The Private Finance Initiative in Malaysia: A Preliminary Framework to Construct a Public Sector Comparator

Dr. Suhaiza Ismail
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The Private Finance Initiative (PFI) or Public Private Partnership (PPP) offers an alternative to the conventional procurement of public service infrastructure. It has been widely used in many countries such as the United Kingdom, Australia and Canada as a result of their public sector reforms. In Malaysia, even though the involvement of the private sector in assisting with the provision of public services and facilities is not new, only recently under the Ninth Malaysia Plan the government has officially announced the implementation of projects using PFI scheme in order to promote greater involvement of the private sector in delivering public services. However, before a PFI project can be approved it has to be demonstrated that the project will provide value for money (VFM). A crucial test for VFM is to compare the cost of a PFI proposal against the cost of a public sector comparator (PSC). Even though the government acknowledges the importance of VFM assessment in implementing PFI projects, a robust PSC framework is yet to be established in Malaysia (Ninth Malaysia Plan, 2006). This study therefore aims at exploring the true nature of the Malaysian PFI. Also, it attempts to develop an appropriate framework of PSC that suits the Malaysian environment. At this initial stage, the researchers evaluated the components of established PSC models for PFI projects in different countries particularly the UK, Australia and Canada. The methodologies adopted in this study involved in-depth interviews and an extensive review of the official documents published by the official bodies involved in the implementation of PFI in various countries. From the interviews conducted with officers from a government agency in Malaysia, to some extent Malaysia seems to have a ‘unique’ model of PFI. Even though most PSC models make up of few common components, there are several significant variations between the components of PSC models established in the three countries found in this study.

Keywords: Private Finance Initiative (PFI), Public Private Partnership (PPP), Value for Money (VFM), Public Sector Comparator (PSC)
Stream: Economics and Management
Presentation Type: Paper Presentation in English
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Dr. Suhaiza Ismail

Assistant Professor, Department of Accounting, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia
Gombak, Kuala Lumpur, Malaysia

Research interest area: 1. Public Sector Accounting: Private Finance Initiative in the UK and Malaysia. 2. Accounting Education

Ref: I07P0651