A new competition law that Singapore plans to introduce in 2006 has been criticised for exempting some government businesses that dominate local services in the city-state of 4m people.

The legislation, which covers both foreign-owned and domestic companies, provoked an unusually fierce debate this week in parliament in spite of the overwhelming dominance by the long-ruling People?s Action party.

Some key industrial sectors, such as telecommunications, media, postal services, transport, power generation, water and waste management, would be exempt from the competition law.

These sectors involve businesses, some of which are monopolies, that are managed by the government directly or are controlled by Temasek Holdings, the powerful state investment agency.

The new law is meant to curb anti-competitive agreements, prevent the abuse of market dominance and regulate mergers and acquisitions that would lessen competition.

Some members of parliament suggested that the exclusion of some state businesses from the law was an example of how the government was protecting its own interests from the free market.

The government said state businesses could be excluded on national security, defence and other strategic grounds, or when there were ?exceptional and compelling reasons of public policy.?

Although the government said exempted businesses will still be subject to supervision by separate regulatory agencies, one MP complained that it would create ?uneven standards? on competition policy.

Questions were also raised about the impartiality of the new competition commission established to implement the law since it would likely be staffed mainly by civil servants who might favour state businesses.

Vivian Balakrishnan, the junior minister for trade and industry, pledged that some industries, such as telecommunications and media, would eventually come under the purview of the competition law after they completed the ?transition from a monopolistic to a more competitive environment.?

Under the law, the government could take into account the dominant positions in overseas markets of foreign companies that want to operate in Singapore.

The government could also review local business agreements retroactively if they threatened to reduce competition.

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