Tag: conflict of interest

Categories
Politics & government

[2783] Public officials do not deserve privacy

Privacy very is important to me. It is important not just in the practical sense but also as a matter of principle with the context that I am a libertarian. Even in the internet age when doxing and hacking are almost normal and easily done, surveillance and privacy breaches are still a concern.

Now, the 1Malaysia Development Berhad scandal involves a lot of violations of individual privacy. Details of individuals’ bank accounts have been leaked out. Yet, I do not take it as violation in the libertarian sense.

Does this mean I am applying double standard in this case?

No.

So, why does the privacy for these individuals weigh less than that of others’?

These individuals — public official and their close relatives — do not deserve the typical privacy protection granted to the common men and women because they are in power. They are public officials. The higher up they are on the echelon of power, the less protection they deserve and the greater scrutiny the they should come under.

If they were accorded the same protection, it would create great opportunity for corruption and makes it harder to detect actual cases of corruption. For a clean government to exist, power must always survive skepticism. And so too for men and women holding public offices.

In fact, it should be the practice for public officials to declare their income and wealth to the public in the first place to reduce the opportunity for corruption. That very practice refuses them the right to privacy as far as income and wealth are concerned.

But in Malaysia, we do not have that declaration system and the public cannot access existing incomplete, inadequate asset declaration records. And this doubly means that these individuals of power do not deserve privacy that they are demanding.

Truly, leaks targeting 1MDB and others in power are now the only means for the public to ascertain the various allegations of corruption. These allegations are no more about sensationalist tabloid gossips. They are a matter of state administration and corruption.

Worse, sadly, the leaks have more credibility than most Malaysian institutions. I hold that it is these leaks that are forcing our institutions to investigate 1MDB finally. Without the leaks, these institutions compromised as they are, would have done nothing. The leakers, whoever they are, are providing public service.

This leads to another point. Our institutions suffer from trust deficit. Years of abuse by the government have robbed our institutions from the neutrality and the credibility they need to do their job.

And on top that, there is also conflict of interest just by the way our institutions are designed. In the case of 1MDB specifically, the attorney general who is leading the investigation suffers from conflict of interest. The AG office is both the public prosecutor and the legal counsel for the government. Since the AG office itself is under the Prime Minister’s Department, I fear the political reality means the AG will act more of a legal counsel to the government than as a reliable public prosecutor.

If the lack of very public asset declaration practice, trust deficit and conflict of interest has yet to convince you why individuals of power (public officials and their close relatives) do not deserve the typical privacy protection, then perhaps the awkwardness of them using the privacy laws to prosecute the leakers and prevent the public from finding out if there is indeed has been any wrongdoing.

At the very least, there is a very strong suspicion of abuse in 1MDB, a government-linked company. Any individual benefiting from the abuse deserves no privacy protection. They, instead of the leakers, should face the full force of the law instead.

Categories
Politics & government

[2468] They drive, they measure, they are tempted and they can

It does not inspire confidence when the same entity that is driving a program is the one that measures the success of the program as well. There is a conflict of interest there.

Imagine a soccer team up against another team and imagine the referee is a team member of the former team. It is safe to bet that the referee will rule in favor of his or her team. Similarly, if you are running a program to lower crime rate and you are also the one measuring the success of the program, there will be temptation to report your progress in an overly generous way, especially when your progress is not too good. More than temptation, you can actually give undeserved good marks to yourself if the temptation gets the best of you. In order words, you are the prosecutor, the judge and the jury all at the same time.

I see PEMANDU’s National Key Performance Indicators through the same lens. The NKPIs basically measure some areas where PEMANDU or the government wants to see improvement in. While I do appreciate that these tools do increase transparency and makes debates on some matters more objective than it was in the past, the measurements themselves are not entirely trustworthy. PEMANDU has the incentive to look good. What guarantees the indicators reported are not tempered with?

To compound the issue, PEMANDU is not exactly an independent or even an impartial party. It answers to a minister. I suppose it helps that Idris Jala is an unelected minister with probably an entirely professional background. That is an argument of him being isolated for the myopic politics. But then again, myopia is not a trait exclusive to politics. It is well documented in businesses, and everywhere else.

And the fact is that he ultimately answers to the Prime Minister, whose career is entirely dependent on politics. The success of PEMANDU will be one of the key factors in increasing the odds of reelection of  Barisan Nasional. So, it is in the Prime Minister and Barisan Nasional’s best interest to have PEMANDU succeed, or really, appear to be successful. PEMANDU wants to look good. The Prime Minister wants to look good. The government wants to look good. Well, everybody wins by looking good.

We have not even begin to consider the KPIs under the case of various ministries, which are even more suspicious. KPIs, at least the ones I have witnessed elsewhere, are always negotiated. The negotiation ensures that the KPI is not a kind of out of this world so that it is not impossible to achieve but at the same time, not too easy to make it meaningless. Now, consider a bunch of politicians that want to get reelected. It is in their collective interest to set easy KPI that can be achieved even without a mad dog chasing them behind.

So every time when somebody comes up to me and shows me some indicators to prove that PEMANDU has been successful in some area, I quietly note the conflict of interest at the back of my mind.

Categories
Politics & government

[2463] We don’t need a big government voting bloc

In our modern Malaysia, one can hope that government policy comes about through the general will of the people peacefully through democratic means. One can further hope that this mean not merely crass majoritarianism but that which is respectful of individual rights. After all, the government and the state derive its legitimacy from the people, the citizens — an idea that is clichéd but time-tested and the prevailing idea of government in our time. It took us humanity hundreds if not thousands of years to finally subscribe to it either willingly or grudgingly.

The ideal democratic government and state translate the general will into policy and ideally, they must always accede to the general will.

What is ideal is not necessarily true on the ground however. How many self-proclaimed democratic states have turned against its citizens?

History has witnessed many of those examples, which should be enough to convince the democrats among us of the need to establish some mechanism to limit the opportunity for government to shirk from their responsibility to the people and more importantly, to prevent it from developing means to promote its own separate interest at the expense of citizens.

Since we really live in a largely majoritarian reality, herein lies the importance of a small government.

To understand the need to control the size of government, it is crucial to note that government employees themselves are voters and all voters are self-interested. They will vote for those who will promote their welfare and interest more often than not. They are exemptions, of course, but the assumption of self-interest remains the most robust assumption of human behavior. It expects the least and thus less susceptible to disappointment, unlike other more benevolent but naïve assumptions that exist on the economic left that have failed more frequently than the financial markets have crashed.

A large government employing a large fraction of citizenry will invest this group of voters with excessive political power. The larger the government, the more votes will go toward enhancing the welfare of its employees.

This creates a conflict of interest where the employees of the government can promote their interest collectively instead that of the wider voting population. With a power voting bloc, the institution that is supposed to execute the general will of the people takes a life of its own. How many times have large rewards been to government servants just before the election in Malaysia?

Essentially, that large voting bloc enables government servants to raise their own wages and grant themselves other benefits, a conflict of interest so brilliantly portrayed in an episode of the BBC’sYes Minister.

That conflict of interest is even more worrying when the taxpayers are mostly those who are employed in the private sector. What pain do the benefactors of the voting bloc suffers when someone else is financing the punch party?

With a majoritarian reality and an influential voting bloc, officeholders and the aspirants will not dare promote a responsible public finance. So not only it exacerbates the status quo, it reduces the likelihood of putting the party to a stop before it is too late to switch the tracks.

At the very extreme, such bloc makes the liberal rationale for the state irrelevant. The state now becomes overly sensitive to government servants, and less so to the citizens at large.

The 19th century American author Edward Bellamy somewhat circumvented the problem by making everybody the employees of the state. He detailed his views in his work of fiction, Looking Backward.

Ingenious, except he dreamed of a very different society. He dreamed of a utopian communist society where all wants and desires are fulfilled, and men and women work not for monetary reward but merely for recognition that scout boys proudly wear. Men and women of Looking Backward believe the government does everything for the benefits of the masses, ever so efficiently.

Where Bellamy spotted a utopia, Orwell saw a dystopia.

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 Sun on November 25 2011.

Categories
Economics

[2441] No target, no central planning

Milton Friedman once visited Hong Kong in 1963. He met John Cowperthwaite, the financial secretary of Hong Kong, whom was credited for enabling Hong Kong to become Asia’s foremost financial center through his free market policy. Friedman asked him “about the paucity of statistics” in Hong Kong. Cowperthwaite replied, “If I let them compute those statistics, they’ll want to use them for planning.[1]

Statistics has its uses and it does help us understand our society better. It describes phenomena objectively instead of forcing us to rely on conflicting anecdotes that are dependent on point of views. First and foremost, statistics has descriptive power.

But not all individuals believe in only the descriptive power of statistics. Some believe too much in the prescriptive aspect. Statists tend to belong in the latter group. PEMANDU is afflicted with it too, arrogantly trying to manage the economy when the economy itself is organic.

I reject targets placed on something as organic as the economy. While the government does have a role to play, to set a target on the economy mistakes the economy as a business entity or a firm, pretending as if the planner is the CEO, where there is none really.

The dangers of having a set of targets like having specific real GDP growth rate are plenty. One of them is the incentive for the government to spend too much just to meet its target. There is a conflict of interest when the target is set by the very entity that is meant to achieve it (this is also partly the reason why I am skeptical with a lot of KPIs set by the government: incentive to set them low to make themselves good).

This adverse incentive is bad for public finance and ultimately, for taxpayers.

More generally, having those targets encourages central planning.

But this entry is not meant to bash PEMANDU. I think I have criticized PEMANDU so much that I am bored of it already. This entry is meant to criticize Anwar Ibrahim.

Anwar Ibrahim is smart. When he realizes that the Najib administration is targeting possibly an unrealistically high real GDP growth rate given the global economic circumstances, he challenges it and demands accountability from the federal government. He wants a special parliamentary sitting to meet if the federal government fails to meet their target later in the year.[2]

I disagree to the demand for accountability. It is not so much I would like to give the Najib administration a free ride. It is only because I disagree with having a target in the first place. To demand accountability only strengthens the path to the target. That means central planning.

This is a case where accountability is not so hot.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved
[1] — The difference in the economic policies followed by Hong Kong and Britain was a pure accident. The colonial office in Britain happened to send John Cowper-thwaite to Hong Kong to serve as its financial secretary. Cowperthwaite was a Scotsman and very much a disciple of Adam Smith. At the time, while Britain was moving to a socialist and welfare state, Cowperthwaite insisted that Hong Kong practice laissez-faire. He refused to impose any tariffs. He insisted on keeping taxes down.

I first visited Hong Kong in 1955, shortly after the initial inflow of refugees. It was a miserable place for most of its inhabitants. The temporary dwellings that the government had thrown up to house the refugees were one-room cells in a multistory building that was open in the front: one family, one room. The fact that people would accept such miserable living quarters testified to the intensity of their desire to leave Red China.

I met Cowperthwaite in 1963 on my next visit to Hong Kong. I remember asking him about the paucity of statistics. He answered, ”If I let them compute those statistics, they’ll want to use them for planning.’’ How wise! [Milton Friedman. The Hong Kong Experiment. Hoover Digest. July 30 1998]

[2] — KUALA LUMPUR, Oct 10 — Datuk Seri Anwar Ibrahim today demanded Parliament reconvene for a ”special sitting” if Putrajaya fails to meet its ”unreasonable” gross domestic product (GDP) growth forecast.

The opposition leader today poured cold water over Datuk Seri Najib Razak’s Budget 2012 tabled on Friday, claiming the prime minister’s predictions and his administration’s alleged penchant for unbridled spending would likely worsen the country’s deficit.

Anwar also predicted the Najib administration would table a supplementary supply bill by mid-2012, seeking for additional funds just as it did in June this year. [Clara Chooi. Anwar wants special Parliament meet if GDP aim unmet. The Malaysian Insider. October 10 2011]

Categories
Economics

[2388] Nudge, nudge, wink, wink

It is the practice of some labor unions to produce one or several publications annually to inform their members of various activities and developments related to the unions.

As with many things in this world, it costs money to produce these publications. These unions finance the publications through a number of ways. Membership fee is one example. Another is selling advertising space to non-members, especially to the business community. This, however, can be an ethically grey area.

This kind of funding can be ethically iffy if the union members comprise employees of public regulators or law enforcement agencies, like the police, the Fire Department or Customs. This particular interaction between the unionized employees and the business community through the sale of advertising space creates perverse incentive.

It is a potential channel for corruption. It has the ability to affect adversely the traditional relationship between the public and the government.

Everybody deals with some of these regulators and enforcers in one way or another. The police maintain public order. The Fire Department apart from firefighting ensures public adherence to certain codes. City Hall and other local councils enforce even more codes. Many other regulators and enforcers exist out there to match the hundreds or thousands of laws that govern too many things.

Services provided by the enforcers and the regulators are funded by public money. To put it simply, the public pays for the services and these government arms render the services to the public. This is the traditional relationship. It is simple and clean.

This traditional relationship between the two must not be influenced by any other factor, lest the regulators and the enforcers filter their customers for their own benefit.

The sale of advertising space by unions especially to business establishments twists the traditional relationship by creating another channel for the public to interact with the regulators and the enforcers. That new channel runs through the unions to form a special relationship between the space purchasers and sellers, who are part of the government or its agencies.

There are at least three ways this is detrimental to the traditional relationship.

One, the sale and purchase of advertising space can be done by the business community to return a favor previously done or will be done by certain unionized employees. This is downright corruption.

Two, the sellers, who are employees of the government bodies and agencies, will feel indebted to the purchasers. It is a profitable relationship and one always keeps profitable relationship intact.

By doing so, the purchasers will have special relationship with the seller and, implicitly, to the regulators and enforcers. Those particular employees or any member of the union may systematically handle future requests or transgressions by the sellers leniently. This runs contrary to the ideal that prescribes everybody as equal before the law.

Three, even without such favors or the feeling of indebtedness, a mere request by the unions may create consternation among the solicited. A forward-looking person, and especially businesses, upon receiving the advertising request would ask, how would this affect us? For those who conclude that a negative reply would affect the likelihood of approval to future transactions, they might feel compelled to purchase the space from the unions. This can happen even if there is no intention by the union to abuse its influence. In other words, it creates a perception of corruption even though there is no actual corruption.

The way the incentives have been perversely structured inadvertently or otherwise may make it necessary for the relevant authority to look into this particular activity of these particular unions.

Despite all that, this is not to say that there is actual corruption in the system. This may sound like a cop-out but the whole structure is an opportunity for corruption nevertheless.

Individuals are not inherently good or bad, clean or corrupt. Many times, it is the institutions that provide the incentives for corrupt practice to flourish.

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 June 27 2011.