The privatisation of the electricity sector in Malaysia

• Main Author: Yunos, Jamaluddin Mohd
• Published: University of Surrey 1995
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.731045

This thesis examines the desirability and the feasibility of the privatisation programme of the electricity sector in Malaysia, and its progress and achievements to date. Using the Data Envelopment Analysis (DEA) Method the efficiency of the National Electricity Board (NEB) is assessed in comparison to the Electricity Generating Authority, Thailand (EGAT) and the Central Electricity Generating Board (CEGB), United Kingdom. It is found that its efficiency lags behind that of EGAT and the CEGB. However, the financial performance of NEB is better than that of the EGAT where its been able to achieve its financial targets set by two of its major lenders, the World Bank and the Asian Development thus enabling it to undertake capacity expansion programme. With rapidly increasing demand of electricity due to an expanding economy, privatisation is seen to be a strategy to increase the efficiency of the electricity sector. The Theory of Bureaucracy, Property rights theory and X- Inefficiency theory provide the theoretical framework in which assessment of the privatisation programme is made. They highlight the problems faced by the bureaucrats in the electricity sector; government and political intervention, patronism, rent-seeking activities and corruption, selfmaximisation interest of the politicians and the bureaucrats, the lack of competitive environment, which have contributed to the inefficiency of the sector in Malaysia. Although the privatisation programme has been accompanied by electricity reform such as industry restructuring and the creation of a regulatory body to regulate the industry, TNB still exhibits its pre-privatisation period characteristics such as lack of competition and positive regulation, government and political intervention. Recommendations on how to increase efficiency include further restructuring of the industry such as the vertical separation between generation and transmission activities and the horizontal break up of TNB, promotion of competition, full privatisation of TNB, positive regulation and less government and political intervention.