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Of Najib, Obama and Protectionism

Posted by Simon Templar On Friday, November 13, 2009

Bloomberg on 13 November 2009 reported in their article 'Obama Must Be Like Bush in Free-Trade Commitment, Malaysia Says' that:

"Najib Razak urged President Barack Obama to show the same commitment to free trade that his predecessor, George W. Bush, expressed at a meeting of Asia-Pacific leaders last year... "

"APEC in Singapore is a wonderful opportunity for us to make a very strong political statement that we will resist protectionism,” Najib said.

What a whole load of cow dung! Look who's talking here.

Who is Najib to talk about free trade? Who is Najib to talk about open market? Malaysia under the dictatorship of Barisan Nasional is possibly one of the most protected economy in the world. And mind you, protection not to the interests of the ordinary farmers or fishermen or white collared salaried workers but that of the interests of BN politicians and their beneficiary cronies.

(There is nothing wrong if Obama wants to protect the economy of his country, but what I cannot swallow is a robber telling another robber not to rob.)

Proton is an example of a protectionism nightmare. Ridiculously high import and excise duties placed Proton in such a cosy seat to the extend that all that comes out from its factories are jokes that literally kill on the roads. Protectionism kills competition. Without competition there is no pressure for creativity or drive to improve. What more, non-Proton car prices from the little Viva to the high end Maseratis are inflated sky high to the extent that the entire economy is bubbled up.

There is no such a thing as a stand alone component item in the economy. Every item within the economy is inter-related. Higher costs of vehicles lead to higher costs of transportation which in turn affects delivery of raw materials, then sub-components and then final consumer products. Can you imagine if our local car industry is not protected. With car prices falling by 60%, what do you think will happen to the prices of all other goods in Malaysia?

(There are of course concerns with a plunge in car prices and its immediate repercussions on the corresponding loans with banks being forfeited etc. but that is another topic for another day).

I am an advocate for free trade. But that does not mean that I support no protection. There could be areas where protection is required. But the overall benefit to the population has to out-weight the benefits reaped by the few who enjoy the protection they are accorded.

We know that this is not the case in Malaysia. No doubt the restriction on import of rice helps to protect the local paddy farmers. But are the paddy farmers the real beneficiaries? No. Our farmers are still one of the poorest in the country. The profits have landed in the hands of government related conglomerates such as Bernas. And such protectionism also leads to little innovation. Our local rice is of such poor quality that it is deemed 'a poor man's' diet. Those who can afford it are dining on the expensive Thai fragrant rice. In this case, how has a protectionism policy actually helped the general Malaysians? Ever wondered why we cannot produce high grade rice like those of the Japanese?

It is always good to look at the actions of those who have done well for themselves. And in Malaysia, the ultra-rich Robert Kuok is a very good example. If you asked me, I'll say that Robert Kuok have had enough of the Malaysian government and its rubbish. He is a businessman (and a darn good one at it) and has no interest in the political games of Malaysia. Did you know that he is no longer the Malaysian Sugar King? He has already disposed off his investments. And he is definitely getting his other businesses out of Malaysia - you may recall the transactions with his Singapore based Wilmar. His core businesses are now based in China and Hong Kong. So, the richest man in Malaysia no longer stays in Malaysia and the bulk of his businesses are also not based in Malaysia. That must really say something.

Look at another Malaysian success story, Genting. The Genting Group knows that the future of their gambling business lies in the hands of the Malaysian government. Who would like no control over the future of their business? Naturally, they've smart it up. They have now expanded their gambling business to UK and Singapore (to be completed in Jan 2010). They are also venturing into Macau. What is your prediction for Genting Highlands? The Malaysian government can shaft it up their arses for all they care. Genting will die a natural death and the loser is the Malaysian government who will lose out on lucrative tax revenue.

Another form of protection which is not seen by the ordinary rakyat is that of our foreign exchange. Do you think that the ringgit is rightly value at RM3.35 to US$1.00? Nobody seems to think so except for Bank Negara. Why can't we float our ringgit again? Enough bullshit about speculators playing with the ringgit. The Malaysian government is one of the largest forex player in the world pre 1997 meltdown. Don't blame others for your own mistakes and greed. Float the ringgit and I am blardie sure that we will easily be in the range of RM2.50 and Rm2.80. And I read somewhere that based on burgernomics (that's forex and economy based upon spending power on McDonald's products), the real value of the ringgit could even be below RM2.oo (I think that that is s a bit pushing it la).

No doubt that keeping the ringgit high is beneficial for the exporters. But remember, it makes imports very expensive. And we are a country that relies heavily on imports because our economy is so protected that many things produced are sub-standard. So who suffers with a high exchange rate? The rakyat again. That's you and me. Why can't we float the damn ringgit and force our manufacturers to learn to produce quality goods at low prices? Why should we rakyat have to suffer so that our manufacturers can make a profit and make the government looks good with healthy exports? Why must we rakyats pay for everything? Why must the rakyat be sacrificed so that the manufacturers get to buy their S Class and 7 Series.

There are many more protectionism imposed in this country. It will take an entire thesis for me to write about all of them - if that is even possible at all. The point is protectionism is good only if it is not abused. But we know that our government is incapable of not abusing anything.

I say the best thing Obama can do is to tell Najib to shut up and mind his own business. I hope that the US got really offended by Najib's remarks and retaliates. It will be good to see them forcing Malaysia to adopt a full FTA. Failing which they may impose an economic sanction on Malaysia. Let me tell you this; in the short run an economic sanction will hurt Malaysia. But in the long run, every single rakyat Malaysia will benefit from an open trade because right now be are just being suckered by the Barisan Nasional government. Malaysia must be forced into an economic reform or she never will.

We have already missed a boat for an economic reform when Mahathir rejected IMF's reform in 1998. That would have opened up the economy and removed all the political nonsense. Look at South Korea who took up the offer. Take a hard look at South Korea today. Where are they now? And where are we? And why did Mahathir reject the IMF? Because they would have killed off UMNO's power in the country and the wealth of its politicians and cronies. Everything else mentioned about us being colonised by the west via IMF is bullshit. South Korea is still South Korea and not the United States of Korea. Indonesia in not known as United Indonesia. Talking about Indonesia, guess who got kicked out from his lofty seat when IMF went there.

Ordinary Malaysian do not pay just the expensive cars; we pay for much more for everything we incur every day because of protectionism. Economics affect our daily lives much to the ignorance of the uninformed laymen. And the BN government will continue to manipulate economics for its benefits because the bulk of the rakyat do not understand the technicalities of economics.

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For the benefits of those who are not well versed with economic terminologies, here is what Wikipedia has to say about 'protectionism':

Protectionism is the economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of local markets and companies. This policy is closely aligned with anti-globalization, and contrasts with free-trade, where government barriers to trade are kept to a minimum.


1 Response to "Of Najib, Obama and Protectionism"

  1. Anonymous Said,

    No doubt that keeping the ringgit high (i think you mean low relative to the USD because high ringgit casues exports to be expensive and vice versa) is beneficial for the exporters. But remember, it makes imports very expensive. And we are a country that relies heavily on imports because our economy is so protected that many things produced are sub-standard. (our economy is predominatly export oriented because our domestic market is small) So who suffers with a high exchange rate? The rakyat again.


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