Writen by: DR.MUZAHET MASRURI.
Ph.D (Economics), University of East Anglia, United Kingdom.
Thesis submitted for the degree of Doctor of Philosophy
School of Development Studies
University of East Anglia
United Kingdom
February 1996
This thesis provides a general public policy framework of analysis in assessing the achievement of the privatization program in meeting its objectives. The Malaysian Privatization Policy specifies certain objectives to be achieved from privatization exercise: relieving the government’s financial burdens, improving efficiency of the privatized companies, facilitating economic growth and achieving national economic policy target of equity ownership restructuring. In this thesis, the discounting technique in the Cost-Benefit methodology is used in determining the net financial position of the government from the ‘revenue generated’ and the ‘revenue foregone’. Total Factor Productivity Growth (TFPG) is employed in the Malaysian context and its theoretical assumption is argued in relation to privatization and economic growth. The ‘Effective Equity Shareholding’ (EES) indicator is developed in estimating the achievement in meeting the equity restructuring targets of the New Economic Policy (NEP).
From the perspective of the government, the multiplicity of objectives forms a holistic package in the privatization program. However, the thesis shows that this simplistic assumption is wrong and that many of theses objectives conflict with one another. Based on limited assumptions, the analysis in this study shows that the objectives of reducing the government financial burdens, increasing efficiency of the privatized firms and accelerating the country’s economic growth are largely not achieved. But, the policy has been successful in achieving the NEP target of increasing Bumiputera share acqusitions in the short-term although, in the long-term, the equity ownership tends to be concentrated in a small number of large-scale and institutional investors.
The paradox suggests that a discretionary policy option should be made as to which objective is to be given priority. In this context, the hypothesis in this study is supported by the fact that it is the restructuring of the equity ownership target that underlies the main motive behind the privatization program in Malaysia. Specifically, the motive is to create a small but rich and skillful group of Bumiputera (Malay) entrepreneurs with the view that the future country’s wealth will be equally shared and that the number of Malays who are rich equals the number of Chinese who are rich.
