A sure-‘W1N’ way to reduce the deficit?

There is so much talk about the need to cut the budget deficit.  As subsidies are rolled back, the public is now paying a heavy price and is aghast at the rising cost of living.  

We are already seeing price hikes in basic necessities, electricity and toll, among others.  On Thursday, we were told that most of us will soon be not eligible to buy RON95 petrol.  It is subsidised fuel reserved for the "poor", we were told.  How that will be implemented and how "poor" is defined, is unclear.

But you can bet that if they decide to reserve RON95 petrol only for national cars at the petrol pumps, that will be a "sure-WIN" for Proton.  Speaking of WIN and cars, there is an almost sure-WIN way of closing in the budget deficit fast, without unnecessarily burdening the public.  The public will gladly pay for this effort, and it will be largely funded by the upper classes and elites.  

I am talking about the creation and selling of special car numbers. This week, the Sultan of Johor paid RM748,000 to secure the car number plate "W1N" which looks like "win".  

Malaysians have a great affinity for cars, and even greater affinity for car numbers.  For many businessmen and tycoons, the car number is as important as the car marque.  In a land where Mercedes and BMWs are common, it gives the owner added status and identity. 

To be fair, the sum paid by the Sultan of Johor as much higher than usual. But then again, it is the only one with a "win" permutation.  The subsequent numbers, W2N to W10N netted a total of RM653,687, or an average of RM72,632.  If we average out W1N to W10N, the average per number would be RM140,169.

If a W1N number is worth as much as ten times that of a non-W1N, then perhaps we should start considering creating more W1N permutations?

Imagine if we create more opportunities for the public to own the winning number.  We could start by adding more numbers behind W1N, starting from W1N 1 to W1N 9999.  That gives you 9,999 permutations of the W1N series. If each number can be sold for, say, an average of RM50,000, we are looking at a potential revenue of RM500million !

Stretching our imagination a bit further, what if we add more permutations to the W1N series, by also adding alphabets before that? Okay, that would cross state boundaries, but if we could add MAT, NOR, BIN, AL1, ABU, HAJ, ARU, AR1, TAN, LIM, ANG, ONG, AKU and so on.  To precede W1N, the possibilities are endless. 

A number like "TAN W1N 1" or "LIM W1N 1" will surely be coveted by rich tycoons with the surnames Tan and Lim, of which there are plenty.  Similarly, for the combinations that appeal to ethnic Malay and Indian names. 

For the more neutral, "AKU W1N 1", "1 W1N 1" or "MY W1N 1" sound perfect ! The young at heart would love to have MACHA W1N 1, but, oops, there are too many alphabets there.

Imagine again, if we could create just 20 of such permutations, each to join W1N and followed by the 9,999 permutations for the numbers that follow. We are looking at a total of 199,980 possible permutations! And if each number can garner say an average of RM30,000, we are looking at potential revenue of RM6 billion!

If one is worried about potential oversupply of numbers, it can be easily absorbed as this would represent less than one-third of new cars sold yearly.  And one will gladly pay for a number that bears his or her name, and can be kept for future cars and future generations.

This is of course, a tongue-in-cheek proposal. I am not sure if the authorities will take it seriously, although there is a huge market, and it will be a "Sure-W1N" formula.

But the main reason I am writing on this is to show that there are actually many ways for the government to cut the budget deficit.  It can be achieved by not just focusing on cutting subsidies, raising taxes or burdening the public.  

The government should be more creative. It must think out of the box to find new ideas to raise revenue or cut unnecessary wastages. 

Oh, and of course, please don't privatise these ideas !

Easy money, who can let it go?

The Government just announced that excise duties on cars will remain, dashing hopes of any reduction in car prices. Excise duties generated RM7.09 billion in 2012. Together with other forms of taxes, the Federal Government collects RM11.14 billion in 2012 from the car industry.

This RM11.14 billion is equivalent to 48% of personal income taxes, 22% of corporate taxes and 33% of petroleum taxes. For 2013, this revenue source is likely to be higher. The Edge Malaysia carried a thorough report and analysis of the Malaysian automobile industry in the January 6, 2014 issue.

At a time when fiscal restraint is critical to rein in the budget deficit, to counter possible credit rating downgrades and capital outflows, this revenue source is proving too hard to let go.

In the same announcement, the Government has deferred any decision on removing the approved permits (APs) system for importing cars into Malaysia.

In a system where a few individuals can make huge amounts of money by simply being granted the rights to bring in cars, this easy money is too hard to let go. For the interest of making a few rich elites richer, the rest of the population continue to suffer high car prices.

Here is an idea. Remove the excise duties and the Government owns all the APs. Profits from the APs now become Government revenue, replacing the excise duties. And removing the excise duties lowers the price for cars. So, why not?

Edge Education Forum, the what and the why

What factors are responsible for the poor state of affairs of our public education? The mushrooming of international and private schools catering to Malaysians, not just foreigners, best exemplified this situation. Results from internationally recognized assessments such as TIMSS and PISA, highlighting the weaker performance of Malaysian students, is another.

For many, this is the consequence of the poor quality of teachers. While this may be true, it is only the symptom. What are the causes? A lack of training or too low a salary scale, which drives away capable candidates from the profession? Or is it more to do with the absence of meritocracy, where the quality of teaching is not relevant to the teacher’s career development? Is our education policy too “centralized”, driven by bureaucrats that have lost touch with the needs of teachers and students?

What about the language of instruction? Was the change from English to Bahasa a fundamental cause? It is hard to imagine that language does not affect quality of the students and their capabilities when they subsequently join the workforce.

Why must we improve the quality of our public schools?

Quality of education directly impacts the livelihood of the individual and his family, and the growth and prospect of the entire nation. For the individual, it determines his employability, wages and in the longer term, his upward mobility through gaining greater knowledge and experiences.

For the nation, it creates national wealth, innovation and creativity, job creation, higher income, higher tax revenue to fund national development, better institutions and so forth.  One is tempted to argue that the quality of education may be the single most important factor to move the country out of the middle income trap.

Two other related issues are equally important.

Education should be a unifying factor for Malaysia, given our diversity in ethnicity, religion, languages and wealth.

Those of us who went to public schools in the 1970s not only remember fondly our teachers, their passion and commitment to the wellbeing and quality of their students, but also our classmates. Every class was multi-ethnic, Malays, Chinese and Indians. We were all Malaysians, we played football and badminton together. We cheered for our school teams, not our race. We ate together, even if at times, we cannot participate in each other’s food.

Are our schools now contributing to racial and religious polarization? The Sekolah Kebangsaan are predominantly attended by Malay children. Chinese and Indian children go to vernacular schools. If the children do not learn to live and play together when they are young, how much more difficult will it be for them to live together later, when their prejudices have already been formed?

Those with the means send their children to private and international schools. Does this not create another layer of polarization? Between the haves and the have nots?

And if education is meant to be the universal “leveler”, giving equal opportunities to all, the fact that we have so many private and international schools, which charges exorbitant fees, is contradictory. These privileged schools will obviously be able to hire better teachers and provide superior resources. A further question is whether education should be a business for profit. Is it more of a social good or a private good? Should everyone have equal access to the same quality or should those with money be advantaged?

I hope these issues and more will be debated at the upcoming “The Edge Education Forum 2014” and I look forward to many of you participating.

Invitation to The Edge's Inaugural Education Forum

Further to my article on "An alternative solution to Malaysia's education woes" published in this blog last Nov and the interest shown by many readers on this topic, I am pleased to share that The Edge is hosting its Inaugural Education Forum on Saturday, Jan 18, 2014. Readers who are interested to attend the forum may register online here for free seats.

A tale of two diverging carmakers

The Edge, Jan 6, 2014 issue
By Kamarul Azhar 

South Korea’s Hyundai Motor was established in 1967 and has a 16-year head start on Malaysia’s national car company, Proton Holdings Bhd, which was set up in 1983, two years after Tun Dr Mahathir Mohamad became prime minister.

Proton, which started with Japanese partner Mitsubishi Corp, was to be the centrepiece of Dr Mahathir’s ambition to make Malaysia an Asian industrial powerhouse.

While the 16 years’ advantage is big, the reality is the gap in the performance of Hyundai and Proton is far bigger than the difference in their age.  Hyundai is now enjoying immense success and is a global car company with annual sales of 4.4 million cars. Together with its 32.8%-owned associate KIA Motors, Hyundai Motor Group is the fourth largest carmaker in the world, with 7.12 million cars sold last year, after Toyota, General Motors and Volkswagen.

Proton, meanwhile, continues to languish even in its protected home market and has hardly any export market to talk of. In Malaysia, it is now the No. 2 carmaker with 141,121 units sold in 2012, behind Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Why is it that South Korea could create world champions in the automotive industry? Today, Hyundai and KIA cars can be seen on the roads from Panama City to Manila, not to mention major markets like the US, Europe and China.  

The picture for Proton is totally different. Despite all the protective measures put in by the government, it has not made any impact outside of Malaysia. When Hyundai launched its first model in 1967, it was a rebadged Ford Motor Company’s Cortina. Proton did the same, with its maiden model launched in 1985 — the Saga, a rebadged Mitsubishi Lancer Fiora. After almost a decade of rebadging Ford’s models, Hyundai graduated as a fully fledged carmaker when it introduced its first home-grown model, the Pony, in 1975. Soon enough, the car was exported to Ecuador, the Benelux countries and Canada.  In 1986, Hyundai exported its cars to the US, then the largest car market in the world. While Hyundai cars used to be dismissed as unreliable, the company persevered and continued building its brand image by investing in design and build-quality as well as undertaking long-term research of its cars.

The rest, as they say, is history, with its current flagship model, the Sonata, competing at the same level with the likes of Toyota Camry and Honda Accord.

Proton, meanwhile, only managed to launch its own model, the Gen-2, in 2004, to mixed reviews. With mounting challenge in the domestic market, notably from Perodua, it continues to struggle with lack of economies of scale and the heavy burden of having to invest in developing new technologies and models.  

Proton has not utilised the protection and privileges it enjoyed over the past 30 years to become a globally competitive car company that is able to stand on its own. Instead, it is still dependent on some form of protection.  And it continues to enjoy a research and development grant amounting to close to RM200 million a year from the government, even though Proton is now privately owned by Tan Sri Syed Mokhtar Albukhary, who bought Khazanah Nasional’s stake in the company several years ago.

Indeed, now that it is in private hands, should we still give it national car status and the privileges that come with it?