Public Private Partnership (PPP) is a form of cooperation between the public and private sectors where a standalone business is created, funded and managed by the private sector as a package which includes the construction, management, maintenance, repair and replacement of public sector assets inclusive of buildings, infrastructure, equipment and/or facilities.
- The SPV must be financially strong and possess the relevant management and technical expertise;
- The SPV must have the relevant expertise to implement the project, manage related risks as well as maintain the asset over the life of the concession period; and
- The SPV must be innovative so as to enhance the quality of services and to provide economic value to users.
- Sale of Equity
Equity sales are specifically for Government companies and involved title transfers as well as management, asset (with or without liabilities) and staff responsibilities. This form of privatisation may involve selling of some or all the equity of a company. Total equity sales means transferring 100% of Government equity in the company, while partial transfer means less than 100%. An example of this method is Mardec Bhd., Naval Dockyard Sdn. Bhd. and Perusahaan Otomobil Nasional (PROTON) Bhd.
- Sale of Assets
Sale of assets involves the transfer of assets owned by Government agencies or Government owned companies to private entities. The private entity would then own the assets and operate the related commercial activities. The sale of assets can be accompanied by the transfer of management and personnel or otherwise. Examples include the sale of assets in South East Johore Development Authority (KEJORA), Development Authority of Pahang Tenggara (DARA), Jengka Regional Development Authority (JENGKA), MARA Shipyard Engineering Terengganu and the takeover of the bus services from Municipal Council of Pulau Pinang.
This model involves changing the status of Government agencies from public sector entities into companies incorporated under the Companies Act 1965. The newly created companies would be fully owned by the Government through the Ministry of Finance Incorporated. Examples include SIRIM Berhad, MIMOS Berhad and Institut Jantung Negara Sdn. Bhd. (IJNSB).
- Land Development/Land Transfer
Land development/land swap involves a private company constructing facilities for the Government such as offices and quarters at its own cost. In return, the Government will transfer ownership of suitable Government land of commensurate value to the company. This model may also involve development through joint venture arrangement between the Government and private companies in which the land on which the facilities are developed is not transferred to the company but the assets developed will be sold directly to the public. The return to the Government will be in-kind and/or cash. Examples include, the redevelopment of the Bukit Bintang Girls School in Kuala Lumpur, the development of Dewan Bandaraya Kuala Lumpur's (DBKL) land in Mukim Batu, the development of Bukit Jalil National Sports Complex and the development of army camp in Bukit Gedung, Pulau Pinang.
The Build-Operate-Transfer (BOT) model is adopted for projects that traditionally have been implemented by the Government such as infrastructure and public works projects. A private company will be granted a concession to undertake the financing and construction of a project and operate it for a designated period during which it is allowed to collect user charges. At the end of the concession period, the facility will be transferred to the Government at no cost. Examples of BOT projects include toll highways and sewerage facilities.
In this model a private company is granted a concession to finance, develop, operate and maintain the asset without transferring the asset to the Government upon expiration of the concession period. The company is allowed to impose a charge for the use of the facilities or services. Examples of BOO projects include power plants developed by Independent Power Producers (IPP) and the Gas District Cooling project in Putrajaya.
- Management Contract
In this model, private sector management expertise is engaged to manage facilities and services that hitherto had been provided by the Government. A private entity is granted a concession to manage public facilities and services which involve the transfer of management responsibility, personnel and assets to the company. The Government will make regular payments to the company as stipulated in the concession agreement. Examples of management contract projects are the maintenance of federal roads and the provision of hospital support services for Government hospitals.
In this model, a private company is granted right of use of Government assets and facilities through a lease agreement. The company will make regular payments to the Government as stipulated in the lease agreement. This model is normally used for the privatisation of entities with high-value assets such as ports and airports. This model does not involve transfer of assets to the company but provisions can be made for the company to purchase the asset at the end of the lease. Examples include Kuantan Port and the container terminal in Port Klang.
In this model, a private company is granted a concession to finance and build public facilities which are then leased to the Government. Upon completion, the facilities will be used by the Government and the company will be paid rental fees by the Government during the concession period. Upon expiration of the concession period, the facilities will be transferred to the Government. Examples of BLT projects include the development of the Government complex in Putrajaya and the construction of 10,000 units of the teachers' quarters in Selangor, Kuala Lumpur, Pahang, Perak, Penang, Kedah, Perlis, Sarawak and Sabah.
In this model, a private company is granted a concession to finance, build, and maintain public facilities which are then leased to the Government. Upon completion, the facilities will be used by the Government and the company will be paid rental fees by the Government. Payment to the concession company is contingent upon the company meeting service quality level or KPIs agreed upon in the concession agreement. The facilities will be transferred to the Government at the end of the concession period. Example of BLMT project include the development of UiTM campuses.
In this model, a Government-owned company will be listed on Bursa Saham Malaysia through an IPO exercise. Examples include Perbadanan Bekalan Air Pulau Pinang Sdn. Bhd., UDA Holdings Bhd., Syarikat Padi dan Beras Nasional Bhd. (BERNAS) and Malaysia Airport Holdings Bhd.
- Facilitation Fund
The RM20 billion facilitation fund is a form of grant provided by the Government to attract private investment worth not less than RM150 billion within the 10th Malaysia Plan period. The fund's objective is to bridge the viability gap of strategic projects which have the potential to generate huge spill over effect in the economy. Eligible projects can be granted 10% of the project cost subject to a maximum of RM200 million.
Project proposal can originate from the private sector and Government agencies, as such:
- Initiated by Government (Solicited Proposal). The proposal is submitted by ministries/agencies; and
- Initiated by Private Sector (Unsolicited Proposal). The proposal is submitted by private sector.
The project proposal must include at least the following:
- Background, objectives and need statement from the ministry/agency;
- Justification for proposing project implementation through the PPP method;
- Project scope and estimated cost;
- Concession period;
- Proposed project site; and
- Financing model.
The Public Private Partnership Committee or Jawatankuasa Kerjasama Awam Swasta (JKAS) was established to scrutinize PPP project proposals submitted to UKAS, JPM. The committee comprises of representatives from UKAS, JPM (Chairman), Ministry of Finance, Attorney General's Chamber, Economic Planning Unit, Department of Director General of Lands and Mines, Department of Valuation and Property Services and the respective line of ministries and/or agencies. The functions of JKAS are as follows:
- To act as a the main committee for PPP projects;
- To deliberate on the project proposals submitted through the Steering Committee;
- To make recommendations regarding project proposals for the consideration of the Public Private Partnership Higher Committee or Jawatankuasa Tertinggi Awam Swasta (JTAS) before Cabinet approval; and
- To finalize negotiation of terms and conditions of the concession agreement with the successful project proponents.
Project planning and coordination is centralized while project implementation and contract management is decentralized. UKAS, JPM plays the lead role in coordinating and processing project proposals from inception to signing of concession agreement.
Subsequently the relevant ministry/agency will monitor the implementation of the project and manage the concession agreement.
However UKAS, JPM will continue to monitor large scale PPP projects albeit at the macro level. Towards this end, UKAS, JPM has established a project monitoring unit which receives regular reports from the ministries/agencies concerned.
- To advise on technical matters and Government policy;
- To increase awareness of the PPP concept and program and the various implementation models of PPP;
- To provide a conducive environment for PPP program implementation;
- To establish good governance structure and practices and ensure compliance thereof;
- To implement capacity building programs so as to increase the skills and competences of personnel managing PPP projects; and
- To provide advice and financial assistance (e.g. Facilitation Fund).
- Incomplete documentation;
- Non fulfilment of the qualifying criteria stated in the tender document;
- Non fulfilment of the terms and methods of payment stipulated in the tender document;
- Unrealistic prices – too high/too low; and
- Over emphasis on price and related financial aspects while neglecting other aspects like value for money and innovation.
- Infrastructure; and
- Green Technology.