Public-Private Partnership: Ownership

It is an intricate issue in defining the ownership of the subject matter, in this case the physical asset of developed infrastructure such as buildings, complexes, highways and the like in any PFI-based development.

Simply because the nature of construction output itself where it has an added-value to the original state of piece of land or stretch of compound. For example, the Government wanted to develop a campus on a fresh bear land which was originally owned or through acquisition. The land will be leased to a developer, normally called Special Purpose Vehicle (SPV) to proceed with the objective of developing the land into a massively new campus from its own funding. Once the project is practically completed, the development (campus) is owned by the SPV entirely and not jointly owned with the Government, being the capital contributor in the partnership (land by the Government and funding by the SPV).

This certainly poses financial impact on the profit sharing of which currently the Government has no right on the profit from the monthly / annual repayment through leasing back to the Government for occupancy and operation of the asset by the owner because the owner of the asset is the SPV. Only and only when the asset is transferred and owned by the Government at the end of the concession-long period (ranging from 20-30 years) that the right of profiting from the asset by the Government finally becomes practical, of which the ‘partnership’ had come to an end and fat profit had been earned by SPV singularly.

As recorded by Prof. Wahbah Zuhaili that various definitions are given for partnership (Musharakah). The Hanbalites define sharikah as the amalgamation of rights or freedom to transact (tassaruf). The Shafi‘ites define sharikah as the confirmation of the rights of two persons or more over a common property. The Hanafites define sharikah as a contract between two parties in relation to capital and profit. As such, these various definitions refer to three (3) dimensions:

1) Sharikah is essentially a contract between two or more parties.

2) Focus of sharikah is on authorisation to transact with the capital or partnership property.

3) Profit-sharing element (this is considered as one the pertinent ingredients in modern business transactions).

Wallahua’alam.

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