Malaysia

Malaysia

Infrastructure procurement: In line with the Tenth Malaysia Plan (10th MP), the Malaysian government encourages private sector investments in development projects through either PPPs or direct investment. The PPP-specific objectives of the Plan focus on improving basic infrastructure and upgrading public transportation in Greater Kuala Lumpur.

PPP projects: Since 1983, close to 700 projects have been implemented through PPP as well as a privatisation programme which created large private sector projects, particularly in the transportation, telecommunications and energy sectors. PPP projects took place in a wide range of sectors, including transport, communication, education, health, solid waste and power generation, using a wide diversity of instruments such as Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT) and Build-Lease-Transfer (BLT).

The first BOT highway project is the North South Highway, in which Malaysia’s Government provided substantial financial assistance to the concessionaire in the form of support loans, traffic volume supplements and external risk supplements. Other examples include the BOT of the KLIA Express and Transit, and in 2012, a 60-year concession to build the West Coast Expressway from Banting, Selangor to Taiping, Perak.

Overview of Public Interventions
Subsidies & Guarantees
Infrastructure Tax Incentives The Government offers:


• Partial exemption from Corporate Income Tax of 70% of the statuary income, for up to five years, for projects with 'pioneer' status (whereby investment is in a promoted product or activity). The exemption increases to 85% of the statuary income for investments in Sabah, Sarawak and the Eastern Corridor of the Peninsula of Malaysia.
• Investment Tax Allowance of 60% of the qualifying capital expenditure and 80% in Sabah, Sarawak and the Eastern Corridor of the Peninsula of Malaysia. The allowance is an alternative incentive to the partial exemption due to the pioneer status.
• Infrastructure Allowance of 100% of the infrastructure investment for companies active in certain sectors and located in Sabah, Sarawak and the Eastern Corridor of the Peninsula of Malaysia.
• Industrial Building Allowance, also eligible for PPP projects.
• Stamp Duty Remission to reduce transaction costs for PPP projects.
Further information on the Promotion of Investment Act (1986), Income Tax Act (1967) and incentives are available.

Revenue Guarantees These are off-take agreements to reduce demand risk. In power generating projects, payments to the private operator consist in a fixed capacity (availability) payment and a variable utilisation payment.
Guarantees Danajamin Nasional Berhad
Established in 2009, Danajamin Nasional Berhad provides guarantees for private bonds with the aim to stimulating the Malaysian bond and sukuk (Islamic bond) markets. The guarantees facilitate Malaysian companies’ access to the capital market, covering the principal payment and up to one coupon/profit of the bond/sukuk.


Danajamin is jointly owned by Minister of Finance and Credit Guarantee Corporation Malaysia Berhad and benefits from a local AAA rating. In 2013, its total assets were worth RM1.9 billion. Its main objectives are to:


• Provide guarantees to enable financially viable companies to access the capital (bond/sukuk) market in order to obtain financing, with an emphasis on long-term financing;
• Encourage smaller/non-traditional issuers to raise capital via the bond/sukuk market;
• Catalyse the further development of the domestic PDS market as an alternative source of financing to complement the banking industry;
• Stimulate economic growth by improving access to capital for Malaysian companies.


Contact:
The Gardens North Tower, Level 25
Lingkaran Syed Putra, Wilayah Persekutuan
59200 Kuala Lumpur, Malaysia
T : +60 3-2299 2000
F : +603 2265 0900
E : danajamin@danajamin.com
Website: www.danajamin.com

Grants/Soft Loans
Viability Gap Funding (VGF) The Facilitation Fund, managed by the 3PU , is equivalent to a VGF and aims to bridge viability gaps in projects. It aims to facilitate new private sector investment, large-scale ventures and privatisation and PFI projects.


The Government of Malaysia established a Facilitation Fund under the Economic Stimulus Package in the Ninth Malaysia Plan (2006-2010). The Fund seeks to encourage the implementation of private sector projects, by financing basic infrastructure such as access road, bridges and utilities, as well as land acquisition for highway projects. The Fund can generally finance up to 10% of the total project cost. Under the Tenth Malaysia Plan (10 MP), the Government has allocated a sum of RM20 billion for the Fund, whose specific aims are to:


• Bridge the viability gap in private sector investments in high value projects which have huge spill-over effects as well as high strategic impact to the country's economic development;
• Become a catalyst for private investment in the strategic sectors;
• Rationalise the Government’s involvement in business and increase private sector participation in the economy.


Contact:
Public Private Partnership Unit, Prime Minister’s Department
Level 3, Tower Block
Menara Usahawan, Lot 2G6, No 18 Persiaran Perdana Presinct 2
Director, Facilitation Fund Section
T: 03-8880 5937/5867/5868/5980
F: 03 8880 5810
E-mail: feedback@ukas.gov.my
62562 PUTRAJAYA

Other Financial Support • Government-provided loans coupled with revenue-sharing arrangements.
Industrial Building Allowance (IBA) for projects being procured through a Build-Lease-Transfer (BLT) mode.
Other Public Support
Land Acquisition Support Beside a few exceptions, no restrictions on foreign land acquisition.
The government can purchase land for PPPs if the project supports the economic development (see Land Acquisition Act).
Project Development Fund (PDF) PDF currently in place.