International Financial Institutions and their effect on National Competition

Policy

A PAPER
SUBMITTED TO THE ATENEO LAW SCHOOL
ATENEO DE MANILA UNIVERISTY
ROCKWELL CENTER, MAKATI CITY

IN PARTIAL FULFILMENT
OF THE REQUIREMENTS FOR THE COURSE
INTERNATIONAL ECONOMIC LAW

ABRAHAM ALONZO O. GUIYAB

DECEMBER 23, 2015

It has often been said that at the turn of the new millennium, one developmental paradigm has
stood triumphant over all models in the world stage, and the so-called Washington Consensus was to be
that paradigm. After the collapse of the Soviet Union in 1991, it appeared that state planning was a dead
relic of a bygone age and nothing would stop the agents of a new economic order from making free
market liberalism the uniform economic law of the land. Francis Fukuyama said as much in his seminal
1989 article, The End of History,

The triumph of the West, of the Western idea, is evident first of all in the total exhaustion of
viable systematic alternatives to Western liberalism. In the past decade, there have been
unmistakable changes in the intellectual climate of the world's two largest communist countries,
and the beginnings of significant reform movements in both. But this phenomenon extends
beyond high politics and it can be seen also in the ineluctable spread of consumerist Western
culture in such diverse contexts as the peasants' markets and color television sets now
omnipresent throughout China, the cooperative restaurants and clothing stores opened in the past
year in Moscow, the Beethoven piped into Japanese department stores, and the rock music
enjoyed alike in Prague, Rangoon, and Tehran.1

No one entity has been more at the forefront of the advancement of such market oriented policies
as have the two Bretton Woods institutions, the International Monetary Fund and the World Bank.
One Dollar, One Vote: Politicization of the IMF
One of the existing bodies of political-economy literature which deals with the IFIs is that
regarding the politicization of the IMF. Numerous studies have shown that the IMF is, in fact, politicized
1 Fukuyama, F. (1989). The End of History, The National Interest, Summer 1989, last accessed
December 21, 2015, available at https://ps321.community.uaf.edu/files/2012/10/Fukuyama-End-ofhistory-article.pdf

at various levels, Strom Thackers work, The High Politics of IMF Lending, is one of the most cited in the
field, and details numerous factors which point toward significant IMF politicization. 2
In his study, Strom posits three points which suggest IMF politicization. Although the IMF is in
fact subscribed to what is termed the Doctrine of Economic Neutrality, the record of the IMF lending to
debtor states which constantly violate its conditionality agreements or else have a very low rate of
borrower compliance leads to Thacker looking into other factors as opposed to a purely economic
rationale which may determine eligibility for loans.
Strom Thackers The High Politics of IMF Lending deals with the notion of the IMF being a
politicized organization, particularly at the Executive Committee level. Citing the IMFs Doctrine of
Economic Neutrality, Thacker evidences three main points which argue for the IMF as being a
politicized organization. The first is that there is a very low compliance rate on borrower conditionality
agreements, which are a requirement for IMF loans, and yet these countries are still able to secure
succeeding loans from the IMF despite their non-compliance. Thacker views this as proof that variables
other than economic considerations are taken into account when deciding whether or not to disburse IMF
funds to borrower countries.3
Second, he mentions the fact that each countrys representative on the executive board is
nominated by his or her country, which is likely to put them in a position to approve policies aligned with
the interests of their home state. Although it is the staff and not the board that proposes programs, the
board must approve all proposed programs before they are implemented. Also, he postulates that the
familiarity of the staff with the boards preferences will prevent them from creating proposals which are
not likely to be approved.

2 Thacker, S. (1999). The High Politics of IMF Lending. World Politics , 38-75
3 Id.

Finally, he notes that the voting system in the IMF is determined by member contributions, in
which the United States has the lions share, amounting to 17.83 percent of the total vote. He then
mentions that IMF voting procedures require a majority of at least 85%, thus giving the US an unofficial
veto.4 Further, a study by Radkin and Strand cited by Momani states that, although the number is not
absolutely large, it is essential for building winning coalitions in the IMF voting process, and their study
estimates the US relative voting strength to actually be at around 62.3%. 5 It is speculated that other
countries may accede to us decisions for fear that the US may veto their own favored programs.
He proposes a decision making model regarding whether or not a country will receive IMF loans,
which states that, as a country moves its political position closer to that of the United States, the more
likely it is to receive loans. Countries already within the US political position are not significantly
affected otherwise. It takes into account numerous variables, such as per capita income, level of US
foreign direct investment, political proximity to the US, political movement, balance of payments,
outstanding debt, and the probability of default. His econometric model operationalizes alignment
position with the US on the basis of voting in the United Nations General Assembly, and was able to
correctly predict the outcome in 83.25% of cases. 6
Woods and Lombardis Uneven Patterns of Governance studied the means by which developing
nations seek representation within the IMFs 24-Member executive board, as the existing system gives the
top 5 states in terms of voting share (USA, Japan, France, Germany, and the UK) an exclusive right to
appoint their directors, while the remaining 19 members, who individually possess a weak voting share,
must seek alternative methods of representation in order to get their interests heard. Their study found
that, in the case of these weaker countries, it was expedient for them to arrange themselves into large
4 Id.
5 Momani, B. (2004). American politicization of the International Monetary Fund. Review of International Political
Economy , 880-904.

6 Thacker, S. (1999). The High Politics of IMF Lending. World Politics , 38-75

coalition groups or constituencies and to then appoint a single director for representation at the board
level, because their individual votes shares were low enough as to be ignorable in deliberation of
pertinent issues.7
These constituencies would then confer upon their director the ability to use all of their collective
voting power, hence providing a collective action mechanism for vote-poor countries in the IMF vis-a-vis
the wealthier ones. These strategies then encourage countries to expand their coalition base in order to
improve upon their position within the organization.
Bessma Momani discusses in her American politicization of the International Monetary Fund
how the decision-making in the International Monetary Fund is not only politicized at the level of the
Executive Board, as studies by Thacker and Oatley have suggested, but also at the level of the
technocratic staff which drafts policy recommendation. She employs a method of analysis which involves
declassified documents regarding the IMFs role in Egypt, and then she analyzes them for what she terms
as slippages in the policy recommendations. Essentially, slippage occurs when the final plan presented
to Executive Board after Article IV Consultations with Egypt contained strict measures. Specifically, if
the terms drafted by the Staff during Article IV consultations are not included in the actual agreement,
slippage is said to have occurred.8
Momani chose Egypt as a Case Study for two reasons, mainly because of the United States
vested geopolitical interests in the region, and because of the strong bilateral aid ties between the two
countries. Four cases of IMF agreements were analyzed, this was done in order for a pattern to emerge in
the decision making procedures. Momani found that in two of the four agreements studied, slippages were
indeed present and the agreements were in fact, likely politically determined. These were exemplified by

7 Wood and Domenico, N. a. (2006). Uneven Patterns of Governance: How Developing Countries Are Represented
in the IMF. Review of International Political Economy .

8 Momani, B. (2004). American politicization of the International Monetary Fund. Review of

International Political Economy , 880-904.

the US facilitating the agreement, when regular economic criteria would have in fact demanded more
stringent terms from Egypt. The politicized agreements in question were the 1987 and 1991 agreements,
which Momani views as US attempts to shield Egypt form difficult economic conditions and reward its
participation in the First Persian Gulf War.9
Thomas Oatley discusses in his American Interests and IMF Lending the politicization of the IMF
to be the result of the institutional structures governing IMF decision making creating an opportunity for
American policymakers to influence IMF lending decisions. He believes that the considerable financial
resources possessed by the IMF and its ability to create economic policies for its member states make it
able to exert more influence than any other organization in history. He looked into the amount of
loans the IMF extended to countries as a factor of their outstanding indebtedness to US commercial
banks. He then concludes that the political interests do in fact reach into IMF processes at the decisionmaking level, the IMF executive board, which corroborates what other studies had already stated. 10
Further, he also concluded that American foreign policy interest also make it into the policy
formulation stage, meaning in the design of the Conditionality agreements. 11 His theory is that the IMF
lends to countries with significant commercial bank debt because the primary use of the IMF loans will be
to service debt owed to the commercial banks. In essence, the IMF is being used by the American policy
makers to transfer credits to their own commercial banks.
Having discussed the possible politicization of the IFIs, it is now pertinent to examine what
existing literature has to say regarding the effects of the IMF on the domestic politics of various states.
Money Talks: How International Financial Institutions Affect Domestic Policy

9 Id.
10 Oatley, T. (2004). American Interests and IMF Lending. International Politics , 415-429.
11 Id.

Several studies have also show the significance of IMF activity on politics at the domestic level.
This was clearly given as an example by Robert Putnam in his The Logic of Two-Level Games, wherein
he cites John Hillmans The Mutual Influence of Italian Domestic Policies and the IMF. That study in
particular, while acknowledging the perception that the IMF imposes certain conditionality agreements
over its debtor nations, attempted to look into the effect of the IMFs influence on domestic political
outcomes. In the Italian case, certain difficult austerity measure being demanded by the IMF from the
Italian government were having difficulty being ratified due to the existence of significant opposition
from domestic interest groups.12
In an unusual circumstance, the IMF directly went to the groups and negotiated with them, and
then restructuring its demands to include long-term investment and recovery (without altering any of its
immediate, short term demands) thus paving the way for the continuation of negotiations (the negotiations
failed afterwards due to other circumstances). Hillman then concludes that, oftentimes, rather than the
IMF simply imposing its agenda on debtor countries, domestic actors may actually take advantage of the
IMFs presence in order to strengthen their own domestic agenda. 13
This is in agreement with James Vreelands study Why do Governments and the IMF Enter into
Agreements? wherein he question why some countries which do not need IMF loans do seek them, while
some countries which do need IMF loans do not. Vreeland postulates that, aside from the conventional
wisdom which suggests that governments approach the IMF when they are in need on loans or financing,
governments may in fact be using the IMF to help further their own domestic agendas. For certain
governments, particular structural economic reforms are exceedingly costly and politically unpopular to
domestic constituencies, they may use the IMF presence to help implement these particularly difficult

12 Putnam, R. (1988). Diplomacy and Domestic Politics: The Logic of Two-Level Games. International
Organizations , 427-460.

13 Id.

policies.14 In other words, governments enter into IMF conditionality agreements, with the expectation
that certain specific conditions will be stipulated.
Vreeland cites the case of Uruguay 1990, the country with the strongest level of cash reserves and
balance-of-payments ever to seek an IMF loan. Desperate to push for reforms to curtail the budget deficit,
the welfare state nature of Uruguay nevertheless made it practically impossible for then-president Lacalle
to mobilize support for it. Seeing the need for an International ally, Lacalle actually filed a letter of intent
to the IMF within two weeks of sitting in office.15
The tighter policies Lacalle espoused (specifically the privatization of the State-owned
telecommunications monopoly) were able to pass through Uruguays legislature. However, opposition
was so strong that, no sooner had this happened, opponents were able to start a motion for a referendum
on the issue, which was then promptly voted down by a landslide 70% margin. Vreeland concludes that
the mere fact that Lacalle could pass a bill with 70% public opposition through the legislature is a
testament of the strength and utility of the IMFs conditionality agreements for helping push for desired
unpopular domestic policy agendas.16
In Irfan Nooruddin and Joel Simmons The Politics of Hard Choices, the discussion centers on
the role that IMF conditionality agreements play on domestic politics, particularly in terms of the budget
allotments for the social programs welfare of governments. With a focus on democratic regimes, the
authors state that while IMF program may differ across countries, in general they do share an emphasis on
reducing the role played by the state in the economy. Citing numerous studies, they illustrate that a
significant number of IMF programs contain provisions on reducing government expenditure and deficits.

14 Vreeland, J. (2003). Why Do Governments and the IMF Enter into Agreements? International
Political Science Review , 321-342
15 Id.
16 Id.

Governments aiming to do this normally undertake it "by decreasing subsidies, public-enterprise deficits,
public employment, public-sector wages, and government expenditures on investment. 17
The authors then point out that the content of all IMF programs are in fact the product of arduous
negotiations between the IMF and its prospective debtor countries, thus this means that politicians in the
borrowing country still retain, to a certain degree, some control over which programs are to be
implemented, what type of spending is to be cut, and what reforms are to be enacted. Through an analysis
of economic indicators from the World Bank of all countries for whom data was available, Nooruddin and
Simmons conclude that the evidence provides significant support the critique that IMF conditionality
programs often resulting reductions of social spending in democracies, and that this is often because
public sector interests groups are less able to organize themselves politically in order to resist spending
cuts.18
Further, with regards to the characteristics of the structural adjustment programs commonly
espoused by the IMF, there is a general consensus that for the period leading up to the 1990s, at the very
least, economic liberalization has been a cornerstone of their macroeconomic reform agenda. According
to Dani Rodrik, in cases of debt recovery, IMF programs put an emphasis on economic stabilization in the
early stages of the process, primarily through the means of fiscal restraint and currency devaluation. Once
the desired degree of stabilization is achieved, then the shift is made towards the true structural reform
strategies, which include, among others, trade and financial liberalization, privatization, and deregulation
of both industry and agriculture. As of the 1990s, Rodrik stated that this outline of strategies constituted
the accepted orthodoxy of that period, which had a pronounced focus on liberalization and marketoriented reform.19

17 Simmons, N. & Nooruddin, I. (2006). The Politics of Hard Choices: IMF Programs and Government Spending.
International Organization , 1001-1033.

18 Id.

In line with this, Collier et al., who looked into the experiences of African countries, have also
stated that the primary method by which the desired macroeconomic reforms are achieved by the IMF is
through conditionality arrangements. In particular, the receipt of both loans and aid was made conditional
to acceptance of policy reform provisions. Among the consequences of this was the existence of a
dominant donor presence in the countries which received financial assistance, primarily representatives
from the agencies in questions who set up office in order to keep track of program compliance. 20
As to the rationale for the conditionality provisions, Collier elaborates on five objectives which
are sought to be achieved via the introduction of conditionality. Firstly, as inducement for recipient
countries to change their policies (to induce governments to enact policies they would not otherwise).
Secondly, selectivity of aid to recipients who already possess the desired policies, thereby encouraging
the continued implementation of such policies. Third, a paternalistic objective in which focuses on the
improvement of the recipient (thereby restricting what funds may be used for only to a certain category of
spending, e.g. public school building). Fourth, conditionality is used as a means of lock-in, in order to
have recipient countries honour their previously made commitments, and provide a disincentive for
reneging. Fifth, another objective is signaling, whereby loans and aid are used as expressions of
confidence in the recipient, in order for others (and in particular, private agents) to follow suit. 21
In particular, Gore states that the general idea of the Washington Consensus was actually best
advanced through the activity of the International Financial Institutions (IFIs) in the form of the Structural
Adjustment Programs espoused by organizations such as the IMF and the World Bank. 22 Although the
19 Rodrik, D. (1990). How Should Structural Adjustment Programs be Designed? World Development ,
933-934
20 Collier, P. et al. (1997). Redesigning Conditionality. World Development , 1399-1401.

21 Id.
22 Gore, C. (2000). The Rise and Fall of the Washington Consensus as a Paradigm for Developing
Countries. World Development , 789-804

term Washington Consensus actually refers to ten policy prescriptions first articulated by Williamson as
being widely shared in Washington (headquarters of the IMF and WB), the term in general refers to a
variety of policies which serve to promote I) macroeconomic stability and deficit reduction, 2) trade and
capital account liberalization, and 3) liberalization of domestic markets through privatization and
deregulation. In general, however, the ideas of the Washington Consensus have only been in vogue so to
speak, since the 1980s, where it found most of its thrust through the activities of IFIs. Providing a short
timeline of development thinking, the 1950s and 60s saw controversies between the ideas of balanced and
unbalanced growth, while in the 1970s some pointed out the inadequacy of focusing on structural issues
when there were important social objectives that needed addressing. 23
Buira in turn notes that, while conditionality is often considered the most controversial aspect of
IMF programs, there has been a noticeable increase in the number of conditionality arrangements
observed during the decade of the 1990s. Indeed, he notes that the progression conditionality agreements
into progressively more complex arrangements, and to illustrate this, he showed that the average number
of conditions in an IMF agreement during the 1970s was around 6 conditionality provisions. In the 1980s,
this average figure rose to ten, while in the case of the World Bank, the average number rose from 32 in
the 1980s to around 56 in the 1990s.24
Further, he states that the amount of conditionality in IMF agreements reached its peak during the
Asian Financial Crisis of 1997. During this time, the number of provisions reached quite large numbers
when compared to the 70s; with Thailand having 73 provisions, South Korea having 94, and Indonesia
140.25

23 Id.
24 Buira, A. (2003, February 13). An Analysis of IMF Conditionality. Retrieved May 16, 2012, from G24 Website:
Paradigm for Developing Countries

25 Id.

Competition Policy and the International Financial Institutions

As a consequence of the desire to see neoliberal market reform achieved, it often becomes
necessary for the IFIs to intervene with matters concerning competition policy as well. In practice, this
comes in two forms, either a push to deregulate a particular sector, or a desire to diminish if not dismantle
outright, state monopolies. To illustrate, some case studies from the experience of other states within the
recent past will be most helpful.
The Mexican Case
George Philips work on petroleum regulation in Mexico focused primarily on the role that
political considerations played with regards to the management of the state-run oil monopoly Pemex.
Philip concludes that the process of reform was indeed widespread from the period of 1982-1994,
wherein several of Mexicos industries were subjected to reform and deregulation, but notes that
comparatively, Pemex and the Mexican petroleum industry has experienced a very slow pace of reform
and change. Philip then characterizes Pemex and the Mexican oil industry as one wherein the government
of Mexico exercised extreme policy caution and maintain a very consistent policy of risk aversion. 26
Philip makes a point of establishing that the government and the bureaucracy of Mexico at the time were
to be categorized as being highly technocratic, and that conventional political explanation for why
reforms would not take place, such as a state being predatory, for example, did not apply. Hence, Philip
states that the findings of political considerations playing a significant role in decision making proved to
be surprising. He concedes that Mexican oil and gas policy during this period is an example of when
governments are willing to accept a clear and significant economic inefficiency in order to avoid threats
26 Philip, G. (1999). The Political Constraints of Post -1982 Mexico: The Case of Pemex. Bulletin of Latin
American Research , 35-50.

against order. Further, Philip described the context of Mexican petroleum reform during that period as
being a case where one political goal, which would be system-maintenance or maintaining the political
status quo, came into conflict with another goal, namely that of promoting economic efficiency.
Elaborating on this, Philip states that it is not altogether unusual that a state would pursue goals of
system maintenance at the cost of economic stability, but that the case of Mexico had two characteristics
which made it unique.

Firstly, Philip states that the government of Mexico is an authoritarian

technocracy, which means that its government very much had a free hand to implement policies as it
deemed fit, and secondly, that long-term economic inefficiencies in its context may also translate into
long-term political consequences in the future.
Thus, the decisions to be made by the Mexican government were a trade-off between short-run
political risks to be caused by reform and the long run political risks to be caused by economic
inefficiencies. Also in this vein, gradualism became the norm for the pace of reforming the industry, as
Philip states that the government believed that the political consequences of shock reforms far
outweighed the potential political consequences of slow growth and economic underachievement. One
method this was achieved was through cross-subsidies employed during Mexicos oil boom period,
wherein Mexico was a major exporter of oil. Domestic prices of crude oil were sold at low cost and local
sales (which were primarily refined products) only constituted a small portion of Pemexs income,
whereas crude oil exports earned three times as much as domestic sales. Philip states that this was in line
with the governments strategy to promote industrial development and to hold down the rate of inflation,
which was on an inflationary trend.27
All of this of course, was much to the chagrin of the IMF which had long sought to eliminate the
state oil monopoly in Mexico. Which is why in the 2014 Article IV Consultation Report of the IMF
concerning Mexico, after a successful Constitutional reform concerning energy rights, made Energy
Reform a key sector of negotiation. The report concluded favorable by saying that:
27 Id.

The reform amended the constitution to end a 75-year old state monopoly in the oil and gas
sector, and allows the state to enter into a wide range of risk-sharing contracts with the private
sectorfrom production-sharing to licenses. The reform also increases the autonomy of PEMEX
and CFE (the state-owned electricity company), which could help raise their productivity and
efficiency. In addition, the reform encourages greater private participation in electricity
generation and natural gas distribution, and improves the regulation and management of
transmission and distribution.28
The Thai Case
Thailand has enacted regulations on its petroleum industry ever since the oil shock of 1973
adversely affected world market prices of oil. Pursuant to this, the government issued a regulation entitled
Prevention and Rectification of Fuel Oil Shortage 1973, an act which granted to the Prime Minister all the
authority necessary to enact the actions which would be needed to respond to the oil crisis. Utilizing this
new authority, the government of Thailand established the Oil Fund in March of 1979.
The purpose of the fund was to stabilize the prices of fuel products domestically whenever they
would be significant fluctuations in the price of oil prices globally. When necessary, the fund subsidized
domestically in order to keep prices within the ceiling set by the government. This system of regulation
would be maintained by the Thai government from 1979-90, when to government began to undertake the
deregulation of its oil industry29.
Peter U believes that, perhaps taking advantage of the falling oil prices on the world market as a
consequence of the end of the Persian Gulf War, the Thai government implemented its deregulation
agenda. The implementation itself was done through a staggered manner, beginning first with a semi28 IMF, MEXICO STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION, October 14, 2014, available
at https://www.imf.org/external/pubs/ft/scr/2014/cr14320.pdf

29 UNESCAP. (2003, October 30). The Oil Fund. Retrieved May 16, 2012, from UN Escap Virtual Conference
Website: http://www.unescap.org/drpad/vc/conference/bg_th_14_tof.htm

deregulated phase in May 1991, followed by full deregulation three months later. U states that the
regulatory system employed by the Thai was very much analogous the OPSF system used by the
Philippines, in the sense that retail prices and marketing margin were both set by the government, and
retail prices rarely changed.30
The market structure of the Thai oil industry itself did not have that many players, with there
being two large state-owned oil companies (Bangchak and PTT), with four large private corporations
(Shell, ESSO, Caltex, and Thaioil). Entry to the industry was restricted via the governments control of
license grants. After deregulation, the four largest players still controlled 80% of the overall market share.
This is, however, notwithstanding the fact that the number of new entrants into the industry was
significant and the growth in the number of service stations nationwide was significant 31.
At the onset of the Asian Financial Crisis in 1997, the government of Thailand needed to obtain a
Stand-By Arrangement loan with the IMF in order to strengthen itself financially against the effects of the
crisis. The loan, valued at US$16.7 billion (later raised to US$17.2 billion), required conditionality in
terms of stabilization and reform, the primary program of which had two components: The first being a
stabilization program which required the reduction of the current account deficit primarily through
An increase in the rate of the value-added tax (VAT) to 10%, expenditure cuts in a number of
areas, ending subsidies on some utilities and petroleum products, and greater efficiency in state
enterprises via privatization
The second aspect of the conditionality agreement was through a structural reform of the
financial sector, which was focused primarily on the elimination of unviable financial institutions. As
part of the moves toward improving the deficit position, the Thai government imposed a fuel tax of one
baht per litre of petrol, something which was tremendously unpopular with the general popular. Popular
30 U, P. L. (2000). Competition Policy for the Philippine Downstream Oil Industry. Philippines ASEAN Study
Center Network.

31 Id.

opposition to the move was so strong, in fact, that Prime Minister Chavalit was forced to revoke the tax
merely three days after its passage, and Finance Minister Bidaya resigned over the laws revocation. 32
The Philippine Experience

The Philippine role of the IMF is best expressed by the agency itself via the agencys own
Independent

Evaluation

Office

(IEO).

A crucial stage of the IMFs relationship with the Philippines covers the period leading to, and the
reforms involved in; the 1994 EFF agreement with the fund. According to the IEOs report, immediately
following Fidel Ramos assumption of the presidency, the IMF management and staff began preparing an
EFF specifically designed to be the final agreement, one designed in order to finalize an exit program
which would finally allow to Philippines to graduate from its status of prolonged user. 33 The loan itself
took nearly three years of negotiating to finalize, and it was viewed that if the Philippines could sustain
five percent economic growth per year, there existed the likelihood that the Philippines would once again
find itself encountering external financing problems. Thus, the EFF was viewed by the IMF as being
necessary to ensure medium-term financial stability for the Philippines.
According to the IEO, the primary objectives of the 1994 EFF was fiscal consolidation, which it
aimed to achieve through certain key reforms; foremost of these were income tax reform, and the
deregulation of oil pricing in the country, although it also included tariff reduction and, public expenditure
reform, and local government devolution as some of its objectives. The tax reforms were finally
completed with the passage of a comprehensive tax reform law in December 1997(although the IEO

32 Bullard, N., Mallhotra, K., & Bello, W. (1998). Taming the Tigers: The IMF and the Asian Crisis.
Third World Quarterly , 505-555.
33 Independent Evaluation Office . (2002). Report of the IEO on the Prolonged Use of IMF

Resources. Washington, D.C.: International Monetary Fund, publication Services.

report states that the tax administration weaknesses still remained), and the oil industry was completely
deregulated in early 1998 (after an earlier attempt was declared unconstitutional in 1996). 34
The IEO did express satisfaction at the way that many of the items on its reform agenda, which
included among other things, the deregulation of oil, domestic shipping and telecommunications, banking
reform and competition policy, and in general the 1994 EFF is viewed as modestly improving growth
performance and boosting exports, but the report still expresses significant disappointment at the apparent
failure to meet commitments when it comes to meaningful reform in terms of taxes. Although the
Comprehensive Tax Reform Package (CTRP) was passed, meeting the IMF requirement for legislation on
the matter of taxes, the nature of the reforms themselves fell far short of those envisioned by the IMF and
the tax administration still remained weak.

Conclusion
It is readily demonstrable that the International Financial Institutions can have a markedly
pronounced effect on a nations competition policy, most of it imposed via their conditionality
arrangements. Some of these requirements may require the enactment of specific legislation or even
constitutional amendments, and these are frequently undertaken with a view towards market
liberalization. From a practical perspective however, it does appear that the reason that IMF pursues such
policies is because wasteful state monopolies or state owned enterprises are often very harmful to a states
balance of payments and credit standing, and such the practices of shutting down subsidies or
deregulating industries is often done with the ultimate goal in mind of improving a nations
macroeconomic position, and is less concerned with matters such as competition efficiency gain.

34 Id.