The Efficiency of the National Electricity Board in Malaysia – an Intercountry Comparison

One of the most pressing questions facing developing countries and the international agencies that finance their economic programmes is the appropriate way in which to operate and manage their power industries. Until recently, power industries have been regarded as public sector utilities to be operated as monopolies in order to achieve a variety of policy goals. Much international policy has been directed towards reducing the state’s role in the electricity sector, and promoting efforts to privatise its management and ownership. This paper focuses on one aspect of economic performance, namely the efficiency with which electricity is generated. Evidence suggests that changes in the organization of electricity generation can be justified on efficiency grounds. We make use of an increasingly popular non parametric technique – Data Envelopment Analysis – to analyse the case of Malaysia, a country which adopted a privatisation policy in the mid 1980s. One of the main arguments for the privatisation programme in Malaysia was that public enterprises were not efficient. We use unique data sets to compare the performance of its National Electricity Board with those of other countries in a similar stage of development, as well as with the major privatised Western electricity sector – that of the UK.