APs are inarguably bad for the country

QUESTION TIME | An approved permit or AP is nothing more than a tool to put money, almost for free, into the hands of connected bumiputeras, many of whom are not even businessmen in the correct sense of the word and who sell the APs to others for money.

That the new Pakatan Harapan government is going ahead with this tool of patronage, which robs the man on the street via higher prices to benefit the permit holders, is bad news. Not only is it very wrong, it also distorts competitiveness and market efficiency.

APs have been systematically abused by successive BN governments, including during Dr Mahathir Mohamad’s previous term as prime minister, to make billions for cronies by giving them a licence to virtually print money. It did little or nothing in terms of benefiting bumiputera business development.

Billionaires were made through APs, whether by letting other people use the permits or to make use of the monopolistic or oligopolistic practice to make super profits, all at the expense of the public.

It has been used for a wide range of products, including mandarin oranges, steel, coconuts and plastic waste products, but its most controversial use is for cars.

An AP is basically a piece of paper which allows you to import products from overseas, which an ordinary person is not allowed to import.

Let’s stick to APs for cars in this article and how it has been abused in the past and will be in the future with the latest measures introduced by the Ministry of Trade and Industry (Miti), which issued APs to 164 companies, including 36 new ones.

According to this report, which quoted officially released figures, the controversy related to the APs, which were initially issued in the 1970s to encourage bumiputera participation in the used-car industry, exploded in 2005 when it was revealed that a handful of individuals monopolised the AP business.

“It was reported that among the few ‘AP Kings’ then were the late SM Nasimuddin SM Amin, Syed Azman Syed Ibrahim, Mohd Haniff Abdul Aziz and Azzuddin Ahmad. They collectively received 33,218 APs, which was about 50.1 percent of a total of 66,277 for 2004, and 28,283 APs, or 41 percent of 68,330, for 2005 alone, according to a list released by the government.

“According to the documents, the four ‘AP Kings’ were earning RM1 billion a year just from the sale of the APs.” That’s a clear indication of the substantial abuse of open APs in the past.

Miti deputy minister Ong Kian Ming (photo) has now promised that open APs, issued to those who are not holders of franchises for car brands, will not be abused because of a system of checks and balances, which includes requiring holders to have a legitimate motor business.

But as the past has shown, it is not foolproof. Previously, open APs have been sold for as much as RM50,000. As Ong said, the APs are now used for high-end cars. Therefore, their value could easily remain as much as RM50,000 each.

Ong revealed that some 28,000 open permits were issued in 2018. If we maintain a value of RM50,000 per permit, that works out to RM1.4 billion, which is a lot of money for very little work done. This is a tool for distributing patronage, which must be discontinued.

Even if the permit holders have a legitimate business, it allows them a monopoly or an oligopoly to import such cars and sell the cars at high prices, thereby making far more than the RM50,000 which we have used as the value of an AP.

It should be emphasised that the APs don’t help bumiputera business or the bumiputera cause, but merely enrich already rich bumiputera businessmen by giving them an unneeded preferential advantage over all others.

It’s exactly the kind of business that should have been nixed by the Harapan government, and provides yet another disappointment in the long list that has transpired since it took power post-GE14. It represents one more instance of succumbing to the black side of the coalition, instead of taking the right measures and moving forward.

Just imagine what ditching APs will do. Anyone, including you and me, can import anything from anywhere in the world, getting the best possible price we can and paying all applicable government duties in the process. Either we can use these goods ourselves or we can sell to others.

A much freer market than that caused by the preferential system of APs will ensure fair pricing for imported products and will bring prices down due to greater competition. This should be complemented by the government easing on all kinds of licences and requirements for the setting up of businesses.

Already, there is abuse of the current AP system. This report in Malaysiakini speaks of a dormant company having obtained APs. That’s not surprising because people will find a way to abuse the system and provide excuses.

The best thing to do is to simply do away with APs and anything else which hinders fair and free competition within the economy. APs are inarguably bad for the country. Why persist with them? Who gains?

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P GUNASEGARAM says the easiest way to promote business is to remove hindrances. E-mail: t.p.guna@gmail.com. - Mkini