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Public policy is not always straightforward

As we get closer to the general election, many politicians are making promises. Many from the public too are putting forward their own ideas. But most people tend to think in isolation, without looking at the bigger picture. Not many realise that public policy is not always black or white. Sometimes the impacts are beyond the usual suspect.

My favourite example to highlight policy dilemma is always the tobacco industry. It is a touchy subject because cigarettes are universally accepted as hazardous to health, yet it is available in the market. This makes it a perfect example for discussions on the potential unintended consequences of policy proposals.

Let us take plain packaging as an example. This is a policy where cigarette manufacturers are forced to standardise their packet designs. All packets, regardless of brand, are sold in a uniform packaging nationwide.

In the United Kingdom, the plain packaging rule means that the designs are replaced by one uniform colour and design for all brands. The authorities there hope this will discourage people from buying cigarettes.

Other countries are looking to emulate this plain packaging policy too, including our neighbour Singapore. There, authorities are still thinking about it, but I doubt they think about how their policy will impact us in Malaysia.

In reality, if Singapore introduces plain packaging, Malaysia will have increased problems in our own fight against illicit tobacco products. A perfect example of how good intention in one policy area creates problem in another.

Let me explain.

Let’s look at the Singapore scene first. If Singapore adopts plain packaging, we can expect that the circulation and availability of illicit cigarettes there will increase. This is because if all packaging are designed the same, criminal syndicates will have just one design to copy for their illicit products.

Currently, syndicates looking to fake a genuine brand have so many designs to copy, increasing the costs for their illegal activities. But not anymore with plain packaging. It makes it easier for criminals to operate and profit because the government has made one design fits all.

At the same time, law enforcement agencies in Singapore will also have a harder time. It will be more difficult for them to sift out counterfeits because all packages will look the same. This means even more of those illicit products will be able to be brought into Malaysia.

But, I doubt if the Singapore authorities are thinking about what their actions will do to Malaysia. We are already facing a crisis in illicit cigarettes and our authorities are struggling to cope with it. But this is not a concern for Singapore.

I must admit here that we in Malaysia are not doing ourselves a favour anyway. We have very heavy excise duties on legal tobacco products. In the past five years, cigarette taxes have increased by over 110 percent. When the government artificially increases the price of an item, people will turn to the black market in droves. These black-market products are much cheaper, and, as a result the number of smokers in Malaysia has gone up from 4.75 million in 2011 to 5 million in 2015. Clearly the heavy taxes do not work. But I digress.

Coming back to plain packaging, if Singapore introduces it, situation in Malaysia will worsen. Border crossings are often used by smugglers to transport illegal cigarettes to other locations. The Malaysia-Singapore border is one of the busiest and most porous checkpoints in the world. Last year about 300,000 people walk between Singapore and Johor daily, and the figure does not yet include commuters on motorcycles, cars, vans, lorries and buses.

With the high number of pedestrians and vehicles crossing the border, controlling the flow of goods is a challenge. It is very likely that more illegal cigarettes will flow into Malaysia from Singapore. Already, more than 50 per cent of cigarette packs sold in Malaysia is illegal. What would happen if Singapore enforces plain packaging, making it easier for syndicates to produce their products? It will mean higher chances of illicit products crossing over to our country.

Thus, Singapore’s action on this matter could mean problems to us. We will lose tax revenue normally collected from legal tobacco products. Any anti-smoking campaigns and education efforts our government introduces will also be less effective because cheaper illicit cigarettes from Singapore are easily obtained in the Malaysian black market. That is not yet to speak about the potential healthcare costs because nobody knows what goes into the illegal cigarettes.

Therefore it is useful for Malaysia to observe how Singapore acts on this issue. Their decision can have a negative impact on our country.

But, coming back to my real point, I hope the above sufficiently illustrates how one policy can have many ramifications, even across national borders. This is why no policy should be considered in isolation. In our excitement about GE14, we should be careful when politicians promise us the stars and the moon. There is always a wider context that must be taken into account, and we really do need to be careful about the promises. There are things that have unintended consequences in places that we do not expect.

First published in Sin Chew Daily, 30 July 2017, by Wan Saiful Wan Jan

Wan Saiful

Wan Saiful is Chief Executive of the Institute for Democracy and Economic Affairs, Director of the Southeast Asia Network for Development and Chairman of the Istanbul Network for Liberty.

2017-07-30T08:56:59+00:00 30th July 2017|Opinion, Government & business|Comments Off on Public policy is not always straightforward