Thursday, 2 April 2009

Infrastructure Journal: Malaysian Government Ready to Extend PPP Programme

A pilot hospital PPP in Malaysia could presage a major bout of government spending on other infrastructure projects, according to an expert on the country's PFI programme. An SPV headed by construction group TSR Capital BHD is poised to DBFM a RM1.7 billion (US$466m) teaching hospital at the International Islamic University Malaysia (IIUM) in Nilai.

The scheme is still subject to a concession agreement being finalised, but if given the go ahead the project could prove to be a significant milestone in the development of the country's PPP market, despite not having a traditional project finance model.

The IIUM facility is the first of as many as 40 new hospitals PPPs to be launched in the coming months as part of the first phase of Malaysia's proposed RM7 billion (US$1.9b) PFI programme. With the government reportedly hoping to roll out these projects this year it would be impossible for the country to honour its infrastructure commitments without seeking private partnerships, according to Professor Kamarul Rashdan Bin Salleh of the Malaysian PFI advisory team.

Prof Salleh told IJ News that although the pilot scheme was at best a quasi-PPP, with a government agency forming part of the Medicalcity consortium that will build and finance the hospital, such a model would not be sustainable across all Malaysia's infrastructure needs. "It is not really a PFI because the government will loan to the consortium," explained Prof Salleh.

However, the scale of the proposed programme means that the traditionally parochial Malaysian market will have to look for investment from the private sector overseas. Prof Salleh added: "The main contractors will be local contractors but in terms of funding it they will need to partner with someone else."They do not have the capacity or expertise because thy have not processed PFI before and in this market it will be difficult for them."

The potential emergence of a new PPP market is likely to pique the interest of major players in the European market and Prof Salleh, who will visit Malaysia later this month to advise the government on the best way forward, believes the UK could be well positioned to profit. "If they are looking for a partner to deliver these projects then the UK would be the best one," he said.

(this article has been published in the Infrastructure Journal on 1 April 2009)


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