PM asks BRICS to fortify markets with sound policies

Prime Minister Manmohan Singh today called upon member countries of the BRICS bloc to formulate sound policies to maximise the beneficial effects of markets while at the same time preventing market failures.

The prime minister cautioned BRICS against volatility of portfolio investments, often accentuated by speculative fund flows.

"We face common challenges of monitoring and managing speculative capital flows. It is a challenging task in times of global uncertainty," he said.

Capital markets worldwide, particularly in emerging market economies, witness huge volatility as soon as talks of tapering of quantitative easing begin.

While growth, development and poverty reduction are the most important challenges that the governments of Brazil, Russia, India, China and South Africa face, he said, it is equally important to look for a sound architecture of policy in which the beneficial effects of markets can be maximised by action to prevent market failure.

''The development of a sound competition policy is, therefore, an essential element of such an architecture. Anti-competitive behaviour deprives markets of their ability to deliver efficient results and it also hurts the poor most of all.

''But 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 said.

Addressing the inaugural meeting of BRICS International Competition Conference in New Delhi, the prime minister slammed legislative and fiscal policies that shield public sector enterprises from the market forces and exhorted member countries to switch to new competition policies that free these firms from bureaucratic delays. 

Emerging economies, with the characteristic government regulations, face unique challenges in designing the right kind of institutions, in addition to the enforcement of competition laws, he pointed out.

''A competition law enforcement regime cannot operate in isolation but instead has to be shaped and transformed by the existing socio-economic ideology and by other available policy tools. The economic objectives promoted by competition law on the one hand and prevailing socio-economic ideologies on the other are often in conflict with each other in economies in transition. This could limit the role and potential of competition law enforcement regimes,'' the prime minister pointed out.

''Increased awareness of competition rules resulting in the establishment of a competition culture in our economies can, therefore, go a long way in the effective implementation of competition law,'' he added.

There is an increasing need to recognise the complementarities between competition law enforcement and liberalisation of markets for public procurement, so that competitive procurement helps save valuable fiscal resources and release funds for development, he said.