No economy has ever been able to sustain membership in the high-income, developed-country league without having first adopted the institutions of secure private property rights and their free, competitive use under the rule of law that treats all citizens equally. These institutions (or rules) can be called the ‘software of free-market capitalism’. These basic rules of conduct make it easier for people to incur the transaction costs of innovation and to interact productively with each other in an increasingly complex, dynamic economy. Interventionism, income redistribution and crony politics weaken or destroy these essential institutions. They are therefore likely to lock the economy into a middle-income trap’, apart from creating political tensions and growing social instability. To develop the ‘software’ of economic development, social scientists and policy analysts must go beyond technical analysis and engage in moral discussions. This is a challenge that only the young in the countries concerned can tackle, if they want to create a better, freer and more prosperous future for themselves.
Key failings in the Malaysian public procurement system and how they can be addressed by greater transparency
The Malaysian government has established an official system of procurement which conforms to a certain extent to international standards. However, Auditor General Reports repeatedly highlight cases of procured goods, services and works that are being paid for well above market prices, under-utilised, and substandard. The paper argues that these problems may be caused by inadequate procurement planning and poor drafting of specifications, insufficient use of open competitive tendering and lack of monitoring and evaluation. The paper further argues that by putting more comprehensive transparency measures and addressing problems that have been hampering transparency initiatives such as political interference and continued use of direct negotiation, Malaysia will be able to address those problems and reap full benefit of transparent procurement system.
Among transparency measures specifically recommended by this paper are disclosure of procurement planning and non-performing contractors and suppliers, and allowing outside observers such as representatives from the Auditor General’s Office or the Malaysian Anti-Corruption Commission (MACC), and relevant business organisations to attend procurement board meetings.
Click the above thumbnail to download the paper.
Economic Freedom of the World
The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two variables are used to construct a summary index and to measure the degree of economic freedom
in five broad areas:
1 Size of Government;
2 Legal System and Property Rights;
3 Sound Money;
4 Freedom to Trade Internationally;
Since thefirst publication in 1996, numerous studies have used the data published in Economic Freedom of the World to examine the impact of economic freedom on investment, economic growth, income levels, and poverty rates. Virtually without exception, these studies have found that countries with institutions and policies more consistent with economic freedom have higher investment rates, more rapid economic growth, higher income levels, and a more rapid reduction in poverty rates.
The EFW index now covers 152 countries and territories. Data are available for approximately 100 nations and territories back to 1980, and many back to 1970. This data set makes it possible for scholars to analyze the impact of both cross-country differences in economic freedom and changes in that freedom across a three decade time frame.
KUALA LUMPUR, MALAYSIA – Malaysia ranked 33rd out of 131 countries globally in the 2013 International Property Rights Index (IPRI), released today by the Institute for Democracy and Economic Affairs (IDEAS) in partnership with the Property Rights Alliance in Washington DC.
The IPRI measures the intellectual and physical property rights and their protection for economic well-being. The IPRI uses three components of property rights to create a composite score: Legal & Political Environment (LP), Physical Property Rights (PPR), and Intellectual Property Rights (IPR).
Malaysia’s IPRI score remains unchanged from 2012 at 6.5 points. It is disappointing that our index scores remain stagnant, whereas neighbouring countries Indonesia, Thailand, Philippines and Brunei all recorded increases in index scores of up to 0.2. Malaysia ranks 7th in the Asian region, below China, Hong Kong, India, Japan and the Republic of Korea.
The IPRI emphasizes the great economic differences between countries with strong property rights and those without. Malaysia in the second quintile has an average GDP per capita of US$26,680, whereas nations in the top quintile like Finland and Australia enjoy an average national GDP per capita of US$38,288.
Individual scores in key components of intellectual property rights (from 1 to 10 where a higher value indicates a higher level of protection of property rights):
Legal and Political Environment: fell to 5.7 from 5.8 in the last year’s report
Physical Property Rights: rose to 7.7 from 7.5
Intellectual Property Rights: fell to 6.1 from 6.2
Although there was no change in the overall score from 2012 to 2013, this year we achieved a lower score in two categories. The decline in the Legal and Political Environment component is because both ‘Control of Corruption’ and ‘Judicial Independence’ had very small increases in scores. Intellectual Property Rights also declined due to a drop in ‘Protection of Intellectual Property Rights’.
In the ongoing TPPA negotiations, Malaysia’s position is to proposal to provide extended protection for patent owners. This may have an impact on the score IPR protection.
“Whilst we are pleased to note the increase in protection of physical property rights, this is only because of the increase in the numbers of registered properties. What is of greater concern is the slight decline in the control of corruption, judicial independence and protection of intellectual property rights.
These three elements are crucial in supporting private property, a freer economy, and a democratic society. The right to property ensures the voluntary transfer of assets, resulting in exchange and economic growth, and this would make Malaysia a more attractive place to invest in, live and work”, said IDEAS Chief Executive, Wan Saiful Wan Jan.
The outcome of Malaysia’s 13th General Election (GE13) is still contested. Some argue that since Pakatan Rakyat won the popular vote, Barisan Nasional therefore does not have the legitimacy to rule. But all political parties entered the election knowing that popular vote is not the deciding factor in a parliamentary system. Popular vote cannot be the basis to protest against the elected government, but it can be used to call for reform of the political system especially the electoral system.
Positing that a healthy democratic system is the best legacy we can pass to future generations, this paper takes the premise that there is now an opportunity to deepen democracy in Malaysia by moving on and focusing on issues that matter.
Democracy in Malaysia is a legacy to be cherished. Many developing countries have not been able to build strong democratic institutions. But we have these institutions today and we urgently need to strengthen them.
Reforming the electoral processes is a key step to deepen democracy in Malaysia. Creating a parliamentary committee to oversee the Election Commission (EC) may be a step in the right direction, but replacing the EC leadership with one that can command more public trust would be a much stronger step. Once that is done, it would be necessary to look into the unequal constituency apportionment, political financing, and press freedom. All are important to improve the
democratic election of a government.
The paper also discusses other important reforms to deepen democratic governance, such as the need to distribute power to other levels of government, strengthening the role of civil society and parliament in providing check and balance, creating healthy interaction between government and opposition, and ensuring positive relationship between the federal and state governments regardless of which party is in power.
Private schools are usually associated with better quality but the cost is usually beyond the reach of the common citizen. However, this study shows that it is possible to introduce key elements of the private system – accountability, parental choice and competition – at a much lower cost or even for free to the students. This is a study of five schools in two Indian cities, Mumbai and Delhi. All the schools serve families with very low income, including those living in slum areas. We interviewed headmasters, teachers and parents. We found that two models exist: affordable private schools that charge a monthly fee (with a voucher system for those who cannot afford to pay anything), and government schools that are run by the private sector without charging any fee. We found that poor parents are willing to pay in order to obtain good education for their children. But there is not yet a comprehensive system to help parents assess school performance objectively. We also found that the private school market for the poor to be very competitive, with school operators trying hard to attract new students by continuously pushing up quality.
The Indian experience shows that there is a clear opportunity to bring market discipline into the school system, with the ultimate aim of driving up quality so that the poor too can benefit from what is traditionally the monopoly of the rich. To end the discrimination against the poor in Malaysia, we propose that the school system should be liberalised, and the private sector encouraged to explore the bottom 40 percent market. A private voucher system should also be introduced to assist those who cannot pay any fee.
IDEAS was accredited by the Election Commission of Malaysia (EC) to observe the recently concluded 13th General Elections. Our mandate was to observe, record, analyse and report events leading up to GE13, and subsequently recommend ways to improve any weaknesses found. We benchmarked our observation against the Inter-Parliamentary Union’s Declaration on Criteria for Free and Fair Elections. We deployed 325 observers to 99 parliamentary constituencies in Peninsula Malaysia and 6 overseas polling centres.
Generally, we found that EC successfully ensured the overall process between nomination day and election day proceeded smoothly without any major glitches. Complaints have been filed about the possibility of phantom voters and the failure of the indelible ink to work as it should. Both are important issues that must be addressed. However, we position these two issues in the context of the wider lack of trust in the integrity of the electoral roll, instead of simply a weakness of the EC. In order to address the root cause of the problem, serious attention must be given to improving the integrity of the electoral roll. This involves improving the integrity of the National Registration Department’s database, which may not be within the EC’s purview.
It is important to examine the events building up to GE13 in order to get a better perspective. Taking a long-term view, we saw that (1) The media was heavily biased in favour of Barisan Nasional. State-funded media platforms have been abused to project partisan views to the public; (2) There were doubts about the EC’s impartiality and competency despite their many efforts to improve the electoral system. They were seen as being part of an already biased civil service. The fact that EC members repeatedly issued statements that could be construed as partisan did not help. Their defensiveness when criticised further angered the public; (3) Trust in the integrity of the electoral roll is low. This resulted in the public being very cautious when there were reports of foreigners being flown in, when they saw foreign-looking individuals, or when the indelible ink was seen as ineffective; (4) The Registrar of Societies did not treat all political parties equally, delaying the registration process of non-BN partie; (5) Constituency sizes are too unequal, allowing parties that win many smaller seats to win parliament, despite not commanding popular support; (6) Financing of political parties is not transparent, resulting in a big lack of clarity about the financial standing of the competing parties; (7) During the campaigning period, government and armed forces facilities were repeatedly used for campaigning purposes during the official campaign period; (8) Racial issues were dangerously exploited for political gains. There were many instances of BN fishing for votes by sowing mistrust between the Chinese and Malay communities.
Therefore, although the official campaign period and electoral processes may have proceeded smoothly and with minimal major issues, wider issues that are not within the EC’s purview have built up over the last few years. These issues conspired against non-BN parties, therefore creating a very uneven field. Due to these reasons, we conclude that GE13 was only partially free and not fair.
- – -
By Debashis Chakraborty
Our third briefing paper argues that the private sector will have to play a key role in increasing health provision in India, given the weakness of much existing public provision.
Although the government has had the ambition of achieving Universal Health Coverage since independence in 1947, it has had very limited success. Recently, however, the government has developed a number of Public Private Partnerships (PPPs) to help increase healthcare for all Indians.
While there have been many successful PPPs, this paper argues that many have failed to live up to their potential as a result of mismanagement by the government partner.
In particular, the paper argues that private sector partners need to be given the freedom to plan and manage without undue political interference.
- – -
Debashis Chakraborty is Assistant Professor of Economics at the Indian Institute of Foreign Trade New Delhi.
The views expressed in the paper are the author’s own.
EMHN is a project of Institute for Democracy and Economic Affairs (DEAS), Malaysia.
Fake medicines are becoming a critical problem in Asia, constituting between 15 and 25% of the market in countries like India and Indonesia. Even highly regulated markets like Malaysia have a prevalence rate of around 5%, according to Ministry of Health studies. There is near consensus that concerted action is needed at the international and national level to solve this major threat to public health, with most commentary focusing on the lack of regulation in poor countries where the problem of fake medicines is most acute. Is regulation the answer, or are other mechanisms such as intellectual property rights and civil law more important.
Please visit EMHN for more information about the Emerging Markets Health Network
Fake medicines – which are either criminally motivated or the result of lax manufacturing standards – are a worsening problem, particularly in Asia. In some of poorer parts of the continent, up to a quarter of medicines fail quality tests.
Evidence shows that cheap generic drugs are the most faked medicines in Asia, although there appears to be a particular problem with anti-malarial drugs in places such as Laos and Cambodia. China and India appear to be production hotspots.
Producers and purveyors of fake medicines are exploiting the increasing globalisation of the pharmaceutical supply chain, poorly defined and enforced civil and criminal laws, and a lack of an international definition of what legally constitutes a fake medicine. International efforts to combat fake medicines have been hampered by the inability of countries to agree on a legal definition for fake medicines.
Legal scholars and health experts are now pushing for a global treaty to correct this problem and allow for greater cooperation between national authorities, but this will be many years off. At any rate, a treaty will only be as effective as the legal and regulatory enforcement capacity in the worst affected countries.
In many countries, general weakness of the rule of law is at the heart of the problem of fake medicines, so it is unclear how adding more and stricter laws and regulations will address this very basic shortcoming. Technology can help legitimate manufacturers protect their brands, and this is discussed in the next EMHN briefing paper.
Please visit www.emhn.org for more information about the Emerging Markets Health Network.