This article first appeared in The Edge Malaysia Weekly on April 19, 2021 - April 25, 2021

SEVERAL large construction companies are understood to be considering coming up with proposals for the construction of the unbuilt portions of the 1,236km Sabah Pan Borneo Highway.

While The Edge understands that there has been no official request for proposals by the federal government, the companies are looking at funding the initiative via private finance initiatives (PFIs).

When asked if his ministry was supportive of the PFI model being used for the highway, Senior Minister of Works Datuk Seri Fadillah Yusof says in a text message: “(We) Will look into all the proposals and thereafter will table (the proposals) to the Public Private Partnership Unit (Unit Kerjasama Awam Swasta, or UKAS, part of the Prime Minister’s Department) and the Ministry of Finance for further deliberation.”

Late last year, Sabah Deputy Chief Minister Datuk Seri Bung Moktar Radin, who is also the state’s works minister, had proposed that the federal government allow the project to be expedited via a PFI, but there has yet to be confirmation on this.

Some of the companies said to be interested in the proposal include Bina Puri Holdings Bhd, Malaysian Resources Corp Bhd, IJM Corp Bhd, YTL Holdings Bhd, a consortium of Sabah-based companies, as well as Datuk Mohamed Raffe Chekku, who helms Rafulin Holdings Sdn Bhd and is the managing director of the KL-Kuala Selangor Expressway Bhd, the concessionaire for the KL-Kuala Selangor Expressway (Latar Expressway).

It is not clear if Bina Puri, which controls 50% of Latar Expressway’s equity, is working with Mohamed Raffe.

Some of the interested parties are also understood to be looking at tying up with Chinese companies, which will provide some financial muscle for the execution of the multibillion-ringgit project.

“The government may pay us back (for constructing the highway) via a land swap, or pay us a yearly sum with interest, or any other means as well. It’s open for discussion, from what I understand,” an executive at one of the companies says.

A key driver for the switch to a PFI model for the highway could be the federal government’s depleting financials. Just last week, Prime Minister Tan Sri Muhyiddin Yassin conceded that Malaysia was short on funds after handing out RM340 billion in economic stimulus packages throughout the Covid-19 pandemic.

All in, the Sabah Pan Borneo Highway has three phases of construction. The first phase, with 35 work packages, is slated to cost RM15.27 billion. The first phase spans the 706km Sindumin-Kota Kinabalu-Kudat-Ranau-Batu 32 Sandakan-Tawau stretch; the second phase, from Tamparuli to Ranau, is 98km while the third phase, from Tawau to Kalabakan to Keningau to Kimanis, covers 432km.

Until March this year, only 49% of 11 packages of the first phase’s 35 packages had been completed. Put another way, just about 15.4% of the first phase has been concluded, despite the project being awarded five years ago.

To recap, Borneo Highway PDP Sdn Bhd was appointed the project delivery partner (PDP) for the construction of the Sabah portion of the Pan Borneo Highway on April 11, 2016. Borneo Highway PDP is 60% owned by privately held Warisan Tarang Construction Sdn Bhd and 40% by a 50:50 joint venture between publicly traded MMC Corp Bhd and state-controlled investment arm Khazanah Nasional Bhd’s wholly owned UEM Group Bhd.

However, on April 22, 2019, Borneo Highway PDP received a notification from the government to terminate the PDP agreement for the Sabah portion of the highway, opting instead for a more conventional approach, in line with the government’s efforts to optimise the cost of projects with high financial implications for the country. In a bourse filing in 2019, MMC had said the termination was on the grounds of national interest.

Back in 2019, only 12% of the Sabah portion of the Pan Borneo Highway had been concluded but there had been considerable cost overruns. In stark contrast, the Sarawak portion of the highway had been 38% completed by then.

“It’s not easy … To put things in perspective, it’s like building another North-South Expressway. The scope of building the highway in some areas involves the clearing of large tracts of jungle; in other areas, the soil is soft so there must be piling and earthworks.

“Then there is the Crocker mountain range in the west coast of Sabah to contend with. Do you know that mountain ranges move ever so slightly every year? So, it is not a walk in the park,” the executive of the interested company says.

There is also heightened interest in Sabah and Sarawak, with Indonesia’s new capital city being built in Kalimantan, which borders the East Malaysian states on Borneo island. The initial budget estimate for the construction of the new capital city is in the region of US$32.3 billion (about RM133 billion), and it is slated for completion in 2024.

The excitement is focused on Kalabakan, which borders Kalimantan and could be the gateway to the future Indonesian capital from Sabah. Thus far, RM600 million has been allocated for building a road along Serudong in Kalabakan and Simanggaris in Kalimantan and paving the way for a Custom, Immigration, Quarantine and Security complex at the border. With considerable development in this area, many companies are looking for a foothold in Sabah.

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