(A) Characteristic of monopoly and its relationship with MyEG system
The definition of monopoly means a market where there is only one seller of a particular good or service.
The characteristics of monopoly are: 1) only one single seller in the market, there is no competition; 2) there are many buyers in the market; 3) the firm enjoys abnormal profits; 4) the seller controls the prices in that particular product or service and is the price maker; 5) consumers do not have perfect information; 6) there are barriers to entry, these barriers many be natural or artificial; 7) the product does not have close substitutes.
According to the characteristics of monopoly mentioned above, the MyEG system fully displays the characteristics of monopoly.
Firstly, there is only one company was assigned by government to handle with the application and renewal of foreign workers working permit, there is no other competitor to handle with the same business. And, most importantly, it is the government who decides the assigned company without openly known by public, there is the problem with the government transparency.
Secondly, there are many buyers in the market. Based on the media information, there are 2.4million legal foreign workers in Malaysia, if every application and renewal fee of foreign workers costs RM38, it means that the monopolized company will earn RM91.2 million (2.4 x 38) only for the registration procedure. From this calculation, it demonstrates the third point of the characteristic of monopoly which is the company enjoying abnormal profits. The government needs to answer why there is such abnormal profits earned by a privatized company based on official procedure (i.e. Application and renewal of working permit) due to a new government policy.
Thirdly, monopoly causes the seller controls the prices in that particular product or service. It is itself as a price maker. Since the price is fixed by the assigned company, there is not free competition monitored by the economic market. The assigned company is the price maker. As this issue concerned with public interest, to be transparent, the assigned company should provide a list of criteria in deciding the fixed application and renewal fee clearly with thorough explanation and calculation.
Fourthly, consumers do not have perfect information, meaning the employers do not have enough information before launching this new system. Employers should be given a period in understanding the operation and the reason of launching new system, but not simply start it in a sudden. There is exploitation in the right of knowing.
Fifthly, there is only one assigned company responsible to handle with the registration procedure. There is barrier for other privatized company entering into this field though the assigned company is also a privatized company. As this is the only online system that the employers are forced to use, there is no other substitutes of the service, this is considered as an artificial barrier created by government policy. The employers have no choices and they are coerced to use this service when they need it and experience its disadvantages.
(B) Disadvantages of monopoly
After synthesizing some results on research of monopoly, some disadvantages of monopoly are as below:
1) consumers maybe charged higher prices for low quality of goods and poor services; consumers are highly exploited by the monopoly charging high prices for goods and services
2) Lack of competition may lead to low quality of goods and poor services
3) Consumers have limited choices due to limited choices given by the monopoly
4) Improper management may lead to inefficiency, it can be in the use of inputs or lack of control on the costs of production
5) Monopoly will created dissatisfied consumers who often complain about the firm’s products
A monopoly may also have monopsony power in employing workers and buying products. This means they can pay workers lower wages. (eg. Supermarkets can pay farmers lower prices.)
(C) Some examples of monopoly
Example 1:
In Saudi Arabia, there is only one local travel airlines to travel from city to another city inside Saudi Arabia. So the people are coerced to travel with this airlines and its disadvantages. In addition, the company that has monopoly usually does not have good services.
Besides, monopoly caused increased prices. For example, in 2002 in Saudi Arabia, there was only one telecom company, Saudi Telecom Company, and it had high prices in the call’s cost because there was no competition and they wanted to make the highest profit. In contrast, Saudi Telecom Company reduced its prices because there are many companies in the telecommunication field.
According to www.stc.com.sa (2007) “ Saudi Telecom announced the launch of its new promotion for Afaq DSL Shammel reaching 55%”. So the competition is coerced Saudi Telecom Company to reduces its prices.
Example 2:
The German state monopoly, Deutsche Telekom dominated the German telecom market until 1998, with high prices and sometimes slow service. Since then it has been gradually privatized and the market deregulated to allow competitors to enter and control interconnection charges.
Even though the majority of fixed lines are still operated by Deutsche Telekom, competition has reduced charges, especially for long-distance calls. This is mainly due to customers being able to use alternative providers by dialing a special prefix before their call.
Even though the majority of fixed lines are still operated by Deutsche Telekom, competition has reduced charges, especially for long-distance calls. This is mainly due to customers being able to use alternative providers by dialing a special prefix before their call.
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