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 3 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 ▪ ▪ ▪ ▪ 7 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 8 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 9 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 10 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 13 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 20 PPP PROJECTS IN MALAYSIA PPP PROJECTS Penang Bridge Ports Kuala Lumpur Tower 22 LRT PPP PROJECTS National Art Gallery Smart Tunnel Putrajaya 23 GOVERNMENT OFFICE BUILDINGS Federal Administration Complex Putrajaya 24 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 25 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 26 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 28 -THANK YOUPlease visit our website www.ukas.gov.my
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