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TASK 3
Students Name:Reshminder Kaur
Matrix No:A 132843
Lecturers: Prof. Ir. Dr. RIZA ATIQ ABDULLAH BIN O.K. RAHMAT
:Dr. MUHAMAD NAZRI BIN BORHAN
:Puan NORLIZA BINTI MOHD AKHIR

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
This problem can be solved by the method of privatisation of the project itself. Privatisation is
the transfer of ownership of property or businesses from a government to a privately owned
entity. Privatisation is a good way to develop the research project because it is can generate very
fast development, with lower cost to be worried an more optimization on laborers. It is a lot more
cheaper because it leads to lower prices and greater supply and least corruption. Beside, 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 and
this will lead both party benefits. Privatisation will give a chance to many private company to
handle more bigger project.
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But privatisation is expensive and generates a lot of income in fees for specialist adviser such as
banks and professional workers. As well as the government being motivated by short term
pressures, this is something private firms may do as well. To please shareholders they may seek
to increase short term profits and avoid investing in long term project.

Responsibilities of Parties Involved
a) Governments
Governments have to specify their scope of goal that intended to be achieved and select most
suitable company through open tender.The most important criteria in selection of company is
their property and fund owned.The richest company have a very bright chance to be chosen due
to their higher capacity to fund the project and reduced risk of the project being abonded.
Furthermore,the governments will be responsible for the transfer of the land title to the developer
with a reduced price.Also,give assistance to get necessary approval from Federal and Local
Authority.Apart from that,Government shall allow construction of Hotels and certain commercial
building for the benefit gain of the private companys investors.Meaning,the investments of
private companies considers their profits in the long run.
b) Developer
The developer shall proposed detail Master Plan for the project.according to the specification and
scope provided by Goverments.They also shall upgrade existing road infrastructure surrounding
the development with construction and maintenance of public garden for recreational purposes.
c) Operation and Management
This department must hire workers for operation and manage the complex until the concession
ends.
d) Financial Management
This department must manage all the financial of this project before, during and after the
completion of the project until the operation.
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e) Maintenance
This department must take safety measures to all aspect including workers, public and
environment.

BENEFITS

Save Taxpayers Money
By applying a variety of privatization techniques to state services, infrastructure, facilities,
enterprises, and land, comprehensive state privatization programs can reduce program costs.
Over 100 studies have documented cost savings from contracting out services to the private
sector. Cost savings vary but average between 20 and 40 percent, depending on the service. For
some services, such as prison construction and operation, savings are generally less, while for
others, such as asphalt resurfacing, savings are often greater. Competitive bidding whenever
possible and careful government oversight are crucial to sustained cost savings.
States can also realize large one-time windfalls from the sale or lease of state infrastructure and
facilities. Moreover, privatization can put an end to subsidies to previously government-run
operations.
Privatization also creates a steady stream of new tax revenues from private contractors and
corporations who pay taxes and license fees, while state units do not.




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Increase Flexibility
Privatization gives state officials greater flexibility to meet program needs. Officials can replace
the private firm if it isn't meeting contract standards, cut back on service, add to service during
peak periods, or downsize as needed.

Improve Service Quality
A number of surveys have indicated that public officials believed service quality was better after
privatization. In a survey of 89 municipalities conducted in 1980, for example, 63 percent of
public officials responding reported better services as a result of contracting out.
If competitive bidding is instituted for a service, service quality can improve even if the service
is retained in-house. The reason is simple: competition induces in-house and private service
providers to provide quality services in order to keep complaints down and keep the contract.
Service quality is not assured, however, by privatization. Contracts must be well-designed with
performance standards that create incentives for high quality service. Furthermore, diligent
monitoring of the contractor's performance through customer surveys and on-site inspections
must also be performed by government in its oversight role.






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Increase Efficiency and Innovation
Private management can significantly lower operating costs through the use of more flexible
personnel practices, job categories, streamlined operating procedures, and simplified
procurement. Private companies have more profit incentive 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. However, a private firm is interested in making profit and so it is more likely
to cut costs and thus optimizing the efficiency of the development.
Private ownership can stimulate innovation. Competition forces private firms to develop
innovative, efficient methods for providing goods and services in order to keep costs down and
keep contracts. These incentives, for the most part, do not exist in the public sector.

Allow policymakers to steer,rather than row
Privatization allows state officials to spend less time managing personnel and maintaining
equipment, thus allowing more time to see that essential services are efficiently delivered.

Streamline and Treamline and downsize Government
Privatization is one tool to make bureaucracies smaller and more manageable. Large private
corporations often sell off assets that are underperforming or proving too difficult to manage
efficiently. Under new owners and leaner management, such divisions often receive a new lease
on life. Entrepreneurial governments can replicate this experience.



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Improved Maintaince
Private owners are strongly motivated to keep up maintenance in order to preserve the asset
value of the investment in the facility. Public owners often defer maintenance due to political
considerations, increasing overall long-term costs.

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. For example a state enterprise
may employ surplus workers which is 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 privatisation 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,
privatisation doesnt necessarily increase competition, it depends on the nature of the market.

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DISADVANTAGES

Services get Worse
Private companies do not have a social purpose, their legal priority is making a profit for
shareholders, not putting people first. This means they may end up cutting corners, or
underinvesting in our services. They have a duty to make as much money as they
can. Water companies ignore leaks instead of investing in infrastructure, while private company
involvement in the National Hospital Services has been bad for patients. Private companies also
have 'commercially sensitive' contracts, so they don't share information with others; this makes it
harder for them to work in partnership to provide an integrated service.

Costs goes Up
Government pay more, both as a taxpayer and directly when paying for public services. Value
for money goes down because private companies must make a profit for their shareholders and
they also pay their top executives more money. This means either we the people, or the
government, or both, end up paying more than they did before.

Difficult to hold certain private companies accountable
If the local council runs a service, we know where to go to complain. But if a private company
runs a service, they are not democratically accountable to goverment. That makes it harder for
goverment to have a voice.More severe,project might get abonded.




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Staff are undermined
A Europe-wide study found that privatisation has had largely negative effects on employment
and working conditions. There are often job cuts and qualified staff are replaced with casual
workers, who are paid less and have worse conditions. This has a knock-on effect on the service
being provided for example, in the cases of care workers or court interpreters.

Its difficult to reverse
Once our public services are privatised, it's often difficult for us to get them back. Not only that,
we lose the pool of knowledge, skills and experience that public sector workers have acquired
over many years. We also lose integration across different services (private companies often
don't share information because it's 'commercially confidential').

Problem of regulating private monopolies
Privatisation creates private monopolies, such as the water companies and rail companies. 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.






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CONCLUSION

The primary rationale for privatisation is based on the argument that privatisation increases
efficiency. Thus, it is implied that welfare will be maximised with privatisation. Privatisation is
undertaken to reduce government involvement in business, which is done to avoid the crowding-
out of private sector investments and to reduce the costs of government intervention in business.
However, the privatisation record in Malaysia shows that the government involved itself in
business in different ways: it continued to intervene, but perhaps less directly.

If the government had deliberated more careful on drawing an institutional framework(various
institutions are considered necessary for economic growth, such as property rights, regulatory
institutions, institutions for macroeconomic stabilisation, institutions for social insurance and institutions
for conflict management (Rodrik, 1999). Rodrik (1999) emphatically states that participatory political
regimes deliver higher-quality growth) that emphasised efficiency, transparency and good
governance, it is possible that cronyism could have been curtailed.

The Malaysian experience demonstrates the importance of soft issues, such as institutional
reform, because 'hard' outcomes are compromised when such issues are ignored. Although there
was a need for privatisation, it should have been preceded by the establishment of
appropriate institutional mechanisms.