Finance Ministry to introduce 'clean' PPP model

KUALA LUMPUR: The Ministry of Finance (MoF) will not cancel public-private partnership (PPP) projects awarded through direct negotiations by the previous Barisan Nasional administration, particularly land swap deals, but will introduce a "clean" PPP model in line with its policy to conduct open tenders.
In a review process, the MoF found that 14 out of 17 PPP projects were directly negotiated.
"Most of the 17 projects were land swap projects, which essentially means the contractor will carry out a government project such as building affordable housing, schools, police stations, fire stations and army camps, and get pieces of government land in return, instead of being paid in cash. For the projects reviewed, the contractor would have negotiated directly with the government on the price of the project and the value of the government land at the same time.
"Such a direct negotiated process not only perverts the model of PPP into a piratisation exercise or crony capitalism, it also puts the federal government into deep debts. By direct negotiation, the real value of the government land is invariably underpriced whilst the cost of the public works project is overpriced," Finance Minister Lim Guan Eng said in his keynote address at the launch of the Institute of Corporate Directors Malaysia (ICDM) here today.
He added that this is evidenced by the RM201 billion debt that has to be borne by the federal government as a result of the perversion of the PPP model.
Lim said the open tender process would ensure that all government projects are awarded to contractors who can deliver the best outcomes by getting the best value for money and that it does not add on debt but instead help to bring in revenue.
"This is one of the alternatives adopted by the Ministry to ensure that the projects will be carried out instead of taking the extreme approach of cancelling them altogether," he added.
Lim said Penang's adoption of the clean PPP model by open tender is the basis for its annual budget surpluses, increase in cash reserves by more than 100% and reduction in state government debts by 90%.
"This new model will not only be applied to the 17 major projects which were reviewed, but for all PPP projects in the future," he said.
Earlier, Lim launched ICDM, a dedicated body established by the Securities Commission Malaysia (SC) to enhance the professionalism and effectiveness of corporate directors in Malaysia.
Formed by directors for the benefit of directors, ICDM's main objectives are to promote excellence, integrity and the highest levels of skills and professional competence among corporate directors in Malaysia; represent the interests of its members and advocate the adoption and application of corporate governance practices.
Outgoing SC chairman Tan Sri Ranjit Ajit Singh said the ICDM will add to the already rich and diverse corporate governance ecosystem to enhance director effectiveness and board leadership in Malaysia.
ICDM will focus on building a sustainable pipeline of directors through education programmes that equip directors with essential skills to serve on listed boards. ICDM also maintains a directors' registration provide director-sourcing services to companies so that succession planning is competency-based.