Natural Monopoly and it's Regulation
Bukhara state universityDepartment of
Economics
Ministry of Higher and Secondary
Special Education of the Republic of Uzbekistanworksubject "
Microeconomics ”: Natural Monopoly and it’s Regulation
Done by: Social-Economical Faculty, 2 "G"
(3-3IQT12) Group Mirshod Narzullaev Student: Adizov B.
2014
Contents
Introduction
Chapter I. Theoretical aspects of Natural Monopoly and
it’s regulation
1.1 The essence of Natural Monopoly
1.2 The necessity of regulation over Natural Monopoly
1.3 Methods of state regulation over the Natural
Monopolies
Chapter II. Analysis and Uzbek practice of regulation
over Monopolies
2.1.Competition Legislation and Institutions
2.2 Natural Monopolies in modern Economy of Uzbekistan
Conclusion
The list of used literature
Аннотация
Introduction
The concept of natural monopoly presents a
challenging public policy dilemma. On the one hand a natural monopoly implies
that efficiency in production would be better served if a single firm supplies
the entire market. On the other hand, in the absence of any competition the
monopoly holder will be tempted to exploit his natural monopoly power in order
to maximize its profits.course work will take a closer look at the model of
natural monopoly. It will address those areas where an unregulated natural
monopoly is generally considered to be the cause of concern, before offering a
brief overview of the regulatory process and some of its specific regulatory
tools. It should be noted that this work mainly aims to provide an introduction
to the vast literature on this topic, which has fascinated many economic and
legal scholars over the years.aim of this work - learning Natural Monopoly and
it’s regulation. In order to achieve the aim following tasks need to be solved:
· To learn the
essence and influence to the effectiveness of natural monopoly;
· To find out
the methods of state regulation over natural monopolies;
· To observe
state regulation over natural monopolies in the Republic of Uzbekistan
The objectives and tasks of this work define its
structure. The work consists of Introduction, 2 chapters, Conclusion and the
list of used Literature., the following issue is one the most controversial
issues in Economy of Uzbekistan, because in order to achieve new circuits of
economic development it is necessary to take into consideration particular
qualities and problems based on all spheres of Production and particularly the
infrastructure. The reformation of natural monopolies has become more urgent
for the last few years. Specialists are searching for the ways of solving tasks
based on tariff of goods and services in natural monopolies, and other tasks as
well. More effective regulation methods are processing and alternative ways of
attraction of investments are also elaborating.the following course work
periodical stamp materials and normative law acts are used. In Literature this
topic is worked up enough good.
Chapter
I. Theoretical aspects of Natural Monopoly and it’s regulation
1.1
The essence of Natural Monopoly
monopoly is a firm which
is the only one producing and selling a particular product. A natural
monopoly is a monopoly in an industry in which it is most efficient
(involving the lowest long-run average cost) for production to be concentrated
in a single firm. This market situation gives the largest supplier in an
industry, often the first supplier in a market, an overwhelming cost advantage
over other actual and potential competitors, so a natural monopoly situation
generally leads to an actual monopoly. This tends to be the case in industries
where capital costs predominate, creating economies of scale that are large in
relation to the size of the market, and hence creating high barriers to entry;
examples include public utilities such as water services and electricity.in
other situations a monopoly can lead to restricted output, higher than
necessary prices, and production that is inefficient (at higher average cost)
than would occur with many producers, a firm that is a natural monopoly
produces at lower average cost than would be possible with multiple firms.
natural monopoly economy uzbekistan
All industries have costs associated with
entering them. Often, a large portion of these costs is required for
investment. Larger industries, like utilities, require enormous initial
investment. This barrier to entry reduces the number of possible entrants into
the industry regardless of the earning of the corporations within. Natural
monopolies arise where the largest supplier in an industry, often the first
supplier in a market, has an overwhelming cost advantage over other actual or
potential competitors; this tends to be the case in industries where fixed
costs predominate, creating economies of scale that are large in relation to
the size of the market, as is the case in water and electricity services. The
cost of constructing a competing transmission network is so high that it
effectively bars potential competitors from the monopolist's market, acting as
an early insurmountable barrier to entry into the market place.
Companies that take
advantage of economies of scale often run into problems of bureaucracy; these
factors interact to produce an "ideal" size for a company, at which
the company's average cost of production is minimized. If that ideal size is
large enough to supply the whole market, then that market is a natural
monopoly.further discussion and understanding requires more
microeconomics:different types of cost are important in microeconomics: marginal
cost, and fixed cost. The marginal cost is the cost to the company
of serving one more customer. In an industry where a natural monopoly does not
exist, the vast majority of industries, the marginal cost decreases with
economies of scale, then increases as the company has growing pains
(overworking its employees, bureaucracy, inefficiencies, etc.). Along with
this, the average cost of its products decreases and increases. A natural
monopoly has a very different cost structure. A natural monopoly has a high
fixed cost for a product that does not depend on output, but its marginal cost
of producing one more good is roughly constant, and small.firm with high fixed
costs requires a large number of customers in order to have a meaningful return
on investment. This is where economies of scale become important. Since each
firm has large initial costs, as the firm gains market share and increases its
output the fixed cost (what they initially invested) is divided among a larger
number of customers. Therefore, in industries with large initial investment
requirements, average total cost declines as output increases over a much
larger range of output levels.a natural monopoly has been established because
of the large initial cost and that, according to the rule of economies of
scale, the larger corporation (to a point) has lower average cost and therefore
a huge advantage. With this knowledge, no firms attempt to enter the industry
and an oligopoly or monopoly develops.Baumol (1977) provided the current formal
definition of a natural monopoly where " an industry in which multi-firm
production is more costly than production by a monopoly”. He linked the definition
to the mathematical concept of subadditivity; specifically of the cost
function. Baumol also noted that for a firm producing a single product, scale
economies were a sufficient but not a necessary condition to prove
subadditivity.original concept of natural monopoly is often attributed to John
Stuart Mill, who (writing before the marginalist revolution) believed that
prices would reflect the costs of production in absence of an artificial or
natural monopoly. In Principles of Political Economy Mill criticised
Smith's neglect of an area that could explain wage disparity. Taking up the
examples of professionals such as jewellers, physicians and lawyers, he said,
"The superiority of
reward is not here the consequence of competition, but of its absence: not a compensation
for disadvantages inherent in the employment, but an extra advantage; a kind of
monopoly price, the effect not of a legal, but of what has been termed a
natural monopoly. independently of. artificial monopolies [i. e. grants by
government], there is a natural monopoly in favour of skilled labourers against
the unskilled, which makes the difference of reward exceed, sometimes in a
manifold proportion, what is sufficient merely to equalize their advantages. If
unskilled labourers had it in their power to compete with skilled, by merely
taking the trouble of learning the trade, the difference of wages might not
exceed what would compensate them for that trouble, at the ordinary rate at
which labour is remunerated. But the fact that a course of instruction is
required, of even a low degree of costliness, or that the labourer must be
maintained for a considerable time from other sources, suffices everywhere to
exclude the great body of the labouring people from the possibility of any such
competition.Mill's initial use of the term concerned natural abilities, in
contrast to the common contemporary usage, which refers solely to market
failure in a particular type of industry, such as rail, post or
electricity.mill's development of the idea is that what is true of labour is
true of capital.
1.2
The necessity of regulation over Natural Monopoly
Many supposed natural monopolies are the subject
of various types of regulation. As described above, under conditions of natural
monopoly the market is best served when one firm supplies total market demand.
Public interest theory claims to provide an explanation for government
intervention in what may be considered a market imperfection. The need to avoid
duplication of facilities, particularly fixed costs, would serve as a
justification for traditional entry regulation. Consider in this respect the
restructuring of the telecom industry in the United States that broke up the
Bell system to AT&T, while forbidding Regional Bell Operating Systems to
enter the lines of business assigned to AT&T in order to prevent
destructive competition.perfect competition prices of goods equal marginal
cost, as firms engage in a competitive bidding process. Under conditions of
monopoly, the profit - maximizing behavior of the incumbent firm will lead to a
higher price charged to consumers and a lower output. It enables the seller to
capture much of the value that would otherwise be attained by consumers.
Monopoly pricing thus results in a wealth transfer from consumers of a product
to the seller. At the higher price, at which the monopolist tries to maximize
profits, a group of potential consumers will be excluded as they will not be
able to afford the product at the higher (artificially set) price. Thus,
monopoly leads to the classic case of the occurrence of dead weight losses: the
part of the consumer surplus that the monopolist cannot appropriate but
consumers lose.as a result of the monopoly pricing scheme, these consumers may
be forced to consume more costly substitutes or less useful products, although
society’s resources would be better used producing more of the good provided by
the monopoly firm. Furthermore, the argument goes that by limiting output the
monopolist underutilizes productive resources.argument of the negative consequences
of monopoly on economic welfare has been the subject of heavy debate. This
article will not venture into the broad discussion of welfare economics,
monopoly and distributive justice (for an introduction, see Tullock, 1967;
Rahl, 1967; for case studies on the consequences of monopoly pricing and
welfare, Albon, 1988). We can, however, focus on a few of the arguments
concerning the case of natural monopoly which challenge the relevance of the
alleged allocative inefficiency. The classic opposition to monopoly rents as
opposed to everyday rent-seeking by the common man is that monopoly rents are
the result of an artificial scarcity rather than a natural scarcity (Schap,
1985).question arises whether the same really can be said about an unregulated
natural monopolist. Early on, Posner (1969) rightly noted that market power in
the latter case stems from cost and demand characteristics of the market, not
from unfair or restrictive practices.condition of natural monopoly raises the
question whether internal efficiency, cost minimization by the firm, is
achieved under natural monopoly. Does a monopoly firm put its resources to the
best possible use within the existing state of technology?antitrust economists
have used the term ‘X-Inefficiency’ to indicate the internal wastes that occur
when a firm acquires monopoly power and is no longer pressured by strong
competitors to keep its costs at the competitive minimum. Often-cited legendary
examples are US Steel, General Motors, Sears, IBM and American Airlines. These
giant firms, which once dominated their industries, are accused of falling
victim to their own inefficiencies (Mueller, 1996). Empirical data suggest that
the amount to be gained by increasing X-efficiency is significant (for a
review, see Leibenstein, 1966)., in a competitive market firms have an
incentive to reduce costs, in order to obtain higher profits by selling at the
same price or a price between the old price and the new cost level. Although
cost reduction might be shortlived in a competitive situation, as competitors
reduce their production costs and adjust their prices to those of their direct
competitors, the concern for survival provides a firm in such a market with a
strong incentive to minimize costs (Dewey, 1959). If a firm fails to anticipate
or match the cost reductions of its competitors, it might suddenly find itself
in a market dominated by its competitors. Where there are no significant entry
barriers the threat of potential competition will hold price down to cost.
Otherwise other firms will enter the market at the same scale of production,
sell at a slightly lower price and capture the whole market for as long as it
is profitable., it could be argued a monopoly firm has an even stronger
incentive to minimize costs in order to gain maximized profits. Since the
threat of a counter reaction to its pricing schemes is absent, it does not face
the risk that the consequential benefits will only be short-lived.developments
have been the drive behind the transformation of certain natural monopoly
markets to more competitive outcomes. Most notably, this is the case for the
more recent changes in the telecommunications industry, where the enhancement
and development of microwave and satellite technology has come to provide a
strong substitute for the traditional cable networks. The value of technical
development should not be underestimated. Technological progress often reduces
production costs or creates new products and has been of enormous importance to
economic welfare.classic argument goes that monopoly firms lack an efficient
incentive to promote technical change and invest in expensive R&D programs.
Allegedly, a monopoly firm would discourage progress. By virtue of its
protected position it would not fear that a rival will promote products and
production methods and would therefore not be driven to pioneering himself.
Real-life observations regarding the introduction of new technology in monopoly
firms seem to validate this criticism - witness the long life of equipment in
telephone industries. This is often the case, regardless of whether the
monopoly firm is conducted as a public or private monopoly (Dewey, 1959). Some
empirical data suggests that small, profit-seeking firms are responsible for
most major innovations (Scherer, 1984)., there are strong arguments that
provide indications that contradict the traditional allegations concerning the
case of under-innovation under monopoly.when assuming that a monopoly firm will
not introduce new products unless the cost of the new product is less than the
marginal cost of the old (as sunk costs are bygones), there is no reason the
same could not be said about competitive firms (Fellner, 1951)., an important
point has to be made. The fact that an industry is a monopoly does not mean
than only one firm is pursuing research and development in its technology.
Through the presence of external forces it is likely that the incumbent
monopoly firm will feel the pressure to spend time and money on innovation, in
order to safeguard its position (Posner, 1969). Certainly in an unregulated
market, with free entry, successful research in the field of production methods
could seriously threaten the position of natural monopoly firms. Although a
natural monopolist is less concerned about survival, the possible threat of the
introduction of new technology in substitute markets should provide monopoly
firms with a strong incentive to anticipate such developments through R&D
expenditure (this relates to the theory of contestable markets, see Section
8).the other end of the spectrum Schumpeter (1950) holds that there is a
positive relation between innovation and market power. A monopoly firm would be
a strong instead of a poor innovator. Superior access to capital, the ability
to pool risks and economies of scale in the maintenance of R&D laboratories
are likely to advance industrial technology.of social considerations,
government may often feel the need to ensure the provision of certain products
or services at a lower-than-cost price to some consumers. For instance, it is
quite common that governments demand the provision of ‘universal services’ to
consumers by telephone companies, the availability of minimum services at
reasonable prices, even to small and distant communities where the small scale
of operation may lead to very high costs, which often results in the occurrence
of losses.
1.3
Methods of state regulation over the Natural Monopolies
Price Controlcontrol, although driven to the
background in the years of deregulation, has been of increased importance in
the recent trend of privatization in Europe. From a public interest
perspective, price control should allow regulators to set prices at a level
which induces allocative and productive efficiency. This part provides a brief,
non-technical introduction to some of the tools governments have at their
disposal to assure that firms meet consumer demand at efficient cost levels.
For a more in-depth look at the different forms of price regulation and its
analysis, reference is made to Chapter 5200, Price Regulation, which also deals
with natural monopoly.
regulation, Qm in Figure 2 represents
the profit-maximizing output of the monopolist and the demand, in turn,
determines the market price Pm. The monopoly earns a positive economic profit
represented by the area of the rectangle PmFGH. Welfare maximization to society
as a whole is achieved at the quantity-price of Pi, Qi. In other words,
regulating authorities should set a price P1 (marginal cost pricing) in order
to maximize economic welfare. However, at price P1 consumers will
buy a quantity of Q1, whereas AC is NQ1, which is greater
than the price P3. This will result in a total negative economic
profit, shown by the area of the rectangle P1P2AM. In the
long run, the monopoly firm will not stay in business. If the commodity or
service provided is desirable, the only way to keep the monopoly firm in
business is to provide a public subsidy to the amount of P1 P2
AM.political problems associated with subsidization, its implementation and
financing and the difficulties of calculating demand and MC have led to the
application in the public utility field of average cost pricing. In Figure 2
such a price is P2, determined by the intersection of the demand and
long-run AC curve. The output under average-cost pricing, Q2, is greater than
the unregulated monopoly output of Qm. Also, part of the welfare
costs arising from restricted output by an unregulated monopoly is eliminated.
Expansion of output, from Qm to Q2 provides benefits to consumers that are
greater than the additional costs.the other hand, average cost pricing can
hardly be deemed entirely satisfactory either. Under average cost pricing, when
Q2 is produced, welfare losses are caused because at this point
average costs (the AC curve) exceed marginal costs (MC). Graphically, the AMO
triangle in Figure 2 represents this consequential welfare loss. When applying
a rate-of-return policy, regulating agencies focus on the rate of return on
invested capital (accounting profit) earned by a monopoly (fair rate of return)
(Moorehouse, 1995). Allowing regulated firms to acquire a total sum that
consist of annual expenditure plus a reasonable profit on capital investment,
the so-called ‘fair’ rate of return, was constructed by American courts and the
regulating bodies in order to meet constitutional demands of utilities to set
prices on a ‘just and reasonable’ level.can be formulated as E + (r - RB) where
E represents the firms annual expenditure, r is the multiplier, representing
the fair rate of return, and RB the rate (attributed value of the capital
investment).the realized rate of return is higher than what is considered to be
a normal return, then the price must be above average cost. In a
trial-and-error fashion regulators try to locate the price where profit is
normal, for example, where price equals average cost.the regulated monopolist a
fair rate of return creates various economic problems that have to be taken
into account. Auditing costs involved in determining the firms capital base are
considerable. Especially the determination of r, which should reflect a level
of return that is satisfactory to attract investment, is problematic. Looking
at other ‘comparable’ industries or applying the capital asset pricing model,
where one looks at the returns obtained by investors from a portfolio of
investments, as modified by the difference between the returns from shares in
utilities and those from more general market shares, it is clear that these are
imperfect methods for determining a rate of return that potential investors
will demand from the regulated industry., the perverse effects on incentives
that occur when applying the standard rate of return policy are perhaps even
more troublesome (Train, 1991). The regulated firm has an incentive to inflate
its capital cost figures, since higher costs imply higher absolute returns
(Baron and Taggart, 1977, on profit - maximizing behavior under rate of return
regulation, see Hughes, 1990). If the regulator sets the fair rate of return
above the cost of capital, the regulated firm is likely to utilize more capital
than if it were unregulated. Thus, it might use inefficient high capital/labor
ratios for its output. Also, average cost pricing diminishes the monopolist’s
incentive to minimize costs. Figure 2 illustrates some of the consequences of
this behavior. Inflation of costs shift the actual AC curve to AC'. At a price
of P2 losses occur, therefore, regulators grant a price increase to
cover the higher costs (point C).
Price Discrimination
Charging consumers different prices relative to
what they are willing to pay, even though the costs of producing and supplying
the goods or services are the same, has been demonstrated to enable allocative
efficiency. With this technique, often referred to as Ramsey pricing,
information on the price - elasticity of the different goods should allow for
efficient price setting (the higher the price-elasticity, the closer the price
needs to be set to marginal cost) (Ramsey, 1927). The objection often heard is
that such a pricing scheme involves a wealth transfer from the consumer
(consumer surplus) to the producer. Also, severe price discrimination, often
termed predatory discrimination, is an effective method by which competition
may be crushed out (see however for a detailed and comprehensive account
McGee’s case study of the Oil of Indiana case, 1958).classical analysis of
price discrimination was set out by Pigou (1920). A distinction between three
degrees of discrimination was made. The first degree involves a different price
set for every unit purchased by every consumer, in such a way that virtually
all the possible consumer surplus is obtained by the producer. Although this
pricing mechanism can be efficient, as marginal decisions are made as marginal
cost, it is often opposed on income distributional grounds: the transfer from
consumer to producer. Second-degree price discrimination consists of pricing
groups according to their willingness to pay, where all those with a demand
price above a certain level are charged one price, while those with a lower
demand price are charged a lower price. Third-degree price discrimination comes
into effect when consumers are divided into separate groups, each group is
charged a different monopoly price. This technique is of course strongly
dependent on the possibility for the seller to identify groups in each specific
case, which will vary according to market circumstances.
Peak-Load Pricing
When demand follows a periodic cycle, during
which demand might be high at certain times and low at others, peak-load
pricing might offer a way to achieve marginal cost pricing. As marginal cost
generally rises with output, price variations will allow it to reflect the
higher costs. This allows for the moderation of the demand cycle while establishing
a more effective use of capacity (Crew, Fernando and Kleindorfer, 1995). Higher
pricing during periods of peak demand might discourage use and save costly
capacity, whilst lower prices when demand is low might encourage use of
capacity that otherwise would have been left idle.Regulationof the problems
arising from the pricing models, such as the Averech - Johnson model find their
origin in the absence of incentives to operate at minimum cost levels. The
motivation behind incentive regulation is to provide the firm with the
motivation to behave more consistently with regard to the social optimum.
Price-Cap Regulation or RPI-X
Requiring the firm to increase its prices for
each year within a given period by no more than the retail price index (RPI)
minus a variable factor (X) which is the agency’s assessment of the firm’s
cost-efficiency potential, price-cap regulation was found to be superior to the
fair rate of return method both in terms of efficiency and administrative costs
(Littlechild and Beesley, 1992). The system, as described above, would require
less information from the firms to the regulating bodies, which would not only
make this model less costly but also diminish the capture problems associated
with rate of return regulation.
Chapter
II. Analysis and Uzbek practice of regulation over Monopolies
2.1.Competition
Legislation and Institutions
competition policy enforcement body in Uzbekistan
was established for the first time in 1992, as the Department of Antimonopoly
and Pricing Policies of the Ministry of the Finance. The function of this body
was to oversee the observance of anti-monopoly provisions in Uzbekistan.1996,
the Department was transformed into the Committee on Demonopolisation and
Competition Development of the Ministry of Finance, and for the first time it
was given the status of a legal entity, though it still remained under the
jurisdiction of the Ministry of Finance. At the same time, the Committee was
given additional functions, and empowered to implement the observance of the
requirements on consumer rights protection legislation, natural monopolies, and
advertising.to the existing legislative framework for competition and
regulatory policy were highlighted as a priority area for reform by the
Anti-Monopoly Committee (AMC). With the assistance of international experts,
the AMC identified several areas where amendments or new legislation were
needed, including: demonopolisation in commodity markets; anti-collusion
measures; shareholder and property rights protection; rate-setting for
regulated utility monopolies; false advertising; and consumer rights
protection.Law of the Republic of Uzbekistan on Competition and Restriction of
Monopolistic Activities in the Market was adopted in 1996. This Law determines
organisational and legal bases for the prevention, restriction, and suppression
of monopolistic activity and unfair competition, and is directed towards
providing conditions for the formation and effective functioning of a
competitive market within a liberalised economy.conditions for free market
competition4 are yet to flourish in Uzbekistan. Dense regulation of
the economy, a legacy of the Soviet system, was reduced somewhat, but basic
free market competition exists in only a few areas, for example, through the
development of micro-enterprises and joint ventures. However, there is an
extensive informal economy (black economy) that includes all sectors. The State
continues to control and shape the economy in all strategic sectors, especially
raw materials and agriculture.of large industrial enterprises, the
demonopolisation of a number of industries and the cotton market, and the
liberalisation of foreign trade policies are moving ahead very slowly. One of
the most important preconditions for a market economy reform policy, the
convertibility of the Uzbek currency (the Soum), has been announced frequently;
but it has only been implemented in certain segments. All banks are in the
State sector, or heavily regulated by the Government, and a capital market does
not exist.Frameworkhas made substantial progress, since the beginning of
reforms, to develop an institutional framework for all commercial activities
and to promote the establishment of a competitive business environment in the
country. The development of the framework is still in progress. As of now, it
includes, amongst other measures and actions:
• The establishment of the
AMC;of a programme entitled ‘The Concept of Overseeing compliance is within the
remit of the State Committee, which also considers cases of legal
infringements, issues appropriate decisions, provides the violators with the
‘cease and desist’ orders, and initiates cases/investigations, and appeals to
the Court when it is appropriate.Department of Analysis of Commodity Markets
and Anti-monopoly Regulations - This Department’s main functions
include:compliance with antimonopoly legislation and the reorganisation of
undertakings which are either natural monopolies, or those with a dominant
position in financial and product markets, including during the process of
privatisation and breaking up of state
• Enactment of several
laws, such as the laws ‘On Competition and Restriction of Monopoly Activity
in Commodity Markets’, ‘On the Limitation of Monopolistic Activity ’, ‘On
Natural Monopolies ’, ‘On Protection of Consumers’ Rights, ’ and ‘On
Advertising. ’
The central objectives of the Government’s
competition and regulatory reform programme - implemented by the AMC - are: to
develop competition and entrepreneurship in Uzbekistan’s economy; to regulate
the activities of monopoly enterprises; to prevent abuse by firms with dominant
market positions; to enforce sanctions on firms who engage in unfair
competition; and to protect consumer rights. The emerging institutional
framework and policy objectives are generally consistent with international
practice.State Antimonopoly Committeestructure of the State Antimonopoly
Committee is as follows:Regional Divisions of the Committee - Regional
Divisions of the State Committee of the Republic of Uzbekistan on
Demonopolisation and Competition Development are the bodies, which carry out
the implementation of policies in the spheres of competition development,
limitation of anticompetitive behaviour, regulation of the activity of natural
monopolies, consumer rights’ protection, and advertising, in various regions of
the Republic.Department of Methodology and Coordination of Activities of
Antimonopoly Bodies - This Department conducts organisational, methodological
and information dissemination work on the issues of demonopolisation and
competition development, antimonopoly legislation, legislation on consumer
rights’ protection, natural monopolies, and advertising.Department of
Enforcement of Compliance with Legislation on Competition - This Department
supervises the compliance with anti-monopoly legislation, legislation on
natural monopolies, and other normative acts.
• enterprises;
• Coordinating development
of demonopolisation programmes;
• Developing practical
measures aimed at the stimulation of business activity in monopolised
industries and product markets;
• Supporting free
competition; overseeing compliance with antimonopoly legislation in acquisitions
of more than 35 percent of a company’s stock; and
• Overseeing transactions
by natural monopolies.
The Department of Monitoring the Economic Reforms
in Capital Construction Sector - This Department is in charge of overseeing
compliance with anti-monopoly legislation; supervision of meeting the
requirements of resolutions and instructions of the Cabinet of Ministers of the
Republic of Uzbekistan; minutes of the Economic Panel of the Cabinet of
Ministers; and other normative acts targeting budget disbursement in
construction as well as in production of construction materials.addition,
Uzbekistan has a Press Centre and an Antimonopoly Policy Improvement Centre.
The Antimonopoly Policy Improvement Centre was established with the view of
strengthening the practical orientation of research and development in the
sphere of anti-monopoly legislation and legislation on consumer rights
protection. It helps in increasing the knowledge of specialists in the sphere
of international practice of anti-monopoly regulation; and in creating a modern
system of training and retraining of personnel in the sphere of antimonopoly
policy.Business Practicesof the primary instruments, by which the Anti-Monopoly
Committee implements competition policy, is through its Register of Monopoly
Enterprises. This policy instrument is common for many other CIS countries as
well.6 Uzbek enterprises that are considered as ‘dominant’ - defined by statute
as generally having a market share of at least 65 percent, and under certain
conditions, a market share of at least 35 percent - are listed on the
Antimonopoly Committee Register. Therefore, they must declare their prices and
profits for AMC’s approval.regulatory and licensing barriers are the
continuation of the Soviet ‘system of permissions,’ whereby one must obtain
approval from the authorities to embark on even the smallest task. Although
Central Asian governments are vocal in their support and praise for the open
and free market system, businesses have to seek permission from the Government
at every step of operations.‘permissive’ entrepreneurial climate, characterised
In addition, registered monopolies, once they agree with their input suppliers
and output buyers on volumes, delivery times, and other conditions and prices,
must register the transaction terms with the AMC along with their expected
profits. In certain cases - typically for infrastructure (utility) monopolies -
the AMC directly determines prices and profits.
2.2
Natural Monopolies in modern Economy of Uzbekistan
Sector
The telecommunications industry plays a critical
role in Uzbekistan, which inherited the bulk of its fixed telephony network
facilities from the former Soviet Union. The country has made progress since
independence in upgrading its fixed telephony system and building new wireless
communication networks, struggling valiantly to bring its telecommunications
system up to the standard found in developed countries.just over 1.6 million
telephones at the end of 2002, for a penetration of less than seven percent, the
country suffers from outdated and poorly maintained analogue equipment. In
1996, the Government began inviting foreign telecom companies to invest in
Uzbekistan in their own right. In 2000, Uzbekistan created a national
telecommunications holding company, UzbekTelecom, in the first step towards
privatising the sector, but has been moving slowly along this path.has been one
of the most attractive sectors of the country for foreign investment in the
last decade. However, the main telecommunication facilities are still owned by
the State. Current strict regulation on hard currency convertibility, as well
as poor economic conditions, has hampered further development of the
sector.sugar monopolyexpressed sharp discontent with increasing sugar prices.
Following this the State Committee opened investigations against Shakar
Investment, the sole sugar producer in Uzbekistan.research showed that Shakar
had jacked up its prices following a worldwide increase in sugar prices, in
spite of having sufficient stocks in its warehouses. A press release from the
State Committee noted that Shakar took undue advantage of its monopoly.
Further, the firm supplied sugar via direct agreements instead of exchange
trades. The average price for sugar at exchange was about Sum 782, 200 per
tonne, while retail prices ranged between 1, 200-1,400 sums per kilo.Committee
held the action by Shakar as violation of Section 5 (2) of the competition law
and was ordered to cease from the abuse of its dominant position.to the
Committee’s recommendation, the Economics Ministry, after assessing the
production and consumption of sugar in the country, directed Shakar to increase
supply of sugar through the exchange route from 38,000 tonnes to 140,000
tonnes. This measure will not allow artificial resale of sugar and promote
price stabilisation.
Energy Sector
Uzbekistan is the largest electricity producer
amongst the Central Asian Republics, and a net exporter of electricity. The
country has a total installed generation capacity of 11,283 MW. Uzbekistan has
achieved self-sufficiency in energy after gaining independence in 1991.
However, maintenance of its power systems has deteriorated over the past few
years, and some generating units have ceased operation. Much of the equipment
in generation, transmission and distribution systems is outdated and extremely
inefficient.energy sector in Uzbekistan is entirely State-owned. Electric power
generation was controlled by Uzbekistan’s Ministry of Power Engineering and
Electrification until February 2001 when, by a Government Decree, the Ministry
was transformed into the Uzbekenergo joint-stock company. However, its actual
status, functions, and structure did not change significantly.2001, growing
demand for electricity, and depreciation of existing power generating facilities
in the country, motivated the Government to develop a long-term programme for
the reconstruction and development of the sector for the year 2001-10. This
programme aims to extend the life of current power plants, as well as to
increase their generating capacities., a timetable plan for privatisation of
enterprises producing electric power was developed in June 2004. A key tool in
the privatisation process was the Decree of the President of the Republic of
Uzbekistan No. PD-3202 dated January 24, 2003 On Measures to Cardinally
Increase Share and Importance of the Private Sector in the Economy of
Uzbekistan. This was intended to speed-up the development of private sector,
increase its role and importance in the country’s economy, and improve the system
of corporate governance of privatised enterprises.Local Monopoliesdistrict or a
town often has one small-size enterprise that is a monopoly within its
territory. In theory, they could compete, but they do not, due to their
territorial affiliation. For example, three regional repair shops function in
Samarkand: Siab, Temiryul and Bagishamal.enterprises could have competed with
each other within the city territory, but they continued functioning only in
their districts and maintained their local monopoly positions.inefficiency of
enterprises guided by the territorial principle lies in their inability to use
the same resources, located nearby, but in different administrative districts,
thus creating, in this instance, three supply chains.analysis of the situation
produced a competition reform, in the form of the trade tender for contracts
stipulating servicing zones allocated for tender (single district and
multi-district contracts). It helped to raise the interest of previously
non-competing companies for promoting competition among them.ProtectionLaw on
the Protection of Consumer Rights was enacted on April 26, 1996. The Department
of Provision of Consumer Rights’ Protection and Regulation of the Advertising
Market oversees compliance with the Laws On Consumer Rights Protection and On
Advertising. The main objectives of the Department include the creation of
information dissemination on undertakings and individuals, and products, as
well as the improvement of entrepreneurial and customer culture.are also establishing
public organisations to protect their rights recognised by the Government.
These organisations, together with the Committee or on their own, may provide
support for resolution of issues related to the rights of consumers. There are
several voluntary consumers’ organisations in Uzbekistan. The Association of
Consumer Rights Protection, which also has regional offices, is one of them.
Conclusion
A functional market economy in Uzbekistan depends
on the creation of a truly competitive environment. Effective promotion of
anti-monopoly regulation and natural monopolies is essential during the
transition process.the last few years, the formation of a competitive
environment has considerably strengthened, due to the following factors:
• Government measures have
been adopted to reduce the share of the Government sector in the economy;
• The Government has also
reduced the sphere of State regulation and management of enterprises;
• The economy has been
demonopolised, and competition has developed within the framework of the
industrial and regional programmes; and
• Prices and foreign trade
activities have been liberalised.
To increase the effectiveness of the market
economy in the future, the State of Uzbekistan needs to harmonise the legal and
economic conditions for promoting competition, and enforce these laws, prevent
market dominance, improve the existing Anti-monopoly Law, and the Law on the
Protection of Consumer Rights. These few steps will hopefully reduce
corruption.
The
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Khalik, A. Rashad (1998), ‘Incentives for Accruing Costs and Efficiency in
Regulated Monopolies Subject to ROE Constraint’, 26 Journal of Accounting
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George, Frantz, Roger and Green, Louis (2007), ‘Natural Monopolies and Rent: A
Georgist Remedy for X Inefficiency among Publicly Regulated Firms’, 46 American
Journal of Economics and Sociology, 205-217.
. Baish,
Richard O. (1997), ‘The Role of the California Public Utilities Commission in
Western Gas’, 27 Natural Resources Journal, 805-810.
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David P. and Besanko, David A. (1994), ‘Regulation and Information in a Continuing
Relationship’, 1 (3) Information Economics and Policy, 267-302.
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Sanford V. and Tschirhart, John (1998), Natural Monopoly Regulation: Principles
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Frederick C. (1997), ‘Responses to Energy Efficiency Regulations’,8 Energy
Journal, 111-123.
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Ward S. (2006), ‘The New Haven, A Passenger Railroad for Nonriders’, 9 Journal
of Law and Economics, 49-59.
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of the Republic of Uzbekistan about Natural Monopolies from April 24, 1997 of
No 398-I
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T., Christie S. of CUTS (2004), ‘Competitions Regimes in Uzbekistan’,
<<http://competitionregimes.com/pdf/Book/Asia_Pacific/34-Uzbekistan.
pdf>>, last visited January 2014
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<<http://www.antimon. uz/eng/o1.html>>, last visited January, 2014.
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works "The global financial-economic crisis, ways and measures to overcome
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. Transition
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Аннотация
Что собой представляют
естественные монополии в Узбекистане: движущие силы экономики, способные
вывести страну из затяжного кризиса или неповоротливые структуры, вышедшие из
планово-административной системы, тормозящие развитие рыночных отношений в
Узбекистане? Влияние этих отраслей на экономику особенно велико в условиях
экономического кризиса в мире. Более того, их экономическое влияние выходит за
пределы нашей страны. Вопрос государственного регулирования деятельности
естественных монополий остается острым на протяжении всех лет с начала
реализации экономических реформ в Узбекистане.
Одной из главных проблем
переходного периода узбекской экономики, является формирование конкурентных
рынков. Для обеспечения высокой эффективности рыночных отношений необходимо
сформировать принципиально новые организационные условия, пересмотреть
сложившиеся при плановой экономике методы управления и регулирования
деятельностью естественных монополий. Предприятия естественных монополий, в
комплексе образующие производственную инфраструктуру государства, являются
базой для оживления и дальнейшего развития отечественной промышленности,
развития реального сектора экономики.
Естественная монополия -
это состояние товарного рынка, при котором удовлетворение спроса на этом рынке
эффективнее в отсутствие конкуренции в силу технологических особенностей
производства (в связи с существенным понижением издержек производства на
единицу товара по мере увеличения объема производства), а товары, производимые
субъектами естественной монополии, не могут быть заменены в потреблении другими
товарами, в связи с чем спрос, на данном товарном рынке на товары, производимые
субъектами естественных монополий, в меньшей степени зависит от изменения цены
на этот товар, чем спрос на другие виды товаров.
Исходя из этого
определения, получается, что в экономической системе существуют случаи, когда
монополия становится более эффективной, чем конкуренция. Этот случай и получил
название естественной монополии, т.е. когда одна фирма может осуществлять
выпуск товара, достаточный для обеспечения всего рынка спроса, с более низкими
издержками, чем смогли бы две или более фирм. Такой подход содержит
противоречие, разрешение которого является задачей государственной
социально-экономической политики. Действительно, с одной стороны, признается
существование таких товаров, производство которых наиболее эффективно в
условиях монопольного рынка, а, с другой стороны, - в отсутствии конкуренции
единственный производитель может злоупотреблять своим положением на рынке с
целью увеличения своей прибыли. Причем, как показано в теории, цена реализации
продукции, выбираемая монополией для максимизации своей прибыли, всегда выше,
чем конкурентная цена, и общество в целом несет при этом потери. В этой
ситуации государство должно регулировать деятельность естественной монополии
таким образом, чтобы не позволять монополисту диктовать свои условия
потребителям, но при этом дать ему возможность успешно функционировать и
развиваться
Для регулирования
действий естественных монополий могут быть использованы различные инструменты,
которые можно разбить на три группы:
. Непосредственное
установление цен на продукцию естественных монополистов. Фиксация цен и тарифов
на услуги естественных монополистов на практике основывается на множестве
различных причин, например, забота об отдельных категориях потребителей и
связанное с ней перекрестное субсидирование, значимость услуги для потребляющих
ее отраслей и т.п. Именно такого рода регулирование преобладает в настоящее
время в Узбекистане.
2. Косвенное
регулирование цен через установление предельных величин прибыли или доходности.
Существует два основных метода косвенного регулирования цен: введение пределов
повышения цен и фиксацию нормы доходности.
К регулируемым сферам
деятельности естественных монополий в Узбекистане до недавнего времени
относились добыча нефти, газового конденсата, природного газа и угля;
транспортировка нефти, нефтепродуктов и газа по трубопроводам; производство и
транспортировка электрической и тепловой энергии; железнодорожные перевозки;
услуги общедоступной электрической и почтовой связи; водопроводное и
канализационное обслуживание. Как видно, естественные монополии составляют
костяк базовых отраслей экономики республики и имеют большое влияние на ее
общее развитие. Они являются поставщиками производственного сырья и
обеспечивают производственную инфраструктуру для многих других сфер экономики.
Ни для кого не секрет, что расходы на газ, электричество и воду заложены в
себестоимость чуть ли не всей продукции и услуг народного хозяйства, начиная от
спичек и услуг парикмахера до автомобилестроения. Одновременно монополии имеют
неограниченную рыночную власть, позволяющую им навязывать условия ведения
бизнеса в других секторах экономики, например, через установку необоснованно
завышенных цен, что и оправдывает их регулирование со стороны государства.
С развитием в Узбекистане
рыночных отношений в сферах естественных монополий все больше проявляется
конкурентный потенциал, и это имеет большие перспективы. Иными словами,
строительство и содержание сетей трубопроводов, газопроводов, линий
электропередач и так далее наиболее эффективно при наличии одного предприятия,
а вот использовать эти сети могут несколько предприятий-конкурентов, причем
конкуренция здесь ведет к снижению затрат, улучшению качества услуг, повышению
их ассортимента. В настоящий момент в нашей стране осуществляется третий этап
приватизации, при котором в частную собственность должны перейти многие крупные
объекты, осуществляющие свою деятельность, в том числе и в стратегических
отраслях экономики. То есть параллельно с приватизацией фактически происходит
реформа и в сфере естественных монополий. И здесь очень важно, чтобы не был нарушен
баланс интересов общества, государства, зависимого от монополий бизнеса и
собственно самих монополий. Центр по совершенствованию антимонопольной политики
при Государственном комитете Республики Узбекистан по демонополизации,
поддержке конкуренции и предпринимательства провел исследования в области
регулирования естественных монополий с целью разработки предложений для
дальнейшего реформирования в этой области.
Для начала хотелось бы
обратить внимание на особенность модели регулирования естественных монополий в
нашей республике - это наличие общего для всех них Закона "О естественных
монополиях", чего нет в развитых странах. Это отражает особенности
переходного периода нашей экономики, - говорит заместитель директора Центра по
антимонопольной политике Зариф Жумаев. - Органами же государственного
регулирования являются Кабинет Министров и уполномоченный им орган. Также надо
отметить, что в Узбекистане имеет место разделение полномочий в ценовом
регулировании товаров и услуг естественных монополий: Минфин утверждает цены, а
государственный антимонопольный орган - Госкомдемонополизации - контролирует их
соблюдение и правильное формирование. Теперь хотелось бы подробнее остановиться
на тенденциях и проблемах развития в сферах естественных монополий в Узбекистане.
Во-первых, проведенный нашим центром анализ показал, что не все из сфер,
приведенных в законодательстве о естественных монополиях, являются таковыми с
экономической точки зрения.
Сферы естественных
монополий в республике были определены исходя из структуры функционирования и
управления отраслью и их влияния в целом на экономику Узбекистана. Но, в
частности, хотя технологически добыча энергоресурсов (нефти, газа и угля), а
также производство электрической и тепловой энергии и требуют значительных
фиксированных издержек, все же не являются естественно монопольными. Так, уже в
2004 году добычей нефти в республике занимались 6 предприятий, газа - 4
предприятия, а выработкой электроэнергии - 9 предприятий (из них 6 ГЭС, 6 ТЭС и
3 ТЭЦ). Есть проблемы и в оценке экономической эффективности монопольных
структур, поскольку отдельные их единицы являются экономически рентабельными, а
другие - нет. Но существующая система лишает возможности внедрения раздельного
учета издержек по видам деятельности, что не позволяет выделить среди них те,
которые должны стать чисто монопольными, а какие могут быть конкурентными и,
следовательно, приватизированными. Проблемным является и саморегулирование
естественных монополий. Этот процесс подразумевает, что регулирующий орган
имеет полный доступ к необходимой информации и способен ограничивать действия
монополиста, то есть влиять на цену и объем производства посредством
принуждения. На практике же доступ к полной и неискаженной информации может
отсутствовать. Есть еще нюансы. Так, несмотря на то, что в законодательстве
определено, что Министерство финансов является органом, проводящим ценовую
политику, а Госкомдемонополизации осуществляет контроль за соблюдением порядка
ценообразования и применения цен (тарифов), прочие контролирующие функции
естественных монополий по сей день остаются у них самих. Так, например,
совмещают в себе функции регулирования отраслей и ведения хозяйственной
деятельности НАК "Узбекистон хаво йуллари" в сфере услуг аэропортов,
ГАЖК "Узбекистон темир йуллари" - в сфере железных дорог,
Национальная холдинговая компания "Узбекнефтегаз" - добычи и
транспортировки нефти и газа, а Национальная акционерная компания
"Узбекэнерго" - в энергетике. Такое положение дел неизбежно приводит
к конфликту интересов и ставит под вопрос эффективность регулирования. Таким
образом, если резюмировать все вышесказанное, становится ясным, что новые
экономические реализации требуют реформирования естественных монополий.
В связи с этим возникает
объективная необходимость в пересмотре ряда законодательных актов. Кстати, уже
пересмотрен перечень регулируемых сфер естественных монополий в сторону
уменьшения. Из него исключена добыча нефти, природного газа, угля и некоторых
других позиций. Необходимо также более жестко контролировать цены естественных
монополий и изменения тарифов, учитывая, что они имеют общеэкономический эффект
и оказывают существенное влияние на бизнес-планы других сфер экономики. В
данный же момент ввиду отсутствия эффективной системы ценообразования, не
учитывающей наличие платежеспособного спроса, периодическое повышение цен
приводит к росту дебиторской задолженности. Непредсказуемость цен увеличивает
также предпринимательский риск, что является негативным фактором для экономики
в целом. Придание регулярности изменению цен (например, один раз в год)
позволит предприятиям более уверенно рассчитывать свои планы на данный период.