The History Of Public Enterprise In Malaysia

Published Date: 02 Nov 2017

The issue of the sizes and borders of the government’s intervention in the Malaysian economy is not a new issue. It has been talked about and continues to be discussed even until present day whether directly or indirectly. This matter is connected with the issues of public enterprise and privatization. Although both these issues are fast developed globally and always considered as much related with other, however, they do not necessarily the opposite with each other. In Malaysia, the implementation of public enterprise has helped the Malaysian government to be involved in the country’s economic development. Nevertheless, the involvement of public sector in stimulating the economy development has also caused the unnecessary burden and expenditure to the government.

The introduction of privatization in the Malaysian government’s policy was meant to help the progress of the country’s economy development and public enterprise has created a pathway towards privatization. Although the continuous benefits from the privatization program could be seen until today, but throughout the implementation experiences also indicated continuous problems and setbacks. History has shown that the implementation of privatization in Malaysia has not truly given the maximum impact that it should expected to be towards its objectives, but without a doubt it has contributed to the Malaysian economy development. Perhaps, the development could be much more significant with greater impacts if alternatives to privatization are implemented instead.

Therefore, the purpose of the paper is to analyze the establishment of public enterprise of what is the reason for the establishment that makes it so successful in the earlier stages but in the end with so many public enterprises been introduced, has resulted in equally much problems that caused public enterprise not doing well. Eventually, privatization is opted to rescue that situation. Thus, this paper will also look into the significance of introducing privatization in Malaysia by the government of its relevancy at that particular time and the negative effects after it has been implemented for nearly 30 years. At the same time, this paper will also venture whether if there is any other alternative or option that can be considered as a substitute to privatization that could have provided better end result than what privatization has done.

PUBLIC ENTERPRISE IN MALAYSIA

One phenomenon that occurred among developing countries after the ending of World War II was the rapid growth of public enterprises. Governments of developing countries established public enterprise because of the perception that it is the economic development tool in providing greater and faster impact to the society. It is also thought public enterprise not only will provide economical benefits, but also will provide social benefits that may not be able to be provided by private companies. Public enterprise is commonly known in terms of its’ ownership either partly or fully owned by the regional, state or even federal government. Mostly public enterprise consists of industrial, trading, financial and agriculture bodies that are partly or fully own and authorize by the government.

In Malaysia, Keretapi Tanah Melayu (KTM) was the first public enterprise established way back even before the independence. It started with the setting up of Taiping - Port Weld Railway Transportation in the year 1855 which eventually brought to the establishment of KTM in the year 1948. Other public enterprises that was established before independence are the telegraphic services between Taiping and Kuala Kangsar in the year 1981, Lembaga Letrik Negara (LLN) in the year 1949 to name a few. The main purpose of the establishment of these public enterprises is to provide services to the public. Meanwhile, in order to solve the regional unbalance problem witnessed the establishment of Rural Industrial Development Authority (RIDA) in the year 1951 and Federal Land Development Authority (FELDA) in the year 1965. There were established to increase the industrial and agriculture sector surrounding the rural area in the effort to initiate development at less development areas.

RIDA was later known as Majlis Amanah Rakyat (MARA) in 1965 in revitalizing its role to increase the development of bumiputeras economy and social life which at the particular time majority of them are poor. MARA was given the task to expedite the bumiputeras participation in business and industrial sector. In the 1965, Perbadanan Nasional Berhad (PERNAS) was established to also assist bumiputeras to be competitive in various sectors. Other public enterprises that were established around at the same period of time are Lembaga Urusan Tabung Haji (LUTH) now known as Lembaga Tabung Haji (LTH) in the year 1961, Lembaga Pelabuhan Kelang in the year 1963 and Federal Agriculture and Marketing Authority (FAMA) in the year 1965.

During the New Economic Policy (NEP), economic development corporation was established in states that does not have such state economic development corporation yet and at the same time improving the existing state economic development corporation. Meanwhile, Urban Development Authority (UDA) was established in the efforts to stimulate urban development, businesses and industrialization which also increase the process of municipal in Malaysia. Eventually, during NEP also, the Minister of Public Enterprise was established to facilitate the needs of public enterprises. It is noted that the establishments of public enterprises during this NEP era has helped Malaysia in achieving its NEP objectives.

2.1 Reasons for Public Enterprise

In general, there are at least two main reasons for the establishment of public enterprise in developing countries. The first reason would be for the sake of making profits and the second reason is to achieve the social objectives. The reason of fulfilling social objectives varies which include providing job opportunities and developing the less developed areas in a country. Any evaluation towards the overall performance of public enterprise must take into consideration both of those objectives of making profits and fulfilling the social needs. In addition, it is also known that the establishment of public enterprise is for the purpose of preventing the not-profitable private enterprise from closing down which could cause the problem of unemployment.

In Malaysia, it is acknowledge that the role of private enterprise is equally important since our country holds the principle of free enterprise concept. That is why public enterprise only plays minimal and controllable roles to balance the development objectives. The role of public enterprise in Malaysia is more as a temporary measurement compared to its role at socialist countries which is more considered as fixed. This means that when it comes to a certain stage when the private enterprise can runs it activities successfully, subsequently it will be given back to that private enterprise. The need for public enterprise in Malaysia is also much related to the problem of unemployment because the population growth rate increased and it is felt that economy sectors could absorb the existing additional manpower. It is estimated at that particular period of time, that public enterprises could absorb as much as possible of additional manpower because these public enterprises are not established for the motive of profit only.

At one time, Malaysia also faced the problem of poverty whereby statistics shows in 1970, the poverty percentage in Malaysia exceed more that 49%. Among the poor population consists of those living in the rural areas particularly those involve in the agriculture activities. During that particular year also, it was found out that 58.7% rural population in Peninsular Malaysia are poor, compared to only 21.3% from the urban population. This situation shows that there were imbalances of development between the urban and rural area throughout the country. Private enterprise could not solve such problems with the free system because it will need government intervention through its agencies.

In term of regional, it was obvious that states located at the east cost and northern area of Peninsular Malaysia were facing the problem of undeveloped economy compared to states located at west coast area. For example, in the year 1970, statistics shows that the average income per month in state of Perlis and Kelantan was RM121.00 and RM126.00 respectively. This compared to states of Selangor and Wilayah Persekutuan with average income per month for both states at RM417.00. In realizing these facts, hence, the government started to establish regional agencies such as KETENGAH, KESEDAR, KEJORA, MUDA and JENGKA to name a few, for the purpose of developing those related areas. These agencies also indirectly served for the purpose of developing rural sectors that are far behind in terms of development.

The main problem of this nation until the birth of NEP was the gap of economy developments between races. Although the Bumiputeras are the biggest race in terms of population composition in Malaysia, but the nation’s economy is controlled by the Chinese. There are also only a few of Bumiputeras working in the modern trading and manufacturing sector, especially at the management, professional, technical, controlling and even clerical level. This situation has given a negative impact toward the relationship between races in the country which eventually sparks the tragedy of 13 Mei 1969. Therefore, in order to provide economy justice between races, the establishment of public enterprises such as MIDF, SEDC and UDA to name a few, so that Bumiputeras could be given motivation and incentives and not left behind.

2.2 Problems of Public Enterprise

In the past, public sector was considered as the catalyst in encouraging the economic growth through the encouragement of the private sector in the economy field. In Malaysia, without a doubt, public enterprise has been effective and successful in fulfilling the social objectives of income distribution, reducing or abolishing the poverty level, restructuring the society and in terms of complimenting the implementation of NEP. Since the acknowledgment of the importance of public enterprise in the country’s development, it was clearly seen that the government have established so many types and forms of public enterprises. The enormous number of public enterprises had at the same time created various problems to public enterprises in Malaysia which were unavoidable.

One problem that mostly faced by public enterprise is the objective of establishing a public enterprise are not clear enough. Most public enterprises were formed with a broad objective and consist of too many activities to be carried out in order to achieve such objectives. The task of determining the objectives and its activities were given that public enterprises themselves and probably not monitored by other authority. Apart from that, there also existed the clash between the social and financial objectives either within or between public enterprises. By right, in order to avoid confusion, the objectives given to public enterprises should be clearer because the evaluation towards such public enterprises performance will be much meaningful.

Overlapping and duplication of functions between public enterprises is the other problem faced by public enterprise. This problem will not provide effectiveness to public enterprises establishments, but will instead cause these public enterprises becoming less effective and having to compete for the same limited resources. Small and separated public enterprises that were established for each of the industries or sectors will cause inefficiency and wastage. There is also no coordination between public enterprises because each of them existed as their own identity. It would have been much better to avoid the establishments of public enterprises at state level whereby each of those public enterprises will need their own and separate enactment, board of directors and staff.

The consequences of having too many public enterprises with almost similar objectives and almost common activities had caused the problem of coordination. This problem has becoming much more serious with the rapid development of public enterprise in the context of either top level, ministerial level or enterprise level. Each public enterprise will have its own entities and not related with the other public enterprise, at least not directly. Therefore, there is no coordination of activities between these public enterprises whereby each of them will have its own objectives that need to be accomplished. Without a director that can head the related public enterprises, there will be no coordination between public enterprises.

Relationship between ministers, board of directors and managers will give a negative impact to the public enterprise operational functions because the establishment of power is uncertain and unclear. This in fact that can be seen that public enterprise subjected to more than one path of authority. Problem that occurred is that mostly ministers will have to consider the political effects towards the implementation of a certain project and might weaken the efficiency of such project. The large size of board of directors especially those elected not for economical reason might also complicated the problem. In both cases, bad and unclear decisions will be determined and managers who are trying to implement such decisions will have problem to do so.

The lack of expert management manpower that could coordinate and handle the public enterprise as a corporate entity was also seen as a problem to establishment of public enterprise. Apart from fulfilling the social needs, public enterprise also acts as corporate body with the profit-making motive. In public enterprise, there might be situation whereby a skilled staff is loaned from another organization. Therefore, temporary staff will have difficulty to implement long term project or activities. The continuity of such project management might be affected with the changing of staff that was loaned earlier once the loan agreement period ends. The option of hiring less skilled staff is a good long term strategy but will eventually involve the high cost of training in the beginning stages.

Apart from the above problems, there are also other problems to the establishment of public enterprises. Among them that we usually hear that public enterprise facing the problem not rooted from inside the public enterprise but instead caused from the outside of the public enterprise such as competition from private sector and the problem of delaying in paying debts or loan. There are also times when public enterprise facing the problem of not having a proper pricing policy that can be used to establish the value of goods or services by public enterprises. Public enterprise could not also create a maximizing profit because of the existence of pricing policy implemented by the government. Other than that, the problem of misuse of power and corruption can also caused the failing of the operational functions of public enterprise.

Since public enterprise is controlled by the government, therefore the process of public enterprise cannot be denied of the government’s intervention particularly in terms of political trend. It simply means that the political influence has been added to spice up the operational functions of public enterprise. With that reason also it can be said that public enterprise not only meant for the economy and social interest but also for the political interest. Problems will arise when the political interest could not guarantee the interest and prosperous of the society of all the people in general. What has happened in Malaysia is the establishment of public enterprise looks like moving towards taking care of the interest of a particular group only.

One of the critics thrown towards the involvement of public sector in the economy especially with the establishment of public enterprise was the effect towards the nation’s inflation because its contribution in the increase of government’s expenditure. Public enterprises that are having problems especially financial problem is increasing which also include major large companies. Problems faced by these public enterprises consist of those with not gaining much profit, suffering financial loss and some to the extent of having to be resolved. Because there is imbalance between government’s income and expenditure had caused the increase of the nation’s debt and for the first time Malaysia suffered a deficit in the year 1986. Therefore, the overall deficit of the public sector also increased compared to the output of public enterprise.

2.3 The Transition Towards Privatization

The involvement of public enterprise in modern trading and industrialization was to give equal chances and opportunities to Bumiputeras to gain from the nation’s wealth. The increasing of intervention approach of the Malaysian government was the failure manifestation of laissez-faire policy to fulfill the socio-economy objectives. However, it is difficult to categorize public enterprise in terms of the functional or structural organization aspects or even in terms of accountability and performance aspects. What it is known that public enterprise faced a lot of problems that had caused low performance level standard. With so many public enterprise been established, it showed signs that public enterprises are no longer profitable and efficient.

Although some of the public enterprises are monopoly, it could not even able to pay taxes or dividend to the government who are the stakeholders. These public enterprises were always relying on subsidies and capital contribution from the government at almost all the time. At norms, government handles several services and the same time, government ventures into various businesses or enterprises, either as monopoly or shareholder. The tendency of government involvement had caused competition with the private sector, but due to its power, government will prevail and be dominant. However, due to the government’s businesses suffering loss rather than gaining profit, the government has lost its income from taxes that are usually collected from successful businesses.

Therefore, the Malaysian government decided that new priority must be given special attention. Reaction to the size and the increase of inefficiency in public enterprises are given its full attention and later becoming a policy. Having to face the economy crisis in the early 1980’s had caused the government to take the steps towards savings of expenditure, whereby only lesser budgets were given to support public enterprises. The effect of the economy crisis had caused the nation unable to export goods due to less demand of such goods. Furthermore, multinational and private companies reacted in reducing its manpower because not being able to sell its manufactured goods. At the same time, the government feels that the existing public enterprises still suffering loss and the government sees that privatization is the solution to solve the financial problems either operational nor development funding.

The Malaysian government emphasized that if the existing services which are administered by the government can be administered better, hence there is a possibility that the government will earn higher incomes. Based on that possibility, the way forward is through privatization which simply means the transfer of ownership of several services and industries administered by the government to private sector. Therefore, it can be said that the privatization policy had been motivated by the idea to increase the government’s income. In one perspective, privatization can be referred as selling of the government’s interest to the people or to private sectors. In the economy perspective, privatization is seen as the process of transferring shares or government’s assets to private sector or individuals.

The process of privatization can be generalized as the transfer of the majority of the possession of the property ownership of the government to private sector. To make privatization a reality, the Malaysian government must face the challenge to ensure that Bumiputeras will not lose its opportunities in the private sector. First of all, the government had given its assurance that privatization will be concurrent with the objectives of NEP whereby Bumiputeras will get its half in the forming of equity and employment. Therefore, the challenge was to combine and relate the traditional objectives with the concept of privatization and the nation’s objectives to redistribute the wealth to the Bumiputeras society. Nevertheless, these activities were seen to be influenced by influential groups of political interest on what to be privatized and how to privatize. This eventually means that privatization only benefitted a small portiont of Bumiputeras.

3.0 PRIVATIZATION IN MALAYSIA

Privatization in Malaysia formally started in the year 1983 after Tun Dr. Mahathir Mohamad took over the position of Malaysian Prime Minister in the mid-year of 1981. Compared to Look East Policy and Malaysian Incorporated Concept, the Privatization Policy was given a new dimension, particularly after the appointment of Tun Daim Zainuddin as the Finance Minister in the mid-year of 1984 and the impact of economy crisis during the period of 1985-1986. It also looks like the privatization policy in Malaysia arises due the to international privatization campaign that started in the early year of 1980’s, especially after the premiership of Margaret Thatcher in Britain in the year 1979 and the presidential of Ronald Reagan in the United States of America in the year 1980. Privatization was also encouraged by international agencies such as World Bank and Asian Development Bank as part of the efforts that will give advantage to the private capitalist interest.

The Malaysian Government had pointed out five objective of privatization which was documented in the Guideline of Privatization in Malaysia published by the Economic Planning Unit (EPU) from the Prime Minister Department in the year 1985. Those objectives are 1) to reduce the government’s financial burden and administration, 2) to increase the efficiency and economic activities productivity, 3) to encourage the economic growth, 4) to reduce the size and involvement of public sector in the economy and 5) to assist in achieving the objectives of National Development Policy (NDP).

Later in the year 1991, the government had launched the Privatization Master Plan (PMP) to facilitate the implementation of the privatization program and Privatization Action Plan (PAP) to highlight the preferred field to be privatized in accordance with the macro economy policy and government development strategy.

Performance of Privatization

Over the years of the implementation of privatization in Malaysia shows signs of benefits, but at the same time there are also expenditure sacrifice and adjustment needed to be done in order to achieve the privatization objectives. This is because the privatization in Malaysia is complex and the evaluation on the impact of privatization towards its objectives is also complicated. Privatization has definitely reduced the federal government financial burden which comes into two forms consist of expenditure savings and revenue received from the privatization. . At the same time, it has reduced the government administration burden in terms of employment, promotion and training of manpower.

In evaluating the impact of privatization, the value of efficiency and productivity within an organization is emphasized. Privatization had proved that the productivity and entity efficiency increased through the preparation of good services and management. It is contributed by the additional capabilities and services networking apart from the acquisition and usage of modern technology machineries by the private sectors.

Private entity practices remuneration scheme is based on performance achievements and with the increase of private entity performance will substantial benefits to its staff in the form of bonuses and salary increment and sometimes offering the selling of the companies’ shares. Privatization has also played an important role in expediting the economic growth through large investment that brought to the development and expansion of the corporate sector. Growth also occurred because of the impact from the increase of efficiency of private entity. Saved resources in privatization can be utilize for the development of other sectors and will further contribute to the growth of such sector.

Privatization has been used as one of the tools to increase the involvement of Bumiputeras in the economy. In some private entity, Bumiputeras involvement exceeded 51% and there are also achieving 100% from the total equity of such entities. The people also could benefit from privatization through public share offering. Through privatization also, the number of Bumiputeras entrepreneur involved in the privatization projects increased which is in line with the establishment of Bumiputera Trade and Industry Community.

Privatization also has given the opportunity for Malaysia to empower new technology and skills through joint participation with the foreign equity holder, management contract and consultation services. Privatization encouraged the application of information technology and rapid modernization. This is because the organization needs to produce outstanding profits and at the same time to straighten the companies corporate image.

3.2 Negative Aspects of Privatization

Although benefits from privatization program can continuously be seen but there are also continuous problems and setbacks of privatization that must be taken into consideration. The price of services charged by the private entity is much higher than before the implementation of privatization program such as the charges for utilities of telephone, water and electricity are much more expensive than previously. With privatization also means that the government has release part of its social responsibilities to the private sector which by right should be responsible to ensure the prosperity of the people. Privatization can be separated out from the power of monopoly of specific services such as the monopoly of utilities services which are transferred to private ownership and remain as monopoly.

Privatization is also said to be assisting the government to further develop the Bumiputeras in terms of capital ownership and management, but it eventually do not give much benefit to the people. This is because those benefited was the minority higher level group of Bumiputeras who are already millionaires, which does not represent the majority of Bumiputeras as a whole and will create the Bumiputeras capitalist. The development of Bumiputeras small business and entrepreneurship will be set aside by established large Bumiputeras companies who took advantage from the implementation of the privatization program. Bumiputeras living in the rural areas do not get the benefits directly from the privatization program because the benefits only circulated within the elite group.

In terms of determining the companies that are entitle for the ownership from the public sector, there are concerns about the methods of granted the privatization projects. Most of the companies that were granted such privatization projects were hand picked and selected purely on basis of either self-interest or political interest. Private sectors have so much influence on what and how it should be privatized that makes the privatization program as an unfair system. Therefore, it is not weird that although through the experience of privatization, there are still worries whether any packs, complots or ala carte agreement are official or non-official, pattern of granting contracts, the possibilities of the same company granted various types of privatization projects and the existence of self-interest or joint-interest within few companies.

Privatization has also indirectly increase the cost of living of the people with the increase of the society’s burden due to the declining, deterioration or increase of cost of services. The existing of two types of service quality in the economy market whereby involve those who are able to buy or utilize the services provided by private sectors and those who are not able to or such private services will opt directly to public services. With burden of additional unemployment, having to work extra hours, receiving less pay and declining of job opportunities has created the inflation impact. Privatization has indicated the reducing of the user costs or significant improved service quality. Instead, the user costs have generally risen significantly which resulted in consumer welfare net losses. Therefore, the benefits of efficiency have not been significant, but only been exaggerated by those who strongly supported privatization.

4.0 ALTERNATIVES TO PRIVATIZATION

The critics towards private sector and privatization do not mean they are no benefits at all because in general, private sector is more efficient than the public sector. However, it does not mean that private enterprise are more efficient than public enterprise, not until either the enterprises could provide a good service to the people with minimal cost. It could not just be proved as efficient only when there are transactions of transferring the profitable parts to the private sector because it only represents the government opinion on the reasonable role for both private and public sector in the economy. Inefficiency exist when the quality of any jobs and efforts are deteriorating. There are various factors responsible towards the efficiency of private sector which consist of management system, supervision approach and gratuity concept that can be followed by public sector.

Privatization is considered as a concept and policy but the solution to the problem of efficiency. This is because privatization will strengthen the practices of getting maximum profit whereby through these practices will emerge the unhealthy characteristics. Indirectly it will encourage the sense of greediness, acquisitiveness and collected property without limitations. Privatization heads towards the tendency to materialism which is so significant and serious among the upper and middle class. In contrast, public sector at least has the potential to extend the healthy values. This is because the basis principle of public sector is to serve the people in the best possible manner.

Through the serving the people concept, other pure and honorable values can be sown and spread within the society. In order to brighten up these values, it will need to abolish, change and reorganize the economy system, political organization, social relationship and traditional pattern. With the existence of public sector orientating towards the interest of majority, it will have better opportunity to put up efforts for the society that is driven by these pure and honorable values. That is why the government should investigate and research the weaknesses of public sector in this context the public enterprise before even introducing privatization in the first place. Therefore, the alternative to privatization that the government should have done would be to reform certain fields in the public enterprise.

The economic scenario of the public servant in the public enterprise especially among the middle and lower level should be revised. These public servants salaries and the work environment should be amended accordingly to reduce gap of income between the upper and lower level of management. At the same time, the promotion opportunity for the middle and lower level public servants and also needed to be taken into consideration. By improving the mobility of the middle and lower level public servants, the public service in general will be able to prove the true value of determination and willingness. The betterment of the internal administration system within the public enterprise will further motivate its public servants to improve their services to the public. This is because the public servants acts as the employee of the public enterprise will feel the recognition given by the public enterprise as the employer.

Apart from that, this level of public servants should be given the opportunity to participate in the administration and management of departments and agencies to eliminate the trend of decision making on policies implementation between public servants from the higher level of management only. Responsible officers that determine the success of any policies seldom involve the process of consensus. Therefore, as a result of being isolated from the decision making process, the middle and lower level public servants could not contribute in a meaningful manner towards the public services. What needed to be done is to deploy participatory democracy in the formation and implementation of public policies as well as the administration of the public enterprise.

Nevertheless, the participatory democracy will need decentralization or to be précised the devolution of power. Units and departments at the grass-roots level should be given permission to make important decisions at the administration level. Decentralization can be successful when the organizational structure involves the responsibilities of routine operations and decision-making being delegated to the middle and lower managers instead of upper level managers within the public enterprises. It sometimes can be implemented by empowering all levels within the structure with influence in decision-making. For public enterprise, growth will create decentralization need in order to have continuity of efficient in the operations.

The successful effectiveness of public enterprise is very much depending on the group of public servants that supervise the tasks of department or agencies. This group of people should encourage the public servants to voice out or give their opinions and reprimand any mistakes or wrong doings when deemed necessary. Actually, the role of supervisors is very important in every aspects of administration. If they are hardworking, efficient, trusted and understand the objectives of the tasks, definitely the performance of the public enterprise will further advance. That is why it is very important to ensure that this group of public servants will have the in-dept knowledge as well as high interpersonal values.

Although it is recognized that these pure and honorable values are important for the supervisory level of public servants, it cannot be denied also its important such values at all level of bureaucracy. This means that the absorption of values such as integrity, wisdom, hardworking and efficient should be increased through education and training. In order to ensure both the values and structures remain relevant, the creation of social environment is needed with proven concepts. The concept of accountability must be hold strong by the political leaders and the public servants. Any misuse of power or authority and lack of administration in public enterprise should be made known to the public such as the Chief of National Audit annual report is a very good example. This is a very effective method in order to develop the efficiency and trustworthy in the public enterprise.

Efficiency and trustworthy can be further developed by creating and improving the position or department of Ombudsman. It will be given the responsibility to receive, investigate and take the necessary actions towards complaints from the public. By using this method, the general overview of the performance of public enterprise can be evaluated yearly and at the same time giving suggestion on actions to be taken to overcome any weaknesses. This means that voluntary bodies will play important roles to ensure the efficiency of public enterprise. The contribution of consumer associations in revealing any misusage of power or authority and wrongdoings in the public enterprise must be recognized by the government.

Creating a social environment that can ensure effectiveness of the public enterprise also very much depending on the political leadership. Political leadership will be the main factor in determining the development or setback of public enterprise. If the political leadership itself having the pure and honorable values with elements of honesty, knowledgeable and capable, without a doubt, the public enterprise will represents the same values. That is why countries lead by unethical and non-knowledgeable will definitely facing deterioration of its public sector. Obviously, public enterprise could succeed and would be much better option than the privatization concept, as long as the whole social system moving forward towards justice. In achieving such justice should be the ingredient of struggle in becoming a better nation and be competitive in the economical environment.

In the reformation tasks of public enterprise what is required is to ensure that the managers are well equipped with important skills of responsibility, transparency, accountability and flexibility. At the same time, it is also deemed necessary to enhance the culture of respectful and responsive to the public in considering them as human as well as partners in the public enterprise management. The public should be treated more than just as the normal clients and consumers and public enterprise will need to acknowledge that the people and their values as important commodities. Public enterprise reformation will also be able to raise the public’s global awareness, to promote the economy growth and recognizing the values of the community. Communities must be considered as business partners in the public enterprise management system and need to develop the sense of common benefit and sharing of power between directors, administration and the people.

4.0 CONCLUSION

The role of public enterprise and privatization in the economic growth and development in Malaysia cannot be denied because both are important programs to be implemented and will provide great success if it is well managed and organized. In Malaysia, privatization took over and continued the role of public enterprise and has directly reduced the role and scope of government involvement as the manufacturer and provider of goods in the economy. Nevertheless, it does not necessary means that private sector is more efficient and effective compared to the public sector.

Public sector once expanded rapidly until it is time to control the situation by the government. Therefore, efforts were done to reduce the government expenditure by cutting the administration cost through the utilization of human resources and efficient financial management. The unnecessary expenditures were excluded not only within the government department but also within the public enterprises at either state or federal level. Nevertheless, private enterprise does not necessary means more efficient than the public enterprise especially if there is not enough dynamic market power. Privatization was not blended together with enough freedom of economy and reducing regulations that control the private sector. Hence, existed the danger of few large businesses will have the monopoly status to gain outrageous profit although it will burden the society.

History has shown that public enterprise in Malaysia having its own problems and setbacks but the experience of opting for privatization has also shown that changing of ownership did give the much needed success especially in the growth and development of the economy. The important factor is the competitive environment which is required to improved efficiency. The competitive environment can be done through sustaining control by the public sector. The reason for implementing privatization is largely due the managerial and administrative problem of public enterprise. However, the reformation of public enterprise in terms of reforming the administrative and managerial system in public enterprise can equally or more effective as an alternative to privatization.

Therefore, internal reform of public enterprise is an option of alternative for accomplishing substantial gains because the efficiency of a public enterprise is not determined by the status of ownership, instead it is by the management quality. Perhaps what the Malaysian government should have done at that time is to give special attention on ways and methods to increase efficiency in the public sector which also include public enterprise, or maybe the privatization plan should be done cautiously and implemented in stages.