PRIVATIZATION Privatization is the incidence or process of transferring ownership of a business, enterprise, agency, public service or property from the

public sector which the state or government to the private sector. The term is also used in a quite different sense, to mean government out-sourcing of services to private firms such as functions like revenue collection, law enforcement, and prison management. The privatization of large state-owned enterprises is one of the most radical policy developments of the last quarter century. Right-wing governments have privatized in an effort to decrease the size of government, while left-wing governments have privatized either to compensate for the failures of state-owned firms or to generate revenues. In this way, privatization has spread from Europe to Latin America, from Asia to Africa, reaching its zenith with Central and Eastern Europe's transition from socialism to capitalism. In many countries state ownership has been an important tool in bringing cheap water, energy, and transport to poorer segments of the population. In other instances, it has sponsored aggressive cutbacks, corruption, and cronyism.

PRIVATIZATION IN MALAYSIA In the year 1983, Prime Minister Tun Dr Mahathir bin Mohamad were announced privatization policy as the Malaysia policy. This is a new approach to national development policy and complements other national policies such as privatization policy of Malaysia, which was developed to emphasize the increase in the private sector in economic development of Malaysia. Privatization continued to be an essential part of the overall strategy in the Malaysias economic development. During the Seventh Plan period, the privatization program contributed towards the growth and development of the economy, in line with the private sector-led growth strategy and the Malaysia Incorporated Policy. At the same time, the program contributed towards promoting Bumiputera participation in business and commerce. In undertaking the program, emphasis was placed on expanding capacities to develop the infrastructure required to effectively foster the development of industries and supporting services as well as provide better comfort and access to consumers. Steps were also initiated to ascertain that the appropriate regulatory framework is in place. Respect of the ownership of wealth, the privatization policy forms part of Government strategy in realizing active participation in the corporate sector to redress the imbalances in the participation of the corporate sector. Privatized entities should allocate 30% of its equity to Bumiputera. Foreign participation in privatized entities is limited to a maximum of 25% of its capital stock.

THE OBJECTIVE OF MALAYSIA PRIVATIZATION POLICY There are a several objectives considered to be used in implementation of the program: 1) Relieve the financial and administrative burden of the government Privatization will continue at relieving the financial and administrative burden of the Government in undertaking and maintaining a vast network of services. The policy is design to relinquish commercial management to the private sector and leave the Government free to concentrate on traditional functions of maintaining law and order and providing the support for achieving growth and distributional objectives.

2) Improve the efficiency and productivity level of the country Privatization was expected to improve the efficiency and productivity of economic activities. Efficiency would be promoted through several means including the introduction and enhancement of competition, releasing of Government enterprises from political supervision and civil service rigidities and the introduction of employee incentives.

3) Facilitate national economic growth Privatization was expected to improve the efficiency and productivity of economic activities. Efficiency would be promoted through several means including the introduction and enhancement of competition, releasing of Government enterprises from political supervision and civil service rigidities and the introduction of employee incentives.

4) Reduce the size and presence of the public sector in the economy The gradual disengagement of the Government from economic activities through privatization will result in the reduction in the size of the public sector, thus allowing the economy to be increasingly led by the private sector.

5) Promote achievement of the new economic policy targets By enhancing the growth prospects of the private sector, particularly the corporate sector, privatization will provide opportunities for achieving further progress towards the fulfilment of the national economic policy objectives especially in respect of restructuring the ownership pattern in the economy.

METHODS OF PRIVATIZATION Privatization can be implemented by seven methods as shown in figure below:

Sale of Assets or Equity Land Development/ Land METHODS OF PRIVATIZA TION

Lease of Assets

ManagementBuy-Out

Management Contracts

BuildLeaseTransfer

BuildOperateTransfer (BOT)

1) Sale of Assets or Equity The sale method can be applied to either Government equity or assets. Sale of equity applies to Government companies and result in the transfer of all (together with or without liabilities) and personnel. A sale of equity can either be partial or complete. A complete sale represents a transfer of 100% Government equity in the company, while a partial sale represents a transfer of less than 100%. 2) Lease of Assets A lease involves the transfer of right to use assets for a specific period in return for specified payments. It is usually applicable to fixed assets of a candidate to be privatized, particularly if the assets are large and its nature is strategic. Although there is no changed in the
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ownership status of the assets, the acquisition of the leased assets can be arranged at the end of the leasing period. 3) Management Contracts This method involved the contracting of private sector management expertise to manage a Government entity for a fee. Its entails the transfer of management responsibility and may or may not involved the transfer of personnel but does not result in the transfer of assets. 4) Build-Operate-Transfer (BOT) The BOT method involved the private sector constructing a facility using its own funds, operating it for a concession period and transfer it to the Government at the end of that period. During the concession period, the private sector is allowed to collect revenue directly from the users of the facility or indirectly through an intermediary, usually a Government institution. 5) Build-Lease-Transfer This method are implemented by inviting the private sector involved in the built up of the facilities required by the Government. Later the facilities will be leased by the Government for a certain period agreed by both parties involved. At the end, the facilities will be transferred back to the Government as an owner of the facilities. 6) Management-Buy-Out This method are implemented by inviting the private sector involved in the built up of the facilities required by the Government. Later the facilities will be leased by the Government for a certain period agreed by both parties involved. At the end, the facilities will be transferred back to the Government as an owner of the facilities.

7) Land Development/Land The developer was required to construct the facilities needed by the Government which include the infrastructures, technical buildings, non technical buildings such as housing and the training facilities. After completion, all the facilities mentioned will be handed over to the Government. To response the developer act, the government will hand over the Government land to the developer for them to develop on their own decision or requirement. The cost for the development of the facilities for the Government is the value of the land which will be transferred to the developer. The value of the transferred land will be determined by the tender table out by the Economic Planning Unit (EPU), Prime Minister Department (PMD) and valued over again by the Valuation Department and Jabatan Penilaian dan Perkhidmatan Harta (JP&PH). The Government land being transferred to the developer normally have a very high commercial value and giving advantages to the developer when they develop that land. Either a single method or a combination of methods may be chosen depending on the merits of each case. The choice of methods will be considered case by case. As a general rule, however, the methods which results in the maximum practicable degree of private sector involvement will be aimed at.

ADVANTAGES AND DISADVANTAGES OF PRIVATIZATION

ADVANTAGES Privatization places takes risk in the hand of business of Private Enterprise Privatization provides a one off cash boost for government The government should not be a player and an umpire Privatization leads to lower prices and greater supply Competition in privatization increases differentiation Private enterprise is more responsive to customer complaints and innovation.

DISADVANTAGES Privatization is expensive and generates a lot of income in fees for specialist advisers such as bank. Public monopolies have been turned into private monopolies with too little competition, so consumers have not benefited as much as had been hoped The nationalised industries were sold off too quickly and too cheaply The privatized businesses have sold off or closed down unprofitable parts of the business and so services for example transport in rural areas have got worse. Wider share ownership did not really happen as many small investors took their profits and didnt buy anything else.

FACILITIES

Most of the facilities especially the camps available right now are located in locations which are not suitable because of the new development surrounded them and also because of the development of the MAF itself. Besides that, the conditions of the camp which are out of dated, are not economical for the MAF to repair or upgrades. These situations became worse when the MAF started their modernization in line with the new structures of their organization.

The Privatization concept implemented with the privatization agreement made between MINDEF on behalf of the Government and the developer appointed by the Government. In the agreement, the developer are required to construct the facilities needed by the MAF which include the infrastructures, technical buildings, non technical buildings such as married quarters and the training facilities. Upon completion, all the facilities mentioned will be handed over to the MAF.

In return, the government will hand over the MINDEF land to the developer for them to develop on their own decision or requirement. The cost for the development of the facilities for the MAF is the value of the Land Swap transferred to the developer. The value of the transferred land will be determined by the Economic Planning Unit (EPU), Prime Ministers Department (PMD) based on the valuation made by the Valuation Department and Jabatan Penilaian dan Perkhidmatan Harta (JP&PH). The MINDEF lands which are transferred to the developer normally have a very high commercial value. These give an advantage to developer in developing the land.

Malaysian armed forces have few companies now that we can be proud of. Such as SMEA, SMEO, AIROD, SAPURA, DEFTECH, MMC, and BOUSTEAD NAVAL DOCKYARD. AIROD was set up by the Government purely to service and overhaul RMAF aircrafts. It was never designed to manufacture aeroplanes/aircrafts nor spare parts. AIROD has done well to market its overhaul and maintenance expertise, that for a long time the USAF based in Hawaii sent their C130s aircrafts to AIROD for regular maintenance. AIROD in the past has also been successful to get Yemen, Indonesia, Thailand, the Philippines and a few others to send their C130s to Subang on a regular basis. In the case of SMEO, it was established purely to manufacture small arms ammunition (ie 5.56mm,7.62mm, 9mm and 12 bore shotgun). It was not attended to manufacture medium and large caliber ammunition (ie 12.7mm to 155 mm).SMEO, however has taken one step further by doing assembly works on medium and large caliber ammunition to meet the MAF requirements. Unlike the small arms ammunition, the medium to large caliber ammunition lacks the required economy of scale to be viable. SMEO however has not been successful to market their small arms ammunition in the international market due to their high pricing structure which cannot be avoided because they have to import all their raw materials overseas. SMEA which is located in Sungai Buluh has extensive machineries and trained workforce to manufacture aircraft components. SMEA has been successful to persuade European aircraft manufacturers to be their manufacturing vendors for some of their aircrafts components.

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LIFE CYCLE Embarking on Equipment Lifetime Management requires a culture change, commitment to reducing the need for and the cost of maintenance, action directed to streamlining maintenance organization and a mix of specific physical maintenance practices (predictive, preventive, proactive and repair) directed to maximum profitability. Reengineering the administrative process must include establishing ownership, responsibility, and accountability combined with empowerment that rewards initiative and maximizes individual contribution.

For the issues of equipment life cycle, we cannot go further than the maintenance process because the life cycle of equipment is highly depend on how we maintain the particular equipment. So, it was clear that when we follow the maintenance standards prepared by the manufacturer, the lifecycle of the equipment is better than unmaintained equipment. There are some issues related to the professional ethic on the process to maintain the equipment life cycle which are compartmentalization, excessive handoffs, and redundant approvals that must be eliminated.

For the life cycle management, the maintenance data is kept on assets, of course, but is not kept in all cases electronically or in an integrated system. Enabling the capture of repair activities enables the military to reduce costs and increase equipment availability through predictive maintenance. Given how maintenance work on major end items is distributed across field and maintenance operations, developing the ability to track maintenance activity and link it to the parts that were used and particular suppliers is of major importance. Also, within the Life Cycle Management area is the requirement to provide tracking, management, and replacement of

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the limited life components in the asset. The historical maintenance data is used to project the effective life of those components that are limited by either time or exposure to events (e.g., some landing gear components are limited to a fixed number of take-offs and landings).

When we tried to relate the privatization issue with the life cycle of the equipment, it is highly related to the maintenance program. Based on the four level of maintenance written on the Malaysian Armed Forces maintenance doctrine, the third and fourth level are usually be privatize. The four levels are;

Unit/Organizational all maintenance is conducted at and by the owning unit. Direct Support maintenance is conducted by the divisional and non-divisional directsupport maintenance companies. It is mostly repair and return to user, some is repairand return to supply.

General Support maintenance is conducted by the non-divisional general supportcompanies. It is mostly repair and return to supply; some is repair and return to user.

-Depot Level maintenance is conducted at the Army Depots and is repair and return tosupply.

The major problem for this level of maintenance is the capabilities only exist on certain level with each level having to be deployed to give the war fighter a full range of capability in the area of operations. Because this system contributes to a large logistics footprint, it is reliant on evacuation systems, and has a built-in overhead burden at each echelon it will not meet the

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transformation deployment goals for the future force. But the main issue is the capability for each level and its compatibility with the new echelon. There are certain issue that will arise when the third and fourth level of maintenance try to be privatize. Firstly, on the process to choose the company, there must be a surface for the people to do some unethical thins. For example, is the private company that had been chosen fulfilling the requirement to do the job or it had been selected just by means of other reason? This case will refer to the professional ethic issue. As we all know, the major reason for privatization process because of the capability of doing the job. If we wanted to improve our capability to do the job, large amounts of cost need to be consume for this process. But the privatization has been decided to take place just because the cost will be slightly lower than the cost to build up our capability itself. Unfortunately, the cost is still a large amount and just imagine if this amount of money provided by the government had been wrongly used just because the company that had been chosen did not have the capability that achieve the maintenance standard, it really a big wasted and many complication that will occur. Firstly, the life cycle of the equipment is still cannot be maximize since the maintenance process did not achieve the standards. If this problem is really occur, the level readiness of the Malaysian Armed Forces assets will interrupted by this problem. The more bad things are the money that had been spending is for nothing. But this problem just will be occurring if they make a wrong decision on the selecting process. A professional body can be help to make the inspection or the check the qualification of the private company to do the job. .

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1) Abdul Rahman (2009), The Privatization Projects Implemented By Ministry Of Defence, unpublished master thesis. 2) Ismail Muhd Salleh & Lee Tin Hui (1990). Privatization The Process So Far. Institute of Strategic And International Studies (ISIS) Malaysia. 3) Revisiting Privatization In Malaysia: The Importance Of Institutional Process, Shankaran Nambiar, Asian Academy of Management Journal, Vol. 14, No. 2, 2140, July 2009. 4) Jomo K.S. (1995). Privatizing Malaysia Rents, Rhetoric, Realities. Westview Press, Inc, Central Avenue, Colorado

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