ENGLISH FOR ACADEMIC PURPOSE
SHOULD CURRENT PRIVATIZATION PRACTICES BEING FURTHER IMPLEMENTED AS ONE OF THE GOVERNMENT POLICIES IN CATERING PUBLIC NEEDS AND IN ENSURING SERVICES QUALITY?
DEPARTMENT OF ACCOUNTING
KULIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES
TUTOR: BRO. SHAHRIZAL
PREPARED BY: MOHD. AIZAT BIN ALI
In early decades of the 18th century, privatization had been introduced into the market. This new economy reforms started in western world, followed further by its implementation in Asian region in later years. Privatization is a policy whereby the ownership of an entity or controlling right of an entity being transferred from government to private sector. Privatization also being referred as denationalization following the impact behind it, it is privatization reducing government control over economy activities. There are various mechanisms available to implement this policy. Privatization can be carried out by selling the equity or assets of an organization. This is the most common way implemented nowadays, for example government of Malaysia sells its holding share in Malaysia Airline System to private party several years ago. Privatization also being implemented by outsourcing certain services, like most of the highways and roads built in Malaysia is outsourced to private companies.
Historically, privatization in Malaysia is intended to achieve socio-economic goal as stated in the eighth Malaysia Plan (RMK8). The main agenda of the implementation of privatization is to restructure the economic activities for ethnics in Malaysia and to increase the equity holding of Bumiputera in economy. British colonialism in Malaysia had left us with clear distinctive function of ethnics in economic sector. For example, Malay and Indian settled in rural area mainly involved in agriculture activities, while Chinese controlling the business activities in town and cities. This condition resulted to instability in income distribution and living standard among ethnics, which can affect the future of the Bumis in future. Currently, privatization functions as a mean to achieve economic growth, to reduce financial and managerial burden of government and to achieve greater productivity and efficiency of enterprises.
Although in some cases privatization generates positive results, there are critics on its implementation. Many argues that by doing privatization, government lose its control over economic activities. Some opinions claim that privatization policy carried out by government should not be further implemented in the sense that government only privatize revenue centers, not cost centers as it is supposed to happen. Those people argue that privatization should be implemented on cost centers since it has positive impact on cost management. Besides that, they also argue that government’s decision in privatizing sectors that serve as basic needs of people such as higher education, water and electricity and etc. may jeopardize public welfare. In this case, it is agreed that current privatization practices should not being further implemented as one of the government policies because it negatively affect public welfare, quality and accessibility of services and cause instability in the economy.
Argument 1: Impact of privatization on public welfare
Privatization may negatively affect public welfare in various ways. Firstly in term of the welfare of employees that working at the privatized firms. We must understand that whenever an organization being privatized, its orientation also will be shifted from public oriented to profit oriented organization. In other words, managers will focus more on creating economic values for their firms. For these people, economic security of their businesses is more important than social security of other people, even for their employees. To explain further, a profit maximizing firm will...