Malaysian Monopolies: Are They Beneficial?

 In its election manifesto, Pakatan Harapan (PH) had pledged to dismantle the monopoly in the food and essentials sectors to ensure competition. This is to put a stop to profiteering, and encourage entrepreneurship. After assuming office, the Prime Minister said he reprimanded the shareholder who controls Bernas Bhd, over its monopoly. 

Is Bernas the only monopoly in the country?

Source: https://ms.wikipedia.org

There is a sort of monopoly/duopoly for motor vehicles (Proton/Perodua), motor vehicle inspection (Puspakom Sdn Bhd), landline telecommunications (Telekom Malaysia Bhd or TM), electricity supply (Tenaga Nasional Bhd or TNB) and medical supplies to government hospitals (Pharmaniaga Bhd), and perhaps certain transport operators/providers.

There is also at least one case of very limited competition – that of the import of sugar. While it is not a monopoly in the true sense of the word, the business is controlled by only two companies, MSM Malaysia Holdings Bhd and Central Sugars Refinery Sdn Bhd. Individually, the market capitalisation of these companies ranges from RM629 million to RM19.95 billion.

Not all monopolies are bad, for example TM and TNB which are in sectors that involve huge overhead costs and have strategic purposes (this is the view of Dr Yeah Kim Leng as reported in FMT). The entry of new players in these sectors would result in wasteful fixed investment and redundant duplication.

If investment costs and risks are too high for competition or where private investors are too risk-averse, then a monopoly is acceptable. However, it may need effective oversight especially when tariff adjustments are proposed.

Of course more industry players in a free, open and competitive environment would boost competition, ensure efficiency, encourage innovation and protect consumer welfare through lower and more competitive prices, better quality products and wider choices (as noted by Dr Yeah).

Barriers to entry such as high capital investment, fast technological changes (e.g. 5G), and limited expertise (Proton initially) will suggest monopolies are the way forward. But over time, it has to be dismantled because consumers are on the losing end on price choice and innovation.

Reference:

Explained: The state of Malaysian monopolies, Tsubasa Nair, FMT, 28/2/23