Sime Darby is interested to acquire the National Heart Institute (Institut Jantung Negara; IJN) on Jalan Tun Razak from the government.[1] My default position has always been that the government should do what it does best and that is governance. With this, privatization is a natural path to take. However, it is unclear if the deal is desirable.
In many ways, the privatization of the 1980s and 1990s in Malaysia was a baby step into refocusing the government.
As time progresses unfortunately, it is unclear if privatization has continued or ceased with the introduction of powerful government-linked companies in Malaysia. What were privatized long ago are now partly owned by the government indirectly, mostly as the majority or the main shareholder. This is done through Khazanah, PNB, EPF, Tabung Haji and other investment arms of the state.
GLCs notwithstanding, one of the few things that mar many privatization efforts was the creation of monopoly. Monopoly is not necessarily a bad thing but better privatization method could have been employed to encourage competition in the market. Nevertheless, the creation of monopoly through privatization could be defended by resorting to the natural monopoly argument.
Yet, healthcare does not fit the definition of natural monopoly. Competition can exist in the industry. This makes that argument irrelevant to this case.
The proposed privatization of IJN risks of the creation of a monopoly. Not just monopoly but state-induced monopoly. That has to be a double-whammy.
Casual research indicates that the increasingly conglomerate Sime Darby’s existing business does involve healthcare and it does offer services with respect to heart treatments through its Heart Centre.[2] Information provided by The Star does show that IJN and Heart Centre do compete with each other by the virtue of offering the same services.[2a] Without further research, it is unclear how extensive the competition between the two institutions or whether there are other competitors out there; I suspect there is. What is certain is that the merging of the two under Sime Darby Healthcare will undoubtedly grant Sime Darby with market power. Sime Darby, on its own, is already a formidable player in the industry.
In responding to request for comment on the matter, both Prime Minister Abdullah Badawi and his deputy, Najib Razak said that Sime Darby must ensure IJN is accessible to the poor if the deal is to go through.[3][4] How creating a commercial monopoly would do just that would require extensive debate which the PM and the DPM might find it hard to win.
If IJN is to be privatized and if the government really care about making treatments at the IJN affordable, competition is the answer, not monopoly.
There are of course other means to make the treatment affordable even with privatized IJN. Among the methods are government subsidy for those deserving of it or even the creation of a national health system which provides health insurance. I do not endorse these alternatives. By stating the alternatives, I am merely showing there are ways to make IJN private and affordable to the poor. Creating a national health insurance just to address the issues surrounding the privatization of IJN is absurd.
Those alternatives however still do not address the concern for the unnecessary creation monopoly.
In any case, with the proposal in its current form — that is, I assume, a simple acquisition of IJN by Sime Darby — I am not too warm to it. There is no concrete information to show that deal is larger than a simple transfer of ownership from the Ministry of Finance (IJN is owned by that Ministry) to the GLC Sime Darby (in turn owned by the quasi-government PNB).
If IJN is to be privatized, I would prefer for it to be sold to another entity to encourage competition in the market. There are better option out there and the one taken at the moment is not it.
[1] — KUALA LUMPUR: Sime Darby Bhd has expressed interest in taking over the National Heart Institute, or Institut Jantung Negara (IJN), a move that has met with objections from the ministry of health, sources said. [Sime Darby eyes IJN. Lim Shie-Lynn. The Edge Daily. December 18 2008]
[2] — A superior one-stop centre comprising a fully equipped coronary care unit (CCU), cardiac ward and cardiovascular catheterization laboratory. [Heart Centre. Sime Darby Healthcare. Accessed December 18 2008]
[2a] — Fair use. Copyrights by The Star.
[Sime Darby seeks stake in IJN. K.C. Law. The Star. December 18 2008]
[3] — KUALA LUMPUR Dec 18 – The government will allow Sime Darby to take over the National Heart Institute (IJN) if it can guarantee that the low-income group can still afford treatment there. [PM wants Sime Darby to guarantee treatment for poor if it takes over IJN. Shannon Teoh. The Malaysian Insider. December 18 2008]
[4] — Najib, who is also the Finance Minister, said Sime Darby must pledge its commitment that the poor would not be marginalised if IJN is to be transferred to it. [Najib: No objection to Sime buying IJN stake. Shannon Teoh. Business Times. December 18 2008]
