Tuesday, April 9th, 2024 at Business | News
Numerous Bumiputera companies possess the necessary qualifications and capabilities to complete the project effectively
by SHAUQI WAHAB & VEISHNAWI NEHRU
AS MALAYSIA endeavours to strengthen its renewable energy (RE) capacity, the discourse surrounding integrating Bumiputera companies into this sector has grown increasingly prominent.
This article delves into the ramifications of excluding Bumiputera entities from significant RE contracts against the backdrop of Solarvest Energy Sdn Bhd’s recent appointment to install solar power systems at over 300 Petroliam Nasional Bhd (Petronas) petrol stations nationwide.
While some argue for selecting companies purely on merit, others question how inclusive the procurement process really is. The debate highlights the push for Bumiputera involvement, concerns about the economic effects and the challenge of balancing merit with inclusivity in Malaysia’s RE contracts.
Advocacy for Bumiputera Inclusion in the RE Sector
Malay Chamber of Commerce Malaysia (DPMM) president Norsyahrin Hamidon said Petronas has consistently provided significant opportunities to Bumiputera companies in the oil and gas (O&G) industry over the past several decades.
“While we are not aware of the financial and commercial aspects of the Petronas petrol stations’ solar power contract awarded to Solarvest, the technical aspects of it from design to installation, commissioning and maintenance are straightforward.
“Numerous Bumiputera companies possess the qualifications necessary to bid successfully for such projects and deliver them effectively,” he told The Malaysian Reserve (TMR).
Norsyahrin explained that, as is generally known, 30% of the list of turnkey or engineering, procurement and construction-rated companies in the country is Bumiputera-owned and including those Sustainable Energy Development Authority-registered (SEDA) solar photovoltaic (PV) service providers, there would be at least 60 companies.
“In other words, there are many Bumiputera companies that have the merits and capabilities necessary to be included in the bid process.
“What DPMM takes into consideration is that in the long run, Gentari Renewables Sdn Bhd will be a major player in the renewable energy sector, in particular the solar PV power installations.
“Gentari Renewables, a subsidiary of Gentari Sdn Bhd, is planning to plant up to 30 gigawatts-peak (GWp) of solar plants globally,” he added.
Norsyahrin stated that Petronas’ self-consumption requirements (not just the petrol stations but all Petronas plants within the petroleum industries) are already large, and in the next few decades may hit some 15GWp to 20GWp capacity requirement in Malaysia alone.
“It is, therefore, important for Bumiputera players in the energy sector and solar PV industry, in particular, to closely follow, monitor and meaningfully participate in all Gentari Renew- ables’ present and future projects.
“We would like to see that Gentari Renewables also act like the Japanese ‘sogo shosha’ to facilitate Malaysian companies especially Bumiputera to penetrate and have a strong foothold in the global RE and solar energy markets,” he said.
Commenting further, Norsyahrin said DPMM is hopeful that after several rounds of discussion between DPMM and Gentari, there may be a better form of collaboration between Gentari Renewables and Bumiputera players in the industry including improving Bumiputera technical, commercial and financial capacities to participate in Gentari Renewables various energy transition projects in the future.
“We are positive that through the proposed collaboration framework being pursued now any unfair challenges and obstacles. If there are any it can be effectively addressed.
“DPMM will be facilitating and coordinating with Persatuan Industri Tenaga Boleh Baharu dan Alam Sekitar and Malaysian Energy Professionals Association as well with other associations in the RE industry to maximise their members’ participation in Gentari,” he explained.
Norsyahrin further stated that DPMM proposes a specific allocation for solar power works within the National Energy Transition Roadmap’s (NETR) target of 60GWp including what’s planned by Petronas or Gentari Renewables.
“The gap in business activity, productive capacity and profitability (measured by gross operating surplus) between Bumiput- era and non-Bumiputera is simply too big and is dangerously unsustainable.
“Addressing this gap is essential, otherwise, continued inequality could jeopardise the sustainability of the Malaysian economy as a whole and create political challenges,” he said.
Addressing the issue, a representative from United Solar Energy (M) Sdn Bhd said the company was not invited to be part of the Bumiputera candidates for the contract.
The representative also commented that a minimum equity by Bumiputera should be incorporated if they are serious about supporting Bumiputera businesses.
“Also, those who participated in the tender should be ensured to have Bumiputera equities only then sufficient opportunities for Bumiputera companies able to compete fairly for the said contract,” the representative said.
TMR tried to get comments from other Bumiputera industry players but was unable to get a response at press time.
Bumiputera Exclusion’s Economic Impact on RE Contracts
Universiti Teknologi MARA Faculty of Business and Management Department of Economics and Financial Studies senior lecturer Dr Mohamad Idham Md Razak said Gentari Renewables merit-based appointment of Solarvest Energy for their RE project can have a positive ripple effect on Malaysia’s competitiveness in this sector.
“By prioritising qualifications over ethnicity, they set a precedent for attracting the most skilled and experienced firms, fostering innovation, efficiency and ultimately driving down project costs.
“This not only benefits Gentari Renewables with a potentially successful project but also sends a strong signal to other players, encouraging them to focus on building strong technical capabilities to compete effectively in the growing RE market,” he told TMR.
Besides, Mohamad Idham said the exclusion of Bumiputera players from the solar power system installation contract at Petronas’ stations could have detrimental effects on the socioeconomic development and inclusivity goals set by the government.
By excluding them from such contracts, he said it would cause risks of widening the economic gap and impede their progress toward economic empowerment.
“Furthermore, this exclusion undermines the government’s commitment to fostering inclusivity and diversity in economic opportunities, hindering efforts to build a more equitable society and achieve sustainability,” he said.
Commenting further, Mohamad Idham stated Gentari Renewables’ decision could potentially have significant economic repercussions across various fronts within the RE sector.
He believed that in terms of employment opportunities, the exclusion of Bumiputera players might lead to a loss of jobs and hinder the development of skilled labour within these communities, thereby impacting overall employment rates and exacerbating socioeconomic inequalities.
“Secondly, regarding revenue distribution, the absence of Bumiputera involvement may concentrate wealth and economic benefits within certain segments of society, potentially leading to disparities in income distribution and hindering broader economic development.
“Finally, in terms of industry growth, excluding Bumiputera players could impede the sector’s expansion by limiting diversity
and innovation, ultimately slowing down the pace of technological advancement and market competitiveness within the renewable energy industry as a whole,” he said.
Balancing Merit and Inclusivity
Meanwhile, weighing in on the matter, Noma SWO Consult associate partner and Gerson Lehrman Group’s (GLG) council member Nik Zafri Abdul Majid highlights the advantages and potential drawbacks of such a move.
One of the key points raised by Nik Zafri is the ambiguity surrounding the term “merit” which he questioned what criteria are used for that.
“While turnkey has been known for several advantages such as streamlined project management and reduced client responsibility, there are several disadvantages as well along the way,” he noted.
Nik Zafri said although turnkey contracts streamline project management, reduce client responsibility and offer convenience, they also pose challenges such as limited client control over project execution and potential disputes over project scope and performance standards.
He emphasised that awarding contracts solely based on merit could have unintended consequences.
“If merit criteria are narrowly defined or perceived as preferential treatment favouring large firms, it could be of disadvantage to smaller or local companies, including Bumiputera companies.
“Furthermore, if merit is not inclusive of diverse perspectives, backgrounds and expertise, it could result in a lack of diversity among contractors and suppliers,” he commented.
To address these concerns and promote inclusivity and competitiveness in the RE sector, Nik Zafri suggested implementing transparent and inclusive tender processes which include setting higher quotas for Bumiputera participation, providing incentives for Bumiputera companies and fostering partnerships between small and large firms to transfer knowledge and build capacity within the Bumiputera industry.
While the decision to award contracts based on merit aims to promote fairness and efficiency, it also raises questions about inclusivity and socioeconomic impact.
Hence, Nik Zafri believed that balancing these considerations is crucial for fostering a vibrant and competitive RE sector in Malaysia.
“If DPMM believes that tender processes are biased or unfair, they may be less inclined to participate, leading to reduced competition for contracts,” he said.
Nik Zafri added that Bumiputera small and medium enterprises (SMEs) are particularly vulnerable to the effects of perceived preferential treatment.
“If tender processes are seen as favouring established players, Bumiputera SMEs may struggle to compete, limiting their growth opportunities and stifling entrepreneurship in the sector.
“Thus, to mitigate these economic implications, it’s crucial for governments and organisations overseeing tender processes to prioritise transparency, accountability and fair competition,” he commented.
