Wednesday, January 07, 2009

Failed Privatisation

One afternoon some time in early 1984, as president of the Klang Port Authority's Senior Officers' Association (SOA), I was summoned for a meeting with the then prime minister Dr. Mahathir at his office in Kuala Lumpur. Also with me were fellow presidents Ruslan Zainal of the Port Authority Staff Union (PASU) and Mohd. Nor Katim of the Harbour Workers' Union (HWU). The Government had then announced a 'privatisation policy' involving GLCs and other 'national assets' and the PM wanted to formally inform us of the intention to privatise (only) the port's container terminal.

Probably expecting some opposition on being made "guinea pigs" or whatever, Dr. M immediately took us to task in his usual style, but we just played it cool. We were actually quite enthusiastic about the idea and did not think that anything could possibly go wrong because the terminal, the country's first, was already then quite efficient and making money, lots of money. There was also talk that even staff not involved in the exercise would be given "pink forms' to acquire shares when the new company, Klang Container Terminal Sdn Bhd. (KCT), finally gets listed at the Kuala Lumpur stock exchange. KCT was fully privatised in March 1986.

I have now come to believe that with very few exceptions, as in above KCT case, privatisation as a whole in this country as initiated by Dr M, has failed miserably. The objective which was supposed to ease the government's financial burdens, increase productivity and lower costs have not been achieved. Instead, we have expensive bailouts due to corruption and cronyism, more complaints about inefficiency and the expected reduced costs have not been felt by the rakyat. Obviously, the intention was good but the implementation half-assed.

It took some agitation by a few bloggers, here, and the public at large, for Sime Darby to finally jettison its intention to privatise the Institut Jantung Negara (IJN) yesterday. (Read the Malaysiakini report, here). Why the proposal was even ever considered by the government has never been fully explained. One can only guess at the outcome that perhaps its because we have all become very disillusioned especially when there is lack of transparency in the whole process. Perhaps we just need change and perhaps also it is time we should now seriously consider "nationalisation" instead?


  1. Capt.Yusof. When facing an election they remember the Rakyaat but when it comes to such an important decision like privatization they seem to be having sort of an amnesia.

    Agreed privatization is good but it could only be successful if they get the right and qualified person as the CEO.

    Anyway do have a nice day.

  2. Capt,

    You are right about natinalisation. Some DAP MPs have even called on the federal government to buy back the Damansara-Puchong, Cheras-Kajang and Klang-Shah Alam highways, as well as the Penang Bridge.

    They argued that this would be more economical compared to the currently ‘lopsided’ deals signed with the respective concessionaires.

    Sampai bila they want to keep increasing toll ???

  3. Captain,
    You have put it too politely. In Malaysia, only profitable (and preferrably cash-rich) "national assets" and GLCs are privatised and then they are stripped and ripped-off and run into the ground to await govt bailouts! A more accurate term should be the much cliched "PIRATISATION"!

  4. I surely agree with you about 'nationalisation'.

    Let reap a little but gain a lot.Not reaping a lot but gain nothing.


  5. In Malaysia, privatisation is a get-rich-scheme for the BN cronies only whether it's a Malay, Chinese or Indian. They are after the profitable bodies like the port container terminals, JPJ, IJN, Highway, selling power to TNB etc..See how many cronies are interested in the money-losing companies like KTM?
    In case they lose money, they just throw back to the government (like the PD highway, MAS by Tajuddin, IWK ..). In the end, we the rakyat became the suckers. What to do? We ask for it because the majority of us put them into power!
    Like you have said: those who vote them into power, go eat shit & die!

  6. Captn

    I am one of those ppl who concur with your opinion that most of TDM privitisation moves and infact most of his mega projects are failures.

    One trait of TDM is that he is indeed very far sighted but almost all his great ideas failed at implementation.

    The objectives and benefits from the project that were pushed down the throats of rakyat failed to achieve the target. In state of bringing benefits, those projects at present become huge albatross to the nation coffer.


  7. Capt., I beg to difer on the so-called far-sightedness of TDM, there was none except to enslave Malaysians. All the 'piratizations' come with built-in inflation; just look at the contact with Plus. We were told that PTP and Westports are success!! Just ask them to publish all the public funds syphoned into these projects without having to repay!Even on a nominal interest rate of 6% , all the projects would be declared insolvent. Our leading coporate cronies are just good to construct all those projects with up-front payments or through their own in-house construction firms!!

  8. Yo Capt,

    The following appeared at M-T:

    Wong: Contracts contrary to privatisation spirit

    By KOK SU CHIN, Sin Chew Daily

    MCA Youth Legal Affairs & Parliamentary Legislation Research Bureau Chairman Wong Nai Chee said the various highway privatisation contracts signed by the government since late 1980s had been contrary to the privatisation spirit.

    He said those in the prime minister's department economic planning unit responsible for negotiations on the contracts back then had the obligation to explain to the public.

    He said the concept of privatisation mooted by former British prime minister Mrs Margaret Thatcher in late 1970s was meant to help the private sector raise funds, absorb losses and loan risks while cutting back on red tapes and corporatising engineering projects, thus providing high quality services to the public by imposing reasonable charges.

    "The private sector would then hand over the completed projects to the government several years later, allowing the government to harness public funds to maintain the infrastructure. And this is the spirit of privatisation."

    Wong said during an exclusive interview with Sin Chew Daily that the legal affairs bureau discovered after conducting initial inspection on the five highway contracts Tuesday that:

    1. The government was to bear the risks of highway concessionaires' loans. In the case of LDP, the highway concessionaire applied for the loans but the government had to bear the risks.

    2. To some extent, the government was to ensure that highway concessionaires were making profits. The government had to compensate the highway concessionaires if they were not allowed to increase toll rates.

    He said the two points above had clearly shown that our highway contracts had gone against the original spirit of privatisation, i.e. the private sector did not have to bear the risks of loans, but the government.

    He added that if the highway concessionaires were cash-rich, experienced, capable and financially sound, they did not even need the government to bear the risks or make profit assurances.

    "In general, the five highway contracts we have seen do not have the basic characteristics of privatisation. The contracts have very powerful elements of government-sponsored companies assured of profits by the government."

    He said if the highway concessionaires had made losses, there would only be one reason to explain it--poor management and misjudgement of vehicular volume.

    "It is not hard to see that in many areas, highways have been designed in such a way that local residents are forced to use the tolled highways. Therefore, more and more people will be using highways. Under such circumstances, highway projects should be profitable."

    On the signing of the highway contracts, Wong said representatives from the prime minister's department economic planning unit conducted the "bargains" and negotiated the conditions and details with highway concessionaires. Now that the highway contracts have been declassified, those involved in the negotiations should stand out and explain to the public.

    "We want to know under what conditions, and under what spirit did we sign such contracts. We need some clear explanations. Of course we also know that some of the people involved in the negotiations back then are now retired, but where political duty is concerned, they should still explain to the public.

    He nevertheless refused to speculate whether the contracts had incorporated elements of cronyism, but said understandably there would be all kinds of guesses after the contracts have been made public.

    "In legal perspectives, if someone thinks he has the evidence, he has the right to report to the Malaysian Anti-corruption Commission (MACC) so that investigations could be initiated." (Translated by DOMINIC LOH)

    Can we expect a miracle for heads to roll?

  9. Captain,
    They were willing to let go of IJN because they have another plum to take up. Read about it here:
    Now we have another fight on our hands.

  10. If we are to add the sum of the costs of all piratized projects, the actual cost will out strip those unseen fugures. If the truth is to be found then a Royal Commission should be set up so that ALL Gomen officers who were involved should be called to testify under oath. maybe this is what Capt should propose. Of course the present Gomen will NOT agree, but we should persist to raise up these issues at all occasions to the general public; be it GE, By-election, general gathering, espcially May 1St celebration and what have you. The truth must be made known especially to those fence sitters who think these issues are political canon folders. They are not. They are issues which will affect the next few geneearions of your children!!

  11. Yes, it was a thinly-veiled piratisation by the capitalists, where the BN government entered into contracts that are completed in favour of the private companies that built the highways.

    Anything they could rob, they did it that time under the guise of privatisation. Now the rakyat's money bleeds into their bloody bank account. I just can't accept that the government sold the rakyat's interest to some company. It's sick.


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