KKKH 4284: PERANCANGAN BANDAR LESTARI

NAME: DERMA NUR ASHIKIN BT NONG RADZIF

MATRIC NO. A133212

LECTURERS

1) Prof. Ir. Dr. RIZA ATIQ ABDULLAH BIN O.K. RAHMAT

2) PUAN NORLIZA BINTI MOHD AKHIR

3) Dr. MUHAMMAD NAZRI BIN BORHAN

TASK 3 : PRIVATISATION

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 SITE LOCATION

One of Kajang’s landmarks is Stadium Kajang which is situated in the center of the town. The

proposed site for Innovative Research Park is at the Stadium Kajang. Kajang Municipality

intends to redevelop the stadium into an Innovative Research Park. This research park is a

research facility that is often linked with a major research university. Basically the purposes of it

are to create linkages between the university, industry and the community.

2.0 SOLUTION PROPOSAL

Privatization is one the solution to ensure the success of the project. The term “privatization”

refers to the process of private, usually for profit business taking over the provision of public,

government provided services. This approach is to facilitate the Kajang Municipality economic

growth, reduce the financial and administration burden of the municipality, lower the level and

scope of public spending and allow market forces to govern economic activities and improve

efficiency and productivity. The privatization develops the project in short term duration where it

can be done in fast track in term of development. Together with the lower cost consumption and

optimization on man workers. Government sector have to supervise the private sector to make

the project succeed. Task or work given includes the developing, operating, maintaining and

solving a potential problem. The advantages or benefits is gained by both parties in term of

economical profit share and being able to work under one roof. Some types of privatisation

which may be considered.

a. “Outsourcing” means that a government agency delegates some of its in house

operations or process to a third party. It is a contracting transaction where the

government agency purchases services from a private firm while keeping

Location of Stadium Kajang

ownership andultimate 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.

3.0 RESPONSIBITIES OF ALL PARTIES

Government

• Assist in transferring the land the developer

• Give assistance to get necessary approval

• Transfer of the land title to the developer

• Give assistance to relocate the squatters and land owners

• Give assistance to transfer the ownership of part of the area from land owners to the

developer

• Allow the developer to construct a modern mega research centre.

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

• Upgrade existing road infrastructure surrounding the development

• Construct and maintain a public garden

4.0 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, and such an

improvement can be reversed easily by another regime.

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.

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

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 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.

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 doesn’t necessarily increase competition; it depends on the nature of the market.

5.0 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.

Lack of market discipline

Poorly managed state companies are insulated from the same discipline as private companies,

which could go bankrupt, have their management removed, or be taken over by competitors.

Private companies are also able to take greater risks and then seek bankruptcy protection against

creditors if those risks turn sour

Problem of regulating private monopolies

Privatization 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