Critical success factors in obtaining project financing for private finance initiative projects in Malaysia

A continuing increase in demand for infrastructure, with the aim of realising Malaysia's developed nation status by 2020, has driven the government to seek smart partnerships with the private sector. In line with existing privatisation policies, the concept of Private Finance Initiative (PFI) was introduced to carry out public projects in the Ninth Malaysia Plan (2006-2010). Yet, there is a lack of participation by the private sector due to difficulties in obtaining project finance. Financial institutions are generally unwilling to provide long-term financing for PFI projects as they suffer from limited liquidity and visibility. Local financing bodies are still relatively inexperienced and doubtful about PFI project financing. Unclear guidelines and regulations, as well as lack of government initiatives to promote such schemes, have also compounded the problem. The objectives of this paper are to identify critical success factors (CSF) influencing the financing of PFI projects and propose a relationship framework between CSF and success criteria in obtaining finance for PFI projects in Malaysia. An exploratory research method which includes a comprehensive literature review, interviews and questionnaire survey was adopted to strengthen the research case proposed. Four experienced key players in PFI projects were interviewed and fifty two respondents with finance; construction and public agency backgrounds answered the questionnaire. The findings indicate four main dimensions of CSF in obtaining finance for PFI projects including project attributes; Special Purpose Vehicle (SPV) attributes; government attributes and financing attributes. An external environmental factor affecting PFI financing was the political and economic environment. The findings will provide guidelines to key players, i.e. SPV; financial institutions and government agencies in their financing strategies, particularly for Malaysian PFI projects.