In mid 2023, Prof Yeah Kim Leng, a member of ACFIN, was reported by The Star saying a rent seeking legislation is needed "to weed out economic corruption" in the hundreds of billions of ringgit lost to the shadow economy.
Rafizi Ramli reiterated the same message in Februrary 2024 with the announcement that a law to restrict rent-seeking activities could be brought to Parliament by the end of this year.
In Edge Weekly's December 2nd to 8th 2024 issue, Tong Kooi Ong delve on the question of rent-seeking in his column, "Is rent-seeking' corruption? And unorthodox suggestion to fight corruption".
Perhaps, it is indicative that rent-seeking legislature is coming soon to a political theater near you.
Among the issues that will likely come up in the debate could be the thorny Article 153, what constitute Bumiputera rights, and rent-seeking law limits the scope of affirmative action or social assistance.
It could be argued that rent-seeking law offers advantage of incumbency to the established, well capitalised and old money over innovative and entrepreneurial potentials.
The definition of rent-seeking in "the practice of increasing one's wealth by manipulating the political or social environment without creating new wealth" is itself open for debate.
NST had published an article back in 2023 as an attempt to explore in the matter, republished below:
Rent-seeking stifles innovation, entrepreneurship
By Ahmad Ibrahim - July 19, 2023 @ 12:15am
We know the story of Ali Baba and his 40 thieves. The legendary Tan Sri P. Ramlee created a satire to poke harmless fun, depicting the uncontrolled greed of Ali's brother, Kassim Baba.
In the business world, the Ali Baba company in China has made impressive economic gains in the Internet domain, becoming a global brand.
But, in Malaysia, the "Ali Baba" business model is about making money through rent-seeking, where individuals obtain business licences, often through political patronage, and rent the rights to a partner. Such practice has existed for decades in the country.
Most people are aware of the practice, but there has been little attempt to stop it.
Thriving under the cronyism ecosystem, it has denied more capable individuals from venturing into business without having to endure unfair competition from Ali Baba businesses.
A recent announcement by the current Madani government to put a stop to such unsavoury business practice has been lauded by many.
According to experts, the Ali Baba business arrangement has bled billions from government coffers.
Economists say as a country blessed with abundant natural resources, Malaysia could have become a developed nation much earlier.
Instead, we continue to wallow in the middle-income category. Unless we take immediate steps to rectify the system, many predict the country will sink deeper into economic malaise.
A recent report by an international group of economists has warned that as issues of sustainability confront the world, many economies will succumb to economic obscurity.
Kudos to the government for deciding to take bold steps, which may be unpopular to some, to end such rent-seeking business culture.
To address the issue of rent-seeking business practices in Malaysia, experts have long prescribed measures. Many are already in place, but enforcement is a challenge.
One has to do with anti-corruption laws and regulations to combat rent-seeking behaviour.
An independent anti-corruption agency has also been established with sufficient authority and autonomy to investigate and prosecute cases.
Even the suggestion to pro-mote a culture of integrity and ethical behaviour through awareness campaigns and training programmes has long been taken up.
Some gaps may still exist in the transparency of government procurement processes, licensing and permit approvals. They may need further enhancement to reduce rent-seeking opportunities.
Many have suggested implementing open and competitive bidding processes to ensure equal access and fair competition among businesses.
There have also been suggestions to further simplify regulations to minimise bureaucratic hurdles and reduce red tape. The aim is to make it easier for businesses to comply with regulations.
A dedicated team should be put together to review and eliminate outdated regulations that contribute to rent-seeking practices.
Encouraging competition through market liberalisation, and promoting a level playing field for businesses should be given serious consideration.
We already have an independent competition authority to prevent such market distortions. Robust public procurement processes with clear criteria and more transparency are also useful.
Regular audits and monitoring of public procurement activities are a must to detect and prevent unsavoury practices. There have been suggestions to establish mechanisms to protect those who expose rent-seeking practices, providing them incentives and legal protection.
The judicial system has been under a lot of pressure lately. There is a need to enhance the independence of the judicial system to ensure fair and impartial adjudication of rent-seeking cases.
We must promote public trust in the judiciary by fostering transparency, accountability and professionalism.
Other measures include encouraging businesses to adopt and enforce strong codes of conduct and ethical standards. Implementing such measures requires an approach involving the collaboration of government agencies, private sector entities, civil society organisations and the public.
By addressing rent-seeking practices and fostering a transparent and competitive business environment, Malaysia will be able to promote sustained economic growth and ensure equitable opportunities for businesses, as well as incentivise a more robust culture of innovation and entrepreneurship.
The country has performed poorly in innovation, a prime denominator of competitiveness. And, there is no doubt that the rampant Ali Baba rent-seeking culture has contributed much towards stifling innovation and true entrepreneurship. Not too late to reform!
* The writer is a professor at the Tan Sri Omar Centre for STI Policy, UCSI University.
The Professor is long on aspirations but what are the specific activities and business processes which constitute rent-seeking?
Rent-seeking is not exactly corruption. In fact, it is legitimate and extensive in its application.
Do one consider Bill Gates operating system that is designed once but duplicated for use and paid by billions of users for the same program or software considered as rent-seeking?
How about highway concessions which often being dubbed as rent seeking but required up-front investment to construct the highway and raise financing?
If the rent-seeking law is merely to curb Bumiputera renting out business licenses or concessions or outsourcing of awarded contracts, then the scope of the intended law is limited.
It will merely serves the interest of deep pocket big businesses, perhaps to the advantage of a certain ethnic group. Such law will ended up entrenching the incumbent and inhibiting innovative and entrepreneurial business practices.
According to the narrative expounded by the UCSI Professor, it could be perceived as a neo-liberal agenda and it is often to the advantage of big corporations and open the market wide for entry by foreign investors from the West.
The similarity with corruption is that rent-seeking practices is the pursuit for wealth without any added value to the economy.
Certain illegal activities that is already defined under penal code such as smuggling, gambling, counterfeiting and money laundering are easy avenues to wealth without any added value to the economy in addition to by-passing the tax system.
The black economy from such activities are more sizeable and comparable to the reported GDP than the pennies and dimes of Ali Baba rent-seeking.
The burden of proof in corruption cases can be cumbersome and usually it is the receiver of bribes that are being pursued.
Perhaps, the rent-seeking law is one way for "bribe giver with their resources, entrenched position and connection, who intentionally seek to secure special privileges by corrupting bribe takers" will be at the receiving end of the law.
It is one avenue of the law to penalise smugglers, illegal gamblers, counterfeitors, money launderers and any "short-cut" businesses that add no economic benefit to the people without the cumbersome process of getting hard evidences for penal code offences.
Just thinking aloud
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