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
Economics

[2359] Tricubes and apparent inefficiency in the market

The effect of the Prime Minister’s announcement regarding the 1Malaysia email on the stock price of Tricubes is interesting.

Tricubes’ stock price rose after the information about its 1Malaysia email project was first made public. That is fine. The efficient-market hypothesis says that all available information is summarized by its price. Here was a chance to turn a problematic company profitable and the market understood this. Some market participants responded by buying the stocks.

What is not fine is when the price jumped many times over after the Prime Minister announced the same thing more than a week later.

Since the two announcements relayed the same information, only the first announcement should have impacted the price, if the market was efficient. The second announcement was merely a repeat of what everybody in an efficient market should have known. The second announcement should not have effected the price in an efficient market.

Yet, price did go up.

Does that mean the Malaysian stock market is inefficient?

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

p/s — this was written late at night and my mind just was not working. This entry had a very different opening but I thought it was digressing too much that I thought it was easy to misunderstood what I wanted to touch about in the end, which was the efficient-market hypothesis. Just for the record, this was the opening:

Just as the Tricubes and the 1Malaysia email matter started to die down a bit, Idris Jala the man himself poured fuel into the fire to open PEMANDU up for yet another round of harsh criticism: why did PEMANDU, a public setup, defend what was supposedly a private initiative? Earlier communication mixed up ended up embarrassing the Prime Minister, whom shared with the public what PEMANDU knew was more complicated than what the Prime Minister thought he knew.

I am adding this just because I thought it shares what I thought of the whole issue. I wanted to share it but it is so insignificant (one paragraph) but adding it as a postscript would be sufficient.

Categories
Society

[2358] An individualist response to Ioannis Gatsiounis

I watched a documentary once. It was about Muslims in America. There was a young female Muslim in New York with typical American lifestyle. She was not the conservative type and I am on confident of that. She did wear a scarf though and that probably tells you that she identified herself with Islam.

In one segment, she said she did not feel the need to come out in the open to condemn terrorist acts done by some Muslims in the name of Islam. She said she was not responsible for it and she would not apologize for others. They happened to share the same religion as her.

I am in complete agreement with her. I am not because I am trying to defend the religion and Muslims at large. I have grown to be so much a skeptic in the past few years that I am more likely to criticize religion, any religion for that matter, than to defend it.

I am in complete agreement with her because there is a mark of individualism in that statement.

More importantly, the individualism is very much libertarian. We are responsible for our own actions and no one else. Each one of us is responsible for our own actions.

It is for this reason that I do not buy the narrative that moderate Muslims must come out to condemn terrorism or any wrongful act done by fellow Muslims. I disagree with what Ioannis Gatsiounis wrote at The Malaysian Insider today, where he wrote that the Muslim community needs to express “collective expressions of joy and relief of bin Laden’s death” to help combat the suspicion that Muslims are quietly sympathizing Osama Bin Laden and his merry men in Al-Qaeda.[1]

And then, guilt by association is a fallacy, after all.

No doubt, there are Muslims who sympathize with Bin Laden. That however does not negate the individualist argument. Those Muslims are responsible for their own positions. Other Muslims theirs, as with other individuals regardless of beliefs out there in this world.

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

[1] — Your initial reaction to news of Osama bin Laden’s death is telling. If you were disappointed, you no doubt harbour terrorist sympathies.

Of course, many non-Muslims have come to suspect many Muslims have been doing just that at least since 9/11. That impression may be inaccurate. But with repeated silence among moderate Muslims in the face of countless acts of terror committed in the name of Islam since 9/11, it’s easy to see why the suspicion arises [Hope for Islam’s image with bin Laden’s death. Ioannis Gatsiounis. The Malaysian Insider. May 3 2011]

Categories
Politics & government

[2357] A little less conversation, a little more action please

It is easy to dismiss any grand statement made by PKR nowadays. This is not at all unreasonble, unfortunately. PKR has a reputation of boasting to either boost its members’ morale or to attain higher ground while negotiating with other parties, allies or foes alike. Its claim that there would be a change of federal government on September 16 a few year ago is the epitome of they are capable . What happened in Sarawak solidifies PKR’s dented reputation. Now, PKR Selangor is stating that it is it is confident of winning two thirds majority in the state.

Whether that confidence is grounded in reality or in the clouds, I think it is wise for them to not make any claim colored by exuberant confidence any more. Talk is cheap and a person’s reputation can only suffer so much.

For the party to be taken more seriously, it needs to repair its reputation by proving its capability, rather than talking it up only to have the balloon pricked by a pin. By doing more and talking less, perhaps the party can build up its fast depleting reservoir of credibility. PKR needs to do this quickly because the gap in its reputation is substantial.

Although PKR is becoming a laughing stock each time its leaders open up their mouth — observe their justification for their selfishness in Sarawak; while the breakthrough is encouraging, the overall result is disappointing and the denial is astonishing — this is no laughing matter for those who believe in competitive democracy.

PKR is an important component of Pakatan Rakyat. For better or for worse, it is the leader of Pakatan Rakyat. As a leader, its reputation reflects the whole pact. PKR should not abuse its reputation as it is abusing right now. That is most unfair to other members of the pact.

Furthermore, in a country with history rich of opposition coalition breakup, the solidarity of Pakatan Rakyat should not be taken for granted by PKR. An asset can become a liability. There will be a point where PKR stops becoming an asset to other members of Pakatan Rakyat.

Categories
Conflict & disaster Politics & government

[2356] A dead Osama means dead Republicans

President Obama has just announced that Osama Bin Laden is dead.  I am sure there will be a lot of discussions on the matter, of how it will affect relationship with the Muslim world, of how this will affect military operation in Pakistan and many others.

One question I want to explore is its potential effect on the 2012 Presidential election.

This is a huge achievement for the Obama administration for one reason: by choice or by accident, the Republicans made Bin Laden the center of their administration and they failed to close the issue it satisfactorily. President Bush was positioned as a war president and I remember during the 2004 election when I was in Ann Arbor, the Republicans relentlessly attacked the Democrats for being soft on War on Terror. The Republicans put themselves as the only party that could lead the US in time of war.

In the end, Bin Laden was the political object of the war, regardless of his strategic value. Yet, four years later, eight years later, he was nowhere in sight, still roaming the mountains of Afghanistan and Pakistan. Hence, the Republican administration under Bush failed politically.

Now that Bin Laden has been killed by the US military, the objective has been achieved. And was achieved by a Democrat administration.

For a party that is traditionally seen as the one with the experience and the backbone in terms of foreign policy, this cannot be good for the Republicans of 2012. Surely, among the pro-war groups that centered its motive around the need to avenge, the Democrats are the heroes, not the Republicans.

As security concerns slowly retreat into the background and merge with various political noise, so too the likelihood of us seeing a Republican President in 2012.