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Kwek Wei Sei & Ng Soo Yei; August 2007

Privatization continues to be an essential part of the overall strategy in the country’s economic development. During the Seventh Malaysia Plan period, the privatization programme contributed towards the growth and development of the economy, in line with the private sector-led growth strategy and the Malaysia Incorporated Policy. At the same time, the programme contributed towards promoting. Bumiputera participation in business and commerce. In undertaking the programme, emphasis was placed on expanding capacities to develop the infrastructure required to effectively foster the development of industries and supporting services as well as provide better comfort and access to consumers.

Much of privatization in Malaysia has involved projects with high capital costs and large externalities which were once regarded to be beyond the capacity of the private sector to bear, and is the reason why the state had traditionally undertaken many of these investments in the first place. With increasing realization that the private sector is incapable of bearing on its own the financial costs and associated risks of such projects as infrastructure construction or provision of public services, the role of the state has become central in privatization.

While acknowledging poor and inefficient management of many, if not most Malaysian SOEs (State Own Enterprise), the key question should be whether such inefficiencies are necessarily characteristic of public ownership, and hence cannot be overcome except through privatization. The impressive performance of SOEs in neighboring Singapore, which used to be part of Malaysia, or of Malaysia’s well-run Petronas underscore this point. Less politicized and perhaps ethnic criteria for recruitment, appointment, promotion and accountability, as well as greater SOE autonomy, transparency and organizational flexibility would probably radically improve SOE performance (Jomo K. S. and Tan Wooi Syn 1985 ). If the record of Malaysian SOEs has primarily been due to the nature, interests and abilities of those in charge, rather than a consequence of public ownership per se, then privatization in itself cannot and will not overcome the root problems. Also, while privatization may improve enterprise profitability for the private owners concerned, such changes may not necessarily benefit the public or consumers.

Since a significant portion of such activities are public monopolies, privatization will hand over such monopoly powers to private interests who are likely to use them to maximize profits. The privatization of public services tends to burden the people, especially if charges are raised for privatized services. Obviously, private interests are interests only in profitable or potentially profitable activities and enterprises. This may mean that the government will be left with unprofitable and less profitable activities that, consequently, will worsen overall public sector performance, resulting in the claim of inevitable SOE or public sector inefficiency becoming a self-fulfilling prophecy.

Privatization has been credited with enhancing economic growth (Jomo K. S. and Tan Wooi Syn 1985). Resources are said to have been released for corporate expansion through efficiency gains, although no evidence of this has been produced. Growth is also said to have been generated by allowing private entrepreneurship in sectors previously monopolized by the government. While this seems plausible, the examples of build-operate-transfer projects and licensed activities are less than convincing since they merely involve the private sector substituting for what the public sector would otherwise have undertaken at lower cost to users, as is clearly the case for the North-South Highway

The privatization programme continued to be implemented during the Eighth Malaysia Plan period as it has contributed to increased efficiency and productivity of the privatized entities and consequently, benefited the public and spur economic development. Emphasis will be given to viable projects that have high multiplier effects and at the same time, meet social objectives. Steps will be undertaken to further strengthen and streamline the implementation process as well as the regulatory framework, to ensure the effectiveness of the privatization programmes.

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Har Wai Mun @ 2007