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HR: A Smuggler's Paradise
By Harun Rashid
1/1/2002 10:52 am Tue
Jan 1, 2002
A Smuggler's Paradise
by Harun Rashid
Two recent news stories have an interesting relationship. The first
gives notice that a reward of RM 2 million is offered by the
Malaysian government for information leading to the arrest of rice
smugglers. The notice is accompanied by an announcement that the
quota for imported rice is now reduced from 600,000 tonnes to
400,000 tonnes. This is necessary in order to exhaust supplies of
rice that are piling up at the mills.
The second article reports that the Bank Negara reaffirms the
pegging of the ringgit at 3.8 to the US dollar. The peg has been in
place since the end of 1998, and is a fundamental part of a national
economic policy put in place by the prime minister. It is a point of
pride, and has become a political issue apart from its function as an
economic tool of government. Its ostensible purpose is to prevent
fluctuation in the relative value of the national currency, functioning
as a medium of exchange in the arena of international trade.
Opposition to the ringgit peg was a major factor in the schism that
developed between Mahathir and his staunch friend and finance
minister Anwar Ibrahim. Anwar opposed the peg as a hindrance to
international trade, but Daim Zainuddin, an old political party pal of
Mahathir's, supported the peg. According to trial records, it was
Daim Zainuddin who instigated the conspiracy to remove Anwar,
and it was Daim Zainuddin who assumed the responsibilities of the
finance ministry (he was Umno treasurer of many years, and retained
this post) after Anwar was forcably relieved. Forced to choose
between the two, Mahathir chose Daim. He has come to regret it.
Mahathir has a knack, when forced to choose between men of
opposite character, to err.
Anwar began to expose widespread corruption in the government, of
which he certainly had personal knowledge. The public perception
was that in order to silence him, it was decided that the nearest
SWAT team, a team of masked murderers, should arrest him, with
instructions to shoot to kill at the first opportunity.
Anwar, confronted by armed and masked gunmen who broke into his
home at night, did not give them that opportunity. He stayed within
the protective cordon of international journalists and cameramen. The
IGP, on being told that Anwar was brought in alive rather than dead,
was so enraged he personally took the matter in hand. He ordered
his men to blindfold Anwar and handcuff him to a chair. The
courageous IGP then pummeled the helpless man about the head
and face until it appeared that Anwar's life was exhausted.
Anwar was then left in poor condition without medical attention for at
least four days. That he did not die is testament to his strong will to
live. He was hidden from public view until most of his wounds had
healed, but even after ten days the remains of the beating were still
apparent. A puffy black and blue eye testified to the cruel treatment
he had received at the hands of his fellow Muslims, in what is now
trumpeted as "an Islamic State".
Though the beating took place in the national police headquarters in
full view of various witnesses, including prominent prosecutors from
the Attorney General's office, it took a Royal Commission of Inquiry
to finally ferret out the felonious facts. The IGP was forced to resign,
and subsequently served six weeks imprisonment.
The witnesses to the beating have escaped punishment, along with
the man who ordered it. Basically speaking, the entire event has
banished Malaysia from respectable company, especially after
seeing those directly concerned rewarded with higher office,
presumably partnered with pecuniary preferment.
Anwar was eventually tried in court twice, neither occasion rising to
a level of reportable or responsible jurisprudence, and sentenced to
a total of fifteen years. He serves his term in isolation, in order to
prevent him from communicating further details of the corruption that
prevents acceptance of Malaysia into the company of respectable
Daim Zainuddin, who was revealed to be the originator of the Anwar
plot, has so angered the public (and his party) with further massive
transfers of public funds to agencies in which he is allegedly a
principal, and thereby personally profiting from his position of public
trust, that his departure from office (and public view) became
necessary. He continues to operate behind the scenes. With the
enormous funds at his personal disposal, he is able to take
advantage of any opportunity that fortune affords in Malaysia,
neighboring countries and further.
Unable to trust a successor, the prime minister has assumed Daim
Zainuddin's duties as finance minister and Umno party treasurer. All
aspects of the national and party affairs are thus now in trustworthy
Though Anwar and Daim Zainuddin have effectively left the
immediate political scene, both have cast a long and continuing
shadow. Both continue to exert a strong influence over current
events. Mahathir and the ringgit peg remain. With this backdrop, we
can now return to the two news items and an examination of the
events that have transpired since the critical events at the end of
That goods normally move from a region of low price to a region of
higher price, and not the other way round, is a basic observation of
commerce and trade. [When the reverse occurs, it is generally a gift
with a humanitarian motive.] The final price of goods at the point of
consumption is determined by the cost of production in the region of
origin plus the cost of transportation. It is further influenced by
demand at the destination, which tends to inflate the price when it is
high and to deflate the price when it is low.
The final price for a commodity at the point of consumption is also
influenced by the supply available. When there are supplies in
excess of demand, the price tends to be low, and the level of trade
will decrease accordingly. When supplies are low, the demand will
tend to put an upward pressure on prices. The higher price, with its
promise of a nice profit, will then tend to increase the flow of trade.
These are the basic considerations that determine the flow of goods
in international trade. When the flow of trade is free of any barriers
erected by government, it is referred to as "free trade". But
governments tend to give protection to their own domestic industries
by erecting barriers, primarily in the form of customs duties, taxes
and quotas. The presence of these barriers, and their removal, are
the core issues surrounding the WTO meetings and the objections to
Malaysia has interested itself in building a separate world, of which it
is the major moving party. It is a founding member of ASEAN, a
regional closed trading group with trade agreements allowing no
barrier over five per cent. The national currency, now pegged to the
US dollar, is suggested as the centerpiece of a new Islamic
currency, somewhat like the Eurodollar. This group of Islamic
countries is to become a competitive economic unit similar to the
But there are big problems. The first and greatest problem is the lack
of competitiveness brought about by the ringgit peg. Malaysia has
been raised by the ringgit peg to a position of privilege, in which
Malaysian goods and services are at a price level that floats against
neighboring countries as though it were the US dollar. While the
currencies of surrounding countries have fallen relative to the US
dollar, the Malaysian ringgit has remained pegged. Malaysia has in
consequence become an economic island, and other countries in
the region are now able to produce goods and services at a price
lower than Malaysia.
In just twelve months all the remaining trade barriers must be lowered
to a maximum of five percent. Malaysia has been granted an
extension of an additional two years to allow Malaysian automakers
time to adjust to the lower costs in Thailand. This exemption has
caused many to suspect Malaysia of bargaining in bad faith.
A second area of immediate concern is the action of Singapore in
arranging favorable trade agreements with major partners outside of
ASEAN. This allows Singapore to enjoy a position of privilege,
offering access to the other six ASEAN member countries through a
"back door". This unilateral activity by Singapore effectively negates
the purposes of ASEAN, and seriously threatens its effectiveness
and survival as a significant economic entity.
Rice is a basic commodity throughout SE Asia, and it is produced in
Indonesia and Thailand in large quantity at prices much cheaper
than in Malaysia. Thus rice tends to flow into Malaysia, and a quota
has been imposed to control and limit the flow to protect domestic
producers. The quota is intended to protect local rice growers.
Without this protection the growing of rice in Malaysia would slowly
decrease until the agricultural base of Malaysia is seriously eroded.
As local production falls, imports will increase. Eventually all rice will
be imported, large scale domestic production will cease, and paying
for the imported rice will be a severe drain on the local currency.
What is true for rice is also true for all agricultural commodities, so
the threat is a real one, endangering the entire agricultural base of
Malaysia. Rubber, for example, is produced at about the level of
domestic consumption. But exports are also at the level of domestic
production, so where does this extra rubber for export come from?
It comes from rubber that is produced more cheaply in neighboring
countries, primarily Indonesia and Thailand. It is brought into
Malaysia and re-marketed by exporters. The trend is for the flow of
these imports to increase, while domestic production declines. The
same is true for palm oil. The declining agricultural statistics for the
past two years indicate that this is exactly what is happening.
Manufacturing is affected in the same way. While Malaysia's
established industrial base does offer a temporary advantage, the
disparity of price that exists between domestic production and
manufactured goods from neighboring countries puts increasing
pressure on both Malaysia's domestic market and Malaysia's ability
to compete for the international export market. This becomes
especially apparent when one considers the emerging economic
power of China, which has a population of over one billion,
compared with Malaysia's 23 million.
Malaysia has also become a paradise for cigarette smugglers, who
make a profit of RM 2 million or more from each container of
cigarettes brought in without paying the increased tax. There is no
reward offered for catching cigarette smugglers, though smoking is
detrimental to individual health and intolerably expensive for the
national health system. The reward offered is for catching rice
smugglers, though rice is a beneficial basic food.
Demand for cigarettes is not based on any biological need, and must
be regarded as a created demand for a toxic and addictive drug
(nicotine). Constant advertising on local billboards and especially
prime time TV must stimulate the demand. Though the health minister
constantly highlights the danger to public health, the illegal TV
advertising continues through stealth and subterfuge.
Malaysia is now touted as an Islamic State, but cigarettes are forbidden for Muslims. Something of a double standard exists when the trade in health-destroying cigarettes is less odious than the trade in rice. Smokers are observed to consume more cigarettes when they are anxious. There is every reason to expect cigarette consumption to increase in Malaysia, simply because there is much for Malaysians to be anxious about.
Link Reference : HR Worldview: A Smuggler's Paradise