I woke up one morning and then I felt an urge to see the Tasman Sea. So I got on a bus to catch a boat ride to Watsons Bay, which is to the east of Sydney.
This particular shot was taken from South Head, one of the heads that form the entrance to Sydney from the sea.
In the background is Manly.
After writing about the need for separation between the state and federal civil services for The Malaysian Insider during the 2009 Perak constitutional crisis, I learned that the relationship of the services depend on whether the state was part of the Federated Malay States. The FMS were the first states — from the north to the south, Perak, Pahang, Selangor and Negeri Sembilan — to have federated in the modern history of what is now called Malaysia. While the civil service in other states are independent from the federal service, the services belonging to the former FMS is linked to its federal counterpart. Tricia Yeoh has written on the matter with greater insight.[1]
And so, when the controversy of the appointment of the State Secretary in Selangor erupted, I understood why the state government was more than apprehensive. What I understood less was the arguments pro-Pakatan Rakyat individuals and groups threw: how it was unconstitutional and how the state not should but have a say.
I am not an expert on the state constitution but as a layperson, the convention is clear and it is being followed, however abhorrent it is to the spirit of federalism. It is ultimately within the power of the federal civil service. Nevertheless, the federal service could at least solicit opinion from the state out of courtesy, which the state insisted did not happen. The way the federal service shocked the state government is not ideal to say the least.
I fully understand that convention does not always coincide with constitutionality, but in this case, chances are it does. The convention provides the context and the background of the issue. Many who believe that controversy is a violation of the state constitution seem to ignore history, hence context. The history of the former FMS matters. The fact that the Selangor state government has proposed to amend the state constitution to address the issue reveals how untenable the argument about unconstitutionality is.[2]
So, I am skeptical of the arguments about unconstitutionality forwarded by pro-Pakatan Rakyat individuals and groups (some have turned into conspiracy theories which I through and through reject; observed the argument related to Anwar Ibrahim and Wikileaks), although I definitely can sympathize with the fear of the possible toppling of the current Selangor government in the same style as Perak. But I am thinking that if that does happened, Barisan Nasional will be guaranteed to not to win Selangor in the next general election, whenever that will be.
In the end, regardless of my criticism of Pakatan Rakyat, I am on their side on this matter simply because I am a federalist by virtue of my distrust of an overly strong government, at the federal level or otherwise. Besides, legal or not, it is outrageous to have someone who is distrusted by the state government to work as the state’s top civil servant. When the law does that, then something is wrong with it. It needs to be changed.
I am all for greater division between the state and the federal governments. Therefore, I support the proposal by Selangor to increase the independence of its civil service. I am less enthusiastic about improving the power of the sultan though.[3] Remember, I am a republican. A dormant republican but a republican nonetheless.
But as a friend wrote to a bunch of people connected to the Institute for Democracy and Economic Affairs, there are other concerns with regards to greater division. One involves the issue of prestige. For states other than the former FMS, the civil servants have nowhere to go. Imagine the civil service of Perlis. It is the smallest state in Malaysia and it is not too rich. It is a dead end, career-wise for state civil servants. For the service in the FMS, one can do very, very well.
Prestige is euphemism for higher compensation and perks, if you are wondering.
[1] — Since taking over several state governments, one of the areas the Pakatan Rakyat has had to contend most with is the civil service. A majority of the bureaucrats working within the state governments are federally appointed, especially higher-ranked officials from the prestigious Administrative and Diplomatic Service (Pegawai Tadbir dan Diplomatik). [Civil servants at an impasse. Tricia Yeoh. Penang Economic Monthly via The Malaysian Insider. September 4 2010]
[2] — SHAH ALAM, Jan 4 — Selangor is considering amending the state constitution with retrospective effect to break the impasse over the appointment of Datuk Mohd Khusrin Munawi as the state secretary. [Selangor mulls retrospective amendments over Khusrin row. Boo Su-Lyn. The Malaysian Insider. January 4 2010]
[3] — SHAH ALAM: The Selangor state government wants the state constitution amended to return the power of appointing the state secretary to the Sultan and the Mentri Besar. [S’gor MB wants state constitution amended. Wani Muthiah. A. Ruban. The Star. January 3 2010]
“Oh, I don’t know, but… but people do things in the world. I saw pictures of New York and I thought”—she pointed at the giant buildings beyond the streaks of rain on the cab window—”I thought, somebody built those buildings—he didn’t just sit and whine that the kitchen was filthy and the roof leaking and the plumbing clogged and it’s a goddamn world and . . . Mr. Taggart”—she jerked her head in a shudder and looked straight at him—”we were stinking poor and not giving a damn about it. That’s what I couldn’t take—that they didn’t really give a damn. Not enough to lift a finger. Not enough to empty the garbage pail. And the woman next door saying it was my duty to help them, saying it made no difference what became of me or of her or of any of us, because what could anybody do anyway!” [Atlas Shrugged. Part 1. Chapter IX: The Sacred and the Profane. Ayn Rand. 1957]
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.
First published in The Malaysian Insider on December 28 2010.