By Ong Kian Ming

EMGS should be dismantled immediately because it restricts competition, increases costs and inefficiency and creates disincentives for foreign students to study in Malaysia

Promoting competition and market liberalization is one of the 6 strategic reform initiatives under the Economic Transformation Program (ETP). It is also a cornerstone of the New Economic Model (NEM). We have heard our Prime Minister, Dato Seri Najib Tun Razak say that “the era of government knows best is over.”

PEMANDU CEO and Minister in the Prime Minister’s Department, Dato Idris Jala, has also said that “Like charity, competition begins at home. We introduced the Competition Act, which is being enforced this year so that all anti-competitive behaviour among Malaysian industries can be removed and there will be free and fair competition. This is a major milestone and our adoption of this, despite powerful vested interests, demonstrates our commitment towards a competitive economy.”

Unfortunately, it seems that this message was not communicated effectively to the rest of the government ministries and agencies.

Education Malaysia Global Services (EMGS, henceforth) was established on the 13^th of April, 2012, and is a company limited by guarantee by the Minister of Higher Education. The purpose of setting up EMGS was to provide a One-Stop Center to market and promote education in Malaysia for international students who want to apply and study in Malaysia.

But along the way, EMGS has abused its position by forcing international students to (i) firstly, choose only among a EMGS approved panel of clinics whereby they can perform their mandatory health screening at the cost of RM250 (ii) secondly, to buy mandatory medical insurance from just one EMGS approved insurance agent which is AXA-Affin. In doing so, EMGS has violated Section 4 and Section 10 of the Competition Act 2010. (Starting 1^st February, 2013)

EMGS has a list of 62 approved clinics from which foreign students must select from to go through a compulsory health screening. I see no reason why EMGS must come up with its own list of approved clinics among the thousands of clinics which exist in Malaysia which can conduct health screening competently.

But what is more disturbing is the fact that of these 62 approved clinics, 50 or 86% of them belong to the Qualitas Medical Group of clinics. Of the 12 clinics which are not part of the Qualitas Medical Group, 4 are in-house clinics in Segi University, UCSI University, Lim Kok Wing University and Universiti Teknologi Petronas respectively, 6 are in states where Qualitas do not own any clinics (Perlis, Kedah, Kelantan and Terengganu), and 1 is in Melaka where Qualitas only owns one clinic (which is an EMGS approved clinic).

In other words, if you are one of the thousands of foreign students studying in the Subang Jaya area, you would have no choice but to visit one of the Qualitas clinics in order to have your health screening! (Please see Appendix 1 for the list of EMGS approved clinics and which of the 62 are part of the Qualitas Medical Group)

With an estimated 90,000 foreign students in Malaysia in 2012 and at the going rate of RM250 per medical check-up per year, this translates into a yearly revenue stream of RM22.5m (and rising), most of which will be reaped by clinics owned by the Qualitas Medical Group.

In addition, EMGS has made it compulsory for foreign students to buy medical insurance from AXA-Affin with packages costing between RM500 (silver package) and RM850 (platinum package). By making AXA-Affin the only provider of medical insurance for foreign students, EMGS has effectively cut out the hundreds of individual insurance agents who were involved in the same business. Again, with 90,000 foreign students (and rising), this market is estimated to be worth a minimum of RM42 million a year.

By limiting the number of approved clinics for health screening and by forcing foreign students to buy medical insurance from AXA-Affin, EMGS is violating Section 4(1) of the Competition Act 2010 which states that “A horizontal or vertical agreement between enterprises is prohibited insofar as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services.”

In the case of medical screening, EMGS has entered into a de facto vertical agreement with Qualitas Medical Group by having 86% of the clinics of its approved list come from this group. In the case of medical insurance, EMGS has entered into a formal vertical agreement with AXA-Affin Insurance.

In addition, EMGS is also violating Section 10(1) of the Competition Act 2010 which states that “An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.” EMGS is in the dominant position of processing visas for international students. It is abusing that dominant position by forcing these international students to buy medical insurance from only one company, namely AXA-Affin.

By fixing the price of the health screening at RM250 and also the minimum medical insurance package at RM500, EMGS is also violating Section 4 (2) of the Competition Act 2010. Other clinics and insurance companies which want to offer lower prices for health screening and medical insurance are prevented from doing so as a result of the decisions of EMGS.

Other than restricting competition and violating the Competition Act 2010, EMGS also imposes additional costs on the foreign students as well as the local universities without any increase in the efficiency of processing foreign student visas. Each student is now charged a RM1000 student visa processing fee with a yearly RM140 renewal fee, all of which goes to EMGS. If a student decides to change his course of study even within the same university, a new processing fee of RM1000 will be charged. Previously, a change of study program would merely require MOHE to be notified with no additional costs incurred.

In addition, the promise to reduce student visa processing times from 6 to 8 weeks to just 14 days under EMGS has not materialized. The experience of most Private Higher Education Institutions (PHEIs) is that EMGS has added another layer to the visa application process without increasing efficiency.

This is not surprising given that the visa application still has to go to the Immigration Department after being screened / processed by EMGS. The private universities also find themselves having to employ more staff to deal with the new visa application procedures.

As a result of the increase costs and the delays in student visa processing, it has been reported that many foreign students are finding Malaysia to be less and less attractive as a destination for further studies. This is ironic since EMGS is supposed to attract more students to study in Malaysia.

Given all of the problems created by EMGS, it is no wonder that the Malaysian Association of Private Colleges and Universities (MACPU) and 53 of its members have filed a judicial review against the Registrar General of Private Higher Educational Institutions and the Minister of Higher Education as a result of the conditions imposed upon them via EMGS.

This judicial review will be heard on Thursday, the 22^nd of August, 2013.

It is disappointing that the Competition Commission has not responded to the many complaints issued against EMGS including by the private insurance agents who have been affected by the decision by EMGS to award the medical insurance contract to AXA-Affin.

Given the many sections of the Competition Act 2010 which EMGS has seemingly violated, it should be declared as anti-competitive by the Competition Commission and dissolved. The failure to do so would demonstrate that the BN government and agencies such as PEMANDU are talking the good talk in terms of competition and liberalitzation but failing miserably to implement policies that actually increase competition.