Reviving the privatisation of infrastructure

THE Covid-19 pandemic has placed additional strain on the government’s financial resources. In such times, it is timely to re-look at privatisation of infrastructure projects as it allows for the reallocation of financial resources for the social sector without straining national coffers.

In tough times, government spending and private sector investment will drive the economy. Towards this end, infrastructure projects, where a “business case” exists, must be placed to attract private investment in a meaningful manner to drive the economy. For privatisation to happen, there has to be several tenets in place and there has to be a shift in mindset to inculcate the level of trust between the four primary stakeholders involved in any infrastructure projects. The four parties are the public, lenders, private sector, who would be the concessionaire, and the government.

Planning and recalibration

Firstly, there has to be a policy at federal, state and local government levels for infrastructure planning covering long, medium and short terms. The long term is to look at a 10 to 25-year horizon while the medium should cover between five and 15 years. Short-term planning for infrastructure should cover between five and 10 years. All documents must be consistent and correlate with one another and with the medium and long term plans being at a macro level whilst a short-term plan should be detailed and more definitive plans of infrastructure plans against a range of parameters that is anticipated to drive demand. Policies must be put in place to self-adjust the anticipated gaps between demand and supply with the need to recalibrate every five years.

The appointment of consultants to regularly update the above documents is very important to examine actuals versus planned against policies and necessary updates or recalibration. The ‘ownership’ of these documents can be vested with the different levels of governments. These documents will provide the basis for Malaysia’s five-year development plan with all government agencies providing infrastructure requirements to EPU and MOF leading to the formulation of the said five-year year plan. A similar approach is to be taken when the mid-term review of the five-year Malaysia Development Plan is carried out with appropriate updates being done on a ‘bottom-up’ approach. It must be recognised that the master infrastructure plans have to be re-calibrated at all levels at specific periods of about two years to ensure the planned demand and planned supply are within acceptable range for all the stakeholders. The development of scenario planning is important to determine low case, base case and high case scenarios which will affect the strategy and timeline for the

implementation of planned supply.

Transparency

Secondly, procurement of infrastructure privatisation projects must be done in a transparent manner and it must be in line with federal, state and local government infrastructure planning for the short, medium and long terms. These projects must be tendered out by the government with the assistance of external experts or consultants and the bid document must carry the baseline business case for reference to serve the purpose of commercial evaluation by the government.