Categories
Economics

[2431] Two cheers to San Miguel

The sale of Esso Malaysia by ExxonMobil to San Miguel of the Philippines is a done deal. But it was not completed before economic nationalists sounded the alarm. They feared foreigners would seize control of strategic assets within the country while seemingly ignorant of the fact that ExxonMobil is a US-based multinational corporation in the first place.

The more discerning economic nationalists hoped, demanded and appealed to ExxonMobil to sell all of its shares to the locally-based Lembaga Tabung Angkatan Tentera (LTAT).

Luckily, the jockeying was to no avail. Why luckily? Here is a question for consideration: Were these economic nationalists interested in the welfare of Malaysians?

I would say no.

This is a pertinent question given that LTAT already owns Boustead, which in turn operates petrol retailer BHPetrol. To have LTAT controlling Esso Malaysia would likely reduce considerable competitive force within the industry, if there were any to start with. More importantly, it would turn back the clock on any effort at introducing competition in an industry already stifled by government regulation and effective monopoly.

The LTAT path advocated by economic nationalists in Barisan Nasional, Pakatan Rakyat and whoever else would reduce competitive pressure in the area, and it would also exacerbate the already adverse relationship that exists between the government and businesses.

With the government already involved in various industries, what ensures that the government has the interest of actual individual Malaysians in mind instead of the profits of various government-linked companies — or in the latest case of the economic nationalists’ wet dream, the profits of LTAT and its companies?

This is an organization that is already mired in a controversy revolving around opaque military procurement which is closely related to yet another case of conflict of interest. How is it not a conflict of interest when LTAT is the major beneficiary of various military contracts while at the same time being a retirement fund for armed forces of Malaysia? And let us pretend that unlike the experience of Indonesia and Egypt, a military with direct or indirect business interest is an ingredient for the creation of a healthy civilian government.

Real business concerns run mostly on a profit motive. It cannot afford to entertain nationalistic sentiment. If it does entertain nationalism, then it typically seeks to manipulate such sentiment to its own advantage. Proton is one such case: save Proton, buy Malaysia. Or Malaysian Airlines: save MAS, fly Malaysia.

It is not a phenomenon unique to Malaysia of course. In the United States, General Motors and Ford have from time to time brandished their American credentials to American consumers. Many businesses in the past have also employed economic nationalism to justify protectionism in these business favors.

Zooming back to Malaysia, economic nationalism takes the extra step of merging business interest with government interest, thus making the issue of conflict of interest two-fold: government protecting its profits rather the interest of its citizens, and businesses manipulating government powers to advance business interests at the expense of citizens. It is a symbiotic relationship between government and business that turns the very components of a free society into parasites, living on taxpayers’ sweat.

Such perverse incentives cannot be good for the welfare of Malaysians in general.

For these two reasons, the sale of Esso Malaysia to San Miguel should be celebrated.

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 September 18 2011.

Categories
Liberty Politics & government

[2430] Let us inspect the qualifications first

Prime Minister Najib Razak has just delivered a much awaited speech.[1] It is much awaited because it was hyped up by the media. The speech did contain important announcement of intentions but the first 15 minutes were full of fluff.

The substance came later in the second half of the speech. He said his administration intends to repeal all declarations of emergency still in force. These declarations are frequently cited as anti-liberty and as means to circumvent more rigorous laws. He mentioned that the necessary bills will be sent to the Parliament for consideration.

My first reaction was one of excitement. Yet, questions linger. Will we see the return of local elections? There is no explicit mention of that. There are other questions in my mind that require answers.

With that realization, I take a skeptical position. This skepticism grew as the PM read more of his speech.

The proposed abolition of the Internal Security Act for instance should be a reason for liberals to cheer but two new laws are being proposed to replace the ISA. I fear that this may be merely a renaming exercise, due to the qualifications the PM included in his speech.

Another is the annual renewal of permit for the press. The proposal on the table is to replace that mechanism with a system where a license will only be canceled until it is canceled by the government. Does this mean the government will have the discretionary power to cancel a license just like that? That is not much better than the current setup. I prefer a renewal system where the permit lasts more than 5 years beyond typical election cycle to limit political manipulation by the government, be it one led by Barisan Nasional, Pakatan Rakyat or anybody for that matter. It limits discretionary power. The newly proposed system increases opportunity for discretion. The problem has always been the exercise of discretionary power, not the permit system per se.

These qualifications are important because these qualifications will be the true measure of sincerity of this announcement and of any effort at liberalization.

The Prime Minister and his administration deserve a nod for this liberalization plan but let us inspect the qualifications first before applauding the administration.

And I will believe it, after I see it finally done.

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

[1] — [Najib Razak. Perutusan Hari Malaysia. Office of the Prime Minister of Malaysia. September 15 2011]

Categories
Books, essays and others Fiction Liberty

[2429] The good is to live it

For centuries, the battle of morality was fought between those who claimed that your life belongs to God and those who claimed that it belongs to your neighbors—between those who preached that the good is self-sacrifice for the sake of ghosts in heaven and those who preached that the good is self-sacrifice for the sake of incompetents on earth. And no one came to say that your life belongs to you and that the good is to live it. [Atlas Shrugged. Part 3. Chapter VII: “This is John Galt Speaking.” Ayn Rand. 1957]

Categories
Conflict & disaster Personal Society

[2428] How September 11 2001 affected me?

I have told this story many times to friends.

I just woke up from sleep. It was sometime between 8AM and 9AM. My first semester at Michigan. The first or the second week of class. Chemistry class was due at 10AM. Or really, ten after ten. It was Michigan time, you see.

I needed to print some notes and check my email before class. So, I came down from my room and saw a notice on the door of the computing lab at the basement of the Michigan Union. There was a national emergency, it said. The office was closed. I had no idea what the emergency was about.

I logged on the computer, went on Yahoo! and saw a burning World Trade Center. This must be a hoax, I told myself. It was too outrageous to believe.  I dismissed it.

I was young, barely 19, and was still processing what was going on.

I went to class anyway, not wanting to miss anything. I rushed across the Diag, on a possibly clear blue morning.

There was none to be had. The professor was there and the class was a little bit more than half-full, but everybody came to realize something bigger was happening. The Twin Towers had collapsed. Class, dismissed.

Elsewhere, there were talks of repercussion. Friends through emails were warning of backlash against Muslim students. That also included most Malaysian students in the United States. There was fear.

I had heard of stories of xenophobia elsewhere, but I did not suffer from it throughout my 4 years as a Michigan undergraduate. Not ever. Maybe it was the liberal nature of Ann Arbor compared to some other parts of the US, but never once I became a victim of xenophobia.

The weeks and months following the attack formed lasting impression of the US society in my mind. It was one of admiration. There were fierce debates throughout the years about what was right and what was wrong. But the society itself survived the illiberal tidal wave that threatened individual liberty. Coming from a relatively, very much closed society that prevailed in Malaysia then, the societal dynamic of the new world was enticing and refreshing. I was impressed at the US society despite all the criticisms against it.

It was in the US where I found my values.

I have always said that I became a libertarian because of my experience in Michigan. Now, I think I became a civil libertarian because of the September 11 attack. I did not have a label to point at then, but in retrospect, I knew September 11 was the seed for me.

I saw how a free society can regulate itself and overcome fear and distrust. There was little prejudice around even after the attack to completely unravel the argument that a free society will self-destruct, an idea that was prevalent in Malaysia, and maybe still is.

And I saw how freedom needed to be defended from fear and distrust. I saw friends were forced to report to the Department of Homeland Security in Detroit regularly, just because they came from certain countries. Every time I needed to board the plane, the security team would select me for extra screening, just because I am a Malaysia. I took that as racial profiling and I despised that. It was insulting.

That too, strengthened my view on racial discrimination.

I visited New York later in 2002. I visited the site of the World Trade Center. It moved me.

September 11 was not just some event that happened on the other side of the world. It happened on my side of the planet. It deeply was personal.

Categories
Economics

[2427] Are telcos actually raising prepaid rates?

Consider a tax imposed on a producer in a transaction with its customer. In other words, the producer pays the tax. Does the tax burden fall on the producer exclusively? Or is it shared? Or really, is it a tax on the consumer?

This refers to the controversy regarding the passing of the 6% service tax from telecommunication companies to consumers of prepaid telecommunication services. Telcos have been absorbing the tax previously and now they have decided not to do that anymore. The service tax was supposed to be paid by the consumer anyway. It is a service tax, which is a consumption tax.

What does economics have to say about the passing? What is the welfare effect?

Laypersons might find the answer outrageously shocking: it does not matter who pays what. Whoever the taxpayer, the actual tax burden share between the producer and the consumer is unchanged.

There is a concept in microeconomics called tax incidence. According to it, regardless who pays it, the actual burden depends on elasticity. In layman terms, the most desperate between the producer and the consumer will suffer the larger burden of taxation.

Here is a clearer explanation. While the telcos officially pay for the tax and  if the consumer is insensitive to price change relative to the telcos, the truth is that telcos are passing the tax to the consumer in form of higher prepaid service price. If it is the telcos which are insensitive to price change, then the telcos will actually suffer the larger tax burden.

But there is a problem here, I think.

If the tax is passed to the consumer without change in elasticity, the new rate for prepaid service should be cheaper to account for tax incidence. This assumes that the rate prior to the passing already accounts for the absorption of the service tax, which it should in my opinion. So, RM10, for example, should be able to buy the same amount of minutes before and after the passing.

But if not, if customer will have to pay more for the same minutes after the passing (meaning, the rate for prepaid service remain unchanged after the tax is passed), then it is possible that the telecommunication companies are taking advantage of the situation by actually raising its price stealthily.

That has to be it. Think of it. The tax incidence theory has to hold. The government will receive the same amount of tax but the consumer will have to pay more overall. Somebody is gaining something.

That is right. I am suspecting that the telcos are not only passing the tax (which the passing itself is superficial according the tax incidence concept), they are raising the prepaid rates as well.