The Kajang Municipality intends to redevelop a stadium into an innovative research park but lacks funding. Privatizing the project is proposed as a solution. Privatization would involve transferring the project to private companies, reducing costs and improving efficiency. The government's goals for privatization are relieving its financial burden, improving productivity, facilitating growth, and reducing its role in the economy. Main privatization methods include asset sales, where the government sells infrastructure to private companies, and issuing vouchers to individuals to procure services. Potential benefits of privatization are improved efficiency from profit incentives, less political interference, pressure from shareholders, and increased competition spurring improvements.

1. NURUL SYAZRINA BT ABD RAHMAN
A133675
TASK 3
PRIVATISATION
Problem:
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.
Solution:
This problem can be solved by privatization this project. Privatization involves the transfer of
activities and functions that traditionally rested with government to the private sector.
Privatization has generally led to reduced costs, higher-quality services, and increased
innovation. Privatization also played an important role in accelerating economic growth
through greater investments which led to corporate expansion. Privatisation is a good way to
develop the research project because it is can generate very fast development, leads to lower
prices and greater supply.
In formulating its privatization policy, the government aimed to achive the following
objectives:
i. To relieve the financial and administrative burden of government
ii. To improve efficiency and increase productivity
iii. To facilitate economic growth
iv. To reduce the size and presence of the public sector in the economy
v. To assit in meeting the national development policy targets

2. The main methods of privatisaton:
1. Asset sale
Governments sell or ‘cash-out’ assets which could include infrastructural equipment, land
or other capital goods- to private companies in order to recoup a windfall gain and further
expand their tax base resulting in increased revenues. This is particularly effective when
the government owns land that is in high demand or if it owns infrastructure such as
heavy machinery previously used to provide services now being contracted.
2. Vouchers
Vouchers are issued to individual public service recipients and used by those individuals
to procure the services for which they qualify. Voucher privatization distributing
ownership to all for free or at lower cost.
Potential benefits of privatization:
1. Improved efficiency
The privates companies have a profit incentive to cut costs and be more efficient. In the
government run industry , managers do not usually share in any profits. However, a
private firm is interested in making profit and so it is more likely to cut costs and be
efficient.
2. Lack of political interference
It is argued 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.
3. Shareholders
It is argued that a private firm has pressure from shareholders to perform efficiently. If the
firm is inefficient then the firm could be subject to a takeover. A state owned firm doesn’t
have this pressure and so it is easier for them to be inefficient.

3. 4. Increased competition
Often privatisation of state owned monopolies occurs alongside deregulation for example
the 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, privatisation doesn’t necessarily increase competition, it
depends on the nature of the market.