly alongside each other; as the oft-misquoted lines from Kipling's poem above prima facie suggests, they would not meet or conflict. In truth, however, Kipling was highlighting the exact opposite, as becomes evident when one reads the whole poem.

The same applies to public policy. The rules, programmes, laws, and assistance made by government, legislatures, and other arms of the state can and often does overlap, and sometimes even conflicts with each other. In this chapter, we explore the potential conflict between two sets of policy: competition and small to medium-sized enterprise (SME) policies. Are they strange bedfellows? And is there a “middle way” in which the two can successfully work alongside each other?

In theory and intent, they both should benefit SMEs. Competition policy seeks as level a playing field as possible in the economy, through the enforcement of competition law and the opening up of sectors in the economy to competitive dynamics.

Introduction

This chapter considers the impact that competition law, regulation, and trade have on productivity and innovation among small and mediumsized enterprises (SMEs) in the manufacturing sector of Singapore. SMEs account for more than two-thirds of all employment, and 99 per cent of all businesses registered in Singapore (Department of Statistics Singapore 2014). Singapore's industrial and manufacturing focus has evolved since the founding of the Republic in 1965. Its industrial emphasis shifted from labour-intensive products that had limited value-added in the 1960s to export-oriented and semi-automated products in the 1970s. The 1980s saw the rapid expansion of the services sector, as well as a transition to high value-added manufacturing. However, over the past two decades, the share of the manufacturing sector in gross domestic product (GDP) has diminished, crowded out by a rapidly growing services sector. The manufacturing sector, and SMEs especially, have recorded weak total factor productivity (TFP) growth while maintaining a high dependence on foreign labour. Singapore has sought to explicitly address these challenges by raising productivity and wages of the resident labour force. As over two-thirds of the labour force is employed in SMEs, initiatives to increase the productivity of SMEs have received significant policy attention.

The chapter commences by explaining the rationale for the current productivity drive in Singapore and the importance placed on lifting the performance of SMEs. Following this, it examines the nexus between competition law, productivity, and innovation, paying particular attention to the key features of the competition law regime in Singapore.

Introduction

Small and medium-sized enterprises (SMEs) are the biggest single group of businesses to be found globally, and represent the overwhelming majority of trading enterprises in almost every regulatory jurisdiction around the world. The importance of SMEs is reflected in the presence of industrial policies supporting SME development in many countries. Curiously, however, SMEs are almost invisible when competition policy and law issues are discussed or analysed. This is all the more surprising given the lack of consensus amongst countries with competition law on whether SMEs merit a differential treatment in competition law implementation and enforcement.

This book seeks to rectify the relative neglect in research and policy discussions on the role of the SME sector in competition policy and law. A number of issues are addressed in this book. What are the unique features of small firms? In what ways can competition regulators effectively engage with the SME sector? Finally, should we construct our competition laws to take into account the differences between large and small firms? These are some of the issues which this book examines.

Competition Law in the Asia-Pacific

The Asia-Pacific region contains one of the richest and most diverse mixtures of competition law regimes to be found globally. On the one hand, these include some of the oldest, best known, and deeply embedded legal frameworks, some of them more than a century old. There is also a separate cohort of jurisdictions whose systems are now several decades old; and yet there are also many which are either relatively new, or are still coming to fruition.

Canada, for example, introduced one of the earliest modern competition laws to be adopted by a nation state, having enacted its Act for the Prevention and Suppression of Combinations Formed in Restraint of Trade in 1889. Its neighbour, the United States, enacted the Sherman Anti-Trust Act federally just a year later and, in doing so, also gave rise to an alternative descriptor for this entire body of law.

Several decades later, a number of other countries in the Asia-Pacific region also adopted their own laws. Japan was one of the earliest leaders, legislating an Act on Prohibition of Private Monopolization and Maintenance of Fair Trade in 1947.

Introduction

Indonesia is not only the largest economy in Southeast Asia, but it is also one of the largest democracies in Asia. As a country with a very big population of more than 250 million people, creating employment has been a persistent policy challenge. For this reason, small and medium-sized enterprises (SMEs) are considered very crucial to the national economy, as they are the largest employment creator, especially amongst women and the ranks of the lowest skilled. Successive Indonesian governments have provided a wide range of programmes to assist small-scale enterprises, and since the 1997–98 economic crisis, SMEs in Indonesia have received more serious attention, as they turned out to be more resilient than larger firms in responding and thriving in difficult times. This government support is also reflected in Article 50h of Indonesia's Competition Law No. 5/1999, which exempts small-scale enterprises from the provisions of the Law (KPPU 2007).

This chapter provides an overview of the current competition environment for SMEs in the Republic of Indonesia. It begins by defining and explaining some of the contemporary features of its SME sector, and then outlines the main elements of the national competition (antimonopoly) law. It examines some of the current problems and cases being dealt with, and concludes with a suggestion for future research into this new field.

MSMEs in Indonesia: Definition and Key Characteristics

One common definition of SMEs in Indonesia is based on the National Law (No. 20 of 2008) on Micro, Small and Medium Enterprises (MSMEs).

Introduction

Is it possible to build a culture of a well-informed and well-educated SME (small and medium-sized enterprise) community that understands the major elements of a national competition law regime, the logic behind its creation, how individual firms should comply with the law, and how they are able to actively also exercise their rights within the law?

For many regulators, policymakers, and enforcement bodies, knowledge of competition law is a given. It is, after all, the key subject that they deal with on a day-to-day basis. However, for the owners, managers and staff of most SMEs, it is only one of many pieces of disparate information that they must understand, process, and comply with.

Competition law is also complex. It can contain many different precepts, involve a sophisticated understanding of both economics and law, and in many jurisdictions, may also contain numerous per se provisions and exemptions. It is not necessarily the easiest body of regulations for a layperson to absorb, understand, and apply in practice.

There is often substantial information asymmetry and many wrongful assumptions. Regulators who know the chapter and verse of their laws and regulations expect small businesses to be equally fluent in these requirements. Large firms, who have considerable internal resources and access to specialist advisers and trainers, know much more than their smaller counterparts, thus accentuating the disparities in their relative strengths.

Introduction

Japan's Antimonopoly Act (AMA), introduced in 1947, has been used as a means of regulating the transactions between big corporations and small and medium-sized enterprises (SMEs) in many industrial fields. The purpose of the Act is to institute a framework for competitive behaviour in which SMEs are not merely the object of government protection, but are also encouraged to acquire competitive power by their own efforts.

SMEs make up more than three-quarters of Japan's corporate landscape, and fostering these small and medium-sized businesses has been one of the most important parts of the AMA. The legislation prohibits “unfair trade practices” (Article 19), such as the abuse of a superior bargaining position, and is one of the most important provisions in the Act relevant to SMEs.

The Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (also known as the Subcontract Act of 1956) is a statute that was enacted as a complement to the AMA, in order to enable immediate action by Japan Fair Trade Commission to regulate the abuse of superior bargaining position. The most important point of this legislation is a requirement that an enterprise has to immediately deliver to its subcontractor a written statement setting forth key parts of the contractual arrangements that have been agreed upon. This can include items such as the nature and contents of work to be performed, the amount to be paid, the date of payment, and the method of payment. This Act also prohibits certain conducts, such as delays in payment (without a valid reason) by main subcontracting entrepreneurs.

Introduction

Competition policy, as framed by governments, is directed towards those firms with “market power”. Because large firms are more likely than small firms to be able to influence market prices, it is the former that have been the focus of attention of national, and sometimes international, competition authorities.

The prime role of competition policy, certainly in the United Kingdom, has been to seek to benefit consumers, and to have large firms as its key target. In contrast, small and medium-sized enterprises (SMEs) are viewed as more likely to be the victims, rather than the perpetrators, of anti-competitive practices.

So, although there has been considerable research undertaken on the impact of competition policy upon (large) enterprises and upon consumers (see Motta 2004 for a review), there is almost no UK-based work that examines any link between competition policy and SMEs.

Small and Large Firms

Storey and Greene (2010) argue that, other than pure scale, SMEs are different from larger enterprises in several important respects. First, SMEs normally lack any form of market power. In other words, by changing their output, they are unable to influence prices in their marketplace. Second, SMEs are very unlikely to be able to restrict or eliminate the entry of new firms in their markets. So, if they develop a profitable niche, it is very unlikely that they will be able to prevent another firm entering that marketplace to compete against them.

Introduction

The treatment of small and medium-sized enterprises (SMEs) in competition law and policy has always been a contentious issue. SMEs in many countries have, for years, argued that they are placed at a disadvantage in the enforcement of competition law — if not within overall competition policy — and should thus be excluded from the ambit of the law. Some countries have chosen to exclude them from the ambit of the law, whilst others keep them within though subject to the de minimis test. Where SMEs are excluded from competition law, it usually takes the form of a blanket exclusion (such as occurs in Article 50 of Indonesia's Law No. 5 of 1999), although some partial exclusions may also be found. This chapter will examine some issues facing SMEs that arise from the enforcement of competition law, such as the presumption of a propensity to infringe the law, enforcement favouritism for large enterprises, the failure to create a level-playing field, and some other disadvantages faced by SMEs in enforcing their rights under competition law. For the purpose of this chapter, the notion of enforcement of competition law is used in its widest sense to include the enforcement of competition regulation by sectoral regulators; the term “competition authorities” here includes both sectoral and general regulators. The geographical focus is Southeast Asia.

The Presumption of Propensity

One common enforcement characteristic of competition authorities — and this is particularly true with young authorities — is to focus their enforcement efforts on SMEs.

Introduction

Vietnam has attained significant achievements in economic performance since launching the package of economic reforms known as “Doi Moi” in 1986. The economic base has been greatly diversified with the participation of domestic state and private enterprises as well as foreign invested enterprises. The country has become economically integrated as a member of ASEAN (Association of Southeast Asian Nations), APEC (Asia-Pacific Economic Cooperation), and the WTO (World Trade Organization), having one of the highest trade-to- GDP (gross domestic product) ratios. It has also negotiated and concluded a number of bilateral free trade agreements as well as multilateral agreements. These economic reforms unleashed a burst of entrepreneurial energy that enabled Vietnam's economy to grow by 7–8 per cent annually for nearly two decades (Brown 2015).

Introduction

The governments of most Pacific islands countries (PICs) have embraced private sector development as central to their strategies for economic development. Competitive markets are perceived as essential to such private sector development. Accordingly, the governments of several PICs are taking steps toward implementing competition policies or reviewing their regulatory institutions (ADB 2014a). Economic activity in most PICs is dominated by state-owned enterprises (SOEs) and a handful of multinationals or large privately-owned domestic enterprises. In several PICs, policymakers have been pursuing the corporatization and privatization of SOEs. Typically, there is little competition in the major infrastructure-based industries (telecommunications is an exception) but active competition, at least in urban areas, occurs among smaller scale businesses with lower capital requirements.

Policymakers in PICs, as in other developing economies, are therefore looking to micro, small and medium enterprises (MSMEs) as major drivers of the private sector development that is needed to generate economic growth, create jobs, and alleviate poverty (McIntyre 2001). MSMEs are pivotal to the emergence of competitive markets in PICs but face significant constraints on their ability to compete. While MSMEs in the Pacific bear the substantial weight of development expectations, they are poorly equipped to apprehend the implications of competition laws, obtain independent legal advice, enforce their rights, participate in the policy process, or otherwise advance their legal interests.

Introduction

Chinese family companies are a major influence in Southeast Asian economies. While family-owned companies dominate small business, as they do in other countries, what is unusual about Southeast Asia is that family companies also dominate big business. Big enterprises in Asia are not the large-scale firms run along Western lines, but rather a conglomeration of small and medium-scale enterprises in a variety of markets that are often not even remotely related (see, for example, Gomez and Jomo 1999). In a (now dated) survey of corporate ownership by the World Bank following the Asian Financial Crisis in 1997, Claessens et al. (2000) examined the ownership of almost 3,000 Asian companies and found that a high proportion were family controlled; these firms, in turn, controlled a large part of many Asian economies. For example, the top ten families in Thailand controlled about 46 per cent of assets, whilst their counterparts in Indonesia control an even larger proportion — about 58 per cent (see Table 10.1).

What is perhaps surprising is the high concentration of top family assets irrespective of the level of a country's development or its legal or political system. One likely explanation is the importance of elite patronage networks that not only connect businesses but also link businesses and governments, which are then used to obtain monopoly and other competition-restricting concessions. Business goals and firm characteristics are also important. Family-owned businesses, big or small, may put the interests of the family ahead of profitability, which can have implications for competitive conduct — a family business may be more concerned with preserving the business (to employ family members and to ensure proper succession) and so sustain losses for extended periods of time which may drive even more efficient competitors out of business. Or networks can be used to prevent new entry.

Introduction

As small and medium-sized enterprises (SMEs) face an increasingly globalized business world, their ability to remain competitive is essential. In many countries around the world, SMEs make up more than 90 per cent of the number of businesses with the majority of that 90 per cent being micro-businesses (Schaper 2010). Faced with increased regulation, globalization, and competition, many SMEs will need increased guidance and support. Trade associations are well-placed to offer assistance. As competition laws become increasingly widespread and important around the world, this is one area where help is needed.

The number of economies with competition laws has increased dramatically in recent years, with established regulatory frameworks now in place in more than 120 jurisdictions (Dabbah 2010), and several others in the process of introducing their own statutes. Of particular note is the introduction of competition law in ASEAN (Association of Southeast Asian Nations) member countries, which is a target of the ASEAN Economic Community Blueprint.

The complexities of competition law are thus being faced by SMEs around the world. Trade associations provide a forum for SMEs to work collectively rather than face these challenges individually. Ironically, however, such bodies can also provide a forum for competition laws to be breached when competitors meet regularly to discuss business issues. Competition authorities are therefore often understandably suspicious of trade association activities.