ONE of the policy objectives desired to be achieved in pushing Malaysia into a high-income economy is by intensifying private sector investment which slowed down significantly after the 1997 Asian financial crisis to below 10% of the gross domestic product compared to almost 30% prior to that.
Among the measures announced in Budget 2010 by the minister of finance is the gradual reduction of the government's involvement in economic activities through privatisation of viable companies under the ministry of finance and other agencies.
Yes, the "P" word is mentioned again!
It was also mentioned in the budget speech that this second wave of privatisation is aimed at enabling the companies and agencies to expand their activities more efficiently, ultimately reducing their financial dependence on the government.
This shift of position by the government from being a player to being the facilitator of business is indeed commendable.
By focusing on the primary role of providing a level playing field to entrepreneurs to take risk and prosper, the government is allowing the fundamental principle of business, generating profit through real risk-taking, to be further nurtured in the mind of Malaysians.
Being a second wave, we could certainly look back at how privatisation was conceptualised and executed earlier and improve the processes this time around. The famous Einstein was quoted as saying that insanity is doing the same thing over and over again and expecting a different result!
Given the rakyat-centric approach of the present administration, perhaps new measures could be introduced in the privatisation process so that the ultimate beneficiary would be the rakyat at large and not limited to the rakyat that are awarded the privatisation rights.
Since the government is technically the trustee to the rakyat, managing the assets and resources on their behalf, the first step to be considered is to make public government companies and agencies with high potential to be privatised.
This will allow more people to participate and come up with business models and structures which not only are sustainable in the long term but offer the best value to the rakyat in terms of services, pricing and immediate cash flow to the government.
This will certainly send a strong message that the government is serious in providing equal opportunity to all the rakyat who are innovative and have the capabilities to execute the project successfully.
Second, is the way the proposed business models and structures are evaluated. If we refer to the reports of the auditor-general, we have to accept that many things that we did in the past did not result in desired outcomes.
In many cases, the government had to come in and rescue some of the projects resulting in significant moral hazards.
Lately, the private sector has been brought in to assist the government in turning around failed projects. The PKFZ high-level committee is an example. Why not bring these experts in evaluating future privatisation initiatives?
It is better to get their input at the design stage so that robust business models could be developed and reduce the risk of public money being used later if any of the project fails. This will also make the process more transparent and a good deterrent from abuse.
When the financial institutions in the US and Europe failed during the recent financial crisis, one of the measures used was the clawback on executive salaries. Perhaps we could use this as part of the new way of privatisation. If the parties fail to perform as promised, there should be ways for the government to come in and put things straight. In this case the operators or owners should be punished, not the rakyat.
One of the reasons why the government has to come in with the rakyat's money when certain initiatives fail is due to the guarantee provided by the government. Since the second wave of privatisation is about increasing efficiency, a deal should only be struck if the proponents are willing to take the risk from the deals and not to be given the comfort of any government guarantee.
If the proponents do not have the financial standing, then either they should not be considered or another party is brought in to address the financial aspects.
Without exposing them to the risk of failure, there would not be much at stake for the proponents to put everything that they should in seeing the privatisation deals achieve their objectives. We should stop people from going in, investing in huge and bloated capital expenditure and then moving out without being accountable.
The measures proposed reflect the desire to see improved performance in privatisation deals and putting the interest of the rakyat first. A viable project could be compromised by weak governance.
It is hope that this second wave of privatisation would make our economy more competitive and robust and every sector of the society is accountable for their performance, good or otherwise.
This article was also published at the The Edge Malaysia here: