TASK 3

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.

Answer

For our situation that is facing problem in administration has no position to fund the proposed

project the only solution is through privatization. Privatization involves the transfer of activities

and function that traditionally rested with government to the private sector. Privatization

continued to be a vital part of overall strategy to strengthen the role of private sector in the

countrys economic development. The term is also used in a quite different sense, to mean

government out-sourcing of services to private firms. 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.

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 is

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 privatisation 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 doesnt

necessarily increase competition, it depends on the nature of the market.

DISADVANTAGE

Privatization 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 privatization took place. For example, the railways were privatized 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 nationalized 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

privatization.

The privatized 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.

RESPONSIBILITIES OF BOTH GOVERNMENT AND PRIVATE COMPANY IN

PRIVATIZATION

Responsibilities Of 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.

Responsibilities Of 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