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Recommendations and Way Forward:

The Egyptian government’s step of opening the tobacco market to competition ought to be celebrated. The terms of the new tobacco manufacturing license are ostensibly restrictive of competition and may therefore inhibit investment in the sector. It is to be applauded that the government finally decided to postpone the bid to revise its terms and conditions and hopefully make it more competitively neutral.

 

The protection of a genuine competitive structure of the market eradicates barriers to entry for new investors. Genuine competition promotes economic efficiency, boosts innovation, and allows consumers to choose among different producers of goods and services. It also encourages businesses to improve the quality of goods and services they sell, and ultimately, benefits society to achieve better standards of living. Moreover, greater participation of the private sector fosters employment and ultimately creates positive spillovers on the macroeconomic performance of the country. Therefore, it is advisable for the terms of the potential bid to maintain competitively neutral market conditions by enabling a process of genuine and undistorted competition that enables more investment via greater participation of market players that can freely invest in innovation that can lead to the development of health-friendly tobacco products in a way that contributes to achieving more economic efficiency and welfare on the tobacco market in Egypt. The protection of public health can be achieved by less restrictive means that encourages and pushes the firm towards healthy and environmentally friendly products. Greater competition in the manufacturing of tobacco is key to greater investment in less harmful products and therefore positively contributes to reducing the costs of providing public healthcare services. Finally, among other less restrictive means, a condition can be imposed on the potential new entrant to grant FRAND license for new smoking healthy-friendly technologies to the incumbent to ensure greater competition in such a new vertical that will hopefully encourage smokers to consider less harmful alternatives to traditional cigarettes.

 

This note is authored by Dr Amir Nabil, Partner at I&D at the Trade & Competition Department. Dr Amir was the former Chairman of the Egyptian Competition Authority and prior to this he taught and worked in the field of EU competition law in London for several years. He holds unique experience in helping businesses to conduct a compliant and efficient business model by enabling them to consider the best available legal and economic tools that help their business to grow.