PETALING JAYA: The proposed changes to the way public-private partnership (PPP) projects are implemented will likely see the private sector getting more heavily involved in them.
The private sector would also need to bear more of the risks should they choose to undertake such projects following the unveiling of the Private-Partnership Master Plan 2030 (Pikas 2030), according to economists.
The master plan, which was launched by Prime Minister Datuk Seri Anwar Ibrahim on Monday, is aimed at strengthening the country’s economic development and governance.
Pikas 2030 will likely see the private sector driving PPP projects moving forward, said chief executive at the Centre for Market Education Carmelo Ferlito.
“For this to happen, we need a change in the way in which PPPs are conceived.
“Presently, the government decides what to do. It outsources the execution to a private partner.
“But this means that the project responds to what the government believes is needed rather than what the economy needs, which can be discerned only by operating in the market,” Ferlito told StarBiz.
“For new PPPs to be successful what needs to also change is that before the government decides what to do, it should interact with future potential private executors, because private entities are better positioned to know what the market needs, since they operate in the market,” he added.
He said the key factor is to see if the particular PPP project is feasible or sufficiently profitable for the private sector to undertake.
“That’s why I believe and emphasise that the private sector should get involved in the project from the very beginning – at the designing stage of the project. This will foretell if the government will save money or waste money.
“Usually an implementation by the private sector is more efficient,” Ferlito ponted out.
“For a PPP to be economically sustainable as well as create value and jobs, it must first respond to market signals.
“So the PPP project should be conceived together, designed together and operated together with sharing of responsibilities and risks,” he added.
Economist and Prof Geoffrey Williams said Pikas 2030 is timely.
“PPPs are an important way for the government to implement development projects at a lower cost.
“If they are implemented effectively, the costs and benefits are shared with the private sector and the development infrastructure is provided quicker and cheaper,” Williams said.
He noted the expected macro aims, which will include the target to create 900,000 jobs by 2030, are ambitious but achievable.
“This is especially so if they include state level as well as federal government projects,” he said.
PPP projects need to rejuvenate existing infrastructure, he noted.
Pikas 2030 will be applicable in priority areas such as health, education and social protection as well as infrastructure and housing.
“It might be a better idea to look at smaller projects and avoid mega projects because the financing, risks and pitfalls are lower as well,” Williams said.
“For example, renovating a local school, clinic, hospital or public housing project is more impactful than building a new township.
“Many of them were not completed or remain unoccupied,” he added.
“Let the mega projects be driven by the private sector if they are feasible, but help smaller companies join PPP projects at the local level,” he said.
One of the main changes under Pikas 2030 is the shift towards a competitive bidding process for PPP projects through requests for proposals.
This is in line with the government’s ongoing commitment to good governance so that projects are awarded transparently and on merit.
It will also focus on the implementation of PPP projects that are “user-pay” oriented, which is in line with the government’s aim to reduce fiscal challenges.
Project financing in such PPP projects may also see alternatives being adopted including concession monetisation models such as business trusts and real estate investment trust financing.
PPP projects that were developed in the past included the North-South Expressway, Light Rail Transit and Mass Rapid Transit projects.
