The Malaysian Insider :: Opinion
The Malaysian Insider :: Opinion |
| Subsidy reduction is not the only thing Posted: 22 May 2011 05:08 PM PDT MAY 23 — Subsidy reduction will allow market forces to allocate resources more efficiently. Prime Minister Datuk Seri 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 liberalisation 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 favoured 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 liberalisation done through subsidy reduction is merely a half-hearted liberalisation. 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 liberalised. 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. * The views expressed here are the personal opinion of the columnist. Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
| Posted: 22 May 2011 05:01 PM PDT MAY 23 — Writing this article from Singapore which has just undergone its own general election, I wonder what other possible political themes may come out in Malaysian politics. The Najib administration is pushing its 1 Malaysia theme which in general is supposed to appeal to a broad spectrum of Malaysians as its purpose is to be inclusive. Even the opposition PR has to work on inclusive general themes that have broad appeal to the multiracial voter base that is Malaysia. Their theme cannot be far off from Najib's 1 Malaysia. It will still have to be a rose but by another name. They would not change the position of Islam or that of the Malays that is in the Constitution. No one who understands the nature of Malaysian politics would want that. The Constitution provides security both for the majority and the minorities within Malaysia. So then what needs to change? To a large extent it is how the Constitution is interpreted by the powers that be. The problem arises when people try to interpret too far in what is written plainly. If Article 11 guarantees freedom of religion then how come we have cases like Lina Joy's coming up? If the Constitution provides that religions other than Islam may be practised freely in Malaysia how come we have the bible controversy coming up? It seems that some people are reading things which are not in our Constitution. Our Constitution provides us with individual freedoms though some of these freedoms may be curtailed in some exceptional cases. The sad thing is that in a practical sense we seem to be using the exceptions far too often and forgetting about the main clauses that are supposed to keep us free. Even if we look at Article 152 which protects the position of the Malays; it has been interpreted by some as more of a right than a protection. Najib's 1 Malaysia hopes to liberalise the economy while at the same time making it more inclusive. It seeks greater meritocracy so that we are able to keep and harness our best talents so that we will achieve our development goals. It seeks greater racial and religious understanding that he himself engages in with the various interest groups. For it to succeed, the legacy issues as mentioned above need to be rectified and clarified so that what is plainly written in the Constitution is practised and applied. It's hard to argue against what Najib is promoting but what is questionable is whether this is being put into effect on the ground. The likes of Perkasa are working contrary to Najib's vision. They are the proverbial spanner in the works. While I understand Najib's wish to engage all stakeholders, he really shouldn't be wasting too much time on Perkasa's rants. Malaysia's NEP has done well for the Bumiputras having brought their share of corporate wealth up from under two per cent in 1969 to about 20 per cent by the mid-1990s. It has unfortunately not been able to move since then to the goal of 30 per cent as is wanted by groups like Perkasa. To me this is easily solved if that is what Perkasa and the Malays really want. We take the biggest and most profitable companies like Petronas that the government owns and privatise them, giving shares to the people according to their racial composition. Thus the Bumiputras would then own about two-thirds of these companies and the non-Bumiputras about a third. Overall the corporate shareholdings of the Bumiputras will easily reach and even surpass the 30 per cent goal that Perkasa is crying out for. To me though this is not the priority. Rather than constant bickering about how to share the cake, we should look at how to increase the size of the cake. This requires us to be united as a nation. From a business viewpoint, our diversity is our strength if we know how to use it properly. Our ethnic diversity makes it easy for us to do business in India, China, Indonesia, the Islamic world and countries where English is spoken. We as a nation have an advantage compared to others if we are united. If we practise meritocracy, substantially improve our education system and reduce corruption, we would be world class. 1 Malaysia is not an option but a necessity if we want to keep our date with destiny as a truly developed nation. * The views expressed here are the personal opinion of the columnist. Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
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