Public-Private Partnership: Verdict

Over the past few months, we have discussed on the shariah issues pertaining to the application of PPP or PFI scheme. Although some improvement and modifications could be undertaken so as to alleviate the issues, my personal verdict on the initiative is somewhat unsettled.

The main rationale of having this partnership is to encourage infrastructure development while striking a balance in the yearly financial statement of a country. The initial investments are not spent by the Government but rather the private entities (normally big and famous developers which are commonly awarded based on direct-nego). The list of advantages is there to be proven.

However, the major disadvantages are higher repayment over then long-span of concession period, triple times the original cost and to be ammortised across the said period. Imagine not one multi million project, but hundreds of them of similar size.

Furthermore, socio-micro economic activities had dropped significantly since the initiatives took place. Evidently, small time contractors do not have the opportunities to participate in the project as the mighty ones are more superior and powerful to contract with the developer. Similarly, the design team for one PFI project normally is appointed by the developer as one consortium comprises of Architect, Engineers, Surveyors and the like that cover all the project packages. Since most of the project is directly-awarded and the risk is huge, thus the project cost is sky-rocketing, not mentioning the maintenance charges.

On the other hand, should the scheme is properly planned by the Authority at the macro level for the entire spectrum of the physical infrastructure of the nation, I reckon some of the projects (I repeat, not all) could be of the traditional method; appointing design team, tendering to contractors, getting competitive prices, awarding to qualified contractor, handing over, new maintenance contracts and so on. It will create relatively higher chances to the industrialists. For example, a RM100 million can be broken down into minimum five (5) packages that can be entirely separated, designed, managed, tendered and awarded plus maintained. Unlike PFI scheme, a similar RM100 million will be awarded to one single entity only. 

Further applied research and developments are required in order to substantiate the argument and justifications, all in all for the betterment of the country.

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