Putrajaya’s bid to curb rent-seeking must start with itself, analysts say
A general view of the Prime Minister’s Office, Perdana Putra in Putrajaya October 11, 2022. ― Reuters pic
Wednesday, 28 Jun 2023 7:00 AM MYT
KUALA LUMPUR, June 28 — Malaysia needs to move away from political patronage if it is serious about curbing rent-seeking behaviour, said economic experts.
They said poor governance, lack of transparency, and the misallocation of natural, human, and financial resources were all contributing factors.
Economist Nungsari Ahmad Radhi said some activities viewed as rent-seeking — such as enforcing exclusive patent rights — were not entirely negative and, when properly regulated, could encourage economically beneficial activities.
In Malaysia, the most common rent-seeking is typically the result of government intervention, such as the allocation of Approved Permits (APs) for imports, licences, and permits that restrict market participation and create opportunities for lobbying due to the substantial benefits involved.
“Anything that requires government approval and where the approval is to a specific party has rents, land conversion, development approvals, density of development. Government procurement that is not done on a competitive basis contains rents. Direct negotiation government procurement surely contains rents.
“So, it is really the government that creates rents through its procedures and work process. Change those. That will reduce rents and will therefore reduce lobbying and this whole subcontracting thing.
“Even in the subcontracting thing, the relevant government authorities know if the party appointed to do the work did the work or not. Again, it is simply putting not selling the contract as a precondition in the award. And enforce it.
“Just blacklist non-performing vendors/contractors and do it in an open manner. I don’t think you require new laws. Just improve and enforce procedures,” he said when contacted.
Rent-seeking is defined as activities designed to generate individual wealth without generating further additional economic value for others, effectively a parasitic relationship.
Nungsari said since government intervention was the primary driver of rent-seeking, reforms should be focused in this area, with possible changes including eliminating the sale of contracts and enforcing stricter conditions in awarding contracts.
Economist Lee Heng Guie said there were various types of rent-seeking, such as inflated pricing of government projects, piracy, and lobbying for subsidies.
He stressed the need for a comprehensive approach to combat rent-seeking, which includes imposing severe punishments on offenders, ensuring transparency in government projects, and closing loopholes that facilitate rent-seeking activities.
Lee also said it was important to minimise government involvement as well as streamline bureaucratic and regulatory procedures in economic activities to prevent rent-seeking.
“Less government involvement and less bureaucratic and regulatory procedures in economic activities should be the best way to prevent rent-seeking economics. We need to institutionalise a mechanism to contain every case of rent-seeking and corruption in order to deter government officials and politicians from engaging in rent-seeking business,” he told Malay Mail.
“Transparency of public information is crucial. The public deserves to be fully informed about government projects and how to participate in the projects. In addition, the government has to close loopholes for special interest groups, and let the market forces determine the prices of goods and services.
“The eventual enactment of the Government Procurement Act is a positive step in the right direction to curb excesses such as possible corruption, rent-seeking activities and patronage when bidding for the government’s contracts and projects. Public procurements are put out to competitive tender,” he added.
In response to concerns about foreign individuals conducting business with licenses meant for locals, the Ministry of Economy announced that it is studying components for a specific law to address the rent-seeking culture. The preliminary proposals will be presented at the National Economic Action Council meeting in July.
Pasir Gudang MP Hassan Abdul Karim previously raised the issue of rent-seeking by elite cartels and called for a review of affirmative action policies to ensure equitable benefits for all marginalised individuals.
As rent-seeking is not technically illegal, economist Lee Teck Ghee said it would be challenging to curb due to bureaucratic obstacles and politicians exploiting the system for personal gain.
“The NEP (New Economic Policy) can be seen to have legitimised rent seeking. Politicians and political parties are the worst culprits in illegal rent seeking and if there can be legislation to discourage and punish them, this will be most welcome,” Lee said when contacted.
Shankaran Nambiar, a senior research fellow at the Malaysian Institute of Economic Research, said rent-seeking would best the curbed by making business and commerce easily accessible to all, with attempts to restrict being counterproductive.
Addressing rent-seeking practices is not only crucial for Malaysia’s economic efficiency but also for preserving the country’s international business reputation. Failure to tackle this issue could deter global companies and investors from considering Malaysia as a viable place to do business, warned Global Institute for Tomorrow CEO Chandran Nair.
Wednesday, 28 Jun 2023 7:00 AM MYT
KUALA LUMPUR, June 28 — Malaysia needs to move away from political patronage if it is serious about curbing rent-seeking behaviour, said economic experts.
They said poor governance, lack of transparency, and the misallocation of natural, human, and financial resources were all contributing factors.
Economist Nungsari Ahmad Radhi said some activities viewed as rent-seeking — such as enforcing exclusive patent rights — were not entirely negative and, when properly regulated, could encourage economically beneficial activities.
In Malaysia, the most common rent-seeking is typically the result of government intervention, such as the allocation of Approved Permits (APs) for imports, licences, and permits that restrict market participation and create opportunities for lobbying due to the substantial benefits involved.
“Anything that requires government approval and where the approval is to a specific party has rents, land conversion, development approvals, density of development. Government procurement that is not done on a competitive basis contains rents. Direct negotiation government procurement surely contains rents.
“So, it is really the government that creates rents through its procedures and work process. Change those. That will reduce rents and will therefore reduce lobbying and this whole subcontracting thing.
“Even in the subcontracting thing, the relevant government authorities know if the party appointed to do the work did the work or not. Again, it is simply putting not selling the contract as a precondition in the award. And enforce it.
“Just blacklist non-performing vendors/contractors and do it in an open manner. I don’t think you require new laws. Just improve and enforce procedures,” he said when contacted.
Rent-seeking is defined as activities designed to generate individual wealth without generating further additional economic value for others, effectively a parasitic relationship.
Nungsari said since government intervention was the primary driver of rent-seeking, reforms should be focused in this area, with possible changes including eliminating the sale of contracts and enforcing stricter conditions in awarding contracts.
Economist Lee Heng Guie said there were various types of rent-seeking, such as inflated pricing of government projects, piracy, and lobbying for subsidies.
He stressed the need for a comprehensive approach to combat rent-seeking, which includes imposing severe punishments on offenders, ensuring transparency in government projects, and closing loopholes that facilitate rent-seeking activities.
Lee also said it was important to minimise government involvement as well as streamline bureaucratic and regulatory procedures in economic activities to prevent rent-seeking.
“Less government involvement and less bureaucratic and regulatory procedures in economic activities should be the best way to prevent rent-seeking economics. We need to institutionalise a mechanism to contain every case of rent-seeking and corruption in order to deter government officials and politicians from engaging in rent-seeking business,” he told Malay Mail.
“Transparency of public information is crucial. The public deserves to be fully informed about government projects and how to participate in the projects. In addition, the government has to close loopholes for special interest groups, and let the market forces determine the prices of goods and services.
“The eventual enactment of the Government Procurement Act is a positive step in the right direction to curb excesses such as possible corruption, rent-seeking activities and patronage when bidding for the government’s contracts and projects. Public procurements are put out to competitive tender,” he added.
In response to concerns about foreign individuals conducting business with licenses meant for locals, the Ministry of Economy announced that it is studying components for a specific law to address the rent-seeking culture. The preliminary proposals will be presented at the National Economic Action Council meeting in July.
Pasir Gudang MP Hassan Abdul Karim previously raised the issue of rent-seeking by elite cartels and called for a review of affirmative action policies to ensure equitable benefits for all marginalised individuals.
As rent-seeking is not technically illegal, economist Lee Teck Ghee said it would be challenging to curb due to bureaucratic obstacles and politicians exploiting the system for personal gain.
“The NEP (New Economic Policy) can be seen to have legitimised rent seeking. Politicians and political parties are the worst culprits in illegal rent seeking and if there can be legislation to discourage and punish them, this will be most welcome,” Lee said when contacted.
Shankaran Nambiar, a senior research fellow at the Malaysian Institute of Economic Research, said rent-seeking would best the curbed by making business and commerce easily accessible to all, with attempts to restrict being counterproductive.
Addressing rent-seeking practices is not only crucial for Malaysia’s economic efficiency but also for preserving the country’s international business reputation. Failure to tackle this issue could deter global companies and investors from considering Malaysia as a viable place to do business, warned Global Institute for Tomorrow CEO Chandran Nair.
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