Saturday, June 12, 2010

We Want Competition! Don’t We?

I’m in sunny Kota Bahru today for an academic conference, and these two articles in the Star caught my eye on the flight over (excerpts):

Promoting competition

THE Competition Bill 2010, which was passed last month and expected to be implemented by mid- or end of 2011, is aimed at creating a better business environment and to check against anti-competitive practices.

The bill, once gazetted, will be known as the Competition Act 2010.

The bill describes the “process of competition” as encouraging efficiency, innovation and entrepreneurship, which promotes competitive prices, improvement in the quality of products and services and wider choices for consumers.

“In order to achieve these benefits, it is the purpose of this legislation to prohibit anti-competitive conduct,” it says in the bill.

...which strongly contrasts with this one...

SMEs: Sugar ruling will hamper business

JOHOR BARU: Small and medium enterprises (SMEs) are equally bitter with a proposed ruling that requires them to buy sugar only from designated wholesalers.

The proposal by the Domestic Trade, Cooperatives and Consu-merism Ministry would create more bureaucracy and hamper business, said Malaysia SME Association deputy president Teh Kee Sin.

He said such a ruling would create more hassles, affect business and limit the supply of sugar for SMEs, especially those in the food manufacturing sector.

“I will not discount that SME businesses will resort to buying from the black market should the Government impose such a ruling,” he told The Star here yesterday.

The ministry’s proposal comes amidst an impending boycott by about 20,000 members of the Malaysian Federation of Sundry Goods Merchants’ Association over the licensing rule to sell sugar and other essential items.

On the one hand, we finally have a major piece of  legislation that mandates a level playing field in all business ventures (GLCs not excepted), and is also one of the keystones for the foundation of the New Economic Model.

Then, right at the same time, we have a major ministry proposing a non-price rationing mechanism (which is what licenses are), as well as sanctioning the creation of an monopolistic/oligopolistic cabal in sugar distribution.

I mean, what’s wrong with allowing the price mechanism to ration supply? Especially since Teh is as good as saying that SME sugar consumers are willing to pay higher for a steady supply.

The irony would be really funny, if it weren’t so infuriating.


  1. At $10 a licence, it's not much of a distortion mechanism.

    But I agree the principle of it is wrong. These subsidies to producers for sugar, flour, petrol, gas etc should be phased out soon. Though I understand Japan subsidises rice farmers there as a matter of 'national security' issue.

    When all is said and done, our economy will get galloping when the Govt gets the blance right vis-a-vis affirmative action, meritocracy and open competition.

    we are all of 1 race, the Human Race

  2. don, it's not the price of the license, it's the fact that a license is required at all. Especially considering that the blessed thing is freely given and automatically renewed. What's the point of having it, unless at some point the government wants to shut off access to new entrants? And what that means for the potential for corruption?

    In any case, I'm far more concerned over the "selection" of distributors - that's a far more dangerous development, and diametrically opposed to the newly minted competition law. What the ministry is doing completely undercuts the credibility of the law.