Theoretical Literature

-Wealth Of Nation
-Fundamental
Privatization Theorem
-Social Welfare
Maximization
-Privatization May
Not Always Led To
Efficiency

PRIVATIZATION

-1983*
-1991*
-1990-1997*
-After 1997*

Merits
-Workforce
-Recession
-Government
Involvement Too
Extensive
-Public Debt

Objectives
-Financial &
Administrative Burden
-Efficiency &
Productivity
-Economic Growth
-Public Sector Size
-NEP/NDP Target

The transfer of ownership

rights from the public to
private sectors

Malaysia Plan
(6,7 & 8)

Rationales

The Timeline

DEFINITION

Methods
-Sale Of Assets Or Equity
-Lease Of Assets
-Management Contract
-BOT, BO, &BOO
-Management-buy-out

Types
-Section
-Choice
-Contract
-Trade Oriented
-Mortgage
-Foreign
Participation

-Efficiency & Productivity

-Benefits To Public
-Gains To Government
-Economic Growth
-Manpower Development
-Reduction In Govt. Burden
-Bumiputera Participation
-Technology Transfer
-Market Capitalization

Impacts on Public sector

-Burden Relieved
- Size Reduced
-Competition, Efficiency &
Productivity Increase

Demerits
-Cost
-Monopoly
-Partial
Investment
-No Formalities

Theoretical Literature of
Privatization
Benefits of
Privatization (social
welfare
maximization) by
Shapiro & Willig
(1990)

Adam Smiths Wealth

of Nation (back in
18th century- the sale
of crown lands

Fundamental
Privatization
Theorem - statement
about efficiency
(private vs. Public) by
Sappington & Stiglitz,
1987

Privatization May
not always led to
greater efficiency
focus on reduction of
labor cost and excess
employment) by
Shleifer and Vishny
(1994)

Privatization in Malaysia
British colonial era State owned enterprise (SOEs) has been
established

After Independence (1957) - State owned enterprise (SOEs) has

been through Major development

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

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

1980s : the idea of privatization has been stirred up due to the

recession period. The falling of government revenue has led to the
idea of the privatization on infrastructure services in 1983 by Tun
Dr. Mahathir.

The Timeline for Privatization

Policy in Malaysia
1983-1985
Guidelines of Privatization has been initiated. (an official document that elaborated on the objectives and methodology of
privatization was issued )

1991
Privatization Master Plan has been Launched.

1990-1997
More than 400 projects being
implemented.

Saving in Capital expenditureabout 130 billion

Proceeds from sales of

assets/equities 22 billion

Reduction of about 105 000

public servants

After 1997
Additional features of Privatization

More projects established from MSC

Impacts of Privatizations
(focus on Public sector)

Financial and
administrative
burden of
government has
been relieved.
.

Public sector
size has been
reduced

Competition,
efficiency, and
productivity in a
private sector is
being promoted

Merits of Privatization
Efficiency & Productivity
Ex: Ports, Power &
telecommunications

Economic Growth
Ex: Privatization of
highways, Ports,
telecommunication , and
manufacturing company

Bumiputera participation
in the corporate sector

Benefits to Public
Ex: Availability of
facilities, Number &
quality of services

Gains to the
government.

Manpower Development
Ex: in-house and and the
on-job training by Private
company

Technology transfer
Ex: the construction of
LRT in KL

Reduction in government
administrative burden

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 public

Ex: toll charges & telephone charges

Only Partial investment made by the

government (but somehow it is still in
the hands of government).
Ex: Golden Share.

The existence of Monopoly

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

No formalities on the open tender system

Ex: government give tender to the
preferred person or organization, such as
the case of Antah Biwater.

Thank you.
Any
Questions?