Bribery in Malaysia

Bribery

This is an action of persuading someone to act in one's favor, typically illegally or dishonestly by a gift of money or other inducement.

Bribery may be something illegal, wrong and dishonest, but it has become a culture in Malaysia. People in Malaysia use bribery as a way out of trouble, or to negotiate deals while those in the authorities and on the side with power use it as a way to earn profit.

Now, bribery has become an integral part of our society. A general consensus among the Malaysian people is that as long as you have money, you can get out of any problem. For example, whenever someone breaks a traffic law and gets caught, their first thought is "it's okay, I'll just bribe the police officer". This may sound disrespectful to the authorities tasked with the protection of our lives, but the fact that they so willingly receive, and in some cases, initiate the bribe makes them lose the moral high ground .

Now when we look at the implications that bribery has on our economy, the effects are quite significant. According to Transparency International Malaysia-Malaysia, Malaysia took the 60th spot this year, a drop of  four places from last year. Malaysia scored 4.3 on the survey, far behind Singapore (9.3) and Brunei (6.3). Malaysia is among the 60% of countries surveyed that scored below 5 and its underperformance and stirred debates about the seriousness of public sector corruption in Malaysia.

Corruption has a negative impact on productivity, which dampens our long-term economic growth. This is because bribery increases the costs of doing business. In fact, according to the research done by Transparency International, 50% of companies surveyed said that a competitor's bribery has cost them business in the past year (2012).

Corruption also deters investments because bribery is seen as a form of tax on investments. For example,the AFP news report on Indonesia reported the London-based risk consultancy Business Monitor International as saying that ''high levels of corruption have severely impeded investment in the country's infrastructure for non-public sources".

Corruption also causes an inefficient allocation of resources, as the decision of public officials and politicians will be biased towards transactions that offer higher opportunities to strike up corrupt deals that will be financially beneficial to them. Resources would be wasted on projects that have little to no economic prospects.

Based on economic theory, corruption, which is a form of tax, decreases aggregate supply. That is, it shifts the economy's positively-sloped aggregate supply curve to the left. Assuming that the economy's negatively sloped aggregate demand curve remains stationary, the aggregate supply curve's leftward shift implies a rise in the aggregate price level

Mounting public sector expenses as a result of corrupt public sector officials siphoning off public funds meant for development can lead to the government printing money to finance the country's budget deficit.

Based on economic theory, such a move would raise aggregate demand, i.e. shift the economy's negatively sloped aggregate demand curve to the right. Assuming that the economy's positively-sloped aggregate supply curve remains stationary, the aggregate demand curve's rightward shift implies a rise in the aggregate price level. This is a contributing factor to a possible inflation.

Written by, Keeve Wong Weikit (0315620)

Sources : 

http://www.thegreenmechanics.com/2013/01/malaysia-tops-bribery-table.html

http://mybaru1.blogspot.com/2012/06/corruption-and-inflation-how-they.html

http://www.thefreedictionary.com/bribe

4th of July - An economic viewpoint

The 4th of  July is an iconic day of celebration where every year without fail, Americans display their unmatched sense of patriotism and pride for their country. This celebration brings Americans together in celebration of their independence.  Flags are positioned on lawns, on cars, and well, pretty much everywhere  while those from the old to the young adorn clothes with stars and stripes and the colors of their national flag, red , white and blue . Fireworks are shot in the sky and families and friends come together to celebrate this wonderful day with their loved ones.

For this specific article, we will delve into the economic aspects of the 4th of July. As the 4th of July approaches, Americans rush to purchase flags, clothes , fireworks to set off,  and various other products that either portray patriotism or depicts their national flag. But that begs the question…

 where do these products come from ?

 Who produces them ? 

Well, unsurprisingly, the US imports the majority of these products from China, mainly the American flags and the fireworks. According to the U.S. census Bureau Data, of the $3.8 million worth of the American flags imported into the U.S. last year, $3.6 million's worth came from China. For the fireworks on the other hand, of all U.S fireworks imported last year ($227.3 million), $21.8 million's worth of fireworks were imported from China. However, U.S exports of fireworks for the same period paled in comparison, amounting to only $11.7 million. Furthermore, The American Pyrotechnics Association estimates that only 6.7 million of the 207.5 million pounds of fireworks Americans bought in 2012 were manufactured in the U.S.

That's not all, of the many types of 4th of July merchandise sold and purchased in the U.S., a large portion of them were imported from China. It seems that the manufacturers in China have as much to celebrate as the Americans during this holiday , seeing as the large amount of goods produced in China and exported to the U.S not only profits the manufacturers in China, but also contributes greatly to China's GNP. 

However, we cannot omit the fact that the 4th of July also profits the U.S greatly, as a commercial holiday. The retailers and distributors in the U.S take advantage of the spike in demand for these products and go all out in sales, increasing the supply and profiting from the situation. America is said to be the land of opportunity, and in this case, they take all that they can get, offering discounts and promotional deals for products with a patriotic nature and products that depict the U.S. national flag.  

Stores stock up on these products, while small vendors set up stalls on the streets and sidewalks selling T-Shirts, Pants, hats and anything they can put the American flag on .The 4th of July benefits China in terms of GNP, but it also greatly contributes to America's GDP. The sales of these products not only create a festive mood and environment for the American people, but also helps in improving the national economy.

Written by, Keeve Wong Weikit (0315620)

References:

http://www.ibtimes.com/4th-july-facts-most-us-fireworks-flags-made-china-1334433

Malaysia - The Price Ceiling for Low Cost Houses

What comes to your mind when you hear about the Price Ceiling  ? ceilings are normally associated with something high, but in the case of economics, it is something low. The price ceiling is in fact, an economic term which is a regulation imposed by the government that makes it illegal to charge a price higher than a specified level. The implementation of a price ceiling allows consumers to purchase the basic or essential items that were previously unaffordable at a  lower price.

Applying this concept, the Malaysian government has implemented a price ceiling on low cost homes starting from the year 2010. The implementation of this price ceiling is aimed to ensure that people from the lower income group have one of the basic necessities, which is shelter. The government has set the price ceiling of low income houses at RM42,000 in Peninsular Malaysia and RM50,400 in Sabah and Sarawak. 

Furthermore, in conjunction with the 10th Malaysia plan, the government has planned to develop more houses at an affordable price, involving private developers. The target is to have 161,000 affordable homes, of which private developers would build 83,000 units while the rest would be built by the government.

Due to the implementation of this price ceiling, the legal maximum price of low income houses set by the government is lower than the market equilibrium price. This is done in order to protect the interest of consumers by preventing the producers from charging prices that are unaffordable by low income consumers.

From the graph, we can see that the price ceiling for low cost houses in Sabah and Sarawak ( approximately RM50,000 ) is set at a level that is lower than the equilibrium price of low cost houses. Thus, all producers of low income houses within that region is not allowed to sell those houses for any price exceeding the price ceiling.

The government has implemented this price ceiling in order to help those with low incomes afford to buy houses in our current economy where the prices for property seem to be constantly increasing.

This price ceiling increases everyone's ability to buy low cost houses. Thus, one of the implications of the price ceiling is an increase in demand for low cost houses. However, with the price ceiling implemented, the production of  low cost houses will be less profitable, and thus producers will be discouraged to produce them, causing supply to decrease. This in term will result in the demand for low cost houses exceeding the supply, thus causing a shortage to occur.

A potential problem that could occur from the shortage is an unbalanced distribution of the low cost houses. In order to counter this problem, the government should adopt a rationing system. For instance, a person is only allowed to own a certain number of low cost houses. Therefore, everyone has a fair chance to buy a low cost house even though there is a limited supply.

On a side note, the government is allocating half of the development of these houses to the private sectors . This will allow an equivalent distribution of profit between the private sector and the government. 

Written by: Penny Low (0315422)

References:

http://www.thestar.com.my/story.aspxsec=parliament&file=%2f2010%2f11%2f23%2fparliament%2f7482828

Fuel price hike in Indonesia

Fuel, it is an integral part of every economy, and to us it is invaluable. Petroleum is an important natural resource in which our country is rich in, and that contributes greatly to our country's economy. However, it is also an important part of our daily lives, as petrol for our cars and motorcycles, and playing major roles in the transportation of goods in our country. It is something that we all need, whether directly or indirectly. Fuel is something that we need, yes, but it is also something that we dread buying. This is because fuel is expensive, it is an added cost to our lives. For some, the cost of fuel could be easily omitted, but for most of us, it is a significant cost we must bear.

Recently, in Indonesia, the government has announced that the subsidies given for fuel prices will be removed, and petrol prices are to increase by 44%, from 4,500 rupiah per liter to 6,500 rupiah. This is an action taken as a last resort by the Indonesian government in order to deal with the economic crisis and the fall of the national currency.  

This drastic action taken by the Indonesian government has taken the citizens by surprise and has caused an outrage towards the government. Riots have broken out in protest of the fuel price hike. Protesters have taken to carrying out attacks on government buildings and against the policemen and other authorities. According to surveys carried out, nearly 80% of Indonesians are against the fuel price hike.

Fuel is a necessity and thus an inelastic good. If the price of fuel rises, demand will decrease, but not by much because one way or the other, the Indonesians still need fuel. 

This is precisely why the Indonesians are protesting, because of its role as a necessity and its inelastic demand, when the price of fuel is increased, the Indonesian people still have to buy fuel, they do not have the simple option of simply not buying fuel.

Although the current price of fuel in Indonesia is among the lowest in Southeast Asia, (4,500 rupiah) such a drastic change will heavily impact the economy and it will most likely cause an inflation. Fuel is integral in every sector of the economy, most notably in terms of transportation of goods and factory its role in factory production. Thus, when the price of fuel is increased, it will cause a subsequently cause an increase in price for most other goods and consequently cause an inflation.

However, this is a necessary step taken by the Indonesian government as the increase in fuel prices is predicted to strengthen the Rupiah currency and is a step towards strengthening the national economy. The fuel-price increase will strengthen the rupiah and the trade balance as oil imports fall while removing the incentive for smugglers to sell subsidized products abroad. The nation is expected to meet its budget assumption of the rupiah averaging 9,600 per dollar this year.

                                                                                       Written by : Keeve Wong (0315620)

References:

http://www.bloomberg.com/news/2013-07-01/inflation-may-rise-to-6-rate-in-july-indonesia-s-basri-says.html

http://www.abc.net.au/news/2013-06-22/indonesia-fuel-price-hike/4773412

http://globalvoicesonline.org/2013/06/24/indonesia-fuel-price-hike-ignites-protests/

The Haze - How it has affected our economy

 The haze, it is something every Malaysian has to go through annually. Every middle of the year, our country is overcome by smokey dust-filled air caused by the open burning in Indonesia intended to clear land for oil palm plantations. The haze not only clouds our long-distance vision, but also has negative impacts towards our health. Exposure to the haze can irritate the eyes, cause breathing difficulties, sore throat, coughing, and decreased lung function among many others. Thus, when the haze came in to Malaysia, citizens ran to protect themselves and their families, purchasing surgical masks to filter the air they breathe. 

surgical mask

 

Days after the haze began, the demand for these surgical masks surged upwards as Malaysians rushed to buy them.

 shift in the demand curve of surgical masks 

As the demand continued to increase for these surgical masks, a shortage occurred in Malaysia, mainly around Kuala Lumpur and Selangor. 

N95 mask

However, after the information that the surgical masks were ineffective against the haze, and that the N95 masks were more effective, the demand for the surgical masks gradually decreased but still maintained at a high level.

On the other hand, the demand for the N95 mask began to increase , but not at a drastic rate, this is mostly because the N95 mask was high-priced (RM6 at average), as compared to the surgical masks which only cost a fraction of the N95 masks (RM0.70-RM1.0 at average).

However, these are not the only effects the haze had on our economy. On a larger scale, studies have shown that, based on the value of gross national income per capita per day, it works out to an average of RM18,848 per month or RM628 per day, or RM11,900 per hazy day during a haze event on average. This causes a decrease in our national GDP and should be cause to worry.

At this point, tourism, leisure and restaurant businesses stand to lose the most business as most Malaysians opt to stay indoors as much as possible and eat out as little as possible. This causes the income for these businesses to decrease, contributing to a decrease in our national GDP. Furthermore, small vendors such as fruit stall owners, and vegetable sellers who do business in the open are also losing a lot of business as people prefer to shop in an enclosed environment such as grocery stores and shopping malls in order to avoid the haze.

Written by : Keeve Wong Weikit (0315620)

References :

http://www.thestar.com.my/News/Nation/2013/06/25/N95-masks-give-better-protection-says-expert.aspx

http://www.thestar.com.my/News/Nation/2013/06/29/Group-Haze-expected-to-worsen.aspx

http://blissair.com/health-effects-of-haze.htm

http://www.fz.com/content/weighing-economic-impact-haze

 . 

The Fresh Fish Market - A Perfect Competition

Fresh fish, it is something that we're accustomed to here in Malaysia. Fish in Malaysia is one of our staples for protein, either cooked in our favorite sweet and sour sauce, steamed with ginger and oyster sauce or made into otak-otak, it is something that always seems to be around when we think of food.

However, if you look at it from an economic point of view, the fresh fish market is one of the oldest perfect competitions in our country. It is not only a market, but also a tradition and a lifestyle for many fishermen who have had the skills for catching fish passed down for generations.

Being in a perfect competition, there is a very large amount of fishmongers in Malaysia, and all of them are selling the same thing, fish .

The fresh fish market is a very open market, as long as you have fish to sell, you're set. All you have to do is rent a stall at a local market and you can start your business. However, pricing is important when you're selling fresh fish. However, sellers must conform to the market price as they are price takers and  have no market power, so if you overcharge for your fish, you'll probably run out of business very soon.

The supply of fish is not something you tend to worry about, after all, the sea is always there, so there will always be fish, right? Well, when you really think about it, many factors can affect the supply in the fresh fish market. For example, the weather. During the heavy rain season in Malaysia, fish supply is heavily reduced, as fishermen cannot go out to sea to catch the fish. At that point, the demand would surpass the supply, and the price of fish would increase. This will result in a shortage of fish in Malaysia.

Another example is Chinese New Year. This year during the festivities, the supply of fresh fish was drastically reduced at wet markets in the cities and as the majority of Chinese wholesalers were on their Chinese New Year Holiday. Tenggiri fish were being sold between RM26 and RM27 per kilogram , Sardines between RM5-RM9, Tuna fish between RM6-RM7 and prawns between RM19-RM26 per kg depending on size. These prices are RM1-RM1.50 above their market equilibrium prices, but people still bought them.

The laws of demand and supply dictates that when prices increase, demand will decrease. But in this case, demand did not decrease. This is because, being a festive season, this was a special case. During Chinese New Year, chinese families have family dinners and banquets where fish is usually served, and during that time of celebration, they omitted the increment in the prices for fish. This goes to show that many factors are able to influence a perfect competition and we can't just follow the generic rules of demand and supply when  we analyze the market.

Producers in the fresh fish market earn normal profit. At this point, the fresh fish sellers are putting all their resources to the best use, working at full efficiency.  The overall goal of the fishmongers is to maximize their economic profit while minimizing their costs.

Written by Cheryl Chai Hui Yih (0314945)

References: 

http://www.themalaysianinsider.com/malaysia/article/low-fish-supply-prices-up

http://www.slideshare.net/mrtopf11/unit-2-3-2-perfect-competition-3427628

http://staffwww.fullcoll.edu/fchan/Micro/4perfect_competition.htm

Astro's Monopoly in Malaysia

Does anyone know what Monopoly in Market Structure is?  Among all the market structure, Monopoly will be the most interesting part. Monopoly is which there is only a firm that producing products and services.  It would be high barriers that could protect the firm from prevent other market to enter and due to that, there would not be any substitutes and that’s why it make the product is unique.  Is Astro still a monopoly firm since nowadays we have Unifi?

  

Unifi, under TMnet not only provide wireless line but also provide drama and shows named HyppTV. Particularly, the number of shows and drama provided by both the firm are totally different. Unifi focusing on providing wireless line while Astro is the firms that focus on channeling TV shows. Astro is also a natural monopoly. A natural monopoly is an industry that single firm production that good or services that is more efficient. The natural monopoly market structure in Malaysia is Astro.  Astro Malaysia Holding Berhad is a leading unified consumer media entertainment group in Malaysia and Southeast Asia. Over 130 million or 52% penetration of Malaysia TV households, Publication and Digital Media.  It could be stated that Astro has hold a big market in channeling hundred of TV shows in Malaysia.    

 Astro Malaysia Holding Berhad would affect Malaysia in many ways for example like it would be an extra income for the country such as government tax. To attract the consumer, Astro comes out with many promotions that would be cheaper than the usual price. For example like Super pack 1, super pack 2, super pack 3 and super pack 4. Super pack 4 only cost RM 125.00 that valued RM 199.95 and plus 6% government tax.  In addition, there would be many exclusive channels for news, kids, learning and variety such as discovery, Disney channel and celestial movies. When it is on promotion, more consumers will purchase it because it is reasonable that the amount we need to pay for 160 channels.   

The advantage of monopoly is earning high profits. Astro enjoy high revenue as high as RM3.2 billion. Astro also enjoy the benefits of economic scale as well. However, the disadvantages of monopoly are incentive and innovate. Malaysia viewer knew that when raining fade it would be a big problem for subscribers as the signal is not stable and we could not watch the TV shows.

In conclusion, monopoly firm had been protected by government by introducing barriers. In my opinion, it would be more effective to have only one firm than having more than one firm to compete with each other.

Written By : Loh Jing (0315615)

A view on the smartphone market - An Oligopoly

The smartphone market is one of the most prominent oligopolies. It is one of the largest and most profitable markets in the world . Among the major players in the smartphone industry are Apple, Samsung, Nokia, Blackberry, HTC, Sony Erricson, LG and Motorola.

The most identifying characteristic of an oligopoly is the number of sellers . In the case of the smartphone industry, the number of sellers are small, each of them holding a sizable percentage of the market share, with Apple and Samsung being the dominant players. When firms are working within an oligopoly, the number of sellers are so small that they must anticipate their competitors' reactions before making a pricing decision.

Being an oligopoly, the barriers to entry for the smartphone market is very high. It is extremely difficult for new firms to enter the market as barriers such as existing patents, control over essential raw materials and market, high customer switching costs and strong customer loyalty for existing brands block access to new firms who wish to enter the market. For example, Apple and Samsung's existing loyal customers would not be inclined to switch brands to a new startup firm as they have strong customer loyalty and trust in the brands that they are using , not to mention the extreme difficulty any new firms face with patent ownership, making production of new smartphones a very difficult task.

When firms work within an oligopoly, they have a joint control over the price of the products. Thus, there exists a mutual interdependence between firms to strategically price their products in order to mutually enjoy the highest profits. In the case of the smartphone industry, firms are forced to comply to the prices that are set in the market, or risk losing the demand for their product. When one firm lowers the price of their smartphone, the demand will increase and thus profits will increase. However, this increase in profits cannot be enjoyed for long because other firms will decrease the prices of their smartphones as well, in order to even the playing field .

Mergers also exists within the smartphone market. When firms sense the danger of new firm entries, they merge and create joint policies in product pricing and and production in order to discourage the entry of new firms. This is an integral component for the survival of the current firms. In order to continue profiting, the firms that exist within an oligopoly must work together to block the entry to new firms who wish to enter the market.

Samsung has recently taken the lead in the smartphone market, overtaking Apple in terms of market share, thanks largely in part to their flagship device, the Samsung Galaxy S4 outselling Apple's iPhone 5. And thus, as the smartphone market continues to grow and evolve, Samsung will be spearheading this movement forward, dominating the market with their Samsung galaxy S4, at least for the time being.

Written by : Keeve Wong Wekit (0315620)

References :

http://money.cnn.com/2013/06/05/technology/mobile/samsung-apple-market-share/index.html

http://www.oocities.org/znuniverse/micro_economics/Price_Determination_under_Oligopoly.htm