Privatizing the redevelopment of Kajang's stadium into an innovative research park offers benefits but also risks. The municipal could outsource the project's operation through a public-private partnership or contracting arrangement. This would relieve the municipal of funding duties while enabling private expertise and competition to improve efficiency. However, the municipal must still regulate the private operator to ensure public interests are served and monopolistic abuse avoided. Close monitoring of the operator's responsibilities and the research park's services would be needed. While privatization may boost accountability and innovation, the municipal could lose potential dividends and market discipline if oversight is insufficient.

1. FAKULTI KEJURUTERAAN DAN ALAM BINA
JABATAN KEJURUTERAAN AWAM DAN STRUKTUR
KKKH 4284 PERANCANGAN BANDAR LESTARI
TASK 3: PRIVATISATION
NAMA: AHMAD NAZRUL HAKIMI BIN IBRAHIM
NOMBOR MATRIK: A133762
NAMA PENSYARAH:
PROF. IR. DR. RIZA ATIQ ABDULLAH BIN O.K. RAHMAT
DR. MUHAMAD NAZRI BIN BORHAN
PUAN NORLIZA BINTI MOHD AKHIR

2. 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 center in Kajang area
to turn the municipality into center 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, the benefit of your proposal and the problem that might occur in the
future.
CONCEPT OF PRIVATIZATION METHOD
The term “privatization” refers to the process of private, usually for-profit businesses taking over
the provision of public, government provided services. 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. Some types of privatization which may be considered.
a. “Outsourcing” means that a government agency delegates some of its in-house
operations or processes to a third party. It is a contracting transaction where the
government agency purchases services from a private firm while keeping ownership and
ultimate 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

3. 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.
Proponents of privatization often point to success stories which demonstrate cost savings, while
opponents express concerns about accountability and undermining organized labor, which results
in jobs without health, pension, and other benefits.
The most common type of privatization is contracting out programs or services to a
private company or another governmental entity to operate. The contracting government is still
responsible for the service, but someone else actually provides the service. This is usually the
most popular method of privatization that is accomplished through a Request for Proposal (RFP)
process or an Invitation to Bid (ITB).
In the RFP process, any and all qualified businesses may submit a proposal to the
government agency that describes in detail how they would perform the particular service and for
what cost. Through this competitive process, it is not necessarily the lowest cost that “wins” the
contract, but that which demonstrates that a service can be both improved and operated more
economically at the same time. An Invitation to Bid is the standard sealed competitive bid in
which the lowest bidder usually gets the job.
Contracts may take a variety of forms, including fixed price contracts, unit price contracts
and cost plan contracts. They usually are quite detailed. It is important that a contractor can be
held accountable for the performance of the service as desired by the government, and that the
expectation of such performance is clearly defined. The contract should be capable of being
terminated under pre-established conditions if necessary, and include options for the government
in such a situation. There are typically more opportunities for privatization than local officials
realize for solving problems involving government-owned assets, facility operations, services,
debt structure, and other facilities and infrastructure.

4. RESPONSIBILITIES OF GOVERNMENT AND THE PRIVATE COMPANY IN
PRIVATIZATION
i. Responsibilities Of Majlis Perbandaran Kajang (MPKJ)
 MPKJ should always be planned as part of an integrated public transport system, not as a
separate money-making venture.
 MPKJ should make sure that the tram lines should go where the demand is (present or
planned), not where there is a disused railway line or other surplus land.
 Monitor of the tram service in the city should be maintained. If a tram interchange is
necessary it should be at-grade and involve as short a walk as possible. Frequencies of all
services should be good enough that exact time keeping and connections are not
necessary.
 MPKJ have to monitor the cost structure and ticketing should be totally integrated with
the rest of the public transport system.
 All improvements to tram facilities should be designed with potential conversion in mind.
 The release areas at the edge of Kajang may be suitable as it can be planned for from the
beginning. This would be dependent on the population density being high enough to
support a line, and that tram would take people to at least a major center without having
to change.
ii. Responsibilities Of Innovative Research Park Project
 The innovative research park project in the city should be maintained.
 There are many possible improvements.
 Promoters are the entrepreneurs who take the full risk of the concert. They can be local
(meaning they work only in one city or area), regional (several states), national or
international. If they lose, they can lose big, but as acts get more successful they squeeze
them and limit the promoter's upside. The result is a friendly game of "hide the pickle"
that promoters routinely play in rendering statements of how much has been earned.

5. BENEFITS AND PROBLEMS OF INNOVATIVE RESEARCH PARK PRIVATIZATION
BENEFITS
i. 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.
ii. 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.
iii. 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
iv. 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.
v. 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,

6. 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.
PROBLEMS
i. 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.
ii. 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
iii. 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.