CIVIL & STRUCTURE DEPARTMENT

FACULTY OF ENGINEERING & BUILT ENVIRONMENT

THE NATIONAL UNIVERSITY OF MALAYSIA

REPORT OF PROJECT SUSTAINABLE URBAN PLANNING

SEMESTER II, SESSION 2012/2013

KKKH4284 SUSTAINABLE URBAN PLANNING

Assignment Title:

TASK 3

PRIVATISATION

Lecturer:

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

Group Member:

NURSYAHIDA BINTI BAHARIN A128791

1.0 INTRODUCTION AND OVERVIEW OF PROJECT

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, the benefit of your proposal and the problem that might occur in the

future. 

2.0 BACKGROUND OF SUGGESTED SITE

The center of Kajang is the bustling Old Town, where all the roads meet. Most of the colonial-

era buildings were constructed around 1920s to 1930s. The architecture of these shophouses is a

combination of traditional Chinese and European designs. The ground floor was used mostly for

commercial activities and the upper floor as the family living quarter.

One of Kajang's landmarks is Stadium Kajang which is situated in the heart of the town.

It is near a popular hangout place among the locals named Haji Samuri, which is also home to

the famous dish satay Kajang. People come from all over Malaysia to taste the satay here. The

stadium can accommodate up to 5,000 people and is used throughout the year for the community

soccer competitions.

Stadium Kajang are often used for sports day and funfairs. Many football matches were

held there in the 1960s and 1970s. The police, military and schools would have their sports day

at the stadium as it had an eight-lane 400m running track. It was also often rented to funfair

operators. During the pre-war era, it was just a field with grass tennis courts and a clubhouse. It

was only fenced up during the 1980s. The Kajang Stadium has persevered through many decades

and seen some important football matches.

3.0 CONCEPT OF PRIVATIZATION METHOD

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. Some types of privatization which may be considered.

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.

The most common type of privatization is contracting out programs or services to a

private company or another governmental entity to operate. The contracting government is still

responsible for the service, but someone else actually provides the service. This is usually the

most popular method of privatization that is accomplished through a Request for Proposal

(RFP) process or an Invitation to Bid (ITB).

In the RFP process, any and all qualified businesses may submit a proposal to the

government agency that describes in detail how they would perform the particular service and for

what cost. Through this competitive process, it is not necessarily the lowest cost that “wins” the

contract, but that which demonstrates that a service can be both improved and operated more

economically at the same time. An Invitation to Bid is the standard sealed competitive bid in

which the lowest bidder usually gets the job.

Contracts may take a variety of forms, including fixed price contracts, unit price

contracts and cost plan contracts. They usually are quite detailed. It is important that a contractor

can be held accountable for the performance of the service as desired by the government, and

that the expectation of such performance is clearly defined. The contract should be capable of

being terminated under pre-established conditions if necessary, and include options for the

government in such a situation. There are typically more opportunities for privatization than

local officials realize for solving problems involving government-owned assets, facility

operations, services, debt structure, and other facilities and infrastructure.

4.0 OBJECTIVES OF PRIVATIZATION

5.0 RESPONSIBILITIES OF BOTH GOVERNMENT AND PRIVATE COMPANY IN

PRIVATIZATION

5.1 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.

5.2 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.

6.0 PROS AND CONS OF INNOVATIVE RESEARCH PARK PRIVATIZATION

6.1 PROS OF PROVATIZATION

Privatisation places the risk in the hands of business or Private Enterprise.

Private enterprise is more responsive to customer complaints and innovation.

The Government should not be a player and an umpire.

Privatisation provides a one off cash boost for Government.

Privatisation leads to lower prices and greater supply.

Competition in privatization increases differentiation.

6.2 CONS OF PRIVATIZATION

Privatisation is expensive and generates a lot of income in fees for specialist advisers

such as banks.

Public monopolies have been turned into private monopolies with too little

competition, so consumers have not benefited as much as had been hoped. This is the

main reason why it has been necessary to create regulators This is an important point.

It partly depends on how the privatisation took place. For example, the railways were

privatised in bit of a rush and there might have been other ways to do it so that more

competition was created. It partly depends on the market. Some markets are 'natural

monopolies' where competition is difficult. For example, it would be very wasteful

and expensive to build two sets of track into Liverpool Street just to create some

competition. Natural monopolies create a special justification for public ownership in

the general public interest.

The nationalised industries were sold off too quickly and too cheaply. With patience a

better price could have been had with more beneficial results on the government's

revenue. In almost all cases the share prices rose sharply as soon as dealing began

after privatisation.

The privatised businesses have sold off or closed down unprofitable parts of the

business (as businesses normally do) and so services eg transport in rural areas have

got worse.

Wider share ownership did not really happen as many small investors took their

profits and didn't buy anything else.