This article first appeared in The Edge Malaysia Weekly on January 22, 2024 - January 28, 2024

A lesson learnt from the aerotrain project is that the construction of public infrastructure involving deferred payments can be undertaken only by companies with deep pockets and a proven track record.

Under new terms, Malaysia Airports Holdings Bhd (MAHB) has given the mandate of overseeing the Automated People Mover (APM) project to Alstom Transport Systems (Malaysia) Sdn Bhd. Alstom will partner a joint venture (JV) of IJM Corp Bhd and Pestech International Bhd to complete the 1.5km railway track that connects the main terminal of the Kuala Lumpur International Airport (KLIA) to the satellite building.

MAHB has stressed that the total cost of the job is RM456 million — up 15% — and that the deadline to complete the project remains the same — the end of 1Q2025.

Previously, MAHB had awarded the job to Pestech, which ran into financial difficulties. The terms then were different as Pestech was to build, finance and maintain the infrastructure in return for payment on a deferred term.

Pestech misjudged the financial commitment required to undertake the job and did not command the confidence of the key suppliers. Its problems were compounded when the company’s principal executives were charged by the Malaysian Anti-Corruption Commission (MACC).

The agency withdrew the case against Pestech’s executives even before it could be heard, but by then, the company had already lost the APM job.

Although MAHB has to pay more now, the contract is an outright award to the main company involved in the APM system. Alstom is responsible for the trains and system, which are the key components of the project.

IJM has a 60% stake in the JV, with the remaining 40% held by Pestech. They will have to ensure the other parts of the infrastructure are completed on time.

With such big names, it is easy to understand why MAHB is fairly confident of seeing the project through on time, despite it having come to a standstill in August last year.

Nevertheless, the company is paying a higher price, which is a hard lesson to learn.

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