Competition in French Polynesia: Cost of Living Implications and Economic Analysis

INSTITUTE FOR SMALL MARKETS LAW & ECONOMICS Competition in French Polynesia: Cost of Living Implications? Economics: Intermediate report 1

Methodology Substantive 1 Previous institutional work of sources of cost of living Economics survey, Analysis of data (sources: e.g., ISPF) 2 3 Analysis of law 4 Interviews Timing Intermediate report provisional suggestions 1 Feedback 2 3 Final report with recommendations 2

Diagnostic: Where do imports come from? Asia 42% of imports EU CMA/CGM strong position for French imports Data on shipping concentration and nature of goods transported available in CMA CGM/Bollor merger review at APC US / Canada Mostly food Australia / New Zealand South America 3

Diagnostic: Cost of living comparison Statistical Offices outcomes Basic + comparison based on products locally produced Consumer goods Value added Goods Intermediary goods Breakdown Telecoms Examples Services Banking Others Tourism Against whom to compare? France m tropolitaine 1 2 DROM COM 3 Other Pacific island economies 4

How have margins changed in last 20 years? Agriculture, sylviculture et p che Industries extractives Autres activit s de services Over last 15 years, margins relatively constant But cost of living has augmented Arts, spectacles et activit s r cr atives Activit s immobili res 2% Information et communication 3% Sant humaine et action sociale 3% Activit s sp cialis es, scientifiques et techniques 4% Activit s de services administratifs et de soutien 4% Activit s financi res et d'assurance 5% H bergement et restauration 16% Margin ratio by secteur, 2008, 2022 Activit s immobili res Sant humaine et action sociale Activit s sp cialis es, scientifiques et H bergement et restauration Commerce 15% Industrie manufacturi re Production et distribution lectricit , gaz, Construction Production et distribution lectricit , gaz, vapeur...eau, assainissemen Industries extractives Autres activit s de services Agriculture, sylviculture et p che Information et communication Enseignement Activit s financi res et d'assurance Activit s de services administratifs et de soutien Construction 10% Arts, spectacles et activit s r cr atives Transports et entreposage 15% Transports et entreposage Commerce 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 Industrie manufacturi re 14% 5 2022 2008 Source: ISPF Source: ISPF

Causes: Why would there be differences in cost of living? Structural Regulatory Market power Different categorisations By cause 1 Insularity vs regulation a b Insularity vs market power 2 Along the value chain 6

Causes: Structural Insularity 1 Transport costs (shipping, loading, stocking, etc.) a b Small economy: room for few players 2 Structure of demand Income distribution a b Europeanisation of demand Structure of supply 3 a Links with France of retailers (logistics and inputs traditionally or through contracts from France, coordination cost to change flows) b Import exclusivity c Exclusion of suppliers from some countries 7

Causes: Regulatory barriers Impact of various protectionist measures 1 Tariffs a Exclusions b Quantity limits c Differential taxation d 2 Regulation that restricts domestic competition Licenses a Business permits and training requirements b c Approvals to sell a product 8

Causes: Market power issues Entrepreneurship levels: normal 1 Entry barriers 2 a b High vertical integration (can be +ve, efficient by addressing market failures) High market share of main players High barriers to entry in a number of industries Access d c Difficulty to access land Difficulty to access finance Market power conversion into high margins OR high costs 3 Natural monopoly 4 9

Proposed Reform Objectives Proposed Reform Objectives Re-route imports (intervention could be limited in time) 1 a Advantage: lower costs and save on transport How: Change import duties, differential tax and partial or complete exclusion b Address bottlenecks 2 Stop import exclusivities and constrain contractual exclusivity a Increase access to scarce resources and vertical chains b Adapt and review protectionist measures 3 4 Review regulatory drafting for domestic restrictions in high margin sectors 10

Recommended next steps for government PPL products review 1 Competition assessment of sector regulation 7 Transport 2 a TDL and import quota International Conditional on development / pricing Domestic 3 Physical infrastructure b Food and retailing value chain Port expansion to allow larger vessels Information 4 Import rules c Price comparisons with Metropolitan France Code Digital comparison Tariffs 6 Business and product licensing Revise competition law text d Extend time for mergers & 3rd party comments Energy e Market studies information collection powers Note: macro aspects like fairness of tax system, redistribution, employment that are at play with the proposals and to assess No import exclusivity: reverse burden of proof 11

Thank you Muruuru Merci 12