Privatization in Malaysia

RUNNING HEAD: Privatization in Malaysia

Malaysian Studies Privatization in Malaysia

Introduction Privatization is defined as the transownership of a business or enterprise from the public sector (government), to the private sector. Privatization is usually considered in hopes of achieving improved outputs, efficiency and the yield in profit of the privatised organization. There are four known methods to carry out the process of privatization; share issue, asset sale, voucher and privatization from below. the choice is large influenced by the political factors, the capital market, as well as the overall health of the firm. History The inception of the idea of privatization dates back to Ancient Greece, when the government had signed everything over to private ownership. The roman republic also

Privatization in Malaysia

observes majority of the services being administered by private parties. Among the earlier pioneers of privatization includes the Han dynasty in China; Taoism had had a significant influence on this incidence when it had been integrated into the government. The Hans were among the few whom had delegated complete power and responsibilities to the collective, applying the principles of laissez-faire. A significant amount of privatizations had occurred in Britain regarding common lands in 1760 - 1820. In the 1950s, Winston Churchills government had privatized the steel industry. Thirty year later, it had gained momentum on a global scale under the leadership of Ronald Reagan and Margaret Thatcher of USA and UK respectively. The World Bank had assisted in the privatization of state owned enterprises in eastern and central Europe, including the former Soviet Union in the 1990s. An on-going privatization of the Japanese post and the world's largest bank is being led by Japans Prime Minister, Junichiro Koizumi, with hopes of completing it by 2017. Even in Malaysia, privatization has been around for a while. JTM was corporatized in 1987, forming Syarikat Tenaga Nasional Bhd, which was Malaysias first private entity. Followed by Tenaga Nasional the year after. Malaysian Airline, former under state control was also privatized not too long after its inception. In the 1994, the ministry of health divested its pharmaceutical services followed by the outsourced hospital support services two years later. Other privatizations that can be observed are the roads driven upon; Shah Alam Expressway, Damansara-Puchong Expressway, North-South Expressway. Arguments for Privatization Private markets can potentially perform more efficiently than governments, relative to the theory of free market competition. In addition, there will be relatively more freedom for the firm to operate outside of bureaucratic constraints. The revenue to investment ratios will

Privatization in Malaysia

become more favourable in a long run. More importantly, the increased competition would lead to lower prices for consumers; encourage research and development of new commodities and a more promising quality service. Argument against Privatization Natural monopolies are essential necessities needed by the collective of the society. If the private market is allowed to exploit this, overall satisfaction will eventually cripple. In the interest of the public, things such as health care and defence should not be run as profit making bodies. In an instant, health consultants and medical examiners will be more concerned with the patients wealth rather than health. Such economic environment makes it hard to regulate private monopolies as well. Better alternatives should be consider; municipality, outsourcing, non-profit organizations, public-private partnership.