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

Institutional and political failure 61infrastructure and strategic investment which reduced power outages (Leary1998). However, TNB’s profitability decreased while cost per unit and costto public per unit per output increased as a result of unequal power purchaseagreements with (private) independent power producers (IPPs) (MalaysianBusiness, 1 September 1993; The Sun, 2 January 1996; New Straits Times,8 January 1996, 4 July 1996; The Star, 28 December 1996, 5 October 1999,23 January 1999; Business Times, 11 November 1998; Malaysia 2001b).Furthermore, despite divestment, both Telekom Malaysia and TNBremained majority state-owned.The contracting out of solid waste infrastructure and services improvedgarbage collection in Kuala Lumpur from 5.7 tons of waste per vehicle perday before privatization to 8.7 tons in 11 municipalities, and resulted in costsavings in nine others (Lee Y.F. 1997). Sports Toto, the privatized lotteryfund, expanded and introduced new products as well as registered gainsamounting to 11 per cent of predivestiture sales (to 1990) from improvedmarketing to expand market share (Galal et al. 1994b; Jones 1994). Revenuesfrom levies on the privatized lottery were three times greater (in real terms)than revenue from the former SOE (Kikeri et al. 1994). However, it is notentirely clear that Sports Toto’s performance was the result of privatizationand not other factors, particularly given that ‘minimal efforts were taken bythe government to expand operations in view of the [unIslamic] nature of thecompany’s activity’ (Ismail 1991: 624).Overall, the evidence here is small (given the scale of privatization),selective (often restricted to a few same case studies or sectors) and employsdifferent measurements. The diverse modes of privatization and differententities privatized also make pre- and post-privatization comparisons orcomparisons with similar SOEs difficult if not impossible. It is also sometimesnot clear whether efficiency gains, where these took place, were theresult of privatization or favourable macroeconomic conditions.Facilitating economic growthPrivatization is argued to have facilitated economic growth through corporateexpansion and greater utilization of growth opportunities throughprivate sector motivation (Malaysia 1991b). This was reflected in overalllevels of private investment, corporate and industry growth, and marketcapitalization. Private investment increased absolutely and in terms of itsshare of total investment and GNP (1983–97). Private investment growthrates also exceeded GDP growth rates after 1986. However, although theincrease in private investment is most likely the result of privatization(particularly in the case of large BO/BOT infrastructure projects in the late1980s and early 1990s) (Malaysia 1991b), private investment was alreadygrowing rapidly and constituted over 60 per cent of total investment from1970 to 1980 (Table 3.04).