Newspaper readers deserve a better deal

I HAVE been reading with interest the growing dispute between the Malaysian newspaper publishers and Malaysian Newsprint In- dustries (MNI), the country’s only newsprint producer. 

The International Trade and Industry Ministry (Miti) is in the middle, playing the role of arbitrator. It has found in favour of MNI and has imposed, from May 28, provisional anti-dumping duties ranging from 8% to 43%. Unless Miti or the government changes its stand within 120 days, the anti-dumping duties will be effective for five years. 

The Malaysian Newspapers Publishers Association (MNPA) is crying foul and has warned in a press statement that its members will have no alternative but to pass on the costs to consumers in the form of higher cover prices. 

MNPA said newspaper prices could go up from the current RM1.20 to between RM1.50 and RM1.80. 

Before I proceed further, let me declare my personal interest in the matter. Being a senior news executive of this newspaper and holding employees stock options, I would like to see Star Publications (M) Bhd continuing to prosper. 

I accept that a case can be made for the government to impose anti-dumping duties on imported newsprint from the five countries singled out by MNI; namely, the US, Canada, South Korea, the Philippines and Indonesia.  

Under WTO rules, a country or company is involved in dumping if its export prices are lower than domestic prices. 

But there are more important issues than this, the most pertinent being: is it right that the government is providing so much protection for a single company (MNI) at the expense of millions of newspaper readers? 

MNI commenced production in April 1999 with a plant in Mentakab, which has one production line with a rated mill production capacity of 250,000 tonnes per annum.  

Local consumption of newsprint is around 310,000 tonnes to 400,000 tonnes a year, meaning MNI is unable to supply the entire local market needs. 

The MNPA believed MNI had incurred high start-up capital costs and would have been saddled with high financing and depreciation charges. 

“Relatively high operating expenses (and not wages and number of its production workers alone, as cited in its petition for anti-dumping action) could also have contributed to its losses,” MNPA had said in its press statement. 

The newspaper publishers argue that MNI shareholders should have known the very competitive and volatile nature of the newsprint industry, particularly in South-East Asia, before they invested in the venture. 

It’s the nature of the South-East Asian market that when demand for newsprint is strong, prices of newsprint are higher in South-East Asia than in other parts of the world, and conversely when demand is low, newsprint prices in South-East Asia are lower than elsewhere. 

Malaysian newspaper publishers say they are supportive of MNI, provided its prices are as competitive as other newsprint suppliers. MNPA members have indeed been very accommodating towards MNI and have often sacrificed opportunities for better deals from overseas suppliers. 

But MNPA’s main argument against the stiff anti-dumping duties is: these will not only badly affect the profitability of newspaper publishers, but millions of readers will also be made to suffer through higher newspaper prices. 

Currently prices of Malaysian newspapers are among the lowest in the world. Most newspapers are sold at RM1.20, cheaper than the price of a cup of coffee in many outlets. 

This is largely because newspaper owners have been absorbing the increased production costs as much as they can bear. 

For example, when the government pegged the ringgit at RM3.80 to the US dollar in September 1998, newspaper publishers were hit with a 50% increase in their newsprint costs. Before the Asian currency crisis, it took RM2.50 to buy one US dollar. 

Typically, newsprint forms about 40% of the production costs of a newspaper; so you can imagine how much pain the newspaper publishers have been absorbing to provide cheap newspapers to their readers. Cover prices were revised only about four years after the ringgit peg. 

Newspapers publishers had to absorb another burden in 1999 when the government imposed an import duty of between 5% and 10%, based on a complaint by MNI. 

But MNPA said the latest anti-dumping duties were just too much to bear, and the association had issued a blunt warning – newspaper prices will have to go up. 

Now there is also a general misperception that newspapers are very lucrative businesses, or licences to print money. How such a misperception could be perpetuated is beyond me. 

Newspaper publishing is a heavily capitalised, cyclical business. Many papers are either losing money or just breaking even. If import duties were imposed, a lot of newspapers would have to go downhill. 

Newspapers that make some decent profits have had to plough back most of their profits for reinvestment in new printing plants and ancillary facilities so that readers and advertisers get a value-for-money product.  

And companies like the Star had to go for a RM250mil bond issue to finance its expansion on top of having to retain reserves over more than a decade. 

The point that has to be made very strongly is this: the authorities are imposing stiff anti-dumping duties to protect one company. Newspapers cannot absorb such a huge increase in tariffs without passing on the increased costs to readers by way of higher cover prices. Malaysian readers deserve a better deal. 

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