Is it luck or brains?

Even the British did not know that one day Malaya would become an important asset to Britain when they decided to colonise the country more than 200 years ago. The prosperity that the country experienced was by sheer accident and luck and not due to clever planning. However, on hindsight, it appears like the British were very clever whereas they were not really that clever.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

FUEL SUBSIDY

Tun Dr Mahathir Mohamad

1. The Government has withdrawn subsidy for petrol by 20¢ or roughly by 10% of the pump price. Businesses are already talking about raising the prices of goods they sell. They say that they have to pass on the price increase to their customers.

2. How does the price increase affect business? That depends on how much oil including transport cost enters into their business or products.

3. Assuming oil makes up 10% of the input into their products or services. This will mean 10% of 10% -- that is 1%. It is a percentage in terms of increase in cost, which most businesses can easily absorb. There need not be any increase in prices of their products or services.

4. Of course some products or services may have 50% or more of fuel needed. For example transport business. Even here the fuel needed is not 100%. There are other costs to bear. The increase in cost should therefore not be 50%. It should not be even 10%. It should be only 5% or only slightly more.

5. Malaysians must accept prices to increase over time. It is not possible for prices to remain fixed over long periods of time. Generally incomes have also been increasing. Surely part of the income increase must go towards paying for the increase in cost of living.

6. Government I think should monitor the effect of fuel price increase on major industries. This is essential to prevent runaway inflation due to profiteering.

7. I think it is imperative that subsidies be reduced. But it should be done slowly so as to allow people to adjust.

8. It is difficult to regulate subsidies so that only certain deserving people or industries enjoy it. We know of people who sell subsidised petrol to other countries even. Still the idea of regulating subsidies should be considered.

9. The Government’s excuse for reducing subsidies on petrol is in order to reduce deficits. But this alone cannot help. Government need to be more prudent with regard to its expenditures. They should be properly budgeted for. Giving money for people in order to help them financially is good. But the Government needs to be more selective. I notice some of the BR1M receivers spot new cars and decent houses. If the Government wants to give money it should be to the really poor. It is not good to make the people too dependent on the Government. It should be noted that most socialist and communist countries have failed simply because revenues do not increase when people are not productive. Paradoxically it is at the time when people are not productive and revenues are low that Government needs to dole out more BR1M and subsidies.

10. I am no expert in this matter but I do hope that some Government people might read this.

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One thing I have always said, and which I will repeat, is that Malaysia is over-regulated.

We regulate what people are allowed to think. We regulate what people are allowed to believe. We regulate how people are allowed to dress. We regulate what people are allowed to do. We regulate when people are not allowed to eat and drink. We regulate what books people are allowed to read and movies people are allowed to see. We regulate what flag people can fly and now even want to regulate when it is compulsory to fly the flag.

Hmm… the list is starting to get very long. Maybe I should just list down what people are allowed rather than what people are not allowed. That would be a much shorter list. So what is it that people are allowed?

As Tun Dr Mahathir Mohamad said (which he ‘borrowed’ from Singapore’s Lee Kuan Yew), Malaysia practices ‘guided democracy’. Hence the government has to regulate what people can and cannot do. And there are more things people cannot do than what they can do.

The other thing that is very regulated is business. Monopolies, quotas, permits, price controls, etc., are imposed in Malaysia (which means the need for subsidies as well). And the government thinks that this will make life better for Malaysians. Actually, it may be better that the government allow a free-for-all. Let competition reign. Let it be the survival of the fittest. Every one should be allowed to set up a business and compete for their market share. In this way the consumer may even get a better deal.

Once upon a time Malaya’s economy was resource-based. It was just luck that Malaya had a lot of tin, and due to the Industrial Revolution in Europe they needed a lot of tin.

The Industrial Revolution saw mass migration of the rural population to the towns and cities -- who looked for work in the factories that were mushrooming all over Europe. In the past, 80% of the population was rural and people grew their own food. So they were mostly farmers. But with the urbanisation of the rural population, food now needed to be ‘imported’ to be able to feed this exploding urban population. Hence tin for food canning purposes became crucial and this benefited Malaya.

Later, however, other forms of packing were introduced and which reduced the dependence on tin. Furthermore, with the opening of roads and railways, fresh food could be transported over large distances and across state boundaries and this too meant that food no longer needed to be canned or preserved.

Hence development and technology meant that Malaya’s domination of the tin industry declined and the final collapse was triggered by the Maminco tin fiasco of almost 30 years ago. The tin industry never recovered thereafter.

The next money earner for Malaya was rubber. This, too, was sheer luck and due to circumstances rather than clever planning.

At that time the British were growing cocoa in Ceylon. Then they experienced a crop blight, which permanently contaminated the soil, and this triggered a collapse of the Ceylonese cocoa industry.

The British planters were forced to look for a new place to plant cocoa and because Malaya’s climate was similar to Ceylon they decided to shift their plantations to Malaya. Large cocoa plantations were opened up in British Malaya.

Later, Brazil overproduced cocoa and this resulted in a collapse of the cocoa prices so it was no longer viable to plant cocoa since the production price was higher than the selling price.  

Brazil also planted rubber but on an ad hoc and disorganised manner. The British then smuggled some rubber seeds out of Brazil and after experimenting in Kew Gardens in London they found a better way to plant rubber trees. They then introduced rubber plantations to Malaya to replace cocoa.

Soon rubber became the second money earner for Malaya and with the exploding car industry the demand for rubber escalated. Now, of course, the use of synthetic materials has overtaken rubber mainly because synthetic materials are better.

I would not say that Malaya’s economy was cleverly planned. It is just luck that certain things happened in other parts of the world that benefited Malaya (the Korean War being one more example). If there was no Industrial Revolution or Ceylon did not experience a crop blight or Brazil did not overgrow cocoa or the British had never colonised Malaya (and Malaya had remained under the Dutch) and so on, Malaya would have never become important to the British because then Malaya would not have contributed to 30% of the British economy.

What then would have happened to Malaya if not for all these lucky breaks? This is the famous ‘what if’ question, which no one can really reply. But I suppose Malaya would not have seen the 1950s boom that it saw and maybe the Communist Party of Malaya would have succeeded in its struggle and today Malaysia would be just another tin pot Communist regime because the British would not have bothered with what happens to the country since the country is not important to British economic interests.

When Dr Mahathir took over as Prime Minister in 1981, he realised that the days of Malaysia’s resource-based economy were gone. Malaysia could no longer depend on tin, rubber, palm oil, etc., to pay the cost to develop and run the country. It needed to become an industrialised nation like Japan, Korea and Taiwan. Hence the introduction of HICOM as his Heavy Industries Policy soon after Dr Mahathir took over as the Trade and Industry Minister in 1978 and the Look East Policy after he became Prime Minister.

Dr Mahathir had foresight. But whether his methods were correct is another matter and which is open for debate. He knew that thus far Malaysia had been lucky and had prospered mainly due to circumstances beyond its control. To move forward Malaysia had to reduce its dependence on resources and build up its heavy industries.

And Dr Mahathir pursued this agenda with a vengeance and sometimes with drastic results.

Maybe Dr Mahathir believed in ‘collateral damage’. Maybe Dr Mahathir believed that to fry the egg you must first break the shell. Nevertheless, he did cause much damage and break many shells in propagating what he felt was the best way forward for Malaysia in its transformation from a resource-based economy to an industrial-based economy.

Malaysia went into territories where even angels feared to tread. Shipping and ship building. Automobiles. Railways. Highways. Even tourism. And the toll to win the war to industrialise was very high indeed.

Today, Prime Minister Najib Tun Razak has inherited much of these headaches. How Najib is going to take Malaysia forward is something only he knows. Or maybe he does not know how. Only God knows then.

Should Dr Mahathir have done what he did (or done it the way he did it)?

Even the British did not know that one day Malaya would become an important asset to Britain when they decided to colonise the country more than 200 years ago. The prosperity that the country experienced was by sheer accident and luck and not due to clever planning. However, on hindsight, it appears like the British were very clever whereas they were not really that clever.

We may need to wait another generation to analyse what Malaysia want through over those 50 odd years from the mid-1970s to, say, 2020. Then we will know whether Dr Mahathir was actually a genius or whether he bungled big time.

As they say, geniuses are never appreciated in their lifetime. Even then people will be very divided as to whether that person was or was not brilliant. People have mixed feelings over Winston Churchill and Margaret Thatcher as well. Some say they were idiots and others say they were brilliant. I suppose it will depend on which aspect of their career you are measuring them.

One thing we have to agree is that the direction has already been charted. So we cannot turn back the clock or change direction without too much trauma and damage. We need to make the best of whatever situation we have found ourselves in and see how to move forward. And if we can focus on that rather than on unproductive issues that are keeping the country in a rut then there may yet be light at the end of the tunnel.