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POLICY AND GUIDELINES ON
INDUSTRIAL COLLABORATION
PROGRAMME (ICP)
IN GOVERNMENT PROCUREMENT
A Review
CONTENTS
▸Background
▸Technology Depository Agency Berhad (TDA)
▸Mass Rapid Transit Corporation Sdn Bhd
(MRT Corp)
▸Indust...
BACKGROUND
of the Internship
3
A compulsory component of the Masters in Science, Technology and Innovation (STI)
Policy program in Perdana School of Poli...
TECHNOLOGY
DEPOSITORY AGENCY
BERHAD (TDA)
5
TECHNOLOGY
DEPOSITORY
AGENCY
BERHAD
(TDA)
▸Government Owned
Company wholly owned by
MOF
▸The ICP Authority in
Malaysia
▸40...
Review & Analysis
Conduct study on the
current and future local
industry needs.
Planning
Develop strategic
documents to en...
MASS RAPID TRANSIT
CORPORATION SDN BHD
(MRT CORP)
8
MASS RAPID
TRANSIT
CORPORATION
SDN BHD
(MRT CORP)
▸Government Owned
Company
▸Special Purpose Vehicle
wholly owned by MOF
I...
MRT
Vision and
Mission
10
Vision
To be recognised as an
integral provider of
urban rail transport
solution
Source: MMC-Gam...
11
The STI Human Resource Pyramid
Agenda
Setting
Policy
Formulation
Policy
Adoption
Policy
Implementa
tion &
Enforceme
nt
...
INDUSTRIAL COLLABORATION
PROGRAMME (ICP)
POLICY
An Introduction
12
“Industrial Collaboration
Programme (ICP) is a
program which consists of
activities that add value to
procurement made by ...
ICP
14
ICP
15
ICP
16
 The ICP consists of 3 main
elements that are:
▸ Economic
Enhancement
Programme (EEP);
▸ Offset Programme; and
▸ C...
MALAYSIA ICP
MANAGEMENT
FRAMEWORK
17
Source: Attachment 1, ICP Policy
ICP
MANAGEMENT
UNIT (IMU)
AND
THE ICP
REPORTING
STRUCTURE
18
CASE STUDY:
Trent900
Program
19
Supplier/OEM
▸ Rolls-Royce has been selected as the supplier of the engines
Government Pro...
Offset Projects Impact
1
Authorised Maintenance
Center (AMC) status to
Airod Turbopower Sdn Bhd
• Reduction of cost to bec...
POLICY REVIEW
21
Issue Improvement Areas
1
The Government
procurement value of
RM50 million for foreign
contractor and RM100
million for lo...
Issue Improvement Areas
2
Economic Enhancement
Program (EEP) is
compulsory to local
contractor that is awarded
with contra...
Issue Improvement Areas
3
The policy formulation Does not involve stakeholders. Only TDA and
MOF. This makes the policy un...
Issue Improvement Areas
4
TDA’s conflict of
interest
The function of governance and profit making
entity should be separat...
Issue Improvement Areas
5
No code of conduct for
IMU
Learning from MRT Corp’s experience, it is
high time for TDA to imple...
Issue Improvement Areas
6
The ICP Program is
implemented with no
premium (additional
payment to support
the ICP
implementa...
Issue Improvement Areas
7
ICP Program and the
Trans-Pacific
Partnership Agreement
(TPPA)
Malaysia is being asked in the TP...
Issue Improvement Areas
8
A tripartite ICP
Agreement need to
be signed by OEM,
Agency and TDA (on
behalf of the
Government...
Issue Improvement Areas
9
Lack of definition
and cross reference
on the terms in the
Policy
There is a serious lack of def...
Issue Improvement Areas
10
A lot of typo error in
the original
documents
The typo error happen due to the editing of the
P...
THEORY
vs
REALITY
Stakeholder’s
Engagement
Was not fully
practiced during
Agenda Setting,
Policy
Formulation and
Policy Re...
CONCLUSION
33
CONCLUSION
▸ ICP Policy has a lot more improvement needed as
identified in my report
▸ Contradicting clauses and unclear t...
THANK
YOU
norazliza.aris@mymrt.com.my
35
Q&A
36
BACK UP SLIDES
37
ICP CREDIT
VALUE
(ICV)
▸ ICP Credit Value (ICV) is a credit value which the calculation is
based on the economic impact ge...
ICP CREDIT
VALUE
(ICV)
39
ICP CREDIT
VALUE
(ICV)
40
RELATIONSHIP
MRT CORP AND
TDA
41
OEM 1 OEM 2 OEM 3 OEM 4
MRT
CORP
ICP
COMMITTEE
MIEC
Chair by MOF, TDA as
Secretariat, mem...
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POLICY AND GUIDELINES ON INDUSTRIAL COLLABORATION PROGRAMME (ICP) IN GOVERNMENT PROCUREMENT - A Review

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A review on the implementation of ICP Policy in Malaysia

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POLICY AND GUIDELINES ON INDUSTRIAL COLLABORATION PROGRAMME (ICP) IN GOVERNMENT PROCUREMENT - A Review

  1. 1. POLICY AND GUIDELINES ON INDUSTRIAL COLLABORATION PROGRAMME (ICP) IN GOVERNMENT PROCUREMENT A Review
  2. 2. CONTENTS ▸Background ▸Technology Depository Agency Berhad (TDA) ▸Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) ▸Industrial Collaboration Programme (ICP) Policy ▸A Review On ICP Policy ▸Conclusion 2
  3. 3. BACKGROUND of the Internship 3
  4. 4. A compulsory component of the Masters in Science, Technology and Innovation (STI) Policy program in Perdana School of Policy, Universiti Teknologi Malaysia. Four months period with two different organizations. TECHNOLOGY DEPOSITORY AGENCY BERHAD (TDA) 12 February – 31 March 2016 MASS RAPID TRANSIT CORPORATION SDN BHD (MRT CORP) 4 April – 3 June 2016 Supervisor: Dr Nor Ashikin Mohamed Yusof Sr Azita Mohamed Tahir Learning Goals: 1. To understand and compare the concept of Policy Cycle in theory and in real life implementation in a Government owned organizations; 2. To understand different roles and function of both organizations towards realizing the objectives set in the ICP Policy; and 3. To identify and propose areas of improvement in the formulation and implementation of ICP Policy. 4 BACKGROUND
  5. 5. TECHNOLOGY DEPOSITORY AGENCY BERHAD (TDA) 5
  6. 6. TECHNOLOGY DEPOSITORY AGENCY BERHAD (TDA) ▸Government Owned Company wholly owned by MOF ▸The ICP Authority in Malaysia ▸40 employees 6
  7. 7. Review & Analysis Conduct study on the current and future local industry needs. Planning Develop strategic documents to ensure national procurements are fully leveraged to support national needs. Assessment/ Evaluation Carry out evaluation of ICP Proposals and audit activities for the ICP Recipient and ICP Providers. Surveillance/ Monitoring Ensure that the implementation of ICP Programs comply with the Malaysia ICP Management Framework. Verification Perform verification process on the output of each projects. Database Record and store all information about ICP in Malaysia and also the needs of the country for planning of future ICP projects. TDA Roles and Functions1 7 1. Clause 130, ICP Policy
  8. 8. MASS RAPID TRANSIT CORPORATION SDN BHD (MRT CORP) 8
  9. 9. MASS RAPID TRANSIT CORPORATION SDN BHD (MRT CORP) ▸Government Owned Company ▸Special Purpose Vehicle wholly owned by MOF Incorporated ▸The developer and asset owner of the Mass Rapid Transit (MRT) project ▸600 employees 9
  10. 10. MRT Vision and Mission 10 Vision To be recognised as an integral provider of urban rail transport solution Source: MMC-Gamuda (T) Sdn Bhd Mission To engineer and deliver an effective, efficient and integrated mass rapid transit system safely, on time and within cost.
  11. 11. 11 The STI Human Resource Pyramid Agenda Setting Policy Formulation Policy Adoption Policy Implementa tion & Enforceme nt Policy Evaluation & Monitoring Policy Cycle Source: Professor Tan Sri Datuk Dr Omar Abdul Rahman TDA MRT TDA TDA TDATDA TDA MRT INVOLVEMENT OF TDA AND MRT CORP IN THE ICP POLICY
  12. 12. INDUSTRIAL COLLABORATION PROGRAMME (ICP) POLICY An Introduction 12
  13. 13. “Industrial Collaboration Programme (ICP) is a program which consists of activities that add value to procurement made by the Government of Malaysia” 13 Source: Clause 3, ICP Policy
  14. 14. ICP 14
  15. 15. ICP 15
  16. 16. ICP 16  The ICP consists of 3 main elements that are: ▸ Economic Enhancement Programme (EEP); ▸ Offset Programme; and ▸ Countertrade Programme
  17. 17. MALAYSIA ICP MANAGEMENT FRAMEWORK 17 Source: Attachment 1, ICP Policy
  18. 18. ICP MANAGEMENT UNIT (IMU) AND THE ICP REPORTING STRUCTURE 18
  19. 19. CASE STUDY: Trent900 Program 19 Supplier/OEM ▸ Rolls-Royce has been selected as the supplier of the engines Government Procurement ▸ Purchase 6 units of Airbus A380 aircraft by GOM ▸ 28 units of engine are needed for the aircraft. An Offset Agreement between the Government of Malaysia and Rolls-Royce was signed on 30th March 2006 for a 5-year implementation period Offset Program strategies ▸ Support the development of Malaysian Aerospace industry; ▸ Develop capacity and capability through: ▸ ToT; ▸ Research skills & capability development; and ▸ Industrial participation & commercilization; ▸ Create high-income/high skill jobs.
  20. 20. Offset Projects Impact 1 Authorised Maintenance Center (AMC) status to Airod Turbopower Sdn Bhd • Reduction of cost to become 8th AMC in the world • Window to current global business segment opportunities worth of RM 350 million 2 Aerospace contract manufacturing works to local parts and component manufacturers (CTRM, UPECA and SMEA) • V2500 nacelle program awarded worth RM178 million (more than the original requirement) • Led to a business deal worth of RM 3.5 billion until year 2023 3 Collaborative R&D between UTM and Cambridge University on Aero Gas Turbine Combustor and Bio Fuel • Position Malaysian bio-mass into high value product • Getting ready to market potential of RM120.96 billion in 2030 4 Aerostructure Manufacturing Innovation Centre (AMIC) • Capacity development for aerospace industry • Triple-Helix concept at work 5 Maerogel Application on jet- engine parts • Stepping stone to global nanomaterial market segment worth of RM60 billion 20 CASE STUDY: Trent900 Program
  21. 21. POLICY REVIEW 21
  22. 22. Issue Improvement Areas 1 The Government procurement value of RM50 million for foreign contractor and RM100 million for local contractor is compulsory to implement ICP. The value is too low and should be set should be higher. Government procured a lot of non-strategic item like agriculture products and medicine with low value. Higher value indicates higher technology contents. Therefore, by increasing the procurement value for the ICP, TDA can focus its resource towards managing more strategic and higher impact procurements such as in defense, biotechnology and transportation. 22 POLICY IMPROVEMENT
  23. 23. Issue Improvement Areas 2 Economic Enhancement Program (EEP) is compulsory to local contractor that is awarded with contract worth more than RM100 million EEP is a burden to local industry. Local industry needs to allocate their resources to implement the EEP when what they should be focusing is to deliver the main contract as expected and gain higher margin out of it. EEP will be a hindrance to local industry to deliver the project and make profits. Because EEP is mandated to local industry, there will be no technology transfer happening since the ICP Obligor has the same technology maturity as the ICP Recipient. Instead, Malaysia should utilized ICP to fill the technology gap (in design and manufacturing) that can be obtain from foreign contractor. 23 POLICY IMPROVEMENT
  24. 24. Issue Improvement Areas 3 The policy formulation Does not involve stakeholders. Only TDA and MOF. This makes the policy unrealistic and too ideal for real life implementation. The policy should involve all stakeholders with and without ICP knowledge from the inception stage. The final Policy should be presented and reviewed continuously by all the strategic stakeholders for further improvement. 24 POLICY IMPROVEMENT
  25. 25. Issue Improvement Areas 4 TDA’s conflict of interest The function of governance and profit making entity should be separated. TDA should be independent and focuses more on the governance side of the Policy. Other agency such MIGHT can provide IMU services to government agencies with no in-house IMU. In MRT Corp’s case, they are relying solely on TDA to manage, make decision and consult the industry regarding the ICP Program since TDA-IMU has been paid to provide this kind of services to MRT Corp. All the issues on conflict of interest as stated in Section 6.1 of my report can be mitigated if TDA perform only one function either as ICP Authority or IMU, but not both. 25 POLICY IMPROVEMENT
  26. 26. Issue Improvement Areas 5 No code of conduct for IMU Learning from MRT Corp’s experience, it is high time for TDA to implement their own version of No Gift Policy to avoid misperception and misuse of authority. 26 POLICY IMPROVEMENT
  27. 27. Issue Improvement Areas 6 The ICP Program is implemented with no premium (additional payment to support the ICP implementation) and based on mutual benefit (profitable and beneficial to the Government, ICP Provider and Beneficiaries. Although ICP Program aspiration is to have programs that will benefit not only Malaysia but also the OEM, the measurement of the success of the Projects during Post-Implementation Audit is heavily depends on the investment made by OEM. This means that OEM need to increase their pricing margin to include to the cost to implement ICP. This will only increase the project cost that will be charge back to the Government. Not to mention, Agency need to put aside a percentage of the budgeted project allocation to pay for the IMU services fee to TDA. In the end, Government is essentially paying for the ICP Program. 27 POLICY IMPROVEMENT
  28. 28. Issue Improvement Areas 7 ICP Program and the Trans-Pacific Partnership Agreement (TPPA) Malaysia is being asked in the TPPA to let foreign suppliers compete in its procurement on an equal basis with its domestic suppliers. Malaysia have 12 years to slowly reduce and in the end abolished the ICP Program. The Policy needs to address this new development in TPPA and to decide whether we want to continue to rely of ICP as a tool of development. 28 POLICY IMPROVEMENT
  29. 29. Issue Improvement Areas 8 A tripartite ICP Agreement need to be signed by OEM, Agency and TDA (on behalf of the Government) TDA has no authority to sign on behalf of the Government. This requirement need to be taken out from the Policy. The ICP Policy has not been endorsed by the Attorney General Chamber (AGC). Therefore, by having the Government as the signing party will only expose the Government to additional risk. The ICP Agreement should only be between OEM and the Implementing Agency. 29 POLICY IMPROVEMENT
  30. 30. Issue Improvement Areas 9 Lack of definition and cross reference on the terms in the Policy There is a serious lack of definition and cross reference in the document. For example, and important document, ICP Strategic Document (ISD) is not being properly defined in Clause 10, Terminology and Definition. There are also discrepancy on terms and definition between Bahasa Melayu’s version and the English version. Appendix C in my report identifies some of the discrepancies. 30 POLICY IMPROVEMENT
  31. 31. Issue Improvement Areas 10 A lot of typo error in the original documents The typo error happen due to the editing of the Policy is not done by professionals. Appendix C in my report illustrates the various typo errors in the documents. Besides effecting the translation and understanding of the Policy, the typo errors reduce the credibility of the policy and the implementing authority as the Policy is being used by foreign OEMs all over the world. 31 POLICY IMPROVEMENT
  32. 32. THEORY vs REALITY Stakeholder’s Engagement Was not fully practiced during Agenda Setting, Policy Formulation and Policy Review. Legimitation There is no activities towards ensuring that the chosen policy instruments have supports. No legislative approval by AGC, no implementation budget and other resources by GoM. Implementation TDA, the ICP Authority to take responsibility for implementation, ensuring that policy decisions are carried out as planned, is exposed to impartiality and conflict of interest. 32
  33. 33. CONCLUSION 33
  34. 34. CONCLUSION ▸ ICP Policy has a lot more improvement needed as identified in my report ▸ Contradicting clauses and unclear terms and definition makes the ICP Policy open for different interpretations. This will result in inconsistencies during implementation ▸ ICP Policy needs a reality check ▸ The ICP Authority needs to create more awareness and educate the industry on the opportunities offered through ICP Policy ▸ ICP program is supposed to be a win-win situation between the Government and OEM. Mutual understanding and goodwill is more important than following the rules set out by the ICP Policy. 34
  35. 35. THANK YOU norazliza.aris@mymrt.com.my 35
  36. 36. Q&A 36
  37. 37. BACK UP SLIDES 37
  38. 38. ICP CREDIT VALUE (ICV) ▸ ICP Credit Value (ICV) is a credit value which the calculation is based on the economic impact generated by the ICP implementation within the specified period in line with the terms and conditions agreed in the ICP Agreement. The mandatory ICV (unit is in Malaysian Ringgit) for an ICP is based on a minimum of one hundred per cent (100%) equivalent to the value of the Main Procurement Contract. 38
  39. 39. ICP CREDIT VALUE (ICV) 39
  40. 40. ICP CREDIT VALUE (ICV) 40
  41. 41. RELATIONSHIP MRT CORP AND TDA 41 OEM 1 OEM 2 OEM 3 OEM 4 MRT CORP ICP COMMITTEE MIEC Chair by MOF, TDA as Secretariat, members are other Govt Agencies Chair by MRT, TDA as Secretariat, members are MOF and SPAD IMU-TDA

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