Tenaga Nasional Berhad (abbreviated as TNB or simply Tenaga Nasional is the only electric utility company in Peninsular Malaysia and also the largest publicly-listed power company in Southeast Asia with MYR 99.03 billion worth of assets. It serves over 8.4 million customers throughout Peninsular Malaysia and the eastern state of Sabah through Sabah Electricity Sdn Bhd. TNB's core activities are in the generation, transmission and distribution of electricity. Other activities include repairing, testing and maintaining power plants, providing engineering, procurement and construction services for power plants related products, assembling and manufacturing high voltage switch gears, coal mining and trading. Operations are carried out in Malaysia, Mauritius, Pakistan, India and Indonesia.
Monopoly is a single firm producing a commodity that has no close substitutes. The firm is also considered as the industry. The essence of monopoly lies in the ability of the firm to control the price of its product or service, and Tenaga Nasional Berhad is able to make it.
Tenaga Nasional Berhad is the only company in Malaysia which supplies electricity to households. The company remains as the only electricity supplier direct to the consumer because to start such a monopoly business as TNB will require a company to invest a huge amount of capital. A huge capital is needed mainly for the start-up of power plants with the high electric capacity of megawatts.
We now assume there are two companies supplying electricity in Malaysia such as TNB and Malaya Electricity Berhad, having two companies to choose for consumers, it is definite that consumers will most likely make a decision based on which company can offer a cheaper price. Furthermore, not just price will be the issue but the number of power plants will also increase in the country, which will lead to the increase of transmission towers, what’s worse is how will they direct the cables to each household who chooses different suppliers. In order to resolve these issues, the government have given the license to only TNB to operate this business. This helps limit the entry into the industry by using license, and these are why monopoly industry has extreme barriers.
TNB has ownership of the scarce raw materials and this plays a part in making an effective barrier to entry with no other firms having access to the scarce inputs to produce their output. So, if a certain production requires a particular input and the single firm which owns the entire supply of the input, the firm will have complete control in the industry. In this case, TNB has access to coal, which is the cheapest raw material used to generate electricity here in Malaysia.
Moreover, a single firm should be in this industry to keep the production cost from increasing, if there were more than one firm in this industry it will contribute to a higher price in coal. Then the coal supplier will sell the coal at a higher price because coal is a scarce resource by selling it at a higher price will contribute to the increase in production cost.
Based on the graph where production at the Marginal Revenue (MR) = Marginal Cost (MC) output. In order for the company to obtain maximum profit, the price must be set at the point, where it touches the demand curve and must be above the Average Total Cost (ATC). If TNB remains a monopoly in this industry it will be able to make supernormal profits indefinitely.
Monopoly usually gets supernormal profit as their type of profit. Supernormal profit is the total revenue exceeding total costs for a company that holds a monopoly in a market.
As a conclusion, TNB is a pure monopoly and this makes the TNB a price maker, so if prices were to be maintained or increase in the future, TNB will still be making a higher supernormal profit during that period, which will boost the company’s income. In the Islamic view, monopoly emerged on the economic scene after the industrial revolution. There is nothing in Islamic jurisprudence to justify an indiscreet condemnation of modern monopoly structures. Sometimes we need them in social interest. Also, we can take action if monopolies misuse their powers against social interest.
THAT'S ALL, THANK YOU.
Reference :
1) Economic with Islamic Orientation Oxford Fajar Sdn Bhd
2) http://www.preservearticles.com/201106178114/what-is-the-difference-between-normal-profit-and-super-normal-profit.html
3) Google image
4) Wikipedia
5)https://jonathan0311542.wordpress.com/tenaga-nasional-berhad-is-a-monopoly-company/
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