JABATAN KEJURUTERAAN AWAM DAN STRUKTUR

FAKULTI KEJURUTERAAN DAN ALAM BINA

KKKH 4284 PERANCANGAN BANDAR LESTARI
SEMESTER 2 2013/2014

TASK 3: PRVILIZATION

NAME : YONG SIEW FENG
NO. MATRIC : A133075
LECTURER : Prof. Ir. Dr. RIZA ATIQ ABDULLAH BIN O.K. RAHMAT
Dr. MUHAMAD NAZRI BIN BORHAN




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.
1.0 Concept of Privatization Programme
In this project, privatization is suitable to be used as a viable solution in order to
achieve the success of the project. The term privatization refers to the process
of private, usually for-profit businesses taking over the provision of public,
government provided services. This includes contracting with or selling to private
parties the functions or firms previously controlled or owned by governments.
Privatization covers a wide spectrum of government operations, management, and
ownership arrangements.
This approach is to facilitate the countrys economic growth, reduce the
financial and administration 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.
Some types of privatization which may be considered in this project are:
a. Outsourcing means that a government agency delegates some of its in-house
operations or processes to a third party. It is a contracting transaction where the
government agency purchases services from a private firm while keeping
ownership and ultimate responsibility for the underlying processes. They inform
the private firm of what they want and how they want the work performed. The
private firm can be authorized to operate as well as redesign basic processes in
order to ensure even greater cost and efficiency benefits.
b. Design, Build, Operate (DBO) means negotiating a contract with a private
firm for design and construction services with comprehensive operating
agreements for new, expanded, or upgraded facilities. The project components are
procured from the private sector in a single contract with financing secured by the
public sector. From design through operation, these contracts can extend for
periods of up to 20 years or more.
c. Public-Private Partnership refers to a cooperative arrangement between a
local government and a private organization in which both parties assume some
responsibility for operating a program or service. Each party brings something to
the arrangement that contributes to the operation of that particular service.
d. Asset Sale means the sale of government-owned assets to private companies,
such as the sale of water/wastewater and electric utility assets. Proponents of
privatization often point to success stories which demonstrate cost savings, while
opponents express concerns about accountability and undermining organized
labor, which results in jobs without health, pension, and other benefits.

2.0 Responsibilities Of Government And Private Company In Privatization

i. Responsibilities Of MPKJ
MPKJ should always be planned as part of an integrated public transport system,
not as a separate money-making venture. MPKJ should make sure that the tram
lines should go where the demand is (present or planned), not where there is a
disused railway line or other surplus land. Monitor of the tram service in the city
should be maintained. If a tram interchange is necessary it should be at-grade and
involve as short a walk as possible. Frequencies of all services should be good
enough that exact time keeping and connections are not necessary.
MPKJ have to monitor the cost structure and ticketing should be totally integrated
with the rest of the public transport system. All improvements to tram facilities
should be designed with potential conversion in mind. The release areas at the
edge of Kajang may be suitable as it can be planned for from the beginning. This
would be dependent on the population density being high enough to support a line,
and that tram would take people to at least a major centre without having to
change.

ii. Responsibilities Of Innovative Research Park Project
The innovative research park project in the city should be maintained. There are
many possible improvements. Promoters are the entrepreneurs who take the full
risk of the concert. They can be local (meaning they work only in one city or area),
regional (several states), national or international. If they lose, they can lose big,
but as acts get more successful they squeeze them and limit the promoter's upside.
The result is a friendly game of "hide the pickle" that promoters routinely play in
rendering statements of how much has been earned.
3.0 Benefits of Privatization in Redevelop Stadium into Innovative Research Park
i. The removal of political interference
In the private sector, decisions are made on the grounds of efficiency and profit.
Politicians may make decisions to further their own political ends and not those of
the industry in question.
ii. General increase in efficiency
State monopolies tend to create inefficiency, are poor innovators and restrict
consumer choice. The existence of consumer sovereignty in the private sector has
the potential for widening consumer choice, increasing quality and, through
increased competition, lower prices. Basically, the nation's resources will be used
more efficiently. Allocative efficiency and productive efficiency will be striven
for, and more likely to be achieved.
iii. Widening share ownership
Is this an argument for privatisation or an end in itself? It is certainly a nice idea
that more members of the general public own shares and, therefore, has a direct
say in the running of the private sector. But do any of these part-time shareholders
bother to go to vote on important issues, and how many of them sold their shares
as soon as they had made their overnight profit? Almost all of the
denationalisations involved under-valued share prices to encourage their sale.
With hindsight, this encouragement was not really required as there were
normally at least five times as many willing customers as there were shares.
Obviously the shares rocketed in value as soon as they were issued, giving these
new shareholders an instant profit of anything between 20% (British Gas) and 85%
(British Telecom). Some cynics argued that wider share ownership was a
Thatcher end in itself as these lucky new shareholders were likely to vote
Conservative for the foreseeable future.
4.0 Possible Problems In Future
i. The abuse of the 'public interest'
Those who have opposed privatisation argue that the public utilities were
nationalised in the first place in the public interest. The utilities are products and
services that are essential to all members of the general public. A private company
in charge of one of these industries, interested only in profit, is likely to close
down or marginalize unprofitable elements of its operations. As nationalised
companies, unprofitable but essential services continue through cross-
subsidisation; unprofitable services being subsidised by the profitable services.
ii. The problem of externalities
Unexpectedly, all of the utilities create negative externalities (via pollution,
spoiling the environment, etc.) It can be argued that as public sector companies,
the government can regulate output and make sure that it is at the socially optimal
level (i.e. allow for externalities). In the private sector, maximisation of profit is
the only concern, so a socially damaging level of externalities will occur. It
should be noted, though, that the government could still achieve a socially optimal
output level by subsidising/taxing the privatised utilities until the desired outcome
is achieved (see the topic called 'market failure' if you are muddled).
iii. The redistribution of wealth
One can argue that the increasing inequality of the eighties was, in part, due to
privatisation. The government was selling off state assets (owned by everyone) to
a wealthier subset of the population, thereby increasing the gap between the rich
and the poor. Although it can be argued that the poorer have gained through
improved services, this is not true of all utilities and those at the top end have got
ridiculously wealthy.
iv. The loss of economies of scale
One of the major advantages of nationalized industries is that their sheer size
allows them to take advantage of economies of scale. Privatization normally
involves the break-up of a large entity into many smaller ones. This was
particularly true with the railways. These smaller units will not be able to take
advantage of economies of scale in the way that British Rail could in the past.
v. Job losses
Privatization forces the new private companies to be efficient, or at least find
some way of reducing their costs in order to make a profit given the strict pricing
formulae used by the regulators. By far the most popular way of cutting costs for
these firms was to shed labour in large quantities.