Download Privatization

KKKH 4284
PERANCANGAN BANDAR LESTARI
Task 3 : Privatization
NURHAYATI BINTI ABDUL RAZAK
A133731
DEPARTMENT OF CIVIL & STRUCTURAL ENGINEERING/4
Lecturers:
Prof. Ir. Dr. RIZA ATIQ ABDULLAH BIN O.K. RAHMAT
PUAN NORLIZA BINTI MOHD AKHIR
Dr. MUHAMMAD NAZRI BIN BORHAN
TASK 3 : PRIVATIZATION
Problem
Kajang Municipality intends to redevelop the stadium into an Innovative Research Park. The
park is intended to take advantage of a number of universities and research centres in Kajang
area
to
turn
the
municipality
into
centre
for
innovative,
high
value
added
industries. However the administration is in no position to fund the proposed project. You
are required to propose a viable solution to ensure the success of the project. Explain the
responsibility of all parties involved in the project, project component, the benefit of your
proposal and the problem that might occur in the future.
Solution
Introduction
Kajang is a town in the eastern part of Selangor, Malaysia. Kajang and its surrounding areas
is a sub-district located within the Hulu Langat District in the state of Selangor. It is situated
approximately 14 miles southeast of Kuala Lumpur. From Kuala Lumpur, Kajang can be
reached by roads and rails. Kajang is also linked with Putrajaya, the National Administrative
Centre and Cyberjaya, the National Multimedia City. On its west is situated Puchong town,
Batu 3 and Klang. Basically Kajang consists of a number of Malay, Chinese and Indian
settlements.
Map of Kajang City
The center of Kajang is the bustling Old Town, where all the roads meet. Most of the
colonial-era buildings were constructed around the 1920s to 1930s. The architecture of these
shophouses is a combination of traditional Chinese and European designs. The ground floor
was used mostly for commercial activities and the upper floor as the family living quarter.
One of Kajang's landmarks is Stadium Kajang which is situated in the heart of the
town. It is near a popular hangout place among the locals named Haji Samuri, which is also
home to the famous dish satay Kajang. People come from all over Malaysia to taste the satay
here. The stadium can accommodate up to 5,000 people and is used throughout the year for
the community soccer competitions.
The total population of Kajang has grown rapidly in the past few years, with
estimated population growth of 9% per annum. The soon-to-be-realized Klang Valley MRT
station in Bandar Kajang will boost the property value in Sungai Chua. As of 2004, a few
townships have been developed in Kajang, such as Taman Prima Saujana (straight from Jalan
Cheras), Sungai Chua, Taman Kajang Perdana (Kajang Highlands). Lately, many high-end
developments has mushroomed in Kajang such as Twin Palms, Sri Banyan, Country Heights,
Jade Hills and Prima Paramount. Areas surrounding these new townships are easily
accessible via the SILK Expressway. Kajang is governed by the Majlis Perbandaran Kajang.
What is privatization?
Privatisation, also spelled privatization, may have several meanings. Primarily, it is the
process of transferring ownership of a business, enterprise, agency, public service, or public
property from the public sector (a government) to the private sector, either to a business that
operates for a profit or to a non-profit organization. It may also mean government
outsourcing of services or functions to private firms, e.g. revenue collection, law
enforcement, and prison management.
The privatisation policy was first announced as a national policy by the Government
in 1983. It represents a new approach in the national development policy and complements
other national policies such as the Malaysia Incorporated policy, developed to underscore the
increased role of the private sector in the development of the Malaysian economy.
This approach is to facilitate the country’s economic growth, reduce the financial and
administrative burden of the Government, reduce the Government's presence in the economy,
lower the level and scope of public spending and allow market forces to govern economic
activities and improve efficiency and productivity in line with the National Development
Policy. In respect of ownership of wealth, the privatisation policy forms an integral part of
the Government's strategy in realizing active participation by Bumiputera in corporate sector
to correct the imbalances in the corporate sector participation. The privatised entity should
allocate 30% of its equity to Bumiputera. Foreign participation in a privatized entity is
limited to a maximum of 25 % of its share capital.
Privatization (sometimes referred to as contracting out, outsourcing, competitive
sourcing or public-private partnerships) is really an umbrella term referring to a range of
policy choices involving some shift in responsibility from the government to the private
sector, or some form of partnership to accomplish certain goals or provide certain services.

Recent decades have seen privatization shift from a concept viewed as radical and
ideologically-based to a well-established, proven policy management tool.

Indeed, local policymakers in many jurisdictions in the United States and around the
world have used privatization to better the lives of citizens by offering them higher
quality services at lower costs, delivering greater choice and more efficient, effective
government.

Virtually every local government service from road maintenance, fleet operations and
public works to education, recreation and public health services has been successfully
privatized at some point in time somewhere around the world.
In recent years, government's role is evolving from service provider to that of a broker
of services, as the public sector is increasingly relying far more on networks of public, private
and non-profit organizations to deliver services.

This trend is not confined to any particular region, or to governments dominated by
either major political party. In fact, privatization is a bipartisan trend, embraced by
pragmatic local policymakers from both sides of the aisle.

The reason for the widespread appeal of privatization is straightforward: it works.
Decades of successful privatization policies have proven that private sector innovation
and initiative can do certain things better than the public sector.

Privatization can also boost the local economy and tax base, as private companies
under government contract pay taxes into government coffers and offer employment
to communities.
The experiences of the thousands of other local governments around the country (and
indeed, around the world) that have embraced privatization demonstrate that there is indeed
another more entrepreneurial and pragmatic way to govern. When implemented with care,
due diligence and a focus on maximizing competition, privatization is an approach that puts
results, performance and outcomes first and can deliver high-quality public services at a
lower cost.
Advantages of Privatization
1. Increase in efficiency and Profitability
Most Govt. industries and services are inefficient and running in losses, when these
will be transferred to private sector, their administration will improve and nondevelopment expenditures will be reduced, their efficiency will increase and will be
converted into profitable ventures.
2. Increase in Foreign Investment and Export Earnings
Privatization will increase foreign investment when foreigners will purchase them.
Their production will increase which will more foreign exchange for Pakistan and if
these enterprises are set up by foreign loans, these loans will be repaid out of the sale
proceeds, which will reduce the burden of foreign loans.
3. Broaden the Base of Share Capital and Stock Market
Sale of enterprises through stock exchanges will broaden the base of share capital
hence stock market will develop, because general public will be in position to
purchase their shares and investment opportunities for general public will increase.
4. Decrease in Political Pressure
There are always political pressures on Govt. owned industries, banks and other
institutions for employment of political workers and loan facilities from banks. When
these enterprises will go in the hands of private owners then these illegal pressures
will be reduced to a great extent.
5. Use of Latest Technology and Know-How
Private domestic investors and foreign investors will adopt latest technology and
know-how for the increase in output and their profits. This will result in the increase
in national product, thus national income of the country will grow.
6. Decrease in Deficit Budgeting and Increase in Infrastructure
Govt. enterprises usually run into losses and to keep them going. Govt. provides funds
every year. After privation, Govt. need not to resort to deficit financing and the funds
provided to these enterprises will be utilized for construction of social infrastructure
of the economy.
Disadvantages of Privatization
1. Privatization is expensive and generates a lot of income in fees for specialist advisers
such as banks.
2. Public monopolies have been turned into private monopolies with toolittle
competition, so consumers have not benefited as much as had beenhoped. This is the
main reason why it has been necessary to createregulators. This is an important point.
It partly depends on how the privatization took place. For example, the railways were
privatized in bit of a rush and there might have been other ways to do it so that
morecompetition was created. It partly depends on the market. Some markets
are'natural monopolies' where competition is difficult. For example, it would bevery
wasteful and expensive to build two sets of track into Liverpool Street just to create
some competition. Natural monopolies create a special justification for public
ownership in the general public interest.
3. The nationalized industries were sold off too quickly and too cheaply.With patience a
better price could have been had with more beneficialresults on the government's
revenue. In almost all cases the share prices rosesharply as soon as dealing began after
privatisation.
4. The privatized businesses have sold off or closed down unprofitable partsof the
business (as businesses normally do) and so services eg transport inrural areas have
got worse.
5. Wider share ownership did not really happen as many small investorstook their profits
and didn't buy anything else.
Parties Involved
Government
1. Assist in transferring the land the developer
2. Give assistance to get necessary approval
3. Transfer of the land title to the developer
4. Give assistance to relocate the squatters and land owners
5. Give assistance to transfer the ownership of part of the area from land owners to
the developer
6. Allow the developer to construct a modern mega research centre.
Developer
1. Transfer of certain floor area of completed office space to the government
2. Construct low cost houses to be given free of charge to the squatters
3. Construct
infrastructure
network,
including
two
grade
separated
intersection
4. Construct a number of houses to be given to the land owners as offset of
their land lots.
5. Construct an underground pedestrian crossing
6. Upgrade existing road infrastructure surrounding the development
7. Construct and maintain a public garden