Risk Management in Transport PPP Projects
In the Islamic Countries
206
Box 36 Government support on toll roads PPPs
 The land is usually provided by the government and land development rights are offered to
the concessionaire;
 Support loans can be provided. For instance, they were provided to PLUS highway project
(the first BOT project in Malaysia) at an interest rate of 8%;
 “Supplementary” loans (traffic volume supplement and external risk supplement) were also
foreseen in the PLUS project upon the materialization of certain future scenarios.
Since the beginning of the privatization strategywhich led to the introduction of PPP inMalaysia,
local private funding sources have been mobilized to develop many infrastructure projects. This
has helped to alleviate the financial burden on the government, while transferring some of the
project risks to the private sector.
Legal provisions
Malaysia does not have a specific PPP law. PPP projects are governed by the national policies
on PPPs (i.e. the above-mentioned Privatization Master Plan), the Financial Procedure Act, and
the individual laws for each sector.
Markom et al. (2012), for example, report that in the road transportation sector, the Federal
Roads (Private Management) Act 1984 was enacted to allow the government to grant to
private developers the right to collect tolls on public roads. This permitted private companies to
construct, operate and maintain new road systems while recovering the costs by collecting tolls.
The Financial Procedure Act (1957), although it does not provide specifically for PPPs,
provides for the general control and management of the public finances and regulates public
purchase and acquisition (The World Bank, “Benchmarking PPP procurement 2017 in
Malaysia”).
The World Bank highlights also Treasury Instructions, Treasury Circulars and Federal Circular
Letters issued by the Ministry of Finance as source of provisions for the regulation of
government procurement.
Malaysia’s framework for PPPs is complemented by general PPP guidelines, issued by the PPP
unit in 2009. They differentiate between PPP and privatization methods, describe the principles
of adopting the PPP approach and describe the key steps for developing PPP projects.
Institutional arrangements
Malaysia has a well-structured and centralized system for the preparation and implementation
of infrastructure projects, including PPPs.
The Financial Procedure Act establishes that the Minister responsible for Finance must
authorize any project which utilizes public funds, including PPPs when this is the case.
Therefore, the Ministry of Finance is a pivotal institution in the Malaysian PPPs framework.