Privatization and Renationalization in Malaysia: a Survey

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AN ARTICLE REVIEW:

PRIVATIZATION AND RENATIONALIZATION IN MALAYSIA: A
SURVEY

By Jomo K. S. and Tan Wooi Syn

Brief Summary of the Article

ABSTRACT: This article discuss about the theory of Privatization in and Renasionalization in Malaysia. This article start to review the evolution of the public policy from the colonial period and so on to the further development of the theory of Privatization starting from the very beginning of it until todate.

The article start to review about the growth and Privatisation of Malaysian State Owned Enterprise (“SOE”) until to the mid-sixties when most Malaysian State Governments began setting up state economic development corporation (SEDCs) to enhance the flexibility until the developments nowadays.

This article also discussed about the implementation of the theory in Malaysia and from the practical aspect of the writers’ point of view.

What is Privatization?

Generally, privatization has been defined in terms of the transfer of enterprise ownership from the public to the private sector. More generally, privatization refers to changing the status of a business, service or industry from state, government or public to private ownership or control. The term sometimes also refers to the use of private contractors to provide services previously provided by the public sector. Privatization can be strictly defined to include only cases of the sale of 100 percent, or at least a majority share of a SOE, or its assets, to private shareholders. Full or complete privatization would therefore mean the complete transfer of ownership and control of a government enterprise or asset to the private sector.

Malaysian Prime Minister Mahathir Mohamad’s 1983 announcement of his government’s intention to embark on a privatization policy represented a dramatic reversal of preceding Malaysian government policy although it was very much consistent with his own personal ideological and policy preferences as well as the then new wave of conservative market reforms beginning in the West with the election of the Thatcher Government in the United Kingdom in 1979 and the Reagan administration in the United States late the following year.

DESIGN/METHODOLOGY/APPROACH Generally, privatization has been defined in terms of the transfer of enterprise ownership from the public to the private sector. More generally, privatization refers to changing the status of a business, service or industry from state, government or public to private ownership or control. The term sometimes also refers to the use of private contractors to provide services previously provided by the public sector. Privatization can be strictly defined to include only cases of the sale of 100 percent, or at least a majority share of a SOE, or its assets, to private shareholders. Full or complete privatization would therefore mean the complete transfer of ownership and control of a government enterprise or asset to the private sector. In Malaysia, such privatizations are not the norm, the most prominent cases involving the North-South Highway, Kumpulan Fima and Peremba.

FINDINGS The Main Reason for Privatization of Its Rationale

The Malaysian government summed up its five arguments for privatization in its Guidelines on Privatization (EPU, 1985).

Firstly, it was supposed to reduce the ‘financial and administrative burden of the government’, particularly in undertaking and maintaining services and infrastructure.

Secondly, it was expected to ‘promote competition, improve efficiency and increase productivity’ in the delivery of these services.

Thirdly, privatization was expected to ‘stimulate private entrepreneurship and investment’, and thus accelerate economic growth.

Fourthly, it was expected to help reduce ‘the presence and size of the public sector, with its monopolistic tendencies and bureaucratic support’. Fifthly, privatization was also expected to help achieve NEP objectives, ‘especially as Bumiputera...
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