As the next Government , Pakatan Harapan, must tackle the issue of the rising cost of living. As part of our public service program, we would like to outline what needs to be implemented immediately to ensure that the people’s lives will be uplifted.
The basic premise is that no Malaysian should go hungry because they are struggling to put food on the table. This is because the country is sufficiently rich but has been mismanaged to the core by parties who in their own words ‘do not need to answer to anyone.’
One way is to introduce an entire Supply Chain, pioneered by an entity like FGV, which links producers of goods to the end customer. This may involve Government injection of public funds or a Government guarantee of debt or an injection of capital through entities like Khazanah.
A differentiating factor in this supply chain will be the use of ‘Smart Contracts’ through crypto-technologies like Blockchain.
Why use smart contracts?
In a sentence ‘Smart contracts’ are used for one reason alone, which is transparency throughout the supply chain. Costs increase when there is no transparency, conversely supply increases and costs reduce when there is transparency.
But it only works if you have an honest and trustworthy entity managing the entire supply chain. Honesty and trustworthiness is what makes sure the country progresses. By all means, the next Government should raise all Ministers salaries to RM 5 million a year if required, but at the same time with one single law – No more corruption!
As the contracts are digital, Government Ministries like the Domestic Trade and Consumer Industry will have ‘real time’ access to producer prices and prices at the store front. Through this mechanism, the role of profiteering by the middle man, a horrible issue in Malaysia, will be eliminated. If a price increase is due to a supply shortage, then it will be easier for Government policy or capital to be directed to ease the supply shortage, a point that was pointed out by Rafizi Ramli when commenting about the high cost of ikan kembung.
Another thing is to ensure better management of demand and source of supply.
For example, suppose we can reliably estimate that a particular region has a stable demand for mutton for 1,000 Metric Tonnes / Week but the source is currently imported mutton from India. This gives an incentive to the Government to create a supply source within the country.
Not only will this provide economic opportunities to marginalised segments like Generasi 2 Felda Settlers, it will then create another set of demand related inputs, for example, supply of grass, supply of carpentry, supply of woodwork as well additional supply related outputs, such as Goats Milk and products derived from Goats Milk, as well as demand for abattoirs, refrigerated transportation , etc.
We had talked about this in our piece here , but really this is a very powerful source of Economic transformation within a country. It keeps consumption strong, it increases the purchasing power of the Ringgit as it reduces unnecessary imports and it promotes investment within the country. All these components are the key drivers of Economic Growth.
It also solves one problem with Malaysian businesses which is squeezing the suppliers. This must be eliminated because contracts are honoured in a digital supply chain thorough a form of payment assignment. For example if I contract to buy $50,000 of mutton from Ali and Ali contracts to buy $1500 worth of grass from Muthu, Muthu can ask for direct payment from me rather than wait for Ali to reimburse him. The whole motivation is that goods must flow quickly through the chain and participants must be incentivized to ensure continous production of goods and services.
Of course, the question naysayers may ask is “if it is so good, why isn’t it done elsewhere?”
In a way it is done, by entities like Walmart who have computerized their entire supply chain and are experts at sourcing and keeping prices down. However, Walmart does not have an incentive to create investment opportunities as it is a corporation. This only works in a Government controlled economy like Malaysia, where the role of Government is ‘so massive’ because the Government owns huge chunks of the economy.
So what does it take for this concept to get off the ground?
Number 1, capital and the sum of capital allocated should be reflected by the size of the problem.
If the problem is the Number 1 problem that caused the collapse of the ruling Government, as Mah will say, ‘jangan beri celah celah gigi.’
The capital is not spent all at once. The capital is used to analyse consumption patterns, perform feasibility analysis and provide capital or government guarantee to ensure success. The measure of success is three things, number one, ability to reduce prices, number two, ability to generate GDP and number three, ability to reduce imports.
For example if RM 25 billion is allocated, the output would be for example 5,000 supply chains from producer source to end consumer generating GDP of RM 10 billion a year. There is accountability as each decision is backed by a business case and through the smart contracts, the data is real-time.
In order for that to work, the most important factor is Number 2 – ZERO Political interference.
The reason why Malaysia lags so far behind is because of this bullshit concept called “Political Interference.” “Political Interference” is what causes countries to become poor and their people to suffer. If people want to ‘fight in politics’, then by all means, ‘fight in politics’ and win and become a Minister. But then some person alluded by money will come in and tickle the Minister’s ears and he will start to interfere.
Let me clear 100 percent – we work in big business and we make plans and decisions which are expected to be honoured. You cannot run a big business making decisions one day and getting countermanded the next day . You cannot solve the country’s number one problem like that, no you need smart, honest people doing things which benefit the country.
BN failed to get that basic thing correct, hopefully, Pakatan Harapan will get that correct.