Privatisation is the act of reducing the role of government or increasing the role of the private institutions of society in satisfying people’s needs (Shehnaz, 2010).
Government take privatization stance to reduce its burden in terms of underutilization of resources, over and redundant employment, fiscal burden, financial crisis, heavy losses and subsidies in order to improve and strengthen competition, public finances, funding to infrastructure and quality and quantity of services in terms of management (Kouser, Azid & Ali, 2011).
Privatisation was incorporated in Brunei Darussalam in the Fifth National Development Plan (1986-1990) undertaken by Islam Bank Brunei Berhad, promotes saving and productive uses of capital ((brunei company laws and regulation handbook). Other than giving opportunities for private companies sector to grow, privatisation is being pursued for its contribution to many other policy objectives (Hjh Zainab, 2001).
As to the acting director-general of the department of economic planning and development (JPKE), “privatisation is recognised as an important strategy particularly as the private sector has been perceived as the engine of growth for further development of the sultanate” (Suhaimi, 2009).
This essay will explain further why privatisation is a good policy in Brunei Darussalam. Firstly, it helps to boost the economy in Brunei Darussalam as it reduces the spending and improves efficiency in public services. The Minister of Development said during the opening two-day seminar on privatisation in June “Through privatisation, government could optimize spending in providing services to the public” (Hjh Zainab, 2001)
Secondly, private investment will relieve government burden in terms of administrative and financial cost in Brunei Darussalam. Therefore, through this government will be in a better position to manage its resources for the development of other strategically important sectors to help diversify the economy.
Lastly, the process of employments could be done a bit faster and the number of unemployment could be decrease with the increased growing rate of the economy as a result of the gains of efficiency on a smaller level and increased stability on bigger level. “The privatization can have contradictory short and long term effects” (Masalkovska, 2010)
On the other hand, privatization was not a good policy when it deals with public interest such as health care, education and public transport. For example, health care, there might be a greater priority is given to profit rather than patient care. “when doctors treat patients they are unlikely to try harder if they get a bonus” (Pettinger, 2011)
Another example is the tap water. “tap water has very significant fixed costs, therefore there is no scope for having competition amongst several firms. Therefore, in this case, privatization would just create a private monopoly which might seek to set higher prices which exploit consumers. Therefore it is better to have a public monopoly rather than a private monopoly which can exploit the consumer” (Pettinger, 2011)
“Although privatization is an essential instrument for transforming government-controlled economies into market-oriented systems and for making established market economies more efficient, it is neither a panacea for all governments ill nor sufficient to ensure economic progress. Privatization is most effective when it is part of a broader programme of economic policy reforms and institutional development” (Rondinelli, 1996)
From my opinion, although privatisationit is still quite new in Brunei Darussalam, but it is a good policy and there is no doubt that it will change the economic conditions by increasing the number of private sector in Brunei Darussalam. As mention in Brunei times articles “privatisation will be key to improving the efficiency of public services in the sultanate” (Too, 2009)