AFFIRMATIVE policy in Malaysia has a noble aim: to help Malays catch up with the usually commercially savvy Chinese. But the noble aim has been abused, not just by Malays, but others, too, thus taking the "catch-up" game into the first quarter of the 21st century. The abuse goes by the name of "Ali Baba", a rent-seeking invention that is native to Malaysia.
Rent, an economic idea perhaps as old as David Ricardo, is, in its simplest term, unearned wealth. Here is how it works. Ali, typically a Malay or Bumiputera, an affirmative policy beneficiary, wins a government contract. He then farms out the contract to Baba, typically a Chinese.
Ali gets a cut, which may range between tens of thousands to a few millions, depending on the value of the contract. Baba pays off Ali, though he has done nothing except win the contract. The "Ali Baba" scenario has a few permutations, one of which is where Baba funds Ali with bank guarantees and all.
Naturally, Baba isn't going to pay Ali out of his pocket. Commerce and charity are two different words for a reason. Baba has priced Ali's unearned income into the contract.
This is a stock lose-lose situation. Ali is enriched, but for contributing nothing. Baba has got a contract he may have not won if he bid himself. But he has overpriced the contract and walked away with some unearned wealth himself. The government ends up losing many times over. Its aim of making Malays and indigenous groups commercially savvy is close to zilch.
Thanks to Ali and Baba, even seven decades of post-independence years aren't enough to create a robust Malay and Bumiputera business class. And what is worse, rent-seekers have made the government pay for it all. Prime Minister Datuk Seri Anwar Ibrahim is having none of this.
In his calculation, it costs the government one per cent of the country's gross domestic product, or RM19 billion a year. That is a humongous sum for a nation with a debt of RM1.5 trillion. A dozen years ago, a minister told the BBC that Malaysia was losing RM3.3 billion to "Ali Baba" rent-seekers. The very same minister said laws were being drafted to cull the culture.
Is "Ali Baba" practice illegal? Ask lawyers, and there will be as many different answers as there are legal practitioners. One thing is for certain. It is not court-tested. After all, laws get made there. But there is a solution even before anti-"Ali Baba" laws get passed. It lies in the procurement, contracting and contract administration processes.
But this is a henhouse and no foxes must be placed in charge. But they are. Otherwise, how do you explain Ali farming out to Baba when the former is the contract awardee? Any contract that seeks to protect the interests of the government will prohibit "subcontracting" such as this. It is inconceivable that government lawyers overlooked it.
It is again a fox and a henhouse story, which leads to two questions in search of answers. Why are political parties and the public service allowing foxes in? And having allowed them in, why are they retaining them?