privatisation of kajang project
DESCRIPTION
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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