Adoption of Private Finance Initiative (PFI) in Malaysian Public Works Projects: Are We Ready?

In the United Kingdom (UK), Public Private Partnerships (PPP), in the guise of the Private Finance Initiative (PFI), has become an integral part of national government policy in the delivery of public facilities and services. The aim of introducing the PFI was to achieve closer partnering between the public and private sectors at both central government and local authority levels. Despite the PFI may have been tested for more than a decade in developed countries, the idea is just beginning to germinate in Malaysia. Government has embarked on using PFI as one of the methods to procure building and infrastructure development projects. In all likelihood, Malaysia is coming up with its own version of PFI, which deviates somewhat from the ideal PFI principle. This is to take into account the business and political reality of the country. Therefore, this paper describes the key issues and challenges in implementing PFI in the Malaysian construction industry under the Ninth Malaysia Plan. Based on the interviews conducted with government agencies, a Main Board listed construction companies, and consultancy firms, the results revealed that Malaysia is coming up with its own version of the PFI in that its financing arrangement is different from UK‟s PFI. In the Malaysia context, the government provides financing support indirectly through Employees Provident Fund (EPF) that provides Ringgit Malaysia (RM) 20 billion for PFIs.