Construction projects under 9MP to gather pace


  • Business
  • Thursday, 13 Jul 2006

PETALING JAYA: Construction projects under the Ninth Malaysia Plan (9MP) are widely expected to be rolled out at a faster pace in the current third quarter (Q3) of the year, industry sources and analysts said.  

A hint of this was given when Second Finance Minister Tan Sri Nor Mohamed Yakcop said the construction sector should rebound in Q3, given the scheduled implementation of projects under the 9MP, according to recent news reports.  

Several projects have, in fact, been awarded, such as upgrading works for the Kota Kinabalu International Airport for a total contract value of RM1.44bil. WCT Engineering Bhd won one package of this project while Global Upline Sdn Bhd secured another package.  

In May, Kuching-based Naim Cendera Holdings Bhd was awarded a RM707mil contract to design and build medium-cost houses in the same town. This was assigned by Syarikat Perumahan Negara Bhd, a wholly-owned subsidiary of Minister of Finance Inc.  

At the same time, several established contractors continued to win construction projects in the Middle East and India while others are persevering in the same direction.  

There is also anticipation that Prime Minister Datuk Seri Abdullah Ahmad Badawi will unveil the masterplan for the South Johor Economic Region (SJER) in the current quarter. Khazanah Nasional had said the masterplan had been submitted to the government which will announce its decisions.  

The government planned to invest RM12bil to develop SJER under the 9MP, with numerous projects such as a new Johor state administrative centre at Bandar Nusajaya, a coastal highway to link Nusajaya with Johor Baru, and a high-speed rail link between Johor Baru and Kuala Lumpur, according to a recent report by UOBKayHian Securities.  

An elavted highway project in India which IJM is handling.

Elsewhere, contractors have prepared to kick-start their projects. IJM Corp Bhd, for instance, has a standby offer of a RM600mil Islamic bond for its participation in the construction of the Kajang-Seremban (Kaseh) tolled highway.  

IJM has submitted to the authorities for some adjustments to various facets of the highway that would have to be set out under a supplementary concession agreement. “Once we have the concession agreement sorted out, we can accept the bond offer and start work straight away,” IJM managing director Datuk Krishnan Tan told StarBiz yesterday.  

In addition, IJM has applied for a rupee loan that would be the equivalent of about RM400mil to finance construction of a 285km highway in the state of Tamil Nadu in India. “We’re working towards a financial close for that,” he added. 

That project involves a capital investment by the group as the highway will be developed on a build-operate-transfer (BOT) basis.  

While many infrastructure projects were developed on a BOT basis in the 1990s, the government has said it will adopt a new global concept of private finance initiative (PFI).  

PFI is an interesting new concept as, under this scheme, the government will pay the contractors by lease instalments over a long period of time, whereas under the BOT method, the public has to directly pay the concessionaires. 

Highways built under the PFI approach could therefore be toll-free. This would be somewhat similar to the annuity type of payment for some of the projects awarded in India.  

In Malaysia, the first PFI project may be awarded to Ekovest Bhd. The company received a letter of appointment from the government in April for the privatised construction of the National Institute for Natural Products Vaccines and Biology. The construction, it is believed, may be financed by PFI.  

The PFI method may be suitable for the huge SJER projects in Johor too. By this means, payment for the projects can be stretched and smoothed out over a number of years.  

It was hoped, analysts said, that as the government approved various projects, the respective ministries and authorities would expedite their execution, such as the issue of the detailed letters of award. Delays in implementation by the authorities would hold back a strong revival in the construction sector, they added. 

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