This article first appeared in The Edge Malaysia Weekly, on April 4 - 10, 2016.

PRIVATELY held Warisan Tarang Construction Sdn Bhd is likely to partner UEM Group Bhd and MMC Corp Bhd on the multibillion-ringgit Sabah portion of the Pan Borneo Highway, sources say.

The three are set to form a joint-venture company that will be the project development partner (PDP) for the 700km Sabah portion of the highway, which links Sindumin to Tawau and is expected to cost about RM16 billion.

It is understood that an agreement is being firmed up, under which Warisan Tarang will control 60% of the JV while UEM and MMC will own the rest of it equally. 

“It should be concluded quite soon and an agreement could be inked as early as this week,” a source in Sabah who is familiar with the matter tells The Edge.

Initially, news reports had said MMC and UEM would each have about 30% of the consortium, leaving 40% for Sabah companies, but the latter seem to have wrangled more of it.

Late last year, there was talk that MMC would be dropped from the Pan Borneo Highway job in Sabah, but this seems to have faded away, and MMC is back in the mix.

Warisan Tarang appears small in comparison to construction giants MMC and UEM, but considering the joint venture’s role as the PDP for the project, the three companies need not fork out any money to kick-start it. They just have to act as the project manager in return for a percentage of the project’s value.

Open tenders will be called and qualified Sabah contractors will be invited to participate.

Construction companies from Peninsular Malaysia may also be invited to set up joint ventures, considering the dearth of big construction companies in Sabah, unlike the situation in Sarawak.

“In Sarawak, during Tun Abdul Taib Mahmud’s 33-year tenure as chief minister, large companies such as Cahya Mata Sarawak, Naim Holdings, HSL (Hock Seng Lee Bhd) and Zecon, among others, were developed,” says a construction industry source, adding that in Sabah, no large companies — local champions — were similarly established.

The only listed Sabah-owned company is Suria Capital Bhd, which is involved more in port operations and property development rather than road construction. Warisan Harta Sabah Sdn Bhd has a 46% stake in Suria Capital.

A filing with the Companies Commission of Malaysia (CCM) shows that Warisan Tarang was set up in March 2012, and is wholly owned by Teo Chee Fah @ Wah Chai.

Its directors are A Ashar A Paturusi, Shahelmey Yahya and Muzalee Mujim, who are not big names in the construction industry. The company also seems to have been dormant as it did not register any revenue in its financial year ended June 30, 2014.

The nature of Warisan Tarang’s business, according to the CCM, is general construction and civil works. The company has an issued capital of RM750,000 and an authorised capital of RM1 million.

While the individuals behind Warisan Tarang may not be prominent in the peninsula, they are relatively high-profile in Sabah.

Shahelmey, for example, is an Umno Youth vice-chairman and has a 70% stake in engineering outfit Perunding Shahelmey & Rakan Rakan Sdn Bhd, which chalks up a revenue of RM5 million a year.

However, it is unclear if there will be changes at Warisan Tarang with possibly stronger shareholders emerging.

UEM is wholly owned by state-controlled investment arm Khazanah Nasional Bhd, and was instrumental in the building of the North-South Expressway, the Penang Bridge, the Kulim-Butterworth Expressway and Malaysia-Singapore Second Crossing, among others.

As one of the largest highway operators in Malaysia, UEM’s role in the Pan Borneo Highway is understandable.

Diversified MMC, meanwhile, is the flagship of tycoon Tan Sri Syed Mokhtar Albukhary who controls 51.76% of the company, which has interests in ports, power plants, water treatment, rail and other infrastructure, among others.

The detailed design of the Sabah portion of the highway was slated for completion late last year with the project expected to commence last month.

The RM25 billion Sarawak portion of the Pan Borneo Highway, spanning about 950km, was awarded to Lebuhraya Borneo Utara Sdn Bhd, which was given the mandate by the federal government to plan and undertake its construction.

Several joint ventures have already been set up to undertake the job, which will link Lundu to Lawas.

The Pan Borneo Highway is likely to be toll-free as Prime Minister Datuk Seri Najib Tun Razak indicated at a gathering.

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