TASK 3: PRIVATISATION

Title : To redevelop the stadium into an Innovative Research Park.

Task : Explain the responsibility of all parties involved in the project, project component,
benefit of your proposal and the problem that might occur in the future.

First of all, we need to identify the main problem of this proposed project. Kajang
Municipality intends to redevelop the stadium into an Innovative Research Park. They have the
enough space for the propose construction but the problem is the administration is in no position
to fund the proposed project. So, based on this problem, we can solve it by the method of
privatization the project itself. Privatization is the process of transferring ownership of a
business, enterprise, agency, public service, or public property from the public sector which is
the government to the private sector. The privatization process functional either to a business that
operates for a profit or to a nonprofit organization. It may also mean government outsourcing of
services or function to private firms, e.g. revenue collection, law enforcement, and prison
management. By this method, the municipal wouldnt have to worry about the cost as it is
develop by the private company itself, operates by them, and maintained by them. The municipal
just have to monitor the project while the private company do their job to complete the project.
Essentially, Privatization is an economic strategy aimed at reducing the role of government in
otherwise economic activities and in favor of widening the scope for the private sector to
operate.
Privatization is an important policy tool for generating growth and addressing structural
imbalances by removing artificial barriers and opening up the economy to competition. Besides,
privatization program is part of the economic reforms agenda of the Government that along with
deregulation, restructuring and good governance seeks to enhance growth and productivity in the
economy by harnessing the private sectors capital and managerial potential as engine of growth
and gradually decreasing Governments role to providing level playing field and favorable
business climate. The process of privatization will provide benefits to both party.

Responsibility by Government (Kajang Municipality)
Governments took a more active role in the ownership, production and delivery of
different goods and services. The Kajang Municipality will, therefore, systematically come out
of the business of running businesses and industry through privatization of public enterprises
(PEs) and confining its role to:
Making policy and providing good governance
Providing a sound and effective regulatory framework
Ensuring social equity and economic justice
Providing enabling environment, including physical and technical infrastructure and social
services.
But first of all, the Kajang Municipality need to transfer of the land title to the developer
with a reduced price. Besides, they need to give assistance to developer to get necessary approval
and in relocating the squatters. To attract the developer, Kajang Municipality should allow them
to construct commercial buildings and other facilities around the land.
Responsibility by Developer
As developer, they must provide adequate infrastructure and ensure the propose project
completed within the prescribed time. Some of the responsibilities by developer are:
Upgrade existing road infrastructures surrounding the development.
Construct low cost houses to be given free of charge to the squatters.
Construct a number of houses to be given to the land owners as offset of their land lots.
Upgrade existing road infrastructure surrounding the development
Transfer of certain floor area of completed office space to the government.



ADVANTAGES OF PRIVATIZATION
Improved Efficiency.
- Private companies have more profit incentive to produces more goods and services for
the sake of reaching a customer base and hence increasing profits. Besides, the private
companies is able to cut costs and this lead to a more efficient development. If we work
for a government running a project, managers do not usually share in any profits. A
public organization would not be as productive due to the lack of financing allocated by
the entire government's budget that must consider other areas of the economy.
Specialization.
- A private business has the ability to focus all relevant human and financial resources onto
specific functions. A state-owned firm does not have the necessary resources to specialize
its goods and services as a result of the general products provided to the greatest number
of people in the population.
Lack of Political Interference.
- It is mainly known that governments make poor economic managers. They are motivated
by political pressures rather than sound economic and business sense. A political
government tends to run an industry or company for political goals rather than economic
ones. For example a state enterprise may employ surplus workers which are inefficient.
The government may be reluctant to get rid of the workers because of the negative
publicity involved in job losses. Therefore, state owned enterprises often employ too
many workers increasing inefficiency.
Shareholders
- It is argued that a private firm has pressure from shareholders to perform efficiently. If
the firm is inefficient then the firm could be subject to a takeover. A state owned firm
doesnt have this pressure and so it is easier for them to be inefficient.

Increased Competition.
- Often privatization of state owned monopolies occurs alongside deregulation such as
policies to allow more firms to enter the industry and increase the competitiveness of the
market. It is this increase in competition that can be the greatest spur to improvements in
efficiency. For example, there is now more competition in telecoms and distribution of
gas and electricity. However, privatization doesnt necessarily increase competition, it
depends on the nature of the market.

DISADVANTAGES
Government loses out on potential dividends:
- Many of the privatized companies are quite profitable. This means the government
misses out on their dividends, instead going to wealthy shareholders.
Public view
- Opponents of certain privatizations believe that certain public goods and services should
remain primarily in the hands of government in order to ensure that everyone in society
has access to them. The public does not have any control or oversight of private
companies.
Political influence:
- Governments may more easily exert pressure on state-owned firms to help implementing
government policy
Job Loss:
- Due to the additional financial burden placed on privatized companies to succeed without
any government help, unlike the public companies, jobs could be lost to keep more
money in the company.

Concentration of wealth:
- Profits from successful enterprises end up in private, often foreign, hands instead of being
available for the common good
Problem of regulating private monopolies:
- Privatization creates private monopolies, such as the water companies and rail
companies. Privatization will not result in true competition if a natural monopoly exists.
These need regulating to prevent abuse of monopoly power. Therefore, there is still need
for government regulation, similar to under state ownership. As the research park has
been developed, there will still be need monitoring by the municipal itself. The municipal
must enforce regulations and laws so that the private sector must follows and less
dominate the field.

REQUIRED PARTIES:
Designer:
- This department has to design the complex and ensure the design approved by the
municipal according to the specification given
Builder/ Contractor:
- This department must build the complex and ensure the safety of the building and the
insured period.
Operation and Management:
- This department must hire workers for operation and manage the complex until the
concession ends.
Financial Management:
- This department must manage all the financial of this project before, during and after the
completion of the project until the operation.
Maintenance:
- This department must take safety measures to all aspect including workers, public and
environment.

CONCLUSION
Governments privatization program is flexible and keeps adjusting according to ground
realities while keeping the overall direction intact. Privatization of public enterprises has
continued over the years despite changes in the government. This has ensured continuity of
policy with appropriate adjustments in the program. The Privatization has been helpful in
liberating the Government from micro-management of the economy. This in turn has freed
substantial public funds for diversion to socio economic development which were otherwise
being used as subsidies for loss making public enterprises. Privatization cannot be accomplished
without the support of all the stakeholders including various Government agencies, departments
and organizations and most importantly the developer.



Prepared by
(MUHAMMAD SAFUAN BIN CHE AHMED)
A133024
JKAS/4