Rules and regulations have helped lay the foundation for local players in sectors such as healthcare, plantation and E&E to become globally competitive. IHH Healthcare Bhd, for example, is worth some RM55.6bil. However, moving lower down the value chain, there are sectors where Malaysian companies have struggled to survive. — Kamarul Ariffin/The Star
IN the global business world, government agencies, including regulators of industries, play a major role in laying the foundation for the creation of strong local companies.
Many US banks would not be leading the world today if they had not been given some level of safeguarding from their government. The same applies to Malaysia.
Malaysian banks are hailed as regional champions, having been nurtured in our local market, giving them the ability to then venture into South-East Asian markets successfully.
Foreign banks have been limited from expanding in Malaysia and generally, no new entrants have been allowed into our market for some time now.
Of course, banking is considered to be a crucial part of a country’s economy and this is why they have been given special attention.
The healthcare sector is another one where rules and regulations have helped lay the foundation for local players to become globally competitive.
Today, Malaysia boasts having one the world’s largest public listed hospital chains in the form of IHH Healthcare Bhd
, which is worth some RM55.6bil.
Other examples where Malaysian companies have thrived with help from good regulation of their industries include the plantation and electrical and electronics (E&E) sectors.
However, moving lower down the value chain, there are sectors where Malaysian companies have struggled to survive.
In these sectors, foreign players have managed to crush local players who were not sufficiently protected or who did not have a good foundation laid for the creation of an industry champion.
Take the case of taxis.
Since the entry of ride hailing companies like Grab, Malaysian taxi companies have been badly hit.
However, local taxi companies in countries such as Singapore, Thailand and Indonesia do not seem to have the same problem and remain profitable.
In Singapore, land transport giant ComfortDelGro commands a market capitalisation of S$3.2bil (RM11.22bil). ComfortDelGro is Singapore’s largest taxi operator, with 8,724 taxis as at February.
In Indonesia, the Blue Bird taxi company, founded in 1972, remains Indonesia’s largest taxi operator and has a market capitalisation of US$170mil (RM805.79mil).
While these companies do face competition from tech companies like Grab and Gojek, the fact remains that they had been allowed to grow into sizeable players even before the entry of the tech players.
Some level of regulation, like controlling taxi licences in the past and giving them to those who could run a successful business, are the reasons why those companies have thrived, unlike here in Malaysia.
Then, there is the case of the last mile delivery segment.
Globally, the big boys such as Germany’s DHL, US-based United Parcel Service and FedEx are the largest delivery companies.
They must have enjoyed the protection of their own governments which limited the entry of foreign players. This gave them a base from which to grow into global giants. Alas, in our last mile delivery segment, local players have been badly hit by the entry of foreign companies. Many have just been forced into shutting down their businesses.
This is because the well-funded foreign players were allowed into our market with few restrictions, thereby dropping prices to gain market share. The price war in our last mile delivery segment has been well documented.
Foreign players have deep pockets and have been able to quickly gain market share by dropping prices.
Some foreign-owned e-commerce platforms have also been “masking out” local players (by not allowing them to be listed as a delivery option for users on the selling platform) in favour of certain delivery partners, clearly an anti-competitive practice.
Even when they do allow local players into the platform, they can impose difficult criteria, so as to surreptitiously favour delivery players with whom they have stronger relationships.
The regulators need to do more to protect local players.
For example, “masking out” should be prohibited. Unfair terms should be weeded out. A base price for parcel delivery should be imposed.
Incidentally, while free or close to free delivery charges are something that Malaysians on e-commerce platforms love, there is a negative implication to all this price dropping.
The delivery riders will continue to get less for their work. And when all the local delivery last mile companies are wiped out, these riders will be left with no choice but to work for the foreign players who pay them a pittance.
Many know how it feels. After all, we now have one dominant ride hailing company in operation today, with drivers and users all at its mercy.
This article first appeared in Star Biz7 weekly edition.
