CIVIL & STRUCTURE DEPARTMENT

FACULTY OF ENGINEERING & BUILT ENVIRONMENT

THE NATIONAL UNIVERSITY OF MALAYSIA

KKKH4284 PERANCANGAN BANDAR LESTARI

Assignment Title:

TASK 3

PRIVATISATION

Lecturer:

PROF. IR. DR. RIZA ARIQ ABDULLAH BIN O.K RAHMAT

Dr. MUHAMAD NAZRI BIN BORHAN

Puan NORLIZA BINTI MOHD AKHIR

TANSHONG LIANG A133006

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 privatization project. 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 nonprofit organization. It may also

mean government outsourcing of services or functions to private firms, for example revenue

collection, law enforcement, and prison management. Privatization has also been used to describe

two unrelated transactions. The first is the buying of all outstanding shares of a publicly traded

company by a single entity, making the company privately owned. This is often described as

private equity. The second is a demutualization of a mutual organization or cooperative to form a

joint-stock company.

Thus, privatization is one of the best ways to develop the research project because it is can

bring a very fast development, with a lower cost. Other than that, it leads to lower prices and

greater supply and least corruption. The municipal wouldn’t have to worry about the cost as it is

developed 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. Privatization will

give a chance to many private companies to handle bigger project. Below is some methods to

conduct this project:

a. “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.

b. “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.

c. “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.

Advantages

Performance. State-run industries tend to be bureaucratic. A political government may

only be motivated to improve a function when its poor performance becomes politically

sensitive.

Increased efficiency. Private companies and firms have a greater incentive to produce

more goods and services for the sake of reaching a customer base and hence increasing

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.

Improvements. Conversely, the government may put off improvements due to political

sensitivity and special interests, even in cases of companies that are run well and better

serve their customers' needs.

Corruption. A state-monopolized function is prone to corruption; decisions are made

primarily for political reasons, personal gain of the decision-maker, rather than economic

ones. Corruption in a state-run corporation affects the ongoing asset stream and company

performance, whereas any corruption that may occur during the privatization process is a

one-time event and does not affect ongoing cash flow or performance of the company.

Accountability. Managers of privately owned companies are accountable to their

owners/shareholders and to the consumer and can only exist and thrive where needs are

met. Managers of publicly owned companies are required to be more accountable to the

broader community and to political "stakeholders". This can reduce their ability to

directly and specifically serve the needs of their customers, and can bias investment

decisions away from otherwise profitable areas.

Disadvantages

Civil-liberty concerns. A democratically elected government is accountable to the people

through a parliament, and can intervene when civil liberties are threatened.

Goals. The government may seek to use state companies as instruments to further social

goals for the benefit of the nation as a whole.

Capital. Governments can raise money in the financial markets most cheaply to re-lend to

state-owned enterprises.

Strategic and Sensitive areas. Governments have chosen to keep certain

companies/industries under public control because of their strategic importance or

sensitive nature.

Natural monopolies. Privatization will not result in true competition if a natural monopoly

exists.

Concentration of wealth. Profits from successful enterprises end up in private, often

foreign, hands instead of being available for the common good.

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.

Responsibility

MPKJ

Integrated public transport system.

Monitor of the tram service in the city should be maintained..

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.

Developer

• Transfer of certain floor area of completed office space to the government

• Construct low cost houses to be given free of charge to the squatters

• Construct infrastructure network, including two grade separated intersection

• Construct a number of houses to be given to the land owners as offset of their land lots.

• Construct an underground pedestrian crossing