Malaysia more careful in privatization: Mahathir

Malaysia more careful in privatization: Mahathir

KUALA LUMPUR (AFX): Prime Minister Mahathir Mohamad said his government still has faith in privatization but is more careful in implementing the policy after the failure of several privatized companies.

"Privatized companies, like other companies, can fail, and a number of the privatised companies in Malaysia have failed due to the economic turmoil of 1997/98 ... Despite these failures, the government still has faith in privatization," Mahathir said when opening an economic seminar.

"We have learnt a lot about the pitfalls and we are now more careful," he added.

Mahathir said privatization has contributed much towards the pace of the country's development but is "not perfect".

"Carefully managed, it can work but it may fail because the people involved are incompetent, or economic downturn such as that brought about by deliberate currency devaluation undermines the business," he said.

Mahathir said "certain quarters", including free-market advocates, believe that failed companies should be "allowed to just die" under a system where only the fit are allowed to survive.

"But the Malaysian government does not believe in washing its hands off the affairs of the companies that it has privatized. There are too many things at stake, including the welfare of the workers and public interest," Mahathir said.

He also said selling off these companies at whatever cost or simply letting them die off can lead to serious social and economic problems and "that is why the government decided in several instances to help out or take back the company."

Mahathir also noted continuous criticisms on the country's privatization program since it was introduced.

"There is a naive belief that privatization means transferring a government function to the private sector completely ... Actually privatization takes many forms, all of which would give some gain to the government and the nation," he said, adding that the privatization program is aimed at taking advantage of private sector management skills.

He said the sale to the private sector is not based on the true asset value.

He said the highways privatization was transferred to the private sector at a nominal cost, along with soft loans from the government to complete the project.

"This may attract adverse criticism that the government is helping its cronies to make fat profits. Nothing is further from the truth. The private operators of the completed highways have yet to make profits," he said, adding that the concessionaires have only a short period to make a return on their investments.

"The below-cost sale price and the soft loans are meant to reduce the burden of the public," Mahathir said, adding that the toll rates are fixed by the government to avoid political repercussions and at such rates, private companies will not be able to make a profit if they have to pay for the real assets value and without soft loans from the government.

Mahathir added that the public will have to contribute towards the provision of these public amenities "but the amount is really quite insignificant" and the government is also not abdicating completely its responsibilities.