A framework and evaluation technique for project's viability of privatization highway projects in Malaysia

Abstract

The construction sector is one of the indicators of national economic growth and has contributed 4% yearly in average to Malaysia GDP and 6% to the national economy between 1995-2015. The excellent of construction growth is mainly from projects implemented under "Public-Private Partnership" (PPP) and privatization. Under 10 th Malaysian Plan, 52 projects valuing about RM62.7 billion will be implemented under PFI for infrastructure works. This study aims to evaluate the project viability and the correlation between the costs and revenue collected for entirely concession period. A systematic framework for project viability of highway privatization projects has been developed based on research findings. The methodology adapted in this research is by using descriptive literature technique analysis. The research finding shows that most preferred technique used by respondents are Internal Rate of Return (IRR) and Net Present Value (NPV). In sustaining the highway projects, the costs incurred during concession period should be managed efficiently. Four (4) variables are found for evaluating project's viability and identifying which variables correlate and significantly contributes to the project viability namely operation cost, maintenance cost, actual toll traffic, and revenue. Actual traffic volume significantly correlates with the revenue meanwhile the operation cost is less correlated to the revenue. This research highlighted the viability of the privatized highway projects for entirely concession period and based on the findings, it is suggested a comprehensive framework for future project evaluation comprising of 8 components of commercial and technical evaluation for privatization highways in Malaysia need to be introduced and recommended to be implemented in the industry.