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Najib should explain whether the costs from "Piratisation" has outweighed the benefits of privatisation of RM 153.6 billion savings in capital expenditure since 1980s and RM 7.7 billion in savings annually in operating expenditure


Press Statement

by Lim Guan Eng


(Petaling Jaya, Thursday): DAP disputes Deputy Prime Minister Datuk Seri Najib Razak's contention that Malaysia's privatization programme is a success as the people have been unable to enjoy the benefits of privatization in the form of cheaper pricing and higher efficiency whilst being forced to give up regulatory control over provision of essential services. Najib had claimed in the Jeddah Economic Forum yesterday, 

"The government's budgetary commitments were reduced whereby RM7.7 billion were saved in terms of its operating expenditure annually whilst capital or development expenditure savings are estimated at RM153.6 billion, equivalent to one third of our gross domestic product. …the government's administrative burden was equally reduced, with more than 113,000 public sector employees transferred to the private sector through the privatisation exercise."

Najib is clearly confused between fact and fiction. It is a fact that one of the aims of the privatization policy was reduce the number of civil servants public servants to just over 500,000. But it is pure fiction for Najib to hail the success of privatization by claiming that the government has succeeded as shown by the transfer of 113,000 public sector employees transferred to the private sector.


Unfortunately, instead of declining the public sector continued to expand. In 1990, the federal government had 773,997 employees but by 2000, there were 894,788 - a rise of 15.6%. In 2007, the federal government employed 1.1 million civil servants, a rise of 42% since 1990. The figures could be higher than 1.1 million as it does not include employees of state governments.


Whilst it is a fact that the government saved RM 7.7 billion annually in operating expenditure and RM 153.6 billion in development expenditure from privatization, it is pure fiction to maintain that the government did not suffer any losses. Has Najib forgotten the following hundred billion ringgit costs of privatization?


RM11,022 million to rescue only 7 privatised projects from 2001-2006

One, Deputy Minister in the Prime Minister's Department Senator Datuk Abdul Rahman Suliman told the Dewan Rakyat in December last year that the government spent more than RM11,022 million to rescue seven ailing privatised ventures over the past five years from 2001-2006 as follows:-


·      the Putra transport system, which cost RM4.486 billion;

·      the STAR-LRT bailout costing RM3.256 billion;

·      MAS bailout costing RM2.802 billion respectively;

·      the takeover of the National Sewerage System costing RM192.54 million;

·      the Seremban-Port Dickson Highway costing RM142 million;

·      the Kuching Prison costing RM135 million; and

·      the Unit Kajian Makanan dan Gunaan Orang Islam costing RM8.3 million.


The original cost of these sick 7 privatised projects amounts to RM 15,864 million. In other words spending an extra RM 11,022 million represents an extra 70% of the original cost, far above the variance of 5-10% for construction projects.


More importantly, this only includes the money spent by the government to bail out failed privatized ventures during the past 5 years from 2001-2006. There were 490 projects were privatised from 1983 to 2005, and Malaysians do not know the number requiring bailouts out of the 490 privatised projects since 1983 by the Federal government.


Amongst those failed government project not included are the RM120 million Middle Ring Road 2, where an additional RM70 million had to be paid for repair work; the RM167 million Matrade building which was eventually completed at a cost of RM287 million; and the RM198 million Navy Recruit Training Centre (Pularek) which had 7,032 defects and needed an additional RM13 million.


RM 38.5 billion in compensation payment to highway concessionaires

Two, on September 22 last year in Parliament, Works Minister Datuk S Samy Vellu revealed that the government had paid RM 38.5 billion in compensation to the 20 highway concession companies in the country. The first toll collection began at the Shapadu highway in Klang in 1984 followed by the North-South Expressway in 1988.Of the total RM38.5 billion, the government paid RM1.76 billion in cash while the remainder was in tax exemption and extending the concession period.


Clearly the RM 38.5 billion in compensation to the 20 highway companies does not include the toll collected from motorists using the highways. The RM 38.5 billion compensation paid by the government exceeds the construction cost of all these highways without including the tens of billions ringgit in toll collected from motorists.


Morgan Stanley estimates US$100 billion losses from corruption since 1980s

Three, what about those allegations of financial scandals attending failed privatized ventures such as the twin RM 3.5 billion Bumiputra Finance scandals or RM 5 billion Perwaja scandals? In Time Asia magazine issue on March 15 2004, South East Asian economist at Morgan Stanley in Singapore Daniel Lian, figures "that the country may have lost as much as U$$100 billion or RM 380 billion since the early 1980s to corruption."


If Malaysia lost RM 380 billion to corruption both from privatized and government ventures during Mahathir's 22 year old reign, the situation now could have worsened. When Mahathir stepped down as Prime Minister in 2003, Malaysia's ranking was No. 37 under the Transparency International Corruption Perceptions Index. And Morgan Stanley estimated RM 380 billion losses due to corruption during that period.


Three years later, Malaysia 's corruption ranking has deteriorated to No. 44 in 2006. By slipping down 7 places during Abdullah's rule as Prime Minister, many fear that corruption has worsened and the cost to the nation may be even higher than during Mahathir's era.


Clearly the costs of privatization are substantial and may even exceed the savings of RM 7.7 billion in annual operating expenditure and RM 153.6 billion in development expenditure. No wonder many refer to the government privatization programme as a piratisation exercise which benefits the few to the detriment of all Malaysians.


* Lim Guan Eng,  Secretary-General of DAP

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