THE OPPORTUNITIES AND IMPLICATIONS PRIVATISATION IN MALAYSIA

Upon gaining independence, the Government, inevitably had to take the leading role in developing the country, in view of the limited capacity of the local private sector at that time in terms of entrepreneurial, managerial and financial resources. The kind of egalitarian principles which influenced many developed countries to nationalise or even to become communist also affected Malaysia with its many imbalances and disparities. From the provision of utilities such as roads, water, electricity, telephone, postal services, etc., the Malaysian Government moved swiftly into purely economic activities. Within a very short period hundreds of Government owned companies were formed to do, among other things, housing development, trade, run hotels, estates, mines, shipping, airlines, construction and manufacturing. By the 1980`s some 10 billion ringgit was directly invested in about 1,000 companies.

Guarantees total 25 billion ringgit. While some succeeded admirably, most failed. Even those which are monopolistic are not able to pay their way, much less make a profit. The pendulum had obviously swung too far. While we cannot say the policy is a total failure, for much experience had been gained from it, we cannot continue to pay this very high price.Given this scenario, the Government at the beginning of this decade, decided upon privatisation as a way out. At that time privatisation was not the world trend that it is now. But the many failures and the high cost of Government involvement left us with no choice but to try this unproven approach. Besides, the country now has the infrastructure in place and the private sector is better equipped with man, money and skills to make privatisation feasible. In Japan, while the private railways make profits, the Japan National Railways (JNR) when it was owned by the Government, lost money constantly.

Now the JNR has been privatised and in its first year of operation the companies have made profits. Apart from the new owners and probably some key executives the people manning the JNR are the same. Yet the performance is different. The assumption must be that the management input is different. Management is not one of Malaysia`s strong points. In the first instant we do not have enough managers. Of the ones that we have, a good number are unfortunately mediocre. Some we have seen are downright dishonest. If privatisation is going to remedy the ills of nationalisation then we must have good managers. The Government cannot afford to have too many failures in the privatised companies. We do not want to be forced to take them back. We do not want to involve ourselves in business again. While the Government will exercise every care to ensure that Government enterprises will not fall into the wrong hands, we hope that responsible institutions in the private sector such as merchant banks, business consultants and intending entrepreneurs will study very carefully the ability of the companies taking over Government services or enterprises.

There are many good examples in other countries. We must learn from them. If necessary, we should use their expertise, their direct involvement even. Let us admit that we do not know everything. There is so much we can learn from others with their experience. If the Government happens to award the enterprise to companies that are partly owned by foreigners, it is not because the Government is not patriotic or un-Malaysian. We want to save the nation from disasterous mistakes. But that does not mean that capable locals cannot on their own succeed in taking over the services we wish to privatise. The fear of price increases is greatly felt with privatisation of monopolies where prices may be determined by the need to earn super normal profits. It is the function of the Government therefore to prevent such a move by the private sector through the establishment and enforcement of an effective regulatory mechanism.

Such a mechanism will not only have to regulate prices of services but also its quality and geographical coverage. In the licence to Syarikat Telekom Malaysia for example, the company is bound to continue with the unprofitable services to the rural areas. But we would like to assure interested parties that the Government does not wish to regulate unless the situation compels it to do so.Fears of strategic industries falling into the hands of foreigners can be easily circumvented through specific provisions in the instruments enabling the industry to be privatised. Fears of the privatised entity undertaking actions which are injurious to national interests can also be overcome through this means. Hence, although it is admitted that there are dangers attached to the policy, safeguards can be built-in to circumvent such dangers. As we can see, privatisation does not mean that the Government will be absolved of its social responsibilities.

The Government will still maintain its role as the guardian of public welfare. This will be done through minimal regulatory measures rather than through direct participation in the production of goods and services. Where subsidies are unavoidable these will continue to be provided but on a more selective basis and to deserving cases. The Government will remain accountable to the public and must therefore be responsible for ensuring that privatisation will be beneficial to all concerned. The Government truly believes that privatisation will on the whole be beneficial to the nation and hence it is fully committed to it.