Just in from Malaysia – maybe some parallels to draw?

By John Nixon 30/10/2009

October 29, 2009 22:04 PM
Hiring Foreign Firms For HSBB Will Minimise Risks For Local Firms, Says Telecom Malaysia

KUALA LUMPUR, Oct 29 (Bernama) — Telekom Malaysia’s (TM) decision to sign up foreign principal vendors to spearhead the national High-Speed Broadband (HSBB) project will minimise the business risk to local firms while helping them gain technology transfer, TM group chief executive officer, Datuk Zamzamzairani Mohd Isa said Thursday.

This is because, touted as the biggest infrastructure roll-out project by global standards, the HSBB initiative’s liability for failure can exceed the contract value.

“It is therefore important that TM directly signs with the principal so that the principal can be directly accountable for this,” he said in a statement here.

“Therefore, to ensure that the project runs smoothly with minimum risks and the best procurement quality, it only makes sense for TM to conduct an open tender process to principal vendors.”

Zamzamzairani said this in response to an earlier statement by the Malay Chamber of Commerce Malaysia that local firms were being shunned to participate in Class A contracts of the HSBB project and instead made junior partners to foreign principals.

He explained that much of the fibre-optic infrastructure work and core network development required high-technology capabilities and experience that was still hard to come by given the cutting-edge nature of the project.

This project also involves new and complex technologies and the equipments are not manufactured in Malaysia.

“Hence, only international manufacturers are capable of developing and producing the advanced equipment with proven systems,” he said.

But as part of the tender criteria, the bidding principal vendors are required to identify capable local contractors as their Focal Local Partner, as the strategic partnership would enable knowledge transfer, capability building and real value added participation.

The Focal Local Partner will then identify qualified local partners to work with them in the project, he said.

“With this expertise acquired via the “knowledge export” in hand, TM and local partners involved in this project will be able to move up the value chain by offering consulting and other related services to other telecommunication companies in the region who are thinking of introducing IP technology into their networks locally and internationally,” he added.

To further protect the interest of the Focal Local Partner, TM has introduced The Master Agreement to be signed by the telco, the principal and the local partner in a tri-partite arrangement.

This will allow TM to monitor and control the relationship between the Principal and Focal Local Partner to achieve National Policy Objectives.

As at end of September, TM has awarded HSBB-related contract work worth RM1.186 billion, where more than 200 local vendors have been awarded, led by the RM600 million contract for the Fibre-to-the-Home (FTTH) Passive infrastructure awarded to local fibre optic manufacturers.

However, Zamzamzairani said TM was still finalising other HSBB packages and to uphold confidentiality and governance in respect of the tender process, the telco will make official announcement at the appropriate time.

As an end-to-end project over a 10-year period, the work involved will be done in parcels, he said.

In relation to this, TM has launched a three-year Vendor Development Programme to ensure that its external local contractors have the requisite capacity and capability to undertake HSBB-related work.

TM has also invested in the training of its 800-strong force of HSBB contractors who will oversee the physical fibre access roll-out, he said.

These local partners will be in an excellent position to reap the shared business ecosystem benefits when the service is commercially launched in the first quarter of next year, he said.