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