Formulating budgetary management framework for public-private partnership projects

Abstract

The implementation of infrastructure development projects through Public Private Partnership (PPP) that involve investments from the private sector has greatly benefited the country. Apart from being an alternative to conventional public infrastructure projects, PPP is also said to be a more efficient method of project implementation for the government as significant risks are transferred to the private partner. Even with the advantages, it cannot escape criticism, especially the implementation of PPP projects, which involve financial implications to the government in the form of “availability payments.” In 2018, the Government of Malaysia revealed the financial implications of PPP projects to the government with a total amount exceeding RM200 billion. This disclosure inspires the researcher to conduct this study, as this problem has not been adequately addressed in previous research. This study is qualitative case study research with Malaysian PPP experience as a single unit of analysis. The data focuses on the experience of government officials, especially their respective involvements in the process of evaluating and implementing PPP projects. A total of 29 officers from several government agencies were interviewed. Based on the data collected which was analyzed using Atlas.ti application, the main findings of this study are related to the loophole in the work process in recommending the implementation of PPP projects. This is in relation to the application of financial allocation. Since the requirement to pay “availability payment” will only appear after three or four years from the date of signing of the concession agreement. Since the allocation involved seems to be operational in nature, i.e., rental payments, the general view at the beginning was that the financial allocation would only be applied after three or four years, and the financial allocation to be applied for is under the annual operating expenditures. The issue has been resolved through a new approach, among others, by using the development expenditure for PPP-related payments, listing the PPP payment commitments as part of the annual development expenditure commitment for each Ministry, and the implementation of a single window approach where the proposed PPP projects are evaluated in conjunction with other infrastructure development projects in the five-year Malaysia plan. Apart from contributing several theories regarding PPP, the results of this study have provided a real case study example, especially on Malaysia's learning experience in dealing with financial commitment issues arising from the implementation of PPP projects.