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Fear of Privatisation

What we should fear is not privatisation, but how things are privatised.

Written by johnleemk on 1:43:06 pm Jun 18, 2007.

In Malaysia, there is a great fear of privatisation and of allowing the private sector in on tasks once solely under the purview of the government. However, privatised services are often more efficient — it is the method of privatisation that matters.

Sometimes,it is difficult to fathom what sort of logic opponents of privatisation are using. For example, one cornerstone of opposition to the privatisation of the water industry was that it might lead to national security problems, because foreign-controlled companies might end up controlling our water supply.

If you are that afraid of foreigners, maybe we ought to stop importing our food from overseas, then? Maybe we should stop buying treated water from Singapore too — you never know what those crafty people might be up to!

The strongest argument against privatisation, however, has always been that it is a tool to place more power and money in the hands of cronies, rather than to place more power and money in the hands of the people.

This is not an argument against privatisation. In reality, it is an argument against privatisation as it is presently practiced in Malaysia.

Commonly, our "privatisation" consists of nothing more than the government replacing a government monopoly with a private monopoly. No benefits to the public are realised; instead they are at a net loss since now they do not even gain from the monopoly's profits.

In privatised industries in Malaysia, there is often little to no deregulation, making it difficult for new companies to jump in. This stymies the workings of the market, and allows the maintenance of an unfair monopoly position which might not otherwise exist.

In some cases, where a monopoly may be justified for, say, economies of scale (electricity would be a good example), then the government must regulate the monopoly to ensure minimal standards of service, or otherwise attempt to provide some incentive for the monopoly to serve the consumers.

There is no reason to be afraid of privatisation per se. Properly carried out, it is a boon to the public because competition drives down prices and improves the quantity and quality of service.

The true problem is false privatisation, which does not support the market, but supports business. It is not the market we must be afraid of. It is business.