Categories
Liberty Politics & government Society

[2370] Is longer national service the solution?

The Malaysian Defense Minister said that the national service might be extended.[1] He reportedly said that three months were too short a duration to develop noble character and sense of patriotism. The suggestion to extend the program is not new. The then Deputy Prime Minister Najib Razak himself suggested in 2007 that “one year is most ideal, but two years would be better.”

Implicitly, the effort by the government to extend the duration suggests that the program in its current form has failed.

When it was first introduced, it was described as if it was a panacea. But a panacea it is not.

After 18 years exposed to the Malaysian reality, it is hard to believe a 3-month make-belief, propagandistic summer camp will undo what some perceived as unwanted behaviors and worldview shaped by the society by much, never mind that the government itself partly contributes to the problem through the mangled education system. Those in the government know this. Else, they would not have wanted to extend the duration.

While there are reasons to believe by stretching the duration longer may make the program more effective for better or for worse — for me, it is the worse — it is easy to parallel this to the sunk cost fallacy. A program fails and somehow by investing more into it, it will work. If indeed a longer program will fail just as it has failed in its current form, that would mean more public money wasted. Already the program is costing more than RM500 million per year according Khairy Jamaluddin.[2]

If the extension would improve the program, I would still oppose it. I oppose the program on principle, not because of its duration or its general farce.

While the current Malaysian national service is a misnomer — especially when compared to proper program that exists in Singapore, Taiwan and South Korea that has militaristic aspects — the Malaysian version is still conscription. It is a draft. Extending the duration only makes the draft worse, never mind that for many, it is an interruption to their education plan.

Never mind the deaths associated with the program. Having a program that runs more than 3 months will increase the likelihood and the cases of death in the program. For a summer camp that is not really part of the national defense force, it is deadly farce.

The national service is unneeded. All of its objectives and modules — in its website, the four modules are physical training, nation-building,  character-building and community service[3] — can be done in schools. Or better, voluntarily in or outside of schools.

Did you not do all these things while in elementary and high schools? Oh wait, even if you did, it was within a largely Malay environment, a largely Chinese environment, etc. And the government is supporting that system.

The fact that the national service is considered necessary by the power that says something about the public education system: it is defective. One would expect the solution is to improve the system.

But no. To some, the solution is to introduce another compulsory program that has shown to fail.

A failed program to augment a defective education system.

What a policy.

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

[1] — KUALA LUMPUR, Malaysia – The National Service training programme’s three-month period may be extended, said Defence Minister Datuk Seri Dr Ahmad Zahid Hamidi.

He added that the ministry was studying the possibility as three months was too short a time to develop noble characters and foster a sense of patriotism.

“The matter will be discussed at a meeting of the National Service Training Council,” he told reporters after the presentation of 2010 National Service Training Department Excellent Service awards at the ministry here yesterday. [NS term may be extended. The Star. May 27 2011]

[2] — Khairy sebelum ini meminta kerajaan mengurangkan pembelanjaan untuk program yang dikatakannya kurang berkesan dan menelan belanja yang besar contohnya Program Latihan Khidmat Negara (PLKN) yang memakan belanja RM560 juta setahun. [Tempoh Latihan PLKN Mungkin Dipanjangkan – Zahid. Bernama. May 26 2011]

[3] — See Training Module at Jabatan Latihan Khidmat Negara. Accessed May 28 2011

Categories
Politics & government WDYT

[2369] When will the Parliament dissolve?

When do you think will the PM dissolve the Parliament?

  • In the next few months (44%, 12 Votes)
  • By the end of 2011 (30%, 8 Votes)
  • 2012 (15%, 4 Votes)
  • 2013 (11%, 3 Votes)

Total Voters: 27

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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
ASEAN History & heritage

[2367] From Tanjong Pagar to Woodlands

I meant to write this more than a year ago when Prime Minister Najib Razak announced that the Malaysian government agreed to relocate Keretapi Tanah Melayu’s terminus from Tanjong Pagar to Woodlands. News that the Tanjong Pagar Station will finally close on July 1 encourages me to open up my archive of unfinished writings and finish this particular entry.

While the agreement has improved relations between Malaysia and Singapore, which is good, I was disappointed with the decision, and remains so today.

It is a disappointment because Tanjong Pagar is the last visible link that exists between the two countries, harking back to a time when Singapore was part of colonial Malaya and later modern Malaysia. It reminds Malaysians and Singaporeans alike that we share a common past. There was a dream unrealized; Singapore to Kuala Lumpur as New York to Washington D.C.

For regionalists who dream of a closer Southeast Asia, the link provides concrete infrastructure to that dream.

The dream will live on, even without Tanjong Pagar. And of course, the link is not severed at all. It is only shortened. Woodlands is still in Singapore after all.

Still, the link to Tanjong Pagar is special. It is special not just because of the past but also for what it can be. A high-speed train between Kuala Lumpur and Singapore will greatly enhance people-to-people interaction.

Even so, the KL-Singapore high-speed train link is only part of a bigger dream. Imagine a Penang-KL-Singapore link. Imagine a Bangkok-Penang-KL-Singapore link. Imagine bigger.

Of course. Of course. Of course there is still Woodlands. But the experience will be vastly different. Trains are not supposed to be like airports, detached from cities with all the associated hassle. Trains are supposed to be convenient. One embarks in a city only to disembark in another city.

Woodlands is nowhere. Like Changi. Like Sepang. Unlike Brickfields. Unlike Tanjong Pagar.

Categories
Economics

[2366] Does the rounding mechanism contribute to inflation?

Does the rounding mechanism in Malaysia contribute to inflation?

Malaysia implemented the rounding mechanism in 2008. All prices are now rounded to the nearest five sen. The mechanism makes the one sen coins redundant although the coins themselves are legal tenders still.[1]

To answer the question, I have an anecdote to tell.

Australia also employs the rounding mechanism. The only difference between the Australian and Malaysian systems is that the Down Under version applies to cash transactions only. In Malaysia, prices are rounded regardless of transaction types.

I am a stingy person. In the case with the Australian system, I was literally penny wise, pound foolish. Well, more penny wise and less pound foolish. Considerably less for the latter.

Really.

Anyway, whenever I went out shopping in Sydney, I would check up on the price and see if whether it would be rounded up or down. If rounded up, then I would use my card so that I would save a couple of pennies. If down, I would use cash to get penny discounts.

I did that because I thought these firms were getting too much of the good stuff. I also thought they might have purposely priced their items so that prices would always rounded up in their favor. Hey, if I were the shopkeepers, I would do that too. And some of these businesses are big. I am not anti-business or anything but I sure do think they can make do just fine by not squeezing another penny out of me. Not when I am still alive damnit!

So, I would do that. After awhile, I thought maybe, it did not matter in the end. The saving from this little exercise was really small that if the whole two years worth of saving were combined, I could probably get a candy. One candy. That would not have impressed the ex-girlfriend by much.

The point is that even if the rounding mechanism contributes to inflation, I doubt it is significant.

But that is an anecdote. Here is something more scientific.

Chande and Fisher in 2003 wrote about the effect of rounding mechanism in Canada. They concluded that the expected impact was small. In fact, the effect of rounding on inflation is expected to be zero. Why?

They assumed the last digit that matters in rounding is uniformly distributed from 0 to 9. Therefore, the probability of each digit occurring is 10%. Since four digits will be rounded up, four digits will be rounded down and another two do not need to be rounded, the expected extra cost or revenue incurred or earned from the mechanism is zero. In simpler terms, the mechanism’s expected contribution to inflation is zero. On average, the sellers and the purchasers do not enjoy or suffer extra revenue or cost due to the rounding mechanism.

The authors ran a simulation and concluded that for purchases more than two items, the last digit of the price did distribute uniformly across the natural number line.

For purchases of less than three items, the digits did not distribute evenly. This suggests that this kind of purchases does contribute to inflation but since it is one or two purchases, its impact is likely small as suspected by Chande and Fisher.

How about strategic pricing?

Let me quote the paper I mentioned:

Thus, in order to take advantage of rounding, a retailer would need to know how frequently different combinations of items are purchased. While retailers like Tim Horton’s would have access to such data, Table 2 suggests that even if prices were strategically adjusted by firms to squeeze extra revenue from their customers, the amount per transaction would be so trivially small as to have little impact on consumer behaviour or welfare. Moreover, we have focused on price-setting by a single firm and ignored the reaction of other firms selling in the same market. It is an open question whether an oligopolistic market would lead to equilibrium prices that exploited rounding to the detriment of consumers. Indeed, anecdotal evidence from New Zealand suggests that such fears maybe unwarranted. Correspondence with the Reserve Bank of New Zealand, which in 1990 removed its 1- and 2-cent coins from circulation, revealed that some supermarkets at the time advertised they would always round in favour of the customer. [Dinu Chande. Timothy C. G. Fisher. Have a Penny? Need a Penny? Eliminating the One-Cent Coin from Circulation. Canadian Public Policy. December 2003]

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

[1] — The Rounding Mechanism is a method whereby the total bill amount (including goods and services subject to tax) is rounded upwards or downwards to the nearest multiple of 5 sen. In this regard, total bill amount that ends in 1, 2, 6 and 7 sen will be rounded down while 3, 4, 8 and 9 sen will be rounded up to the nearest multiple of 5 sen. [Frequently Asked Questions on Rounding Mechanism. Bank Negara Malaysia. Accessed May 19 2011]