This contribution is part of a series of personal views invited by Cyprus Mail on the subject of consumer prices.
Manthos Mavromatis, President of the Cyprus Chamber of Commerce and Industry (KEVE) on competition
“From the available statistics, covering the first five months of 2009, it seems the biggest recorded price increases were in food, but within this group there were differences. For example, the prices of fruit and vegetable tend to be seasonal and traditionally go down in the summer, but imported fast-moving consumer goods tend to remain stable.
Generally there is strong competition in the retail sector. In clothing, for example, not only have there not been significant increases, prices have dropped, helped especially by sales. The ruling by the European Court of Justice last April should help to relax restrictions on sales periods.
Because retail competition is high, this usually restrains prices to what is most reasonable. Commerce Minister Antonis Paschalides has talked about some “distortion in competition” in the case of products like fuel and milk, suggesting that prices may have been pushed up artificially. In such cases, it is a matter for the Competition Protection Commission to rectify the situation, to allow genuine competition to operate.
Recently, Eurostat data showed that Cyprus is very expensive for electrical goods compared to the rest of the EU. In general, world prices in electrical goods have kept relatively low due to outsourcing to places like China. Despite this, the prices we pay in Cyprus are still high. There is a basic explanation for this: the charges imposed by Limassol Port Authority (LPA) are exceptionally high, and these are then passed on to the consumer by the importer. In our view, the costs of container-handling are stable, so the high charges levied by the LPA are unjustified. The LPA’s monopolistic position – we only have one commercial port – certainly results in distorted competition and pushes up prices for everybody.
We have a disadvantage compared to the rest of Europe when it comes to imported goods. First of all, we are a small market, so purchase prices are higher than in the bigger EU countries. Then there is a longer delivery chain. Lorry transportation to Greece may be relatively cheap, but then the container has to travel by sea to Cyprus.
It is true that some people take advantage of a particular situation to set higher prices than those which would be determined normally by market forces. That said, in several sectors there is stiff competition, which has the effect of preventing prices from being pumped up artificially.
(Interview by Charles Charalambous)
