Murky practices in rail tenders deter foreign firms, weekly reports

By Lisa J. Ariffin

Malaysian Insider, June 17, 2012

Since the late 1980s, Malaysia has preferred direct negotiations in awarding public works and the construction of infrastructure projects over public tender. — file pic

KUALA LUMPUR, June 17 — International companies are shying away from Malaysia’s rail sector due to less-than-transparent decisions in the tender process, The Edge weekly has reported.

According to an article in the business and investment weekly’s latest edition, “intense lobbying, glitches in the tender process and political favouritism” are among some of the reasons why foreign firms are snubbing rail tenders, a move which could deprive the country of a high-quality rail system.

The Edge reported that the response to open tenders has been poor purportedly due to the unfair selection of large contracts, adding that government officials have acknowledged the problem but have defended it as a relatively new phenomenon.

“It is a learning process, but the government is committed to the open tender system,” an unnamed official from a government transport agency that oversees the country’s rail networks was quoted as saying.

However, the weekly reported that international investors are not convinced of this assurance, with a representative of a company in pursuit of engineering contracts in Malaysia saying: “Most tenders start off well. It is in the evaluation process where things get very murky and you are often left feeling that it is not a level playing field”.

Another foreign consultant pointed out: “Not attracting bids only raises more questions about the tender process”.

The weekly added that since the late 1980s, Malaysia has preferred direct negotiations in awarding “public works and the construction of infrastructure projects over public tender because the government was keen to speed up the development of the country’s infrastructure”.

“But the practice has long been criticised because the awards have often favoured politically well-connected business groups.

“Critics also gripe that the negotiated tender practice is littered with failed projects that have resulted in costly government bailouts,” it reported.

It added that with contracts valued at more than RM1 billion up for grabs in the coming months, the loss of international investors would prove detrimental.

“More than RM70 billion worth of rail projects have been slated for the next decade, including the prized RM50billion Klang Valley MRT project,” it pointed out.

“Industry executives have noted the government needs to quickly deal with the grievances faced by international companies to salvage the open tender system,” it added.