Financing Sustainable Infrastructure through Private
Participation and the Capital Market– Malaysia’s 40-year Journey
HK Yong
ASEAN Advisory

Asian Capital Market Roundtable, Nomura Foundation
Tokyo, 2 February 2023

1

“ Build them first and they will come”

Today’s Touch Points
1.

Malaysia’s enviable Sustainable Infrastructure2.

How did Malaysia achieve this?
 The 5-Year Plans
 Developing a robust local Capital Market that supports Infrastructurebonds and equity
 Using NDFIs (National Development Financing Institutions)

3.

Way Forward

3

Malaysia’s Enviable Sustainable Infrastructure•Ranks one the highest in ‘Quality Score’ for sustainable infrastructure (Goldman Sachs)•One of the highest road densities in ASEAN based on km/1000sqkm of land area) (ADB’s‘Meeting Asia’s Infrastructure Needs’ report)•Infrastructure
New roads added in the 5 years
National Road Development Global Index
Increase in air passengers handled
Increase in urban rail ridership in the 5 years
World Bank Logistics Index ranking
Household broadband penetration
Population served with clean and treated water
Sewerage coverage in population
Generation capacity added
Electricity coverage of populationAchievements (10th MP – 2011-2015)
93,100 km
From 1.42 in 2010 to 2.29 in 2015
39%
32%
29 in 2013 to 25 in 2014
70% in 2014
95% by 2013
41 million
5,458 MW98%

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2,000 km of toll roads

The North-South Expressway (toll)(966 km stretching from North to South)
Opening up the country for development

Ampang Elevated Toll Highway, KL(along the Ampang River)Tanjung Pelapas Port

(14 berths over 5 km , handling 12.5 million TEUs)

URBAN REDEVELOPMENT(14 acre – the Pavilion Shopping Complex)
formerly site of a girls’ school

Putrajaya at nightConstricted Wriggle Room and the Need for Private Participation

How did Malaysia achieve these – the 5-Year Plans?

The 5-Year Plans – embedding Private Participation in the Planning•

5-Year PlanPPP Development•

4 (1981-85)

Privatisation incorporated into Plan•

5 (1986-90)

Privatisation Policy 1985•

6 (1991-96)

Privatisation Masterplan (PPP 1.0)

•9 (2006-10)

PFI was introduced (PPP 2.0)

•10 (2011-15) PPP further emphasised•

11 (2016-20) PPP further emphasised•

12 (2021-25) PPP further emphasised (PPP 3.0?)

12The Many Types of PPP’s (Alphabet Soup)

Range of public/private Public provision of collective goods
business models
 Service provision contracts

PPPModalities Outsourcing/contracting Design and construct (D & C)
 Sale and leaseback
 Operate and maintain (0 & M)
 Operate maintain and manage (OM & M) ?
 ?
 Build transfer operate (BTO) Build operate transfer (BOT) Build lease transfer (BLT) Build lease transfer maintain (BLTM)
 Build own operate remove (BOOR)
 Build own operate transfer (BOOT) Lease renovate operate transfer (LROT) Design build finance operate (DBFO) Design construct manage finance (DCMF)
 Design build finance operate manage (DBFOM) Build own operate (BOO)
 PFI
 ?
 Franchise Concession
Joint venture (JV) Regeneration partnership Outright privatization

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Developing a Robust Local Capital Market for Infrastructure Financing•

PPP projects in Malaysia are financed through a mix of equity, bank loans and projects bonds•

Mobilisation of long-termed local currency financing•Infrastructure bonds accounted for 26% of overall bond issuance (1993-2019)•Malaysia is a Global Centre for Islamic Bonds (sukuk)•Attracting conventional investors such as pension funds•

Launched the world’ first green project-finance sukuk•

ESG-compliant loans and bonds (eg YTL Power’s RM1.1 billion LEED-certified Islamic term
Financing Facilities for their 48MW IT Load Hyperscale data Centre (HDC) project)

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Using NDFIs (National Development Financing Institutions)•

What’s in a Name? – SIBs, Mission-oriented banks, Challenged banks, Promotional Policy banks•

Roles played by Malaysia’s NDFIs•

Patient Capital and Blended Financing, crowding in philanthropic/donor financing•

Rebooting NDFIs

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The Way Forward - Issues•

Refining the Art of Crowding In the various actors- conflicting/complementary interest- national infrastructure needs- equity investor- patient capital & philanthropic/donor financing (Current annual giving to climate action was between $7.5billion to $12.5 billion out of $810 billion in total global giving to all causes in 2021
- local/international capital market- ESG compliant•

The demise of PFI and the ‘new’ PPP 3.016

Thank You