Indian Journal of Science and Technology

Abstract

Objectives: In Malaysia, under the Public Private Partnership (PPP/PFI) financing arrangement, the private company has to secure large project funding for the development of public infrastructure projects. The reasons are due to the unfavorable financial market conditions, lack available banks offering long-term financing, less attractive lending terms, and higher interest rates could hinder the private company to obtain capital funding. This paper aims to investigate sources of financing for PPP/PFI projects in Malaysia and to identify barriers involved in the PPP/PFI financing. Method: A qualitative method of data collection was employed. A semi-structured interview has been conducted among the three key players involved in the PPP/PFI projects: bank, public authority and private company resulted of 22 participants from 16 PPP/PFI projects in Malaysia. A computer aided qualitative data analysis software ALTAS.ti was used for data analysis. Findings: The findings revealed that most of the Malaysian PPP/PFI infrastructure projects are associated with high project cost amounting up to RM6 billion and the debt-equity ratios are in the range of 80:20 and 90:10. This demand the private company to restructure the PPP/PFI project financing through a combination of few sources, debts (i.e., Sukuk, bond, syndicated term loan, and government support loan) and shareholders’ equity. Furthermore, the financing constraints are affected due to the complexity in credit assessment, high financing costs and limited suitable financing facilities. Improvements: For future research, the viability of the PPP/PFI projects and the strength of the private company are inevitable to secure good financing from respective banks. A framework of ‘securing project finance for PPP/PFI projects in Malaysia’ will be developed in detail consisting of four components: sources of financing; critical factors; securing financing strategy and success securing finance. It is believed that the framework could assist private construction company in obtain financing for their future infrastructure projects. 

Keywords: Debt-Equity Ratio, Financing Facility, Malaysia, PPP/PFI Projects, Sources of Financing