Tag: The Malaysian Insider

Categories
Economics

[2368] Subsidy is not the only thing

Subsidy reduction will allow market forces to allocate resources more efficiently. Prime Minister Najib Razak was reported saying so recently to justify his administration’s commitment to subsidy reduction in the long run. By doing so, the Najib administration claims to be an advocate of free market. A claim that is not necessarily true, however. At best, that claim reveals a selective belief in the free market.

The truth is that market forces are restricted not only through price mechanism. The restriction also comes in form of quantity control, among others. This is especially relevant in Malaysia where the government has introduced various regulations and institutions to control the price and supply of various items. Among those items are flour, diesel and sugar.

In fact, the government has wide discretionary power over this matter. Proof: the new Price Control and Anti-Profiteering Act grants the government the power to fix the price of any goods and services in the country. Yes, that is any goods and services. The net has been cast widely.

Despite the various channels where market forces are prevented from distributing resources efficiently, for some reason the price mechanism is receiving all the attention while the quantity side remains relatively untouched. As an example, look no further than the domestic sugar industry.

The government recently reduced sugar subsidy and effectively raised the retail price of sugar. All the liberal benefits of reduction have been thrown out in the open: fiscal deficit reduction, efficient resource allocation, investment over consumption, etc. You just need to name it.

At the same time and less discussed is the existence of the illiberal import quota system. The government through a quota system controls the importation of sugar. The government also grants the quotas only to several refineries ultimately owned by Felda and Tradewinds, which themselves are closely connected with each other.

It is not an understatement that the two companies control the sugar industry with a clear government sanction. As a side note, it will be interesting to see how the two companies will be subjected — if ever — to the new Competition Act, which has a highly questionable purpose.

If the government gets one point for liberalization due to subsidy reduction, then the government must lose a point from the import quota policy. Given how the import quota policy has created two related monopolistic companies — one being the favored entrepreneur of the government of the day and the other being a government-linked company — and that prices are controlled, the government must lose more than a point.

However one wants to keep the score, the inevitable conclusion is that this liberalization done through subsidy reduction is merely a half-hearted liberalization.

Whatever market forces are mentioned to justify the reduction in subsidy, it is stated insincerely. The liberal argument is just something convenient that the administration grabbed out of the air just because it fits its agenda of day. When one does not derive an argument from the first principle, one cannot expect anything less than inconsistency; the Gods of Inconsistency are staring straight into the eyes of the Najib administration.

The government can prove its credential as an honest advocate by deriving its policy from the first principle. That is, the whole industry must be liberalized. The removal of subsidy and price control must happen together with the loosening of the import quota system.

This goes not just for the sugar industry, but also for the relevant others.

It is only then that the prime minister can state that subsidy reduction will enable market forces to allocate resources more efficiently with a clear conscience.

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 May 23 2011.

Categories
Economics Politics & government

[2360] Competition Act is a farce

Competition puts a downward pressure on prices. It is one of the forces behind innovation. It enhances welfare. Therefore, initiatives aimed at creating a competitive market are worth supporting.

For those who truly believe in a free and competitive market, however, the Malaysian Competition Act passed last year deserves neither admiration nor respect. It is worthless.

How can one respect the Act when the government itself is unimpressed with the spirit of the Act?

This question is especially pertinent after the Najib administration recently granted Bernas with another 10-year monopoly over rice imports in Malaysia.

The Act will be enforced in 2012. One would expect any government that is sincere or serious about encouraging competition to prepare the ground. What we are seeing instead is business as usual. Instead, the government continues to grant monopoly power to a specific company without any regards for the Act.

Government-sanctioned monopoly is not a phenomenon exclusive to the rice market. In the sugar market, the government awards import quota to a limited number of sugar producers. Here is something that makes it even more interesting. Tradewinds effectively monopolizes the sugar market, and it is related to Bernas.

In Sarawak, there is CMS Berhad, which has a disproportionate access to government procurements and tenders. It is the grand monopoly of Sarawak and it is a prime target for a proper anti-trust law.

One must not forget the various government-linked companies. They are so large and so powerful that their ability to distort the market is not doubtable. What makes it worse is that, one would rightly expect these companies to sleep in the same bed as the government, at the expense of consumer welfare.

The government after all has an interest to see that these companies are profitable because the government is the shareholder. For companies that it only has an indirect relationship with, bad performance is just bad politics.

In the name of competition, a respectable anti-trust law must subject everybody under the same rules.

Yet, ”activities, directly or indirectly in the exercise of government authority” are excluded from the Act. Companies that obtain their monopoly power through a government authority like Bernas easily fit the bill. It is also easy to argue that GLCs will enjoy the exemption as well.

Even if that stated exemption does not cover those companies, the Competition Commission as established by the Act has wide discretionary powers to exempt anybody from the Act. With a perverse incentive system that exists within the government, selective prosecution will likely be the norm. Private firms that attain large market share through sheer ingenuity will be prosecuted in the name of competition while GLCs and companies like Bernas continue to be shielded from market forces by the government.

In short, not only does the Act not encourage competition, it is a tool to make the market less perfect.  This Competition Act is no anti-trust law. It is a discrimination law.

The truth is that competitiveness of the Malaysian market can be enhanced without this Act, which shamelessly masquerades as an anti-trust law.

Government policy created these monopolies and because of that, it is arguable that a proper anti-trust law is like taking a sledgehammer to a nut. Instead of expanding the role of government, a reduction can be just as effective as a proper anti-trust law. Such a retreat will definitely be more effective than the farce that is the Competition Act.

This is how a retreat should look like: The government to divest away from most GLCs, to institute an open and competitive process to most of its procurements and to stop granting monopoly powers to the likes of Bernas. Do all that and with a little luck, even a real anti-trust law might be redundant.

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 May 4 2011.

Categories
Politics & government

[2350] DAP’s tilt at inclusiveness

There is a common denominator to any kind of respectable democratic system. The side with the most votes generally wins. There lies the importance of inclusive politics in a diverse society typical in Malaysia.

It is not enough to appeal to only one specific community in a competitive democracy as a whole. There is always an extra vote somewhere outside of the community that can make a difference. The communal divides have to be crossed just because those who fail will lose the democratic competition.

One of those divides in this country is language. There is no doubt that this divide exists in Kuching.

I have been in the Sarawak capital for nearly two weeks now and I have been trailing the state election campaigns of the DAP very closely. This gives me the opportunity to observe the party’s strategies and operations firsthand with respect to the election.

Kuching of the south bank — Padungan, Pending, Kota Sentosa and Batu Kawa — are Chinese-majority areas. In two of those areas, the Chinese make up no less than 90 per cent of the total voters. At the same time, it is inevitable for an impartial observer to conclude that the DAP is primarily a Chinese-based party. It is ethnically more diverse than any other political parties in Malaysia, with the exception of its Pakatan Rakyat partner PKR.

That does not negate its Chinese characteristic, however. This statement cannot be any further than the truth in Kuching, where its active membership reflects the demography of the city.

The composition of Kuching makes it only natural for Chinese to function as the primary language in the city. It is not a wonder that the DAP had used only Chinese for its political communication here in the past. There were not too many reasons for the local chapter to change.

While Kuching is so, the overall situation in Malaysia is more diverse. For a party with national aspirations, it has to widen its appeal beyond the Chinese community. It has to face the Malaysian diversity.

Continued reliance of the DAP on a single community that is also shrinking in terms of percentages will have the party boxing itself in a corner and eventually lose the democratic game at the national level. The DAP knows this and the party is addressing it. Kuching is a perfect example of the party’s try at inclusive politics.

The impression I get so far is that there is a remarkable swing against the Barisan Nasional government here in urban Kuching. Local reception to the DAP’s political rallies in the city has been impressive. In Sibu and Miri, news of more impressive turnouts was reported. Donations to the DAP meanwhile skyrocketed.

In stark contrast, the rallies of the SUPP have yet to make a mark. It is no exaggeration that the SUPP is lagging badly. The BN component party that is an MCA of Sarawak — the DAP’s foremost rival in the state — faces the possibility of becoming as irrelevant as the MIC, Gerakan and PPP.

With the big swing, Chinese votes alone could possibly guarantee the DAP seats in Kuching’s south bank. Yet, the party is not merely focusing on Chinese votes. It is trying to be inclusive.

For the first time in Kuching, the political messages of the DAP are done in languages other than Chinese. The English, Malay and Iban languages are now being used more widely in its pamphlets and posters.

Concurrently, the party is penetrating Bidayuh and Malay villages on the outskirts of Kuching for the first time ever. These areas were hostile to the DAP previously. This hostility, or perceived hostility, is absent today. Taib Mahmud and his allies are such a lightning rod that there is no anger left for anybody else.

Quite clearly, the situation is just right to grease the advance of the DAP’s inclusive initiatives.

The level of support for the DAP in Kuching has been tremendous so far. Members and volunteers of the DAP are showing exuberant confidence. It is hard not to.

In some small pockets within the DAP, however, there is a call for caution. Whether those supports will translate into actual votes will only be known after the polls close tomorrow.

After a tiring day campaigning criss-crossing Kuching from the relatively modern Batu Kawa shops and to the ill-equipped Kampung Tematu, a high-ranking DAP member sighed with face in his hands, saying: ”I hope these efforts with the Bidayuh work.”

It would be a shame for the DAP to lose. Even if it loses though, at least the act of reaching out itself is a brilliant beginning. It is not just a brilliant beginning for Kuching or Sarawak, and not just for the DAP itself. It is simply excellent for Malaysia.

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 April 15 2011.

Categories
Politics & government Society

[2346] Officer Dredd, the Blue Ocean Man

It is comforting that the Najib administration is showing some concerns about the size of government expenditure. They are doing something about it in some parts of government, even as the big picture offers a more complex and contradictory narrative. Yet, not all cuts in spending are right.

A reduction or saving cannot be done simply for the sake of reduction. That is mindless. There have to be principles behind all cuts.

For many skeptics of the state, that principle is small government. The concept demands the power of the state be kept in check. It advocates limiting the size of government while instituting a mechanism to counter the influence of the state.

As far as a system of check and balance is concerned, the idea of a small government is not an ideological extreme. A wall separating various offices — offices that if left together would corrupt the whole structure — prevails in any society subscribing to the supremacy of rule of law out of fear for potential abuse of power

That includes, believe it or not, Malaysian society. Even companies put in place some check and balance mechanism, even if in some cases it is only for show, and even if only to find scapegoats when something goes wrong like what is happening in certain government-linked companies in Malaysia.

A system of check and balance is expensive but one does not simply throw it out of the window for the sake of cutting cost. There is more at stake than failing to balance the budget.

For instance, one simply does not merge the functions of the police and the judges together to reduce government expenditure. The world of Judge Dredd — someone who is the police, judge, jury and executioner all at the same time — makes for a good comic but it is not ideal for the creation of a power abuse-free society.

Some believe in the separation wall. The Najib administration believes in the Blue Ocean Strategy. If the government is left to its own device, the blue ocean may inundate us all.

The Najib administration is encouraging closer co-operation between the police and the military. He said this was part of the Blue Ocean Strategy thinking. I call it the Officer Dredd thinking.

Some co-operation — having the military patrolling the border instead of the police and rehabilitating petty criminals in army camps instead of in prisons — seems innocent and even laudable at first glance. Not only it does cut cost, more importantly its rationale makes sense.

Others — having the police and the armed forces patrol the streets jointly and using of military facilities for police recruiting and training — are insidious in nature.

There is a reason behind the separation between the police and the military. The police force is concerned with mostly internal affairs. They are armed and trained accordingly. The traditional function of the military is to address external threats. The military does have additional roles in times of emergency but the qualifier is clear: only in times of emergency.

The awesome firepower of the military is the reason why it is not granted the wide-ranging power of the police force in a society under normal, peaceful times. Once merged, the forces will have extraordinarily wide powers that no single entity should have. It is a step closer towards military rule. Whoever wields this power will be the dictator. The gun will always be too hot for a free democracy.

For this reason, any co-operation between the police and the military deserves critical assessment and hostile suspicion.

Suspicions aside, is the finance of the government in such dire straits that the police and the military have to participate in someone else’s fascination with Blue Ocean Strategy and, in the process, tear down the separation wall?

If the situation is so bad, the government can take other more traditional avenues without adversely affecting any public check and balance mechanism.

There are 24 ministries in the Najib administration, not including the offices of the prime minister and the deputy prime minister. Do we need so many ministries, even more ministers and their deputies?

Some government ventures in the commercial world ended up needing bailouts. Does the government need to be in the business world?

More than 20 per cent of the RM67 billion worth of stimulus spending has yet to be spent as of March 2011, two years later. Does the Malaysian economy need that stimulus spending, if it was needed in the first place at all?

And there are multiple failed economic corridors courtesy of the Abdullah administration. Why is the Najib administration still propping them up?

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 April 6 2011.

Categories
Politics & government

[2340] What’s important and what’s not

I am tired of politics revolving around personality. With it comes excessive feudal culture and ugly mudslinging all too frequently. One can never truly escape it but there are other issues of actual importance if one wants to take a break from the ugliness of it all. These other issues are the ones that truly affect our livelihood. These issues involve our jobs, our savings and our taxes, among others.

Until very recently, Malaysian politics was grazing at the level that makes politics a worthy field to match its name. From military procurement to the mass rail transit system and to nuclear power, things that matter took the limelight.

For a period, there was nuance in the political debate held in the public sphere. It was a breath of fresh air from the stale old stuff of race and religion.

One example that took public debates to the next level was Pakatan Rakyat’s Buku Jingga. Although I do not necessarily agree with some of its points, I can definitely appreciate how the Buku Jingga forced both sides of the divide to raise the level of debates beyond name-calling. That is the greatest contribution of Buku Jingga.

There were other matters running parallel to this. One was the sodomy trial involving Anwar Ibrahim and Saiful Bukhari Azlan, which is still ongoing of course. Ongoing or not, the issue is dead to me. I have lost interest in it.

What made it even more forgettable were the outrageous details. Listening or reading graphic descriptions associated with the trial created a sensation that I call sodomy fatigue.

Yes, there is a feeling that the system is being manipulated at Anwar’s expense. Yes, there is a feeling of injustice committed against Anwar. Yes, he is important. Yes, he has a significant role to play in instituting a competitive democratic system in the country.

Yet, the country is not about Anwar Ibrahim. Too much energy is being invested in defending and discrediting him.

That energy invested towards Anwar can better be harnessed in other areas that affect our livelihood. For a country that censors the slightest hint of two persons kissing each other on television, there has to be something more than sex — in one way or another — to think about.

The issues of MRT, defense and others that involve billions of ringgit of taxpayers’ money are vying for primetime spots. Rather than reading about someone else’s private parts made public, I would rather focus on public goods treated as private property by the paternalistic few who think they can spend my money better than me.

Imagine my disappointment when morality becomes the centre of attention yet again, as a certain somebody with a lion’s courage alleged that a certain politician is involved in a sex scandal.

In scandal-crazed Malaysia with a sense of morality littered with hypocrisy, many simply drop the things that matter to moralize or hypothesize about others’ lifestyles. The same many are probably rushing to the Internet searching for the video of the scandal, and looking for a cheap thrill along the way.

I am sorry if that is crass. Still, is there anything that is not crass in this country anymore? Parliament is full of it. The courthouse is full of it. The boardrooms of some government-linked companies are so full of it. What is crass anyway? The word by its very self has been diluted by a pool of mud, and something else.

Sarawak is having an important election very soon. In the meantime, what does Malaysia have on its mind?

Sex.

Lim Guan Eng sent out the right message recently. He said ignore the scandal.

Ignore it indeed.

Focus on things that matter instead. Do not take your eyes off your public money, that belonging either to Sarawak, or to Malaysia at large.

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 March 31 2011.