NEM
at ground level: Same old model, no paradigm shift
Written by Dr. Lim Teck Ghee Saturday,
02 March 2013 02:34
Commentary
When the New
Economic Model (NEM) was first unveiled by the government, Prime Minister Najib
Razak promised that it would be market-friendly, merit-based and transparent.
Three years later, most business people have discovered that it is the same old
model in new packaging — still not market-friendly, not merit-based and opaque.
It is turning out to be little changed from the corrupt-ridden,
crony-dominated, patronage-driven, racist-oriented system of doing business
that came with Dr Mahathir Mohamad’s extension of the New Economic Policy
(NEP).
Three nights ago, I had dinner with
my brother, a commodity trader in Canada. He was on his annual Chinese New Year
trip back, when he combines a family reunion with meetings with business
clients. His line of trade is pork, which Malaysia imports at the considerable
quantity of over 15,000 tonnes annually from around the world.
When I asked him how his business
was in Malaysia, he said that it was down. He had finished a meeting with his
main client and returned disappointed as the client had wanted to substantially
reduce his purchases.
I was surprised by this disclosure
since his client is a major meat importer, and from all accounts, the
importation business in pork is booming according to trade data.
My brother explained that this slash
in imports was not because of reduced demand or the client's lack of business
acumen. According to my brother, he heard the common refrain “cronyism,
corruption and rent-seeking at the highest level”. He offered to introduce me
to his client so I could find out the real situation.
Politicians make profit from
semi-monopoly
My informant's storyline and details
(he asked that his identity be concealed to protect his business) is depressingly
similar to that of other long-established practices of the NEP where the right
to importation and the issue of licences has become a gold mine for the
politicians, bureaucrats and the coalition of distributors who control them.
It is a tale of how pork importation
has degenerated from a freer market with few entry barriers to a semi-monopoly
controlled by a business-political mafia and which involves the highest level
of leadership in the Ministry and agency responsible for the welfare of its constituency
and the consumers.
According to my informant,
complaints made to the relevant authorities, including the Prime Minister’s
Department and MACC on the issue of import licences, quotas and the tight
control by the cartel, the Malaysian Association of Pork Importers (MAOPI),
fell on deaf years. Apparently the MAOPI, under the leadership of two Datuks,
is closely linked to the political and bureaucratic wielders of power.
So powerful is this new cartel and
the hidden hands that support it that even the MCA — for whom the issue of
unfair pork importation licences and quotas is critical to the party’s
political support — has been powerless to help my informant and his colleagues.
Incidentally, the MCA president's
son who holds the position of Deputy Minister of Agriculture is either impotent
or refuses to antagonize the more powerful vested interests involved in the
operation of the scam. This is giving him the benefit of the doubt that the MCA
and the Deputy Minister are themselves not beneficiaries of the scam.
Need to now out-bribe the
competitors
Besides the award of licences and
quotas to these mostly newcomer cronies that discriminate against
long-established importers, a new consortium was formed to levy a new surcharge
of 50 sen for each kilogram of pork imported. The surcharge apparently goes
directly towards the consortium which he was reluctant to discuss, although he
eventually provided me its name.
If 20,000 tonnes of pork are being
imported into the country this year, the consortium skims off 10 million
ringgit by passing on the surcharge to the intermediaries and final consumers.
The above example is only the tip of
the iceberg of the rampant rent-seeking and cartelization occurring not only in
the country's import sector but in other economic sectors regulated through
licences, permits, quotas and other regulatory means.
Data on corruption shows a rising
trend. Malaysia’s overall scores in Transparency International’s Corruption
Perception Index have deteriorated for three consecutive years.
More worryingly, businesses have to
indulge in bribery to outbid their competitors and stay ahead. A recent survey
showed that half of the corporate executives surveyed in Malaysia by global
corruption watchdog Transparency International believe that competitors had
secured business deals through bribery and presumably by having to ‘out-bribe’
competitors.
The following table shows that
Malaysia scored the worst in the 2012 Bribe Payers Survey.
NEM takes the same path as NEP
From pork consumed by non-Muslims to
the provision of pharmaceuticals products, rice and other food items vital for
all Malaysians, from basic supplies to luxury goods, this problem is the norm
in the nation’s business life nurtured under Mahathir’s NEP and now nourished
by Najib’s NEM.
No business person is immune from
the big and little ‘Napoleons’ that are in cahoots with their business cronies,
whether new entrants, established businesses, or small, medium or big
enterprises.
As the case is with my informant,
those that refuse to play ball or are unwilling to share their profits or those
without political or bureaucratic patronage or immunity stand to lose their
businesses competitiveness and livelihoods.
In part two of this article, the
writer will discuss the two faces of the NEM – the ugly one for local small
businesses and the benign sycophantic one for favoured foreign and local large
concerns.
Various proposals will be provided
to better protect small businesses against the underhand or corrupt practices
of the distributional coalitions that are the major players in raising the cost
of business for millions of small businesses in Malaysia. - CPI
