08 December, 2009

Protectionist policies must go !

You know something is not right if for a rice-growing nation, the cost of producing this staple is 30% more than other rice-producing countries.

SEVERAL weeks ago, a delegation from a major European company held a no-holds barred meeting with our government officials.

The discussion centred around opening up markets, free trade agreements and protectionists policies. Needless to say, this was not the first time that the company officials had dealt with our bureaucrats. But what was different this time was that the usually polite and diplomatic Europeans had no time for niceties.

The gloves came off and they made it clear that Malaysia’s flip-flopping on its protectionist policies and the culture of the "enrichment" of certain groups at the expense of fair trade and the absence of a standard trade guideline was not the way countries in the European Union (EU) did business. There is no "kautim" mentality or "special arrangements". All’s fair in capitalism.

Of course critics of the World Trade Organisation will have their own opinion on capitalists, but what this delegation was cheesed off with was the fact that our inconsistent business policies was costing them money.

It was getting expensive to do business in Malaysia because it was difficult to plan. For instance, the phasing out of the approved permits (AP) system under the National Automotive Policy is supposed to begin next year, culminating in 2015, following which we all hope imported cars will be cheaper by at least RM50,000 (current rates).

However, now we hear that the government may give in to requests from Malaysian dealers and rent seekers to extend it until 2020 to allow the creation of more millionaires. And mind you, we are not just talking about cars. Most imports, including sugar, carry APs. This invariably makes the cost of doing business in Malaysia higher than our neighbours’, which is why we are losing out to others in the region.

In his exit speech in 2007, EU ambassador to Malaysia Thierry Rommel made some remarks that did not go down well with our folks here. Rommel among others charged that some of the government’s policies were designed to practise significant protectionism of Malaysia’s own market covering the automotive sector, steel, consumer goods, agricultural products and services.

Rommel may have had his own agenda but he was merely articulating how the outside world – Europe at least – feels about doing business with us.

While trade last year was RM140 billion, Rommel’s successor Vincent Piket forecasts trade with Malaysia will drop by RM35 billion this year. We can attribute some of that to the global economic downturn. But it is during times like this that we need to up our game, call a spade a spade and be proactive in getting rid of old habits or risk having foreign investors look elsewhere to spend their money – as was the case with the European company at the beginning of this column.

You know something is not right if for a rice-growing nation, the cost of producing this staple is 30% more than other rice-producing countries. So if even Malaysians have to pay more for the rice we eat, then who’s benefiting? Certainly not the people. The sole company awarded the contract to import and distribute rice, perhaps?

In any case, to move forward the government must show its sincerity in protecting all Malaysians. Its policies must be all-encompassing and attractive to those whom we wish to do business with.

It is laudable that the government has abolished import duties on over 2,000 items as part of its commitment to the Asean Free Trade Area (Afta) which comes into play next year. Hence, opening up the markets may also make such items as rice cheaper as import duties for rice will also be reduced.

However, I am expecting the government to flip-flop again, especially when certain entrepreneur groups complain that Afta is hurting them. Soon before you know it, we will have more "special arrangements".

Emerging markets in Southeast Asia are giving us a run for our money. The only advantage we have over them is that English is widely spoken here – but even this is being threatened by politicians with hare-brained ideas of compelling the private sector to use the national language to enhance the usage of Bahasa Malaysia.

Such myopic views do not augur well for us and the future for a nation that aims to be a global player but is bogged down by decades’ old thinking and selfish priorities which will only succeed in reducing our competitiveness internationally.




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