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Saturday, June 21, 2008

Malaysia likely to give growth projects priority

The government's review of infrastructure and mega-projects under the Ninth Malaysia Plan (9MP) could see several projects put on hold, scaled down, or extended over a longer period, industry sources said.

Projects will likely be prioritised based on necessity, cost, and urgency.

Amid soaring costs and higher fuel prices, projects that would have the most benefits for the people would jump to the front line, they said.

"The government is more concerned with rising food prices. So they will go for top priority projects which can generate growth, instead of mega developments. While this is a concern among industry players, we hope to be given a slice of the smaller cake," said one official of a public listed construction firm.

The government had announced that 880 projects worth about RM15 billion will be implemented under the 9MP.

So far, projects that have been awarded under the 9MP include East Coast Expressway Phase 2 comprising packages 10 and 12 (worth RM1.5 billion), Kota Kinabalu Airport upgrade works (RM750 million), Second Penang Bridge (worth RM3 billion) electrified double-tracking projects from Ipoh-Padang Besar and Seremban-Gemas (RM16 billion collectively), and Langat 2 Water Treatment Plant (RM4 billion).

Projects that have been shortlisted but not yet awarded, meanwhile, include the Penang Outer Ring Road (PORR), Penang Monorail, Johor Baru Monorail, West Coast Expressway, flood mitigation, Pahang-Selangor Raw Water Transfer Project, Klang Valley LRT extension, and Selangor water treatment and distribution, worth RM28 billion collectively.

One industry player said he believes the government may postpone flood mitigation and building of highways in Peninsular Malaysia, while giving the go- ahead for road and bridge construction works in Sabah and Sarawak.

Some research houses, meanwhile, believe that PORR may be shelved indefinitely while the Gemas-Johor Baru double-tracking project could be postponed to 2009.

"Under the Eighth Malaysia Plan (8MP), 30 to 35 per cent of the projects were delayed and carried forward to the 9MP. We are expecting the same for the 9MP, looking at the current political scenario and rising costs.

"We believe the Ipoh-Padang Besar double tracks awarded to Gamuda-MMC could be prolonged from five to 10 years, and there may be some hitches in the Selangor water projects," an analyst said.

The flow of project awards will also likely slow down for the remainder of 2008, which could put downside pressure on the stock market.

"Most people have already factored in the news (project delays). The constraint now is that the government has a budget deficit level to meet and that level is 3.1 per cent of the gross domestic product in 2008. With this constraint in mind, they can't simply go around spending," said one analyst.

The analyst said there is talk that the Penang Monorail project may be re-tendered and the development plan restructured under a build, operate and transfer concept or private finance initiative offering the company the concession.

Another industry player said the government is expected to concentrate on projects which could benefit the public such as building new roads and improving the public transport system.

"We believe the government may go ahead with the Klang Valley LRT extension. They may shorten the plan," he said.

The LRT extension includes an extension of the Kelana Jaya LRT line to Klang, and a new outer-ring line serving the outskirts of the Klang Valley.

By New Straits Times (by Sharen Kaur)

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