State Owned Enterprises, Competition Law and Foreign Investments: View from The Gulf States

Agata Jurkowska-Gomulka

Chair of Administrative Law - College of Media and Social Communications - University of Information Technology and Management

Abstract

State Owned Enterprises (SOEs), also known as public enterprises, are owned by Governments. Not owned by the private sector, SOEs directly and implicitly compete with private companies, including foreign investors. A scope of applying competition rules towards SOEs constitutes one of the key features of competition protection regime in particular countries. Generally two approaches can be identified in this area: 1) equality approach (competition rules are applied in the same manner towards public and private sector), 2) differentiation approach (an application of competition rules towards SOEs is totally excluded or highly limited). The second model is usually justified by important social and economic goals, mainly by a necessity to provide high quality public services (known in the EU as services of general interest). However, the differentiation model cannot bring privileges to SOEs and it must respect a neutrality principle, otherwise it destroys a sound structure of competition what can be devastative also for an intensity of (foreign) investments. Competition law should provide a level playing field between public and private sector in order innovation and investments to be encouraged, goods and services offered to be of a better quality and prices. Gulf States Competition Laws include exemptions for SOEs and the public sector in a broader sense. A list published in 2019 of SOEs in Qatar enumerates around 30 Companies from sectors such as Oil and Gas sector, Telecommunications, Water and Electricity, Postal Services etc, which are under 100% and up to 100% within state-ownership. In 2015, Emirates was immediately after China in terms of SEOs with 88%. The new Saudi Competition Law states that the provisions of this Law shall apply to all firms operating in Saudi market, except public establishments and wholly owned state companies. In Kuwait there are few fully state-owned enterprises (SOEs) outside the upstream oil sector, with the exception of Kuwait Airways. Oman is pro-active towards privatization of most of the sectors, however the Law explicitly states that is not applicable to the activities of public utilities fully owned and operated by the state. The short and formal Bahraini Competition Law is silent on the SOEs treatment. However, the country is known by liberalization of the telecommunication sector, a step undertaken in order to join WTO. Taken into account the above characteristics of national competition regimes, the paper aims at classifying GCC Competition Laws in terms of their approach to SOEs. As a consequence authors try to assess a potential impact of models adopted in the Gulf States on foreign investments.

Keywords

State Owned Enterprises, Competition Law and Foreign Investments: View from The Gulf States