This article first appeared in The Edge Financial Daily on April 4, 2019

KUALA LUMPUR: Pharmaceutical giant Pharmaniaga Bhd and provider of licence renewals My EG Services Bhd (MyEG) have been flagged by the cabinet committee on market monopolies.

Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail said Pharmaniaga and MyEG as well as rice purchaser Padiberas Nasional Bhd  and vehicle inspection firm Puspakom Sdn Bhd are the four main companies being scrutinised by the committee.

So far, the committee has heard presentations from the secretary-generals of the relevant ministries on whether or not these businesses should continue, be dismantled or otherwise, Saifuddin told reporters at a luncheon talk hosted by MIDF yesterday.

“This has taken into consideration their investments, the need for monopoly [based on] old policies,” he said.

Recommendations made by the committee have yet to be submitted to the cabinet, he added. The special committee was established in June last year and is chaired by Economic Affairs Minister Datuk Seri Mohamed Azmin Ali. Also on the committee are the ministers of transport, agriculture and agro-based industry, and health.

According to Saifuddin, three elements being considered in assessing these monopolies include whether the policies that allowed for the creation of these monopolies are still relevant, the size of their investments and the economic impact of potentially dismantling them.

“Monopolies are not necessarily bad, but the ones that are bad are those that are inhibiting their competitors, manipulating prices and controlling supply,” he said.

Shares in MyEG and Pharmaniaga closed down yesterday on the news.

MyEG declined four sen or 2.74% to RM1.42, leaving it with a market value of RM5.12 billion. It was the most actively traded stock on Bursa Malaysia, with 138.66 million shares traded.

The group has come under scrutiny as far back as 2015 when the home ministry was looking into alternatives to break its monopoly on the renewals of foreign work permits.

In January this year, the High Court upheld a RM9.34 million fine imposed by the Malaysia Competition Commission against MyEG for abusing its dominant position by imposing different conditions in equivalent transactions in the purchase of insurances for the renewals of such permits.

Meanwhile, Pharmaniaga declined eight sen or 3.59% to a record low of RM2.15, giving the group a market capitalisation of RM560.09 million. The pharmaceutical firm was among the top 10 decliners with 599,200 shares traded yesterday.

Pharmaniaga has previously been accused of being the sole concession holder to purchase, store and distribute both branded and generic approved drugs and other medical products to 148 government hospitals and 2,871 clinics and district health offices nationwide. However, the health ministry has defended its sourcing of pharmaceutical products via a tendering process.

Market talk is rife that other monopolies may also come under watch, including Duopharma Biotech Bhd, previously CCM Duopharma Bhd, which has also benefited from government contracts to supply pharmaceutical products.

“There are still many industries and companies in Malaysia that are monopolistic. In fact, we still have many policies that create monopolies,” Saifuddin said.

“I feel it is very wrong to impose price controls on retailers and wholesalers because I know the sources [of the products] are held by either very rich individuals or big conglomerates, which are influencing the supply and prices,” he added.

In addressing cost of living concerns, Saifuddin reiterated the prime minister’s conviction that technology and innovation must drive growth, instead of only focusing on increasing employment and wages.

“Raising wages is not the only solution. There must be continuous political will in ensuring technological improvement and innovation,” he said.

Saifuddin highlighted the discrepancy between the sectors in which the most patents are registered (digital communications, medical technology, and measurement), Malaysia’s national research and development priority areas (biodiversity, environment and climate change, and plantation crops and commodities) and export-based priority sectors (electronic integrated circuits, processed petroleum oils, and palm oil).

“These are out of sync. There is a disconnect between these areas [that we want to promote and that there are investments in],” said Saifuddin, adding that he would bring up this issue to the cabinet as well.

He also shared that it is his hope that the government will eventually be able to focus on helping the lower-middle-income group, or lower M40 segment of Malaysia’s population, and not just the B40 with their cost of living concerns.