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Infrastructure Development
Through Public Private
Partnership : Malaysian
Experience
Presented by:
Dato’ Dr. Tan Yew Chong
UKAS, JPM
INTRODUCTION
ABOUT PUBLIC PRIVATE
PARTNERSHIP (PPP) UNIT,
MALAYSIA
 Initially part of the Economic Planning Unit (EPU),
Prime Minister’s Department
 Increasing
need
for
closer
public-private
collaborations in developing the economy requires
the creation of the new unit
 Established on 22nd April 2009
 Acts as a central agency for planning
coordinating PPP programs in Malaysia
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and
CORE BUSINESS
Plan, evaluate, coordinate, negotiate and monitor the implementation of
PPP projects through the following:
 Evaluate initial proposal and need statement
 Prepare PPP documents
 Evaluate financial proposals in order to attain value for money
 Negotiate terms and conditions of concession agreements with the
cooperation of the Attorney General's Chambers and relevant agencies
 Obtain Cabinet approvals for PPP projects
 Coordinate and monitor implementation
1983
Privatisation
Policy
PPP Guideline
1985
2009
Privatisation
Guideline
PPP Unit Malaysia
established
1991
Privatisation
Masterplan
2010
2009
2006
Introduction
Private Finance
Initiative (PFI)
Introduction
Facilitation Fund
PPP methods:
Build-Lease-Transfer (BLT)
Build-Lease-Maintain-Transfer (BLMT)
Build-Lease-Maintain-Operate-Transfer
(BLMOT)
Land Swap
Build-Operate-Transfer (BOT)
Build-Operate-Own (BOO)
Outsourcing/Management Contract
Leasing (long term)
5
1983
PRIVATISATION
23 years
Malaysia Past Successes
& Lessons Learned
Unique Local Conditions
International Best Practices
6
2006
PRIVATISATION/PFI/PPP
9th Malaysia Plan onward
PFI/PPP
WHY PPP
Normal procurement:
▪ Cost and time overrun
▪ Late delivery
▪ Quality not assured
▪
▪
▪
▪
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over long term
Defect liability only for
24 months
No incentive for
private sector to
ensure prolonged life
span of assets
Maintenance and
repairs separately by
government
Private sector not
responsible to ensure
full functionality of
facilities

Better and quick delivery through effective allocation of risks:

Zero completion and rework risks to the Government
 Design and construction risks are with private sector


Quality delivery of public service
 Built quality responsibilities are with private sector
 KPI implementation ensures uncompromised service quality
 Sinking fund built-up through out concession period for heavy
maintenance, refurbishment, upgrading
Realizing value for money

A whole life approach through integration of design and
service
 Great desire and incentive for private sector to undertake
careful planning right from the design stage as it has direct
implication on service quality which subject to KPIs

Project selection, structuring

Procurement strategy

Contract management
PPP CONCEPT
Smart partnership
arrangement between
Government and private
sector for the purpose of
providing public
infrastructure, community
facilities and related
services
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Characterized by the
sharing of investment, risk,
responsibility and reward
between the partners
Reasons for establishing
such partnership:
--Efficient
Efficient design,
construction, operation
and maintenance of
infrastructure
-Enhanced services
CURRENT POLICY RELATING TO
PPP
 Private sector led growth strategy
 No specific legislation on PPP
 PPP in Malaysia is implemented based on :
- Guidelines on PPP
- Guided by Cabinet decision
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IMPLEMENTATION FRAMEWORK
Centralised planning and processing at UKAS
Decentralised implementation and monitoring by the
Ministries and State Governments
Negotiation/Standardisation of terms and conditions of
concession agreement by the JKAS Committee
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PRIVATISATION
PRIVATE
FINANCE
INITIATIVES
(PFI)
Sales of Assets or Equity
Corporatisation
Land Swap
Build--Operate
Build
Operate--Transfer (BOT)
Build--Operate
Build
Operate--Own (BOO)
Outsourcing/Management
Contract
• Leasing (long term)
•
•
•
•
•
•
• Build
Build-Lease
BuildLease--Transfer (BLT)
Lease
• Build
Build--Lease
Lease--Maintain
Maintain--Transfer
(BLMT)
• Build
Build--Lease
Lease-Maintain
LeaseMaintain-Operate
MaintainMaintain
OperateTransfer (BLMOT)
PUBLIC
PRIVATE
PARTNERSHIP
METHODS
Differences Between Conventional, PPP and Privatisation Approach
Conventional
PPP
PFI
Privatisation
Procurements are funded
directly via public budget.
Funding via private financial
resources without public sector’s
explicit guarantee.
Funding via private financial
resources without implicit or
explicit public sector guarantee.
Immediate impact on public
sector financial position.
Impact on public budget spreads
over the duration of the
concession.
No impact on the level of public
sector expenditure.
Risks are entirely borne by
public sector.
Risks are allocated to parties
which can manage them most
efficiently
Risks are entirely borne by the
private sector.
Extensive public sector
involvement at all stages of
project life.
Public sector’s involvement is
through enforcement of preagreed KPIs.
Government acts as regulator.
Relationship with private
contractor is short term.
Long duration of relationship
with private contractors.
Long duration of relationship
with private contractors.
Applicable for projects with high
socio-economic returns and
those justified on strategic
considerations.
Applicable for projects with
commercial viability.
Applicable for projects with high
commercial viability.
PPP STRUCTURE
Payment
Special Purpose
Vehicle
Procuring Authority
and Users of Public
Services
Equity
Services
Delivered
Carried Out Under Contract
Debt
Construction
Contractor
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Equity
Investor
Facilities Mgmt
Operator
Debt Provider
ACHIEVEMENTS
PPP ACHIEVEMENTS (1983-2013)
Number of Projects Implemented
Number of Jobs Eliminated from Government’s Payroll
Savings : Capital Expenditure (RM billion)
611
113, 487
182.45
Proceeds fr Sale of Government’s Equity & Assets
(RM billion)
6.48
KPI (private investment) for 2013 (RM billion)
50.00
Achievements for 2013 (RM billion)
63.77
PPP IMPACTS
▪ Efficiency in delivery of public services
▪ Created employment opportunities
▪ Improved distribution of income and standard of
living
▪ Accelerated growth through private sector-led growth
strategy
▪ Better access and connectivity – highway projects
ISSUES &
CHALLENGES
ISSUES & CHALLENGES
▪ High expectation: Complexity of the process requires time and
specialist skills from public sector;
▪ Risk transfer: Not all risks can be transferred cost-effectively to the
private sector;
▪ Project finance: financing arrangements and risk pricing in PPP can
result in potentially higher cost - high contracting rules out many
projects;
▪ Long term commitment: Government involved in long term financial
commitment which requires a systematic budget planning;
▪ Monitoring: Ministry/agencies (appointed project director-PD) roles to
monitor through out the concession period and ensure the project is
carried out as per concession agreement and agreed KPI.
WAY FORWARD
PPP: WAY FORWARD
▫ Update privatisation master plan
▫ Review of PFI-BLMT method
▫ PPP will continue to be one of the
key instruments in implementing
Government projects
▫ New
areas
such
as
green
technology, energy-efficient design
will be given priority
▫ Sectors that generate high spill-over
effects will be main focus
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PPP PROJECTS IN
MALAYSIA
PPP PROJECTS
Penang Bridge
Ports
Kuala Lumpur
Tower
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LRT
PPP PROJECTS
National Art Gallery
Smart Tunnel
Putrajaya
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GOVERNMENT OFFICE BUILDINGS
Federal Administration Complex
Putrajaya
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 PPP method: BLT (Built-LeaseTransfer)
 Development cost:
 RM 2.39 billion (8,113,225 sq. ft)
 Return to private sector in form of
lease rental
 Concession period: 25 years
 Tourist spot for well-planned
integrated township, iconic buildings
TOLL HIGHWAYS
Toll Highways
 30 toll highways have been built
 PPP method: BOT (Build-Operate-Transfer)
 Concession period: 20-40 years
 Return to private sector: toll charges
 North-South Highway
 Puchong- Damansara Highway (LDP)
 Elite Highway (Elite)
 Spill-over effects: created new townships and
industrial area
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UNIVERSITY CAMPUSES
UiTM Branch Campuses
PPP method:Built-Lease-Maintain-Transfer
(BLMT)
Development cost : average RM300
million each
Concession period : 20 years
Ensuring value for money (VfM)
Involves creation of public assets and
procurement of services
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Government-pay principle based on
established KPIs
CONCLUSION
CONCLUSION
• Rapid infrastructure development
was made successful through PPP
• Performance delivery improved
through private sector efficiency
• PPP approach is only possible
through
smart partnership
venture between private-public
sector
with
high
level
commitment
from
the
Government
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