The Malaysian government is expecting to save around RM3.1 billion with the takeover of the Sarawak Pan Borneo Highway project from a project delivery partner (PDP), The Edge Markets reported finance minister Lim Guan Eng as saying. According to the finance minister, this represented a saving of 14% before the agreement with the PDP was terminated.
The expected cost with the engagement of the PDP was expected to be RM21.9 billion, while the takeover would see the project cost RM18.8 billion, Lim said, adding that the lower cost was due to the removal of a 5.5% service fee imposed by the PDP in a previous agreement, as well as other reimbursable costs, Lim said.
“This is a very important agreement because we are recording significant savings, and we intend to channel it back to Sarawak after the project is completed. If there are cost overruns, this will be reduced accordingly,” the finance minister said during the signing of the new project funding agreement between the federal government, the Sarawak government and DanaInfra Nasional Berhad yesterday, The Star reported.
At the same time, a mutual termination letter for a previous funding agreement, and the works ministry had issued a notice of termination to the PDP last September, the finance minister said. The government will be the new owner of the project after February 20, said works minister Baru Bian. “We would like to give an assurance that we will work with the Sarawak government through our partners, JKR Sarawak to implement the project,” he said.
Leaving out the PDP does away with the middle man in the transactions, which then allows the government to make more savings, the works minster said. Regarding compensation to the PDP, a settlement has not been reached yet, however it will be looked into, he said. DanaInfra is a government-owned special purpose vehicle established in 2010 for the financing of mass rapid transit (MRT) projects in the Klang Valley, as well as the Sarawak portion of the Pan Borneo Highway.
On the termination of the previous agreement, Lim said that the move has allowed the federal government to have full handling of the project by issuing tenders and the allocation of construction, under the supervision of government-appointed representatives in the Sarawak public works ministry, The Edge Markets reported. The old agreement that was entered into by the previous administration was not formulated based on national interest nor conducted in a transparent manner, he said.