Tag: The Malaysian Insider

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Economics

[2294] Of favoring the fat over the fit

The prime minister has said it so many times. His administration wants to turn Malaysia into a high-income country.  One of several initiatives that the administration believes can help in that direction is the introduction of minimum wage through the establishment of the National Wage Council. In promoting its supposedly market-friendly and market-driven policy, the federal government embarks on central planning without even flinching at the contradiction. For others, they will do more than flinch because as with any effort at central planning, there are side effects. One of them is the creation of an uncompetitive market.

In the free market, some firms have more market power than others do. That is inevitable due to various factors that are only too natural. Some are just larger than others are and they may have better access to resources and may be able make use of it more efficiently than others do, thus allowing them to sustain their prominence in the market.

That, however, does not prevent smaller firms from competing against their larger counterparts in the same industry successfully. There is enough flexibility in the free market to enable smaller firms to succeed. That flexibility creates free competition and that competition in the free market exacts punishment on mistakes made by anybody, even by larger firms. It gives others the opportunity to rise up.

This competitive force may no longer be true if the wage council dictates wages. The focus here is not the minimum wage itself but rather, the mechanism at which the council dictates the wage.

Consider the possible composition of the wage council. For it to be truly representative, it has to have all stakeholders in the labor market represented. This includes firms of all size and industries. There will be representatives from the labor unions and the government as well.

Consider now the interest of each side given an industry. The government wants to turn Malaysia into a high-income nation and believes the introduction of minimum wage can help. The labor unions want higher wage for its members and are strong advocates of minimum wage. The larger firms do not like competition and can afford higher wages. Finally, the smaller firms do not like competition as well but unlike the larger ones, they cannot afford to pay the kind of wages that the larger firms usually can.

One can see that at least one aspect of interest of the government, the labor unions and large firms coincides and then competes directly against the interest of small firms. Given this setup with the wage council, smaller firms are likely to lose out.

What begins as a problem of low wages or wage stagnation — what has been the rationale for the proposed formation of the wage council and the introduction of minimum wage in Malaysia — that is partly caused by unequal bargaining power between employers and employees is transformed into something else. It turns one problem into another.

While it attenuates the difference between employers and employees, the council amplifies the bargaining power differential between firms. The incentive mechanism of the free market is tweaked, or rather mangled, to give more leeway to larger firms to make mistake and less for smaller ones.

To put the implication more starkly, the wage council encourages the creation as well as the continuance of monopolies in the market. It creates an uncompetitive market, on top of the inflexibility created by the minimum wage policy.

What makes this all the more unpalatable to those who actually believe in market-driven policy is that many pre-existing monopolies in Malaysia are government-linked companies while the smaller companies are likely to be privately held. And when the monopolies are not government-owned, many of these monopolies came to being not because they were competitive, but because of past government policies of lemon socialism that privatized profits but socialized losses.

The concern for lemon socialism and privately-owned monopolies aside, the dynamic of the wage council is stacked against privately-held companies in favor of larger as well as government-linked companies. The role of the state in the market increases with the establishment of the wage council.

This is an example of Najib administration’s supposedly market-driven policy.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on December 28 2010.

Categories
Politics & government

[2289] Of the tap water must flow

The tussle for control of water distribution in Selangor attracts strong opinions and allegations. The Pakatan Rakyat Selangor state government and its supporters claim that Syabas, the sole water distributor in Selangor, is being mismanaged. Some of the more vocal supporters of Pakatan Rakyat and the state government claim that Syabas is a case of incompetence and downright corruption. The state government believes it could do a better job than Syabas. Whatever it is, Pakatan Rakyat is on a relentless offensive. In the end, however, it might find itself in a situation that Napoleon once found himself in, which was in the frigid Russia.

Pakatan Rakyat in Selangor is having a successful campaign so far. That is because it is hard to disagree with most of the issues raised by Pakatan Rakyat given the negative reports surrounding Syabas. Breach of contract, conflict of interest, large compensation received by its executive chairman Rozali Ismail”¦ the list goes on and on.

The large debt accumulated by Syabas is a symptom to all of these issues and the symptom itself cannot be swept under the carpet. The debt is the immediate factor for Syabas’s request to increase its water tariff by a significant margin.

The state government opposes this, convinced that Syabas is passing the cost of its mismanagement to water consumers unnecessarily. This presents a problem for Syabas. Without the hike, it faces the possibility of bankruptcy.

The default might happen as soon as the end of this year, which is just days away. Bondholders of Syabas have argued that the default might adversely affect the wider capital market, hence the necessity of bailout. The Barisan Nasional-led federal government seems convinced of that argument and it has indicated that a bailout is possible.

The fear is very real. What is also real is the anger that will follow any bailout. Any bailout will be unfair because it is a case of privatizing profits but socializing losses. The stakeholders of the bailed-out firms stand to gain everything at the expense of taxpayers at large.

That, however, does not negate the fact that the only thing that is worse than being forced to pick up someone else’s tab is having no tap water. Any allegation made against Syabas, which is likely to be true, will stand pale against widespread unfulfilled demand for tap water. The tap water must flow regardless the issues.

If there is no resolution to the war of attrition between the state government and Syabas before the default occurs, Pakatan Rakyat’s campaign might see its fortune reversed. When push comes to shove, a bailout will be preferred to no bailout.

Without bailout, the uncertainty regarding tap water supply will be devastating. Everybody loses under the case of no bailout, and no tap water.

If a bailout does happen, somebody will have to take the blame. The federal government will not want to be that somebody. The federal government will want to be seen as the savior of the day instead.

To do so, the federal government might defend itself by stating that without a bailout, the tap water might not flow. The fear of possible water supply interruption is already making its round in the mainstream media. The Sultan of Selangor, for instance, has voiced his concerns regarding the matter.

It is in the interest of Pakatan Rakyat-led Selangor to not to have a bailout. It is in its interest to resolve the issue before Syabas defaults on its bonds.

Perhaps, it is even in the interest of Pakatan Rakyat to allow the water tariff hike to happen. At least that way, Pakatan Rakyat can continue to be on the offensive, leaving Syabas and, indirectly but more importantly, Barisan Nasional on the defensive well into the next state and national elections.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on December 15 2010.

Categories
Politics & government Society

[2288] Of ridiculously supernatural by too much

As long as there are those who believe in supernatural explanations to rationalize the completely natural world and as long as there are public choices that require collective decisions, religion will be relevant in our society. The relevance of religion, however, is not a ticket to be used with impunity in the public arena.

In The Courtier and the Heretic: Leibniz, Spinoza, and the Fate of God in the Modern World, author Matthew Stewart described how the religious of 17th-century Europe were anxious about the advancement of science. As the explanatory power of science grew, the room for supernatural explanation shrank. Four hundred years on, the room for the supernatural continues to shrink as we continue to understand more about the world around us. We have become more rational than ever.

Unlike in the days of old, this is an era when many assertions relating to the secular world require rational reasoning as its thrust. Many individuals no longer accept an assertion as true simply because someone invokes the name of god, or any being of similar status.

While the relevance of religion in society is not denied, it is easy to see how its relevance has been overestimated by some. That overestimation invites ridicule, especially so when the invocation of god’s name is based on self-interest.

When Mohd Saiful Bukhari Azlan swore on the Quran that Anwar Ibrahim violated him, it was quite clear that his purpose was to strengthen his case, regardless of the truth behind his allegation. While the truth in his case was at best uncertain, he tried to use religion to pre-empt the civil justice system. One can take comfort that the supernatural bows to rationality in the justice system for else, truth would be so cheap that it would be worthless.

A starker example involves former Selangor state assemblyman Lee Hwa Beng of the MCA. When he wrote that the Christian god commands Christians to oppose the concept of an Islamic state, he was using religion for his own political purpose. He linked the DAP with an Islamic state as promoted by PAS to cultivate the fear of Christians towards PAS so that they would vote for BN instead.

Of interest here is the use of supernatural-based rationale against another supernatural-based position. Even in the realm of the supernatural, supernatural rationale is problematic. It was so problematic that criticisms came in fast and harsh. What was supposed to be an insignificant statement on Twitter became a considerable embarrassment for Lee and he was forced to retract his statement and apologize.

Lee’s was a case where a person spoke on behalf of a god. He is, of course, not unique. Many members of PAS have taken the tone where the Islamic god wants this and that. Still, they are more or less Islamists and it is only expected of them to use religion to justify their political ambition. Nevertheless, they do struggle to justify the goal of an Islamic state while trying to widen their appeal and achieve their national ambition of wrestling Putrajaya from Barisan Nasional. Rather than appealing to supernatural reasoning, PAS has in the past tried to promote some of its ideal by stressing universal concepts like justice instead. If the 2008 general election is any indication, then secular methods are more successful than ones inspired by divine diktat.

And recently, Wan Azizah Wan Ismail, president of PKR, said that her husband Anwar Ibrahim is a person granted by god to Malaysians to become our leader. As if the obvious needs pointing out, it is not hard to see how the fortune of Anwar is closely related to PKR. Maybe after criticism regarding PKR’s recent direct election, she thought that the outdated concept of divine right might justify Anwar’s position. Well, it did not work. She burnt her fingers. The wolves of Barisan Nasional pounced on her and she deserved it.

In each case, if they had resorted to the more rational path, they would have been less susceptible to ridicule. Saiful’s legal counsel could have presented convincing evidence in court. Lee could argue that an Islamic state may discriminate individuals based on creed. Wan Azizah could instead say that Anwar Ibrahim’s leadership is indispensible, for instance.

But no. They had to tickle the pink unicorn. Whether the unicorn has been entertained, we will never know. What we do know is that if they had chosen the more rational path, they would have been less susceptible to ridicule.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on December 13 2010.

Categories
Economics Politics & government

[2280] Of centrists lose with a viable “third force”

There is talk of a third force in Malaysia. Lawyer and activist Haris Ibrahim has stated that the third force is a bunch of independents ready to co-operate with Pakatan Rakyat. Zaid Ibrahim wants to form a third political party. If in the end, it comes to a third competitive and national political grouping capable of affecting national elections, then I do not think it is the wisest of all moves.

A third party will adversely affect Pakatan Rakyat more than Barisan Nasional, given that members of the so-called third force seem to be those disillusioned liberals. They sided with Pakatan Rakyat in the last general election but that alliance is unraveling. They are disappointed with Pakatan Rakyat due to various reasons.

While liberals, they are liberal in superlative terms instead of being proper liberals who adopt a comprehensive liberal worldview like the classical liberals. Some may even be social liberals, however, noting how Kua Kia Soong has written that the third force has to stand on the left of Pakatan Rakyat, assuming he is part of the so-called third force. But never mind whether they are proper liberals or not. What matters is that these groups disagree with the status quo in the country.

Furthermore, Barisan Nasional, the beneficiary of the status quo, does not have too many liberals within its ranks. The liberals are closer to Pakatan Rakyat than Barisan Nasional, hence any competitive third grouping will compete more against the former rather than the latter. I would be in agreement with Nik Nazmi Nik Ahmad about the effect of a third force as defined earlier in encouraging the status quo, i.e. having Barisan Nasional continue to be in power, for better or for worse.

Pakatan Rakyat, however, will not be the only side to lose because of a third force. A system of one-party dominance is bad for centrists because it provides only one choice to centrists. Instead of Sophie’s choice, one faces Hobson’s. In fact, it is worse than that. Regardless of choices, there is only one outcome: more of the same.

Another point on the adverse effect of a third force can be demonstrated through the famed Hotelling-Downs model.

The model is a location game. In a two-party (or two coalition like in Malaysia; it does not matter as long as the parties within the respective group collude) democratic system, both political parties gravitate to the center. This happens because political parties want to win elections and they win it by garnering the most votes. Meanwhile, voters will vote for the party that is closest to them. As a result, a party that sits farther from the center with respect to the other party will get fewer votes than its rival. Both sides know this, sooner or later. Eventually, there is only one solution: sitting at the center is the best winning strategy.

Now, I do not think highly of centrists. More often than not, their positions are inconsistent. It is forged out of convenience rather than conviction. Their positions are a hodgepodge of points assimilated from everywhere, regardless of contradictions. Some centrists are centrists simply because they are apathetic.

Nonetheless, centrists do provide the stability required in a political system. They are the anchor in society. Given that many views are diametrical, centrists would process these views and hold compromised ones instead, if they care at all. Since the Hotelling-Downs model suggests centrist voters — more accurately the median voters — will win, the other side of the coin suggests that a competitive two-party system has the capability of preventing extremists from assuming power.

Unfortunately, this central tendency within the model is weak. The moment the system accommodates a third competitive third party or more, the central tendency weakens, or even disappears. It has been proven under the Hotelling-Downs assumption that there is no equilibrium with three competitive parties or more.

It will always be optimal for parties to change their positions, be it at the center or somewhere else. A party can always do better than the others can until the other parties respond by changing their positions. That in turn encourages the original party in question to change its position to outdo the others. The process will continue on forever.

There is no guarantee that the center position will be taken. There is really no reason why the center position is special anymore. The political centrists cease to be the anchor. Their influence on national politics decreases with respect to extremists. Thus, it is quite possible for extremists to hold power in the end, even if for a short while.

The lack of equilibrium is not necessarily bad, of course. It is an opportunity for diverse political views to prevail. There are many other benefits to having a third competitive party, but breaking the one-party dominant system is not it.

Even so, it is hard to see these liberals switching their positions too much in order to win elections. Their views are ones based on conviction and not convenience. The same cannot be said about Barisan Nasional and Pakatan Rakyat. If the Hotelling-Downs model can be used and if the competitive third party is strong enough to affect the election outcome, then this suggests that it will be optimal for Barisan Nasional and Pakatan Rakyat to move away from the third party and away from the center.

Again, centrists will lose out.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on November 24 2010.

Categories
Liberty Politics & government Society

[2276] Of it requires an answer

At a recent public lecture in Sydney, Australia, Anwar Ibrahim said he avoids answering which he aspires to: a secular state or an Islamic state. He reasoned that the issue is contentious and unproductive to engage in. He believes what exists instead is a quasi-secular state, and a hypocritical one at that. He went on to state that the problem revolves around hypocrisy. I left the lecture dissatisfied with the message. Immediately after he ended his speech, I began to wonder about the kind of consistency he was looking for.

He argued that part of the reason why the issue is contentious is that both mean different things to different person. For instance, there are opponents of secularism who believe that secularism is anti-religion. That illiberal brand of secularism stifles religions in the public sphere, like what happened in Turkey before. And then there are proponents of secularism who assert that secularism is neutral of religion. Backed by liberal principles, a liberal secular state will treat all religions equally as long as those religions do not infringe on individual liberties. I myself subscribe to this idea.

Being the glue that holds Pakatan Rakyat together, it is completely understandable why he avoids the question. If anybody needs a reminder, DAP and the Islamist PAS are both the main component parties of Pakatan Rakyat. Both have rattled sabers over the matter within the Malaysian context. In Sydney, he stressed the need to build consensus. Fair enough.

The avoidance, however, is problematic when he is critical of the double standards in the implementation of Islamic law in Malaysia, where the rich and influential get away with what Islam frowns at while others get punished. That criticism relies on the idea of equality before the law. Such equality itself is a sound concept. Yet, not all equality ranks equally in terms of preference.

While the application of unequal weight of the law is distasteful, I shudder to think of a situation of equal implementation of Islamic law, especially in its current form in Malaysia. This is because it violates individual liberties — especially for those whom the state considers as Muslims — such as freedom of conscience. That translates into law that states whom a person can marry, what he or she can eat or drink, what a person can believe in, etc. It excessively dictates one’s personal life. An Islamic state that runs on Islamic law necessarily does that.

Religion has always been a personal, private matter for liberals. When religion is a private matter then the state has no say, freedom has more opportunities to flourish. This is why liberals prefer a secular state with respect to any religious state, while holding all other concerns constant. The opportunity for liberty to flourish doubles when there are guarantees for individual liberties within a liberal democratic framework, which addresses the problem of tyranny of the majority.

Criticism of hypocrisy and the existence of preferences in different kinds of equality essentially introduce back the question of secularism and Islamic state. The question does not need to be framed in such a stark contrast. Forget the labels. Ask instead, will religion, specifically Islam, be used to dictate a person’s lifestyle? More specifically, will it be used to dictate a Malay’s lifestyle?

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on November 18 2010.