Revisiting Privatization and Economic Growth in Malaysia: An Empirical Examination

Abstract

The rapid expansion of the public sector’s investment in the early 1970s and 1980s in Malaysia had resulted in a bloated bureaucracy, inefficiency, high costs and low productivity. The emergence of privatization policy in Malaysia aimed to reduce the financial burden of government, increase the level of efficiency and productivity, increase firm’s revenue, improve the country’s fiscal position and encourage foreign direct investment. Nevertheless, some privatization initiatives are controversial. This paper reexamines the relationship between privatization and economic growth in Malaysia. Two sets of annual macroeconomic data from 1984 to 1990 and 2009 to 2015 were used. Descriptive and frequency analysis was used to test the hypothesized relationship between privatization program and its impact on the nation’s macroeconomic benefits namely GDP growth, job creation as well as FDI inflows. By looking at the economic data sets, this paper found that the influence of privatization in Malaysia on economic growth, job creation and foreign direct investment inflow varies.

Assessing privatization efficiency in CIS countries: financial, non-financial, and GDP-linked indicators

“…Authors of the study related to privatization and economic growth in Malaysia (Lai et al, 2018), consider privatization as a response to the high costs and poor performance of state-owned enterprises. In terms of macroeconomics, privatization ensured the formation of conditions for international businesses development in the country.…”

Challenges in Privatization Development Projects under Local Government in Malaysia

“…According to Lai et al [6], involving the private sector as a preference, especially when managing and delivering the services and infrastructure, is due to government bureaucracy. He finds that government regulations and processes are complicated and less efficient to be applied in commercial activities or operations than the private sector, which compromises its strength in this area.…”