Short Position

  • Business
  • Saturday, 23 Mar 2019

The cost of removing PDP

THE mandate of the project delivery partner (PDP) is to deliver a construction project within time and cost. In return, the PDP earns a fee and gets reimbursed for cost associated with managing the project.

PDPs effectively replaced the role the Public Works Department (PWD) played in managing government infrastructure jobs. It came about after many large-scale government jobs were not well managed – in terms of delivery within time, within cost and build quality.

The government has reverted to the PWD overseeing its jobs again, in a move to save cost.

The switch was smooth for the mass rapid transit phase 2 project where the PDP – Gamuda Bhd – became the turnkey contractor. However, the light rail transit 3 (LRT3) project has met with delays, with contractors complaining that they have yet to be paid, some more than 10 months after they started work.

The focus now is on the PDP that undertook the Sabah portion of the Pan-Borneo Highway. The task went to Borneo Highway PDP Sdn Bhd, which comprises privately owned Warisan Tarang Construction Sdn Bhd controlling 60%. UEM Group and MMC Corp Bhd hold 20% each in Borneo Highway.

The Sabah portion is reported to be running above cost and behind time. If true, it implies that the PDP has failed.

Towards this end, Sabah Chief Minister Datuk Seri Mohd Shafie Apdal has said that the PDP has been removed for the Sabah portion of the Pan-Borneo Highway and that the PWD would oversee the works on 12 packages awarded so far to save cost and time.

The question is, would Borneo Highway be required to compensate the government if indeed the project was behind time and running above cost?

And what about the PDP for the Sarawak portion of the Pan-Borneo Highway?

The Sarawak portion is running on schedule with well over 50% completed and within cost.

Hence, should the PDP be removed if they are performing, causing disruption to the works and giving rise to the possibility of the government going into a dispute over compensation?

Fix the problem first

TALK that the government is considering listing some of the GLCs came about in a way to spark interest in the capital market.

This approach did work at one point when a slew of companies, including FGV Holdings Bhd, hit the market in an apparent move to get things going. At that point in 2012, Malaysia dominated global headlines, as investor interest was drawn towards our shores.

Fast forward to today and what investors are finding is a listless market. Corporate earnings are down and economic growth based on reported projections for this year is not going to move the needle much for Malaysia.

The government does have companies that it can list. Part of it is to generate funds to get the country’s debt levels down, but these companies must appeal to investors. Whatever programme the government has will never compare to the listings of corporate giants like Telekom Malaysia Bhd and Tenaga Nasional Bhd in the 1990s when privatisation was a buzzword that gripped the markets like never before.

There is one company that will surely generate immense interest in a listing and that is Petroliam Nasional Bhd (Petronas). The listing of Petronas has been mooted before as a means to lift the spirits and interest of investors in Malaysia but was never executed. The main reason is the influence it will have on the market. A listing of that size will dominate the benchmark FBM KLCI and render most other companies almost oblivious to investors and fund managers, as its weightage will overwhelm the other stocks.

What the market needs, however, is clarity on policies. The government must feed investor-friendly moves to investors who today have many more options that before. Even Malaysians have an avenue to invest abroad and Malaysian-listed companies must rise to show why they should be a magnet for investors.

Unfortunately, the drivers of many companies domestically are hamstrung by a weak property market and construction sector. Those sectors have big linkages to the local economy. Policies should be created to move Malaysian companies and people up the value chain of innovation and profitability before foreign and domestic investors are interested in ensuring the local stock market does not retain the position of the worst-performing market in Asia.

Green is the new black

IN a week during which the stock market, particularly banking shares, were hit in response to certain comments from the government, a silver lining also appeared.

This was in the form of Energy, Technology, Science, Climate Change and Environment Minister Yeo Bee Yin estimating that there would be RM1bil worth of job opportunities for the private sector under the Net Energy Metering (NEM) programme.

In addition to that, there are RM2.2bil worth of renewable energy projects to be tendered out this year, of which RM2bil are large-scale solar (LSS) and two tenders amounting to RM200mil for the energy efficiency (EE) retrofitting of 50 government buildings.

Malaysia’s “going green” plane is pretty impressive.

Going by the minister’s recent press release, expect things like peer-to-peer energy trading, purchasing option for 100% renewable energy (RE) electricity, as well as the potential establishment of a mandatory renewable energy certificate (REC) market, come 2035.

In an intensely modernising civilisation, going green is the only way ahead.

It preserves the planet’s longevity, reduces waste, improves both air and water quality, and in the longer run, is more cost-effective.

The ministry’s focus on strategic allocation of funding for research and development (R&D) in industrial research is also spot on, as there is a disconnect between what the economy needs and what researchers are working on.

However, start-up costs remain a challenge.

Hence, Yeo has proposed that the government pump some level of funds by increasing the R&D funding allocation of the industrial research portion from the current 8.9% to more than 50%.

Execution will be key to the success of this initiative.

Projects should be awarded purely on merit and not to select parties -- something that the country was embroiled in, in the past.

This occurrence was also present in R&D grants.

Another good news is the plan to bring in private funding.

The Securities Commission (SC) has been entrusted to form a green financing task force to evaluate and recommend action plans on financing for RE and EE initiatives.

The findings and recommendations of this task force will be included in the tabling of the next budget.

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