First published in The Edge Malaysia
By Wan Saiful Wan Jan , (c) 2016, The Edge Communications Sdn. Bhd. (c) 2016
If we flick through the New Economic Model (NEM), we would find that the government has identified ineffective and siloed government bureaucracy as two of the key factors that keep us in the middle-income trap.
The NEM points out that “investors have often complained about government agencies that work in isolation with little coordination with each other (the silo scenario). This, coupled with excessive regulatory requirements and lengthy procedures, increases the financial and time costs for investors seeking to establish and expand their businesses. As global investors are increasingly turning their eye to large-scale markets to lower costs, small economies like Malaysia must remove all costly barriers.”
The NEM then goes on to propose a solution to the problem. It says, “The private sector will be the main driver of growth … The government will be an efficient facilitator through a streamlined, proportionate, market-focused and supportive regulatory framework.”
And then, the concluding part of the NEM states that the government will ensure that “regulation for the pursuit of its social agenda does not impede private sector competitiveness and innovation … This should be pursued through a continuous programme that ensures policy consistency.”
I am highlighting these sections of the NEM because policymakers in government seem to have forgotten about it. Today, they do not talk about it anymore. The government’s commitment to ensuring a market-friendly regulatory environment has become haphazard and uncoordinated.
Just look back over the last one or two years and you will see quite a few examples. Perhaps the most prominent one was when Uber first entered the market. The immediate reaction from the Land Public Transport Commission was to ban it. GrabCar did not have an easy ride either. This is despite the fact that consumers are quite fond of using these new services.
More recently, the regulatory burden fell on the tobacco and nicotine industry. I usually avoid using the tobacco industry as an example in my writing because I don’t want readers to confuse my example with my actual point. But this industry can be a very good example of how the government has forgotten about the NEM’s desire that regulations for the pursuit of a social agenda should not impede private sector competitiveness and innovation.
When vaping came into the market, the authorities initially did not know how to react. And when they woke up, rather than positively regulating the emerging industry to ensure safety, several states decided to ban this new product.
Several months ago we heard that the Ministry of Health (MoH) was considering the introduction of standardised packaging for cigarettes. If implemented, this would be an appropriation of the intellectual property rights of legitimate businesses. Is the government now saying that protecting IP rights is not important?
In the recently released National Strategic Plan for Tobacco Control, the MoH announced that it wants to gazette more no-smoking zones. The plan charts a scary picture of how the government wants to intrude into the private spaces of citizens. By 2035, it will enforce no-smoking zones in various places including hotels, restaurants, private cars and even private homes. These are private spaces and this plan is a clear violation of the private property rights of the owners of those premises. A more proper action is to allow such decisions to be made by the rightful owners.
In short, if standardised packaging is about the MoH being ignorant about intellectual property rights, its new strategic plan indicates that it couldn’t care less about legitimate physical property rights either.
At IDEAS, we have been involved in the production of the International Property Rights Index since 2010. We even hosted the global launch of the 2015 Index in Kuala Lumpur last November.
We champion the protection of property rights, both physical and intellectual, because it is the cornerstone of a market-driven economy. But the MoH’s behaviour now seems to say that the government does not care about our property rights. This is a real cause for concern.
What worries me more is the silence of the wider private sector on this regulatory overreach. I do appreciate that only the tobacco industry is facing this at the moment. But if we widen our outlook, we can detect a slow-moving yet worrying trend that could engulf many others.
Just last Thursday, the British government announced the introduction of a tax on sugary drinks. It will be levied on producers based the volume of sugar-sweetened drinks they produce or import. So manufacturers of sugary food should beware.
In South Africa, standardised packaging has been imposed on infant formula for several years. The country’s MoH believes that standardised packaging of infant formula milk will encourage breastfeeding. So, manufacturers of healthier food are not off the hook.
In fact, at home there are also the proposed amendments to the Communications and Multimedia Act that could curb online freedom of speech and may have negative repercussions on businesses that rely on communications technology. Technology-based companies should beware too.
Ensuring a market-friendly regulatory environment is a role that all stakeholders must play. We are contemplating a series of studies on this and we would love to build alliances with like-minded entities.
Addressing the challenge of regulatory overreach cannot be left to only those currently facing government action. By the time the tentacles reach your industry, it would be too late to react. It is better to act now and shape the discourse instead.
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