Cheers! Have a rent-seeking beer label…

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Making your way in the world today
Takes everything you’ve got;
Taking a break from all your worries
Sure would help a lot.
Wouldn’t you like to get away?

(Extract of lyrics from the “Cheers” theme song)

Times are bad and everyone wants to get ahead in the world….

Today, while Malaysians were protesting in the heart of Kuala Lumpur against the sharp and painful oil price hike, comes news about what sounds like another rent-seeking operation. Beer makers Carlsberg and Guinness-Anchor are locked in a standoff over controversial security labels with a little-known firm Kod Efisien, which was awarded the concession. Kod Efisien later passed this concession to another firm, Lembah Sari. And guess who is a director in Lembah Sari…

From the Singapore Business Times, 13 June 2008

Beer makers still in security label standoff

Since 2003, they have refused to play ball with concession holder

By S JAYASANKARAN
IN KUALA LUMPUR

THE Malaysian units of beer giants Carlsberg and Guinness-Anchor are at war with a private company that has a monopoly on security-labelling alcohol to help cut smuggling. And the federal government is stuck in the middle.

Carlsberg and Guinness-Anchor have refused to play ball with the company Kod Efisien since 2003 when it was given the concession to security-label locally produced beer and cigarettes to stem smuggling fuelled by high excise duties.

In public, the beer companies maintain that they ‘are still in negotiations’ with the government.

But industry officials say privately that both companies would consider taking the dispute to court if push came to shove.

The beer makers argue that as foreign multinationals there is nothing they cannot do more efficiently than a middleman.

They also say steep duties mean Malaysian beer prices are among the world’s dearest – and that security labelling would make them ever dearer.

‘If the money was going to the government, we would not mind as much,’ an official told BT. ‘But this is just going to a private-sector third party.’

Kod Efisien claims savings from reduced smuggling would more than compensate the companies. But there is little evidence that the labels cut smuggling.

When the firm first began labelling cigarette packs, smuggling dropped 50 per cent.

But it has since bounced back to 17-20 per cent of the industry, says the Confederation of Malaysian Tobacco Manufacturers.

The beer makers’ recalcitrance has put the government in a spot and raises questions about Kuala Lumpur’s ability to enforce its own rulings. Stretched to its logical conclusion, the government could revoke the companies’ licences.

But both firms are listed in Malaysia and have been operating here since before independence. It is not clear if any move on their licences could stand up in court.

The controversy spotlights one of the least attractive features of Malaysian business that emerged during the tenure of former premier Mahathir Mohamad and has continued unabated since – the creation of ‘rent-seeking’ businesses that profit from the provision of unsolicited services to profitable companies.

This has been compounded by the manner in which concessions have been dished out – almost always in an opaque manner without open, competitive bidding or public debate, and of course to companies with influential shareholders.

In this case, the award was even rotated among different companies.

In August 2006, Kod Efisien’s concession to security-label cigarette packs was simply passed to another private firm, Lembah Sari, without any explanation, negating arguments that Kod Efisien was providing unique technological benefits to the cigarette companies.

Industry officials said that Lembah Sari continued to supply the same security equipment and ink supplied by Kod Efisien – from Swiss-owned Sicpa Holdings.

According to documents lodged with the Companies Commission of Malaysia, Kod Efisien is capitalised at RM2 million (S$840,000) and is owned by Hashim Abdul Wahab and Aminuddin Harun, two relatively unknown figures. For the year to end-April 2006 – its last published accounts – the firm made a loss of over RM215,000 on revenue of RM54 million.

Lembah Sari is capitalised at RM1 million but its ownership structure is unclear as the shares are owned by other private companies.

Even so, its directors include Haris Onn Hussein, the youngest son of the third premier and brother of the Education Minister, and Zulkifly Rafique, a prominent lawyer in Kuala Lumpur.

For the year ended December 2007, the company made a net profit of RM1.7 million on revenue of RM25.6 million.

Not bad, RM1.7 million profit!

Now, you tell me, does this “security labelling” sound like a genuine business or does it smack of rent-seeking? If indeed it is necessary to have such security labels, why not let it be handled by a government-owned entity, so that any profit goes to public funds?

In an immediate reaction, a senior investment analyst with a leading stock-broking firm, still upset with keris antics, told me: “If this story is true, the highly respected (late) Tun Hussein Onn would be disappointed at how his two sons have turned out.”

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Anak Pulau Pinang

It is well and good to curse and swear at Mahathir and his legacies of so-called Mahathirism among UMNO Puteras. However, there is so much we can put on the shoulders of the Damned Mamak-turned-pure-bumiputra but the fact of the matter also is that B…, his son in law and cronies and other UMNOputras have conveniently carried on with this system of slicing up areas of interest and large pieces of this fantastic cake called Malaysia have been hived of and are still being hived off to all within the “sphere of Bodoh-ism” and all in the name of NEP.… Read more »

fendi

J Choo & Anil,

Good Idea.. perhaps you should should dig even a bigger hole and tell all the people out there who actually owned the business for the security stickers on health product… But let me tell you something as a start… The company belongs to a Chinese guy name Dr ….. using 1 Malay guy name Datuk …. as the Chairman…
I wonder how much is that Ah Beng guy makes since it was introduced..

matt

(If this is really rent-seeking, then) Only in malaysia truly asia this highway robbery is allowed.One law for us and another for these thieves.

J Choo

Anil, I sincerely hope you read this. You can also “look into” the “security stickers” on health products (including all packaged medication). Take out any medication package (eg. eye drops) and you will see a little shiny sticker with “serial numbers” on it. I am telling you if you dig deeper you will find “you know what and you know who” are supplying this “specialized technically high-tech imprintment which no one in the world can produce”. I forgotten how much each sticker costs; it’s something like “so-many sen” each. Multiply by the millions each day, and wallah, laughing all the… Read more »

Andrew

‘God understands their greed’. I like this Mr. Smith. Maybe I should change my name to Mr. Chin. Then we can show Mahathir convert Mat Chang two fingers.

Teresa M J N

Who are the few team players enjoying the profit from the fuel around the world. Of course there must be lah! Surely they are some orang kaya-raya who wants more to renovate their swimming pools.

We are getting poorer while their enjoy our money. Consolation : No bad deeds have a long life span. All bad deeds must come to an end

Kopi O

I really hope the king comes out soon & makes a clear stand against UMNO & also one of lack in confidence, dissapointment in the way they have run the country & all the crimes & corruption of their time in power. We must make them pay to have any real precedents in this country. In China, they shoot corrupt officials that have been proven guilty! A really long jail term would be better for the … thieves! The whole world is looking at laughing us. The situation is critical! PR you don’t want to take over a Malaysia that… Read more »

Lim Wen Quan

Very soon we will be heading towards the scenario that prevailed during the Suharto rule in Indonesia when his children and cronies monopolised every damn business activity where easy money can be made sans effort. These blood-suckers drained the poor Indonesian folks who broke their backs trying to made a decent living to raise a family. Are the UMNOputras so devoid of scruples and religious principles that they have to resort to such practices? No wonder their leaders want NEP to continue in perpetuity! Already many countries are overtaking us in economic growth and expanding their business all over the… Read more »

lucky8

by the way, hiring a new maid is costed me rm7K+ now…. which cant be guarantee is good or not, and will be suffering a lost if we want to change or the maid escape from our house… that’s always the big spending & lost onto consumer…

caravanserai

Security labels For the cronies what else? In legitimate companies Milking out the country’s wealth BN/UMNO leaders find ways To run businesses on legal template So that no corruption involved We smell a rat running around Now where is the cat when we needed it? This government must change The many holes on the ground They don’t fill it up They say they have no time They are after the milking cow Money the government can earn The leaders just throw it away Give it to their cronies, families and friends Let them enrich close one eye on the peoples’… Read more »

Cheng Poh Heng

This is the legacy of Mahathirism,which shall haunt the future generation of Malaysians. (He) had destroyed every facet of good govervance and civil society during his “mad hatter” regime. All the mega projects to feed his meglomaniacal ego. He had to be more Malay than the Malays to fool the Malays. (In my opinion), he was a racist to the core, the “Mahathir” dilemma! … With the spiralling cost of living due to the hefty hike in the price of petrol and diesel, many Malaysians shall be bracing for hard times. Malaysia “Boleh” tetapi rakyat Malaysia “Tak Boleh”. Cheng Poh… Read more »

Valerie

If someone bothers to dig up and check on all major businesses/companies, I am sure we will find rent seekers are of UMNO origin. Its just so sad that we know and yet can’t seem to be able to stem this(rent seeking).
From the recent fuel hike, and ‘discussions’to alleviate our problems, the sinking realisiation will soon set into each rakyats minds (and their pockets)-then you will find a new breed of rent seekers ranging from lower ranks government across the country. Then it becomes a ‘way of life’. Sigh

Mr Smith

“Alamak! Making money off the beer industry halal meh?” …It is halal as long as they make money from it under the NEP. However, drinking beer is not halal. It’s the same with gambling. It’s OK to be Chairman of Genting/Magnam as long as you don’t gamble. It is also OK to own hotels and serve hard liquor as long as you don’t drink. (Almost) every thing is OK as long as it is done by (those associated with UMNO). God understands their greed. Anil, if you start digging you will find UMNO middlemen everywhere, like parasites, making money by… Read more »

peggy

Thank you for reminding me the good time I had when I was in my Uni. Oh, how I miss this song…..
Thanks.

donplaypuks

This is what Suharto’s children used to do very well. Remember the infamous Cloves (Kreteh Cigarettes) Monopoly Board cornered by Tommy? So, rent seeking is the gaji buta (sinecure) syndrome so endemic among the children, family members & croneys of many of M’sias leaders and elite. The Govt has foregone billions – Toll Highways, FOMEMA, AP’s, Chip for Passport, printing coins & notes, HDC & Halal certification etc & now security seal – which could have been collected directly to reduce our budget deficit, finance development and cushion the harsh impact of spiralling oil price on the majority of M’sians.… Read more »

Leithaisor

Alamak! Making money off the beer industry halal meh?

Perhaps JAKIM should now step in and issue their learned opinion whether Muslims can be involved in a beer bottle security labelling venture.

yyy

if i remember correctly, the deal was passed from kod efisien to the present operator for a nominal sum of RM1.00. and you wonder who is behind kod efisien to sell a monopoly business at that price.
yup, insofar as I gather from the same piece of news then, Hussein Onn family is behind the current operator. you wonder such miniscule profits from a monopoly? dissect the numbers coz there are many ways to skin a cat.
well, this is another Mahatir-type of crony projects.
Enough said. Too tired to repeat again and again.

frankie

c***b** government.

hangjebat

“If indeed it is necessary to have such security labels, why not let it be handled by a government-owned entity, so that any profit goes to public funds?”

fyi, (i hear) there was a proposal from an MoF entity to do this but it was:

a) (allegedly) hijack by cronies

b) (allegedly) stopped by MoF

c) all of the above

jeff ooi’s little bird 007 🙂

raj raman666

Why i pay 20k, the skill worker wont come to malaysia if their income less than $1,500. workers permits $5k (2workers) agent fees in indonesia $5k (2 workers) agent fees in malaysia $1k (paper work wish i hate most) undertable (???) my expenses to interview skill workers in indonesia including 5star hotel,flight,food,car and driver for 5days 6k.(i make two trip because someone i want medical fail and i to go again) Again its still worth because the following three years contract i only pay their levy $2,500 without become taxi driver and i always choose the best. rajraman-how the small… Read more »

malaysia born

….

Next thing you know, all baby milk powder has to carry some security labels thus adding to the cost of baby milk…..and guess who will be supplying the security labels.

Let’s have a snap election and wipe these slime off the face of the political scene!

UMNO ….don’t you have any shame?

raj raman666

mr.anil, alots of things happening,this is high hidden profile news but look into direct profile news. 1.If have a small company which required foreign workers- pay throu you nose openly-all the permits outsource to some well connected proxy. You need to pay outsource fees and montly fees to the outsource company.(around $100.00ringgit a month and $3500.00 yearly for the worker permit and god knows how much more hidden cost) Its like a taxi permit-someone drive and someone collect daily rental from the poor taxi driver. Thats why alot of bangladesh worker flooded Malaysia without work and stuck here.From info i… Read more »