Risk Management in Transport PPP Projects
In the Islamic Countries
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and the Concession Agreement was signed between Express Rail Link Sdn.Bhd (ERLSB)
and the Ministry of Transport in 1997, the project opening for traffic in 2002 once
construction reached completion. Thus, high speed rail train was designed, financed,
constructed, operated and maintained by ERLSB for a concession period of 30 years;
 The light rail transit (LRT) projects. During the 1990s, issues resulting from extreme traffic
congestion in the city of Kuala Lumpur led Malaysian government to carry out a BOT
contract with Sistem Transit Aliran Ringan Sdn Bhd (STAR-LRT) and Projek Usahasama
Transit Ringan Automatik Sdn Bhd (PUTRA-LRT). The agreed concession period for both
the train lines was 60 years. PUTRA-LRT was in charge of the design, construction,
operation and maintenance of the 29 km long line with 24 stations. The execution of
PUTRA-LRT required a financial loan involving 4 major groups which were Commerce
International Merchant Bankers Bhd, Bank Bumiputra Malaysia Bhd, Commerce MGI Sdn
Bhd and Bank Islam Malaysia Bhd (Rahman et al. 2014). As regards the other section for
which STAR-LRT was in charge, there were two phases of construction; the concession
agreement for the first phase was signed in December 1992 while the second in August
1995. Construction started in 1994. The first phase was launched in December 1996 and
phase two in July 1998. For works execution, STAR-LRT took a loan of RM 800 million for
phase 1 and loan of RM 1.32 billion for phase 2 from Bank Bumiputra. Overall, finance for
construction cost was a combination of equity, commercial loans and government loans.
However, the project failed during the operation phase.
These initiatives have been selected based on their significance with respect to riskmanagement
and availability of information, however they do not constitute a representative sample of the
performance of PPPs in the country.
5.6.2. Strategy and policy
Political support and strategies
The history of PPPs in Malaysia started in the 1980s when the Malaysian Incorporated and
Privatization Policies were formally promulgated respectively in 1981 and 1983 and paved
the way to PPPs. The Malaysia Incorporated Policy had the aim to encourage cooperation
between the public and private sectors, based on the idea that while the public party defines
policies and provides specialized support services, the private party undertakes the commercial
and economic activities. The Privatization Policy was launched to support the Malaysia
Incorporated Policy towards further increasing the private sector's role in the country's
economic development. These two policies were introduced with the ultimate goal to reduce the
financial and administrative burden of the government while working in close cooperation with
the private sector and encouraging private investment to foster Malaysian economic growth.
The implementation of the Privatization Policy was strengthened through the Privatization
Master Plan initiated in 1991 and continued bringing positive results until the Asia financial
crisis erupted (in 1997), when many large infrastructural projects were postponed (The World
Bank, 2001).