Andrew Harding, Centre for Asian Legal Studies, National University of Singapore
This case study is based on Singaravelloo’s discussion of Malaysian privatisation. Privatisation is part of what is known as ‘new public management’, which in this instance is used in Malaysia to attempt to solve problems of underfunding in local government. Although this function is referred to as ‘urban cleansing’, it concerns solid waste collection, which is a function of all local councils, not just urban ones, as well as dealing with water pollution, and sewage disposal, and public nuisances.
In the context of Malaysian local government, cleansing services are critical. They are the main reason for the development of local government. Furthermore, in a tropical climate cleansing is especially important. For example, in Malaysia garbage is collected at least twice and sometimes three times a week, whereas as once a week is normal in colder climates. Citizens attach great importance to cleansing services. Complaints are frequent with regard to local government neglect and incompetence in this area of activity. These complaints have often reached Parliament and Cabinet and have been the cause of concerted government action at the national level.
Given what has been said above concerning local government finance, from the 1980s privatization has been a major initiative designed to deal with government, especially local government, problems. The Malaysian Government took its cue from other governments such as the United Kingdom’s, which invested heavily in privatization initiatives during the 1980s. At the national level, government-linked companies have been important in terms of economic and infrastructural development. At the local level, urban cleansing has featured prominently.
Public-private partnerships, states Singaravelloo
‘have evolved over time in Malaysia, from the context of traditional privatization involving both parties, to the outsourcing of public services to the private partners, through the awarding of contracts, to one that expects strong financial capacity from the private sector (during the Ninth Malaysia Plan), and on to one that shares the risks and burdens and better returns (in the Tenth Malaysia Plan).’
Some local authorities decided to privatise urban cleansing services by transferring them to private companies under contract with the local authority. The smaller, especially rural local authorities, facing financial difficulties used their own staff to provide the urban cleansing. During the first Mahathir administration (1981-2003), the federal government intervened, removing this service from local governments in the Peninsular Malaysia, and repackaging them to three major interim consortia, that is, Alam Flora Sdn. Bhd. to cover Kuala Lumpur and the states of Selangor, Pahang, Terengganu and Kelantan; to Northern Waste Management Services Sdn. Bhd. (now Environment Idaman Sdn. Bhd.) to cover Perak, Penang, Kedah and Perlis in the north of the peninsula; and to Southern Waste Management Sdn. Bhd. to cover Johor, Melaka and Negri Sembilan.
The consortia for solid waste disposal claimed that they would perform more efficiently once the solid waste management service was fully and finally privatised. However, the system was found to be problematical, because payment by local authorities to the consortia was affected by their poor financial standing. Local authorities therefore sought financial help from the federal government. Singaravelloo records that a total of RM 151.84 million (Euro 30.3 million) was given as financial aid to 28 local authorities during 1998-2010. By December 2010, local authorities in Peninsular Malaysia owed RM 357 million to the consortia. The interim solid waste management collection agreement did not support the consortia in their search for commercial financing for investments, which are mostly needed to purchase new machineries and equipment. What was initially initiated as an interim measure for five years had by 2010 extended to sixteen years in Johor and about nine years in the neighbouring State of Negeri Sembilan.
With effect from 1 September 2011 the federal government decided to enforce the Solid Waste and Urban Cleansing Management Act 2007, thus taking ultimate control over the delivery of urban cleansing services in eight states and the federal territories which meant enforced privatisation in most of Peninsular Malaysia. Opposition-controlled states declined to participate, so that in those states urban cleansing services reverted to the local authorities as per the previous system for them to appoint their own contractors, while some local authorities in Selangor started to run the services themselves to cut costs.
A similar process was used for sewerage services, where problems of efficiency had been encountered, which were privatized to Indah Water Consortium Bhd., a federal-government-owned entity, ‘due to the fact that the majority of the local authorities were unable to operate sewerage services effectively, let alone manage and maintain sewerage infrastructure effectively’. As a result, the federal government privatised sewerage services in the whole of Peninsular Malaysia as a federal service, enacted a law to empower the company to perform its duties and to recoup its expenses from consumers by means of a separate bill using a tariff structure. However, bill collection proved unable to meet Indah’s expenses, and it was repeatedly bailed out by the federal government.
Privatisation in the sphere of local government services has not succeeded in solving the problems with these services, while spawning other problems. The story of urban cleansing does not show that there is a genuine alternative to providing a secure financial basis for local services. As a microcosm of decentralisation, local initiative and commitment seem more likely to improve services than mega-fixes at the federal or even state level. Clean and consistent water supply and waste collection continue to be problems in many parts of the country.
Jomo KS, ‘Privatisation in Malaysia: For what and for whom?’ in Thomas Clark and Christos Pitelis (eds), The Political Economy of Privatisation (Routledge 1993)
Munir AB, ‘Privatisation in Malaysia: A Case Study of the Telecommunications Department’ in William Neilson and Euston Quah (eds), Law and Economic Development: Cases and Materials from South East Asia (Longman 1993)
Singaravelloo K, ‘Fostering Public-Private Partnership in a Win-Win Situation: The Experience of a Malaysian Local Government’ in Luiz Montanheiro and Mirjam Bult-Spiering (eds), Public and Private Sector Partnerships: The Enterprise Governance (Sheffield Hallam University Press 2013) Wigdor M, No Miracle: What Asia can Teach all Countries about Growth (Ashgate 2013)
 Kuppuswamy Singaravelloo, ‘Fostering Public-Private Partnership in a Win-Win Situation: The Experience of a Malaysian Local Government’ in Luiz Montanheiro and Mirjam Bult-Spiering (eds), Public and Private Sector Partnerships: The Enterprise Governance (Sheffield Hallam University Press 2013).
 Abu Bakar Munir, ‘Privatisation in Malaysia: A Case Study of the Telecommunications Department’ in William Neilson and Euston Quah (eds), Law and Economic Development: Cases and Materials from South East Asia (Longman 1993) 169.
 ibid. 155.