Privatization Paper Concept

8/10/2019 Privatization Paper Concept

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PRIVATIZATION DEFINITION

The Timeline

Malaysia Plan

(6,7 & 8)

Objectives

Rationales

Methods

Types

Impacts on Public sector

Merits

Demerits

Theoretical Literature

-Section

-Choice

-Contract

-Trade Oriented

-Mortgage

-Foreign

Participation

-Sale Of Assets Or Equity

-Lease Of Assets

-Management Contract

-BOT, BO, &BOO

-Management-buy-out

-Workforce-Recession

-Government

Involvement Too

Extensive

-Public Debt

-Cost

-Monopoly

-Partial

Investment

-No Formalities

-Burden Relieved

- Size Reduced

-Competition, Efficiency &

Productivity Increase

-Efficiency & Productivity

-Benefits To Public

-Gains To Government-Economic Growth

-Manpower Development

-Reduction In Govt. Burden

-Bumiputera Participation

-Technology Transfer

-Market Capitalization

-Financial &

Administrative Burden

-Efficiency &

Productivity

-Economic Growth

-Public Sector Size

-NEP/NDP Target

-1983*

-1991*

-1990-1997*

-After 1997*

The transfer of ownership

rights from the public to

private sectors

-Wealth Of Nation

-Fundamental

Privatization Theorem

-Social Welfare

Maximization-’Privatization May

Not Always Led To

Efficiency’



Theoretical Literature of

Privatization

Adam Smith’s Wealth

of Nation (back in

18th

century- the saleof crown lands

FundamentalPrivatization

Theorem - statementabout efficiency

(private vs. Public) bySappington & Stiglitz,

1987

Benefits ofPrivatization (social

welfaremaximization) by

Shapiro & Willig(1990)

‘’Privatization Maynot always led to

greater efficiency’’ – focus on reduction oflabor cost and excess

employment) byShleifer and Vishny

(1994)



Privatization in Malaysia

British colonial era – State owned enterprise (SOEs) has beenestablished

After Independence (1957) - State owned enterprise (SOEs) hasbeen through Major development

1969 (racial riots) led to the establishment of New economic

Policy(NEP) and the existing of State owned enterprise (SOEs) hasbeen strengthened.

1980s : the idea of privatization has been stirred up due to therecession period. The falling of government revenue has led to theidea of the privatization on infrastructure services in 1983 by Tun

Dr. Mahathir.



The Timeline for Privatization

Policy in Malaysia

After 1997

Additional features of Privatization More projects established from MSC

1990-1997

More than 400 projects beingimplemented.

Saving in Capital expenditure-about 130 billion

Proceeds from sales ofassets/equities – 22 billion

Reduction of about 105 000public servants

1991

Privatization Master Plan has been Launched.

1983-1985

Guidelines of Privatization has been initiated. (an official document that elaborated on the objectives and methodology ofprivatization was issued )



Impacts of Privatizations

(focus on Public sector)

Financial andadministrative

burden ofgovernment has

been relieved..

Public sectorsize has been

reduced

Competition,efficiency, and

productivity in a

private sector isbeing promoted









Merits of Privatization

Efficiency & Productivity

Ex: Ports, Power &telecommunications

Benefits to Public

Ex: Availability offacilities, Number &quality of services

Gains to thegovernment.

Economic Growth

Ex: Privatization ofhighways, Ports,

telecommunication , and

manufacturing company

Manpower Development

Ex: in-house and and theon-job training by Private

company

Reduction in governmentadministrative burden

Bumiputera participationin the corporate sector

Technology transfer

Ex: the construction ofLRT in KL

Market capitalization

Ex: Privatized company &Kuala Lumpur Stock

Exchange (KLSE)



These savings could be

used to other sectors

such as education or

poverty eradication.





Demerits of Privatization

Increase costs towards the publicEx: toll charges & telephone charges

The existence of Monopoly

Ex: The postal service department,the Internet Provider (TM net)

Only Partial investment made by thegovernment (but somehow it is still in

the hands of government).

Ex: Golden Share.

No formalities on the open tender system

Ex: government give tender to thepreferred person or organization, such as

the case of Antah Biwater.



Thank you.

Any

Questions?

Documents

Privatization Paper Concept