PRIVATIZATION Privatization in Malaysia, Regulation, rent-seeking and policy failure

140 Malaysia Airlinesother interests as security for the syndicated loan. With the sale, Tajudin(through DCB Merchant Nominees (Tempatan) Sdn Bhd) owned 32 per centof MAS, while the government owned 27.2 per cent 10 and retained a ‘goldenshare’ through the MoF.After successive losses and mounting debts between 1998 and 2000,Tajudin admitted he could no longer finance MAS. The government confirmedon 6 November 2000, after two years of speculation, that it wasinvolved in talks to buy Tajudin’s stake in MAS, and approved, in principle,the purchase of MAS on 23 November 2000 (Asian Wall Street Journal,24 November 2000). On 20 December 2000, Tajudin signed an agreement tosell his share in MAS back to the MoF for RM1.79 billion, or RM8 per share,when MAS shares were trading for around RM3.80. The government wasreported to have agreed on the price considering the net tangible assetsof MAS and the premium for a controlling stake (New Straits Times,21 December 2000) even though it paid less to the Brunei government andalready owned 49.2 per cent of MAS by 12 December 2000 through variousagencies. 11PerformancePrivatization here will be taken to refer to the period after the sale of acontrolling stake to Tajudin in December 1993 as the government continuedto be the majority shareholder after corporatization in 1985. MAS’s performancecan be measured in terms of operational efficiency (revex ratio,productivity, passenger load factor, passenger yield) and financial performance(leverage, liquidity and profitability). Although both sets of indicatorswere affected by the 1997–98 Asian financial crisis, we can isolate externalfactors in assessing the performance of MAS before and after privatization intwo ways.The first is to examine data before the Asian financial crisis, which startedin the second half of 1997. As MAS’s financial year ends in June, this allowsus to consider data covering three years of privatization before the crisis(1994–97), with the three years prior to privatization (1990–93), excluding1993–94 (which may be viewed as a transition year as privatization wasannounced at the end of 1993 and Tajudin only assumed control of MAS on6 August 1994). Although this is a fairly brief period to assess, it doesisolate, to a degree, the impact of the Asian financial crisis, and provides someindication of efficiency gains and financial performance.Secondly, we can reduce the effects of external factors by comparingMAS’s average performance in each period (as well as post-1997) with thecombined average performance of its main regional competitors (referred toas MAS’s ‘competitors’) – Singapore International Airlines (SIA), CathayPacific and Thai Airways. It is also important to examine trends for each ofthese indicators, and to locate them in the context of overall industry trends.Hence, if MAS exhibited improvements which coincided with general