Monday, May 30, 2005

Let Them Establish Universiti UMNO with their Own Money.

Higher learning institutions are the last bastions to shape the minds of leaders of tomorrow. You can bet that almost every organisation or political party would want to instil and inculcate their ideas, beliefs and methodologies to those young intelligent minds. So its no surprise that UMNO wants to establish its own university, where competing political ideas is shut out.
University colleges are where aspiring future leaders develop their networking skills and contacts – their know-who as well as their know –how. By establishing Universiti UMNO, These politicians are taking steps of cloning themselves – creating a group of elite ruling Malays (after all, only Malays can join UMNO), a cut above the rest. The blue blood ruling class of Malay politicians want to perpetuate their legacy to the next millennium. This Universiti UMNO will be the Ivy League university, much like some Democrat or Republican affiliated universities in the United States. Good model to follow.
As far as I know, all government funded universities in Malaysia are already controlled by the government, albeit not directly. Lecturers at universities are not allowed to be involved with opposition parties, and they have to sign the AKU JANJI letters, pledging loyalty to the government. Student politics are dominated by pro-government council, those who are even slightly critical of the government risks their funding cut off.
This is the methodology that has been used by the government to stifle dissent and criticism at universities. That’s why our graduates are a sorry lot; don’t have their own opinion, incapable of expressing themselves and being ‘pak turut’.
I am of the opinion that if UMNO leadership want their own university, let them have it – using their own money of course. Let them raise fund, set the curriculum etc – the lot. The duty of higher education ministry is just setting the standard – that degrees awarded meet certain minimum educational attainment.
There is nothing wrong with investing money in higher education, because education broadens minds, improve skills and widens our marketability in the job market. Highly educated workforce tends to be more competitive and be able to handle new technology easily. They also have the potential to earn higher incomes. Just because there are a large number of unemployed graduates doesn’t mean that tertiary education is worthless. In the West, graduates doing menial jobs are common, especially those who originated in Eastern Europe. At least being tertiary educated they have a chance of moving upward in their careers. Ask anyone who doesn’t have a degree; not having a degree can impose a glass ceiling in one’s career.
However I would oppose to this idea of Universiti UMNO if the funding were from government coffers. We have heard enough of under funded universities already, without adding another one. That money could be better spent maximising the potential and enrolment of our current universities and funding the higher education loan company. Haven’t we heard enough about starving students on a diet of instant noodles and under funded universities? We would be better off allocating more funds to existing universities instead of building a new one.
If we think that providing more funds for Higher Education Loan Company is like throwing good money after bad, we are wrong. Government loans like that is like deferred taxation. The fact that the borrowers can hardly pay back their loans because of unemployment, low income or simply refuse to pay can be handled differently. I would suggest that JHDN be given the job to collect the loans as a percentage of declared income, just like income tax.
Lets not muddle up between the freedoms to set up a university, college, school, kindergarten or madrasah to educate our children the way we want and our disdain for another money grabbing venture by the elite ruling class. (Imagine the amount of contracts given out to UMNO affiliated contractors.)
Has Stopa explained yet how UMNO is going to finance this university? I hope not from the government’s or Petronas’ coffers.
Noor Yahaya Hamzah

Tuesday, May 17, 2005

The Futility of Price Control

In the past 3 month I have been advocating removal of subsidies, (particularly petrol and diesel subsidy) free floating of the ringgit, deregulation of the financial markets and stopping the inflow of cheap foreign labour into the country as well as advocating for minimum wage and safety net. For the full articles, visit
Lately the government has taken the step to reduce costs associated with ballooning fuel subsidy cost – petrol and diesel price increase, which will save the government approximately RM2.2 billions. With this savings for the government, comes the pain for the masses, price increases in everything that needs transport. Lorry charges, taxi rides, bus fare as well as prices of general food and vegetables – fish, meat and chicken. The government has been trying its best into talking down the prices, the Prime Minister has been calling the traders not to increase price.
Price control defies economic logic. If a good (e.g. a kilo of sugar) cost RM1.30 to produce, how could a trader sell it for RM1.20? Well the trader has to make his/her profit somewhere else, i.e. he/she must sell something else that returns more than average profit to make up for the losses of the controlled good. In the case of our small traders and operators in essential goods (market traders, taxi drivers et al), they don’t have any other profitable products that can make up for the losses incurred. So what will they do when losses become unbearable? Gulung tikar. To me that is a gross injustice.
Losses and lower than average profit in any sector of the economy signals to the operators in that sector to cut their losses and move their capital investment elsewhere. This is what will happen to some sector of the economy which is facing government imposed price control. The telltale sign of underinvestment in any sector are evident in our bus service, taxi and agriproducts (especially vegetables, chicken and beef).
So in the near future, prices of these products will be much higher than its fair prices, because current underinvestment in these sectors creates scarcity, and with scarcity, prices increase, ceteris paribus.
Ask any average Malaysian if he/she knows any good that is under controlled price or subsidized to a certain extent. Almost every essential products; cooking oil, sugar, rice, chicken, beef to name a few, are under price control.
I can suggest a better way for the government to help low income earners, that is increase their income sufficiently to afford decent living. Social welfare payment for those who are unable to earn a living, income top up directly from the government for low income earner in the private sector would be more useful because it target directly to the intended group. Minimum wage law could also be enacted so that errant employers would not be able to exploit workers with impunity. Current system of subsidy, tariff and price control is flawed, subsidies benefit the rich more than the poor (look at petrol and diesel subsidy), tariff made prices of goods higher (and delivering fat profits to the protected industries) and price control promotes shortages and underinvestment in the affected sectors. Let’s free the market.

Wednesday, May 11, 2005

Three Addictions of a Nation

I laud the Prime Minister’s speech at Harvard Club about the three addictions of our nation the other day. Let me reproduce part of the speech here.
1. Firstly, we are still addicted to cheap foreign labour. Rather than making the necessary investments to become more labour-efficient and adopting high technology, the preference is to form strong lobby groups and pressure for more cheap foreign labour. Over-dependence and social ills are then seen as an acceptable price to pay for this seeming necessity, in almost all sectors of the economy.

2. Secondly, we are addicted to subsidies. Rather than investing to become more energy-efficient, we fight to keep prices artificially low. Never mind that the money can be better spent on schools, hospitals, and other facilities to benefit many more people, especially those in need.

3. Thirdly, we are addicted to rent seeking; we would rather go for “know-who” than “know-how”. Rather than investing to become better than our competitors or to add value in our products and services, we try to find a way in by other means and seek to leverage on our sense of privilege and entitlement to get somewhere in life. We seem to think: surely someone else, at the very least the government, owes us a living?

I ask you, ladies and gentlemen: can the government sustain the costs of maintaining these ‘props’ to our competitiveness? The answer is no. As is plainly obvious to all, the treasury’s coffers are limited. As other countries become more competitive and innovative, it will also become more and more difficult to rely on such strategies to grow our incomes. Furthermore, as a matter of principle, the government cannot continue to nurture habits that reduce the incentive to increase efficiency and productivity. We cannot go on masking our true competitiveness in the global marketplace via subsidies and the like.
On the issue of cheap foreign labour, while the Prime Minister’s speech clearly states his view, the Minister in charge of labour issues made media statement about bringing in workers from Pakistan and other countries to work in construction, agriculture and manufacturing. A stopgap measure? Cheap foreign labour has always been used by previous civilisations in their nation building; Americas is an easy example. Millions of African were shipped across the Atlantic and enslaved to build the riches of Southern States USA, the Caribbean, and Brazil. Not much different than indentured labourers from India working in rubber plantations of Malaya and Javanese shipped to Dutch West Indies to work in sugar plantations. Even the Egyptians were building the great pyramids using the labours of the Jews.
So we are only following their examples, bring in foreign labour, use them to all their worth, and then when we finish with them, send them back to their countries, minus their due wages if possible (some companies are taken to court by Indonesian representatives, and our Minister was not happy). In my opinion, this is not ethical; we are using our neighbours’ human resources, profit from them and send them back to their country when they are old and cost a lot of money in healthcare. 21st century new form of slavery. Why can’t we invest in our own people, a better technology, machinery, working condition and wages would attract some of the unemployed into the sector concerned, not to forget higher productivity. If we don’t stop this soon, we would be following the path taken by Gulf Arabs, e.g. unemployment among Saudi citizens is as high as 30%, yet there are more than 6 millions foreign workers across the kingdom. Saudi citizens have high expectations about the jobs they are willing and want to do, leaving the menial jobs to foreigners.
Henry Ford in his memoirs wrote about his policy of paying higher than average wages, “We wanted to pay these wages so that the business would be on a lasting foundation. We were building for the future. A low wage business always insecure. The payment of five dollars a day for an eight hour day was one of the finest cost cutting moves we ever made.”
$5 a day back in 1914 was a big sum of money when Americans were working 12-14 hour day for $2 to $3 per day. To explain simply, this is efficiency wage theory.
Subsidies and tariff distort economics signals. The billions spent on petrol and diesel subsidies could be better spent elsewhere to those in need – healthcare, early childhood education or improving service delivery in government departments. Unfortunately, those who are better able to lobby always win, regardless of the consequence for the rest of the populace. Do we have the will and gumption to remove those subsidies and tariffs? Like a baby, we all have to be weaned off sooner or later. I couldn’t agree more Prime Minister.
Noor Yahaya Hamzah