By Chan Quan Min
Since we have committed ourselves to being part of a larger capitalist world, Tiger says it would be hypocritical to continue to protect our automotive and steel industries. The aviation industry is a good example of an industry that has been opened up to the benefit of consumers.
Us tigers belong on land. We spend most of the days prowling our well-marked jungle territory, which we defend ruthlessly.
This tiger is not a stranger to the sensation of flight, however. Tiger has been following the developments in the aviation industry’s very own territorial fight.
They say the big boys come to Asia to fly the skies. Indeed the aviation industry in this part of the world is perhaps the fastest growing and the most dynamic.
Malaysia is no different. We have seen over the past 15 years the unravelling of a tightly controlled aviation market dominated by a single player, Malaysia Airlines.
Back then, ticket prices were high and the choices few. The flag carrier was a source of pride but also an errand boy for the government, flying routes the government deemed necessary to commerce and tourism
Open competition changed all that, but the liberalisation of the industry came slowly. Barriers were only broken down bit by bit. For instance air routes between Malaysia and our closest neighbour, Singapore were not fully liberalised until late 2008, less than five years ago.
Of course Malaysia Airlines had its adjusting pains, read: bouts of unprofitability. Which tiger wouldn’t have to lick its wounds after a bitter battle for territory?
Above all else, the consumer has benefited from lower prices and more choices. Can we do the same for the country’s other industries?
The aviation industry was a testing bed. Could we now open up the rest of our many protected industries, especially those that have a big impact on consumer prices such as automobile manufacturing and steel making?
To mitigate any detrimental effects of a more competitive environment on the incumbent the government can loosen the protections gradually.
Indeed, the incumbent should be allowed some financial help if they fall into tough times because the aim is to inculcate as many players as possible to maintain healthy competition.
Do not instead try to merge companies at any sign of the incumbent falling into dire straits. This will prop up the weaker player at the expense of the consumer. Tiger will be watching and will bare his fangs if anyone tries this cheap trick.
Two years ago, Khazanah Nasional and AirAsia attempted to reverse perhaps a decade of liberalisation of the aviation industry by announcing a share swap agreement between Malaysia Airlines and AirAsia.
Thankfully good sense prevailed and the deal was unwound. It was not until earlier this month that the Malaysian Competition Commission or MyCC fined both airlines RM10 million apiece for colluding to set prices during the short few months of the unholy alliance.
Back in 2011 a merger between sickly Proton and better performing Perodua was proposed. This was akin to forcing an arranged marriage between two (Tiger suspects) unwilling parties.
Back to the skies, while consumers have benefitted from lower airfares, the airlines themselves have grown more resilient.
Today, the homegrown AirAsia group has one the lowest per unit costs worldwide, not to mention industry leading profit margins.
Malaysia Airlines, meanwhile, is in financial trouble. But there are signs that the airline is slowing climbing out of the storm clouds into clear skies.
Despite the airline’s troubles, Malaysia Airlines has maintained it internationally recognised service and operational standards. We should no longer fear open markets and open competition. We also owe it to our Asean neighbours to respect the regional trade pact.
Let the new National Automotive Policy due for later this year free up the automotive market. We will be in for a bumpy ride, but the benefits could not be more democratic – and beneficial.
GRRRRR!
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