IMPROVING OFF-SITE INFRASTRUCTURE PROVISION THROUGH THE PLANNING APPROVAL SYSTEM IN PENINSULAR MALAYSIA DANI BIN SALLEH UNIVERSITI TEKNOLOGI MALAYSIA IMPROVING OFF-SITE INFRASTRUCTURE PROVISION THROUGH THE PLANNING APPROVAL SYSTEM IN PENINSULAR MALAYSIA DANI BIN SALLEH A thesis submitted in fulfilment of the requirements for the award of the degree of Doctor of Philosophy (Urban and Regional Planning) Faculty of Built Environment Universiti Teknologi Malaysia JULY 2009 iii ACKNOWLEDGEMENTS I would like to thank my principle supervisor Professor Dr. Ho Chin Siong for his thoughtful and encouraging supervision and his significant input for his guidance, comments and suggestions especially helping me on statistical analysis during the course of this study. I would like to thank other staff members, particularly those in Department of Urban and Regional Planning, Faculty of Built Environment, Universiti Teknologi Malaysia (UTM) for their advice and assistance in my study. I am also indebted to the Department of Public Services (JPA) and Universiti Utara Malaysia for granting me financial assistance and study leave in order to undertake the study at the Universiti Teknologi Malaysia. My deep appreciation goes to my colleagues at the Department of Development Management, Faculty of Public Management and Law, Universiti Utara Malaysia (UUM) for taking over my teaching duties during my absence. Many other people, both in Britain and Malaysia, have also given their assistance without which the study would not have been possible. I would particularly like to thank: - Dato’ Mohd. Khalid (Deputy President of REDHA Malaysia), - Dato’ Khoo Kim Choon (REDHA Legal Advisor), - Professor Patsy Healey (University of Newcastle Upon Tiny), - Professor Jim Claydon (University of New England), - Professor Dr. Ghani Salleh (USM), - En. Abu Bakar Johar, Director of Development Planning Department, Ministry of Housing and Local Government (MoHLG). - Pn. Maimunah bt. Shariff (Director of Town Planning Department, Municipal Council of Penang Island, MPPP). - My post-graduate friends for their helps (Department of Urban and Regional Planning, Department of Architecture, Department of Quantity Surveying, from Faculty of Built Environment, UTM). I am grateful to them for recognising the value of the study into an area on which little has been published. I would also like to express my gratitude to my colleague at Department of Development Management, Faculty of Public Administration and Law, Universiti Utara Malaysia (UUM), who drew my attention to the research projects referred to in this work and who gave helpful and encouraging support. Finally, special thanks go to all my Guru, my parent, my wife and children (Ezzul Hillman and Nuraini Suhailah) for their patience and support during my study. iv ABSTRACT The scarcity of financial sources has caused local authorities to no longer remain as the single providers of off-site local infrastructure. This has forced them to diversify and identify new methods to accommodate the provision. This has raised the need for the present practice to be reformed in order to involve the private sector. This research examines the possibility of applying planning approval system to secure off-site infrastructure from the private sector. To achieve the objective, the research used both qualitative and quantitative methods to identify the hindering factors of the present practice of off-site infrastructure provision. The findings showed that most off-site infrastructure provisions were delivered by public sector. The private sector delivery was only evident in large-scale development. The responsibility to provide off-site infrastructure now falls under the mutual responsibility of both private and public sectors. In addition, the development plans has played a significant role in terms of the mechanism in coordinating new development with adequate provisions of off-site infrastructure. The tendency of private sector to contribute off-site infrastructure is influenced by the cost of development. The main issues of private involvement in local infrastructure provision (off-site) are caused by the inconsistency of the conditions imposed by local authorities to justify the requirements of off-site infrastructure. The findings propose the practice of off-site infrastructure provision to be clearly defined and standardised. The study revealed that planning approval system can be used to provide off-site infrastructure by private sector through negotiation with approving local authority as the most acceptable approach. However, it requires further investigations to detail how the framework of negotiations should be outlined and the structure to be applied. The implications of the findings have shown that the system should be improved by integrating the element of negotiations as alternative means in considering planning approvals and the types of infrastructure delivery should be diversified to include Build Operate and Transfer (BOT), Public-Private Partnership (PPP), Private Finance Initiative (PFI) and other methods of private delivery. The basis to seek contributions from private sector should be properly established and local authority therefore shall establish an Integrated Planning Approval System which enables them to distribute costs of providing infrastructure to potential users. v ABSTRAK Sumber kewangan yang terhad telah menyebabkan pihak berkuasa tempatan tidak lagi berperanan sebagai penyedia utama kemudahan infrastruktur yang berada di luar kawasan pembangunan swasta dan keadaan ini telah memaksa pihak berkuasa tempatan mempelbagai dan mengenalpasti beberapa pendekatan baru bagi memenuhi keperluan tersebut. Perubahan terhadap amalan semasa penyediaan infrastruktur diperlukan sebagai usaha untuk melibatkan pihak swasta. Selaras dengan itu, kajian ini mengkaji sama ada sistem kelulusan perancangan boleh digunakan untuk mendapatkan infrastruktur daripada pihak swasta. Untuk mencapai objektif kajian, pendekatan kualitatif dan kuantitatif telah digunakan untuk mengenalpasti faktor yang menghalang penglibatan pihak swasta menyediakan infrastruktur. Hasil kajian menunjukkan bahawa kebanyakan penyediaan kemudahan infrastruktur disediakan oleh pihak kerajaan manakala pihak swasta hanya menyediakan infrastruktur untuk projek berskala besar. Tanggungjawab menyediakan kemudahan infrastruktur sepatutnya adalah tanggungjawab bersama di antara pihak kerajaan dengan pihak swasta. Di samping itu, pelan pembangunan memainkan peranan yang penting sebagai mekanisme untuk mengkoordinasi cadangan pembangunan dengan penyediaan infrastruktur yang mencukupi. Kecenderungan pihak swasta dalam penyediaan infrastruktur pada masa ini adalah dipengaruhi oleh faktor kos sesuatu projek. Isu utama yang menghalang penglibatan swasta adalah ketidakselarasan garispanduan yang ditetapkan oleh pihak berkuasa tempatan untuk menjustifikasikan keperluan penyediaan kemudahan infrastruktur ini. Kajian mencadangkan supaya amalan ini diperkemas dan diselaraskan. Kajian ini juga mendapati sistem kelulusan perancangan boleh digunakan untuk menyediakan kemudahan infrastruktur daripada pihak swasta dengan menggunakan pendekatan perundingan dan diterima oleh pihak swasta. Pendekatan ini perlu diperinci dari segi kesesuaian kerangka perundingan. Penemuan kajian memberi implikasi bahawa pendekatan perundingan perlu digunakan sebagai kaedah alternatif di dalam mempertimbangkan kelulusan perancangan dan kaedah penyediaan infrastruktur perlu dipelbagaikan dengan menggunakan keadah penyediaan swasta seperti Build Operate and Transfer (BOT), Public-Private Partnership (PPP), Private Finance Initiative (PFI) dan beberapa kaedah lain yang sesuai. Di samping itu asas untuk mendapatkan sumbangan daripada pihak swasta perlu disediakan dan pihak berkuasa tempatan perlu menyediakan suatu bentuk Sistem Kelulusan Perancangan Bersepadu untuk membolehkan kos penyediaan sesuatu infrastruktur diagihkan kepada pengguna yang berpotensi. vi TABLE OF CONTENTS CHAPTER 1 TITLE PAGE DECLARATION ii ACKNOWLEDGEMENTS iii ABSTRACT iv ASBTRAK v TABLE OF CONTENTS vi LIST OF TABLES xiii LIST OF FIGURES xvi LIST OF ABBREVIATIONS xix LIST OF APPENDICES xxi INTRODUCTION 1.1 Introduction 1 1.2 An Overview of Urban Development and Local 2 Infrastructure Provision 1.3 Current Issues in Local Infrastructure Provision 3 1.4 The Definition 5 1.5 Problem Statements 9 1.6 Research Questions 13 1.7 Purpose of the Research 14 1.8 Scope of Research 15 1.9 Significance of the Research 16 1.10 Expected Contributions of the Research 18 1.11 Thesis Structure 20 1.12 Conclusion of the Chapter 23 vii 2 LOCAL INFRASTRUCTURE PROVISION AND PLANNING APPROVAL SYSTEM: A THEORETICAL FRAMEWORK 2.1 Introduction 24 2.2 Local Infrastructure Provision: The Previous Studies 24 2.3 Public and Private Initiative in Infrastructure Provision 27 2.4 Local Infrastructure Provision: Why Private Sector? 30 2.5 Private Delivery of Local Infrastructure Provision 33 2.5.1 Issuing Municipal Bonds 34 2.5.2 Traditional Public Contracting 35 2.5.3 Service/Management Contracts 35 2.5.4 Lease Contracts 35 2.5.5 Public-Private Partnership (PPP) 36 2.5.6 Private Financial Initiative (PFI) 36 2.5.7 Build Operate and Transfer (BOT) Schemes 37 2.5.8 Concession/Franchise Agreements 38 2.5.9 Joint Ventures 38 2.5.10 Full Privatization 39 2.6 Classification of Infrastructure 39 2.7 Planning Approval System and Off-site Infrastructure 44 Provision 2.7.1 Planning System and Development Plans 44 2.7.2 Development Process and Planning Approval 46 2.7.3 Planning Gains and Planning Approval Process 50 2.7.4 Planning Approval Mechanism to Secure Off-site 57 Infrastructure 2.7.4.1 Planning Contributions 58 2.7.4.2 Development Charges 58 2.7.4.3 Planning Agreements 59 2.7.5 Negotiating Off-site Infrastructure Provision 62 viii 2.8 2.9 3 Comparative System of Local Infrastructure Provision 65 2.8.1 Ireland 65 2.8.2 Australia 66 2.8.3 Germany 68 2.8.4 United States 69 Conclusion of the Chapter 71 PLANNING APPROVAL SYSTEM IN MALAYSIA 3.1 Introduction 73 3.2 Urbanisation and Infrastructure Development 73 3.3 The Framework of Planning System 75 3.3.1 Planning System in Malaysia 75 3.3.2 The Administrative Functions of Local Authority 78 3.3.3 Administrative Framework of Planning System 82 3.3.4 Legislation Framework for Development Control 83 3.3.5 Planning System and Infrastructure Provision 85 3.4 Development Plan and Infrastructure Provision 86 3.5 Development Process and Planning Approval 89 3.6 Conclusion of the Chapter 95 ix 4 LOCAL INFRASTRUCTURE PROVISION IN MALAYSIA 4.1 Introduction 96 4.2 An Overview of Infrastructure Development in Malaysia 96 4.3 Local Infrastructure Provision in Malaysia 100 4.3.1 Local Infrastructure Development 101 4.3.2 Local Expenditures on Infrastructure Development 103 4.4 Source of Funds for Infrastructure Development 107 4.5 Planning Approval System and Infrastructure Provision 109 4.6 Planning Approval and Planning Contribution 111 4.6.1 Development Charge 112 4.6.2 Unilateral Undertaking of Planning Obligation 112 4.6.3 Improvement Service Fund (ISF) 114 4.6.4 Issuing of Municipal Bonds 115 Conclusion of the Chapter 115 4.7 5 RESEARCH METHODOLOGY 5.1 Introduction 117 5.2 Research Process 117 5.3 Conceptual Framework 122 5.4 Research Approach 123 5.5 Methods of Data Collection 125 5.5.1 Fieldwork Survey 126 5.5.2 Questionnaire Design 127 5.5.2.1 Local Authority 128 5.5.2.2 Developer 130 5.5.3 Sampling Design and Procedure 131 5.5.3.1 Local Authority 131 5.5.3.2 Developer 134 x 5.5.4 Pilot Survey 135 5.5.5 In-depth Interview 136 5.5.6 Library Research 138 5.6 Validity and Reliability 139 5.7 Methods of Data Analysis 141 5.8 Documentation of Research Findings 144 5.9 Limitations of the Study 145 5.10 Conclusion of the Chapter 6 146 PRACTICE OF SECURING OFF-SITE LOCAL INFRASTRUCTURE PROVISION 6.1 Introduction 148 6.2 The Background of Respondents 148 6.2.1 Local Authority 149 6.2.2 Developers 152 6.3 The practice of Local Infrastructure Provision 155 6.3.1 The Present Practice of Off-site Local 155 Infrastructure 6.3.2 The Reasons of Using Private Sector 158 6.3.3 The Type of Off-site Infrastructures Most Needed 160 by Local Authority 6.3.4 The Responsibility of Providing Off-site 162 Infrastructure 6.3.5 The Costs of Off-site Infrastructure 163 6.3.6 Delay in Obtaining the Planning Approval 165 6.3.7 The Influence of Infrastructure Distribution 167 on Project Locations 6.3.8 The Major Drivers of Private Sectors Involvement in Off-site Infrastructure Provision 170 xi 6.4 The Application of Planning Approval System to Secure 171 Off-site Infrastructure Provision 6.4.1 The Perceptions over the Methods Applied to 171 Secure Off-site Infrastructure 6.4.2 The Effectiveness of Negotiations 172 6.4.3 Developers’ Reaction of Off-site Infrastructure 174 Requirements 6.5 The Problems Relating to Off-site Infrastructure 176 Provision during the Planning Approval Stage 6.5.1 The Constraints of Private Involvement 176 6.5.2 The Appropriate Forms of Off-site Infrastructure 178 Provisions 6.5.3 Weaknesses of the Present Practice of Off-site 180 Infrastructure Provision 6.5.4 The Developers Perceptions on Off-site Local 182 Infrastructure Provision Requirements 6.6 Suggestions to Promote Off-site Infrastructure Provision 185 6.7 Existing Perceptions on the Appropriate Type of Delivery 189 of Off-site Infrastructure Provision 6.8 Conclusion of the Chapter 7 192 PROPOSED IMPROVEMENT OF OFF-SITE LOCAL INFRASTRUCTURE PROVISION 7.1 Introduction 196 7.2 The discussion of the Key Findings 196 7.2.1 The Present Practice of Local Infrastructure 196 Provision 7.2.2 The Application of Planning Approval System 199 to Secure Infrastructure Provision 7.2.3 The Problems Faced by Local Authorities to Secure Off-site Infrastructure Provision 200 xii 7.2.4 The Perceptions of the Possible Mechanisms to 203 Secure Off-site Infrastructure 7.2.5 Summary of Findings 206 7.3 The Key Issues of Off-site Local Infrastructure Provision 207 7.4 Towards the Improvement of Local Infrastructure 209 Provision System 7.4.1 The Conceptual Framework of the System 210 7.4.2 The Components of the System 212 7.4.3 Incorporating Planning Approval and Negotiations 214 Process 7.4.4 Incorporating Private Delivery Methods in Local 219 Infrastructure Provision 7.5 Recommendations to Improve the Planning Approval 222 System with Regards to Off-site Infrastructure Provision 7.6 Conclusion of the Chapter 8 227 SUMMARY AND CONCLUSION 8.1 Introduction 227 8.2 Summary of Discussion 227 8.3 Key Issues for Future Research 229 8.4 Conclusion 231 REFERENCES 233-259 APPENDICES A - C 260-316 xiii LIST OF TABLES TABLES NO. TITLE PAGE 1.1 Revenue of major municipalities in Malaysia, 2003 11 1.2 Local infrastructure expenditure in major local 12 authorities in the State of Johor (2000-2004) 2.1 The range of responsibility for infrastructure funding 43 2.2 Types of gains as reported by local authorities 61 2.3 The distribution of planning applications and planning 62 gain agreements in Wokingham, 1974-1981 2.4 Some infrastructure provided by private options in 67 Australia 3.1 The distribution projection of urban population in 74 Peninsular Malaysia, 1911-2020 4.1 Public financing for infrastructure development 98 in Malaysia, 1991-2000 4.2 Local infrastructure investment required for central sewerage system in major towns Malaysia 102 xiv 4.3 Local infrastructure investment required for domestic 103 solid waste in Malaysia 4.4 Local infrastructure expenditures in Municipal Council 106 of Penang Island Financial 1992-1995 5.1 The purpose of in-depth interview 137 6.1 Type of local authority 149 6.2 The procedures applied to expedite planning approval which 156 involves off-site infrastructure requirements 6.3 The reasons of using private sector for off-site 159 infrastructure provision 6.4 Development cost involved and the percentage of 164 allocation for off-site infrastructure 6.5 Planning permission processing period by development cost 167 6.6 Factors influence developer’s decision to determine 168 project locations 6.7 The major drivers of private involvement in off-site 170 infrastructure provision 6.8 Methods applied to secure off-site infrastructure 171 6.9 The effective of negotiation methods 173 6.10 Developers’ reactions when off-site infrastructure 175 imposed by local authority xv 6.11 The constraint of private involvement in local 177 infrastructure provision 6.12 The appropriate form of contribution of off-site 179 infrastructure provisions 6.13 Weaknesses of the present practice of off-site infrastructure 181 provision as observed by developers 6.14 The perceptions of off-site local infrastructure practices 183 6.15 The problems faced by developers related to off-site 184 infrastructure provision 6.16 Suggestions to promote off-site infrastructure provision 188 6.17 Local authority and developers’ perception on 191 the appropriate xvi LIST OF FIGURES FIGURE NO. TITLE PAGE 1.1 Thesis structure 22 2.1 The range of infrastructure provision 32 2.2 Types of local infrastructure components 42 2.3 The stages of property development process 48 2.4 The outline of British decision-making procedure in 49 planning permission approval 2.5 The cycle of development gain expenditure 54 2.6 Local infrastructure provision (off-site and on-site) 72 3.1 The overall government development machinery 76 3.2 The concepts of state-level administrative boundaries 79 3.3 The location of major municipalities and population 81 in Peninsular Malaysia xvii 3.4 Land-use planning framework 83 3.5 Development process in Malaysia 90 3.6 Development approval process in Peninsular Malaysia 92 4.1 Expenditure for infrastructure development in Malaysia, 99 1991-2005 4.2 Municipal Councils of Penang Island development 105 expenditure 1992-2004 5.1 The comparison of process involved in qualitative 119 and quantitative type of research 5.2 The research process 121 5.3 The flow of field work survey and the distribution 133 of respondents 5.4 The relationship between reliability and validity 140 in qualitative research 6.1 Years of experience of respondents (Local Authority) 150 6.2 Involvement with off-site infrastructure provision by 151 type of local authority 6.3 Status of ownership of the developer 152 6.4 The years of establishment of the developers 153 6.5 The average of development cost 154 xviii 6.6 The present methods of off-site infrastructure provision 157 6.7 The distribution of off-site infrastructures mostly needed 161 by local authority 6.8 Responsibility of providing off-site infrastructure 162 Facilities 6.9 Development cost allocated for off-site infrastructure 163 6.10 Planning approval timeframe 166 7.1 The practice of local infrastructure procurement 209 (funding and delivery system) in Malaysia 7.2 Local authority infrastructure provision (off-site and on-site) 214 funding and delivery mechanisms 7.3 Proposed integration of planning approval and negotiation 215 process of local infrastructure 7.4 The negotiations process during planning approval stages 216 7.5 Integrating planning approval and negotiation process 219 7.6 Proposed improvement for local authority infrastructure 224 provision (off-site and on site) funding and delivery system xix LIST OF ABBREVIATIONS Act 133 : Street, Drainage and Building Act 1974 (Act 133) B.O.O.T : Build Operate Own Transfer B.O.T : Build Operate Transfer DBKL : Dewan Bandaraya Kuala Lumpur (City Hall of Kuala Lumpur) EIA : Environmental Impact Assessment FMP : Fourth Malaysia Plan IWK : Indah Water Konsortiun LA : Local Authority LP : Local Plan LPAs : Local Planning Authorities MBJB : Majlis Bandaraya Johor Bahru (City Council of Johor Bahru) MoHLG : Ministry of Housing and Local Government MPPJ : Majlis Perbandaran Petaling Jaya MPSJ : Majlis Perbandaran Subang Jaya MBSA : Majlis Bandaraya Shah Alam MPK : Majlis Perbandaran Klang NDP : National Development Policy NEP : New Economic Policy OPP1 : Outline Perspective Plan 1 OPP2 : Outline Perspective Plan 2 xx BPA : Pihak Berkuasa Air P.F.I : Private Finance Initiatives P.P.P : Public-Private Partnership PBTPG : Pihak Berkuasa Tempatan Pasir Gudang (Local Authority of Pasir Gudang) REDHA : Real Estate Developer and Housing Association SMP : Second Malaysia Plan SP : Structure Plan SPC : State Planning Committee STM : Syarikat Telekom Malaysia SYABAS : Syarikat Air Selangor TCP : Town and Country Planning Act 1976 (Act 172) TNB : Tenaga Nasional Bhd. WTO : World Trade Organisation IMF : International Monetary Fund xxi LIST OF APPENDICES APPENDIX A1 TITLE Evaluation of alternative local infrastructure PAGE 260 funding measures A2 Different type of private sector involvement 264 in local infrastructure delivery B1 Method of privatisation of major infrastructure 265 in Malaysia (National level of infrastructure) B2 Infrastructure expenditures in City Council 266 of Johor Bahru 2000-2004 B3 Infrastructure expenditures in Municipal Council 267 of Johor Bahru Tengah (2002-2004) B4 Infrastructure Expenditures in Municipal Council 268 of Kulai (2000-2004) B5 List of the completed projects funded by federal 269 government allocation for MBJB, 2003 B6 List of projects under construction funded by federal government allocation for MBJB (2003) 270 xxii B7 List of projects under construction funded by federal 271 government allocation for MBJB,2003 B8 List of the completed projects funded by State 271 Government allocation for MBJB, 2003 B9 List of projects under construction funded by internal 272 funds for MBJB, 2003 B10 List of development projects in MPJBT, 2003 273 B11 List of development projects in Majlis Perbandaran 274 Kulai (MPK), 2002-2003 B12 Examples of Planning Agreement by local authority 275 to secure off-site infrastructure from private sector C1 The distribution of local authority in Malaysia 279 C2 Set A1 - Local Authority Survey 280 C3 Set A2 - In depth Interview for Local Authority Survey 294 C4 Set B1 - Developer Survey 299 C5 Set B2 - In depth Interview for developer 312 CHAPTER 1 INTRODUCTION 1.1 Introduction Rapid urbanisation creates pressure in the demand for additional infrastructure at the local level. Sufficient infrastructure facilities are vital for a sustainable economy and local development. In many countries, infrastructure provision always concerns the involvement of public sector in providing the physical facilities, consisting of public facilities, roads and highways, hydroelectric dams, sewerage systems, water treatment plants, airports and many others. Adequate provision of infrastructure is a prerequisite for the sustainability of local development. Local authorities (LA) increasingly find themselves in a shortage of funds. Due to rising costs of infrastructure, there is a need for a paradigm shift of provisions from public to private sector. This scenario has forced local authorities to identify new forms of delivery of local infrastructure from private developers. This introductory chapter provides a context for the subsequent ones reviewing the background of the study in relation to current issues in local government infrastructure. The chapter discusses problems that constraint the involvement of private sector in local infrastructure provision with reference to the planning approval system. The chapter also outlines the purpose, scope, significance and the structure of the study. 1.2 2 An Overview of Urban Development and Local Infrastructure Provision Infrastructure has played an effective role in local development. The main concerns are often raised on the impact of infrastructure development on local communities, about the appropriate roles of public and private sectors in infrastructure financing, ownership and management. Enormous change in local development in the last two decades has sparked a shift of perceptions, likely shifting the role of public sector in local infrastructure development. At the same time central government has considerably reduced the allocation for local infrastructure provision. Acceleration of local development coupled with financial limitation, have forced local authorities to diversify the full range of local infrastructure alternatives, in particular referring to those infrastructures located outside the responsibility of private developers (off-site). This scenario has forced local authorities to be more adaptive in formulating local development policies preferably in managing local infrastructure provision. According to Helmsing (2001), local authorities in many developing countries were allowed to include the private sector in local infrastructure provisions. This actually initiated a new chapter in local infrastructure development. In the same scenario, London Mayor Ken Livingstone (London Housing, 2001) called for the involvement of private sector to be involved in local infrastructure provision. The mayor urged local authorities to acquire some gains from the private development in return for planning approvals. This would further strengthen the capacity of the local planning authority (LPA) to negotiate any possibility for additional infrastructure via planning gain method. This particularly involved off-site infrastructures required by local development. The rationale of the practice is that the approved development might generate a degree of development 'impacts' in term of the increased demand for new infrastructure in the surrounding 3 areas. This has to be managed by the respective local authorities by providing the appropriate infrastructure in order to ease the impacts. In many countries, the involvement of private sector in local infrastructure provision offers new alternatives of local infrastructure delivery (Guy and Marvin, 1997; Ennis, 1997; Healey, 1997; Claydon and Smith, 1997). In Britain, planning approval has been widely used to secure local infrastructure such as social infrastructure, environmental and community facilities from private developers (see Ennis, 1997). The factors identified as causes of the scenario are the reduction of property tax that reduced the income of local authorities and the limitation of budget as imposed by the central government (Healey et al., 1995). The British planning approval system was identified as an effective means for local authorities to secure infrastructure facilities from private developers (see Healey et al., 1995; Bunnell, 1995) and the system appearing as a normal expected spin-off from the development process through the state intervention to ensure the essential non-profit-making facilities are provided as well (Greed, 1996). These might range from the provision of basic physical infrastructure (such as sewers, drains and roads) and social facilities (such as schools, community centres, public conveniences, parks and bus stations). 1.3 Current Issues in Local Infrastructure Provision Provisions of public infrastructure at local level cover transportation infrastructure, water and wastewater, health sector and public buildings. Traditionally, the local government has carried out the responsibility at all stages of infrastructure development. These included the stage of planning, design, financing, construction, operation and maintenance (Hallmans and Stenberg, 1999). 4 There is no doubt that growing communities require recreational parks, local roads, waste water facilities, proper drainage systems, solid waste collection and disposal, streets, parks and other necessary facilities to be provided adequately. These facilities are needed for the community to function in a manner that protects the public health, safety and welfare for local development sustainability. With the scarcity of financial resources, the scenario has raised the question as to who should provide the infrastructures located outside the development area (off-site) and this remains a concern for many local authorities. According to Ennis (1997), two arguments exist here; one concerning the appropriateness of the private sector's increased share in the costs of provision; the other, concerned with the party that should pay for the cost of infrastructures, from which three potential cost-bearers have been identified: the landowner, the developer and the buyer. The problems that constraint the involvement of private developers are as follow: i. Deficiency of consistent guidelines on off-site infrastructure provision requirements, ii. Insufficient funds for off-site infrastructures, and iii. Delay in obtaining planning approval with those projects involved with off-site infrastructure These issues have some cumulative consequences on the responsibility of all actors in the sector. However the fundamental question is that between local authority and developer who must shoulder this financial burden, since by common consent, most on-site infrastructure has to be provided by the land owner or developer. 5 Today local authorities are urged to be more creative in diversifying methods to finance local infrastructure particularly using planning approval system instead of increasing the assessment taxes. As practiced in the British planning system, some off-site infrastructure is secured by planning approval and the practice incorporates the element of negotiation between local authority and private sector. Therefore, this research is aimed to look at the possibility of this practice to be adopted by the Malaysian planning approval system. 1.4 Definition of Terms For the purpose of this study, the following definitions will be used throughout. a). The Concept of Infrastructure In Peninsular Malaysia excluding Federal Territory of Kuala Lumpur, by referring to Town and Country Planning Act 1976 (Act 172), the legitimate definition of infrastructure is divided into two broad categories, i.e. public amenities and public utilities. Public amenity includes open spaces, parks, recreation grounds and play ground. Whereas public utilities include roads, water and electricity supplies, street lighting, sewerage, drainage, public works, and other similar public services and conveniences. This definition is being applied by all local authorities in the country. However, in the Federal Territory of Kuala Lumpur, the definition of infrastructure is defined by Federal Territory (Planning) Act 1982 (Act 267). The term infrastructure here refers to amenity and utility. Amenity means such quality or condition of a place or area as contributes to its pleasantness, harmony, and better enjoyment, and includes open spaces, parks, recreation grounds, and playground. Utility includes roads, water and electricity supplies, telephone 6 services, street lighting, sewerage, public works, and other similar public services and conveniences. According to Stewardson (1995), there are two types of infrastructure, namely economic and social. Economic infrastructure usually refers to transport, gas, water, electricity and communication due to the 'hard' engineering-based delivery networks. However, 'social infrastructure' may include public schools, public hospitals, police and emergency services and inter-local district roads. Webb (2004) on the other hand classifies infrastructure into two main categories: the economic infrastructure (such as telecommunication, transport networks etc.) and the social infrastructure (such as schools, hospitals, public housing open space etc.). The distinction between these two types comes from the level of capital intensity in infrastructure service delivery. b). Off-site and on-site Infrastructure Based on a study conducted by Utah Governor's Office of Planning and Budget (2004) to develop Infrastructure Cost Assessment Model, there are three levels of infrastructure: i. Regional infrastructure; this includes roads, transit and water supply. Planned by state governments and financed by state and/or federal funds. ii. Sub-regional (off-site) infrastructure; this includes water and waste water treatment facilities, distribution lines, storm drain facilities, arterial roads, maintained by the municipality or service district. This type of infrastructure is financed by local governments through bonds, impact fees and tax revenues. 7 iii. On-site infrastructure by developers; this includes roads, water lines, sewer lines, dry utilities (telephone, electric, etc.) and storm drains financed by the private developer. In the context of this study, on-site infrastructure would refer to those needed infrastructures identified as mandatory requirements for the proposed development. In all cases, these types of infrastructure are secured via planning requirements and fully provided by developers upon the completion of the project; whereas off-site infrastructure would refer to those needed infrastructures outside the development boundaries specified by planning approval due to the justification of development impacts. In many cases, the term is used alternately as public utility and public amenity. c). Development Control The practice of development control ensures that land activities carry out according to specified development plans. It is part of the planning system to ensure efficient and effective land use in the interest of the public, a set of frameworks in which local authorities work. As defined by McCarthy et al. (1995), development control is a system of issuing development approval for the purpose of land-use development. In the context of this research, development control features the ability to secure infrastructure facilities both on-site and off-site prior to local authority granting planning approval, through a proper framework of land use control regulation, significantly contributing to private provision of local infrastructure during planning approval system. d). 8 Development Impacts, Planning obligation and Planning Agreement The purpose of regulation on land use is mainly to avoid the loss of amenity to immediate neighbours to cover the impacts of development on the community. This requires local authorities to identify the impact of proposed development. If there are such adverse social costs, who should shoulder the correction? Normally after the impacts are identified, a proper estimation is made. Then the developers (applicants) shall pay a certain sum to the local authority concerned prior to acquiring planning approval. Whereas planning obligations and planning agreements are means to ensure that an appropriate level of infrastructure is achieved to serve new development. The provision of infrastructure within the proposed development is usually covered by conditions attached to planning approval. However, this cannot be applied to land outside applicant's control unless the impact of the proposed development is identified. Planning agreements and planning obligations are offered by developers to ensure the fulfilment of services and facilities required to serve a proposed development. Developers also offer a way of striking bargains safeguarding the public interest. The planning obligations attached to planning approval would help the local authority to secure contribution from private sector to facilitate a proposed development. These include the agreements (e.g. unilateral undertakings) between the applicants and local authorities on an obligation offered by the applicant to the local authority either in support of a planning application or a planning appeal. e) 9 Planning Gain The nature of planning gain lies in the view that by granting planning approval, the local authority is conferring great increase in land value to land owners and in turn, benefit from the development gains (Allison and Askew, 1996). The purpose is to mitigate the impact of proposed new development. The various presented definitions of planning gain are significantly broad. The term has been used to encompass almost any outcome deemed desirable by the local authority. In the context of Town and Country Planning Act 1976 (Act 172) and Federal Territory Planning Act 1982 (Act 267), such practice was considered under development contributions. Indeed the idea is to mitigate predicted development impacts identified during the planning approval stage. 1.5 Problem Statement The adequate provision of infrastructure is vital for the local development which becomes a major concern for many local authorities. Choguill (1996) emphasises that the adequate provision of infrastructure is a precondition to the sustainability of local development. However, the proliferation of infrastructure costs limits the ability of local authority to provide adequate off-site infrastructure (Healey, 2003). At the same time, local authority has periodical infrastructure maintenance which implicates a considerable allocation of its budget. This remains an on-going debate in most countries. According to Vickerman (2002), there has been increasing questioning of the rationale for this as the cost of infrastructure provision indirectly boosts the productivity of private sector. Therefore, the question is raised whether or not there exist ways to shift at least some of the responsibility of infrastructure provision to those who may benefit from it most. 10 In Peninsular Malaysia, the problem of infrastructure provision faced by many local authorities largely concerns the provision of parking facilities, recreational parks, wet markets, hawker centres and others related community facilities. It also implicates a substantial allocation of local authority expenditure for the maintenance of the existing infrastructure. Referring to Table 1.1, local authorities collect revenue to cover operation expenses and construction of new infrastructure for the benefit of tax payers. The revenue comprises of assessment rates, trading licenses, parking fees, planning fees and grants from the state government. Among the local authorities, City Hall of Kuala Lumpur (DBKL) is the largest in terms of revenue generation of four municipal councils compared to Petaling Jaya (MPPJ), Subang Jaya (MPSJ), Shah Alam (MPSA) and Klang (MPK). However, a large portion of the revenue has been allocated for development and operating expenses including infrastructure development. The amount allocated for urban infrastructure has been spent for upgrading and maintenance of existing infrastructure and construction of new ones. This incurs a deficit of 56% increase in urban infrastructure expenditure to RM1.09 billion. A similar scenario reoccurred among three local authorities in the State of Johor. For instance, in the City Council of Johor Bahru, a total of RM42 million was required for local infrastructure development in 2004 (as compared to RM22 million in 2000). The fund was used mostly for construction and maintenance of off-site local infrastructure comprising of public utilities, hawkers facilities, drainage system, flood control, sewerage system and roads (see Table 1.2). 1,444.57 2,758.40 Source: Adapted from Ministry of Housing and Local Government, 2005 1,092.57 -995.34 -897.26 -79.05 -7.58 9.43 -15.80 -5.00 1,815.92 254.83 164.44 159.45 118.26 142.50 103.00 927.42 74.84 41.54 28.77 20.00 - 888.50 179.99 122.90 130.68 122.50 - 918.66 175.70 164.44 151.87 127.69 126.70 98.00 1,763.06 Deficit Total Development Operating Surplus/ Collection Expenditure (RM’million) > Actual collection and spending up to October 2003. > The figure tabulated above represents collection and spending for 2003. Total Dewan Bandaraya KL Penang Subang Jaya Petaling Jaya Shah Alam Klang Ipoh Municipal Councils Revenue/ Table 1.1: Revenue of major municipalities in Malaysia, 2003 11 95.036 20.451 4.702 120.18 9 Assessment Rates Non-Assessment Rates Contributions in Lieu of Rates Total Surplus/(Deficit) Income Total Expenditures (a+b) 11.980 62.920 21.960 22.151 114.17 4 6.015 2.610 1.793 0.413 17.142 4.520 40.960 3.738 92.023 0.001 1.200 1.500 19.451 3.590 30.590 2.220 0.041 17.889 63.758 1.562 5.076 4.987 20.098 7.379 3.825 0.046 0.500 3.008 0.100 12.719 3.358 8.643 0.408 0.210 19.670 3.983 1.432 25.085 MPK (0.903) 130.857 27.443 3.659 3.650 2.242 17.892 4.074 103.414 20.475 68.170 3.616 7.080 98.236 25.080 6.638 129.954 MBJB 4.490 72.920 29.350 5.060 2.531 0.342 21.413 4.360 43.570 4.180 32.240 2.76 0.03 56.930 14.590 59.940 77.410 MPJBT 2001 0.134 26.145 10.454 5.051 1.011 0.473 3.919 0.072 15.691 3.548 10.975 0.909 0.187 21.227 3.746 1.306 26.279 MPK 4.768 33894 3.300 0.095 (7.004) (5.163) 145.245 85.176 33.530 38.923 6.3504 7.510 2.300 3.753 2.830 0.500 22.050 23.820 4.130 4.197 111.715 46.254 24.060 72.981 3.263 7.281 99.507 57.848 32.261 15.606 6.473 6.559 138.241 80.013 MBJB MPJBT 2002 (5.916) 33.930 15.091 7.078 1.616 0.000 6.397 0.164 18.839 4.246 13.823 0.592 0.014 23.637 3.713 0.664 28.014 MPK (7.755) 151.244 40.200 12.700 1.200 3.700 22.600 4.254 111.043 26.201 71.465 1.424 7.699 102.507 34.689 6.293 143.489 MBJB 1.487 79.891 36.820 10.670 2.100 0.400 21.00 4.004 43.071 4.431 33853 0.640 0.144 58.386 16.667 6.324 81.377 MPJBT 2003 1.145 42.435 17.050 9.000 0.400 0.150 7.500 0.263 25.385 4.266 20.118 0.665 0.073 36.959 3.936 2.685 43.580 MPK (6.296) 154.368 41.750 10.750 1.200 2.200 27.600 4.382 112.618 26.987 71.822 1.497 7.930 105.507 36.272 6.293 148.072 MBJB (Source: Adapted from MBJB, MPJBT and MPK, 2005) Indicator: MBJB - City Council of Johor Bahru; MPJBT - Municipal Council of Johor Bahru Tengah ; MPK - Municipal Council of Kulai Development Expenditures (b) Public Utilities Hawkers facilities Offices/Buildings/Lands Drainage system, Flood control, Sewerage and Roads Total Administrative and operating Expenditures (a) Emolument Services & Supply Assets Contributions & Fixed Payments Miscellaneous Total MPJB T MBJB Income 56.011 13.570 5.320 74.901 2000 Table 1.2: Local Infrastructure Expenditure in Major Local Authorities in the State of Johor (2000-2004) (RM’million) 1.018 83.269 37.500 12.400 2.100 0.200 19.00 3.889 45.769 5.023 35.502 1.202 0.153 59.686 17.657 6.944 84.287 MPJBT 2004 MPK 7.944 37.106 11.950 5.450 0.000 0.000 6.500 0.270 25.156 4.394 19.961 0.320 0.211 38.006 4.059 2.985 45.050 12 12 1.6 13 Research Questions As deducted from the discussions above, the raising cost of infrastructure provision has significantly reduced the possibility of local authority to provide offsite infrastructure. Therefore, there is a need for the local authority to identify ways to accommodate infrastructure requirements by seeking new methods of funding. However, in Malaysia under the present practice of planning approval system, local authorities are allowed to impose such planning requirements prior to granting planning approval. Thus, the research will aim to answer the question as to how off-site local infrastructure provision can be secured by local authority using planning approval system. Accordingly the research is designed to answer the following questions: i. How is infrastructure provision practices in Malaysia? ii. How is planning approval system applied by local authority to secure infrastructure provision? iii. What are the problems pertinent to off-site infrastructure provision in obtaining planning approval from local authority? iv. What are the perceptions of developers and local authorities on using planning approval to secure off-site infrastructure provision? 1.7 14 Purpose of the Research The main purpose of this research is to study the possibility of using planning approval system to secure off-site infrastructure from private sector. In achieving the objectives above, it is required to understand the present practice of planning approval system. Further, to identify factors closely associated with the constraints of the active involvement of private developers in providing infrastructure. To achieve this objective, the research was carried out based on the following sub-objectives: i. To study how local authority secures off-site infrastructure. ii. To examine the current practice of off-site infrastructure provision through planning approval system. iii. To identify factors closely associated with constraints of developers' involvement in off-site local infrastructure provisions. iv. To identify the possible approaches of how planning approval measures can be used to secure off-site infrastructure provision. The findings subsequently will help develop recommendations on off-site infrastructure provision for local authorities as an alternative means to secure infrastructure facilities; with the local authority broadening the possible means to meet the required facilities. As an outcome, the findings of this study help develop an appropriate model to improve the off-site local infrastructure provision in the nation. 1.8 15 Scope of Research The research will start with the review of pertinent theories and concepts of development planning system and development control as practised in Peninsular Malaysia with reference to the impact of rapid urbanisation on major local urban centres as the result of inadequacy of local infrastructure. This approach will give a wider scope of the concept pertaining to local infrastructure provision. It is done in order to form the basis for the conceptual framework of the study. It will then discuss, as a background, the financial constraints and problems faced by local authority in providing infrastructure facilities which necessitate a proper and viable system or approach imposed to encourage private sector to participate in providing infrastructure facilities. The focus of the research also would be to identify how a new planning approach such as planning gain can be adopted as an alternative means by local authority to secure its infrastructure facilities under the present planning approval system. Therefore the study needs to identify the factors which are being closely associated with constraints of the active involvement of private sector in local infrastructure. That requires an evaluation on the perceptions of developers and local authorities on how this new approach can be adopted by the local authorities to secure infrastructure facilities. Finally, the research will analyse the findings that lead to a system (or approach) to enable private developers to participate proactively in local infrastructure provision and also recommendations to improve the existing system of infrastructure provision. 1.9 16 Significance of the Research The availability of adequate infrastructure is critical to local development. The lack of infrastructure would affect the well-being of local communities and consequently harm the momentum of local property sector development in particular and the efficiency of economy in general. There is a variation between different planning systems and infrastructure provision that is financed through a variety of means operating at local level by both private and public sectors. What is needed here is a means by which infrastructure is provided by private sector using planning approval system. Graham and Marvin (2001) stressed that one of the significant reasons why local infrastructure has been neglected is because of the relationship between infrastructure provisions in their broader sense and the planning system. Again, Graham and Marvin (2001) identify several factors for this insight, such as: i). Issues relating to urban governance and local economic development take no account of the local infrastructure which is critical to all local development; and ii). Some infrastructure network characteristics are hidden in nature. Some are located underground and the management of these facilities are undertaken by technical institutions or agencies. Another crucial aspect of local infrastructure provision is the question of who pays for the cost of infrastructure provision? There are three potential parties identified as responsible in absorbing the cost incurred, namely; land owner, enduser and the developer (Keogh, 1985). 17 Based on the previous discussion, the significance of this research is as follows: i. Limited research on the effectiveness of planning approval system to secure infrastructure. What is available at present does not shed much light on the detailed procedure of the planning approval aspects to promote infrastructure provision. This leads to the lack of appropriate guidelines, acting as the framework for off-site local infrastructure provision. Since the use of negotiation in planning agreements to secure planning gain has been an on-going debate, there is a need for such research to be carried out in order to gauge the level of perception from both private and public sectors. ii. The proliferation of infrastructure costs apparently induce a negative impact on the local authorities' capacity of planning and implementing infrastructure provision. iii. Recent studies in U.K and Europe show that most of the subject countries practice the approach of planning gain in their system as an alternative tool enabling local planning authorities (LPAs) to reduce the financial burden in providing on-site infrastructure. iv. The findings of the study would be very significant for local authorities to diversify and broaden the present means to secure off-site local infrastructure. In addition, it is deemed important for the local planning authority to be proactive in identifying ways to generate additional financial sources to accommodate infrastructure requirements to meet the future demands of the fast growing urban sector. v. As argued by Helmsing (2001) in the context of local development, local economy is very much shaped by central government agencies and critically depends on central government intervention. Some of these interventions were implicit and discrete rather than based on an explicit policy of local 18 development. Local economic development strategy is a means to achieve this. Local resource mobilisation becomes crucial to finance these investments. Therefore local authorities are encouraged to secure their own local infrastructure in order to provide the required infrastructure. The material on off-site local infrastructure provision which is readily available tends to be limited in scope and scattered amongst a variety of sources. Due to the significant aspect of local infrastructure development as outlined above, it is considered of value to study how off-site local infrastructure can be secured using planning approval. Therefore, the significant feature of this research is to undertake a review of the existing research on planning approval and to relate the research findings to the current issues on off-site local infrastructure provision. 1.10 Expected Contributions of the Research The present studies on planning approval do not shed much light on the details of how the system can be used as a method to secure infrastructure for local authorities. Much of the 'evidence' derived from literature is anecdotal in form and often relates to the operations of planning in general rather that the appropriateness 'features' of planning approval to be used as legal mechanisms to secure contributions (off-site infrastructure) from private sector. Apart from the objective to propose an improvement to the present practice of local infrastructure provision system, this research also would contribute significantly to the following areas: i. The research would then provide a basis for local authority and other public authorities to secure infrastructure from private sector. ii. The findings of this study further pave the way for future research on local infrastructure provision. 19 iii. According to Claydon and Smith (1997) such study can contribute to the enhancement of the present planning approval system pertaining to off-site local infrastructure provision. iv. As argued by Guy and Marvin (1997) however, if local authorities don't take into account these new infrastructure practices, they might lose significant opportunities providing wider benefits to the local community. Therefore, the expected findings of the research would further furnish the present practice, provided that the perceptions of both private developer and local authority are positive. v. Many authors look at the fundamental constraint of local infrastructure provision as involving the private sector. Guy and Marvin (1997) argue that the current debates about developer contribution in relation to infrastructure provision look quite confusing to developers. They define this move as the efforts of the authorities to 'off-load' their responsibility. This research is intended to study the possibility of using planning approval system to acquire off-site infrastructure provision from private sector. 1.11 20 Thesis Structure This thesis consists of eight chapters. Figure 1.1, illustrates the summary of the overall structure of the thesis. The thesis starts with the introduction in Chapter 1. The chapter outlines a very general overview of the research which briefly discusses the research problem, the purpose, scope and also the objective of the research. Chapter 2 will discuss the salient background in local infrastructure provision. A review of literature on relevant theories and concepts on local infrastructure and the concept of off-site infrastructure provision which is discussed under development control practice. Apart from this, the chapter also includes the review of some impacts of urbanisation on the local infrastructure. As a background to the research, the discussion in Chapters 3 provides an overview of local infrastructure provision and development control system with reference to the Malaysian context. The chapter also discusses how planning approval is practised at local authority level related to infrastructure provision within the framework of the Malaysian planning system in order to answer one of the research questions. Chapter 4 will examine the local infrastructure provision in Malaysia. The main focus of the chapter is to discuss how planning approval within the framework of development control applies to secure infrastructure from private developers. It will then have a closer examination of the local scenario on infrastructure provision. Chapter 5 outlines the foundation of the work by discussing the methodology in performing this research. It starts with defining the scope as well as the strategy employed in designing the research. It will discuss the conceptual framework from which the main question of the research is to develop and explain 21 the methods of data collection and analysis. This chapter also enumerates the processes involved in constructing the research questionnaire for data collection. Chapter 6 presents the results obtained from the fieldwork interview. It discusses the perception of developers and local authorities on local infrastructure provision in Malaysia, which forms the main focus of this study. The analysis looks at the local authority perception on local infrastructure provision, which includes the current practice of off-site infrastructure provision and development approval practice, how local authorities secure their off-site infrastructure provisions, the feasibility of using planning approval means to secure infrastructure facilities. Chapter 7 addresses the perceptions of the two key players of the research, local authority and developer on off-site local infrastructure provision. In the chapter, the discussion mainly focuses on recommendations to improve the present system of planning approval to incorporate private options in off-site infrastructure provisions. Finally, Chapter 8 will summarise and amalgamate all findings into one coherent set of results in order to answer the outlined research questions. The chapter discusses the limitations to this research and ends with recommendations on areas for future research. 22 1. Introduction 2. Local Infrastructure Provision and Planning Approval System: A Theoretical Framework 3. Planning Approval System in Malaysia 4. Local Infrastructure Provision in Malaysia 5. Research Methodology 6. Practice of Securing off-site Local Infrastructure Provision 7. Proposed Improvement of off-site Local Infrastructure Provision 8. Summary and Conclusion Figure 1.1: Thesis structure 1.12 23 Conclusion of the Chapter At the beginning of the chapter, an introduction to the background of the study was given generally with the purpose to provide a thorough review to the research problem. The relationship with the main identified research components between infrastructure provision and planning approval system were discussed. In the second part, a brief overview followed on the current situation of off-site local infrastructure provisions within the framework of Malaysian development control system. A number of successful experiences in others countries were generally overviewed. The following parts elaborate findings on similar research areas. This is done by a brief review of the problems encountered by local authorities in securing off-site local infrastructure provision. The last part of the chapter outlines the structure of the study in order to show the relationship between chapters, to ensure that the flow of the argument can be referred systematically. CHAPTER 2 LOCAL INFRASTRUCTURE PROVISION AND PLANNING APPROVAL SYSTEM: A THEORETICAL FRAMEWORK 2.1 Introduction The chapter examines the relationship between local infrastructure and planning approval. It provides the understanding of how planning approval system can be used to secure infrastructure facilities from private developers. The chapter is divided into two parts. The first part discusses the present mechanism of local infrastructure provision and the background understanding and the process of planning approval; and the second discusses how planning approval system is used to secure infrastructure provisions. 2.2 Local Infrastructure Provision: The Previous Studies One of the primary concerns of local activities is providing adequate infrastructure to ensure the effective and efficient function of urban areas, more particularly at local authorities. It is important to acknowledge that the infrastructures are linked and interrelated. The efficient local economy is realised by utilising a range of infrastructures like public amenities and public utilities. Local development is not possible without the adequate provision of urban facilities. According to (Dilworth, 2001), without such facilities the development would never have achieved the availability of its infrastructure provision to support 25 the future capital investment. In order to understand the nature of the local infrastructure, it is necessary to understand the purpose of infrastructure provision. All components of local infrastructure exist to indicate the role of infrastructure in the functioning of local development in form of social and economic activities. The arguments related to these questions lie at the heart of the controversy surrounding infrastructure provision as secured from the private developer. These facilities secured through various available methods, are subject to their effectiveness and adaptability of the methods with current local authority practices. Infrastructure provision is the fundamental asset to local development. Without access to this, land has little potential for development. Therefore, most of the infrastructure is usually provided by governments of various levels and forms. However, the question is how local authority provides and delivers its infrastructure? As this chapter aims to provide an overview on to the planning approval system and how local authorities abroad secure some of the local infrastructure from private sector. Based on the study by the Organisation for Economic Cooperation Development (OECD, 1991), the local authorities are facing a number of challenges and constraints with regards to local infrastructure provision. This can be summarised as below; i. Improper maintenance of infrastructure - there is a need for the existing local infrastructure to be replaced or rehabilitated, while providing the new infrastructure in order to adapt to the emerging industries and activities. ii. The need for environmentally-friendly local infrastructure - the urban environment is deteriorating and this requires urban infrastructure to be improved for a better quality of life for urban occupants. 26 iii. Increasing of financial burden – the cost required for urban infrastructure constitutes a significant element of both public and private investment on infrastructure. This in turn will focus on how the costs should be financed and who should bear them. iv. The constraint and limitation of public funding - most local authorities face serious constraints on public expenditure. Public borrowing severely limits the ways in which long-term investment in urban infrastructure can be financed. v. The need to promote the private sector in local infrastructure provision the involvement of private capital in financing local infrastructure provision could relieve the private sector of the need to increase its burden. According to Jaarsma and Dijk (2002), many countries in Asia have invested heavily on local infrastructure over the last fifty years using international funding agencies. Unfortunately, in many cases, the international funding agencies (e.g. World Bank and Asian Development Bank) were not willing to assist in the long term funding arrangements. This scenario has significantly shifted the public funding responsibility to the private initiative in local infrastructure provision and particularly through planning approval system (sees Howe, 1998; Sylte, 1996; Ziethow and Bull, 1999). Numerous studies show that the planning system does have a significant impact on local development, particularly on the requirements of private sector in local infrastructure provisions (See Healey, 1995; Ennis, 2003; Bunnell, 1995; Rydin, 1985; Booth et al., 1997; Altshuler and Gomez, 1993; Kaplinsky, 1999). By looking at the way planning system interfers with the overall development process, the system itself has the tendency to interfer with the process in many ways significantly. Planning system uses mechanisms such as planning approval to interfer in the local development process by changing the availability of land for development. It might also happen during development approval process where 27 local authority acts as local planning authority, imposing such planning requirements. Securing infrastructure from private developers through planning approval system has been practised since the late 1970s. The practice was not a new approach, according to Allinson and Askew (1996), in the British planning system local planning authorities have had policies in their adopted statutory development plans enabling them to assess the need for new infrastructure whether on-site or off-site as a firm justification imposed on the private developers to contribute to meeting this need. According to Claydon (1997) and Ennis (1995), local authorities are encouraged to use development plans to facilitate the effective mechanism between local authority and private sector in infrastructure provision. Numerous studies show that development plan is able to perform a central role in the privatisation of infrastructure provision. Prior to the granting of planning approval, some planning permission might be secured through a series of negotiations; and during the process the applicants (or developers) can present offers to local authorities for additional approval. These shall be made within the permissible requirements. 2.3 Public and Private Initiative in Infrastructure Provision The cost of establishing local infrastructure is substantial and has caused local authorities to seek alternatives in the delivery of infrastructures. In the past, the public has placed a legal responsibility on municipalities to provide the required infrastructures and services to their residents (Kaplinsky, 1999). Local governments are increasingly pressed with lack of funds for necessary infrastructure. As Altshuler and Gomez (1993) put it: 28 “…In most cities in North America, the reasons for this situation includes deterioration and overcrowding of existing facilities, a rise in infrastructure costs due to higher standard of living and a concern for environment, a decline in central government funding, and opposition from taxpayers to property tax increases due to reduced income growth…” In the past, local authorities would finance infrastructure and new developments from the general public revenue, expecting broader tax base in return. Private infrastructure provision is not a new idea. Traditionally most local authorities have been responsible for the essential hard-infrastructure networks such as local roads, drainage, recreation facilities, parks, gardens and open spaces; in cases, water and sewerage infrastructure and/or neighbourhood-based public transport systems as well. They have also provided ‘soft’ infrastructure services such as cultural, civic and library facilities amongst others. The deregulation of the public expenses in the United States and the privatisation movement in the United Kingdom, saw a major change in the way infrastructure is viewed; but this has not been without its disappointment, since the supporters of private initiatives see the off-loading of some of their responsibilities for local infrastructure delivery. There has been increasing objection on the local authority’s responsibility in providing local infrastructure. Under such circumstances infrastructure provision should be promoted by stimulating the private capital and shifting responsibility to the beneficiaries. Therefore, this requires local authorities to seek innovative methods to finance new infrastructure such as through Joint-ventures (JV) with the private sector, developer contributions, Public-Private Partnerships (PPP), Private Finance Initiative (PFI) and identified methods of delivery with the aims of building high quality public infrastructure. 29 There are several reasons to incorporate the private sector in local infrastructure provision and the reasons vary among countries. In the United States, local authorities have been shifting infrastructure costs by levying user fees on the consumption of infrastructure services to users and beneficiary groups. The charges can be structured in a variety of ways such as flat monthly rates (as with water and electricity). Beneficiary charges are based on the positive effects infrastructure services have on properties and businesses. It was identified that the rising cost of infrastructure provision urges local authorities to shift some of the existing responsibilities to provide infrastructure to private developers. As revealed by Megginson et al. (1994), in a study of privatised infrastructure in Australia, the efficiency of local infrastructure services increased constantly when exposed to competitive pressures. The study identified several factors influencing the involvement of private sector in local infrastructure provisions: i. Accelerate local economic development, ii. Improve quality of service delivery and also enable to bring forward investment, iii. Lower the cost of providing local infrastructure provisions, iv. Access to private sector capital options, v. Use of private sector skills. In the past years, there has been a significant increase in the participation of private sector in infrastructure development in developing countries (Vives, 1996). However, the approach has not reached its targets and seems to be below expectations. This failure has sparked much concern on the effectiveness of the approach. The apparent gap depends largely on how the transition process of the practice from public funded to private funded is handled and how this new framework is planned and managed by the relevant authorities. 30 Another reason for private involvement is to improve the efficiency of public infrastructure delivery. The participation of the private sector in the provision of infrastructure services has the potential to stimulate supply and improves the quality of service. Moreover, it releases government funds for more needed social programs, attracts private investments and reduces public spending (Vives, 1996). 2.4 Local Infrastructure Provision: Why Private Sector? The importance of private involvement in local infrastructure provision has burst research interest to identify the appropriate approach to involve private sector in local infrastructure development. Despite these concerns, there has been little research on the relationship of development process and infrastructure process (McLoughlin, 1985), the assessment of the role of planning approval in large new settlement projects (Elson, 1990) and the studies on the role of planning approval in relation to infrastructure provision (Rowan-Robbison and Lyod, 1988). This study is to review the arguments that justify the rational behind private sector providing off-site infrastructure by Healey et al. (1995) and to review the arguments used to justify the rational of negotiating planning contribution from developer in local infrastructure (Bunnell, 1995). According to Guy and Marvin (1997), the private sector in the United Kingdom has been given key role in developing the policy pertaining to infrastructure development at local level. Since the early 1980s, the utilities sector has been subjected to restructuring of privatisation and liberalisation of infrastructure facilities, while private sector has been increasingly involved in the provision of infrastructure. With reductions in public expenditure, private sector has to supply infrastructure ahead of development. These shifts have created considerable changes in the local infrastructure development and development 31 process and the practices of infrastructure provision need to be placed in a broader context. In Peninsular Malaysia, the local authorities look up ways to secure off-site infrastructure from private developers during the stage obtaining the planning approval. In principle the planning approval system can and does provide the needed infrastructure. Therefore, the local authority has to be more creative to explore the new ways to secure the needed off-site local infrastructure provision. The policies pertaining to infrastructure provision as outlined in development plans such as structure plans are generally very broad in nature. Whereby during planning approval, developers are required to ensure that planning applications comply with development plans and that enabled externalities can be minimised (Wills, 1995). The plans provide the basis for relevant agencies to detail their infrastructure development programs and particularly for private developers to comply the requirements outlined by local authority in the proposed developments. Accurate estimation of requirements for off-site infrastructure has been a problem in local infrastructure provision. As suggested by Simpson (1983); “…when dealing with the provision of off-site infrastructure, the effects of an increase in demand from one site can be felt at several other locations where the fund allocated to the particular locations may be reduced. This may have ramification spreading over a considerable area…” To minimise the uncertainty level of cost required to provide off-site infrastructure, local authorities have to establish an integrated and efficient system to involve private sector (or developer) in considering planning approval. Whereby, with these technical assessments, the local authority has to formulate a standard negotiation procedure on charges or contribution (Healey et al., 1996). Where this often gives developers incentives and clear path of the cost implication might be incurred at the early stage of development. Characteristics 1. Traditional Public Sector Delivery Set by local authorities to provide, maintain and expand services in order to meet the public needs. It governed all operations and maintenance activities. 2. Traditional Public Contracting Infrastructure asset ownership and operational risks remain with local council. 3. Service / Management Contracts Private operator is hired to carry out specified services for a period of five to seven years (max 10 years). Local council remains the primary provider and owner of the infrastructure assets. Responsible for all capital and service and bears very little risks associated with fluctuations results from fluctuating demand. 4. Lease Contracts Remuneration is usually tied (or in part) to the agreed cost of service delivery and estimated level of demand and have to built-in incentives that encourage private provide efficient services (extendable up to 30 years). 5. Build Own Operate and Transfer Private sector requires designing, constructing and operating such facilities for a term of between 20 and 30 years and sells back to Council. The council retains ownership and becomes the customer and regulator of the service. All capital, recurrent and capital maintenance expenditures are assumed and managed by the private sector. 5. Concession / Franchise Agreements Private contractor responsible for the delivery of the infrastructure services in a specified area, including all operating, maintenance, collection and management activities and any capital investment required to build, upgrade or expand the system and for financing those out of the revenues drawn from system users, with which it interacts directly 6. Joint Ventures (JV) It requires a separate corporate entity to be formed by the public and private interests and result from the partial sale of an infrastructure ownership entity to the private sector. It is usually independent from the municipality and shares the operating profits and work. Has the primary responsibility for performing daily management operations. 7. Municipality Bond Municipalities issues bonds to raise capital for their day-to-day activities and for specific project such as provisions infrastructure. Public will be paid a certain annual rate of return when the bond matures at some specific time in future. 8. Full Privatisation Full privatisation of the local infrastructure. Assets are sold to and remain to private sector. All risks are borne by the private sector. Public sector authorities retain regulatory responsibility and ensure reasonable service delivery charges. 9. Public-Private Partnership It involves some form of contract between public and private sector. PPP is a rather more general arrangement between public and private sectors (often with legal force) for expected mutual benefit in the provision of services. 10. Private Finance Initiative (PFI) The private sector undertakes design, building, financing, and operation of public sector assets in return for long-term payments from the government. It requires a full financial backing from the participating private companies over the life of the project. Public Sector Private Sector Increasing of private sector role Type of delivery Increasing of public sector role 32 Figure 2.1: The range of infrastructure provision (Source: Australia National Office of Local Government, 2002) 33 Most local authorities are looking for new methods of infrastructure funding to be incorporated with planning approval system to accommodate the increased demand of local infrastructure. Figure 2.1 illustrates the range of private and public arrangement of infrastructure provision delivery. As suggested by Healey (1997), Ennis (1997), Greed (1996) and Claydon (1996), negotiation was among the most effective ways for private developers to be involved in local infrastructure development. As verified by Sidney, (1996); Stephen and Murray, (2000); Ronald, (2000); Carroll and Steane, (2000), there are several options of private financing and delivery widely practised, including: - Public Sector Delivery - Service / Management Contract - Lease Contracts - Public-Private Partnership (PPP) - Private Finance Initiative (PFI - A form of PPP) - BOOT or BOT (Schemes) - Concession / Franchise Agreements - Joint Venture (JV) - Full Privatization 2.5 Private Delivery of Local Infrastructure Provision The provision of off-site infrastructure as resulted from new developments has always been a central issue in the bargaining process between local planning authority and private developers. Since then, local authorities have long been exploring for reliable alternative methods to finance infrastructure provision. Furthermore, initiatives are taken to explore means to enable local authorities to secure infrastructure from private sector. In British planning system, local authorities are allowed to impose such financial contribution to private sector as a 34 gain to be paid to local community by granting planning approval (Claydon and Smith, 1997; Marvin and Guy, 1997). However, according to McNeill and Dollery (1999), local authorities in Australia are in favour of private funding for local infrastructure. Some of the provisions of infrastructure are made during obtaining development approval from local authorities. Where at this stage, negotiation process takes place between local authority and private sector to determine the types of infrastructure to be provided and the suitable methods of delivery of the agreed infrastructure. This involvement has come under various methods of delivery, including service/management/lease contracts, joint ventures, build operate and invest arrangements (e.g. Build Operate and Transfer, BOT), full privatisation of the infrastructure networks/ services, public-private partnership (PPP), private finance initiative (PFI), and issuing municipality bond (see also Figure 2.1). 2.5.1 Issuing Municipal Bonds These are bonds issued by a state, city or local government. The main purpose is to raise fund to finance the local infrastructure provisions. The public is encouraged to buy bonds that generate stable annual rates of return. Where the financial capacity of local authority is stable, it is encouraged by the central government to gain operating expenses by issuing municipal bonds. As long as each additional project will bring net additional revenue to the local authority, the project can be financed by way of issuing bonds to general public. 35 2.5.2 Traditional Public Contracting The method varies only to the extent that the private sector usually competitively tenders for a specified task or service on a basis (e.g. design and construct), usually for an agreed fixed price. Wider project/ system management, infrastructure asset ownership and operational risks remain with local authority. 2.5.3 Service/Management Contracts Under this category the local authority essentially hires a private operator to carry out local services for a period of five to ten years. Local authority is usually responsible for all capital and service expansion spending. The private operator usually executes operational and maintenance expenditures and the local authority is again responsible for the regulation of the infrastructure. The private contractor does not deal with the end users and all financial interactions are made directly with the local authority. The services are delivered at an agreed cost and shall meet performance standards set by local authority. The private operator bears less ongoing commercial risks associated with fluctuations in the cost of service delivery or the revenues flowing from demand. 2.5.4 Lease Contracts Under this method, the private operator’s remuneration is tied to the agreed cost of service delivery and estimated level of demand. The private operator usually bears any changes away from these upfront agreements, thereby assuming ‘commercial risk’. Lease contracts can be extended for up to thirty years of period and have promoted a range of incentives that encourage private sector. 36 The advantages of this method include: - Reduced operating costs; - Increased revenue; - Improved collection from users/ customers; - Regular maintenance of assets 2.5.5. Public-Private Partnership (PPP) At the present, local authorities place considerable emphasis on the use of private options for local infrastructure. As far as large infrastructure projects are concerned, they are looking into ways to encourage public-private partnership. A great awareness on the ‘partnership’ between public and private in the promotion and financing of infrastructure projects exists in many countries (Garwood, 1995). In certain legal implications, partners may have joint liability on the obligations of the partnership and the actions of one partner bind the entire partnership. In response to increasing demand for local infrastructure, local authorities and private sector have sought new ways of promoting local economy. 2.5.6 Private Finance Initiative (PFI) Over the years, the private sector has played an important role in financing infrastructure projects (Asenova and Beck, 2003). In Britain, the preferred model of Public-Private Partnership (PPP) is the Private Finance Initiative (PFI). The method initially developed by the British government to provide financial support for Public-Private Partnerships (PPP). This involves a long-term contractual partnership in which the private sector takes on the risks of a venture in return for payments dependent on agreed standards of performance (Birnie, 1999). 37 Under the PFI, the private sector undertakes to design, build, finance, and operate the physical assets in order to provide a required service as demanded by a public sector responsible for the delivery of the service (Kirk and Wall, 2001). In the context of local infrastructure provision, the key distinguishing characteristic as compared to other forms of contract, lies in the fact that in PFI the emphasis is on the procurement of services rather than the construction of the infrastructure (Owen and Merna, 1997). Under this method, the private sector undertakes design, building, financing, and operation of public sector assets in return for long-term payments from the government. The long-term partnership of PFI allows the private sector to introduce its own management and procurement strategies, leading to cost savings, increased efficiency and innovation in local infrastructure provision. The approach has now been adopted by parts of Canada, France, Netherlands, Portugal, Ireland, Norway, Finland, Australia, Japan, the United States and Singapore. 2.5.7 Build Operate and Transfer (BOT) Build, Operate and Transfer (BOT) are one of the private deliveries which incorporate private sector capital investment in infrastructure provision. Usually these arrangements are instigated for the construction of a new facility (e.g. water treatment plant, toll road, power generator, etc.) or the complete refurbishment of an existing facility. The method involves designing, constructing, and operating the facilities for 20 or 30 years, after which the investment is either handed over or sold to local authority, depending on the terms of the contract. This extended contract duration allows the private sector to recover the return of investment and the significant costs of construction. The local authority retains ownership of the infrastructure asset and becomes the customer and regulator of the service. Local authority agrees to purchase a minimum level of output. 38 2.5.8 Concession/Franchise Agreements This method entails municipalities awarding a private contractor (concessionaire/ franchisee) full responsibility for the delivery of the infrastructure services in a specified area, including all operation, maintenance, collection and management processes. This includes any capital investment required to build, upgrade or expand the services drawn from users. The method incorporates more incentives for the private sector to expand its customer-base, increase investment, and maintain existing assets and, most importantly, reduce loss in the distribution network (e.g. water, electricity). The local authority remains the regulatory body and at the end of the concession contract period, the infrastructure will be transferred back to the authority. 2.5.9 Joint Ventures (JV) A joint venture (JV) requires a separate corporate entity to be formed by the public and private interests. It results from the partial sale of an infrastructure to the private sector and generally applies in combination with other arrangements such as a JV for the provision of urban services. In this case the public and private interests share the operating profits and work together to ensure wider acceptability. The private sector has the primary responsibility for performing daily management operations. Apart from the sharing of profits and commercial risks, the JV is distinguished from less intense forms of private involvement at the early stage. Private sector contributes to feasibility studies prior to binding of contractual arrangements to invest in the resulting joint entities. Thus JVs are more processoriented and infer earlier involvement of the private sector. 39 2.5.10 Full Privatization According to Vickerman (1995), based on experience in United Kingdom expected savings in providing local infrastructure may not be as great as previously believed. However a PPP and PFI may have offered better results. The problems faced by private sector in providing and managing the public services without the involvement of public sector creates doubt on the actual private sector provision. However, there are two arguments against these views; the competition does take place in the form of the competitive bidding for the rights and in reducing costs (e.g. PFI schemes). However the question remains whether the practices allow the introduction of full competition, rather than competitive bidding, for major infrastructure. Full privatization of the local infrastructure interprets in assets being sold to and remaining indefinitely in the hands of the private sector. All risks are born by the private sector and local authority retains regulatory responsibility in order to ensure reasonable charges and to control the level of service quality as signed in the agreements. 2.6 Classification of Infrastructure The first stage in contextualising the concept of local infrastructure provision is to produce the classification of infrastructure. A distinction is made between hard and soft infrastructure. In some countries, the term refers to infrastructure networks operating at the local level. It ranges from water supply, and sewerage, infrastructures. effectively. to the community centres, schools, and environmental Such definitions are useful in order to precede the study 40 The classification enables a clearer understanding of the structure and function of local infrastructure system. Seeley (1995) as cited by Ennis (2003) defines public infrastructure as: ‘… almost every support system in modern industrial society, public or private, infrastructure is to be said to include not only roads and sewers, but national transportation grids, communications system, media, housing, education, computer networks and fibre-optic ‘information super-highways….’. What is emphasised here is the importance of public infrastructure to support the local development. Defining all the main components of the city as infrastructure is useful in providing a way to analyse the role of actors in local development. Figure 2.2 and Table 2.1 provide such classification of the main components of local infrastructure, and their availability as required by most local authorities (Healey et al., 1997). Briefly, Ennis (2003) defines the types of infrastructure as follow: i. Economic infrastructure - their establishment is essential for urban economy and are intended solely for profit. These include industrial, retail, office spaces and other premises. However, in cases, local authorities generate local economy to acquire these facilities in form of off-site infrastructures from private developers via negotiations during planning approval. ii. Physical infrastructure - the facilities falling under this category are critical infrastructures in terms of function, some of which can be considered marketable. Local road infrastructure is typically a public sector concern with both national and local authorities being responsible for the construction and maintenance. Then, there are instances where developers are `willing to contribute`, in cases imposed by local authorities during the planning approval stage. 41 iii. Health infrastructure - in order to sustain healthy urban communities, there is a need for adequately provided health infrastructure. Normally, the provision is the responsibility of the public sector. However, there are local authority efforts to provide and this scenario brings the possibility of private developer to provide at a profit. Lists of infrastructure that fall under this category are hospitals, clinics or polyclinics, rehabilitation centres and other types of health facilities. iv. Educational Facilities - education facilities are very urgent, in terms of necessity. In many countries, educational infrastructure is publicly-owned and freely available to local residents. v. Housing - in most local authorities, housing area covers the largest portion of land available for development. For instance, in the UK private sector provides housing for locals in the private market and local authorities building their own housing schemes then letting them out. In some cases, this infrastructure is secured through negotiation during planning approval stage. vii. Community facilities - this is the key facility necessary in community development. Almost all the infrastructures under this category are public and non-marketable which are unlikely to be provided by private sector. The facilities such as community halls, recreation facilities such as public swimming pools, markets, public library, religious centres and others fall under this category. These are provided by local authorities and state funds and grants allocated annually by federal governments. viii. Environmental - refers to the infrastructure required to increase the quality of the environment surrounding a development such as open space, buffer-zones, landscaping provisions and others as required and also provided by developers. Economic infrastructure on-site Physical infrastructure: This includes highways, footpaths, water, sewerage, parking, public transport, incinerator, local roads, road furniture off-site Economic infrastructure: Comprises places of business, skills training on-site Health infrastructure: Hospitals, health centres. Socio infrastructure Types of local infrastructure 42 Educational Facilities: Schools, universities, colleges. Housing: Owner-occupied, private rented, affordable housing. off-site Community facilities: Such as recreational facilities, art galleries, museums, fire stations. Environmental: Landscaping, open spaces, street furniture, ecological. The differences between Social Infrastructure and Economic Infrastructure Economic Infrastructure 1. Revenues are often from third parties subject to market using the facility. 2. Infrastructure provider faces genuine market risks. 3. Traditionally delivered through a Government Business Enterprises. 4. Revenue risk are key driver of financial outcomes. Social Infrastructure 1. Paid for out consolidated revenue - subject of government resource allocation decisions; 2. No market risk to provider of infrastructure – payments streams are usually subject to long term contract or budget allocations; 3. Traditionally delivered through a general Government agency; 4. Costs risks are a key driver of financial outcomes. Figure 2.2: Types of local infrastructure components (Source: Adopted from Ennis, 2003) 43 Table 2.1: The range of responsibility for infrastructure funding Level of government Economic Infrastructure Social Infrastructure Central - Aviation services (air navigation etc.) - Telecommunication - Postal services - National roads (shared) - Local Roads (Shared) - Railways (shared) - Tertiary education - Public Housing (shared) - Health facilities (shared) State - Roads (urban, rural, local) (Shared) - Railways (Shared) - Ports and sea navigation - Aviation (some regional airports) - Electricity supply - Dams, water and sewerage system - Public transport (train, bus) - Educational institutions (primary, secondary and technical)(shared) - Childcare facilities - Community health services (base hospitals, small district hospitals, and nursing homes) (shared) - Public housing (shared) - Sport, recreation and cultural facilities - Libraries - Public order and safety (courts, police stations, traffic signals etc.) Local - Roads (local) (Shared) - Sewerage treatment, water and drainage supply - Aviation (local airports) - Electricity supply - Public transport (bus) - Childcare centres - Community centres and nursing homes - Public housing (shared) - Recreation facilities, parks and open space. Source: Adapted from Webb (2004) 44 2.7 Planning Approval System and off-site Infrastructure Provision Planning approval is a method applied by local planning authority to ensure development proposal according to development plans (McLoughlin, 1975). During planning approval stage, the system enables local authority to secure adequate provision of infrastructure (on-site and off-site) prior to granting of planning approval by the authority. In the context of local development, the system is identified as the major influential to the local development (Bo-sin Tang et al., 2000). In this case, according to Klosterman (1996), the system has been widely applied as an effective means to ensure the adequate provision of infrastructure by developers. Therefore, by regulating land use control, the system enables to contribute a significant provision of infrastructure. 2.7.1 Planning System and Development Plans Development plans have been an important tool in considering planning approval decisions. In the context of off-site infrastructure provision, the granting of planning approval is made according to the requirements outlined in the plans to ensure the mentioned proposed infrastructure is provided. In many planning systems, the plans which consist of structure plan and local plan are treated as primary guidance to be referred in making planning approval decisions (Ennis, 1997; Healey, 1991; Claydon, 1997; Ratcliffe et al., 1991; Bunnell, 1996). The plan frequently acts as a basis which requires the applicants to provide the needed infrastructure. In many planning systems, the plans act as guidance in implementation of infrastructure. 45 According to Morgan and Nott (1995), plan preparation is subject to legal process due to the basis where the statutory plan-based making process enables the local planning authority to establish the policies to guide and control future land use. However, as added by Grant and Jowell (1983) there is now a tendency by many local planning authorities to provide a detailed requirement of infrastructure in plan rather than leaving matters to the discretion of the planning authority. The purpose of planning approval system is to ensure efficient and effective land use in the interest of the public. In this regard local planning authorities have the responsibility to influence developers to carry out development according to the approved development plans (Burke and Taylor, 1990). It is particularly important that the relevant infrastructure is of adequate standard to cater for new developments (Thomas, 1997). It provides the policy framework in form of development plans, land use regulations and scrutinise the type of infrastructure required for the proposed development to take place. This is what has been outlined by Greed (1996) when describing the characteristics of planning system. Planning approval is plan-led system, therefore development plans are not the only consideration in the system. To fulfil the responsibility, local authorities are likely to include other significant relevant features in their planning policy agenda such as social, economic, political and environmental considerations, design and layout constraints of development as well as ensuring adequate provision of infrastructure. The significance of development plans in considering planning approval is stressed by Thomas (1997), when he claimed that in British planning system, development plans become the material of consideration when local planning authority considers planning approval. It consists of policies which describe in detail the type of infrastructure to be provided in a particular location (Greed, 1996). 46 Normally, the plan gives such following guidelines according to infrastructure requirements; i). to improve the quality of the present infrastructure ii). to improve access and circulation to the location of the facilities provided, and iii). to identify the strategic and accessible location of new infrastructure 2.7.2 Development Process and Planning Approval Planning as an activity is widely recognised as a legitimate land use process. Furthermore, the general understanding of planning approval is more than of development process. Technically, planning approval is a term used to define the system of issuing permits for land development. Basically, the stages of development process are: initiation, approval, building and disposal. At the approval stage, planning approval is a vital part of the development process (Ratcliffe et al., 2001) because granting of planning approval increases the value of land and buildings (Thomas, 1997). Along the process, it may involve negotiation by local planners to secure public facilities from private sector, particularly in securing offsite infrastructure (see Figure 2.3). In the previous paragraphs much has been elaborated on the nature of development process. Similarly in Peninsular Malaysia one of the hurdles of the developer is the certification of planning approval from local planning authorities prior to commencement of development. At this stage, the developer is required to obtain approval from a range of other statutory bodies or the relevant technical authorities; local planning authority acts as the central approval authority (see Figure 2.4). The developer will need to conform to the requirements of the building 47 regulations; to conform to any restrictive covenants (e.g. certificates of approval from various authorities such as fire department, public work department, health department and etc.) over the way in which the land can be used or developed. In certain cases, developer is required to provide a range of infrastructure not just located within the development area, but the developers might impose conditions requiring the provision of infrastructure outside or adjacent to the site of the proposed development. In planning terms, outside is referred to as off-site. 48 1. Analysis of Property Investment Situation - Review of property portfolio. - Existing portfolio management. - Examination of future trends - Property market analysis Actors involved Accountants – Financiers/Bankers – Economists – Stock market specialists – The developer as client 6. Letting/selling of units and management 2. Decision to develop - Development advice. - Feasibility studies. - Site analysis. - Site finding. Actors involved Town Planners – Architects – Market researchers – Design consultants – Property agents. 3. Obtaining planning permission - Agency role in letting disposing of units. - Property management. - Property maintenance. - Overall financial management, portfolio revisions. - Legal issues, rents, rate reviews with district valuer. - Representing client in submitting outline application, followed by negotiation and planning gain consultation, or inquiry. - Local planning authority and central government ‘planner’ determining the application may also be surveyors. - Also private surveying practices act as consultants to local authorities in statutory plan preparation. Actors involved Property agent, Maintenance engineers- Retail managers – Arbitrators. Actors involved Town Planners - Lawyers - Economists – Architects Design consultants – Community Groups. 5. Building design and construction 4. Site development - Liaison on design with user groups. - Liaison on planning control. - Costing, procurement, tendering. - Property management. - Involvement in building team in many specialist roles. - Investigating land rights, covenants as constrains on development. - Monitoring land transfer, site analysis and setting out. - Landscaping liaison. - Design consultation. - Consumer research. - Occupancy prediction. Actors involved Architects - Planners – Accountants – Civil engineers. Actors involved Civil engineers – Landscape Architects – Highway engineers - Town Planners Lawyers – Architects. Figure 2.3: The stages of property development process (Source: Adapted from Greed, 1993) 49 Applicant/Developer Submission of Planning Application to appropriate local authority Consulting with other departments of local authority Planning Department Application registered, checked against plans and policies outlined by the approval authority Planning officer visits proposed site for development Referred to county for ‘county matters’ Advised locally for comments Technical comments received by approval authority ‘Called in by Minister who institutes Inquiry and make decision Decision made accordingly to comments received In certain cases planning approval might be decided by LPAs without consulting other technical departments Refer back Planning committee decide Decision deferred Council decide 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Decision released Application approved / refused / approved with conditions Decision issued to applicant / developer Applicant may appeals to ‘relevant’ channel which provided under laws [Pre-application discussion between applicant and local planning authority (LPA)]*. Application submitted by applicant to LPA. Application check, registered and acknowledge by LPA. Public consultation period with statutory and non-statutory consultees. Planning officer visit site and starts to compile report on the application for planning committee on the basis of material considerations. Results of public consultation received by LPA. [Before final decision there may be further discussions between applicant and LPA to make application acceptable]*. Planning officer finalises his report and either makes a decision himself under delegated power or remits it to LPA planning committee with a recommendation to grant or refuse planning permission. Planning committee decides to refuse or grant planning permission. Applicant notified of decision, which is recorded in planning register. [Where applicant is dissatisfied because of refusal or onerous conditions, he may appeal to Secretary of State].* *Note: This stage some time not necessarily in the procedure. Figure 2.4: The outline of British decision-making procedure in permission approval (Source: Thomas, 1997) 50 2.7.3 Planning Gains and Planning Approval Process This part pursues further the significant features of planning system in planning approval process with particular reference to the question of what means are available to local authority to secure some portion of benefit from private development in order to achieve his social and environmental objectives. In many parts of the planning system, one particular attention is given to the effectiveness of applying planning gain as a means to achieve such local development plan policies. According to Keogh (1982) as cited by Allison and Askew (1996), to certain extent such practice is applicable to many local authorities. Planning gain is used in negotiating additional gains (infrastructure) from private sector to community when the private development in a huge area is under progress. According to Greed (1993), planning gain is a non-statutory term which covers additional concessions secured by the local authority from the developer when entering into agreement to provide certain amenities in return for a more favourable planning approval. It is not a bribe, as it is for the benefit of the community and has to be directly related to the development in question. Typical examples might be the provision of infrastructure such as road improvements, recreation facilities, open spaces, community centres etc. Certain local authorities acquire much higher contributions than the mentioned ones from developers ranging from local schools or even sport facilities to construction of new roads. This is one of the limited means by local authorities to materialise the social aspects of planning in view of public financial cutbacks. Conceptually, planning gain is that any extraneous profit above the norm in private development might be negotiated as planning contribution to be provided in form of off-site infrastructure provision. In the context of planning system in Peninsular Malaysia, such practice is not clearly mentioned in the TCP or any other statutory documents. The concept is an ad-hoc in some local planning authorities when dealing with off-site infrastructure provision. In British planning system, 51 planning gain is being using to secure infrastructure from private sector (Healey et al., 1992). In a study by Ennis (1994) using two case-studies to determine the perception of local authority and developer towards the practice of planning obligation, there is a significant reformation in the practice of the planning gain. The used legislations such as Town and Country Planning Act, 1990 and DoE’s Circular 16/91 made the change from ad hoc practice to more structured practice. Negotiating planning gain informally practiced in the 1980s became gradually established by the statutory plan policies. The major issues identified in the study are the formalisation and legitimising of the planning obligation practice. The major concern by most developers was on the size and scope of the said obligation that might be imposed on developer. The results show that most countries have been practising the approach of planning gain in their planning system as an alternative which enables local planning authorities (LPAs) to reduce the financial burden in providing off-site infrastructure. This part pursues further, the role of LPAs in the development process with particular reference to the question of what means are left to the local authority to get benefits from the private development and with focus on the role of planning gain as a means of achieving such infrastructure. The purpose of planning gain is to mitigate the impact of proposed new development. Various definitions of planning gain have been put forward, most very broad. In general, the term has been used to encompass any outcome which a local authority views as desirable. 52 However, the concept of planning gain is best expressed by Circular 22/83 (cited by DoE, 1993): ‘..whenever, in connection with a grant of planning approval, a local planning authority seeks to impose on a developer a positive obligation to carry out works not included in the development for which planning permission is being sought, or to make some payment or confer some right or benefit, in return for permitting development to take place…’ To be sure of the concept and definition of the practice, there are several definitions widely accepted such as: Jowell (1970); ..defines planning gain as the achievement of a benefit to the community that was not part of initial application and that was not of itself normally commercially advantageous to the developer..’ Marsh (1989) defines planning gain as a benefit to the community, achieved at no cost to the community… usually secured by the developer and local planning authority (LPA) signing a planning agreement before planning consent is granted…’ Crow (1998), spoke of its concern about planning gain as the arrangements whereby local authorities, in granting planning approval, achieve planning and other community gains at the expense of developers…’ At this point, development should not be permitted because of any extraneous offers from private developers and ensures local authorities’ attempts to extort unreasonable benefits from developers. To be a valid planning gain, the item which is decided by planning authority to be acquired as list of ‘gain’ must fulfill the following characteristics: i. Relevant to planning ii. Fair and reasonable in scale and kind 53 iii. Logical iv. Directly related to the proposed development, and v. Necessary In the context of British planning system, the gain can take a variety of forms which lies in the view that by granting planning approval, the local authority is actually conferring a great increase in land value. In many cases, planning authorities are in a stronger position to impose such planning gain, and even impose additional conditions on the planning approval as applied by developers for development. The Circular 16/91 (Planning and Compensation Acts: Planning Obligations), cites the following as 'reasonable' subjects for planning gain: i. Specification of use ii. Dedication of land and building for public use iii. Improvements of environmental quality iv. Off-site infrastructure provision v. Cash payments One might argue that the practice of planning gain is allowable to local authorities to extract public benefits (e.g. on-site and off-site infrastructure) at no cost. As mentioned earlier, in the definition of planning gain, the term contribution does not require to be commercially disadvantageous to the developer (Verhage and Needham, 1997). However, it offers a relevant benefit to the local authority elsewhere as beneficial to the developer (see Figure 2.5). 54 Ad-Hoc Expenditure of development gain What is the size of the development gain? Who receives the development gain? Who has power over the use of development gain? Negotiations - Characteristics of site - Other than financial arrangements - ‘Regulated expenditures’ Residential development Figure 2.5: The cycle of development gain expenditure (Source: Verhage and Needham, 1997). According to Greed (1993) planning gain should only be limited to land-use and land development. Anything else is strictly ultra virus. Any planning condition must be for a genuine reason, for restricting or regulating the development or use of land, and reasonable (Morgan and Nott, 1988). Jowell (1977) defines planning gain as the achievement of a benefit to the community that was not part of the initial application (and was therefore negotiated) and that is not normally commercially advantageous to the developer. Furthermore, Marsh (1989) defines planning gain as a benefit to community, achieved at no cost to the community and usually secured by the developer and local planning authority signing agreement before planning consent is granted. 55 Generally, planning gain can only be secured by local planning authority when development occurs. It is relevant to ask exactly how advantageous is the practice of planning gain to the local residents (Allison, 1996). Besides the advantages of planning gain to secure infrastructure, Allinson and Askew (1996) argue that in implementing planning gain, the United Kingdom’s experience of disadvantages can be applied to consider the value of gains. These experiences can be learnt for the purpose of adopting this approach in the Malaysian context. Planning gain may include provision of facilities arising from the need created by the development. The nature of planning gain can be described as follows: i. Planning gain is only achievable in areas of development pressure, where there is the potential for profitable, large-scale development. ii. The system of negotiation for planning gains is corrosive to the neutrality of the local planning authority. iii. The nature of planning gain agreements is secrecy. The practice of negotiations normally is held behind closed doors between developers and planning officers. iv. There is a question as to the actual benefit of the gains to the local community. v. Commercial viability during negotiating for planning gains was given priority as a material consideration. 56 In the United Kingdom, the benefits from planning gain can take a variety of forms such as additional contribution to infrastructure, amenities, social facilities and landscaping, in return for a better planning permission. Similarly in Peninsular Malaysia, for instance the Municipality of Penang in the State of Penang (MPPP), the planning gain can be divided into two main categories: i) Monetary gain (e.g. development charges, financial contribution levied in exchange of public amenities; and ii) Amenities gain (e.g. infrastructure improvement, environmental improvement, providing open spaces, recreation parks, parking facilities, religious facilities (mosque), allocating a piece of land for building of school etc.). However, in the first part of the practice, planning gain is not likely what has been practised in United Kingdom. There is a misconception regarding the actual meaning of planning gain. Grimley et al. (1992) as cited by Healey et al. (1995) found that negotiation process is critically valuable in dealing with issues by large and complex development applications and particular to sort out who should pay for what in relation to infrastructure development. For developers, the advantages of agreement noted in the study include: i. Removing an obstacle to planning permission; ii. Bringing forward public infrastructure programmes; iii. Avoiding delay through an appeal; iv. Enabling a trade-off between advantages and disadvantages of project, so allowing it to proceed; 57 v. Influencing public opinion on the effectiveness of applying negotiations approach in securing public infrastructure from private sector; and vi. Enhancing the development itself. Even though planning gain much benefited local authorities and communities in particular, the practice receives a number of public arguments. For example although Marsh (1989) has argued that planning gain has allowed local authorities to achieve public benefits at ‘no cost’ it’s still argued that the definition of contribution should include offers from developers which allow a local authority to achieve a benefit at less cost than incurred otherwise. As opposed to Jowell’s definition of planning gain, the definition of ‘contribution’ does not require to be commercially disadvantageous to developers. Rather, contributions offered to the local authority, might also be beneficial to the developer. 2.7.4 Planning Approval Mechanism to Secure off-site Infrastructure Planning application will be processed according to a set of guidelines fulfilled by the applicants prior the granting of planning approval. In the extreme situation, the local authority is in a strong position to apply whatever means available under the prescribed legislative to secure planning contribution and this includes of off-site infrastructure. As supported by Claydon (1997), there are widely accepted practices which allow local planning authority to accept an adverse-offer from developer as planning contribution. The offer was in form of off-site infrastructure which can be secured via negotiation process. Under this category, there are three mechanisms of how off-site infrastructure can be secured from private developers through planning approval process. This includes Planning Contributions, Development Charges and Planning Agreements. 58 2.7.4.1 Planning contributions Planning contribution or development contribution primarily relates to the provision of parks, gardens, open spaces and others facilities by planning applicants. This requirement was provided under planning control guidelines. Infrastructure charges or development contributions apply to secure adequate level of infrastructure before planning approval is granted. It may come in many forms, such as drainage system, parks and open space, transport infrastructure (local roads) and infrastructure for local community purposes (i.e. community facilities, cultural facilities etc.). The planning contributions are recovered by various methods, in the following forms: - Incorporated in the local planning authority's planning control guidelines. - By voluntary agreement, usually for the purpose of securing the required planning approval (e.g. via unilateral undertaking agreement by developers); or - Through statutory enabled negotiated agreements. 2.7.4.2 Development Charges The development charge imposed by local planning authorities on developers is used to pay for infrastructure required by new development. In order to fulfil the demands for public utilities and amenities, local authorities have long been seeking ways for reliable methods of infrastructure funding and financing to secure the required local infrastructure (Booth, 1999). In a study on comparative evaluation of development charge practices in Ontario and Israel, Kaplinsky (1999) found a significant result, under planning approval system. Here development charges were found to be of the efficient means to oblige private developers to contribute to the cost of local infrastructure. This was designed to recover the 59 public costs incurred in the provision of infrastructure from the users. Development charges were levied on the land owners rather than the occupants or users of specific services. The terms of development charge have a common purpose but often carry different names such as impact fees, contributions for betterment and special assessments. There are three main reasons for imposing development charges, namely; i). Development charges is a source of income to local authority; ii). It is economically efficient for the development charges to be levied on the appropriate users; and iii). It is equitable to charge those parties who individually benefit directly from the facilities. For example in Australia, the fee was referred to developer contributions. Although the terms have a variety of names, but it was referred to the same purposes which is a process applied by local authority to obtain contribution from developers prior the planning approval is granted. 2.7.4.3 Planning Agreements To make the planning approval system come to force there had to be strong powers of control (Greed, 1993). The system should be entered into either by agreement or ‘unilaterally’ (Heap and Ward, 1980) to impose restrictions and conditions on the development and to require specified facilities to be carried out or to be paid to the local authority prior granting of planning approval. In the case of the ability of local planning authority to impose a betterment levy on developers who benefited from an increase in land value because of a planning approval or land use zoning, it was necessarily for local planning authority to provide such powers. For example, when an agricultural land zoned as residential land would vastly increase in value. However, many would argue that the present proliferation of planning gain may constitute an unofficial form of betterment levy or land tax to get the developer to pay for infrastructure. 60 A planning agreement is not a condition attached to planning approval. In fact, the agreements operate alongside any planning approval. Justification for the local authority to impose an agreement as a pre-requisite of grant of planning approval will be contained in appropriate policies as appeared in the approved local authority’s plans. In the Bristish planning system, such policies may be amplified by Supplementary Planning Guidance (SPG) which aims to clarify the justification of the requirement. Bunnell (1995) had found that the practice of local planning authorities negotiating agreements and contributions as a condition for granting planning approval has become known as the negotiation of planning gain. Applicants may also make similar provisions by making “a unilateral undertaking”. Where given, these normally arise in the context of an appeal. In this case, the applicant makes a legally binding declaration to carry out works or provide funds as part of submissions made to justify an application. This is sometimes the case where negotiations have failed to produce agreement. According to Healey et al. (1995), the practice of planning gain has been initiated since early 1960s in return for the grant of planning approval. The Government proposed to legislate to require developers to contribute community facilities in connection with new development. In fact the planning agreement should be used by local authorities to secure private contributions to infrastructure cost (or planning gain). The first detailed analysis of how local authorities have used agreements was provided by Jowell (1977). Approximately one-half of all authorities who responded to Jowell’s survey reported that they had achieved some kind of planning gain. The types of ‘gains’ local authorities reportedly achieved and the percentage breakdown of those gains are shown in Table 2.2. 61 Table 2.2: Types of gains as reported by local authorities Type of gains Percentage % Public right of way on the developer’s land 19.5 Dedication of land to public use 18.4 Provision of community buildings 6.9 Provision of infrastructure 6.9 Gift of site or buildings for residential use 6.9 Rehabilitation of property 6.9 Source: Gene Bunnell, 1995. By referring to Table 2.3, a consensus appeared to emerge that the practice of forcing developers to sign agreements containing offers of contribution for offsite infrastructure was increasing. In fact the table also suggests a trend toward signing more agreements. From 1974 through 1977, with an average of 10 agreements were signed per year. However, from 1978 to 1981 an average of 24 agreements per year was recorded (Bunnell, 1995). Based on a study by Rowan-Robison and Durman (1993) on the practice of planning agreement to secure infrastructure from private sector, they found a steady increase in the use of agreements in the planning approval process. Among other things, they recommend that local planning authorities should, where appropriate, give guidance in development plans about the circumstances in which they intend to seek to impose obligations through agreements. It shows that development plans are increasingly making provision regarding the funding of collective infrastructure and that some of development plans are making explicit provision arising from detailed planning control policies. 62 Table 2.3: The distribution of planning applications and planning gain agreements in Wokingham, 1974-1981 Year Full applications Planning gain with Agreements 1974 1975 1976 1977 1978 1979 1980 1981 1320 1548 1454 1307 1747 1890 1832 1218 6 2 13 18 21 20 31 22 Total 12,313 133 Source: Bunnel, G. (1995) 2.7.5 Negotiating off-site Infrastructure Provision How is planning gain secured? What method is used to secure gain? Because the negotiation of agreements is costly and time-consuming, it is unrealistic to expect that every agreement should be negotiated for every planning approval. What was the significant feature available in planning system which allowed local planning systems to acquire benefit from private development? By referring to United Kingdom based studies during planning approval process, initially planning approval has to be secured prior commencement of the development. Local planning authority normally always put negotiations as a significant tool to gain some community facilities out site boundary of acquired planning approval (see Healey, 1997; Bunnell, 1995; Claydon, 1997; Greed, 1996). 63 Negotiations, is one of the methods applied by many local authorities in number of countries to secure off-site infrastructure from private developers. The negotiation involves local authority and the developer during the planning approval stage. It involves the bargaining process of the developer contribution during the process. By entering negotiations, planning authorities enable to covers some cost of public infrastructure from the private developer by attaching development contribution conditions to a planning approval (Ennis, 2003; Hendrik, 2003). The practice of negotiation in connection with the grant of planning approval is primarily aimed at ensuring that the adverse social and environmental costs from the development are limited. A planning condition is imposed by local planning authority as part of the public system for the regulation of development projects. As practised in British planning system, the agreements are negotiated based on separate statutory provisions. Therefore the scope and legal consequences can be very different from those arising from a condition. This was pointed out by Healey et al. (1996) the use of planning agreements to impose obligations on those carrying out a development could be seen as a substitute for a betterment levy or development tax. The relationship between the applicant (developers) and local planning authority is probably the most important. This may take the form of pre-application negotiations over planning conditions and planning agreement before planning permission be granted. The negotiation of planning agreements to achieve ‘planning gain’ has generated an on-going debate and widely differing perceptions and interpretations of how local authorities have used agreements. The British planning system is considered `discretionary’ in nature because it provides for the interpretation of policy and the input of material considerations in decision-making. Discretion is also evident at an operational level where officers gather information and make judgments before offering advice on planning applications. Within this discretionary space, negotiation commonly occurs, sometimes in relation to planning gains. 64 Negotiating gains is proposed through the planning approval, a negotiation process is also being acted out. The stages of the negotiation process may be seen to run parallel to those of the planning process but there is not automatic linkage. The successful conduct of both processes, in order to achieve a compatible outcome, depends on the abilities of the key actors. Those actors need helpful organizational structures to support them, but also strategies for successful management of the processes. Most of the studies comment on the mutual benefits the negotiation of obligations brings in improving the present quality of local facilities. Durman and Rowan-Robinson (1991) as quoted by Healey et al. (1995) outlines two main benefits that can be secured by planning authorities during negotiating of planning obligations. The first one is to remove obstacle preventing planning permission being granted in order to ensure infrastructure provided and the second is that to provide a more robust control over development to provide greater strength than was possible through a condition for rapid enforcement. Even though agreements affect relatively few applications, the study found that the practice seems to have become routine among most local authorities during the 1990s. The practice has now extended across the planning system in some part of British’s local authorities in the 1960s and 1970s. Despite of local planning authorities making extortionate demands from developers for planning gain, the reality seems to be that such negotiations have a useful role for most parties in managing the development. The lack of detailed guidance of authority would result in inconsistency in negotiating planning gain. It will continue to be uncertain as long as the authority does not produce a comprehensive guidance to local planning authority to be used as policy guidance. 65 2.8 Comparative System of Local Infrastructure Provision 2.8.1 Ireland In Ireland, part of public infrastructure been has provided by private developers using planning approval. Normally, the negotiation takes place to identify the types of infrastructure to be considered as planning conditions and the method of payment. Previously the negotiation was driven by the need to recoup public investments. However in the recent practice, planning requirement also applies to provide infrastructure that would otherwise not be provided. The lack of infrastructure might be a possible impediment to the local development. This has given a tough responsibility to local authority to apply development process effectively in ensuring the local infrastructure provided adequately. The Irish planning system is a plan-led system which using development plan for its administrative area and each planning application must be considered in the context of the development plan. The main reasons for this are that the development plan is often not sufficiently specific to provide more than an answer to the question whether development should take place in principle, and a significant degree of discretion is left to the decision on an individual planning application. Also in some planning approval practices, planning permission may be granted by default if a planning permission is not made within specified periods. A planning application can be disapproved if it does not comply with the development plan. The planning authority can follow a procedure of material contravention where it decides to facilitate the development (Hendrik, 2003). This is because the choice to follow this procedure of material contravention is open to the planning authority it gives it a negotiating tool. This is helped to a degree by the fact that each planning permission that is granted by a planning authority may also be challenged by a third party while the applicant may also appeal the decision granted to a board of appeal. Through the attachment of development contribution 66 conditions, planning authorities can achieve a contribution from the private developers for the provision of public infrastructure that would facilitate the development for which permission is requested. Development conditions have been used by planning authorities to acquire infrastructure. The reasons to refuse the planning permission may also be based on the lack of infrastructure facilities in the development proposal. Under the planning legislation, planning authorities can refuse a development proposal as being premature if the required infrastructure is not available or where the capacity of the available infrastructure that has been reserved for other development is not enough to support the private development which much benefited the private sector. The use of conditions and refusal reasons enable to promote the use of negotiation and the practice also initiate developers the facts that some of responsibility to provide infrastructure should be bearded by them as part of their corporate responsibility. 2.8.2 Australia According to Cardew (2003) the involvement of private sector in local infrastructure is well established. The private sector has been involved with local infrastructure delivery over a decade and bears most of the inherent risks in infrastructure provisions. They responsible for the provision of the local infrastructure such as recreation facilities, local roads, drainage, parks, gardens and sewerage infrastructure or in some state local authority also provide neighbourhood-based public transport systems. Most of local authority in Australia revealed that private sector financing of local government infrastructure is limited (see Table 2.4). 67 Table 2.4: Some infrastructure provided by private options in Australia Type of delivery Type of infrastructure Lease Contracts Fifty eight different councils - recreation facilities AND cultural, civic and/or library facilities BOOT, BOO or BOT schemes - Willoughby City Council; parks, gardens and open space - Central Goldfields Shire Council; recreation facilities - Frankston City Council; recreation facilities - Warringah City Council; bus shelters - Burwood City Council; public car park - Noosa Shire Council; water and/ or sewerage Concession/ franchise agreements - City of Booroondara; recreation facilities AND cultural, civic and/or library facilities - Kempsey Shire Council; recreation facilities Full privatisation - City of Port Lincoln; recreation facilities - Armidale Dumaresq Shire Council; gas utilities Source: Australia National Office of Local Government (2003). The argument made by many private infrastructure providers, is that the inability of many local authorities to identify the potential of infrastructure projects as local investment opportunities causes local authority go for private sector engagement in providing such facilities. These factors inhibit private investment in local infrastructure. Thus it is acknowledged, by both the private and public sectors, that local authority inability is the main constraint to private sector infrastructure financing. 68 2.8.3 Germany In Germany, the lack of funding of many local authorities increasingly pressured them to provide adequate and appropriate infrastructure (Ache, 2003). It had a significant impact on the local infrastructures. The main challenge for many local authorities was the lack of funds to finance the required local infrastructure. It worked as engines of local economy, adequate provision of local infrastructure would maintain the performance and remain the local authority competitiveness in local development. However, the country has rigid planning system regarding infrastructure requirements. The system operating with a number of regulations which covers ways to provide infrastructure in the planning and development process and how to fund the occurring costs. As a rule, new development cannot take place without securing provision of infrastructures to serve the land development which also covers outside (or off-site) and on-site developments. The provision of infrastructure is solely on the basis of a secured Bebauungsplan, a statutory local plan. The strategy benefits from the practice of planning gain. The local authority is shared at a certain portion with developer to pay for the costs of providing infrastructures. The ‘cost’ for the developer includes providing socio-infrastructure and economic infrastructure. According to Ache (2003) developers had provided public drive ways, social infrastructure, public green space and planning costs. 69 The procedure applied is divided in three main stages: Stage 1: All parties involved agreed in principle on a shared cost basis and this should be done before detail planning work is started. Stage 2: Either the agreement for the actual development is accepted by all parties involved. Stage 3: Finally, the actual agreement for the development is agreed. 2.8.4 United States Under the American planning system, the developers are required to provide on-site infrastructure. However, in the 1970s and 1980s, major cities in U.S increasingly laid down requirements for private-sector provision for off-site infrastructure because of rapid growth in many areas combined with increase in construction costs and interest rates and reductions in federal and state aid increased the cost to local governments of providing new expenditure. Coupled with the fiscal decline of many cities, tax and expenditure limitations, and voter rejection of bond issues, the cost increases have forced many cities to reconsider the way they pay for capital facilities (Snyder and Stegman, 1987). As describe by Nelson et al. (2004), the approach that has been practised is likely as considered as impact fees and is imposed on new development as a means to raise revenue to pay for expanded public facilities necessitated by new development. The fee applied to bridge the gap to build or expand public facilities to accommodate new development. The system would certainly produce some improvements over British planning gain/obligation practice. The system actually produces some improvements over British planning gain practice and is applied consistently and being based on a planned program of infrastructure investment. 70 By comparing the different planning systems, the Ireland and Germany planning system much relevant to what has being practised in Malaysia planning systems in securing off-site infrastructure provision. Part of infrastructure provision been placed under the duty of private sector. The planning approval system is applied to secure infrastructure from private sector and uses the system to reduce the public burden on infrastructure development particularly off-site infrastructure. In securing infrastructure provision, the Irish planning system operates almost similar to Malaysia planning system. They are exercising a development plan system consisting of development plan and development control. During planning approval stage the local authority might use development plan as guidance to consider planning applications. If there is a requirement for infrastructure stated in the plans, infrastructure requirement will be attached to the planning approval. This is also what has been applied in Irish and Germany planning approval system. Local authorities in Ireland had placed a significant consideration to involve private partnership in securing the provision of infrastructure and the system is wellstructured and established. It appeared as discretionary rather than regulatory this is because the development plans is not legally binding due to the type of land development process. In securing of local infrastructure provision, the development approval is negotiable practice because of the degree of discretion that is open to the planning authority in the planning approval process. 71 2.9 Conclusion of the Chapter It can be concluded at this stage that planning system is an essential tool since it enable local authority to acquire adequate provision of infrastructure at the local level. With efficient implementation of planning approval, local planning authorities might secure some benefits or gain from developers at the stage of planning approval. The literature proved that, local infrastructure can be secured from private sector, however local planning authorities have to rely upon the existing procedural aspects of negotiation when dealing with private proposals to achieve the required outcomes. In the recent practices, negotiation is the key factor in securing local infrastructure provision and in particular in the provision of off-site local infrastructure provisions instead of other method allowable under planning system. This has effectively been concerned with the issues that relate to planning gain, how to get back from the developer, and return to the community, some element of the profit that has been made as a result of development to fund the necessary social and infrastructural provision. It can therefore be summarised that the private sector can and has also become more directly involved in the provision of local infrastructure. Such involvement revolves around the rights and obligations in the contractual arrangements between private operators and Councils and can take the form of service/ management contracts, lease contracts, build operate and invest arrangements (e.g. BOOT, BOO or BOT schemes), concession or franchise agreements, joint ventures or full privatisation. This chapter has provided a framework on how this approach can be adopted into planning approval system in Peninsular Malaysia. However, a comprehensive study is needed to evaluate the level of readiness and acceptance of the private sector as the key player before such approach can be adopted. Figure 2.6, illustrates a number of options of private financing and delivery are available at the local level to secure off-site infrastructure within the framework of planning approval. Public Sector Delivery Public financing 1. Development Charge 2. Developer Contribution Issuing Municipality Bonds Indirect Private financing 3. Development Impact Fees 4. Processing fees Planning Approval Process (Development Control System) User Charges (Utility Charges / Direct User Charges General revenue (General Rates / Special Rates / Differential Rates / Separate Rates Internal Funding funding and delivery mechanisms Figure 2.6: Local infrastructure provision (off-site and on-site) Private Financial Initiative (PFI) (PFI is a form of PPP) Public-Private Partnership (PPP) Joint Ventures Concession /Franchise Agreements BOOT, BOO or BOT Schemes Full Privatisation Lease Contracts Service / Management Contracts Traditional Public Contracting Direct Private financing Private financing / delivery External Funding Local Authority 7. Loans 6. Parking lot fees, plans fees, interest receivable and others miscellaneous items. 5. User-charge/ Government grants 4. Improvement Services Fund (ISF) e.g. The fund allowable to be used for building or maintenance of existing local infrastructure. 3. Rentals 2. License fees 1. Real property tax or assessment 72 CHAPTER 3 PLANNING APPROVAL SYSTEM IN MALAYSIA 3.1 Introduction Pursuing private involvement in local infrastructure development is not simple. It requires effective integration of all relevant regulating authorities promoting greater participation of private sector. The discussion in Chapter 2 has provided an overview on the theoretical framework required for the study. This chapter than provides an overview of the planning and development approval system as practised in Malaysia. The discussion will focus on the planning approval system in securing offsite infrastructure from the private sector as outlined in Town and Country Planning Act 1976 (Act 172) and Federal Territory (Planning) Act 1976 (Act 267). 3.2 Urbanisation and Infrastructure Development Rapid urbanisation would create additional demand for infrastructure. In the last three decades, Malaysia has been experiencing a progressive rate of urbanization (see Table 3.1). The total urban population of Malaysia in 1991 was reported to be at 7.68 million (54.3%), i.e., more than half of the nation’s total. It is anticipated that by the year 2020, the urban population would grow to 20 million (or 80.0%) of the total population. By referring to Table 3.2, urban population experienced a rapid increase from 1980 to 2000. 74 This requires the relevant authority to provide adequate infrastructure in order to meet the demand of future development and several strategies have been adopted to maintain and ensure the achievement of an equitable urban growth. At the local level these include the strategies to provide urban infrastructure through the implementation of privatisation projects. Table 3.1: The distribution projection of urban population in Peninsular Malaysia, 1911-2020 Year Total Population Urban Population Rural Population Urban % Rural % 1911 1921 1931 1947 1957 1970 1980 1991 2000 2010* 2020* 2,339,000 2,906,691 3,787,758 4,908,086 6,267,955 8,819,928 11,426,613 14,127,556 16,884,000 20,582,000 25,088,000 250,273 406,936 570,513 929,928 1,666,969 2,662,787 4,182,759 7,676,486 10,838,000 14,406,700 20,070,400 2,088,727 2,399,755 3,217,245 3,978,158 4,600,986 6,157,141 7,243,854 6,541,070 6,046,000 6,174,300 5,017,600 10.7 14.0 15.1 18.9 26.6 30.2 36.6 54.3 64.2 70.0 80.0 89.3 86.0 84.9 81.1 73.4 69.8 63.4 45.7 35.8 30.0 20.0 Source: Federal Town and Country Planning Department, Malaysia (2003) Note: *Projected figures In Malaysia, infrastructure provisions normally concerned the involvement of public sector in providing facilities such as roads, hydroelectric dams, water treatment plants, and airports. This practice therefore contributes financial burden to the local authorities. In order to reduce the burden, the present practice should be reformed accordingly by promoting the private sector in such local infrastructure provision. 75 It has been seen that adequate infrastructure facilities are vital for local development and it is clearly a necessary precondition to sustain economic development. However, the increasing cost of providing infrastructure has had a significant impact on the capacity of the local authorities to provide infrastructure as they did in the past (Healey, 1995; Choguill, 1996; 1997; Ennis). As provided under the present planning legislative, local authority is to impose either the requirements of financial contribution, adequate public amenities and appropriate infrastructure facilities to private developers’ upon the granting of planning approval. In cases, developers are also required to provide off-site requirements such as road improvement, new roads and other facilities. 3.3 The Framework of Planning System 3.3.1 Planning System in Malaysia Britain has a town and country planning system which has provided a model for many other countries. The system comprises the production of policy frameworks in the form of development plans, the regulation of land use and development activities through granting or withholding of planning permission (Underwood, 1981). This Act is modelled after the British system to regulate development in public interest. It has a positive role in the achievement of urban development with adequate infrastructure. This requires an efficient development control system which provides the basis for a sustainable urban development. In Peninsular Malaysia, the town planning system has been practised legitimately since 1976 under the Town and Country Planning Act 1976 (Act 172). The system was established with a hierarchy from the national to the lowest level. Figure 3.1, outlines the overall government machinery at various levels and components of national development system. The Local Government Act 1976 (Act 171) itself does not include planning power under the purview of the local 76 authorities. However, under Sec. 59 (1) of the Town and Country Planning Act 1976 read together with Local Government Act 1976, planning is defined as a function of the local authority. The King (YDP Agong) Council of Rulers National Development Council The Cabinet National Economic Council Prime Minister’s Department National Security Council National Development Planning Committee Federal and State Relation Committee Ministries National Finance Council National Land Council National Council for Local Government Ruler of the State State Executive Council Secretary of the State Federal Secretary (For Sabah and Sarawak) State Development Council State Economic Planning Committee Figure 3.1: The overall government development machinery (Source: Adopted from JPBD, 1994) State Planning Committee 77 The function of the local planning authorities (LPAs) is further said to include power to regulate, control, and plan the development and use of all lands and buildings within its area. In fact, under Sec. 5 (1) of TCP Act 1976 provides that ‘every local authority shall be responsible for the planning of the area under its jurisdiction’. With these provisions, most local authorities have been conferred with a primary physical planning responsibility at local level and retaining their established role in land use planning. In relation to infrastructure development, the process provides a legitimate procedure to local authority to work with. The necessity to accommodate the need of infrastructure within the development planning process is fully recognised and accepted as a useful role of planning. The introduction of the Town and Country Planning Act 1976 (Act 172) and Federal Territory (Planning) Act 1982 (Act 267), would seek to confirm the commitment of the federal government planning in such areas as infrastructure for social change. The Acts provide statutory powers and duties for the planning authorities in the process of planning approval. In relation to the provision of infrastructure, the acts provide several requirements to acquire infrastructure during planning approval stage. These include: i. The requirement to obtain planning approval from the local planning authority before carrying out any development, and ii. The leverage of development charges. However, doubts are raised on the capability of the present planning approval system to ensure a significant strategy to such change. It is argued that the provision of adequate urban facilities is central to social and economic sectors in land use planning; as it has been pointed out that the planning approval system is deemed to be necessary to provide the linkages between strategies policy formulation and implementation. 78 3.3.2 The Administrative Functions of Local Authority Development administration in Malaysia is divided into three levels of government, namely Federal, State and Local Governments. The Local Government Act 1976 (Act 171) provides a consolidated framework for local authorities and empowers the authority to undertake a wide range of functions as stipulated in Town and Country Planning Act, 1976 (Act 172) and Federal Territory (Planning) Act 1982 (Act 267). The Acts state that the local authority shall be the Local Planning Authority (LPAs) for the area and conferring the responsibility for physical planning within its area of jurisdiction (Yaakup et al., 2003) and enable the LPAs for organizing, controlling and planning the development and use of land and buildings in their area (see Figure 3.2). The acts provide a framework for integrated planning of urban development and effective management of the urban planning process in the country. With regards to local infrastructure development, policy has therefore given a great focused on promoting dynamic private sector participation by creating a closer cooperation between the public and private sectors in providing major public infrastructure through privatisation. Generally, local authorities are empowered by laws for local planning and to perform urban planning management. There are four main legislations used in administration of local authorities in Malaysia, namely; i). Town and Country Planning Act 1976 (Act 172); ii). Federal Territory (Planning) Act 1982 (Act 267); iii). Street Drainage and Building Act 1974; and 79 iv). National Land Code 1969; The Environmental Quality Act 1974; Local Government Act 1976 (Act 171) and Land Conservation Act, 1960. State boundary District boundary Sub-district boundary Local authority boundary Figure 3.2: The concepts of state-level administrative boundaries Source: Adapted from Morrison, W.J. (1994) 80 In performing its function as urban services provider, the local authority is also empowered by law to impose the financial contribution and infrastructure provision before granting planning approval. The development plans enable the needed infrastructure available prior the settlement of the development. However, the situation is somewhat complicated for the individual local authority to fund the provision of off-site infrastructure when it does not have the financial capacity. In some states, those lands not incorporated within the jurisdiction of local authority, in spite of the local authority’s boundaries containing them, overlap the sub-district boundaries. For such areas, most of the required infrastructure facilities will be provided by Federal government’s grant under the Ministry of Rural Development. However, the responsibility of planning process still falls under the respective local authority. MBI MPPP MPSP MPSP-K MPKB MPK-P MPS DBKL MPPJ MBSA MPSJ MPAJ MBM MPJBT MDP MPK-J MPKB MPK MPKT ( PBTPG MBJB MDKT Total respondent 4. City Council of Kota Setar (MBKS) 5. Municipal Council of Sungai Petani (MPSP-K) 6. Municipal Council of Kota Baharu (MPKB) 7. City Council of Melaka (MBM) 8. Municipal Council of Seremban (MPS) 9. Municipal Council of Kuantan (MPK) 10. Municipal Council of Kangar (MPK-P) 11. Municipal Council of Seberang Perai (MPSP) 12. Municipal Council of Pulau Pinang (MPPP) 13. City Council of Shah Alam (MBSA) 14. Municipal Council of Ampang Jaya (MPAJ) 15. Municipal Council of Petaling Jaya (MPPJ) 16. Municipal Council of Subang Jaya (MPSJ) 17. City Council of Johor Bahru (MBJB) 18. Municipal Council of Johor Bahru Tengah (MPJBT) 19. Local Authority of Pasir Gudang (PBTPG) 20. Municipal Council of Kulai (MPK-J) 21. District Council of Pontian (MDP) 22. District Council of Kota Tinggi (MDKT) 2. Municipal Council of Kuala Terengganu (MPKT) 3. City Council of Ipoh (MBI) 1. City Hall of Kuala Lumpur (DBKL) Local Authority 164,444 116,977 234,581 113,752 193,237 202,445 81,882 542,010 506,295 158,439 290,452 350,995 79,002 441,703 19,556 8,161 29,929 30,181 24,327 228,119 468,841 1,145,342 1990 n = 22 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 nLA = 22 n = 16 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 nD = 16 No. of Respondent (n) Indicator : nLA = Local Authority nD = Developer 186,433 174,962 251,801 151,082 290,709 288,727 100,162 655,711 575,498 314,440 478,613 42,619 447,183 642,944 94,451 90,742 48,546 40,675 38,863 255,518 536,832 1,305.792 2000 Total Population Figure 3.3: The location of major municipalities and population in Peninsular Malaysia Note: The statistics included all categories of local councils city hall/city council, municipal council and district council) Johor Selangor Kelantan Melaka Negeri Sembilan Pahang Perlis Pulau Pinang Kedah Federal Territory of Kuala Lumpur Terengganu Perak States 81 82 3.3.3 Administrative Framework of Planning System One of the most significant features of the British planning system which has been adopted in Malaysia is the framework of control over the use and development of land. Anyone making a significant change in the land or property is required to seek planning permission from the local planning authority. Whilst local planning authorities are required to produce a strategic policy framework for the area they administer (structure plan) and may produce more detailed frameworks of policies and proposals for specific localities (local plans) in order to guide development (see Figure 3.4). The system is actually influenced by one designed to guide the urban land use. The system has been formulated in order to regulate the balanced development in the public interest. Therefore, it has a positive role to play towards the achievement of an orderly urban development pattern by guiding appropriate development and adequate provision of infrastructure. In order to achieve this, the framework of urban planning and development control should be effective and efficient in concept and operation. 83 National Plans Provide a framework for Regional Strategies Formulating general policies and proposal for socio-economic and physical development Provide general guidance for Provide a framework for Provide general guidance for Development Plans District-wide and, where Appropriate detailed proposals for the development and use of land Provide a framework for Control of Development Coordination of private infrastructure investment Co-ordinate development and use of land through Investment into Physical Infrastructure Public and Private Sector Figure 3.4: Land-use planning framework (Source: Adopted from Bruton, M.J., 2006) 3.3.4 Legislative Framework for Development Control The primary legislation which provides the basis for development control, the part of the system under consideration here is largely the Town and Country Planning Act 1976 (Act 172, amended 2000), adopting certain parts of the Acts to incorporate the change in order to further strengthen the scope of development control as result from rapid development incurred. 84 A country like Malaysia requires a comprehensive legitimate structure of urban planning system for controlling the development process. It not only applied for development planning purposes, moreover it was a necessary instrument for local authorities to safeguard the development according to the standards outlined. The related legislatives in urban planning have been formulated to regulate the balanced development in the public interest. Therefore, they have a positive role to play towards the achievement of an orderly urban development pattern by guiding appropriate urban development strategy. Planning legislations provide the main statutory powers for development control exercise; which provided in the form of structure plan and local plans. The enabling legislation used for development control can be summarised in the following manner: i. Town and Country Planning Act 1976: This Act confers upon the local authority three main forms of statutory power: a) Power to prepare Structure Plans and Local Plans b) Power to control all development of land c) Power to levy development charges for permission granted under various circumstances. ii. Street Drainage and Building Act 1974: This Act empowers local authorities to control building construction and management of sewerage and drainage works. 85 iii. National Land Code 1965: This is the main legislation governing all land matters in Peninsular Malaysia. There are provisions which require plans for subdivision of land to conform to certain requirements and approved by an authority with power on town planning. iv. The Environmental Quality Act 1974: This Act requires developers to submit EIA reports for any housing project exceeding 50 hectares. v. Land Conservation Act, 1960: This act is administered by the land office and meant to control development of hilly land with more 10 than percent slope. vi. Uniform Building by Laws 1984. 3.3.5 Planning System and Infrastructure Provision The planning system in Peninsular Malaysia has been formulated in order to ensure a balanced development in the public interest. In this respect, the planning system has been seen as a potential instrument for creation of urban growth in addition to its traditional function of enhancing environmental quality. Planning system makes an important contribution towards optimising land use. Numerous factors impact the urban development and the relationship between these factors needs to be understood. To meet the future trend of land-use demand, flexibility and forward planning must be incorporated into existing development plans. The system provides a framework for future development and requirements. To support the significant planning system in land use, Chung (1986) had stressed that the extended role of town planning in the context of settlement planning can be based on the five specific areas of specialisation, namely; 86 i. Development planning ii. Socio-economic planning iii. Civic design iv. Infrastructure development v. Advocacy planning With respect to infrastructure development, planning itself is not confined to allocating land for various types of development. It is also concerned with the form of development and redevelopment. The physical development and redevelopment involving investment decisions across many related fields of policies, these include the aspects of planning of infrastructure facilities. 3.4 Development Plan and Infrastructure Provision At the local level, the policies stipulated in the national plans are very spatial in nature and needs to be interpreted in line with local development requirements. Practically, the plans serve to complement upstream efforts by providing necessary physical development strategies for executing socio-economic development policies in definite spatial terms. Under the provision of Town and Country Planning Act, 1976 (Act 172) and amended Act (A933), the Act confers upon the local authority three main forms of statutory power to prepare Structure and Local Plans, control all development of land, and levy development charges for permission granted under various circumstances. To get a better understanding of how development plans under the planning system works, it may be necessary to further examine these two categories of plans under this system. The Town and Country Planning Act, 1976 (Act 172) introduces for the first time a comprehensive system of town and country planning in the states of Peninsular Malaysia. It reflects the growing importance of proper and comprehensive planning in the country. The two main features of the Act are the requirements of the preparation of development plans consisting of Structure Plan 87 (SP) and Local Plan (LP) by the LPAs as adopted in TCP. The preparation process of the plans must be according to the specified procedures (see Sec. 8 and Sec. 12 of Town and Country Planning Act, 1976 [Act 172], A2003) and the requirement to land owner to get prior permission (planning approval) from the LPAs before carrying out any development. SP basically acts as a general guidance document for development control measures, whereas LP provides detailed guidance for development control. However, until the LP providing a universal coverage of the planning area have been prepared and adopted, the SP will provide the basis for development control of those areas not covered by a LP. Pertaining to infrastructure development, the local plan will refine the broad guidance on infrastructure requirement in the prescribed zones or areas according to what had been outlined in the structure plan. The guidelines are eventually used in considering planning approval application. By allocating land to specific purposes (infrastructure type of land uses), such development plans further contribute to the effectiveness in the provision of infrastructure at the local level. The main arguments remain on its contents detailing the quantity of infrastructure provided and the degree of discretion (negotiations) allowed in during determining the type of infrastructure requirements. Therefore by defining areas to which particular development control policies will apply; and by explaining those policies in terms of planning standards and other criteria, the developers should be provided with detailed guidelines (e.g. developers). The involvement of private sector (developers) in local infrastructure development should be implemented via appropriate legitimate procedures. The previous studies show that the neglected aspects in the process would lead into dispute among the two parties (see Healey, 1995; Claydon, 1997; Lee et al., 1999). To resolve this matter, at the stage of LP preparation the local authority defines a clear definition of the scopes and functions of LPA in planning and monitoring 88 local development in particular with the degree of involvement of private sector in local infrastructure provisions. As discussed in the earlier parts of the chapter, Local Plan (LP) can be a significant instrument in local infrastructure provision. The plan in its capacity as a statutory plan would stimulate the involvement of private sector in local infrastructure development (see Figure 3.7). Section 12 (3) of the Town and Country Planning Act (Act 172) defines a local plan as a map accompanied by written statement which shall: ‘… formulate in such detail as local planning authority thinks appropriate, its proposal for the development and use of land in the area of the local plan, including such measures as the local planning authority thinks fit for the improvement of the physical environment, the improvement of communications and the management of traffic…’ By taking into consideration the pursuing framework for local infrastructure provision, local plan is used as statutory plan by local planning authority in determining the scope of infrastructure requirement. These features include: i. The plan details the allocation of land uses and also the demand for infrastructure requirements (on-site and off-site). ii. The plan bring planning issues regarding to infrastructure (on-site and off-site). It can be deduced that LP is proactive in nature where it functions not only to guide and promote local development but also enable local authority to improve any appropriate infrastructure requirements. The policies defined and attached to the plan provide a legitimate basis for local planning authority in considering the requirement of infrastructure provision (off-site or on-site). 89 3.5 Development Process and Planning Approval Property development in Malaysia was highly regulated by various laws, guidelines and statutory development plans which incurred at different stages of development. Chan (1997) stated that the developer has to consider various policies, guidelines and procedures especially those pertaining to off-site infrastructure requirements. These guidelines mostly are issued at local, state and federal levels. In addition to the previously mentioned guidelines, there are numerous government departments that impose regulatory measures in property development (see Figure 3.5). Along the process, planning application has gone through various departmental requirements, ranging from Department of Environment (DoE), Sewerage, Landscape and several other departments (Mohd. Anuar, 1994). The various stages of approval that need to be secured by developer prior final approval were issued by local planning authority. In relation to infrastructure provision requirements, it becomes quite normal for LPA to initiate negotiations of off-site infrastructure provision once there is development impacts identified. The whole process of development approval has been summarised in Figure 3.6. The flow chart of the process only illustrates the broad process of development approval. However, the details of the stages of development may vary from state to state. For the purpose of the study, the researcher refers to the development process flow-chart as used by Real Estate and Housing Association (REDHA). 90 Feasibility Study Application for Foreign Investment Committee (FIC) Approval Acquisition of property Preliminary Appointment of Consultants (For of Layout Plan) Plan Preparation Town Planners/Architects Engineers Land Surveyors Preparation of Site Plan and Layout Plans Drainage and Sewerage design and Section plans Applications Application for Conversion and Sub-division Approval Land office Department of Mineral (PTG) Executive Council (EXCO) Conversion and Sub-division Approval Architect Engineers M&E - State Planning - Department of Irrigation and Drainage (DID) - Health Department - Waterworks - Telecom (STM) - TNB - SEDC - Land and District Office - Parks and Recreation Department - DoE, PWD - Department of Civil Aviation - Sewerage Department (IWK) Land Surveyors Obtain Survey Nos Architect Building plan design Obtain Q.T Application of Developers Licence Application for Advertising Permit Submission of Building Plans to Local Authority Issuing of Q.T Architect Civil Fire Sanitation Plans Approval Project Planning Contract Administration Finance and Control - Project schedule - Progress charting - Inspection - Cost Control & project budgeting - Tender & documentation - Tender selection - Signing of Contract - Supervision - Classification of Payments - End-Finance - Progress Payments Issuing of C.F or CCC Sale Administration - Pricing - Advertisement - Sales Agreement Delivery of vacant possession Figure 3.5: Development Process in Malaysia Source: Adopted from Tan, 1996 91 In the context of the Malaysian planning system, development control in general is being practised implicitly and explicitly throughout the process under the Town and Country Planning Act 1976 (Act 172). The development control in the country had in fact been initiated before any institutionalised planning was established. According to Goh (1991) at least in Peninsular Malaysia before the formal planning institution was set up, there were two fire incidences in Georgetown (Penang, 1813) and in Kuala Lumpur (1881). Consequently, these prompted conscious reactionary development control measures in the form of bylaws in Peninsular Malaysia. These by-laws were empowered under the town’s Sanitary Board (then Local Authority) the towns were divided into land use zones and prohibited the use of timber construction material in certain areas. According to Mohd Annuar (1994), there are three types of development control systems, namely: i) A system originated and practised in British planning system, socalled discretionary system of control; ii) The heavily regulated development control system (often regarded as rigid-based system) as practised in United State ; and iii) The mixed-system called hybrid which is a mix of both system. 92 Comments/Certification JPN / JPBD / JPS / JPP / PBAN TNB / STM / PBPT / JKR Evaluation Department Geosciences and Mineral Department Department of Civil Aviation (DCA) and other if relevant (all in 30 days) Certification JPBD - 21 days / PBT - 30 days Comments/Certification JPN / JPBD / JPS / JPP / PBAN TNB / STM / PBPT / JKR Evaluation Department Geosciences and Mineral Department Department of Civil Aviation (DCA) and other if relevant (all in 30 days) Comments/Certification JPBD JPP JAS JKR - 24 days - 30 days - 90 days - 30 days - 30 days - 30 days - 90 days - 30 days JPBD JPP JKR JPS - 30 days - 30 days - 90 days - 30 days Approach 1 1. Application for Development Policy Approval / Change of Use and Sub-division (1B). Final Approval for Change of Use and Sub-Division (9-10 weeks) Approval for Change of Use and SubDivision (22 weeks) Approach 2 (2). Planning Approval Sec. 21 (1) TCP 1976 Act 172 (12 weeks) 2. Application for Planning Approval (PA) JPS - 30 days TNB - 30 days STM - 30 days PBAN - 30 days Comments/Certification JPBD JPP JKR JPS (1). PTD/PTG Approval for Change of Use / Approval for Development Policy form MMKN (17 weeks) TNB STM PBAN PBT - 30 days - 30 days - 30 days - 30 days (4). Approval for Building Plan (Sec. 70 Act 133) PBT (12 weeks) (PBT) (3). Housing Developer Licence (4 weeks) (KPKT) (5). Application for Sales and advertisement permit (4 weeks) 3. Application for Developer Licence 4. Application for Building Plan 5. Application for Sales and Advertisement Permit Comments/Certification TNB - 30 days STM - 30 days PBT - 30 days PBAN - 30 days (6). Application for Certificate of Occupancy (C.F or C.C.C) 6. Application for Certificate of Occupancy (C.F or C.C.C) Indicators JPBD JPS JPP TNB JAS STM JKR KPKT KTN - Federal Department of Town and Country Planning - Department of Irrigation and Drainage - Department of Sewerage Services - National Electricity Company - Department of Environmental - National Telecommunications Company - Public Works Department - Ministry of Housing and Local Government - National Land Code JKR PBAN LLM JPA Act 172 Act 133 Act 118 MMKN - Public Works Department - State Water Authority - Malaysian Highway Board - Department of Civil Aviation - Town and Country Planning 1976 - Street, Drainage and Building 1974 - Housing Developer (Controlling and Licence) 1966 - State Executive Council Figure 3.6: Development approval process in Peninsular Malaysia (Exclude Federal Territory of Kuala Lumpur and Putrajaya, 2004) (Source: Adopted from Ministry of Housing and Local Government) 93 At the present, most local planning authorities face problems related to housing shortage, traffic congestion and inadequate local infrastructure. Apart from the above, there is also the problem of inadequate sources to maintain and upgrade urban services to sustain the fast growing local population (Osman, 1990). Therefore, local authorities have to adopt an innovative system. In this respect the planning system is seen to be a potential instrument in promoting local infrastructure development. In the context of planning system in the country, the development plans have the basic guidelines to guide local authority in its decision-making process. During the preparation of the plans, they had identified the relevant issues which should be addressed in formulating development plans and these issues include those pertaining to local facilities (infrastructure) required by the local plan area. The development plans also consists of sectoral policies and development control guidelines which include standards of open space provision, recreational, educational facilities and particularly for the provision of community facilities requirements. The development plans are constantly being applied as a main source of reference for development control and planning approval process. It treated as a basis for local authority to impose development charges or any other relevant planning requirements. To facilitate the preparation of detailed planning layouts, local authority has introduced a series of planning and infrastructure standards to be referred. These standards are meant for the provision of amenities such as schools, small mosques, community halls and other facilities required by the local community. The same guidelines also apply to other infrastructures such as sewerage treatment plants, electricity sub-stations, telecom exchange and fire station as recommended by the relevant authorities. 94 As practised by most local planning authorities, local infrastructure provision guidelines were reviewed and upgraded periodically in order to comply with new policies (federal or state government policies) as adopted by the authority. As provided under the Sec. 32 (1) of TCP Act 1976, development charge may only be imposed if there is a local plan affects a change in use, density, or floor area and it would enhance the value of the land. The charge can only be imposed upon the consideration of planning approval if there is an approved local plan. However, even the availability of structure plan being insufficient for the purposes of levying development charges. The charge may only be levied upon carrying out the development benefiting from the provision of the local plan as payable upon the grant of planning approval. Osman (1990) stated that the rules governing the development charges in City Hall of Kuala Lumpur (DBKL) were provided in the Planning (Development) Rules 1970. It outlined four types of development which require the payment of development charges with specified rates. The four categories of development referred are as follow: i. Development involving an increase in residential density where the charge is equivalent to 30% of the increased value of the land resulted from granting of planning approval. ii. Development involving change of land use zoning where the charge is equivalent to 30% of the increased value of the land due to granting of planning approval. iii. Development with shortage of car parking spaces (e.g. the charge is RM15, 000.00 for every parking lot that is not provided. iv. Excess of floor area over and above the permissible plot ratio which involving commercial development. 95 3.6 Conclusion of the Chapter Local development involves a considerable number of policies and implementation decisions which have to consider the cost and benefit of every urban dweller. The public sector as represented by local authority and the private sector represented by the developer become the prime concerns in local development. Therefore the development system should be formulated towards close cooperation between the two. Given the wide range of development activities, local authorities have to allocate a huge amount of allocation for infrastructure provision in order to facilitate the incoming development particularly from private sectors. The discussions of the chapter had provided an overview on the planning approval system as practised in the country by focusing on the off-site infrastructure provision at local level by mainly discussing the background of Malaysian planning system as outlined in Act 172, Town and Country Planning Act 1976. CHAPTER 4 LOCAL INFRASTRUCTURE PROVISION IN MALAYSIA 4.1 Introduction This chapter provides an overview of local infrastructure provision in Malaysia. An attempt is made to study the present practice of how infrastructure provision secured by local authority within the framework of planning system. 4.2 An Overview of Infrastructure Development in Malaysia The main objective of social and economic development of any community is to improve the quality of life of its people. At the local level, overriding goal of the long term development plan is also to achieve a balanced social and economic growth through sustainable development and promotion of quality of life of the community. One way to achieve the goal is by upgrading the existing local infrastructure facilities. In Malaysia off-site infrastructure provision was almost entirely the public sector’s responsibility. The involvement of the private sector started as early as 1980s, when government has stressed that the involvement of private sector as the primary engine of economic growth through the introduction of privatisation concept. The concept was a comprehensive policy which contains liberalisation 97 and deregulation strategies. The strategy resulted in down-sizing the public sector while widening the involvement of private sector. The macroeconomic problem faced in the early 1980s had initiated the privatisation policy. Many of these problems were attributed to the government’s increasing involvement in the economy, largely in pursuit of the objectives of the New Economic Policy. The shift in strategy from public-sector-led growth to private-sector-financed development began in 1983 and the private sector serves as the main engine of growth (Yaacob and Naidu, 2000). The shift is clearly evident in the financing of infrastructure development. Until the Fourth Malaysia Plan (1981-85) investment in infrastructure in Malaysia was funded by the public sector. The growth in public financing for infrastructure development was increase drastically during 1991-2000. During the period, public sector invested RM38 billion and expected to invest about RM27 billion in the Eighth Malaysia Plan (2001-2005) on infrastructure (see Figure 4.1). Table 4.1 illustrates approximately of RM65 billion (5MP-8MP) had been invested in various infrastructure projects, ranging of roads, ports, airports, telecommunication facilities, water supply, sewerage and railway lines. Most of the infrastructure delivered by BOOT, BOT and only few of them had been delivered by sale of equity and management contracts. In order to increase the effectiveness of infrastructure provision, several major infrastructures have been privatised by the federal, state or local authorities. The privatisation of infrastructure provision has changed over the past decade and has resulted in an important change in the role of the public and private sectors in infrastructure development. 98 Table 4.1: Public financing for infrastructure development in Malaysia, 1991-2000 Malaysia Plan’s Expenditure Sectors 6MP A. Public Sector Transport Roads* Rail Ports Airports Urban transport Utilities Water Supply Sewerage Communications Telecommunications and postal services Meteorological services Total 7MP 8MP 11,594.7 20,484.2 21,222.1 7,572.6 12,269.5 14,002.6 705.6 1,735.4 404.0 410.9 5,450.3 4,081.0 1,780.6 1,089.2 1,500.0 95.2 1,271.2 932.9 2,796.7 3,048.0 5,549.9 2,671.9 2,382.7 3,966.3 124.8 665.3 1,583.6 228.0 71.0 39.6 146.7 39.6 4.1 81.3 31.1 35.5 14,462.4 23,571.8 27,000.0 * Excludes local roads in regional development areas, some local authorities and agriculture roads, which have been allocated RM700 millions. Source: Malaysia (2001). Type of infrastructure 12,269.50 7,572.60 11,594.70 1,735.40 404 705.6 Rail 1,780.60 1,089.20 1,500.00 Airports Urban 95.2 1,271.20 932.9 transport 2,796.70 3,048.00 5,549.90 Utilities 15000 Expenditure ('000) 410.9 5,450.30 4,081.00 Ports 10000 Water 2,671.90 2,382.70 3,966.30 Supply 124.8 665.3 1,583.60 Sewerage 20000 71 39.6 228 Communication 39.6 4.1 postal 146.7 ications and Telecommun 25000 31.1 35.5 81.3 ical services Meteorolog (Source: Eight Malaysia Plan (2001-2005). 30000 23,571.80 27,000.00 Total 14,462.40 Figure 4.1: Expenditure for infrastructure development in Malaysia, 1991-2005 14,002.60 21,222.10 20,484.20 6MP Roads* Transport 5000 7MP 0 8MP A. Public Sector Transport Roads* Rail Ports Airports Urban transport Utilities Water Supply Sewerage Communications Telecommunications and postal services Meteorological services Total 99 100 4.3 Local Infrastructure Provision in Malaysia As stated in the Local Government Act 1976 (Act 171) most of the local infrastructure facilities such as road maintenance, sewerage treatment plants, drainage system maintenance, upgrading traffic system, maintenance of street lighting system and maintenance of traffic-light system are undertaken by local authorities. The practice led the local authority to increasingly face shortages of fund to provide the necessary infrastructure. This scenario has also encouraged local authorities to look other ways by shifting to private sector to secure adequate provision. In the previous chapters, the discussion focused on some important features of the country planning system which affects the way of infrastructure provision. Local planning authority is required by the Act to ensure the proposed development is complying accordingly with the contents of the development plans. One of the requirements is to provide infrastructure. The Act may impose such requirements upon the planning approval is granted. Therefore, local planning authority should be more realistic in formulating policies related to infrastructure requirements by taking into consideration of the affordability of private sector. The main focus should be given on how to promote private sector to participate in local development, particularly off-site local infrastructure provision. Basically, the involvement of private sector will naturally be increased when there is availability of infrastructure to support their future development. In order to sustain the participation of private sector, a long-term private interest should be given more attention by local planning authority. 101 4.3.1 Local Infrastructure Development At the local level, the improvement and provision of infrastructure is under the responsibility of various ministries or departments including the local authority itself (Mohammad Nong, 1990). The local authority in response to this has taken steps to upgrade its infrastructure facilities, including roads, water, domestic solid waste incinerator facilities and electricity supply, telecommunication facilities and others. There is a strong relationship between land use planning and the construction of major physical infrastructure. The location, capacity and efficiency of a municipality’s infrastructure can greatly impact the growth and development pattern. Major improvements have been made in many local authorities in the past. However, additional infrastructure development is required to cope with the rapid increase of local development and also to serve the new growth centres (MPPP, 1987). For instance, the rapid increase of urbanisation process in major urban centres in the country has resulted in the increased demand for local infrastructure. This requires the local administration to evolve more efficient delivery of infrastructure provision. For instance in the year 2000, the local domestic waste water sewerage generated 800 million m3 of domestic waste (see Table 4.2). This figure has increased drastically compared to the volume of waste water generated in the previous years (376 million m3 in 1980, 457 million m3 in 1985, 550 million m3 in 1990 and 664 million m3 in 1995). A total of RM9.8 billions of investment required to build the solid waste disposal sites in order to cater for the huge increase in urban water waste. 102 Table 4.2: Local infrastructure investment required for central sewerage system in major towns in Malaysia Investment Needed ($ million) States 1980 1985 556.836 155.503 241.028 104.381 179.514 200.863 427.805 562.202 12.949 487.233 225.181 978.326 676.556 311.740 483.200 209.260 359.880 402.680 446.275 112.707 25.960 976.780 451.430 156.130 815.250 227.668 352.883 152.822 262.822 294.078 449.611 823.106 18.958 664.611 329.682 1,297.343 982.376 274.340 425.224 184.150 304.815 354.365 567.750 988.543 22.845 810.847 397.267 1,590.973 1,183.763 330.580 512.395 221.901 381.624 427.009 909.459 1,195.170 27.528 1,035.796 478.706 2,079.797 P. Malaysia Sabah Sarawak 4,131.821 210.600 238.200 14,612.98 422.200 477.530 5,688.834 308.334 348.743 6,903.495 371.543 420.235 8,783.728 447.709 506.383 Malaysia 4,580.621 5,512.328 6,345.911 7,695.273 9,737.820 Johor Kedah Kelantan Melaka N. Sembilan Pahang P. Pinang Perak Perlis Selangor Terengganu Kuala Lumpur 1990 1995 2000 Note: 1. Wastewater generation rate is 0.225 m3/per person/day 2. Investment is estimated at RM5,000.00 per household 3. Per household population is estimated at 5 persons. Source: Compiled from Ministry of Housing and Local Government (2003). However, the increase in the urban population has also generated significant amount of waste. Referring to Table 4.3, there was 989 million tons of domestic solid waste generated in the urban areas in Malaysia in 1980. This figure increased to 1.4 billion tons in 1990 as compared to more than 2 million tons of solid waste. In terms of investment, the government requires more than RM400 million to build solid waste disposal sites in order to cater for this huge increase in solid waste. Such large expenditure within limited resources requires local authorities implementing the development in particular infrastructure projects strategically in order to stimulate the strategic urban sector development and avoiding allocations 103 to the less needed projects. The emphasis is to ensure that the urbanisation process is planned and implemented at the local level would enhance local economic development. Table 4.3: Local infrastructure investment required for domestic solid waste in Malaysia States Investment Needed ($ millions) Johor Kedah Kelantan Melaka N. Sembilan Pahang P. Pinang Perak Perlis Selangor Terengganu Kuala Lumpur 1980 4.81 1.34 2.08 0.90 1.55 1.74 3.70 4.86 0.11 4.21 1.95 8.45 1985 8.77 2.45 3.80 1.64 2.83 3.16 6.74 8.85 0.20 7.67 3.55 15.41 1990 17.61 4.92 7.62 3.30 5.68 6.35 13.53 17.78 0.41 15.41 7.12 30.94 1995 31.70 8.85 13.72 5.94 10.22 11.43 24.35 32.00 0.74 27.73 12.82 55.69 2000 50.51 14.10 21.86 9.47 16.28 18.22 38.80 50.99 1.17 44.16 20.42 88.73 P. Malaysia Sabah Sarawak 35.70 1.82 2.06 65.06 3.32 3.75 130.66 6.66 7.53 235.20 11.99 13.56 374.75 19.10 21.60 Malaysia 39.58 72.13 144.86 260.74 415.45 Source: Compiled from Ministry of Housing and Local Government (2003) 4.3.2 Local Expenditures on Infrastructure Development In order to have a close understanding on how local authority funds infrastructure, Municipal Council of Penang (MPPP) in the State of Penang has been chosen. The local authority was located on the northern part of Peninsular Malaysia, experiencing high demand for infrastructure to accommodate the rapid increase in urban sectors. The situation has put more financial pressure on MPPP to 104 manage the needs. The task is perhaps even more difficult since the local authority also experienced a deficit in 2001 (see Figure 4.2). A projected deficit amounted to RM79 million for the year 2003, compared to a deficit of RM17.6 million in 2002, which recorded an increase by 3.5 times. However, the deficit alone could be a reflection of MPPP spending to fulfil the needs of urban infrastructure as result of rapid growth in urban population. In the Figure 4.2, the development expenditure has drastically increased from RM57 million in 2002 to RM75 millions in 2003. However, MPPP experiences the highest deficit in 2004 (RM67.8 millions). In fact, this is due to the expenditure made by the local authority to construct adequate facilities in urban infrastructure. This includes the purchase of land for the construction of public amenities, buildings for business premises to accommodate the increase in demand for urban economics and construction of new infrastructure. In this situation it would be difficult for the local authority to reduce its expenditure since there is a need to fulfil the community needs and subsequently to stimulate local investment. The Table 4.4 also illustrates the details of the expenditure incurred from infrastructure development in the local authority from the year 1992 to 1995. Although the data is only available from 1992 to 1995, however it would provide adequate evidence that the local authority is experiencing an increase in allocation, to fund the demand of infrastructure provision. Analysing the trends of urbanisation and demands for various types of local infrastructure has generated several key financial issues. It is apparent that the investment needed to cater for the increased demand for urban infrastructure is tremendous. The total expenditure for major infrastructure projects had increased from RM15 million (1992) to RM27.3 million in 1995. N.A 9.96 Surplus / Deficit (RM'million) N.A 82.1 Years 17.6 -67 18.7 38.7 89.5 -23.9 63.4 -17.6 57.2 103.8 127.4 N.A -Data not available 40.3 121.1 71 167 128.9 136.2 146.9 143.3 2000 2002 1999 2001 1998 Source: Municipal Council of Penang Island, MPPP, 2005 Figure 4.2: Municipal Councils of Penang Island development expenditure 1992-2004 17.23 -37.8 N.A N.A 39.13 38.87 52.38 79.31 Development (RM’million) 2.5 N.A N.A 42.49 42.89 32.4 N.A 31.13 N.A Operating (RM’million) 1997 84.4 1996 80.22 87.47 97.28 1993 Income (RM ‘million) 1992 1995 -100 -50 0 50 100 150 1994 Expenditures (RM'million) 200 2004 -79 74.8 181 -67.9 55.1 184.4 175.8 171.6 2003 142 105 Total Maintenance of Sewerage Pipe-Lines System Villages Development Schemes 100.0 9.0 0.8 3.6 16.3 1.8 2.8 43.3 22.0 0.9 1.4 % 18,735,906.63 1,566,617.00 52,069.00 104,743.00 3,339,063.00 247,444.00 846,549.31 8,382,517.00 3,542,472.00 251,562.51 402,869.81 1993 100.0 8.4 0.4 0.6 17.8 1.3 4.5 44.7 18.9 1.3 2.1 % 23,236,727.42 2,912,671.00 133,811.04 358,494.00 3,660,000.00 330,000.00 100.0 27,275,900.45 2,704,789.00 250,000.00 0.7 12.5 600,000.00 3,660,000.00 340,000.00 1.5 15.8 1.4 1,921,421.70 4.9 1,137,786.60 1995 11,690,556.00 4,721,820.00 1,179,299.24 208,014.51 % 41.9 19.5 1.1 0.7 1994 9,750,876.00 4,526,449.00 266,194.48 160,445.30 Expenditures RM Source: Finance Department, Municipal Council of Penang Island (MPPP), 1997 15,133,286.94 1,365,177.00 116,004.00 543,340.00 2,464,285.00 274,678.00 427,965.78 Drainage System Maintenance Street lighting Upgrading Traffics system Street Lighting System Maintenance Traffic-Light System Maintenance 6,554,383.00 3,325,373.00 136,139.68 200,619.48 1992 Roads Roads Maintenance Road-surface Maintenance Road-Side Maintenance Road Furniture Maintenance Type of Services Table 4.4: Local infrastructure expenditures in Municipal Council of Penang Island Financial 1992-1995 100.0 9.9 1.0 2.2 13.4 1.2 7.0 42.9 17.3 4.3 0.8 % 143 106 107 4.4 Source of Funds for Infrastructure Development The financial sources for local authority include the collection of tax on such items as assessment rates on houses and buildings and non-tax incomes including the issue and renewal of trading licenses, rental of stalls, parking fees and fines. This financial source depends on how well the LA collects revenue and increase income and how efficiently controls the expenditure. Local expenditure can be divided into two broad categories: i) Administrative and operating expenditure; ii) Development expenditure. Administrative and operating expenditure includes salary of local authority staff, acquisition of services and supplies, upkeep of roads and traffic systems, town cleaning and health programs, among others. Whereas, the development expenditure involves the construction of new roads and infrastructure, parking facilities, recreational parks, wet markets, hawker centres and others. The pattern of development expenditure may jump drastically as special needs arise, say, in preparation for hosting of major sport events or to build new infrastructure to replace old ones. In some local authorities, part of development allocation was funded by federal government to finance certain projects or special programs. Ministry of Housing and Local Government (MoHLG) allocated annually for local development. Since, the local authority is a non-profit organisation it is urged to manage its finances to improve the quality of services to the residents. At the ministerial level, as provided in Section 41 of the Local Government Act 1976 (Act 171), local authorities in the country may apply development grant or loan which are not more than five times the annual value as contained in its current valuation list (Mohammad Nong, 1990). 108 However, due to the rapid urbanisation process, the ministry has initiated several funds aims to mobilise resources in assisting the local authority meets the required infrastructure facilities. The new financial funds are; i. Equalisation grants for the purpose of the overall maintenance of their areas. ii. Maintenance of public buildings such as local roads, drainage system. The grant provided for local authorities for maintenance. iii. Grant for the improvement of infrastructure and facilities in the traditional villages and new villages. The grant allocated by Federal Government for the purpose. iv. Grant for the purpose to cleaning and beautification programme for local authorities. The revenue collected by local authorities is categorized into internal and external sources. Internal sources are raised from taxes and business licence fees or charged on public services as provided in Local Government Act, 1976 (Act 171). Whereas, the external sources of funds are either from government grants or borrowings from the State or Federal Government or commercial financial institutions. Specifically, revenue collected by local authorities could be classified into six major groups which are: i). Real property tax or assessment - is a tax levied on all holdings within the local authority area. The property tax is the main income for most local authorities. 109 ii). Licence fees - the licence fee is used as a means of regulating the business activities within a local authority. iii). Rentals - rentals of the local authority’s properties. iv). Government grants - the grants received from the central government in the form of road grants and annual grants. v). Parking lots fees, plan fees, interest receivable and miscellaneous items. vi). Loans. vii). Improvement Services Fund (ISF) - Revenue collected as provided under Street, Drainage and Building Act 1974 (Act 133), Part VI: Section 132. The provision has to be used together with the relevant provisions under Town and Country Planning Act 1976 (Act 172). 4.5 Planning Approval System and Infrastructure Provision The planning system provides the basis for relevant agencies to provide infrastructure. Development plans comprises the policies which are required for the provision of relevant on-site facilities. The policy also describes the type of facilities with potential to be provided in the particular location. The policy outlines the requirements of on-site infrastructure, such as: i) To improve the quality of the present infrastructure facilities, ii) To improve access to and circulation to the location of the facilities provided, and 110 iii) To identify the strategic and accessible location of new development. The large development projects normally involve a series of negotiations between approval authorities and private parties (developers) to determine the provision of infrastructure (off-site or on-site) prior granting of planning permission. There are numerous ways in which public policy can affect development process. As suggested by Healey et al. (1995), under the current practice developers are required to allocate for infrastructure provision. This was revealed by Asiah (1999) that the developers have to allocate a large portion of their land areas for community facilities (on-site infrastructure) and in some cases they have to improve the existing off-site infrastructure. These also included improving or constructing the new local roads, drainage system and other community facilities. The provision of off-site infrastructure would increase the development cost. As practised by many local authorities, facilities such as open space, sites for school, playground, community centre and other as required by local authority. Developers have to provide the facilities according to the standards and requirements and hand over to the relevant authorities upon the completion of these facilities. 111 4.6 Planning Approval and Planning Contribution Like their counterparts in other developed countries, the local authorities in Peninsular Malaysia have explored several alternative methods of funding of local infrastructure. The rapid growth in local development continues to expose additional pressures on local infrastructure funding. There are several methods of funding being practised: i. Development Charge Development charges are the most acceptable and effective source of funding based on the ground that the new growth should not create a financial burden on existing residents of the community. The charge is imposed by local planning authority on new development within a municipality and developers are required to bear the cost of providing the infrastructure. The purpose is to finance the subsequent demand of local infrastructure which would arise as a consequence of new development. Most local authorities collect development charge upon granting planning approval. However, this method is only applicable for on-site provision of infrastructure and not permitted for off-site infrastructure. ii. Unilateral Undertaking of Planning Obligation In the context of Malaysian planning system, the practice of planning obligation requires the developer to contribute for some community facilities before granting of planning approval. The practice is a legal agreement between developer and the planning authority. The obligations that are attached to planning approval enable the local authority to secure 112 contributions to services, infrastructure and amenities in order to support and facilitate the proposed development. However, with regards to off-site infrastructure provision, the practice of planning obligation is only applicable within the following purposes: i. The planning approval which is being applied must be acceptable in planning terms. ii. It is directly related to the proposed development and relevant to planning. Only few planning applications need planning obligation before approval is granted. The obligations imposed have to represent a benefit for the land and/or the locality. If the planning application is imposed with planning obligation, the scope of the obligation only covers the following; i. Require specific operations or activities to be carried out in relation to the land. ii. Restrict the development or use of land. iii. Require land to be used in a certain way. iv. Require payment of a sum or sums of money - e.g. towards future maintenance costs. In most cases planning obligation is only applicable for large scale developments, where the contribution is sought to improve the impact of the proposed development. In practice, unilateral undertaking is an obligation offered 113 by the applicant to the planning authority either in support of a planning application or a planning appeal. The terms of the agreement are produced entirety by the applicant's solicitor without the involvement of local authority. The planning authority will verify if the undertaking is needed, acceptable and legal, and will either accept this undertaking or reject it with reasons as appropriate (see Appendix B12). Planning legislation includes the essential principle that development should pay for the social and physical infrastructure to support and facilitate a development. It would not be fair to expect a developer to contribute towards existing service deficiencies of schools or libraries for example. However, it would be fair to expect them to contribute to reduce the impact of their own development on the local level, such as improvement of the existing infrastructure as impact of the proposed development. The following parameters are applied in the negotiation of off-site infrastructure provision; i. Reasonably related in scale and nature of development. ii. Urgently needed as result of the development. iii. Reasonable in all other respects or there is no interpretation that LPA indirectly off-loading their responsibility in providing the said infrastructure to the applicants or private sector. iv. v. Relevant to planning purposes. The imposed or negotiated infrastructure is directly related to the proposed development. 114 iii. Improvement Service Fund (ISF) As provided by Street, Drainage and Building Act 974 (Act 133), local authority is to raise fund for local infrastructure provisions. The Improvement Service Fund (or ISF) is another method of funding which is adopted and practised by many local planning authorities for the purpose of improvement, maintenance or construction of new infrastructure. The fund is collected during planning approval stage. As provided in Section 32 of Street, Drainage and Building Act 974 (Act 133) [Am. Act A867], the Acts says; i). There shall be established for the purpose of this Act in each local authority a fund to be known as the “Service Improvement Fund” into which shall be paid all money that may from time to time be paid to a local authority for the purpose of carrying out the provisions of this Act, all money recoverable by the local authority from any person under this Act or any by-laws made there-under and any contributions from any person towards the beautification, construction or laying out of any street, drain, culvert, gutter or water-course. ii). The Improvement Service Fund shall be administered by the local authority at its absolute discretion. iii). Without prejudice to the generality of subsection (2) the local authority may pay out from the Improvement Service Fund any expenses which may be incurred in carrying out the provisions of this Act. 115 iv. Issuing of Municipal Bonds Local Government Act, 1976 (Act 171) allows local authorities to initiate the issuance of bonds in order to raise the needed capital for the provision of local infrastructure. In fact the local authorities should be proactive towards other methods or mechanisms to raise the appropriate funds as necessary to the local communities as a whole. This means that so long as each additional project will bring additional net revenue to the local authority, that project can be financed by issuing bonds to general public. The bond issue is a form of domestic loan from the public because it promises the general public who pay the bonds a certain annual rate of return for lending their money which will be repaid when the bond matures at some specific time in future. In Malaysia, the first Municipal Bonds had been launched by the Pasir Gudang Local Authority in the state of Johor in 2005, where the issuance amounted to RM80 million maturing in 2011. The bond is using the Islamic concept (Mudharabah) was arranged by AmInvestment Bank Bhd., one of Malaysia’s leading merchant banks. The public were encouraged to buy these bonds because the bonds generate a good and stable annual rate of return. 4.7 Conclusion of the Chapter The rapid urbanisation at local level has put pressure on the demand for adequate provision of infrastructure; in return demanding a huge allocation to finance its provision. Adequate provisions of infrastructure are essential and must keep pace with local economic development. To increase the effectiveness, local infrastructure provision must be privatised and the involvement of private sector should be promoted. Involvement of private sector in local infrastructure provision is to improve the efficiency of infrastructure delivery and would increase the standard of living of the local community. If there is no immediate reform on the present local infrastructure provision, it would further deteriorate the local infrastructure 116 condition. As revealed in the chapter, the approach should be carried out without reducing the interest of private sector. Most importantly, local authority should be more realistic in reviewing and formulating the related policies of local infrastructure provision by taking into consideration the interests of developers. Within the buoyancy of the current economic scenario, basically, the involvement of private sector is increased when there is availability of infrastructure to support the proposed development. However, in order to sustain the active-involvement of private sector, a long-term private interest rather than short-term public interest should be given more serious consideration by LPAs. Therefore to reduce the financial burden, an effective approach of planning approval system will be the alternative solution. CHAPTER 5 RESEARCH METHODOLOGY 5.1 Introduction The main purpose of this chapter is to discuss the method applied and to provide a better understanding of the direction of the research. It is important because the validity of the findings depend on how the data are collected and analysed. The chapter highlights the assumptions used in arriving at the findings and their limitations. The chapter starts with a description of the process that provides the outline of the work. It proceeds to discuss the conceptual framework of the research and the process of selecting respondents. Consequently, it describes and outlines the appropriate analytical approaches to be applied to draw certain conclusions for the research. 5.2 Research Process Conducting research requires following a sequence. However, the steps vary with the type of social research, but there are essentially seven major steps. The variations involve a quantitative or qualitative nature throughout the research and the related data. By understanding both approaches, the researcher knows about a range of studies and can use both in complementary ways. 118 The key features of qualitative method are best understood as data enhancers. When data are enhanced, it is possible to see key aspects of cases more clearly (Ragin, 1994). Each method has its strengths and is suitable for a particular context. The method adopted for data gathering depends upon the nature of the inquiry and the type of information required. Quantitative approach involving the process of conducting a quantitative study begins with selection of a research topic after thorough review of issues intended to be researched. Neuman (2006) stated that both methods require a thorough review of the research literature to be done and developing the research questions from the related theories. Denzin and Lincoln (1998) are quoted by Neuman (2006) as claiming that the qualitative method has a slightly different approach. Qualitative method ponders the theoretical framework in an inquisitive way and using open-ended questionnaires is an appropriate method. The next stage is to design a study, collect data, analyse and interpreting the data prior documentation of the research findings. On the other hand, the qualitative study tends to develop new concepts and emphasise more on theoretical interpretations. The comparison of the main features between the two types of research techniques is summarised in Figure 5.1. A significant distinction of the terms qualitative and quantitative is often associated with direct methodological implications (Clarke and Dawson, 1999). Quantitative methods generate data that can be presented numerically and are subject to various types of statistical analysis, whereas qualitative techniques produce data that are not readily open to statistical interpretation. A major distinction between the two approaches is that one deals in numbers while the other is concerned with words. Bryman (2000) simply concluded that the quantitative research is typically taken to be exemplified by the social survey or an experimental investigation. Meanwhile, qualitative research tends to deal with unstructured or in-depth interview and participant observation method in data gathering. 119 This was supported by Philip (1998). The combination of qualitative and quantitative methods in a single research has its advantages. It reduces the erroneous findings. The qualitative may require establishing research questions, which will subsequently be addressed by means of quantitative methods; or a qualitative study may suggest questions suitable for further investigation by means of in-depth qualitative methods. The combination of methods may allow a broader range of issues to be addressed during the course of a research than would be possible if exclusive use of either qualitative or quantitative methods had been made. Quantitative Qualitative 1. Selection of research topic 1. Acknowledge Social Self 2. Focus Question 2. Adopt Perspective 3. Design Study 3. Design Study 4. Collect Data THEORY 4. Collect Data 5. Analyse Data 5. Analyse Data 6. Interpret Data 6. Interpret Data 7. Inform Others 7. Inform Others Figure 5.1: The comparison of process involved in qualitative and quantitative type of research (Source: Adopted from Neuman, 2006) 120 Figure 5.2 details the whole process involved in the research. In the first phase, it describes the identification of appropriate research focus area and refinement of general ideas into a precise question to be studied which then results in the formulation of the research problem. Scientific research starts with the formulation of research problems from causal observation and background knowledge (inductive reasoning) and moves onto reasoning out consequences or implications of research problems (deductive reasoning). Inductive reasoning means that the researcher observes particular facts (e.g. the demand for local infrastructure increase drastically when urbanisation process takes place very fast). The next stage is to integrate the research problems with the theories towards facilitating the process to refine the subsequent steps in developing the research process. The formulation of the conceptual framework for the study was addressed by Berger (1988) as a deductive process. It acts as the basis in defining concepts and variables of the research problems based on the relevant theories. 121 Problem definition Identification of research topic Refinement of general ideas To precise research questions Generation of Research Question Formulation of research problem Defining the concepts and identified variables relating to the research question base on the theories At this stage research questions must be related to the identified existing theories or knowledge. It is important to facilitate the subsequent steps in the research process. Generation of the Research Questions base on the relationships of the concepts and variables Data Collection Design procedure and observation for gathering research data Type of data and methods of data collection are identified Data analysis Analysis of data and data interpretation Data collected will be analysed appropriately either using qualitative analysis or quantitative analysis Presentation of research findings The main stages involved Documentation of the research findings The action of the research activities Figure 5.2: The research process Explanation of stages 122 Data analysis and interpretation involve the analysis of the gathered information by comparing research findings with the research predictions. Then, the inductive process would support or reject the theory based on the research findings. The final stage is the documentation of the research findings in a written form. Therefore, the above research process can be grouped into five main stages, namely; i) Problem definition; ii) Generation of Research Questions; iii) Data collection; iv) Data analysis; and v) Presentation of research findings. 5.3 Conceptual Framework Most studies have shown that adequate provision of infrastructure is a necessary precondition to sustain economic development. This requires the local authority to diversify and to find other alternatives to secure infrastructure. In Malaysia, local authorities are permitted to impose such requirements prior to planning approval. There has been an increase in research interest pertaining to the application of planning approval system to acquire infrastructure from private sector. For instance, Elson (1990) looks at the assessments of the role of planning gain in large new settlement projects. The study by Rowan-Robison and Lyod (1988) is on the use of planning approval system to acquire the local infrastructure. The study looks at the role of planning agreements in relation to infrastructure provision and shows that a possibility for the local planning authority to apply planning approval to secure local infrastructure from private developers. Similar findings have been observed in various studies; the use of negotiation and the planner’s role (Ennis, 1997); negotiating planning gain to acquire infrastructure through the development control system (Claydon, 1997); infrastructure provision and development process (Healey, 1997). 123 In another study by Bunnell (1995) on the negotiation of agreements in Cambridgeshire, the findings obtained revealed that developers were willing to offer contribution (infrastructure facilities) for which planning agreements were signed. If there is a significant reward obtained from the agreement, the agreements are more likely to be negotiated during planning approval for those developments located in rural areas or the fringes of cities than in major urban centres and densely developed zones. Until today, there exists very little empirical study on the infrastructure provision under planning approval system at the local level. In particular very little research has focussed on the possibility of local authority using planning approval system to secure off-site infrastructure. It is therefore important to have in-depth survey to identify the constraints and problems faced by local planning authorities and developers which enable local planning authorities impose such infrastructure to developer prior granting planning approval. 5.4 Research Approach In conducting the research, several studies were reviewed to understand the possible approaches to involve developers in off-site infrastructure provision. Most of the studies have been general without looking at the infrastructures provision located outside (off-site) of proposed development areas which are required as a result from the impact of the development. Other studies have shown that very little is known about the perceptions of private sector (developers) on provision of off-site infrastructure during planning approval application (see Healey, 1997; Claydon, 1997; Guy and Marvin, 1997 and Ennis, 1997). These studies conclude that the active involvement of private sector was very important indeed for the local authorities to gain some benefits from the approved development in terms of off-site infrastructure. 124 The method of data collection for this research is based on a study by Healey et al. (1995) on negotiating infrastructure and community impacts and Bunnell (1995), of his study on the application of planning agreements during planning approval stage to secure such infrastructure from private sector. Therefore, the research involves a general review of approaches to use ‘planning gain` during planning approval procedure to secure infrastructure from developers. The research involves two main stages; to review the relevant information from the relevant departments and structure interview with planning officers, developers and also council members. To proceed with, this research will first review the present situation of planning approval and infrastructure provision at local authority in order to obtain the actual situation of the development approval and infrastructure provision practice. It is important to carry out a fieldwork survey which is involve two difference samples of (local authority and developers) to understand the current practices in local infrastructure provision. The second stage is to design procedure and observation phases which involve the identification of specific procedures to be used in the data gathering. At this stage, the types of data and the methods of data collection are identified. This must be done in order to form the basis for the conceptual framework of the study. It will then discuss the financial constraints and problems faced by local authority in providing infrastructure facilities. The third stage is to identify the perceptions of developers and local authority with reference to planning approval system in order to understand the constraints and problems in local infrastructure provision. Finally, the study analyses the findings that will lead to proposing an improvement of the present system in local infrastructure provision. 125 Therefore, in order to obtain the perception of both respondents, they (local authority) were asked on the nature of the planning approval used to secure off-site infrastructure, the problems faced by local authority, the suggestions or opinions on the possible approaches to involve private sector. This is the key question which could be answered by exploring the local authority perceptions on planning approval. It should be stressed here that this research will be interpretative, revealing the perceptions of local authority and developers towards controls imposed by the local planning authority. Therefore, the most appropriate approach to conduct the research is the qualitative method however at the initial stage the study begins with the quantitative approach. Thus quantitative provides the entire picture with the perceptions of the respondents (local authority and developer). The use of qualitative method is far more essential as its emphasis is on understanding the respondents and revealing their perceptions. 5.5 Methods of Data Collection The main purpose of selecting a research technique is to identify the most appropriate method for data gathering that will help provide answers to the research questions formulated during the conceptualisation stage. In this case, it is rare to find a research based only on one method of data collection. This was stated by Clarke and Dawson (1999). There are four main techniques by which the data can be collected which are questionnaire, interviews and observation and documentary sources. This study mainly generates data from two types of sources which are primary and secondary sources. For the primary data it was collected and obtained from a field survey, while secondary data mainly come from books, reports, seminar papers, journals, periodicals and government publications. 126 The interview is an alternative of collecting data for qualitative type of the research. Obviously in field survey, the respondent was asked to read and record all the questions in the questionnaire and answer the questions accordingly. The field survey was conducted during the months of February to September 2005. Two types of surveys were conducted, namely local planning authority survey and developer survey. For the local authority survey it involves four levels of local authorities in our local government system in the country namely city hall, city council, municipal council and district councils. It is an important consideration to have the researcher and respondents (local authority and developer) match on several attributes, particularly professional discipline. This scenario was appropriate as stressed by Neuman (2006) and Silverman (2005) by having similar characteristics of respondents and interviewers would reduce gap of communication of two or more parties during the interviewer session. 5.5.1 Fieldwork Survey The local authority survey was aimed to elicit data and information on the present practice of local authority securing off-site infrastructure, planning approval mechanism, the problems of getting planning approval related to off-site infrastructure negotiations during planning approval, the perceptions of local authority and developer towards off-site local infrastructure provision. The field survey was conducted using a set of questionnaire and were asked in order to gain information from the respondents (local authorities, including city hall, city council, municipality and some districts council which had experiences dealing with off-site infrastructure) to provide a general background of the issues of concern. For the developer, the survey is aimed at eliciting the information on the problems pertaining to off-site infrastructure provision faced during the planning approval stage. The questionnaire for developer field survey is designed similar in 127 most forms with the questionnaire used for local authority survey to obtain the following information; i. The problems related to off-site infrastructure provisions faced by developers in obtaining planning approval. ii. The developers’ opinions on the possibility of local authority to secure off-site infrastructure provision. 5.5.2 Questionnaire Design Survey design reserved a significant effort in conducting this research. The selection of the appropriate instrument to be used is guided by the research problem, research questions and survey objective. Hague (1993) recognise three different kinds of interview which in turn require different kinds of questionnaire in designing the research questionnaires; i. Structured - the questionnaires set out precisely the wording of the questions and the order in which they will be asked. Most of the questions have predefined answers with little latitude for a respondent to stray beyond, hence the basis of large quantitative surveys. ii. Semi structured - this type of interview uses questionnaires with a mixture of questions with predefined answers as well as those where the respondent is to speak freely on the topic. In each session of interview the questions are asked in the same way and are more flexible tool than its highly structured counterpart and there is likely to be more probing to fine out the reasons for certain answers. 128 iii. Unstructured - In this type of in-depth interview, the researcher uses a checklist of questions rather than a formal questionnaire on which the answers are written down. The part of the interview and different channels of questioning will be selected during the interview itself. For the purpose of the research, the most appropriate method was to have a series of interviews conducted through a semi-structured interview. This kind of interview is much less rigid than structured interviews. The goal is to explore the studied area more openly and allow researcher to express their opinions and ideas in their own works (see Esterberg, 2002; Hague, 1993; Denzin and Lincoln, 1998). Appropriately this research applies survey method using questionnaires in the fieldwork. It was one of the most frequently methods used to collect data in research. This method is the major instrument to collect primary data. It is capable of producing large quantities of highly structured and standardised data. The quality of the data gained from the survey largely depends upon the design of the questionnaires and the type of questions will be determined by the aims and the objectives of the study (Hague, 1993). Accordingly, the questionnaire was designed in such a way to ensure it would retrieve all the appropriate data or information from the fieldwork survey. 5.5.2.1 Local Authority For the Section A, the questionnaire has been designed to know the background information of the respondent. In Section B, the respondent was asked whether any initiative made to secure off-site infrastructure from applicant during planning approval stage and suggestions from the respondents on how planning approval can be applied to secure off-site infrastructure from private developers are also being asked in the questionnaire. 129 Section C was designed likely to know how the present off-site infrastructure provision is secured by local authority. Section D was designed to obtain information on the problems faced by respondents related to off-site infrastructure provision in obtaining planning approval. In the Section E, the main purpose is to identify the perceptions of local authority on off-site local infrastructure provision. In Section F, the questions are outlined to obtain the suggestions from both respondents on how off-site local infrastructure provision can be secured by local authority. Likert scaling is adopted as it appears to be a reasonable ordinal scale. According to Neuman (2006), the technique developed by Rensis Likert in 1930s is simple to construct and is likely to be more reliable to provide an ordinal-level measurement of a person’s attitude. It requires a minimum of two categories, such as “agree” or “disagree”. For this study, the scale of five categories was applied, ranging from “Inappropriate” (1), “Less appropriate” (2), “Slightly appropriate” (3), “Appropriate” (4) and “Very Appropriate” (5). By referring to the Appendix C2, a brief explanation of each type of delivery was attached to the both set of questionnaire (local authority and developer). Again, open-ended questions are necessary and the interviews have to be well briefed to ensure that they can probe in depth and offer explanation should respondents face difficulties in providing answers. Open question is one where the respondent is left free to give any answer and this is either down verbatim or the interviewer is armed with a list of anticipated pre-defined answers. Designing for an effective questionnaires take the respondents through the interview in such a way that easy to give precisely. 130 5.5.2.2 Developer The questionnaire used for developer is designed in similar way as the one designed for local authority which is based on the research questions. The questionnaire consists of four sections. In certain parts of the questionnaire, the additional information was provided as appendix to guide and clarify respondents to answer the question so that a level of consistency could be reached in the survey. To achieve the objectives, a semi-structured questionnaire is designed and has covered several main sections. Section A seeks to gather information on the background of the respondents. Categorisation of the developers’ organisation is made because most previous studies show that it has a strong influence of developer to involve with off-site infrastructure based on the size of development cost and the total size of development area (Short et al., 1983; Rydin, 1983). In this section to obtain such data, open-ended type questions are used because this approach allows respondents to answer in their own words, rather than being restricted to choosing from a list of pre-coded choices (Clarke and Dawson, 1999). Section C seeks the developers’ opinion on the possible approach available for local authority to secure off-site infrastructure provision. Section D is designed to elicit information on the perceptions of respondents on off-site local infrastructure provision and suggestions from respondents on how off-site infrastructure can be secured by local authority and the roles that might be played by the private sector. The details of the questionnaire used for the developer field survey are shown in Appendix C4. 131 5.5.3 Sampling Design and Procedure Population is defined by Rossi et al. (1983) as a set of elements; an element is defined as the basic unit that comprises the population. In other words population refers to all the people who possess the characteristics of interest and in this case the population was the local authority. As stated earlier, most respondents have experienced dealing with off-site infrastructure during planning approval stage. As stated by Neuman (2006), purposive sampling applied when researcher wants to identify particular type of respondents for in-depth investigation. The technique enables to gain a deeper understanding of respondents. 5.5.3.1 Local Authority For this research the population of local authorities was 145 (N=145) and for a practical reason this figure is impossible to carry out fieldwork survey involving almost every element in the population. Therefore, 22 local authorities (n=22) had been selected using purposive sampling of non-probability sampling (see Figure 5.3). The determination of respondents is guided by the following criteria; i. The local authority should have a number of years of experience dealing with off-site infrastructure requirements during planning approval stage. ii. Local authorities have such practices of promoting private initiative in off-site infrastructure provision from private sector. Besides the above criteria, the selection criteria made based on those local authorities who yield a substantial number of projects with planning approval were subject to off-site infrastructure provision. Finally, it was important to select different types or levels of local authorities, so as to make possible the observation 132 and comparison of local authority’s perceptions on the use of planning approval in local infrastructure. This part will describe the reason why only few local authorities and developers were used as the respondents. After reviewing the previous discussion, the main criteria set for determining the respondents is the experience with off-site infrastructure provision at the planning approval stage. It is necessary only for those dealing with off-site local infrastructure to be short listed as the respondents. In addition the following sub-criteria are also applied: i. The local authority is seeking for effective and efficient approaches pertaining to local infrastructure provision to enhance the involvement of private sector in local infrastructure provision. ii. Availability of data related to this research objectives. The consideration of data availability and accessibility were very significant factors in choosing the respondent. iii. The researcher is a former planning officer at the Municipality of Penang Island (MPPP) in the State of Penang. This factor helps much to access most local authorities in the studied areas. iv. At present many local authorities are strongly looking for effective and efficient approaches securing infrastructure provision from private sector due to scarcity of funds allocated for infrastructure development. Therefore these local authorities have to identify other ways of providing infrastructure. 133 List of respondents identified from Ministry of Housing and Local Government (MoHLG) Stage 1 Set A (Local Authorities) n=22 Stage 2 Set B* (Developers) n=24 Majlis Perbandaran Kuala Terengganu (MPKT) None Majlis Perbandaran Kota Bahru (MPKB) 1 developer (MPKB) Majlis Perbandaran Kuantan (MPK) 2 developers (MPK) Majlis Bandaraya Alor setar (MBSA) Majlis Perpandaran Sungai Petani (MPSPK) 1 developer (MBAS) 2 developers (MPSP) Majlis Perbandaran Kangar (MPKangar) 1 developer (MPK) Majlis Perbandaran Pulau Pinang (MPPP) Majlis Perpandaran Seberang Perai (MPSP) 1 developer (MPPP) 1 developer (MPSP) Majlis Bandaraya Ipoh (MBI) 1 developer (MBI) Majlis Bandaraya Shah Alam (MBSA) Msjlis Perbandaran Ampang Jaya (MPAJ) Majlis Perpandaran Petaling Jaya (MPPJ) Majlis Perpandaran Subang Jaya (MPSJ) 1 developer (MBSA) 1 developer (MPAJ) 1 developer (MPSJ) Dewan Bandaraya Kuala Lumpur (DBKL) 1 developer (DBKL) Majlis Perbandaran Seremban (MPS) 1 developer (MPS) Majlis Bandaraya Melaka Bersejarah (MBM) 1 developer (MPS) Majlis Bandaraya Johor Bahru (MBJB) Majlis Perb. Johor Bahru Tengah (MPJBT) Pihakberkuasa Tempatan Pasir Gudang (PBTPG) Majlis Daerah Kota Tinggi (MDKT) Majlis Daerah Pontian (MDP) Majlis Perbandaran Kulai (MP Kulai) 7 developer (MBJB) 5 developer (MPJBT) 1 developer (MPJBT) 1 developer (MDKT 1 developer (MPP) *The respondents for the developer survey were identified from the respective local authority which had experience in dealing with off-site infrastructure provision. Figure 5.3: The flow of field work survey and the distribution of respondents 134 v. These local authorities experience high-development pressure due to rapid urbanisation process. Based on the statistical evidence provided by the State Town Planning Department, many of these local authorities are experiencing problems in considering planning approval application which subject to the provision of off-site infrastructure. Based on these criteria, about 22 local planning authorities (n=22) had been selected. 5.5.3.2 Developer Initially before the commencement of field survey for the developers’ group, a considerable list of developers who have experience in dealing with offsite infrastructure had been obtained from the first stage of interview with the local planning authorities. The research had shortlisted 24 developers representing nearly every state in the country. However, only 16 developers responded to this research. The reason was that the local authority received less applications of planning approval subject to off-site infrastructure provision (see Figure 5.3). The field survey is conducted personally by the researcher which takes roughly two months to complete the developer’s field survey. Initially prior field works conducted, a list of respondents used to make appointment before the actual date for interview confirmed by the respondents. Overall, the field work (interview) is successfully carried out in the sense that all the questions in the questionnaires are answered. In terms of validity of the study, most interview sessions is represented by local planning officers and property managers who had experience in off-site infrastructure provision. 135 5.5.4 Pilot Survey In many social researches, it requires proper planning to start a research work. As suggested by many authors (Babbie, 1998; Neuman, 2006; Crano and Brewer, 1986, Denzin and Lincoln, 1998), prior collecting data from fieldworks, there is a need to develop a well organised research plan solely for recording the data. The main reason to conduct a pilot survey is to improve the scope covered by the contents of the questionnaire designed and to ensure the relevance of the information obtained from the field survey. The feedback and comments received at this stage from the pilot study are useful to ensure more comprehensive and clear questionnaires. This will make the task of data collection in the field easier and more efficient. For both respondents (local authority and developer), five respondents for each category are selected and the first draft of the questionnaires is posted out to local authorities and developers who have experience on off-site local infrastructure provision. As detailed in the previous chapters, the feedback received from both sets of respondents was considerably adequate. The researcher felt that the comments were very useful and significantly considered finalising the final drafts of both sets of questionnaires. Since the main objective of the research is to identify actual scenario of the off-site local infrastructure provision, therefore any considerable inputs derived from main actors would be considered. The respondents of each set of questionnaire is represented by experienced planning officer as well as respondents from private property developer who often deal with off-site infrastructure requirements with local authority during planning approval application stage. 136 Based on all the above comments, the questionnaire is revised and amended accordingly to ensure its objectives could be achieved. A final version of the survey questionnaire is sent by post as early September 2004 to all respondents. The list of the Set A survey (Local Authority Survey) is provided by Ministry of Housing and Local Government (MoHLG) and list of developers for Set B (Developer’s Survey) as mentioned in the previous parts of this chapter is suggested by the local authority of the respective states. 5.5.5 In-depth Interview The interview tries to provide a more thorough picture of the problem and constraints faced by local authorities and developers when dealing with off-site infrastructure provision. According to Esterberg (2002) in-depth interview is a data collection technique relied on extensive qualitative research and this was supported by Neuman (2006) by as saying that a qualitative research as ‘a conversation with purpose’. However, the technique varies on type of interview. For the purpose of this study, the in-depth interview is intended to seek the insights by going into more detail pertaining to the present practice of planning approval system, the problem and issues pertaining to off-site infrastructure provision. Specifically, the purpose of the in-depth interview has been described in Table 5.1. 137 Table 5.1: The purpose of in-depth interview Set A: Local Authority - To know how planning approval system is used to secure off-site local infrastructure. - To examine the current practice of off-site infrastructure provision pertaining to planning approval system. - To identify factors constraints the active involvement of developers in off-site local infrastructure provisions. Set B: Developer - To identify the problems related to off-site infrastructure provisions. - To explore the perceptions of developers on the practice of off-site local infrastructure provision. - To explore the perceptions of local authority on the practice of off-site local infrastructure provision. - To study the local authority’ perceptions in order to identify the possible approaches of how planning approval measures can be used to secure off-site infrastructure provision. As mentioned earlier, the in-depth interview is carried out after analysing data from the questionnaire and it should be noted that the interviews had to be completed during the permitted period. The interviews enabled the researcher to focus on the major issues revealed from the questionnaires. The interviews were successfully done. The method used for the interview initially using tape recorder since it could be very helpful and to make the interview session running smoothly without any interruption in recording the information taped from the respondents. However, most of them refused to be taped because of personal opinions. As explained earlier, the research employed a combination of quantitative and qualitative methods, involving a survey and in-depth interview. A field survey is done both in local authorities and private developers. The survey mainly intended to analyse both respondent’s backgrounds, their perceptions, the 138 constraints faced in obtaining the planning approval and also to explore the local authority’s strategy to promote and further to involve private developers in local infrastructure provision in particular the planning approval. After analysing the data from the field survey, then the in-depth interviews were held together with selected local planning authorities and developers which the list of then was identified during local authorities’ field survey from respective states. In local authority survey, the local authorities to deal with were identified during the field survey. This was based on the higher experience of the LA with planning applications containing off-site infrastructure. However, the list of developers is obtained based on the feedback received from local authorities in the particular states. The respective local authority had been asked to name few planning applications which dealt with off-site infrastructure provisions. Next, using this information, at least one developer was chosen as the most suitable for in-depth interview. The in-depth interview carried out for both set of respondents (local authority and developer) provided a detailed insight of the study by looking into the developers’ perceptions, strategies and suggestions over the practice of off-site local infrastructure provision within the framework of planning approval system. For both sets of respondents, the interviews are structured in a set of questions as shown in the interview agenda in Appendix C2 until Appendix C5. 5.5.6 Library Research Although most data are gathered from the field survey and in-depth interview, there are some secondary data that are available from the local planning authority, Federal Department of Town and Country Planning, Ministry of Housing and Local Government, Statistical Department and several state authorities. Some data are also obtained from the respective local authorities. 139 The data obtained from the secondary sources are in the form of government publications, departmental annual reports, books and journals, seminar papers and technical reports. Most of the library research was conducted in some local universities in Malaysia such as the main library of Universiti Sains Malaysia (USM) and Universiti Teknologi Mara (UiTM). Most library search had been done mainly at the Universiti Teknologi Malaysia (UTM) library (including inter-library loan from National University of Singapore, NUS). A considerable amount of data and information came from the Library of Ministry of Housing and Local Government and few resource centres of local authority of which some of the data proved to be very valuable and up to date. One of the particular difficulties dealing with these materials is that most of them were collected for specific purposes and therefore may not directly be relevant to the research. 5.6 Validity and Reliability The meaning of reliability as defined by Neuman (2006) is dependability or consistency. The opposite of reliability is a measurement process that yields erratic, unstable, or inconsistent results. Reliability is necessary for validity and easier to achieve than validity. Further, Kerlinger (1986) defines reliability as consistency and dependability which leads to determination the level of accuracy of the research findings. Therefore, this study suggests that reliability can be achieved in three different approaches: i). The questions is designed based on the same set of objectives. ii). Designing the appropriate measures which relates to the accuracy which is fundamental to the research. 140 iii). Identifying the element of error of measurement. If there is an error of measurement in measuring instrument the instrument is said to be unreliable. The Figure 5.4 illustrates the relationship between the concept of reliability and validity adopted by this research using the analogy of a target with usually complementary (but in some special situations conflicting) concepts. As validity increases, reliability is more difficult to attain. This occurs when the construct is highly abstract with no easily observable definition. Low reliability and low validity High reliability and low validity High reliability and high validity Figure 5.4 The relationship between reliability and validity in qualitative research (Source: Adapted from Babbie, 1998) Since this study applies qualitative approach, it tends to take view that reliability is achieved when as the actual situation is figured by the data obtained from the fieldworks survey. Furthermore, the in-depth nature of qualitative research is closer than in structured surveys (Bryman, 2000; Crano and Brewer, 1986). Thus, the field survey and followed by in-depth interview as applied in the research enable to give the insights and detailed information. For this reason, a degree of validity is managed to be achieved. However as pointed out by Denzin and Lincoln (1998), there is a tendency that an interviewer may influence the interview session. Therefore, a systematic precaution measures should be outlined in order to avoid 141 the element of bias. To mitigate the element of bias the interviewer should be aware of his role in the interview session at the time of conducting the interview. How can reliability be achieved? The validity of the measurements should be predetermined at the earlier stage of the research process. In qualitative type of research, there are several techniques that might be applied to validate the research findings. As discussed in previous parts of the chapter, in-depth interview allowing the study to reveal the actual situation based on the reality. Thus, by applying this technique (in-depth interview), the validity of the research analysis is more towards interpretation rather than its representativeness of a wider sample or population. According to Silverman (2005) the required level of reliability and validity in qualitative research needs to be predetermined at the earlier stage of the study. Normally in this type of research, the high degree of acceptance of reliability is a precondition in accepting the validity of certain observation. Therefore in this research, reliability is a significant prerequisite for validity data (of the respondent perceptions). The level of reliability of the data collected from field survey had been validated by conducting an in-depth interview for the both set of respondents consequently. 5.7 Methods of Data Analysis In analysing the data obtained from the field survey, the research identified several appropriate statistical techniques to be applied to generate the required results. Accordingly, descriptive statistical techniques such as frequency, crosstabulations were used to describe the characteristics of the respondent, i.e. regarding the background of respondents, based on the sample data collected from both surveys. The results from the statistical analysis were used as evidence to show any differences between local authority and developer. However the detailed information will be dealt with in the qualitative analysis. For this reason, an in- 142 depth study using qualitative techniques would be very useful. This means that this research employs a combination of quantitative and qualitative methods, with the quantitative method as the leading methodology. As elaborated previously, the research consists of a combination of quantitative and qualitative methods of analysis. The quantitative analysis provides the general picture regarding the issues as well as revealing the variations that exist between the case study areas. It is then followed by qualitative analysis that provides further explanations on the issues and the developers’ behaviour. Thus, it is clear that the quantitative analysis provides the basis for the qualitative study. In other words, the findings from the quantitative study suggest major issues or questions, which are applied for further investigation by means of indepth qualitative methods. At this stage in-depth interview for validation of the proposed improvement model which developed the later stage of the study. Quantitative analysis will then be used as a foundation for the qualitative analysis. On the other hand, it involves the work of transcribing and putting things together in order to make sense of the interview materials. The discussions from the interview need to be compiled and concluded and this should be done in a very precise manner so as to exclude any misinterpretation of the information. Hence, the quantitative tools are in use only as a valid way to achieve descriptive generalisation as well as to reveal whether or not the variables that relate to the developers’ perceptions, problems and strategies are significantly different between the two areas. In this research, the qualitative analysis starts by looking at the major problems faced by both sets of respondents and then moves on to analyse the common problems confronting the developers regards to planning approval which subject to the requirements of off-site infrastructure provision. Eventually, the study concentrates on the ways they adopted to overcome problems as well as looking for its justification. 143 The next stage of the research is the analysis of the data. Two types of data had to be analysed from the questionnaires and the interviews. In terms of analysis, data from the questionnaires were analysed by using Statistical Package for Social Science (SPSS) as it could provide some basic generalization of the research. Subsequently, the data obtained from in-depth interviews are analysed by quoting all the relevant respondents’ transcriptions. The data provides an evidence to support the relevant theoretical arguments to increase the plausibility in answering the research questions. The analysis is almost entirely descriptive to retain its actual intent or meaning of the respondent perceptions. The exploration of the data on the sample was useful in describing the present situation. The quantitative technique is employed in addressing the main concern of the research seeking insights rather than statistical analysis. In other words, the analysis only concentrates on the background features, providing the general view, before focusing on the major issues of concern. This can be obtained through the questionnaire survey. 144 5.8 Documentation of Research Findings As the research employs a combination of quantitative and qualitative methods, the presentation of the research should encompass both ways, interpretation of tables, charts that involve numbers and making use of quotations to support the analysis. The research findings is presented in the way of the method used either it was a quantitative or qualitative. As mentioned before, the background of the research mainly applied the quantitative method, thus, firstly the results presentation from quantitative analysis was illustrated, elaborated and interpreted using tables, charts and illustrations. For clarification purposes, the issues pertaining to the practices of the planning approval are to be distinguished as experienced by the both respondents. This information required to be revealed in order to compare the common problems faced by both respondents. As the research tries to obtain perceptions from both of respondents on the perceptions of planning approval practices, constraints faced by developers during obtaining planning approval from planning authority was discussed in details. The discussion also made on the perceptions regarding the process involves in the provision of off-site local infrastructure provision. Consequently, the qualitative data gathered from field interviews were then transcribed, as the quotation needed to clarify the assertions made earlier of the research. In presenting the developers’ opinion to enhance certain issues as to give justifications, the researcher transcribed the relevant parts of the interview manually before it was presented in the form of quotation. The idea is that it can be used as supportive evidence which either reflects the general opinion of the developers or which highlights certain issues that may be raised. 145 From the above discussions, it is clear that the research involves two stages. The first level provides the full description towards the issues and the scenario of planning approval system as practiced at local planning authority then in the second stage the study proceeds with detailed in-depth interview from the both respondent on the planning approval. The overall, the analysis could provide the answer to the research questions that had been outlined in Chapter 1. 5.9 Limitations of the Study This part describes the limitations to the research. This research is confined to the practice of planning approval and off-site local infrastructure provision which takes place at local development. The arguments used to support the discussion solely derived from the analysis is based on the data collected only from the field survey. In arriving to the conclusion, the research was ‘framed’ or ‘influenced’ with several limitations. The limitation of the research had been encountered at the stage of designing the questionnaire, identification of sample, the stages of data collection and during analysing qualitative data. During designing the questionnaire, the cooperation received from developer was encouraging. The input from both respondents was very useful and had been incorporated in the final draft of the questionnaires. There are also problems in terms of co-operation from the respondents. As mentioned earlier, obtaining the co-operation from respondent was not an easy task. The situation has really affected the outcome of the research. There were problems in identifying the appropriate developer. This is because the list of developers as identified from the respective local authorities fulfilled the criteria of respondent’s selection, however there are few cases where the appropriately identified respondents (developers) were not available at the moment of interview. Due to time consumption, the researcher had to work within a limited timeframe allocated for fieldwork just for six months. Therefore, the task 146 has to be delegated to another person from the company to proceed with the interview. This actually created a less reliable feedback or responses. Another problem encountered during analysing the qualitative data which was not only time consuming but also involved difficulties in cross-checking facts and data. The analysis involved the process to transcribe the data obtains from the interview as it forms the evidence for an argument as well as supports the analysis. It was done manually through the field notes. To ensure that the findings of the research are accepted methodologically, there are a number of assumptions applied in the analysis. The first assumption is that the selection of respondents should be fulfilled the criteria outlined, however the real situations may affect the ability to of the respondents to represent the whole. Nevertheless, this scenario does not affect the reliability of the results of the survey. 5.10 Conclusion of the Chapter It has been established that this research is qualitative using an in-depth field interview analysis to establish an appropriate ground for this research to be carried out. This chapter had been described as the research strategy and methods of data collection and analysis. The research questions not only imply the objectives and the scope of the research but it would guide how the data will be collected and analysed. Two types of survey were carried out in this research to gather data and information of perceptions of local authority and developer on application of planning approval to secure off-site infrastructure provision from private sector. The local authority survey mainly was aimed at examining the extent of present planning approval being accepted by private sector. However, the developers’ 147 survey, on the other hand, was aimed at examining the reactions of private sector on the practices of planning approval which are imposed by local authority. Both sets of questionnaire had been reviewed after pilot survey had been carrying out. The rationale of why the qualitative method had been applied is explained and also the type and sources of data have been identified. The techniques of data collection have been chosen according to their suitability to the data obtained from the survey. Basic purposive-sampling techniques and field surveys have been followed in order to avoid sampling bias and to secure the highest possible response rate in the surveys. The data from other available secondary sources were also collected to complement the data from the surveys. The data were analysed using the appropriate descriptive statistics. The descriptive statistics were mainly used to summarise the data. In conducting the research, a number of problems were encountered and certain weaknesses were found in the research methodology and respondent cooperation. It has to be mentioned that gaining respondent co-operation in the study was not an easy task affecting the outcome of the study. These problems and weaknesses certainly have an effect on the results and findings of the research. The chapter concludes with the limitations of the study by explaining the assumptions and the validity of the techniques used in the analysis of data. CHAPTER 6 PRACTICE OF SECURING OFF-SITE LOCAL INFRASTRUCTURE PROVISION 6.1 Introduction This chapter analyses the perception of developers and local authorities on the practice of securing off-site infrastructure based on the data gathered from the survey and the in-depth interviews. The input of the chapter was obtained from local authorities and developers. The analysis was guided by the literature as discussed in the previous chapters. The results from this chapter will further be analysed in order to propose the improvement of the present practice in off-site local infrastructure provision. 6.2 The Background of Respondents The research has selected two groups of respondents, from 22 local authorities (n=22) and 16 developers (n=16). Those representing the developers have undergone major property related development which involving the off-site infrastructure requirements in the past. Most respondents are experienced of offsite infrastructure. 149 6.2.1 Local Authority The sample survey covers 22 local authorities (n=22), comprising municipal councils, city councils (and city halls) and district councils. The list of respondents used for this study had been obtained from Ministry of Housing and Local Government (MoHLG). Table 6.1, shows the detail the respondents by type of local authority. Initially, the response rate was only 13% of local authorities returning the questionnaires. Due to the lack of cooperation from the respondents at the early stage of survey, the researcher sought to administer directly by approaching the respondents through appointment. However, such approach was very time consuming. Table 6.1: Type of local authority Type of local authority Frequency Percentage % City Hall 1 4.5 City Council 5 22.7 Municipal council 13 59.1 District council 3 13.6 Total 22 100.0 Source: Field survey 2005 (n=22) Figure 6.1 illustrates the experience of the respondents by years. As stressed in the previous chapter, since the study applies the qualitative approach, the aspect of reliability is given significant consideration in collecting the data. The reliability of the data or answers obtained from the survey that had been carried out through interview was significantly influenced by the level of experience of the respondents. From the survey, most of the respondents have the experience of 4-6 years (45%) as planning officers with local authority, 32% with 150 experience of 7-9 years and only 4.5% have 19-21 years of experience. Based on this figure, the level of reliability that can be concluded will be high and the Year of experience answer obtained from the respondents is considered reliable. 19-21 13-15 7-9 1-3 0 10 20 30 40 50 1-3 4-6 7-9 10-12 13-15 16-18 19-21 Frequency 0 45.5 31.8 13.7 4.5 0 4.5 Percentage 0 10 7 3 1 0 1 Percentage Figure 6.1: Years of experience of respondents (Local authority) Source: Field survey 2005 (n=22) The findings show that most of the local authorities are experienced with the involvement of off-site infrastructure provision. Figure 6.2, illustrates 59.2% of municipal councils as involved in providing infrastructure, 22.7% city councils and city halls (4.5%). What can be concluded is that the selected local authorities have fulfilled the outlined requirements. Most of the respondents representing local authority selected from the states of Selangor, Pinang, Johor and Federal Territory of Kuala Lumpur have experienced rapid growth in population. The population for the period of 19902000 can be used as an indicator to show the level of urbanisation from each of these local authorities. Within these periods, few local authorities such as City 151 Hall of Kuala Lumpur (DBKL), Municipal Council of Seremban (MPS), Municipal Council of Kuantan (MPK), Municipal Council of Pulau Pinang (MPPP), Municipal Council of Ampang Jaya (MPAJ) and Municipal Council of Subang Jaya (MPSJ) experienced a rapid growth in urban population. Percentage of involvement 80 60 40 20 0 Percentage City Hall City Council Municipal Council District Council 4.5 22.7 59.2 13.6 Type of local authority Figure 6.2: Involvement with off-site infrastructure provision by type of local authority Source: Fieldworks survey 2005 (n=22) DBKL is the capital region where one of the respondents in the research applied a different legislation (Federal Territory [Planning] Act 1982 [Act 267]) to guide the planning system. However, the authority is practising almost similar planning approval systems. Based on the survey findings, DBKL was among the local authorities involved with a significant number of development approvals with the condition of off-site infrastructure provision requirements. 152 6.2.2 Developers The research aims to look at the possibility of using private options in providing off-site infrastructure, therefore 16 private developers have been identified to be the respondents for the research. Initially, 44 developers had been shortlisted, however after entirely scanning the nature of the activity of the developer firms, only 25 fulfilled the criteria outlined for the research. In total only 16 developers were willing to be called for the interview. The respondents came from various backgrounds based on the type of ownership. Hence the interviewed developers have the same related backgrounds ranging from the status of ownership, the duration of involvement in property development, the average development cost per project and also their involvement in off-site infrastructure provisions. Figure 6.3 show the distribution of developers representing different levels of ownership from public listed companies (Bhd.) (43.8%), private limited (Sdn. Bhd.) (31.1%), and government linked (GLC) (18.8%) to Joint ventures (6.3%). Public Listed Company (Bhd) 43.8% Private Limited (Sdn.) 31.3% Semi-government 18.8% Joint-Venture Company 6.3% Figure 6.3: Status of ownership of the developer Source: Fieldworks survey 2005 (n=16) 153 In relation to this, it is noted that most developers involved with off-site infrastructure are from the large firms. The findings show that the majority of developers have been involved in off-site infrastructure provision for 7-9 years (24.9%), 10-12 years (24.9%), 13-15 years (24.9%) and only 6.3% having more than 19 years of experience. The respondents have a strong background in terms of years of experience (See Figure 6.4). Years of experience 19 - 21 13 - 15 7-9 1-3 0.0 5.0 Year 1-3 Percentage % 0.0 4-6 12.7 10.0 7-9 24.9 15.0 20.0 25.0 30.0 10 - 12 13 - 15 16 - 18 19 - 21 24.9 24.9 6.3 6.3 Figure 6.4: The years of establishment of the developers Source: Fieldworks survey 2005 (n=16) 154 According to Claydon and Smith (1997), the tendency of developer to contribute to off-site infrastructure is mostly influenced by the size of the project; where the bigger the development, the higher the probability for the developer’s contribution is. Allison and Askew (1996) also revealed a similar scenario where many local authorities have come to depend upon the private funding for the provision of public utilities. This occurs because local authorities have to rely on their power of negotiation with private developers to secure the required facilities. Figure 6.5 illustrates the size of development and percentage of involvement with off-site infrastructure. 25.0% are developers with average development cost of RM15-30 millions, 25.0% with average of RM31-45 millions, 18.8% with cost of 91-105 millions and only 25.0% were involved with more than RM120 millions. Average of development cost ($ million) More than RM 120 RM106-RM120 RM91-RM105 RM31 - RM45 RM15 - RM30 0.0 5.0 Avg. Cost (RM’000) 15 - 30 Percentage 25.0 10.0 15.0 20.0 25.0 31 - 45 91 -105 106 -102 More than 120 25.0 18.8 6.3 25.0 Figure 6.5: The average of development cost Source: Fieldworks survey 2005 (n=16) 30.0 155 The findings had been supported by one of the developers during in-depth interviews as saying: ‘…based on our observation, the practice of off-site infrastructure is only realised in large scale developments ...’ This statement was further supported by another developer: ‘…the tendency for developers to contribute to off-site infrastructure is relatively high compared to the size of the projects applied for planning approval in large scale developments. The quantity of contribution is proportionate to the size of the project ...’ 6.3 The Practice of Local Infrastructure Provision 6.3.1 The Present Practice of off-site Local Infrastructure Planning approval process involves a comprehensive overview of planning matters prior to obtaining approval from local authority. Table 6.2 outlines the procedures applied by local authority to expedite planning approval which involves off-site infrastructure requirements. From the table, there are three methods frequently applied by local authorities. The most effective method is One-StopCentre to monitor planning application (77.3%). The centre would facilitate all the disputes arising between local authorities, technical departments and applicants (developers). The disputes would occur in case there is disagreement on the part of the developer in order to fulfil certain requirements as imposed by local planning authority (e.g. off-site infrastructure), technical departments requesting to list the infrastructure needed to be imposed on applicants (18.2%) and only one local authority initiated such internal committee to expedite the planning application which involved withy off-site infrastructure (4.5%). 156 In the British Planning System, planning approval process is essentially coordinating and allocating of activities (Ennis, 1997). Planning approval mechanism can always be found in the planning system and has been identified as an effective method in securing off-site infrastructure provision. What can be concluded is that the practice of planning approval was proven as one of the acceptable methods for local authorities to be applied to acquire off-site infrastructure. However, planning requirements imposed via planning conditions might be applied if there’s a must for developers to provide. This could happen if the approved projects could deteriorate the adjacent areas. Therefore, there is a need for developer to compensate or to provide any form of mitigation measures to avoid any predetermined negative consequences of the development. Table 6.2: The procedures applied to expedite planning approval which involves off-site infrastructure requirements Procedures applied Frequency Per cent % Each technical departments requested to list the infrastructure required by each individual departments 4 18.2 Having one-stop centre to monitor the requirements of planning approval process 17 77.3 The developer setup SPEAD (SurveyorPlanner-Engineer-Architect-Developer) to expedite the planning application. 1 4.5 Total 22 100.0 Source: Field Survey, 2005 (n=22) 157 In this part the analysis will look at the present practice applied by local authorities to acquire off-site infrastructure from private developers. Figure 6.6, revealed several methods of infrastructure delivery at the local level. Complete public sector delivery has 100.0% from the surveyed council. The recent outsourcing approach of local infrastructure provision had been manifested in jointventure (100.0%), lease contract (72.7%), service management contract (81.8%) and full privatization (77.3%). However, other methods of private option such as concession/franchise agreement and public-private partnership (PPP) were not successfully implemented. 77.3 Planning Contribution 63.6 Planning Requirements 77.3 Full Privatization 100.0 Joint Venture (JV) Concession/ Franchise Agreements 0.0 13.6 BOOT, BOO or BOT Schemes Public-Private Partnership (PPP) 0.0 72.7 Lease Contracts 81.8 Service/ Management Contracts 100.0 Complete Public Sector Delivery 0.0 20.0 40.0 60.0 80.0 100.0 120.0 Figure 6.6: The present methods of off-site infrastructure provision Source: Fieldworks survey 2005 (n=22) 158 In fact, the breakdown in Figure 6.6 also suggests that apart from private options in off-site infrastructure, there are several other methods applied to acquire from private developers, such as the use of planning contributions (77.3%) and planning requirements (63.6%) during planning approval process. The use of these methods to secure off-site infrastructure is very limited. It was found that local authorities widely use private sector financing. However, this situation is applicable to all types of infrastructure delivery as well as to the less effective ones, such as concession/franchise agreements and public-private partnership (PPP). These are few local authorities which utilise an intensive private sector delivery of off-site infrastructures, i.e. Built-Operate-Transfer (BOT, 13.6%). Therefore it can be concluded that in addition to public sector delivery the provision of off-site infrastructure widely shifted from public sector to private sector. The finding has supported by Allison and Askew (1996), a local authority might seek contribution from private developer through negotiation while considering planning approval. In return, the developer might give something to local authority in the form of contributions. The contents of the contribution would be as what has been agreed upon the approval. The process of securing benefits (e.g. off-site infrastructure) normally is enshrined between developers and local authority. 6.3.2 The Reasons for Using Private Investment For this purpose, local authorities were asked to indicate the reasons for using private sector delivery method for off-site infrastructure provision. Private sector does offer improved service delivery when it is exposed to a competitive market. From the Table 6.3, the findings indicate that the main reason why local authority move to use private options in delivering off-site infrastructure was to fund the increase in demand of local infrastructure provision. This was agreed by all interviewed local authorities (100.0%). Other reasons were to improve the 159 efficiency and the quality of services (36.4%) and to increase efficiency of the services provided (13.6%). The study by Megginson et al. (1994) reveals similar findings on private involvement in local infrastructure. The result indicates that efficiency consistently increases when the infrastructure provision is shifted to private market. Table 6.3: The reasons of using private sector for off-site infrastructure provision Involved with off-site infrastructure Yes No The reasons To raise necessary resources (e.g. financing) Total 22 (100.0) - 22 (100.0) Ability to identify and manage risks 1 (4.5) 21 (95.5) 22 (100.0) To provide contemporary management skills and optimize performance 2 (9.1) 20 (90.9) 22 (100.0) To improve the efficiency and quality of services 8 (36.4) 14 (63.6) 22 (100.0) Efficiency improved when exposed to competition 3 (13.6) 19 (86.4) 22 (100.0) Source: Field Survey, 2005 (n=22) 160 6.3.3 The Type of off-site Infrastructures Most Needed by Local Authority Depending on local authority funding guidelines, any specific infrastructure may have social and private benefit components. The particular types of infrastructure have governed the traditional responsibility of local authorities in local infrastructure provision. Responsibility in this context does not refer exclusively to local infrastructure delivery. However, with increased number of private developments, there is need for developers to be involved in local development by participating in infrastructure provisions, particularly in off-site infrastructure. The study shows a few types of off-site infrastructures to be mostly needed by local authorities as provided by private developers. This is indicated by Figure 6.7, to include drainage/monsoon drain (100.0%), parking facilities (100.0%), recreation facilities (87.5%), and improvement of existing local infrastructure (81.2%), public utilities (62.5%) and public amenities (62.5%). Lists of infrastructure 0 Construction of new local roads 20 Drainage 40 Parking facilities 60 81.2 18.8 81.2 18.8 No Yes 0.0 100.0 87.5 12.5 Recreation facilities 0.0 100.0 37.5 62.5 Incinerator plants 81.2 18.8 Betterment of existing local infrastructure 80 62.5 37.5 Other public utilities 2 (87.5%) 3 (81.2%) Source: Field Survey for Developers, 2005 (n=16) provided by a developer 62.5 37.5 Other public amenities 120 25.0 75.0 Maint. of existing off-site infrastructure 1 (100.0%) 1 (100.0%) 100 Figure 6.7: The distribution of off-site infrastructures mostly needed by local authority Percentage Construction of new local roads Local road maintenance Drainage Recreation facilities Parking facilities Incinerator plants Local road maintenances 4 (62.5%) Other public utilities (e.g. Monsoon drain) Betterment of existing local infrastructures 4 (62.5%) Other public amenities (e.g. Market, etc.) Maintenance of existing off-site infrastructure 161 161 162 6.3.4 The Responsibility of Providing off-site Infrastructure While acknowledging the significance of adequate infrastructure for local development, the involvement of private sector would reduce the financial responsibility of local authority in providing the needed infrastructure. In the previous assumption, the delivery of on-site infrastructure realised by private sector while public sector to provide off-site infrastructure. However, the practice remedially has been changed (Ennis, 1997). 100 80 60 40 20 0 Local authority Percentage Local authority and developers 12.5 87.5 Figure 6.8: Responsibility of providing off-site infrastructure facilities Source: Field Survey 2005 (n=16) The Figure 6.8 shows most of the respondents (developers) to have agreed that the responsibility to provide the required off-site infrastructure should be provided by private and public sectors (87.5%), while only 12.5% reserve it under the local authority. The finding was supported by Sagalyn (1997) by saying that United State local development obtains significant contribution from private developers under several approaches initiated by local authority. These include the exactions, incentive zoning and public-private joint development due to the rising costs of infrastructure. 163 6.3.5 The costs of off-site infrastructure In the past, developers have always been required to provide on-site infrastructure. However, with the rising costs of infrastructure provision and the perception that local economies would function efficiently when lower taxation is imposed (Healey et al., 1997) a significant impact has taken place on the capacity of local authority to provide the necessary infrastructure. A similar pattern can be seen in local authorities in the country. Figure 6.9 illustrates 68.8% of the developers interviewed claimed that they had allocated 10-15% from the estimated gross development cost to build infrastructure, 24.9% allocates 15-20% and only Percentage of development cost less than 6.3% allocate 10% from the total development cost. 15-20 percent 10-15 percent Less 10 percent 0 Percentage % 20 40 60 Less 10 % 10-15 % 15-20 % 6.3 68.8 25.0 80 Figure 6.9: Development cost allocated for off-site infrastructure Source: Field Survey 2005 (n=16) 164 As shown in Table 6.4, most developers perceived that more than 69.3% had been allocated 10-15% of development cost and 68.8% had been allocated 1015% from development cost. Whereas most developers perceived 15-20% had been spent on infrastructure with estimated development cost of RM120 millions and above. Thus the cost of providing infrastructure is relatively much higher as the development cost increases. This may be related to the type of infrastructure (see Figure 6.8) required to be complied with. Most of the infrastructure imposed by local authorities ranging from public amenities, public utilities, betterment of existing local infrastructure, parking facilities, recreation facilities and drainage system. Table 6.4: Development cost involved and the percentage of allocation for off-site infrastructure Development cost Total Allocated for off-site infrastructure (RM’million) Less 10 % 10-15 % 15-20 % RM15-RM30 6.3 12.6 6.3 25.2 RM31-RM45 - 25.2 - 25.2 RM91-RM105 - 18.9 - 18.9 RM106-RM120 - 6.3 - 6.3 >RM120 and above - 6.3 18.9 25.2 6.3 69.3 25.2 100.0 Total Source: Field Survey 2005 (n=16). 165 6.3.6 Delay in Obtaining Planning Approval The delay during planning approval was among the most critical problems in planning system. Several studies revealed the same opinion (see Healey, 1995; Wood, 1985; Bunnell, 1995). However delay still remains the concern of local planning authorities particularly those involved with off-site infrastructure. As far as the developers are concerned, most of them bear the difficulties on the effectiveness of the authority to adopt the appropriate approaches to eliminate the problem. The main concern is to determine the appropriate methods or approaches which enable to obtain the faster approval. For many developers the procedure applied to carry out planning approval had cause in delaying planning approval. There had been a growing concern over the role and function of planning approval. It had play a significant role in planning control as its ability to ensure the infill development were carried out accordingly to development plans. The critics complain on the nature of the decision taken and the delay causes by the practices. Based on Figure 6.10, most planning approvals issued within the timeframe of 1-2 years (81.2%) and only 6.3% were granted in less than 1 year. However, the cases were quite rare. From the findings, it can be concluded that most of the developers assume the duration of 1-2 years to obtain planning approval to be acceptable. Furthermore, these are also the cases where planning application only receives the approval in more than 2-3 years (12.5%). 166 100 Percentage 80 60 40 20 0 Percentage % Less than 1 1-2 years 2-3 years 6.3 81.2 12.5 Figure 6.10: Planning approval timeframe Source: Field Survey 2005 (n=16) Time consumption in obtaining planning approval has long been recognised amongst the major obstacles in property development in the country (Ghani Salleh, 1990). Several attempts have been made to reduce the level of constraint. However, the problems still persist in planning approval stages. As far as developers are concerned, most local authorities look at the problem as their main responsibility to expedite the planning approval process. Table 6.5 illustrates the average period consumed by developers to obtain planning approval as more than one year (93.7%). The findings show no significant evidence of the timeframe taken for planning approval to be affected by the cost of project. The timeframe by the average cost incurred, shows that 25.2% fall under the categories of RM120 million (more than 1 year) and 25.2% is RM31 million – RM45 million (more than 1 year). There is 18.3% that fall under the categories of RM15 million – RM30 million (more than 1 year) and only 6.3% is RM91 million – RM105 million received planning approval less than one year. 167 Table 6.5: Planning permission processing period by development cost Timeframe for approval Development cost Total RM15 million - RM30 million RM31 million - RM45 million RM91 million - RM105 million RM106 million - RM120 million More than RM120 million and above Total < 1 year > 1 year 6.3 18.3 25.1 0 25.2 25.2 0 18.3 18.3 0 6.3 6.3 0 25.2 25.2 6.3 93.7 100.0 Source: Field Survey 2005 (n=16) 6.3.7 The Influence of Infrastructure Distribution on Project Locations In dealing with planning approval, one factor that cannot be denied is the influence of planning control on the distribution of investment decisions (Claydon and Smith, 1997). The key issue are the problems faced by developer in coordinating the proposed development with the present location of infrastructure provision and how these problems affect developers’ strategies (Healey et al., 1996). Another question is how local authorities ensure that development have adequate infrastructure provision. In this study, the respondents (developers) have been questioned on the factors considered in selecting the project location. The developers were required to list the factors that influence their decisions in site selection. By referring to the Table 6.6, it can be seen that most developers considered having good access to existing off-site infrastructure is the main factor to determine the selection of 168 project location (81.2%). Developer would rather choose the location which is readily available with adequate infrastructure. As shown in the same table, only 6.3% developers consider areas with less possibility to be imposed with off-site infrastructure requirements for future project location. The developers treated the flexibility in negotiating off-site infrastructure requirements to be less important (12.5%) even if it was given assurance by local authorities. Table 6.6: Factors influence developer’s decision to determine project locations Factors influence developer’s decision Frequency Percent % Areas with less possibility to be imposed with off-site infrastructure requirements. 1 6.3 Have a good access to existing off-site infrastructures. 13 81.2 In local planning authorities which are proactive in negotiating the planning requirement pertaining to off-site infrastructure provision. 2 12.5 Total 16 100.0 Source: Field Survey 2005 (n=16) 169 This implies that the availability of adequate off-site infrastructure is an important criterion in determination of projects location. Developers may have their justifications but the availability and accessibility to the off-site infrastructure mainly influences developers to determine the project location. What can be concluded is that most developers consider sites that are readily provided with infrastructure as the main factor determining location for development. Since it could reduce the cost to provide the necessary off-site infrastructure as it will be imposed by local planning authority upon granting the planning approval. 6.3.8 The Major Drivers of Private Sectors Involvement in off-site Infrastructure Provision The findings of the survey identify several factors of the involvement of private sector in local infrastructure provision. Table 6.7 reveals the prompt responses of the factors driving the private sector participating in local infrastructure. These include, such as to fulfil the planning approval requirements (100.0%), as a marketing strategy (95.5%), as part of corporate social responsibility (87.5%), as capital investment and corporate image (81.2%) and to enhance land and capital (72.3%). What can be summarised from the above analysis is that the private financing is generally perceived as an efficient means by most respondents (local authority). The study also revealed that most respondents (developers) agreed that the involvement of private sector in local infrastructure is significant to local development. However, such practices directly incurred additional cost to the developer in order to meet the needs of local infrastructure provision as outlined by local authority. 170 Table 6.7: The major indicators of private involvement in off-site infrastructure provision Drivers of involvement Yes % No % Total To fulfil the planning approval requirements as imposed by local authority 100.0 0.0 100.0 Used as a marketing strategy 95.5 4.5 100.0 With proper planning of off-site infrastructure provision the project’s profit still can be gained 95.5 4.5 100.0 Appear as part of corporate social responsibility 87.5 12.5 100.0 As long term investment of capital and corporate image 81.2 18.8 100.0 Enhance land and capital value 72.3 27.3 100.0 Source: Field Survey, 2005 (n=16) However, the main obstacle remains on how the financing may be efficiently tapped out from the private sector (developers). These findings are further supported by Bunnell (1995) in his study on the application of planning approval mechanism to secure off-site infrastructure. He then suggested that in order to promote private financing, the most significant part is to clarify the possible method of how private sector can finance the infrastructure. The methods should be appropriately applied and consistent with the established development plans because it would affect the pattern of local development. 171 6.4 The Application of Planning Approval System to Secure off-site Infrastructure Provision 6.4.1 The perceptions Over the Methods Applied to Secure off-site Infrastructure As shown in Table 6.8, the most successful method to secure off-site infrastructure as perceived by respondents is through negotiations (81.8%). However, 18.2% agreed that off-site infrastructure can be secured through planning requirements using ISF (Improvement Services Fund) as provided under Section 132 of the Street, Drainage and Building Act 1974 (Act 133). Table 6.8: Methods applied to secure off-site infrastructure Type of methods Frequency Per cent % Planning requirements (ISF) 4 18.2 Negotiation 18 81.8 Total 22 100.0 Source: Local Authority’s field survey, 2005 (n=22) To support the above findings, an in-depth interview was made. The following revealed the perceptions of developers over the appropriate methods for local authority to acquired off-site infrastructure from private sector; Developer 1; ‘… many developers dealing with large scale development are willing to provide off-site infrastructure. However, the approach must take the benefit of developers who pay the costs…’ 172 Developer 2; ‘…based on previous experiences, off-site not just increases our development cost, but with proper planning it would increase the appearance of our development. Therefore, local authorities have to come-up with proper guideline or explanation regarding to off-site…’ Developer 3; ‘…produce a proper guideline on off-site infrastructure requirements and involved private developer as local partner in local development…’ Developer 4; ‘…the state planning committee has to play a vital role to realise this effort…’ Developer 5; ‘…those local authorities involved with off-site infrastructure requirements should be 'treated' case-by-case. The key features in dealing with off-site requirement must be through negotiation…’ 6.4.2 The Effectiveness of Negotiations In the previous parts, negotiation had been identified as the most successful method to secure off-site infrastructure from private sector. However, the question could be raised is that how effective the method might be? Table 6.9, illustrates that most respondents (local authority) agreed that negotiations was a very effective method to secure off-site infrastructure from the private sector. 173 There are two significant perceptions upon this matter. They found that the method is quite effective since the approach had been backed up by the legal provision (68.2%) and the approach was claimed to be very effective but it is only applicable for large scale of development (27.3%). But for some respondents they also agreed with the method, however, they perceived that the method is only limited too few types of off-site infrastructure (4.5%). Table 6.9: The effective of negotiation methods The nature of effectiveness Frequency Per cent % Quite effective since the approach is back-up by legal provision (Act 172). 15 68.2 Very effective but is only limited to a few types of off-site infrastructure. 1 4.5 Very effective, however it is only applicable for large scale development. 6 27.3 Total 22 100.0 Source: Field Survey, 2005 (n=22) The findings are similar to Sagalyn’s (1997) study on the practice of negotiation to capture public amenities from private developers in United State cities. The latter claims that with strong property market, these local authorities successfully negotiated a demand to fund their public amenities from private developers. He then stresses the power of the public sector (local authorities) in negotiating a deal on a particular private development requiring public amenities during the planning approval stage. 174 Based on the above, and referring to British planning system, negotiation is one of the most efficient and acceptable approaches applied by local authorities to secure off-site infrastructure, from developers through planning agreement during the planning approval stage (Ennis, 2003). If there is a need for off-site infrastructure to be provided prior granting of planning approval, the local authority would then enter into negotiations with developers to secure the appropriate infrastructure considered necessary for the development to proceed. The fact is that, there is no structured guideline available to be used as a basis for such practices. Since negotiation was promoted and implemented in many countries, therefore there is a need for local authority to work seriously to initiate a structured guideline of negotiation procedure. 6.4.3 Developers’ Reaction of off-site Infrastructure Requirements The requirement of infrastructure during the planning approval stage is a product of planning gain. Planning gain is a concept which emerged to retrieve community benefits from the increase of land value after planning approval is granted. However the practice indirectly would increase the development cost as many developers have claimed. The above scenario is quite similar with the finding of the study. In Table 6.10, an approximately 81.8% local authorities interviewed realised that most developers are not favourable over the practice. However, they have no choice since it has been legitimately practised. Although such practice is not favourable to many developers, there are few developers who can really bear the responsibility of private sector involvement in local infrastructure development. This can be revealed by 9.1% of respondents found that some developers do understand the role that have to be played by private sector in local infrastructure development. 175 Table 6.10: Developers’ reactions when off-site infrastructure imposed by local authority Frequency Per cent % Appeal to council to exemption from fulfilling the requirements imposed 2 9.1 Most developers are very unhappy. However, they have no choice. 18 81.8 Some developers understand the benefits to the community. 2 9.1 Total 22 100.0 Developers’ reactions Source: Field Survey, 2005 (n=22) The study also revealed significant findings when local authorities were asked on developers’ reactions with regards to their planning application involved with the requirement of off-site infrastructure provisions. Approximately 9.1% of the 22 interviewed local authorities had experienced developers who appealed to local planning authority in order to obtain exemption from providing the requirements of off-site infrastructure. There were developers have been wary of such practice because of the difficulty in measuring the impact of new development and accepting a reasonable level of compensatory gain in form of off-site infrastructure provision. However the practice to require developer to provide off-site infrastructure was widely accepted as planning gain. As asserted by Fordham (1989), the practice of planning gain is well established and recognised as reality in development control process in planning system particularly to secure off-site infrastructure provision from private sector. 176 6.5 Problems Relating to off-site Infrastructure Provision During the Planning Approval Stage 6.5.1 The Constraints of Private Involvement The main problem faced by local authorities in local infrastructure provision is the lack of private sector involvement. The findings state that most developers believe the main constraints are due to unavailability of off-site infrastructure provision requirements guidelines (62.5%). Improper procedure applied to impose off-site infrastructure requirement is also a major concern. Many developers believe that such constraints can be avoided if the procedure defined clearly by interpreting and incorporating with the local contexts. Moreover, several developers claimed that the main problem caused by the groundless of procedures used to justify the requirements is not consistent from one project to another project and some cases from one local authority to another (6.2%). By considering cost as the main determinant for the viability of the development, the developers may have the perception that planning control affects the development cost. Where, developers have to incur additional cost to provide other infrastructures prior granting the planning approval. The study also claimed that another reason constraining the involvement of private sector results from the nature of the infrastructure. They claimed that the cost of providing off-site infrastructure is comparatively high. This can be true since 18.8% of developers positively responded to the statements that providing off-site infrastructure was costly (see Table 6.11). 177 The findings are supported by many authors. As observed by Crow (1998), the practice of planning gain is not a favourable one because such practice violates the fundamental principle that planning permission cannot be bought or sold. What had been pointed out regards to the abused of power by local planning authority and Crow (1998) made another significant argument over the practice: ‘…the important point that must be made is between the products of planning gain. Which are the nature and the purpose of the gain, sought or offered, and the process in which generally takes the form of negotiation leading to the agreement…’ Table 6.11: The constraint of private involvement in local infrastructure provision Factors Frequency Percent % Providing off-site infrastructure was costly. 3 18.8 Insufficient of guidelines pertaining to off-site infrastructure requirements. 10 62.5 Less incentive given by LA to developers who are willing to contribute off-site infrastructure. 2 12.5 The rational used to justify the requirements of off-site not consistent and unclear. 1 6.2 Total 16 100.0 Source: Field Survey 2005 (Developers, n=16) 178 6.5.2 The Appropriate Forms of off-site Infrastructure Provisions Developers are expected to provide infrastructure to serve the development or to contribute to provision in proportion to the scale of development. From Table 6.12, there are several types of planning contributions as recommended by both respondents, which are: - Financial contribution for existing off-site infrastructure improvement. - Donating land for off-site infrastructure facilities. - Existing road improvements (or provision). - Joint-funding to expand infrastructure. - Dedication of land for public use - Provide urgently infrastructure at the other sites - Constructing infrastructure improvements - Cash payment of constructing facilities - Provision of drainage system However, the main problem that constrained the private involvement has resulted from the improper practised of local planning authority as such unclear definition and insufficient information of the practice which suppose to be provided by local planning authority. 179 Table 6.12: The appropriate form of contribution of off-site infrastructure provisions Local Authority (n=22) 22 (100.0) Developer Donating land or easements at no cost for off-site infrastructure facilities. 22 (100.0) 16 (100.0) Existing road improvements (or provision). 22 (100.0) 16 (100.0) Joint-funding to expand infrastructure capacity to serve subsequent development in surrounding areas. 22 (100.0) 15 (93.8) Dedication of land for public use. 21 (95.4) 14 (87.5) Provide urgently infrastructure at the other sites. 18 (95.5) 12 (75.0) Constructing infrastructure improvements to meet the needs of the proposed development. 22 (100.0) 12 (75.0) Cash payment towards capital cost of constructing facilities or improvement (including commuted payment for construction of off-site parking space). 20 (90.9) 14 (87.5) Provision of drainage system. 20 (90.9) 11 (68.8) Other public building/facilities (e.g. community centre, public library etc.) 17 (77.2) 10 (62.6) Leasing of completed off-site infrastructure to local authority, or some other entity. 13 (59.1) 9 (56.3) Allowing public access and use of privately owned land and facilities. 5 (22.7) 10 (62.5) Selling land to a public authority at less than market cost for the purpose of off-site infrastructure facilities. 2 (9.1) 9 (56.3) Paying fees to public authority towards the cost of operating and maintaining public land or facilities. 4 (18.2) 3 (18.8) Provision of community buildings or facilities. 11 (50.0) 2 (12.5) Form of contributions Financial contribution for existing off-site infrastructure improvement. Source: Field Survey, 2005 (n=16) 16 (100.0) 180 6.5.3 Weaknesses of the Present Practice of off-Site Infrastructure Provision Many interviewed developers expressed concerns over the difficulty to promote private sector (developers) involvement in local infrastructure development due to unregulated-procedure. Developers also have the perception that the process of getting planning approval becomes complicated when it involves the requirement of off-site infrastructure provision. This is particularly evident in Table 6.13, where most developers experience the difficulty in dealing with off-site infrastructure provision due to improper structure of the present practice. The findings show that the main factors are because of no clear guidelines of the negotiation practice (37.5%) and the adhoc procedure applied whenever off-site infrastructure imposed (37.5%). Thus, combining what the developers felt, there are many weaknesses during planning approval when the proposed development is involved with off-site infrastructure requirement. The process is perceived to be time consuming by developers due to improper practice of negotiations. In addition to the above factors, about 25.0% of respondents agreed that there is lack of clear guidelines on the practice of off-site infrastructure requirements and most widely applied negotiations are inconsistent. Again Claydon and Smith (1997) observed that such practice is decretive in nature. The discretion in negotiating planning gain for off-site infrastructure is greater because it places decision-making beyond the carefully defined confines of the development control process. 181 In British planning system, among other factors, planning gain is to be sought only when meeting the following circumstances: i. When necessary; ii. It must be relevant to planning; iii. It must be directly related to the proposed development; iv. Fairly and reasonably related in scale; and v. Reasonable in all other aspects. Table 6.13: Weaknesses of the present practice of off-site infrastructure provision as observed by developers Frequency Percent% Have no clear guideline of negotiation practice. 6 37.5 No proper guidelines on the requirements of offsite infrastructure. Most LA applied ad-hoc procedures which some time create disputes among developers and local planning authority. 6 37.5 There is lack of clear guidelines on the practice of off-site infrastructure. However most negotiation methods widely applied was inconsistent. 4 25.0 Total 16 100.0 List of weaknesses Source: Field Survey 2005 (n=16) 182 The important fact to be stressed here is that based on the above findings, in the effort of local authority strengthening the practice of off-site infrastructure provision similar approaches that have been practised in British planning system can be considered. In the practice, development is permitted if the infrastructures required by local planning authority are adequately provided or where there is a firm undertaking or agreement to provide appropriate provision (Ache, P., 2003 and Hendrik, 2003). That institutional framework outlines the legal grounds for local authority to negotiate with developers to secure the provision of off-site infrastructure necessary for development to proceed (Ennis, 2003). 6.5.4 The Developers Perceptions on off-site Local Infrastructure Provision Requirements The availability of infrastructure is vital in the function of urban community. The lack of such would affect the well-being of residents. In order to fulfil the purpose, this has to be easily available (Ennis, 2003). However, such practice has emerged by many developers or land owners with the concern that the cost of infrastructure provision would affect the profitability of development. Most of respondents agreed that the requirements to provide off-site infrastructure would increase the development cost (see Table 6.14). This is supported by two in-depth interviews to conclude the above findings, which: Developer 1 stated that: ‘…development cost would increase, therefore it will consequently reduce the profit margin. Property prices become less competitive because there is a slight increase in development cost…’ 183 Then the developer 2 said that; ‘…the selling price of the development (project) which is required to provide off-site infrastructure would be increased accordingly. Subsequently, the selling price will be affected. Actually the marketing strategies become very tough if the initial selling price remain unchanged as there is additional requirements from approval authority in development cost …’ Table 6.14: The perceptions of off-site local infrastructure practices Local Authority (n=22) Developer (n=16) Development control process incurs additional development costs. 68.2 % 31.8 % Developers are required to provide off-site infrastructure as a return from additional approval granted to developers. 81.8 % 56.3 % The gradual improvement of off-site infrastructure would expose competitive market of the adjacent properties. 81.8 % 100.0 % Indirectly planning gain has being practiced widely in securing off-site infrastructure in most local authorities in Malaysia and however the practice was improperly practiced. 90.9 % 100.0 % Developers would provide on-site physical infrastructure and the public authority will provide off-site physical and other forms of infrastructure. 9.1 % 90.9 % Perceptions Source: Fieldworks survey 2005 184 Table 6.15: The problems faced by developers related to off-site infrastructure provision List of problems Related Yes No Total Some local authorities are inconsistent in considering planning permission for those projects involved with off-site infrastructure requirements. 11 (68.8) 5 (31.2) 16 (100.0) High percentage of fund/land has to be allocated for public amenities. 14 (87.5) 2 (12.5) 16 (100.0) Requirement to provide off-site infrastructure normally reflects the increase in development cost. 16 (100.0) 0 (0.0) 16 (100.0) Less commitment from developers due to the perceptions that traditionally infrastructure has long being provided by local authority. 4 (25.0) 12 (75.0) 16 (100.0) Developers find that the guidelines used by local authority to impose off-site infrastructure was not clear. 15 (93.8) 1 (6.2) 16 (100.0) Source: Field Survey, 2005 (n=16) From the study, there are several factors identified as commonly confronted by developers when their planning application is involved with the requirement to provide of off-site infrastructure. However, the extent of the problems may vary amongst local authority and the merit of each development. The appropriate approaches should be taken by developers and local authorities to solve the problems. Together with the limitation and the scarcity of financial capability the 185 current practice should be remedially shifted to private sectors (e.g. developers). Table 6.15 illustrates the main problems faced by developers. 6.6 Suggestions to Promote off-site Infrastructure Provision From the Table 6.16, the study has identified several approaches to promote the provision of off-site infrastructure. This can be summarised as follows: i. Introduce an attractive incentive. ii. Standardised the negotiation framework since its enables the both parties achieves a ‘win-win’ situation. iii. The infrastructure should be financed using a special fund generated by local authority. iv. Local authority needs to set up a special mechanism to expedite the planning approval of those projects involved with off-site infrastructure requirements. v. Negotiation for off-site infrastructure by developers should be initiated properly and transparently by a local authority. Based on these findings, it was also revealed that off-site infrastructure can also be secured through planning requirements such as using ISF (Improvement Services Fund) as provided under Section 132 of the Street, Drainage and Building Act 1974 (Act 133). Local authorities seek contribution from private developers through negotiation while considering planning approval. In return to the approved planning permission, the developer might offer something to local authority in the form of ‘contributions’. The contents of the contribution would be as what has been 186 ‘agreed’ upon the approval. The process of securing benefits (e.g. off-site infrastructure) normally is enshrined between developers and local authority. The findings also show that more developers adopted negotiations as an effective approach to obtain fast-approval when dealing with off-site infrastructure. Negotiation had been identified as the most successful and agreeable method to secure off-site infrastructure from private sector. The practice to capture public facilities in a strong property market was successfully negotiated from private developers during planning approval stage. There are several perceptions upon this matter. The in-depth interview with few outstanding developers revealed the following opinions. Developer 1; ‘...introduce an attractive infrastructure contribution scheme out-site of proposed development location. This might be applicable for proposed development located in the area where already adequate numbers of infrastructure have…’ Developer 2; ‘…local authority should initiate private developers to sign planning agreements on the purpose to require private developers to provide offsite infrastructure facilities in return of additional planning approval (e.g. Unilateral Undertaking)….’ Developer 3; ‘… local authority should have Infrastructure Priority Lists (IPL) used as check-list when they enter the negotiation of infrastructure requirements with private developer….’ 187 Developer 4; ‘… developer should be encouraged to provide other infrastructure which needed in the surrounding development area. Subsequently the local planning authority should reasonably ‘entertain’ developers by facilitating the proposed development as far as it’s allowed under prescribed legislations…’ Developer 5; ‘… some new developments could generate the ‘development impact’; therefore there is a need for local authority to impose extra charges (e.g. Development Impact Charge) for the use of infrastructure to reflect the use of resources…’ Developer 6; ‘…. developers should be allowed for maximum development in order to cope with the increased cost of development if the developer is willing to provide off-site infrastructure. However, the exercise must comply with other requirements…’ 188 Table 6.16: Suggestions to promote off-site infrastructure provision Suggestions Introduce an attractive incentive (e.g. ‘Fast-Track’ approval at planning stage). Developer Local Authority (n=22) (n=16) 100.0 100.0 Standardised the negotiation framework since its enables the both parties achieves a ‘win-win’ situation. Therefore, local authority should introduce a transparent method of developer’s contribution (e.g. planning agreements). 100.0 100.0 Off-site infrastructure should be financed directly out of general tax revenues. 13.6 68.8 Off-site infrastructure should be financed using a special fund generated by local authority (e.g. ISF provided , Act 133). 100.0 100.0 Off-site infrastructure should be financed by project owner (e.g. developers). 31.8 - Off-site infrastructure should be financed by both parties; developer and local authority. 100.0 56.3 The user of infrastructure might be charged and the revenues collected charges should be deposited into the so called ‘infrastructure fund’ then to be spend accordingly. 100.0 56.3 90.9 100.0 The cost incurred in providing off-site infrastructure should be shared with other utility bodies and should not be a burden to developers only. 95.5 100.0 The ‘size’ of infrastructure should be quantified from the ‘development impact’. 86.4 50.0 Negotiation for off-site infrastructure by developers should be initiated properly and transparently by a local authority. 100.0 93.8 There is a need for private sector to participate in off-site infrastructure provision to reduce the cost on public sector. 100.0 Local authority needs to set up a special mechanism to expedite the planning approval of those projects involved with off-site infrastructure requirements. Source: Field Survey, 2005. 25.0 189 6.7 Existing Perceptions on the Appropriate Type of Delivery of off-site Infrastructure Provision The local authority may adopt any type of infrastructure delivery, however with the appropriate utilisation of type of infrastructure delivery it could reduce the cost of providing infrastructure. The limitations of funding forced local authority to identify appropriate type of delivery in infrastructure provision. By referring to Table 6.17, four methods of private involvement might be appropriate of delivery for local authority to acquire off-site infrastructure from private sector. These include service/management contract, least contract, Public-Private Partnership (PPP), Joint-Venture (J.V) and privatisation. However, most respondents (local authority and private sector) strongly agreed that such infrastructure can efficiently be secured via Planning Approval System. Service or Management Contract –the private sector will be awarded the contract to maintain the local infrastructure instead of which is currently conducted by local authorities. This type of delivery is suitable for local road maintenance, drainage, landscaping, recreational facilities, parking facilities, incinerator plant, maintenance of public utilities and public amenities. Lease contracts are frequently used for the provision of standalone recreation and cultural facilities and maintenance of pubic amenities. These are usually short to medium term arrangements with the private operator accepting components of commercial risk and with council retaining capital expenditure responsibilities. However, for Joint-Venture (JV), under this method there are few appropriate infrastructures to be delivered, these include recreational facilities and provision and maintenance of public amenities. The local authority can go on JV basis with the private sector to build and operate the local infrastructure and services facilities. Based on the findings, partnership concept which comprises of PublicPrivate Partnership (PPP) and Private Finance Initiative (PFI) has a potential 190 alternative for the both parties (government and private) to be used in local infrastructure provisions. Through this method enables the government to secure service rather than the ownership of the asset and enables the public to obtain a good service and proper maintenance of the services. However, the more intensive methods of private sector financing such as Build-Operate-Transfer (BOT) schemes are very rarely applied in this country. Table 6.17 revealed that the method is normally suitable for provision of highly technical infrastructure such as incinerator plants, amenities and public utilities. Based on the literature in previous chapters, local authority could benefit from the involvement of private sector in (e.g. Service / Management Contracts, PublicPrivate Partnership (PPP), Private Financial Initiative (PFI), BOT Schemes, Joint Ventures and Full Privatisation). Such practice is capable to provide higher responsiveness of private sector and improves the quality of services and also helps to ensure that essential infrastructure development continues even government continuously tightening the relevant measures. Sewerage etc.) Maintenance of existing off-site infrastructure Other public amenities (e.g. Market etc.) Other public utilities (e.g. Betterment of existing local infrastructures Parks, gardens or open space Incinerator plants Parking facilities Recreation facilities Landscaping Drainage Local road maintenance Construction of new local roads Type of off-site infrastructure delivered Type of delivery - LA - 10 62.5 11 68.5 13 81.8 11 50.0 13 59.1 18 81.8 - 12 75.0 11 50.0 - - - - 10 45.5 15 68.2 - - 13 81.3 - 2 12.5 13 81.3 - - 12 75.0 - - - - - - D 10 45.5 - - - 14 87.5 - - - - - LA - - - - D Lease Contracts 17 13 77.3 81.3 13 11 59.1 68.8 9 15 40.9 93.8 15 11 20 68.2 68.8 90.9 22 16 100.0 100.0 12 10 54.5 62.5 15 12 18 68.2 75.0 81.8 - D Service/ Management Contract LA Public-Private Partnership (PPP) - 8 36.4 12 54.5 - - 13 59.1 - - - - - - LA - 3 18.8 11 68.8 - - 9 56.3 - - - - - - D BOOT, BOO or BOT (Schemes) - - - - - - - - - - - - - - - - - - - - - - - - D Concession/ Franchise Agreements LA - 14 63.6 - - - - - 12 54.5 - - - - LA - 12 75.0 - - - - - 11 68.8 - - - - D Joint Venture (JV) Developer (D) n = 16 Source: Field Survey, 2005 Note: Local Authority (LA) n = 22 D 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 16 100.0 Public Sector Delivery LA 21 95.5 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 22 100.0 - 19 86.4 22 100.0 - - 8 36.4 12 54.5 15 68.2 - - - - LA - - 13 81.3 - - 11 68.8 11 68.8 12 75.0 - - - - D Full Privatization 16 72.7 16 72.7 22 63.6 - - 16 72.7 - - - - - - 10 62.5 10 62.5 8 50.0 10 62.5 3 18.8 - - - - - - D Private Finance Initiative (PFI) LA Table 6.17: Local authority and developers’ perception on the appropriate type of delivery of off-site infrastructures 191 - 22 100.0 22 100.0 21 95.5 22 100.0 - - 16 100.0 16 100.0 15 93.8 1 6.3 - 16 100.0 16 100.0 16 100.0 16 100.0 22 100.0 22 100.0 22 100.0 22 100.0 D 16 100.0 Planning Approval System LA 21 95.5 191 192 6.8 Conclusion of the Chapter The data gathered from the fieldwork is used to answer the research questions. The chapter also generates grounds of suggestion for the improvement of the current practice of planning approval through incorporating the element of negotiation. The chapter also discusses the possibility to use planning approval to secure off-site infrastructure, a problem faced by the respondents at the planning stage. For the field survey interview, the collected data is analysed using descriptive analysis through the software program Statistical Package for Social Sciences (SPSS). The chapter reveals the problems pertinent to off-site infrastructure provision through obtaining planning approval. It goes on to study the perceptions of local authorities and developers on the possibility of using planning approval to secure off-site infrastructure from the private sector. For many years local authorities have secured on-site infrastructure to serve new developments using planning approval, however not much effort has been made to identify the possibility to use planning approval to secure off-site infrastructure from private sector (developers). The limitation of funding available for local authorities to provide such infrastructures has left the authorities with few options, other than private sector. The main findings of the study indicate negotiation to be the most effective method to acquire infrastructure from private sector at planning approval stage. The findings reveal that when the necessary infrastructure could not be provided by a planning condition, it would be more effective to secure it by negotiation. If infrastructure is secured in pace with the development, agreement alone may suffice. More commonly, conditions are required to be imposed. Development need not be a remedy to all deficiencies but nor should a developer expect the local 193 planning authority to grant planning approval that complicates matters. The practice depends on the institutional framework of planning approval as extensively framed by legislations. As agreed by many respondents, the development plan system plays a significant role in coordinating new development with off-site and on-site infrastructure provision. Most developers agreed that the practice of negotiation for planning contribution should be allowed, even if against the fundamental principles of planning. However, the basis for seeking contributions to facilitate off-site infrastructure provision from new development must be clearly established by local authorities. Yet, the involvement of private developer in local development must be given prime consideration. Too much demand from private sector is not healthy for local development. It would create insecurity for investment. Developers are driven by the demands of the local property market. As a business entity, the developer will only enter the market if the project is feasible or there is a potential gain. Generally, the respondents who represent developers have the same opinions in terms of development with some differences in guidelines or procedures dictated by local authorities at the planning approval stage. CHAPTER 7 PROPOSED IMPROVEMENT OF OFF-SITE LOCAL INFRASTRUCTURE PROVISION 7.1 Introduction In this chapter, the discussion aims to develop an improvement on the present practice of local infrastructure provision. The chapter elaborates the practices of local infrastructure provision based on the research findings in the previous chapters. The discussion will accordingly answer the outlined research objectives. 7.2 Discussion on the Key Findings 7.2.1 The Present Practice of Local Infrastructure Provision The rapid increase of population demands for adequate infrastructure. In order to fulfil the requirements, the involvement of private sector (developers) must be given prime consideration. However, too many conditions being imposed on the private will discourage the private sector investments. It creates insecurity for private sector to invest in local development. This could happen because with the nature of private investments, they only enter the market if they’re feasible and not involving much procedural problems. Therefore, the procedural aspects in 195 obtaining development approval should be given prior consideration by the local authority, particularly at the stage of considering planning approval applications from private sector. The authority must facilitate the need of private sector without giving less priority to the local residents in terms of quality local facilities. The findings reveal several methods of infrastructure delivery applied at the local level. The tendency of developer to contribute off-site infrastructure is mostly influenced by the development cost. This occurs because local authority may use power of negotiation in dealing with private sector to secure the required facilities. The findings show that most off-site infrastructure provisions had been delivered through complete public sector delivery and only realised in large-scale development. Notably, most projects imposed with off-site infrastructure provision are those with large scale development and the contribution is proportionate to the size of the project. In fact, there are several other forms of private provision such as the use of planning contribution and planning requirement. The use of these two is very limited and it was found that local authority widely used private sector financing. However, this situation is applicable to all types of infrastructure delivery as well as to the less effective methods, such as concession/franchise agreements, Publicprivate Partnership (PPP) and Private Finance Initiatives (PFI). Another method applied by private sector is Built-Operate-Transfer (e.g. BOT, BOOT or BOO). The findings show that the shift from public to private delivery of off-site infrastructure is mainly due to the ability to raise the necessary financial resources to facilitate the increase of local infrastructure provision. The study also found that the availability of adequate off-site infrastructure is an important criterion in the determination of project location. It can be concluded that the sites which are readily provided with infrastructure are more preferable to developers in determining the location for development. The findings are supported by Claydon (1996) where many developers had considered areas 196 with less possibility to be imposed with off-site infrastructure as priority and even treated as priority in negotiating the infrastructure provisions with local authority. Based on the analysis in the previous chapter, the present drivers of the provision of off-site infrastructure can be summarised and ranked as follows; i. To fulfil the planning approval requirements as imposed by local authority. ii. Used as a marketing strategy. iii. To increase the profit margin of the development by proper planning of off-site infrastructure provision. iv. To fulfil as part of corporate social responsibility. v. As long term investment of capital and corporate image, and vi. To enhance land and capital value. 197 7.2.2 The Application of Planning Approval System to Secure Infrastructure Provision The mechanism applied to secure infrastructure from developers is the reflection of the institutional framework in which it operates. Planning approval process is a legitimate process involving a comprehensive review of planning system requirements during the planning approval stage. Therefore, town planners and developers shall be equipped with the related skills and knowledge, such as negotiating private contributions (advocacy planning), obtain planning approval with complicated planning conditions and be more creative in offering planning contributions which contributes to positive impact to the local development. There are three methods frequently applied by local authorities to expedite planning approval with regards to off-site infrastructure requirements. The study found that one of the most efficient methods to monitor the planning application is by setting up a One-Stop-Centre. It enables to facilitate all the disputes arising between local authorities, technical departments and developers. The findings also indicate that the firm whose town planner is well versed in planning is in advantage to deal with planning matters and this helps the firm to expedite timeframe obtaining planning approval. Another significant finding is the key success in local infrastructure provision through planning negotiations. Since the private sector holds the financial capacity to bring local development and the local authority holds the institutional framework in term of planning approval, therefore the local authority have much opportunities to secure the appropriate infrastructure (off-site) from the private sector. 198 7.2.3 The Problems Faced by Local Authorities and Developers to Secure off-site Infrastructure Provision Based on the findings, the main problems faced by local authorities are the scope of definition for “off-site infrastructure” and the concern of developers over the additional cost incurred and borne by developers. Most interviewed local authorities expressed their concerns over the difficulty to promote private sector in local infrastructure development due to unregulated-procedure which is involved with off-site infrastructure provision. The problem resulted from the improper practice by planning authority. The main factor contributing to these are unclear guidelines of the negotiation practice and the ad-hoc procedure applied. By considering cost as the main determinant for the viability of development, developers have the perception that the ‘contents’ of planning approval directly contribute to the development cost. The cost of providing off-site infrastructure is comparatively high. Planning approval might indirectly influence the distribution of private investment at the local level. The key issues are the problems faced by the developers in co-ordinating and financing infrastructure provision and how these problems affect the developers’ strategies with respect to the project location. Another question is that how local authorities are able to ensure the adequate infrastructure provision prior to granting the planning approval. The delay at planning approval stage is among the most critical parts in planning system and this particularly remains the concern of planning authorities particularly those involved with off-site infrastructure requirements. As far as the developers are concerned, the authority has to adopt the appropriate measures to eliminate the problem. The main concern of developer is to obtain rapid approval. In obtaining approval, time has long been recognised as among the major obstacles in property development in the country. However, the problems still persists. As far as developers are concerned, most local authorities look at the problem as their main responsibility to expedite the 199 planning approval process. The study identified several issues and problems pertaining to off-site infrastructure provision, such as: i. In most cases off-site infrastructure requires a lot of amendments in the planning application. This occurs if in the present practice there is no pre-discussion initiated at the early stage of the development, either by local authority or private sector. ii. Most local planning authorities practice inappropriate procedures on off-site infrastructure provision which often creates disputes among applicants (e.g. developers). iii. Without a clear and structured procedure, such practices would prolong the period of obtaining the planning approval and subsequently increase the development cost. iv. Due to unavailability of a structured procedure, the development cost has to be increased simultaneously because the developer is only informed of the requirements once the planning application is considered by local planning authority. However, in some countries (e.g. UK) the planning system itself initiates pre-discussion upon submission of plans. v. Strict planning application procedure imposed by local planning authorities with regards to off-site infrastructure requirements. In most cases such requirements are imposed to mitigate the expected environmental consequences (e.g. traffic congestions, inadequate of drainage, public utilities and public amenities). vi. Poor co-ordination between relevant technical departments. 200 vii. Less commitment from developers due to the perception that traditionally local authority has to provide such requirements. viii. Great bureaucracy in the process. ix. Inability to fulfil requirements due to cost implications. x. The guidelines used are not clear and inconsistent between local planning authorities. xi. Lack of information on off-site infrastructure practice. xii. Inconsistency of the said practice among local authorities. This part summarises the problems pertinent to off-site infrastructure provision faced by local authority and developers at planning approval stage. However, the extent of the problems may vary amongst local authorities and the merit of each development. These problems have to be addressed because the authority is no longer capable to provide infrastructure in order to sustain the local economy. Due to the scarcity of local financial capacity the current practice should remedially shift to the private sector. 201 7.2.4 The Perceptions of the Possible Mechanisms to Secure off-site Infrastructure The findings revealed that the responsibility to provide off-site infrastructure fall under the mutual responsibility of both the private and public sector. Local authority receives contribution from private developers under several current mechanisms. These include the development charge, service charge, Improvement Service Fund (ISF under Act 133), public-private joint development. Although such practice is not favoured by many developers, however, they have no choice since the practice is a legitimate process. Nevertheless, there are few developers who really bear the responsibility of private sector involvement in local infrastructure development. Another point of view is that there are developers agree that the practice by which contribution is obtained from developers should not be allowed. The practice is alleged as against the fundamental principles of planning where the planning approval cannot be bought and sold. The practice requires developers to bear all the cost to provide off-site infrastructure. Planning approval system is applied to secure appropriate level of infrastructure (off-site and on-site) to serve new development. The system is considered as one of the means available to secure adequate level of required infrastructure, either in the form of built facilities or financial contributions. Therefore, the basis for seeking contributions to facilitate off-site infrastructure provision from new development must be clearly established by local authorities. The study revealed that private developers are keen to accept the negotiation approach as the most appropriate and effective way that benefits offsite local infrastructure from private developments. The findings were supported by Sagalyn (1997 and Healey (1996), where negotiations had been considered as an effective method to secure off-site infrastructure. Local authorities seek contribution from private developers through negotiation while considering 202 planning approval. It is further known that off-site infrastructure can be secured through planning requirements such as through ISF (Improvement Services Fund) as provided under Section 132 of the Street, Drainage and Building Act 1974 (Act 133). The findings show that more developers had adopted negotiations as an effective approach to obtain fast-approval when dealing with off-site infrastructure. However, in the actual practice of negotiation, there is a bargaining position on both sides such as enhancing the values by deregulating from approval authority against infrastructure provision of the private sector in return. From the findings, in the return to the planning approval, the developer provides something to local authority in the form of ‘contributions’. The contents of the contribution would be as what has been ‘agreed’ as the approval. This can be revealed by two perceptions from the interviews on developers upon this matter: Developer 1 ‘…private developers and local planning authorities (LPAs) are very keen on off-site provision through the concept of ‘planning obligation’ and not ‘planning gain’ which is claimed by many developers as the abuse of public rights…’ Developer 2 ‘… negotiation of planning contributions is about the ‘willingness’ and ‘not forcing’ developers to provide (to contribute) off-site infrastructure to local authorities in exchange of additional development approval…’ 203 The study also identifies a few types off-site infrastructure which are urgently needed by most local authorities which should be provided by private developers. These include the drainage system (monsoon drain), parking, recreation facilities, and betterment of existing local infrastructure, public utilities and public amenities. As discussed previously, planning approval ensures developers to provide adequate infrastructure as prescribed in the development plans. There are several types of off-site infrastructure that can be sought during planning approval, they are as follows: i. Paying for the provision of other infrastructure or public services; ii. Provide the appropriate infrastructure to mitigate the identified development impacts; v. To pay the compensation of the identified development impacts; and vi. Recovery in increase in the value of land on the grant of planning approval or betterment. However, the requirements are only permitted for a few types of infrastructure and fulfil the following characteristics: i. Critical infrastructure. ii. Relevant to planning. iii. Directly related to the proposed development. iv. Reasonably related in scale and quantity; and v. Reasonable in all other aspects (e.g. environmental mitigations). Developers strongly believe that the constraints can be avoided if the procedure is defined clearly. Moreover, several developers also claimed that the main problem is caused by the rationale to justify the requirements of off-site infrastructure, inconsistent between local authorities. 204 The following summarises several findings about the suggestions to expedite planning approval which involves with off-site infrastructure. i. Technical departments require a list of infrastructure by each individual department. ii. Having one-stop centre to monitor the requirements of planning approval process iii. Setup up SPEAD committee consisting of Surveyor, Planner, Engineer, Architect and Developer to expedite the planning application. 7.2.5 Summary of Findings Planning approval is essentially a process in co-ordinating and allocating of activities. The mechanism that had been identified was an acceptable method to acquire off-site infrastructure provision from private sector. However, the negotiation would be the most appropriate method to deal with the affected developers since the method is widely accepted by the developers. Furthermore, development plans have played a significant mechanism in coordinating new development with adequate provision of infrastructure (off-site and on-site). Planning approval is only given if the conditions imposed by local authority are fulfilled since the approval shall be made according to such gazetted development plans. The new development requires bearing the cost of extra services and community facilities where appropriate. In order to strengthen off-site infrastructure provision, the institutional framework should outline the legal ground for local authority to negotiate with developers to secure the infrastructure necessary for development to go ahead. 205 7.3 The Key Issues of off-site Local Infrastructure Provision The analysis in Chapter 6 revealed some of the key issues pertaining to off-site infrastructure. These are summarised as follows: i. Currently, the local authorities in Peninsular Malaysia are extensively outsourcing the financial requirement for infrastructure provision from public funds. However, the financing from private sector is limited to Joint-Venture, Municipality Bond and BOT. At present the involvement of private sectors only concentrated in infrastructure delivery, such as Service/management contracts and Lease Contract. ii. The results indicate that large local authorities are more likely than small local authorities to have private sector involvement. Once again, this is due to the lack of incentive and inability of the local authorities to manage the risk sharing arrangements across the local authorities. However, qualitative findings indicate that those local authorities located in remote areas receive less involvement of private sector in local infrastructure. Therefore, if there is no immediate reform in local infrastructure provision mechanism the private involvement will remains concentrated in major urban areas. This however would further deterioration the quality and quantity of infrastructure in less developed areas. iii. Various factors have driven the push for private sector involvement in the provision of local infrastructure. These include lowering the cost and improving the quality of infrastructure service delivery, bringing forward investment and other objectives such as: economic development, access to private sector capital ‘options’, use of private sector skills, minimising council risk and broadening the scope of services. 206 vii. In the vast majority of local authority experiences with the private sector, the private sector has performed better than or equal to expectations. Moreover, these perceptions are the results of a long term private sector contact, and not just a once off transaction. Another significant finding is that the local authority needs a list of long term public utilities and amenities projection within its jurisdiction. The lists of infrastructure will be useful for the local authority to negotiate any infrastructure from developer once planning application is considered. This is useful to developer to review his proposed development or to minimise the costs of provision. Normally, all interested parties have experienced conflict in their differing assessments of the cost of providing infrastructure. Nonetheless, there was concern over local authorities who were attempting to extract unreasonable contribution from developers. There are complaints from developers saying that local authority simply reviews their planning application and requires developers to provide or pay for the facilities. The dispute raises debate between local authorities and developers on the difficulties in formulating the charging mechanisms. This happened because the guidelines had been formulated without consulting the private sector (Hodge and Cameron, 1989). Involving private sector would encourage it to view the concerns over the content of the guidelines. In fact the approach indirectly strengthens the involvement of private sector in the local development. This research, ultimately culminating in an improvement of recommendation for local authority, look towards establishing a new balance approach to the provision of local infrastructure, ensuring efficient and effective service provision and contributing to economic growth. Development at local level should ensure a balance of public and private sector approaches, complemented by transparent and effective local policy. 207 7.4 Towards the Improvement of Local Infrastructure Provision System Development of local infrastructure which covers several types of infrastructure such as local road, sewerage, drainage system and waste management was focused on capacity expansion through integrated and coordinated planning to ensure the availability of the facilities to meet the demand. Infrastructure provisions require a supply-driven approach to adopt and encourage the participation of the private sector. The instability of local authority would affect the implementation of major infrastructure projects by the private sector. As a result, the government have to provide financial assistance for the completion of these projects in order to ensure other sectors in the economy is not affected. As revealed in the Ninth Malaysian Plan (9MP, 2006-2010), the strategies are emphasised to enhance efficiency of the existing facilities. The provision of local infrastructure is made to increase coverage and improve the quality of local community. In order to strengthen their revenue collection, local authorities have been encouraged to diversify methods of collection and adopt new methods of private financing such as Public-Private Partnership (PPP) and Private Finance Initiative (PFI). In addition, local authorities are encouraged to incorporate innovative methods to increase revenue to reduce dependency on public funding options and moving towards self-financing in the long run. Therefore, the attempt is to outline the framework of planning approval process by incorporating the various potential components from the research to the proposed improvement of the present local infrastructure provision system. 208 7.4.1 The Conceptual Framework of the System From the previous chapters, the main problem of local infrastructure is always associated with inadequacy of funds. Given this fact, any mechanism to be put forward should be able to consider all significant attributes towards efficient local infrastructure provision. By referring to Figure 7.1, there are two main features of the system that has been identified and should be incorporated in the planning approval system, these are: i. Adopting the present related legislative framework of planning system (planning approval system) to recoup the direct costs from beneficiaries (e.g. private property developers) rather than through general taxation; ii. Maximising cost recovery from beneficiaries within the budget and expectation of the respondents. As discussed in the previous chapters, during the planning approval stage the local authority may initiate some adverse-offers from developers – local authority negotiation or negotiate for additional planning approval from developers to facilitate local infrastructure provision. Normally during the negotiation, local authority will be offered by developers’ preferable items to be considered as developer contributions from the negotiation. Under the present practice, local authorities are not allowed to impose excessive requirement since it is not stated in related acts. 209 Maintenance grant Grant based on economic development Loan Repayment Loan Grant Issuing Municipal Bonds Revenue growth grant Joint-Venture Infrastructure Existing Infrastructure projects projects infrastructure (new) (new) B.O.T Service or Management Contract Note: 1. By assuming that infrastructure project constructed by local authority 2. Local authority can secure infrastructure through negotiation upon the approval of planning permission (subject to the size of the proposal developments). Indicators: The Key Flow of income to local authority Flow of expenditures from local authority Flow of income/financial sources from state/federal government to local authority Figure 7.1: The practice of local infrastructure procurement (funding and delivery system) in Malaysia Direct Federal allocation for project construction Authority Local equity (Construction expenditures) Maintenance (See also figure 4b – 4c) Direct involvement of private sector. (Refers note 2 and figure 4a). Infrastructure projects (new) Direct state budget for infrastructure construction Loan Repayment Loan Grant State Government Local Authority (As executing agency) Infrastructure secured by development control method. 7. Loans 6. Parking lot fees, plans fees, interest receivable and other miscellaneous items. State road grant Federal Government Revenue collected by local authority 5. Services charges/ Government grants Loan Repayment Loan 4. Improvement Services Fund (ISF) e.g. The fund allowable to be used for building or maintenance of existing local infrastructure. 3. Rentals 2. Licences fees 1. Real property tax or assessment Sourcing funding from external/internal fund borrowers (e.g. Asian Development Bank, Local banks etc.) 210 The system is outlined in such a way to avoid local authority facing direct financial implications and the risks of investment as shared by many parties if the fund is sourced from external institutions. However, before the system could be effectively adopted by local authorities, a few changes are needed to meet the local conditions. The system suggests the funding should come from the external financial institutions such as Asian Development Bank. To avoid the problem it is suggested that the funding should be sourced from multi-sources. The system also incorporates the use of municipality bonds as one option to finance the infrastructure provisions. The public are encouraged to buy these bonds since the bonds generate a stable annual rate of return. As long as each additional project brings net revenue to the local authority then the project can be financed by issuing bonds to public. It is a form of loan from the public and promises a return for lending their money when the bond matures. 7.4.2 The Components of the System Based on the previous analysis, the planning approval can be applied by local authority to secure off-site infrastructure from private sector. The following findings provide the ways how planning approval system might be applied to secure infrastructure from developers (private sector); i. Securing infrastructure via negotiations: From the study most respondents strongly agreed that infrastructure can be secured via planning negotiations from private sector at planning approval stage. They added that through such approach the developers may reduce the financial burden if such requirement is imposed during hard times. Healey et al. (1996) also observed that many developers preferred to negotiate in fulfilling the required infrastructure instead of local 211 authority imposing immediate requirements without considering the developers ability. ii. Promoting and regulating a proper planning approval system which involves off-site infrastructure: Currently most local authorities apply ad-hoc procedures and respondents agreed that local authorities should provide proper guidelines enabling them to apply the planning approval to secure infrastructure. The rationale is to detail restrictively both good and bad practices, and clarifying the actual concepts of planning approval to secure infrastructure. iii. The practice of negotiating off-site infrastructure retains high level of public confidence. Therefore, negotiating process should be based on the fundamental principle that the ‘planning approval may not be bought or sold’. iv. Planning approval ensures an adequate level of infrastructure from the new development. Planning system also delivers appropriate facilities, either in the form of built facilities or financial contributions. The basis for seeking contributions from new development must be clearly established and legitimately grounded. However, such practices should be pre-discussed among all players before it came into effects. v. Detailed guidance of planning approval which involves off-site infrastructure requirements enables to spell out at all stages involved. In assessing how infrastructure should be provided from different types and scales of development, the guideline may provide a useful guidance to the developer to identifying the requirements of off-site infrastructure at the earlier stage of development. The new development referred to LPA is required to evaluate the level of reasonableness before it can be imposed with off-site requirements. This requires LPA to establish an institutional framework to guide the negotiations between local 212 authorities, developers and others infrastructure providers in order to fulfil the requirements. 7.4.3 Incorporating Planning Approval and Negotiations Process The outcome of the study revealed that the developers have reacted positively on the need to provide infrastructural facility to remedy the impact of the proposed development prior to planning application approval. Based on this study there is a need for the local authority to restructure the present procedure by incorporating the private sector as local development partner. This approach can be implemented by promoting negotiations as a part of approval approach in planning approval process. The practice should also incorporate as many private financing options such as Built Operate Transfer (BOT), Public Private Partnership (PPP), Private Finance Initiatives (PFI) or issuing Municipal Bonds to raise the capital needed to finance the provisions of the local infrastructure. Such practices will enable local authorities to reduce dependency on public funds. Basically, local authorities are able to finance their projects by way of bonds, so long as the projects generate positive marginal revenue to the local authority. Figure 7.2 outlines the system which formulated in such a way in order to integrate planning approval to have direct to private infrastructure delivery options. By referring to Figure 7.3, during the consideration of planning approval, it is actually undertaken by a team of planning officers in the local planning authorities. In the proposed system, they act to advise planning committees on the matters of off-site infrastructure requirements. The narrated process is based on the research findings. The application, as advised by their planning consultants, is decided by negotiating with the planning authority in advance of the submission of an application. This demands extensive involvement from within the local planning authority and several other technical departments. Normally the process reaches the 213 final decision by finalising the type of infrastructure required and the method of delivery. The whole process is relatively straightforward and subject to amendments on details as decided by the authority. The process also illustrates the representatives of other service providers such Syarikat Telekom Malaysia (STM), Tenaga Nasional Bhd. (TNB), private water suppliers such as Syarikat Air Selangor (SYABAS), Pihak Berkuasa Air (BPA), Indah Water Konsortiun (IWK) and many other public or private infrastructure providers. These are coordinated within the local authority areas in planning approval system. The Figure actually illustrates the passage of planning applications through negotiating process. Normally, the developer is offered to enter for negotiation if the planning application is subject to the provision of off-site infrastructure and however, for those planning applications not affected by off-site provisions, the application will be treated through ordinary process. Referring to Figure 7.3 and Figure 7.4, based on the suggestions received from both respondents, there is a possibility to incorporate the negotiation components in the planning approval system. This enables the local authority and developer to determine, identify and negotiate in order to fulfil both requirements. Such practices enable both parties to achieve a negotiated level of gain where local authority obtains off-site infrastructure then the developer may be granted with additional bonuses such as increases in number of story or waive of some financial contributions. Full Privatization Joint Ventures Concession / Franchise Agreements BOOT, BOO or BOT Schemes Private Financial Initiative (PFI) Public-Private Partnership (PPP) Lease Contracts Service / Management Contracts State Government Federal Government Via Negotiations Process (list of ‘adverse-offers’ User Charges (Utility Charges / Direct User Charges Mandatory Planning Requirements Taxes (General Rates / Special Rates / Differential Rates / Separate Rates Joint Ventures Full Privatization Private Financial Initiative (PFI) Concession / Franchise Agreements BOOT, BOO or BOT Schemes Public-Private Partnership (PPP) Lease Contracts Service / Management Contracts List of adverse-offers by private developers Development Contributions / Infrastructure Charges Development Approval Process (Development Control System) Internal Funding Figure 7.2: Local authority infrastructure provision (off-site and on-site) funding and delivery mechanisms Taping funding from external/internal fund borrowers (e.g. Asian Development Bank , ADB; Local banks etc.) Issuing Municipality Bonds Loan Traditional Public Contracting Direct Public Funding Grant Grant Indirect Private Financing Loan Loan Direct Private Financing Loan Repayment Loan Repayment Loan Repayment External Funding Local Authority Infrastructure Provision Delivery and Funding Mechanisms 214 214 215 Local Authority Applicant/s (submission through qualified town planner) (Planning Department) Technical Committee Departments Planning applications will be reviewed by numbers of technical departments Town and country Public Works Planning Department Department Mineral and Land Malaysia National Drainage and Telecommunication Electricity Irrigation Department Company Company Department Normal procedure of planning approval Planning Department (Receive technical comments) Environmental Department Checking by Planning Department Health Department Technical Department Committee Meeting (Planning guidelines checklists) (Review panel) or Correction & Amendments Tendency of infrastructure provision by public sector Preferred to enter negotiation for infrastructure provision Pre-negotiation of the terms to be offered or required by local authority/developer Agreed with the terms of negotiation Not agreed Tendency of infrastructure provision by privates sector - Metropolitan open space - Community Services - Community Hall - Pre-School - Neighbourhood Centres - Public Library - Open Space - Recreations and Cultural Facilities - Public Transport - Local Roads - Local Parks - Water Treatment Plants - Local Parks - Water supply - Sewerage treatment plants Range of infrastructure categories might be offered/required during negotiations (based on study’s findings) Negotiating the detail of infrastructure will be offered and the mode of delivery The offered items will be bind in form of planning agreements (e.g. unilateral agreement) Disapproved Applicant/s Planning Approval issued to the applicant Approved Full Council Meeting K.I.V Figure 7.3: Proposed integration of planning approval and negotiation process of local infrastructure (Source: Formulated from research finding) 216 Stages Pre-application Consultation Recommendation /decision Revised application Recommendation /decision Activities involved Extensive meeting / discussion among technical departments, planner, architect and local authority. Limited importance because of extent of pre-application negotiations Defer subject to more detailed negotiations, but acceptance in principle Further negotiations between developer and local authority Approval Figure 7.4: The negotiations process during planning approval stages (Source: Compiled based on research findings) For many planning applications, negotiation occurs at the point of initial contact between the applicant and planning authority (see Figure 7.4 and Figure 7.5). The scope of negotiation takes place at this pre-submission varying considerably according to the character of the proposal. Following formal submission of the planning approval applications, a series of parallel processes occur which may involve negotiations with several other parties which are involved in the project. These might include the applicants (developers), owners of the adjacent lots, consultants, representatives of public or the interest group of the project and the planning department. 217 By the pre-application, the applicant will be given a proper explanation regarding how planning approval will likely proceeded if the proposed development is subject to off-site infrastructure requirements. The local authority will notify applicants of the infrastructure requirements. The suggestions to improve the planning approval system which involves negotiation procedures to acquire off-site local infrastructure provision from private sector is summarised in Figure 7.6. 7.4.4 Incorporating Private Delivery Methods in Local Infrastructure Provision The provision of local infrastructure can be more efficient using the private delivery methods. The advantages of these methods are the ability to share investments, risks, rewards and responsibilities between the public and the private sectors. Some projects that had been implemented using the traditional method of delivery have not been successful due to the unstructured allocation of risk between the private sector and the public sector. However, with proper structure of implementation of privatisation (e.g. Public-Private Partnership or Private Finance Initiative) the government is able to lead the approach which benefiting the both parties and particularly public who the user. Take for instance the countries of Australia, Ireland, Netherlands and Canada which have successfully implemented the infrastructure provision using private involvement such as Public-Private Partnership (PPP). Meanwhile in the British local authorities, the provision of local infrastructure provision (off-site and on-site) was intensively obtained from private sector. By looking at the experience from various countries, Malaysia’s local authorities are urged to be more selective in local infrastructure provision due to the fact that not all projects appropriately can be implemented through such partnerships. In Malaysia, the private involvement is being touted as an alternative approach for local authority to secure infrastructure for the 218 next generation of public facilities likes local road maintenance, urban services provision and maintenance. In Malaysia, budget constraint is serious. The government has stated the intention to reduce its budget deficit and that inevitably results in the shelving of some infrastructure projects. The scenario has forced local authorities to look at how to involve private sector in local infrastructure provision. Based on the findings, most respondents (local authorities and private developers) agreed that in order to reduce the cost incurred to provide infrastructure, the concept called Public-Private Partnership (PPP) and Private Finance Initiatives (PFI) have been identified as an appropriate method to be applied for private involvement. However, based on the findings the methods are still less considered by local authorities. This is due to the fact that the method is still new to many local authorities. Therefore it requires a lot of skills to manage such method. Incentives should be awarded to those local authorities willing to apply any innovative private method of delivery to secure infrastructure from the private sector. However, the delivery of public infrastructure and community facilities can be more effective if implemented through these methods. As an outline, the concept is a refined approach of privatisation where partnerships are characterised by sharing of investments, risks, rewards and responsibilities between the public and the private sectors. The method is able to substantially reduce capital expenditure and convert the costs into affordable operating expenditure that spread over the lifespan of the project. - Applicant/agent - Planning officer Parties involved - Administrators - Planning officer - Agents - Legal / organizational processes - Consultants - Planning officer - Agent - Public/groups - Organisational relationships (e.g. policy/design) - Nature of application - Extent of consultations - Organisational culture - Information giving - Amendments - Bargaining (e.g. agreements) Consultations -Planning officer - Politicians - Hierarchy/position - Power/influence - Precedent - Value - Politics - Approval/refusal - Modification to reasons/conditions Recommendation / decision Figure 7.5: Integrating planning approval and negotiation process - Size, location and type of application - Attitude of parties - Power/influence of individuals - Information (e.g. parking) - Modifications (e.g. description) - Information exchange - Bargaining the adjustment of proposal Major influences Components / nature of negotiations Submission Pre-application stage Planning approval process - Planning Application - Planning officer - Nature of decision - Attitudes - Nature of application - Conditions - Details - Resubmission (start again) - Pre-appeal exchange of information Approval stage 219 219 220 PPP and PFI were a refinement of Build-Operate-Transfer (B.O.T) mechanism that see the local authority procuring a service rather that an asset by contracting private sector to design, build, finance, operate and maintain the assets required to deliver the service to its public sector client. Some privatisation projects have not been successful because the risk allocation was not structured properly. Under PPP or PFI, the local authority enables to restructure his financial capacity to ensure his responsibility to provide the urgent infrastructure can beneficit to the local development. There is potential for this method to be introduced at the local level, especially in the provision of public amenities and public utilities. The government could set up a task force to study the viability of implementing such method. Meanwhile, Malaysia can develop its own model based on existing ones and incorporate these with the present planning approval. However, the local authority should be selective when implementing projects using this method as not all projects are viable through such partnerships. 7.5 Recommendations to Improve the Planning Approval System with Regards to off-site Infrastructure Provision The study proposes that the future trend of planning approval system should emphasise more on de-regulation, monitoring and promotional aspects rather than controlling local development. The approach of providing local infrastructure should be based on the following features: i. Giving incentives to those projects providing local facilities such offsite infrastructure. 221 ii. Periodically examining and revising the land use zoning, plot ratio, density control and any other development control guidelines related to off-site local infrastructure requirements in order to cope with the present demand and infill development. iii. Setting up an effective and efficient mechanism to monitor the process of granting planning approvals by fulfilling any changes of policies. The provision of local infrastructure should be viewed in terms of fulfilling the demands of the local population and supporting the growth of the local development by providing adequate provisions of infrastructure. The provision of local infrastructure and utility should be coordinated in the context of the hierarchy and function of local development. Moreover, these facilities need to have an efficient level of management and maintenance service. For an efficient urban service, the main strategy is to widen its coverage and improve the quality of service by ensuring the sustainability and cost-efficiency of maintenance. This could improve the living quality of population as well as increase the attractiveness of the urban area. For efficient and cost-effective provision of off-site infrastructure the present practices shall incorporate such innovative approach requiring private developer to off-site infrastructure. In order to further enhance the efforts to promote private involvement through planning approval, local authority should extensively identify more innovative sub-mechanisms in the present system. For this purpose, this research outlined the following mechanisms to be adopted at in the system: i. In the provisions of off-site infrastructure, the selection of proper sites for the facilities must conform to the existing development plans (e.g. Structure Plans or Local Plans). Therefore, the coordination amongst the various approval authorities becomes pertinent. 222 ii. In preparing provisional plans, local authority must promote such approach of partnership with private developer and other private service providers (e.g. PPP, PFI or BOT). The move may reduce the financial burden of local authorities in fulfilling its tax payer’s needs. iii. As revealed in the findings and the previous studies, there is a need to promote the concepts of integrated-sharing of off-site infrastructure amongst neighbouring developments. iv. In promoting the provision of off-site infrastructure, the authority should ensure that developers (applicants) provide appropriate, efficient and cost-effective infrastructure (normally during approving building plans). v. Introducing an attractive package of incentive to the private sector to encourage their involvement in providing and managing of off-site infrastructure. vi. The local authority may adopt privatisation scheme because experiences have shown that privatisation schemes have not only been able to reduce local authorities’ allocation on infrastructure but also to generate good revenues. Therefore, the privatisation scheme should be made as a part of the proposed financial package model. The limitations of borrowing also encouraged local authority to innovative ways of financing, such as the requirement for contributions from developers. Pricing policy should be designed to enhance efficiency by covering the costs of capital and operation and by internalising the environmental costs of urban infrastructure. It should substantially contribute to financing of local infrastructure investments, maintenance, operation and renewal. 223 The local authority should be clear about the rational used to justify the offsite infrastructure requirements. The findings show that most developers are willing to accept off-site infrastructure provision should be provided mutually by both parties. Such factors of social, economic and environmental impact should be evaluated to determine the level of impact proposed development and this will used to justify the appropriate forms of contributions should be imposed. Private delivery agent Infrastructure facility/service Borrowing Grant Local authority Delivery agent Financing source Infrastructure facility/service Local Authority Taxes Public Indirect users/ wider community Public Indirect private financing Private Subsidy Taxes Indirect users/ wider community Direct Private financing Private: Local government debentures infrastructure / Issuing Municipality Bonds User charges Direct user Federal Government State Government Loan Repayment Full Privatization Joint Ventures Concession / Franchise Agreements BOOT, BOO or BOT Private Financial Initiative (PFI) Public-Private Partnership (PPP) Lease Contracts Service / Management Traditional Public Contracting Outsourcing of funding from external/internal fund sources (e.g. Asian Development Bank, ADB; Local banks etc.) Loan 2. Local authority can secure infrastructure through negotiation upon the approval of planning permission (subject to the size of the proposal developments). Local government debentures Infrastructure/revenue bonds User charges Direct user Issuing Municipality Bonds 1. By assuming that infrastructure project constructed by local authority Explanations Grant Grant Direct Private financing Loan Direct Public financing Submission of Planning Applications Normal procedure of considering planning applications (e.g. unilateral agreement) The offered items will be bind in form of planning agreements Service / Management Contracts Lease Contracts Public-Private Partnership (PPP) Private Financial Initiative (PFI) Joint Ventures Full Privatization BOOT, BOO or BOT Schemes Concession / Franchise Agreements Method of delivery (See Note 3 and 4 for details and guidance) List of adverse-offers by private developers (see Note 2, 3 and 6) Negotiating the detail infrastructure to be offered by developer Not agreed Pre-negotiation of the terms to be offered or required by local authority/developer (See Note 2, 3, 4, 5 and 6 for details) Agreed with the terms of negotiation (Planning Department) Local Authority Technical Committee Departments 1. Real property tax or assessment Disapproved Applicant/s Planning Approval issued to the applicant Approved Full Council Meeting K.I.V Note 6 : Range of infrastructure categories might be offered/required during negotiations (based on study’s findings). Tendency of infrastructure provision by privates sector Tendency of infrastructure provision by public sector - Monson drain - Metropolitan open space - Community Services - Community Hall - Pre-School - Neighbourhood Centres - Public Library - Open Space - Recreations and Cultural Facilities - Public Transport - Local Roads - Local Parks - Water Treatment Plants - Local Parks - Water supply - Sewerage treatment plants - Other facilities identified by Local Authority. Correction & Amendments (Review panel) (Planning guidelines checklists) Health Department Technical Department Committee Meeting Environmental Department 7. Loans 6. Parking lot fees, plans fees, interest receivable and others miscellaneous items. 5. Services users/ Government grants 4. Improvement Services Fund (ISF) e.g. the fund allowable to be used for building or maintenance of existing local infrastructure. 3. Rentals 2. License fees Checking by Planning Department Mineral and Land Malaysia National Drainage and Telecommunication Electricity Irrigation Department Company Company Department Preferred to enter negotiation for infrastructure provision or Town and country Public Works Planning Department Department (Receive technical comments) Mandatory Planning Requirements (General Rates / Special Rates / Differential Rates / Separate Rates) Revenue collected by local authority Planning applications will be reviewed by technical departments (Submission through qualified town planner) Planning Department Development Contributions / Infrastructure Charges (Utility Charges / Direct User Charges) User Charges Pre-discussion or negotiations of off-site infrastructure requirements (See Note 1 for details) Via Negotiations Process (Development Control System) Planning Approval Process iv. Reasonably related in scale and quantity; and v. Reasonable in all other aspects (e.g. environmental impacts) 224 10. Constructs infrastructure then dedicate for public use. LA 95 100 100 100 100 100 100 100 100 100 100 100 D 100 100 100 100 100 100 100 100 100 100 100 100 50 59 82 77 59 41 68 100 55 68 LA D 63 69 82 82 69 94 69 100 63 75 50 82 91 LA 75 823 88 D 46 68 46 LA 13 81 75 D 36 55 59 LA 19 69 56 D Usually one of contracts for small components of the overall infrastructure network, with council bearing virtually all risks. These are common arrangements and include maintenance contracts, design and construct contracts, etc. Service/ Management Contracts Usually a long term contract for a particular infrastructure facility where the private sector finances builds and operates the facility with the assurance that Council will buy a minimum level of output. These are uncommon but may include toll roads, wastewater treatment plants, health facilities, etc. Build Own Operate Transfer (BOOT) or BOO or BOT Schemes D 64 55 LA 75 69 D 86 100 36 55 68 LA 81 69 69 75 75 75 65 75 LA 65 65 55 65 15 D 100 100 96 100 100 100 100 100 LA 96 100 100 94 6.3 100 100 100 100 D 100 Usually a long-term contract for all components of an infrastructure network within a given area, with the private sector assuming all commercial risk and service expansion responsibilities. These agreements may cover water and electricity infrastructure networks, etc. but are uncommon at the local level. Concession / Franchise Agreements The permanent sale of an infrastructure asset/ network to the private sector, usually accompanied with public sector price and quality regulation. The most typical infrastructure privatization (i.e. telecommunications infrastructure). Full Privatization The infrastructure secured from private sector through planning approval system as practised under development control system (Part 4 : Development Control, Town and Country Planning Act 1976 [Act 172). Planning Approval Note: Local Authority (LA) n = 22 Developer (D) n = 16 LA Figure 7.6: Proposed improvement for local authority infrastructure provision (off-site and on site) funding and delivery system / process Usually a short to medium term arrangement for a particular infrastructure facility, with the private operator accepting most commercial risks but with Council retaining capital expenditure responsibilities. An example is the outsourcing of leisure facilities to private Management / operation. Lease Contracts Note 5: The summary of characteristics of delivery methods of local infrastructure provision. How to use Note 4 – There are 2 ways. If LA seeking for the appropriate method to procure recreation facilities. First, refers to list type of delivery_ public delivery-Planning Approval. Then based on the list the most recommended type of delivery were Public Delivery, Planning Approval System and Lease Contract. Source: Compiled from research findings. Construction of new local roads Local road maintenance Drainage Landscaping Recreation facilities Parking facilities Incinerator plants Parks, gardens or open space Betterment of existing local infrastructures Other public utilities (e.g. Sewerage etc.) Other public amenities (e.g. Market etc.) Maintenance of existing off-site infrastructure Type of off-site infrastructure delivered Type of delivery (Percentage %) D 13. Other public building/facilities (e.g. community centre, public library etc. 14. Cash payment towards capital cost of constructing facilities or improvement. . (Including commuted payment for construction of off-site parking space). 7. Provide urgently infrastructure at the other sites. 8. Dedication of land for public use. 9. Commuted payments for car parking. 11. Provision of community buildings or facilities. 12. Provision of drainage system. 6. Existing road improvements (or provision). Note 4: The recommended and priority of type of off-site infrastructures and the methods of infrastructure provision delivery 1. Financial contribution for existing off-site infrastructure improvement. 2. Donating land or easements at no cost for off-site infrastructure facilities. 3. Constructing infrastructure improvements to meet the needs of the proposed development. 4. Leasing completed off-site infrastructure to local authority, or some other entity. 5. Joint-funding to expand infrastructure capacity to serve subsequent development in surrounding areas. Note 3: Some of the types of off-site infrastructure that can be acquired from new development; i. The infrastructure critically required. ii. Relevant to planning. iii. Directly related to the proposed development. Note 2: The off-site infrastructure only can be imposed if fulfilled the following circumstances; Public Sector Delivery Private financing Service/ Management Contract Loan At this stage all the planning applications which the size and the contents of the proposed development fulfilled the minimum requirement set by local authority on the offsite local infrastructure provision have to consult the appropriate local authority to negotiate the quantity or the types of infrastructure should be provided. However, this ONLY applicable if the proposed development subject to the off-site local infrastructure provision and those planning permission which are not subject to these requirements they will proceed to normal procedures. However, the details of the criteria for the requirements will be determined and outlined by the appropriate local authority. Lease Contracts Internal Funding Through PublicPrivate Partnership (PPP) Loan Repayment Note 1: Pre-discussion or negotiations of off-site infrastructure provisions BOOT, BOO or BOT (Schemes) Loan Repayment Explanation Notes Concession/ Franchise Agreements Public Sector Delivery Equity Joint Venture (JV) Indirect Private financing Borrowing Full Privatization External Funding Grant Private Financial Initiative (PFI) Local Authority Infrastructure Provision Delivery and Funding Mechanisms Borrowing Planning Approval System 225 7.6 Conclusion of the Chapter Inadequacy of infrastructure is a common problem threatening local development. Traditionally, local authority has been responsible for the essential off-site infrastructure facilities such as local roads, drainage system (e.g. monsoon drain), recreation facilities, parks, gardens, open spaces, sewerage infrastructure and many other neighbourhood-related facilities. However, the cost of providing the infrastructure is substantial and is set to increase markedly for the years to come. The research suggests that the cost to provide the local infrastructure is expected to increase drastically parallel to the urban population growth. Such pressure has caused local authorities to look for other options of funding mechanism for their infrastructure; recognising that the appropriate and effective delivery methods would be crucial for local authority to provide such infrastructure. The benefits from off-site local infrastructure provision can be very individual and vital for local development. In providing such infrastructure, local authorities therefore are supposed to outline an efficient planning approval system enabling them to distribute costs of providing infrastructure to potential users. However, the present mechanism in providing off-site infrastructure provision is poorly practised. Since the number and the locations of required off-site infrastructure provisions have been allocated in development plans, the lack of funds have forced the local authorities to give priority to the needy areas in order to stimulate private capital investments. Accurate estimation of demand for off-site infrastructure and the cost incurred in providing such facilities has been very problematic in local infrastructure provision. 226 To minimise the uncertainty of cost required to provide off-site infrastructure, local authorities have to develop a mechanism to forecast accurately the size of requirements by new development based on information available. Alongside these technical assessments the local authorities have to formalise the negotiation practices in planning approval stage. A standardised form of negotiation practice by giving developers incentives and clear path of the cost implication should be devised at the early stage of development. The research has identified several problems faced by local authorities involving the provision of off-site infrastructure: i. The rising cost of infrastructure provision to reduce the ability of the local authority to provide off-site infrastructure compared to the past. ii. Unavailability of a structured mechanism to justify the need for the provision of off-site infrastructure during considering planning approval. v. The constraints faced by many potential private sectors (e.g. private developer) to obtain planning permission from local planning authority. CHAPTER 8 SUMMARY AND CONCLUSION 8.1 Introduction This chapter summarises the findings of the previous ones from which conclusions are drawn and recommendations for the improvement of the infrastructure provision of the present planning approval system. The chapter also provides possible areas for further research to identify the options or methods of local infrastructure provision. 8.2 Summary of Discussions The study revealed that without any effort to reform the present practice of local infrastructure provision, the current situation would further constraint the ability of local authority to provide infrastructure. The provision of off-site infrastructure always incurred a substantial financial allocation. This is due to the fact that the provision is not only costly; it entails several financial implications to the capacity of local authority to fulfil such need. To overcome the problems, the findings strongly recommend that the local authority has to reform the present system of planning approval. The system should be adopted with an integrated planning approval be based on the costs-sharing concept among the users via 228 improving the procedures of planning approval system. The approach also stresses on the need to rely on private involvement as the main source of finance. This study has reviewed the different options of public and private funding available to the provision of off-site infrastructure. It then explored the role of external organisations that might assist the progressive improvement of local infrastructure. The findings further provided evidence to indicate that at a larger local authority, off-site infrastructure provision is largely considered as part of the developers’ responsibility to mitigate the development impacts, one of the main concerns over the development. The design and layout of the infrastructure should be tailored within the capacity of the developers. The mechanisms applied to secure contributions from private sector are the reflections of the institutional framework. The study has identified that although both developer and local authority have a good understanding of the fundamental concept of off-site infrastructure, there are still considerable areas of uncertainty surrounding the precise definition and measurement of the key elements pertaining to off-site local infrastructure. The situation occurs because at the present such practice does not have a proper guideline. The practice was segmented amongst local authorities. The findings of the research also revealed that the previous research has only tended to examine the nature of the practice of the infrastructure delivery within the frameworks of national economy and very little focus has been given to comprehensive examination on how private developers can be involved in off-site local infrastructure provision. The main concern over the discussion revolves around the relationship between private developers and local planning authorities over the issue of scarcity of local funds. The study therefore provides the parameters to secure infrastructure contributions. It has argued that in order to achieve a comprehensive understanding of the issues it is necessary to overview on the broader picture, what is required in 229 terms of the types of infrastructure. This can be realised by introducing an Infrastructure Priority List (IPL) which can be used to determine the types and methods of delivery for the urgently required infrastructure. This IPL is a very useful mechanism since it provides a list of currently needed infrastructure either on-site or off-site. The list will be used by the local authority to propose any infrastructure to developer in negotiating planning approval. Other significant findings include the negotiation process that plays a significant role in acquiring off-site local infrastructure. The nature of the process and the effectiveness of the method also vary under different circumstances. This requires further investigation to define how the framework of negotiations should be outlined and the structure of how the method can be applied in various local authorities regardless of geographical features. 8.3 Key Issues for Future Research The findings have raised several key questions on the possibilities of private involvement in local infrastructure development. There are several issues that have been identified for further research, such as: i. Research has to be conducted to identify the main barriers to the private involvement in local infrastructure. The research also has to look at other opportunities such as privatisation of local infrastructure. ii. Local economic development is about creating consensus on the direction of local development, convergence in activities of the various local actors and about undertaking partnerships between local authority and private sector. Therefore, there is a need to identify the opportunities for local authorities to achieve such cooperation from private sectors in off-site infrastructure provision. 230 iii. Another opportunity available for local authority to gain contribution from private developers can be formulated from a framed joint-venture between local development actors with local authority. A model that has been practised in Australia’s local authorities can be considered as the framework to start with. The approaches should be tailored to the local administrative framework. Therefore, this study strongly recommends that a thorough study be conducted to explore the suitability of this model adapted into local infrastructure provision. iv. Both private developers and local authorities emphasise negotiation as a reliable means to secure off-site infrastructure from private developers. This research looks into how the negotiation should proceed and implement. Therefore, it is suggested a future research to delve on the negotiation process, including the bargaining process available at the local authority and benefits that can be gained by the developers. The findings of this study also shed light on the realisation of the relationship between local infrastructure provision and local authority growth. This research has identified that despite good understanding of the planning system which becomes the legitimate framework for local infrastructure provision and the arguments for and against the use of private involvement, there are still considerable areas of uncertainty surrounding the precise definition and measurement of key elements in local infrastructure. 231 8.4 Conclusion Planning approval is essentially a process of coordination and allocation of activities. The mechanism that had been identified was an acceptable method to acquire off-site infrastructure provision from private sector. In the process, development plans have played a significant mechanism in coordinating new development with adequate provision of infrastructure (off-site and on-site). Planning approval is only permitted if the conditions imposed by local authority are fulfilled since the approval shall be made according to such gazetted development plans. The findings reveal that the responsibility to provide off-site infrastructure fall under the mutual responsibility of both private and public sectors. Although it is not favoured by many developers, they are forced to comply since the practice is legal. Nevertheless, there are few developers which indeed bear such responsibility of some local infrastructure development. The tendency of developers to contribute off-site infrastructure is mostly influenced by the development cost. The findings show that most off-site infrastructure provision had been delivered through complete public and private deliveries and most projects coupled with off-site provisions are the large scale developments and the value of contribution is proportionate with the size of the projects. However, there are developers which had objected to the method of contribution. The practice is alleged as contravening the fundamental principles of planning where approval cannot be bought and sold. Several developers had claimed that the main problem to be attributed to the rationale justify such requirement on off-site infrastructure as the issues of non-consistence being imposed on developers is the different local authorities. Therefore, the basis for seeking contributions to facilitate off-site infrastructure provision from new development must be clearly established by local authorities. 232 From the study it is revealed that developers are keen to accept the negotiation approach as the most appropriate in the process of securing off-site local infrastructure from private developers. The findings have reaffirmed of the potential shifting from the public to the private sector through negotiation within the framework of planning approval process. The main reason why local authorities use private options is to fund the infrastructure provisions. In return to the approved planning permission, the developers extend to local authority in the form of ‘contributions’. The contents of the contribution would be as what has been ‘agreed’ as the approval. The main purpose of this research has been to study the possibility of using planning approval system to secure off-site infrastructure from private sector. The findings of the research conclude that the planning approval system could be used by local authority to secure off-site infrastructure from private sector. However, it requires further works to detail on the framework of negotiations and how the method can be applied in the various local authorities. 233 References Ache, P. (2003). Infrastructure Provision and the role of planning in the Ruhr Region, In: Infrastructure Provision and the Negotiating Process, edited by Frank Ennis, ASHGATe Publishing Limited. Ahmah Salim (1982). Land Use Control in Peninsular Malaysia. University of Wales, Cardiff (U.K): Master’s Thesis. Allinson, J. and Askew, J. (1996). Planning gain, In: Greed, C. (Ed.) (1996) Implementing town planning: The role of town planning in development process.Harlow: Longman. Allinson, J. and Claydon, J. (1996). The procedural context, In: Greed, C. (Ed.) (1996) Implementing town planning: The role of town planning in development process. Harlow: Longman. Allmendinger, P. and Thomas, H. (1998). Urban planning and the British New Right.Published by Routledge. Altshuler and Gomez, J. A. (1993). Regulations for Revenue: The political Economy of Land Development Exactions. Washington D.C.: The Broongkings Institution. Asenova, D., and Beck, M. (2003). Scottish Local Authorities and the procurement of Private Finance Initiative projects: a pattern of developing risk management expertise? In: Public Works Management & Policy, Vol. 8 No. 1, July 2003 11-37. Sage Publications. 234 Asiah Othman (1999). The effect of planning system on housing development: a study of developers’ behavior in Kuala Lumpur and Johor Bahru, Malaysia. Ph.D. Thesis. University of Aberdeen, U.K. Australia National Office of Local Government (2003). Guidelines for Local Government Infrastructure Financing Manual (Australia) Final Report. Azizi, M. M., (1995). The provision of urban infrastructure in Iran: an empirical evaluation. In Urban Studies, Vol. 32, No. 3, 507-522. Babbie, E. (1998). The Practice of Social Research, (8th. Ed.). Wadsworth Publishing Company. Balchin, N. P, Sýkora, L. and Gregory H. B. (1999). Regional policy and planning in Europe. Published by Routledge. Batley, R. and Devas, N. (1988). The management of urban development: Current issues for aid donors. In Habitat International, Volume 12, Issue 3, Pages 173-186. Begg. I. (2002). Urban competitiveness: policies for dynamic cities. Published by The Policy Press. Bell, J. (1998). Doing Your Research Project: A Guide for First-Time Research in Education and Social Science (Second Edition), London: Open University Press. Berger, R. M., and Patchner, M. A. (1988). Planning for Research: A Guide for the Helping Professions, Sage Human Services Guide 50, Newbury Park: Sage Publications. 235 Biehl, D. (1986). The Contribution of Infrastructure to Regional Development, Office for Official Publications of the European Communities, Luxembourg. Biehl, D. (ed), 1991, The role of infrastructure in regional development. In: Vickerman, R. ed. Infrastructure and Regional Development. Pion, London. Birnie, J. (1999). Private finance initiative (PFI): UK construction industry response. In Journal of Construction Procurement, 1(5), 5-14. Booth, P. (1996). Controlling Development: Certainty and Discretion in Europe, the USA and Hong Kong. London: UCL Press. Booth, P. (1999). From Regulation to Discretion: The Evolution of Development Control in The British Planning System 1909–1947. Planning Perspectives, 14 (1999) 277–289 Bo-Sin Tang, Lennon, H. T. Choy and Joshua, K. F. Wat (2000). Certainty and discretion in planning control: a case study of office development in Hong Kong, In: Urban Studies, Vol. 37, No. 13, pp. 2465-2483. Bruton, M. J. (2007). Malaysia: The Planning of a Nation. Kuala Lumpur: Malaysian Association of Town and Country Planning. Bryman, A. (2000). Quantity and Quality in Social Research, London: Routledge. Bulmer, M. (1983). Interviewing and field organisation, in M. Bulmer and D. P. Warwick (eds.) Social Research in Developing Countries, Chichester: John Wiley and Sons. 236 Bunnell, G. (1995). Planning gain in theory and practice: negotiation of agreements in Cambridgeshire, In: Progress in Planning, Vol. 44, pp. 1-113. Elsevier Science Ltd. Burke, G and Taylor, T. (1990). Town Planning and the Surveyor. The College of Estate Management. Cardew, R. (2003). Privatisation of infrastructure in Sydney, Australia, In: Infrastructure Provision and the Negotiating Process, edited by Frank Ennis, ASHGATe Publishing Limited. Carmona, M. and Sieh, L. (2004). Measuring quality in planning: managing the performance process. Published by Taylor & Francis. Carroll, P., and Steane, P. (2000). Public-private partnerships: Sectoral perspective. In Public-Private Partnerships: Theory and practice in international perspective. Routledge. London and New York. Chan, Lawrence (1997). Government housing policies and incentives: the industry viewpoint. Paper presented at National Housing Convention. Kuala Lumpur. Choguill, C. F. (1995). Issues in urban development: Case studies from Indonesia: Edited by Peter J M Nas Research School CNWS, Leiden, The Netherlands (1995) 293 pp Cities, Volume 14, Issue 1, February 1997, Pages 45-46. Choguill, C. L. (1996). Ten steps to sustainable Infrastructure. In: Habitat International, Vol. 20, No. 3, pp. 389-404. Elsevier Science Ltd. 237 Chung (1986). The Role of Town Planning in National Development, a paper presented at National Seminar in Planning, organised by ITM. Clark, G. L., and Evans, J. (1998). The private Provision of Urban Infrastructure: Financial Intermediation Through Long-Term Contracts, In: Urban Studies, pp. 301-319. Clarke, A. and Dawson, R. (1999). Evaluation Research: An introduction to Principles, Method and Practice. Sage Publications. Clarke, G. (1992). Towards appropriate forms of urban spatial planning. In: Habitat International. Vol. 16, pp.146-166. Claydon, J. (1996). Negotiations in planning. In Greed, C. (1996). Implementing of Town: The Role of Town Planning in the Development Process.Longman. pp. 110-120. Harlow: Longman. Claydon, J. (2001). Discretion in development control: A study of how discretion is exercised in the conduct of development control in England and Wales. Planning Practice and Research. Claydon, J., and Smith, B. (1997). Negotiating Planning Gains Through the British Development Control System, In: Urban Studies, pp. 2003-2022. Crano, W. D., and Brewer, M. B. (1986). Principles and Methods of Social Research. Massachusetts: Allyn and Bacon, Inc. Crow, P. (1998). Planning gain: there must be a better way, In: Planning Perspectives, 13, pp. 357–372. 238 Cullingworth, J. B. and Nadin, V. (1997). Town and Country Planning in the UK. Published by Routledge. Dani Salleh (2000). The legislative framework of urban planning and development in Malaysia, a paper presented at the World Conference of Urban Future 2000 at the University of Witwatersrand, Johannesburg, South Africa on 10-14 July 2000. Dani Salleh and Asan-Ali Golam-Hassan (2001). Urbanisation and Development: The Role of Development Planning in Malaysia, a paper presented at The International Planning Research Conference 2001, Co-organised by Liverpool University And Liverpool John Moores University, 2001. Davies, H. W. E., D. Edwards, A.R. Rowley (1996). The relationship between development plans, development control and appeal. The Planner. De Vaus, D. A. (1986) Surveys in Social Research, London: George Allen and Unwin. Denzin, N. K., and Lincoln, S. Y. (1998). Collecting and Interpreting Qualitative Materials. Sage Publication. Development Control Standards Manual (1998). State Government of Sarawak: Ministry of Planning and Resource Management. Dilworth, R. (2001). Paving bodies politics: Government fragmentation and infrastructural development in the American metropolis. Ph.D. Thesis. The Johns Hopkins University, Baltimore, Maryland. 239 Dimitriou, H. T. (1991). An integrated approach to urban infrastructure development: a review of the Indonesian experience. In Cities. Vol. 8, Issue 3, Pages 193-208. Dobry, G. (1975). Review of Development Control System, Final Report, H.M.S.O. London. Dowall, D. E. (2000). California’s Infrastructure Policy for the 21st. Century: Issues and Opportunities. Public Policy Institute of California. Drakakis-Smith, D. W. (1992). Urban and regional change in southern Africa. Published by Routledge. Economic Planning Unit (1993). National Urban Policy, Government of Malaysia, Kuala Lumpur. Elson, M. (1990). Negotiating the future: Planning gain in the 1990s, ARC Ltd. Ennis, F. (1994). Planning obligations in development plans, In Land Use Policy Vol. 11, Issues 3, July 1994, pp. 195-207. _______ (1996). Planning obligations and developers: cost and benefits, In: Town Planning Review, 67(2), pp. 145-160. _______ (1997). Infrastructure Provision, the Negotiating Process and the Planner's Role. Routledge, Volume 34, Number 12 / December 1, 1997 (1935 - 1954). 240 _______ (2003). Infrastructure provision and the urban environment, In: Ennis, F. (2003). Infrastructure Provision and Negotiating Process, London, Ashgate. Erik-Hans Klijn and Geert R. Teisman (2000). Governing public-private partnerships: Analysing and managing the processes and institutional. In: Public-Private Partnerships: Theory and practice in international perspective. Routledge. London and New York. Esterberg, K. G. (2002). Qualitative Methods in Social Science Research. Eziyi O. Ibem, E. O. (2009). Community-led infrastructure provision in lowincome urban communities in developing countries: a study on Ohafia, Nigeria. In Cities.Vol. 26, Issue 3, Pages 125-132. Federal Department of Town and Country Planning, (1993). Manual for Development Plans Preparation, Kuala Lumpur. Fordham, R. (1989). Planning gain: towards its codification. Journal of Planning and Environment Law, August, 577-584. Foziah Johar (1989). An Evaluation of Malaysia Town Planning Legislation. Master Thesis. University of Newcastle Upon Tyne, U.K. Friedmann, J., and Weaver, C. (1979). Territory and Function: The Evolution of Regional Planning, London: Edward Arnold. Garwood, J. (1995). Public-private investment partnership. In: Haydn Shaughnessy (1995). Project Finance in Europe. (Eds). John Willey & Sons. 241 Ghani Salleh and Choong Lai Chai (1997). Low Cost Housing: Issues and Problems. In: Housing the Nation: A Definitive Study. Cagamas Berhad. Glaister, S. (1999). Past abuse and future uses of private finance and public-private partnership in transportation. In: Public Money and Management, 19(3), 29-36. Glennie, C. (1982). A Model for the Development of a Self-Help Water Supply Program, World Bank Technical Paper No. 2, (Technology Advisory Group of the World Bank, Washington, DC. Goh, B. L. (1991). Urban Planning in Malaysia: History, Assumptions and Issues, Tempo Publishing (M) Sdn. Bhd. Goh, B. L. (1994). Urban land management, In: Malaysia: An Overview. UMP Asia Occasional Paper No. 11. Golland, A. (1998). System of Housing supply and Housing Production in Europe: A comparison of the United Kingdom, the Netherland and Germany. England: Ashagate. Goodchild, B. (1997). Housing and the Urban Environment: A Guide to Housing Design, Renewal and Urban Planning. Published by Wiley-Blackwell. Graeme Evans, G. (2001). Cultural planning, an urban renaissance? Published by Routledge. 242 Graham, S. and Marvin, S. (2001). Splintering Urbanism: Networked Infrastructures, Technological Mobilities, and the Urban Condition. New York: Routledge. Graziano, A. M., and Raulin, M. L. (1989). Research Methods: A Process of Inquiry, New York: Harper and Row. Greed, C. (1996). Implementation: Perspectives and perceptions. In: Greed, C. (ed.). Implementing Town Planning: The Role of Town Planning in the Development Process. Harlow: Longman. Guy, S. and Marvin, S. (1997). Infrastructure provision, development process and the co-production of environment value, In: Urban Studies, pp. 20232036. Hague, P. (1993). Questionnaire Design, Kogan Page, London. Hall, P. (1974). Urban and Regional Planning, Perquin. Hall, P. G. and Pfeiffer, U. (2000). Urban future 21: a global agenda for twentyfirst century cities. Published by Taylor & Francis. Hallmans, B. and Stenberg, C. (1999). Introduction to BOOT. In Elsevier, Vol.123 (pp. 109-114). In: Progress in Planning, Vol. 44, pp. 1-113, 1995. Elsevier Science Ltd. Hamzah Sendut (1965). Toward A National Urbanization Policy, Penang, USM. 243 Healey, P. (1991). Models of the development process: a review, Journal of Property Research, 8, pp. 219-238. Healey, P. (1992). An institutional model of the land development process, In: Journal of Property Research, 9, pp. 33-44. Healey, P. (1997). Collaborative Planning. Basingstoke: Macmillan. Healey, P. (2003). Collaborative Planning in Perspective, In: Planning Theory, Vol. 2, No. 2, 101-123. Healey, P., Purdue, M. and Ennis, F. (1993). Gains from Planning? York: Joseph Rowentree Foundation. Healey, P., Purdue, M. and Ennis, F. (1996). Negotiating development: planning gain and mitigating impacts, In: Journal of Property Research, 13, pp. 143-160. Healey, P., Purdue, M., and Ennis, F. (1995). Negotiating Development: Rationales and Practice for Development Obligations and planning Gain. London: E & FN Spon. Heap, D., and Ward, A. (1980). Planning bargaining - the pros and cons: or, how much can the system stand? In: Journal of Planning Environment Law, 631-637. Helmsing, A. H. J. (2001). Local Economic Development: New generation of actors, policies and instruments, a summary report prepared for the UNCDF Symposium on Decentralization Local Government in Africa at Cape Town Symposium. 244 Hendrik W. Van Der Kamp (2003). Infrastructure and negotiation: the case of Ireland. In: Ennis, F. (2003). Infrastructure Provision and Negotiating Process, London: Ashgate. Ho Chin Siong (2001). Planning System in Japan. A paper presented at Seminar Towards Strengthening the Planning System in Malaysia. Organised by Universiti Teknologi Malaysia. HO, K.M et. al. (1989). A Functional Urban Hierarchy for National Development, FDTCP, Kuala Lumpur. Hodge, I., and Cameron, G. (1989). Raising infrastructure charges on land development: incidence and adjustments. In: Land Development Studies 6, 171-182. Housing Development Board (1989). Annual Report 1988/89, Singapore. Howe, J. (1998). Impact of rural road on poverty alleviation in developing countries. In: Proceedings of the Third International Workshop on Secondary Rural Roads, Jozefow, Poland, pp. 13-34. Inger Krantz (1990). Urban infrastructure: four perspectives on Swedish development. In Tunnelling and Underground Space Technology. Vol. 5, Issue 4, Pages 367-373. Jaarsm, C.F., and Van Dijk, T. (2002). Financing local rural road maintenance: Who should pay what share and why. In: Transportation Research, Pergamon. 245 Jack W. Lillywhite (1992). Infrastructure privatisation: A viable option for improving municipal services, a paper presented at Pacific Asian Congress of Municipalities, Calgary, Canada. Jayarajan, T.M., (1992). Prospects and Perspectives of Privatising Kuala Lumpur’s Sewerage and Transportation Infrastructure, a paper presented at Pacific Asian Congress of Municipalities, Calgary, Canada. Joardar, D. S. (1998). Carrying Capacities and Standards as Bases Towards Urban Infrastructure Planning in India: a Case of Urban Water Supply and Sanitation. In Habitat International. Vol. 22, Issue 3, Pages 327-337. Jowell, J. (1970). Bargaining in development control. In: Journal of Planning and Environment Law, pp.414-433. Jowell, J. and Grant, M. (1983). Guide-line for planning gain, In: Journal of Planning and Environment Law, pp. 427-431. JPBD (1994). Urbanisation in Malaysia, a paper presented at Regional Workshop on Urbanisation Strategies and Local Development in the context of Decentralisation. 26-29 September 1994. Bandung, Indonesia. Kamal Salih (1979). Urban Development in Malaysia, Nagoya, Japan: United Nation Centre for Regional Development, Working Paper No. 74-3. Kaplinsky, E. S. (1999). An Evaluation of Development Charges and their Alternatives in Israel and in Ontario. Master Thesis. University of Toronto, Canada. 246 Keeble, L. (1969). Principles and Practice of Town and Country Planning (4th. Ed. 1969). Keogh, G. (1985). The economics of planning gain. In: S. Barrett and P. Healey (eds.), Land Policy Problems and Alternatives, pp. 203-228. Gower Publishing Co. Ltd. Aldershot, Hants. Kerajaan Malaysia Malaysia, (1976). Town and Country Planning Acts, Acts 172. Kerlinger, F. N. (1973). Foundations of Behavioural Research, (2nd. Ed.), London: Holt, Rinehart and Winston. Khairiah Talha, (1999). Delivering Physical Development : The Dilemma of Supply and Demand, a paper presented at Seminar on Urbanisation Development, 15-16 November 1999 Organised by District council of Manjung and Perak Branch Campus of UiTM. Kirk, R and Wall, A. (2001). Substance, form and PFI contracts, In: Public Money and Management, 21(3), 41-46. Kirwan, R. (1989) Finance for urban public infrastructure, In: Urban Studies, 26, pp. 285-300. Kivell, P. (1993). Land and City: Patterns and Processes of Urban Change. Routledge, London. Klosterman, R.E. (1996). Arguments for and against planning, In: S. Campell and S. Fainstein (Eds) Reading in Planning Theory, pp. 150-168. Malden, MA: Blackwell. 247 Kotin, A., and Peiser, R. (1997). Public-Private Joint Ventures for High Volume Retailers : Who Benefits? In: Urban Studies, pp. 1971-1988. Kulwant, S. and Steinberg, F. (1999). Integrated urban infrastructure development in Asia. In Habitat International. Vol. 20, Issue 1, 1996, Pages 1-3. Published by Elsevier Science Ltd. Kyung-Hwan Kim (1997). Improving local government finance in a changing environment. In Habitat International. Vol. 21, Issue 1, Pages 17-28. Larkham, P.J. (1990). The concept of delay in development control. In: Planning Outlook. Lee Lik Meng, Abdul Mutalip Abdullah dan Alip Rahim, (1990). Town Planning in Malaysia: History and Legislation. Published by University Sains Malaysia. Lee, Cassey (1995). Regulatory Reform in the Infrastructure Sector: The Malaysian Experience, a paper presented at the Regional Workshop on Managing Regulatory Policies and Reforms in East Asia, Kuala Lumpur. Lee, Cassey (1995). Regulatory Reform in the Infrastructure Sector: The Malaysian Experience, a paper presented at the Regional Workshop on Managing Regulatory Policies and Reforms in East Asia, Kuala Lumpur. Leo van den Berg, Erik Braun and J. van der Meer (2007). National Policy Responses to Urban Challenges in Europe. European Institute for Comparative Urban Research. Published by Ashgate Publishing, Ltd. 248 Lichfield, N. (1989). From planning gain to community benefit. Journal of Planning and Environmental Law (January):68–81. _______, (1990). Planning gain: In search of a concept. In: Town and Country Planning 56(6):178–180. _______, (1992a). The integration of development planning and environmental assessment. Part 2: A case study. Project Appraisal 7(3). _______ , (1992b). From planning obligations to community benefit. Journal of Planning and Environmental Law (December):1103–1118. ———. 1996. Community impact evaluation. London: UCL Press. London Housing (2001). Think again on planning gain? December 2001. MacDonald, J. S. (1979). Planning implementation and social policy: an evaluation of Ciudad Guyana 1965 and 1975, In: Planning Progress, Vol.11. Mahamad Tayib (1996). Local Authority in Malaysia: Problem and Management, In: Jurnal Universiti Utara Malaysia. Majlis Perbandaran Pulau Pinang, (1987) Rancangan Struktur Majlis Perbandaran Pulau Pinang. Malaysia (1974). Street, Drainage and Building Acts, Act 133. ________, (1976). Town and Country Planning Acts, Act 172. ________, (1982). Federal Territory (Planning) Act, Act 267. 249 ________, (1996). Seventh Malaysia Plan (1996-2000). Kuala Lumpur: National Printing Department. ________,(2001). Eight Malaysia Plan (2001-2005). Kuala Lumpur: National Printing Department. ________, (2006). Ninth Malaysia Plan (2006-2010). Kuala Lumpur: National Printing Department. Marsh, C. (1989). Negotiated planning permission and planning gain. In: R. Grower (ed.), Land and Property Development: New Directions, pp. 153167, Gower Publishing Co. Ltd. McCarthy, P., Prism, R., and Harisson, T. (1995). Attitudes to Town and Country Planning. London : HMSO. McGill, R. (1994). Integrated urban management: an operational model for third world city managers. In Cities, Vol. 11, Issue 1, Pages 35-47. McGill, R. (1998). Urban management in developing countries. In Cities, Vol. 15, No. 6, pp. 463-471. Published by Elsevier Science Ltd. McKinlay Douglas Limited, Brent Wheeler & Co (1996). Liberalising the Regulation of Governments’ Infrastructure: An Issues Paper. McLoughlin, J.B. (1985). Control and Urban Planning. London: Faber & Feber Ltd. 250 McNeill, J., and Dollery, B. (1999). Funding Urban Infrastructure Using Developer Charges: The Case of Section 94 Contributions and Road Financing in New South Wales. University of New England School of Economic Studies No. 99-9 December 1999 Working Paper Series in Economics. Megginson, W., Nash, R. and Randenborgh, M. (1994). The financial and operating performance of newly privatised firms: an international empirical analysis, In: Journal of Finance, Vol. 49, No. 2, pp. 403-52. Ministry of Housing and Local Government, Welsh Office (1970). Development Plans: A Manual on Form and Content, London. Mohd. Anuar A. Wahab (1994). An Overview of the Development Control System in Peninsular Malaysia. Occasional Paper No. 4, 1994. Faculty of Built Environment, Universiti Teknologi Malaysia. Morgan, P. H., and Nott, S. M. (1988). Development Control: Policy into Practice, Butterworth : London. Moser, C. A. and Kalton, G. (1971). Survey Methods in Social Investigation, London: Heinemann Educational Books. Muhammad Nong (1990). Financing urban infrastructure: Trends and issues, a paper presented at National Planning Conference. Jointly organised by MIP and JPBD. Municipal Council of Penang Island (1987). Strategies formulating general policies and proposal for socio-economic and physical development Plans (MPPP). 251 Nakagawa, D., Matsunaka, R., Konishi, H. (1998). A method of classification of financial resources for transportation based on the concept of actual payers. Theoritical framework. In: Transport Policy, 5, 103-113. National Office of Local Government of Australia (NOLG), (2002). Guidelines for Preparing a Local Government Infrastructure Financing Manual. Nedovic-Budic, Z. (2001). Adjustment of planning practice to the New Eastern and Central European context. In: Journal of the American Planning Association. Nelson, A.C. (1988). Development impact fees. Chicago: Planning Press. Nelson, K. C., Bengston, N. D., and Fletcher, J. O. (2004). Public policies for managing urban growth and protecting open space: policy instruments and lessons learned in the United States, In: Landscape and Urban Planning, Vol. 69, Issues 2-3, 15 August 2004, Pages 271-286. Neuman, W. L. (2006). Social Research Methods: Qualitative and Quantitative Approaches, 6th. Ed. Pearson. Norman, K. D., and Yvonna, S. L. (1998). Collecting and Interpreting Qualitative Materials. Sage Publication. OECD (1991). Urban Infrastructure: Finance and Management. Paris. Organisation for Economic Co-Operation and development. 252 Osman Mohd Ali (1990). Development control guidelines: managing the physical development of Federal Territory, a paper presented at National Planning Conference on Challenges and Opportunities in Urban Development: Preparing for Growth in the 1990’s. Jointly organised by Federal Department of Town and Country Planning, Malaysian Institute of Planners and Institute of Landscape Architects Malaysia, 8-9th. November 1990. Othman Yeop Abdullah, (1988). Administrative Machinery for Development. Jabatan Perdana Menteri: Unit Pemodenan Tadbiran Malaysia (MAMPU). Owen, G., and Merna, A. (1997). The private finance initiative: In: Engineering Construction and Architecture Management, 4(3), 163-177. PAG (1980) Report to Department of the Environment on Planning Gain. London: HMSO. Pages 244-258. Peter, B. P. and Michael J. T. (2005). Urban environmentalism: global change and the mediation of local conflict. Published by Routledge. Philip, L. J. (1998). Integrating Quantitative and Qualitative Approaches to Social Research in Human Geography - an Impossible Mixture? In: Environment and Planning A. 30(2) 261-276. Porter, D. R. (1989). The relation of development agreements to plans and planning. In: Porter, D. R., and Marsh, L.L. (eds.), Development agreements: Practice, Policy and Prospects, pp. 148-152, The Urban Land Institute, Washington. 253 Private Financing for Government Projects. (2004, June 5). The Star. pp.7. Public Policy Institute of California (2000). Rethinking Infrastructure Policy for the 21st. Century. In: Research Brief. June 2000: Issue 3. Public-Private Infrastructure Advisory Facility, World Bank (2005). Private solutions for infrastructure in Lesotho. Published by World Bank Publications. Ragin, C. C. (1994). Constructing Social Research. Thousand Oaks, CA: Pine Forge Press. Ratcliffe, J., Stubbs, M. and Shepherd, M. (2001). Urban Planning and Real Estate Development. London: UCL Press. Roger Caves, R. and J. Barry Cullingworth, J. B. (2008). Planning in the USA. Published by Taylor & Francis. Ronald McGill (1998). Urban management in developing countries. In: Cities, Vol. 15, No. 6, pp. 463-471. Published by Elsevier Science Ltd. Ronaldo, W. M. (2000). The theory of partnership: why have partnership? In Public-Private Partnerships: Theory and practice in international perspective. Routledge. London and New York. Rossi, P. H., Wright, J. D., and Anderson, A. B. (1983). Handbook of Survey Research. Academic Press New York. 254 Rowan-Robinson, J., and Durman, R. (1993). Plannig policy and planning agreements, In: Land Use Policy, Volume 10, Issue 3, pp. 197-240. Rowan-Robison, J. and Lyod, G. (1988). Land Development and the infrastructure lottery, T and T Clerk, Edinburgh. Rydin, Y. (1993) The British Planning System: An Introduction, London: Macmillan. Sady, E.J., (1962). Improvement of Local Government and Administration for 1962 Development Purpose. In: Journal of Local Administration Overseas. Sagalyn, L.B., (1997). Negotiating for Public benefits : The Bargaining Calculus of Public-Private development, in : Urban Studies, pp. 1955-1970. Saxer, S. R. ( 2000). Planning gain, exactions and impact fees: A comparative study of planning law in England, Wales and the United States. In: The Urban Lawyer, 32(1). Shapira, P., Masser, I. and Edgington, W. D. (1994). Planning for cities and regions in Japan. Published by Liverpool University Press. Sheoli Pargal (2003). Regulation and Private Sector Investment in Infrastructure: Evidence from Latin America. World Bank Policy Research Working Paper 3037. Short, J. R., Fleming, S., and Witt, S. (1983). Housebuilding, Planning and Coomunity Action. London: Routledge. 255 Sidabutar, P., Rukmana, N., Hoff, R. V. D., Steinberg, F. (1991). Development of urban management capacities: training for integrated urban infrastructure development in Indonesia. In Cities, Vol. 8, Issue 2, Pages 142-150. Sidney, M. L. (1996). Build Operate Transfer: Paving the way for tomorrow’s infrastructure. John Wiley & Sons, Inc. Silverman, D. (2005). Doing Qualitative Research. London: Sage Publication. Simpson, B. (1983). Sites Cost in Housing and Development. London: Construction Press. Singh, J.P, Jena, S.N. (2005). The pressure on urban infrastructure: need to revamp the planning philosophy. Paper presented at Indian Building Congress’s 8th Annual Convention and National Seminar on Urban Infrastructure Development. Smith, A. J. (1999). Privatised Infrastructure: The Role of Government. London: Thomas Telford. Smoke, P. and Lewis, B. D. (1996). Fiscal decentralization in Indonesia: a new approach to an old idea. In World Development. Vol. 24, Issue 8, Pages 1281-1299. Snyder, T. P., and Stegman, M.A. (1987). Paying for growth: Using development fees to finance infrastructure, Washington, DC: Urban Land Institute. Society for Advanced Legal Studies (1998). Report of working group on planning obligations. London: Society for Advanced Legal Studies. 256 Southgate, M. 1998. Sustainable planning in practice. Town and Country Planning 67(11); In: Urban Studies (December): 332–342. Steinberg, F. (1992). Urban infrastructure development in Indonesia. In Habitat International. Vol. 15, Issue 4, 1991, Pages 3-26. Published by Elsevier Science Ltd. Stephen, P. O., and Murray, V. (2000). Understanding the process of public-private partnerships. In: Public-Private Partnerships: Theory and practice in international perspective. Routledge. London and New York. Stewardson, R. (1995). The ‘big picture’ from BHP’s perspective, paper 4 in Investing in Infrastructure, Workshop Papers 5, Australian Urban & Regional Development Review. Supian Ahmad and Mansor Ibrahim, (1990). Town Planning Education in Malaysia: Past, Present and Future Directions. Occasional Paper, 1990. Faculty of Built Environment, Universiti Teknologi Malaysia. Sylte, O. K. (1996). Review on the road sector in selected common market for Eastern and Southern Africa (COMESA) countries. Working Paper No. 23. The World Bank and Economic Commission for Africa, Washington DC. Takahashi, T. (1998). On the optimal policy of regional infrastructure provision across regions. In Regional Science and Urban Economic, Vol. 28, pp. 213-235. Elsevier Science Ltd. Thomas, K. (1997). Development Control: Principles and Practice: UCL Press. 257 Thompson, S. (2007). Planning Australia: An Overview of Urban and Regional Planning. Published by Cambridge University Press. Tomalty, R., and Skaburskis, A. (1997). Negotiating development charges in Ontario, in: Urban Studies, pp. 1987-2002. Troy, N. P. (1996). The perils of urban consolidation: a discussion of Australian housing and urban development policies. Published by Federation Press. Underwood, J. (1981). Development control: A review of research and current issues, In: Progress in Planning, Vol. 16, pp. 179-242. Pergamon Press Ltd. Printed in Great Britain. United Nations Human Settlements Programme (2005). Financing urban shelter: global report on human settlements 2005. Published by UN-HABITAT. Utah Governor’s Office of Planning and Budget (2004) Verhage, R. and Needham, B. (1997). Negotiating about the residential environment: it is not only money that matters, In: Urban Studies, pp. 2053-2068. Vickerman, R. (1995). The channel tunnel: the case for private sector provision of public infrastructure, in Banister, D. ed. Transport and Urban Development, Chapman and Hall, London, pp. 96-122. Vickerman, R. (2002). Public and Private Initiatives in Infrastructure Provision, a paper presented at STELLA Workshop, Brussels, 26-27 April 2002. Centre for European, Regional and Transport Economics University of Kent at Canterbury. 258 Vives, A. (1996). Private Infrastructure: Ten Commandments for Sustainability. Inter-American Development Bank. Webb, R. (2004). The Commonwealth Government’s Role in Infrastructure Provision. Department of Parliamentary Services of Australia. Research Paper No. 8 2003-2004. Wegelin, A. E. (1990). New approaches in urban services delivery: a comparison of emerging experience in selected Asian countries. In Cities. Vol. 7, Issue 3, Willis, G. K., Turner, K . R. and Bateman, I. (2007). Urban planning and management. Published by Edward Elgar. Wills, K. G. (1995). Judging Development Control Decisions. In Urban Studies. Vol. 32, No. 7, 1995, pp. 1065-1079. Wong, C. (1997). Financing local government in the People's Republic of China. Published for the Asian Development Bank by Oxford University Press. Wood, W. (1985). Planning and the Law: A Guide to the Town and Country Planning Act. Yaacob, Y., and Naidu, G. (2000). Contracting for private provision of infrastructure: The Malaysian experience. In: Harinder Kohli, Ashoka Mody and Michael Walton (2000). Choices for Efficient Private Infrastructure Provision in East Asia. (Eds.). The World Bank, Washington, D.C. 259 Yaakup, A., Johar, F., Sulaiman, S., and Hassan, R. (2003). GIS and Development Control System for a Local Authority in Malaysia, In: Habitat International. 27 (2003) 683-696 : Pergomon Press Ltd. Zietlow, G. J., and Bull, A. (1999). Reform of financing of road funds in Latin America, a paper presented on the XXI World Road Congress, Kuala Lumpur. • Debt underwritten by Government can use very low interest rates – cheap form of capital. • Cannot access very low interest rates. • Most efficient where costs of managing risks do not exceed benefits of getting access to private capital. Private Debt • Not efficient in setting price signals for best value infrastructure provision. • Could redirect public funds from pure public goods towards goods for which there are alternative funding measures. Efficiency State Debt Debt Finance Consolidated State Revenue Funding Measure • Potentially able to raise very large funds subject to fiscal management imperatives of the State (AAA rating). • Effectiveness dependant on controlling risks – including interest costs / peak levels of debt. • Feasibility subject to securing and hypothecating a low risk revenue stream to fund debt. • May require a Special Purpose Vehicle (SPV). • Able to access large funds – but at higher cost. • Especially where a project (or area to be serviced stands alone) and relies less on a complex web of interrelated decisions that confound aspects of risk management. • Appropriate where governance structures for private-public partnerships are set up to assist in managing risks - and where these costs are acceptable. Equity • Shares costs over time among current and future generation beneficiaries. • Shares costs over time among contemporary and future generation beneficiaries. • Assumes the funding of a wholly public good – not a shared private benefit. • Poor linkage between payment and infrastructure provision. • Uses current public wealth to pay for long term community benefits. • Increased use of this source would require priority reallocation and further taxation. Evaluation Criteria • Unlikely to offer sufficient revenue when required. • Simple to administer and implement as part of a funding package. Effectiveness • Appropriate to fund public goods (subject to fiscal parameters) which represent a long term investment in the city’s future. • Appropriate where supported by a secure revenue stream from a funding source. • Appropriate to finance debt offbudget on the balance sheet of a SPV where Government interest rates can be accessed (and fiscal parameters are met). • Appropriate where risks are able to be managed by the private sector – otherwise requires significant Government underwriting and contractual controls. • Most appropriate where cceptable and reliable sources of revenue can be securely tied to a project (eg: tolls). • Useful to access alternative capital in an environment of fiscal constraint or where public capital has other high priorities. • Well suited to funding network infrastructure components. • Broadly understood and supported mechanism – until political trade-offs with core public services are exposed or extra taxation foreshadowed. Appropriateness (Source: Adapted from Funding Local Infrastructure, Department of Infrastructure, Planning and Natural Resources, Australia) Appendix A1: Evaluation of Alternative Local Infrastructure Funding Measures • Not a funding source – likely to require Government underwriting. • Operates subject to securing a private or public revenue stream (eg: tolls or levies). • Valuable where access to public capital is constrained. • Not a funding source – a financial management tool to smooth out peaks and troughs in costs and revenue – and ensure that costs are spread out over a longer time. • Operates subject to securing a private or public revenue stream (eg: tolls or levies). • Preferred mechanism for the immediate funding of public goods. • Unlikely to be sufficient funds for needs which have alternative funding sources. • As a default – this mechanism is the last resort to fund underwriting of other measures. Comment on Role 260 26 • Not efficient in setting price signals • High cost scheme due to complexity. • Uncertain revenue stream due to land value fluctuation. • But potentially large revenue pool. • Not efficient as a funding mechanism in its own right due to high revenue risk. • Funds local infrastructure and services on the basis of land value as a proxy for demand. Betterment Tax Direct Land Value Capture Local Rates Efficiency Hypothecated City-wide ‘Environmental’ Levy Funding Measure • Very effective and established local revenue raising mechanism. • Not relevant to regional infrastructure. • Impost set via balance sheet overseen by elected council. • Effective at delivering a place outcome where strategic land assets are acquired (e.g.: Rouse Hill regional centre). • High risk - amount of revenue able to be generated is very difficult to predict. • Proven difficult to implement due to complexity in setting valuation and measuring uplift. Equity • Plays a supporting role to ensure that existing local residents contribute to items that they share a benefit in. • Difficult to allocate a high proportion of rate income to new development due to existing resident rate base being the funding source. • May raise anti-competitive concerns where the State may be seen to be acting to maximise land value uplift rather than deliver broader outcomes. • Assume the proportion of uplift targeted is comparable to the benefit conferred by the Government planning and investment decision. • May target asset rich –. cash poor – requiring measures to collect revenue on sale rather than as an annual rate. • Indirect linkage between payment and infrastructure provision. • Payment unlikely to be equitable where beneficiaries are remote and where levels of payment are not sensitive to benefit received or capacity to pay (eg: flat fee across city). Evaluation Criteria . • Potentially very effective at raising funds for specific programs of work. • Unlikely to be sustained for long term or diffuse infrastructure provision where political will may wane. Effectiveness • Local rates perform a limited and strict role in funding a council balance sheet deficit. • Rates do reflect land value uplift but do not extend beyond their role described above – nor beyond the prevailing rate cap. • Rates are useful to fund recurrent local government expenditure. • Most appropriate as a component in a suite of measures – especially where the State needs to guarantee an outcome on a strategic site (eg: Rouse Hill regional centre). • Appropriate to target unearned uplift. • Contributes to broadening funding base by directly targeting the raw land owner. • Community/political backlash to 1970s scheme due to lack of nexus. • May act to pass infrastructure costs backwards and suppress raw land value. • Useful in establishing a new / independent source of targeted funds to achieve a specific result. • Used for specific projects with clear milestones. • Especially valuable to fund regional benefits without upsetting other funding regimes. • Desirable to have community and political buy-in and acceptance of result (eg: ocean outfalls levy). Appropriateness • Application limited by rate capping. • Funds capital and recurrent local expenditure. • Limited to funding council balance sheet. • Less applicable to greenfield development. • Most value as a supporting measure to lock in place outcomes as well as incidentally earn a return on investment. • Would work as a funding mechanism only where crafted to achieve revenue from high land value uplift infrastructure. • Anti-competition issues are raised. • Valuable to target land owner beneficiaries of unearned land value uplift. • Politically difficult to implement – history of 1970s betterment tax regime. • Hypothecated taxes to fund infrastructure bonds are a common feature of US system – typically the community vote to support these taxes. • May have role to fund catch-up and network connections or a specific program with measurable results. • Requires intense political will – likely to be only sustained for brief and visible programs. Comment on Role 261 26 Developer Agreements Developer Contributions Section 94 Contributions Funding Measure • More efficient for Government than contributions via a fund – as land an infrastructure costs can be internalised by the developer. • Agreement optimises provision of land and infrastructure by having the party most suited to manage the risks provide the land/works. • Price signal felt directly by the land or infrastructure provider. • Enables private innovation on delivery of needed works according to agreed specification. • Efficient means of setting the price and level of provision of local infrastructure according to the demands of new development. • Most efficient where costs are internalised to development as works in kind or land dedications. • Least efficient where goods are provided indirectly via a fund. • High administrative costs can hinder the process where income streams are low or erratic. Efficiency • Agreements are a valuable means of linking the execution of interrelated actions towards a common outcome for a development area. • The efficiencies discussed can only be achieved where an agreement binds all parties to their agreed responsibilities – especially where agencies are expected to make long term funding commitments. • Agreements are not effective where there is lingering uncertainty - it frequently proves difficult to finalise agreements and there are many cases of agreement negotiations spreading over many years. • Agreements are most effective where there is an underlying understanding of what is appropriate to be provided for the subject area. • As developer agreements may be complex – their formulation places a burden on the council and agencies involved especially in terms of requiring skilled personnel involvement. Equity • Most equitable where development agreements are genuine ‘agreements’ (not coerced) to progress the delivery of facilities the need for which is reasonably generated by development. • Most equitable where an agreement also ties down arrangements for the broader community to contribute to any public good being produced by the development. • Equitable where a contributions plan establishes reasonable nexus and accurately apportions costs between new and existing development (relying on other sources to fund existing beneficiaries). Evaluation Criteria • Least effective where fund accrues at a slow or irregular rate ill matched with expenditure needs. • Least effective where fund is exposed to land value escalation risks regarding land acquisition. Effectiveness • Most appropriate in major developments involving one/few owners and few agencies – where costs in negotiation are better balanced with the efficiencies gained from using this process. • Agreements need to clearly describe how they fit with surrounding funding arrangements – (eg: does any aspect of a contributions plan continue to apply say for community facilities). • Appropriate to deliver local infrastructure in high growth areas where new developments are the greatest beneficiaries and where contributions income is most predictable. • Well suited to apply to situations where there are multiple owners – with whom the negotiation of a consistent agreement would be very difficult. • Not well suited to apply to regional infrastructure especially due to difficulty of local government coordinating State infrastructure investment. Appropriateness • A more efficient means of internalizing development costs. • Most appropriate where the resources and administration to negotiate an agreement are repaid by the efficiencies – especially where there are one or few owners and large scale works / land dedication required. • There is a continuum between strict application of a contributions plan and the receipt of contributions as works in kind and the negotiation of a broad scope development agreement that although benchmarked against the contributions plan may adopt a different approach to achieve the desired outcomes. • Section 94 contributions delivers local infrastructure outcomes where contributions plans are well prepared and managed – especially where there is high growth (usually greenfields) and income is well matched to expenditure. • Works well when land value escalation risks are managed – especially where acquisition costs are internalised by developers through land dedication. • Works where there are multiple separate owners in development areas who are unable to cooperate to internalise the costs of delivery of needed land / works. Comment on Role 262 26 Tolls/Fares Parking Levies Road Pricing – Concession Extensions User Charging Benefit Assessments / Impact Fees on new development (hypothecated value capture funding works delivering a land value benefit) Flat Percentage Levies (on development) Funding Measure • If charges are set to represent the underlying value of the goods then they offer an efficient means of ensuring that needed goods are provided at the right price. • Question whether charges fund recurrent costs or capital costs of infrastructure, facilities or services provided – where capital costs are funded there is the argument that broader beneficiaries in addition to the current user should also pay. • Difficult to implement charging policy at a local scale (other than parking which has limited scope for funding unrelated items). • Most effective as a complementary funding tool addressing recurrent expenditure in areas relating to the item charged. • Set at around 1% of the value of new development – it would not be sufficient to fund the infrastructure and land needs of major Greenfield development. • However for slow growth areas a steady trickle of funds from this ource could fund modest local infrastructure needs. • Disconnected from price signals not efficient in ensuring that the right assets are delivered for the right price. • However efficient in terms of ease of collection and admin costs especially where income streams are slow and low. Equity • Very equitable in so far as it charges users the costs of the demands or impacts placed on the network or community. • Equity issues arise where user charging extends to fund long term capital improvements that benefit a broader range of beneficiaries other than actual current users.• However where charging is used to fund the mitigation of an impact arising from ‘use’ then full cost recovery may be warranted. • Flat percentage levies provide a very loose nexus between contributions from dispersed new development and local infrastructure / facility provision • However , it is arguable whether Section 94 contributions plans offer clear nexus in slow growth areas where funds are not necessarily spent in a manner that recognises a spatial or temporal nexus. • Danger of the flat levy being seen as a development tax – if poorly targeted without a plan for expenditure. • Targets anticipated benefits from land use changes and infrastructure prevision. Evaluation Criteria • Highly effective if community and political acceptance achieved. Effectiveness • US model more efficient than citywide levies due to targeted benefit areas paying into an hypothecated fund (or paying an infrastructure bond) to provide infrastructure. Efficiency • Appropriate as a distinct element of the funding mix – especially to support the recurrent costs associated with the use of the item being charged. • Where the item is a broad public good even user charging may not be appropriate. • Especially appropriate where there are dispersed but identifiable beneficiaries likely to achieve a windfall gain from land use change / infrastructure. • Well suited to be locked in to funding a securitised cost and revenue stream – eg: an infrastructure bond. • Most appropriate in areas where there is slow and dispersed growth with slow accumulation of contributions – in these situations reducing administration costs via a simpler mechanism would offer better outcomes in delivering community facilities. Appropriateness • Appropriate as a distinct element of the funding mix – especially to support the recurrent costs and externalities associated with the use of the item being charged. • Unlikely to be a dominant part of the development infrastructure funding mix but will play an important role funding recurrent costs and costs most attributable to the user. • Users are a subset of broader beneficiaries • Potentially applicable to slow or lowgrowth established urban areas or dispersed growth in regional / rural areas – especially where the administration costs of running a typical Section 94 contributions plan may substantially erode a fund. • Most appropriate to fund infrastructure or facilities with a similarly dispersed degree of benefit - eg: community centres. • US approach to development contributions. • Key advantage in US is that it is able to be secured to fund the payment of infrastructure bonds. Comment on Role 263 26 Sectors Where Most Appropriate Recurrent Expenditure Responsibility Commercial Risk i. Construction ii. Operation Risks (Cost) iii. Market Risks (Revenue) Non-commercial Risks Capital Investment Responsibility (inc. initial, upgrade & service expansion investment) Public Public Private Not applicable Public Public Public Public Public Public Public Public Public Agreed contract fee Not applicable Basis for Private Operator Payment (All are performance based) Public Once off Not applicable Contract Duration Revenue Collection Responsibility (inc. invoicing & collection) Public Public Infrastructure Ownership Traditional Public Contracting Complete Public Sector Delivery Characteristics Public Where limited capacity expansion required Low willingness pay Private Private Private Private Public (private operator funds capital maintenance expenditure) Public (some private) Unit cost plus margin (linked to estimated demand at contract inception). Up to 30 years Public Lease Contracts Public Private Public Public Private Public Public Agreed contract fee 5 to 10 years Public Service/ Management Contracts Where new facilities are required (e.g. toll roads) Private Private Shared (guaranteed minimum custom) Public Private Private operator (Public sector funds service expansion expenditure) Public Public sector guarantees to purchase a minimum level of output (based on unit cost of delivery) 20 to 30 years Public BOOT, BOO or BOT Schemes Networked based infrastructure (e.g. water) Public Private Private Private Private Private Private Similar to lease or BOOT contract 20 to 30 years Public Concession/ Franchise Agreements Where private capitals is required immediately Joint Private Public & Private Public and Private Public and Private Public and Private Joint Market driven (with regulation) Permanent Joint Joint Ventures Appendix A2: Different Type of Private Sector Involvement in Local Infrastructure Delivery Where competitive structure can be unbundled Private Private Private Private Private Private Private Market driven (with regulation) Permanent Private Full Privatization 264 26 265 Appendix B1: Method of privatisation of major infrastructure in Malaysia (National level of infrastructure) Sector and projects Method of privatisation Type of contract Ports Klang Port Kelang Container Terminal Kelang Port Management Klang Multi Terminal Johor Port Bintulu Penang Port Lumut Maritime Terminal Pelabuhan Tanjung Pelepas Kuantan Port Sale of equity (1986) Sale of equity (1992) Sale of equity and BOT(1986) Sale of equity (1995) Corporatization (1993) Corporatization (1994) BOOT (1993) BOOT (1995) Sale of equity Lease (21+30 years) Lease (21+30 years) Lease (30 years) and concession (33 years) Lease (30+30 years) Lease Lease Concession Concession Lease Roads North Klang Straits Bypass Jln. Kuching/Kepong Interchange KL Interchange North-South Expressway Second Link to Singapore Penang Bridge Butterworth-Kulim Expressway Seremban-Port Dickson Highway North-South Expressway Central Link KL-Karat Highway New North Klang Straits Bypass Cheras-Kajang Highway Elevated Highway over Sg.Klang and Sg. Ampang Damansara-Puchong – Putra Jaya Highway New Pantai Highway Sungai Besi Road BOT(1984) BOT(1985) BOT(1987) BOT(1988) BOT(1993) Management contract (1993) BOT(1994) BOT(1994) BOT(1994) BOT(1994) BOT(1995) BOT(1995) BOT(1996) BOT(1996) BOT(1996) BOT(1996) Water Supply Labuan Water Supply Ipoh Water Supply Larut Matang Water Supply Semenyih Dam Tube Well Maintenance, Labuan Johor Water Authority Pulau Pinang Water Authority BOT(1987) BOT(1989) BOT(1989) Management contract (1987) Management contract (1988) Corporatization (1994) Corporatization (1987) Power Tenaga National Berhad (TNB) Independent Power Producer (IPP) YTL-Paka and Pasir Gudang SEV-Lumut GSP-Sepang PDP-Port Dickson PSP-Powertek, Melaka Sale of equity (1992) BOT(1995)b BOT(1996-1997)b BOT(1994-1996)b BOT(1995)b BOT(1995)b (1990) Telecommunications Telekom Malaysia Berhad 10 Private telecommunications operators Corporatization (1992) Corporatization (1992) Others KTM Berhad (Malayan Railway) Malaysian Airports Berhad National Sewerage System (IWK) Light Rail Transit System I (phase 1) Light Rail Transit System I (phase 2) Light Rail Transit System II BOT(1992) BOT(1993) BOT(1994) BOT(1994) Concession (25 years) Concession (16 years) Concession (30 years) Concession (30 years) Concession (30 years) Management contract (25 years) Concession (32 years) Concession (30 years) Concession (25 years) Concession (27 years) Concession (25 years) Concession (30 years) Concession (33 years) Concession (33 years) Concession (30 years) Concession (30 years) Concession Concession Concession Management contract Management contract Lease Lease License (21 years) Power purchase agreement (21 years) Power purchase agreement (21 years) Power purchase agreement (21 years) Power purchase agreement (21 years) Power purchase agreement (21 years) License (21 years) Lease Lease Concession (28 years) Concession (60+60 years) Concession (60+60 years) Concession (60+60 years) Note: i. BOT is Build-Operate-Transfer; BOOT is Build-Operate-Own-Transfer. ii. a. Transaction was pending in 1996. b. Date of commissioning. Source: Yahya Yaakob, Naidu, G. (2001). 3.66 3.65 2.242 17.89 22.2 Total infrastructure expenditures 2002 Years 33.53 6.35 2.3 2.83 22.05 2003 40.2 12.7 1.2 3.7 22.6 41.8 10.8 1.2 2.2 27.6 2004 (Source: Adapted from City Council of Johor Bahru, 2005) Appendix B2: Infrastructure Expenditures in City Council of Johor Bahru 2000-2004 27.44 2001 2000 0.001 1.2 1.5 19.5 0 5 10 15 20 25 Public Utilities Hawkers facilities Offices/Buildings/Lands Drainage system, Flood control, Sewerage and Roads Expenditures (RM'million) 30 26 266 10.7 2.1 0.4 21.0 3.7 0.5 23.8 Public Utilities Hawkers facilities Offices/Buildings/Lands Drainage system, Flood control, Total infrastructure expenditures 37.5 3.8 19.0 0.2 2.1 12.4 2004 Source: Adapted from Municipal Council of Johor Bahru Tengah (MPJBT), 2005 Appendix B3: Infrastructure Expenditures in Municipal Council of Johor Bahru Tengah (2002-2004) Years 2.7 36.8 3.3 38.9 Electricity/Water Sewerage and Roads 2003 7.5 0 5 10 15 20 25 30 35 40 2002 Expenditures (RM'million) 45 26 267 5.05 1.01 0.47 3.92 10.45 3.83 0.05 0.50 3.01 7.38 Public Utilities Hawkers facilities Offices/Buildings/Lands Drainage system, Flood control, Sewerage and Roads Total infrastructure expenditures Years 15.09 6.40 0.00 1.62 7.08 2002 11.95 6.50 N.A N.A 5.45 2004 N.A - Data not available 17.05 7.50 0.15 0.40 9.00 2003 Source: Adapted from Municipal Council of Kulai (2005) Appendix B4: Infrastructure Expenditures in Municipal Council of Kulai (2000-2004) 2001 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 2000 Expenditures (RM 'million) 18.00 26 268 Construction of Children Playground Construction and upgrading of Children Playground Construction of Children Playground Construction of Orchid Farm 2. 3. 4. 5. MBJB MBJB 2,798,737.06 159,250.00 176,000.00 168,910.00 350,000.00 15,000.00 Allocation (RM’000) 2,798,737.06 150,250.00 152,680.00 152,310.00 317,000.00 Development Cost (RM’000) 2003 2003 2003 2003 2002 Year approved MBJB - Majlis Bandaraya Johor Bahru Source: Adapted from City Council of Johor Bahru, 2005 Jalan Tasek Utara, Johor Bahru Jalan Pinang 4, TamanDaya , Johor Bahru JLN JLN Jalan Meranti 15, Taman Rinting Jalan Perkasa 1/1 Taman Tampoi Utama, Johor Bahru KPKT MBJB Source of funds Kg. Ungku Mohsin, Johor Bahru Location KPKT - Ministry of Housing and Local Government JLN - National Department of Landscape Construction of Community Hall 1. Indicators: Name of projects No 18.2.2003 3.3.2003 3.3.2003 3.3.2003 16.4.2003 Expectation date of completion Appendix B5: List of the completed projects funded by federal government allocation for MBJB,2003 26 269 Maintenance of drainage system at Sg. Chat Construction of Hawkers Complex Construction of Multi-purpose Community Hall Construction of Community Hall Construction of Multi-purpose Community Hall 7. Indicators: 11. 10. 9. 8. 6 5. 4. Source of funds KPKT MT MBJB KPKT MBJB KPKT MBJB KPKT MBJB KPKT MBJB KPKT MBJB KPKT MBJB KPKT MBJB KPKT, MBJB KPKT MBJB 500,000.00 700,000.00 500,000.00 1,000,000.00 500,0000.00 450,000.00 800,000.00 500,000.00 300,000.00 250,000.00 Allocation (RM’000) 178,818.00 1,500,000.00 289,763.90 400,000.00 100,000.00 250,000.00 50,000.00 1,025,547.00 1,161,629.20 754,384.91 935,000.00 1,454,444.00 184,159.42 860,767.00 1,025,047.00 335,640.00 432,613.50 Development Cost (RM’000) 317,000.00 4,394,763.90 2003 2003 2003 2003 2003 2003 2003 2003 2003 Year approved 2003 2003 MBJB - Majlis Bandaraya Johor Bahru MT - Ministry of Tourism Source: Adapted from City Council of Johor Bahru, 2005 PTD 39809, Taman Cempaka, Johor Bahru PTD 101028, Jalan Permas 9/3, Bandar Baru Permas Jaya PTD 32095, Jalan Anggerik 5/1, Taman Anggerik Johor Bahru PTD 1664, Jalan Senduduk, Taman Pandan, Johor Bahru Kg Mohd Amin, Johor Bahru Jalan Banjaran 5, Kempas Kg Melayu Majidee Kawasan Kempas 9, Kempas Baru Kampung Plentong Baru Jalan Stulang Darat Jalan Meldrum (fasa2) Location KPKT - Ministry of Housing and Local Government JLN - National Department of Landscape Construction of Pedestrian Construction for Tourism and Handcraft Centre Construction of new roads and drainage system Upgrading of existing roads and drainage system Upgrading of existing roads and drainage system Construction of new roads 1. 2. 3. Name of projects No 10.4.2003 10.8.2003 25.4.2003 31.7.2003 31.10.2003 6.10.2003 6.8.2003 6.9.2003 5.10.2003 Expectation date of completion 19.7.2003 12.1.2004 Appendix B6: List of projects under construction funded by federal government allocation for MBJB (2003) 27 270 1,968,960.00 3,000,000.00 35,536.46 4,000,000.00 2,639,695.50 Allocation (RM’000) 3,589,379,89 6,639,695.50 3,035,536.43 Development Cost (RM’000) 3,589,379.89 MBJB - Majlis Bandaraya Johor Bahru MT - Ministry of Tourism 2003 2003 2003 Year approved 2003 22.10.2003 21.8.2004 7.8.2003 Expectation date of completion 21.8.2003 Source of funds MT MBJB Allocation (RM’000) 500,000.00 1,549,646.00 Development Cost (RM’000) 2,049,646.00 MT - Ministry of Tourism Source: Adapted from City Council of Johor Bahru, 2005 Jalan Meldrum, Johor Bahru (infrastructure) MBJB - Majlis Bandaraya Johor Bahru Proposed Construction for Tourism and Handcraft Centre 1. Location Year approved 2001 Expectation date of completion 14.3.2003 Appendix B8: List of the completed projects funded by State Government allocation for MBJB, 2003 Name of projects Indicators: JKR JLN MBJB JLN MBJB Source of funds MBJB Source: Adapted from City Council of Johor Bahru, 2005 Median Jalan Tebrau from Persimpangan Jalan Tengku Azizah until the junction of Jalan Kebun, Johor Bahru Bulatan Sawmill to Jalan Dato’ Onn, Johor Bahru Jalan Wong Ah Fook and Sg. Segget, Johor Bahru Jalan Kolam Air, Johor Bahru Location KPKT - Ministry of Housing and Local Government JLN - National Department of Landscape No Indicators: 4. 3. Development along Jalan Wong Ah Fook and the Cleansing of Sg. Segget Beautifications of Landscape at Median Construction of National Public Park Construction of Taman Poket 1. 2. Name of projects No Appendix B7: List of projects under construction funded by federal government allocation for MBJB,2003 27 271 Upgrading sewerage pipe Construction of concrete drainage Maintenance of drainage system Maintenance for drainage system to avoid flood problems Installation of traffic light and upgrading road junctions Modifications of the design of Geometrical Junction Modifications of the design of Geometrical Junction Installation of traffic light and upgrading road junctions 5. 6 13. 12. 11. 10. 9. 8. 7. 4. Construction of bus stop Construction of Pedestrian Improvement and upgrading the road surface Improvement and upgrading the road surface Road maintenance and widening 1. 2. 3. Name of projects No MBJB MBJB MBJB MBJB MBJB MBJB MBJB 105,389.15 192,581.00 116,901.44 197,359.70 493,164.51 230,431.00 131,499.00 4,167,678.12 4,893,460.00 MBJB MBJB 151,931.00 582,710.00 Allocation (RM’000) 2,561,428.00 447,880.00 MBJB MBJB Source of funds MBJB MBJB 105,389.15 192,581.00 116,901.44 197,359.70 493,164.51 64,472.08 116,001.00 3,241,993.45 3,841,556.47 - 382,861.76 Development Cost (RM’000) 1,051,667.90 275,825.99 Indicators: MBJB - Majlis Bandaraya Johor Bahru Source: Adapted from City Council of Johor Bahru, 2005 Jalan Suria Utama/ Jalan Murni 8, Taman Suria, Johor Bahru Jln Tebrau/Jln Kuning/Jalan Harimau Johor Bahru Jalan Tebrau/ Jalan Bakar Batu, Johor Bahru Jln Masai/ Jalan Ara (Taman Rinting/Jln Suria 1 (Bandar Seri Alam) Masai Johor. Infront of Sultanah Aminah General Hospital, Johor Bahru. Jalan Istimewa, Johor Bahru Jalan Darapper, Jalan Taat, Jalan Dato’ Hj Abdullah, Jalan Dato’ Mohamed Johor Bahru. Sg. Sengkuang from Jambatan Jalan Sutera until Pembentung Jalan Pasir Pelangi, Kg Bakar Batu, Johor Bahru. Sg. Bala, Taman Sri Amar, Fasa 2, Majidee, Johor Bahru Taman Rinting, Johor Bahru Jalan Tan Hiok Nee, Pusat Bandar Jalan Serampang, Taman Pelangi, Johor Bahru Jalan Sri Setia, Johor Bahru Location 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 Year approved 2002 2003 4.4.2003 27.6.2003 28.3.2003 28.3.2003 30.3.2003 8.6.2003 18.5.2003 3.4.2003 10.3.2003 21.10.2003 10.4.2003 Expectation date of completion 3.4.2003 23.4.200 Appendix B9: List of projects under construction funded by internal funds for MBJB, 2003 27 272 Upgrading of football field and construction of Astaka Additional works at Food stalls Construction of stalls Construction of 10 units of stalls Construction of tennis court Construction of stall List of projects funded by Ministry of Housing and Local Government grants Construction of 5 units of shop lots Construction of community hall and 4 badminton courts Construction of stall Construction of stall football field Construction of basketball court Construction of sewerage pipes, drainage and maintenance of existing roads Replacement of drainage from house No 185A hingga 138 Installation of 60 units of street lighting unit Installation of decorative street-lighting 1. 2. 3. 4. 5. 6. B 1. 2. 3. 4. 5. 6. 7. 8. 9. List of public facilities projects A Location 500,000.00 90,000.00 200,000.00 649,000.00 1,633,450.00 526, 200.00 159,861.00 94,992.00 500,000.00 596,552.00 348,958.00 117,586.00 296,300.00 308,450.00 374,380.00 Allocation (RM) Source: Adapted from Majlis Perbandaran Johor Bahru Tengah (MPJBT), 2005 Jln Ulu Choh, Kg Baru, Gelang Patah Kg Baru Ulu Choh Taman Johor Jaya Jln Lawang, Skudai Taman Pelangi Indah Taman Sri Pulai Taman Desa Skudai Jalan kebudayaan,Taman Universiti Kg Poh Chi Leng Jalan Dedap 1, Taman Johor Jaya. Jalan Hang Tuah, Taman Skudai Baru Jalan Hang Tuah Taman Skudai Baru Jln Bunga Seroja, Kg Baru Plentong Behind of Multi-purposecommunity hall, Taman Universiti At PTD 47477, Jln Penyiaran 2, Tmn Universiti Name of projects No Appendix B10: List of development projects in MPJBT, 2003 27 273 274 Appendix B11: List of development projects in Majlis Perbandaran Kulai (MPK), 2002-2003 No Name of projects Location 1. MDK T/1/2002: Construction of Public Market Saleng, Senai Johor MDK.T/2/2002: Construction of Public Market Saleng, Senai Johor MDK.T/3/2002: Upgrading the road of Jalan Kampung Melayu, Kulai MDK.T/4/2002: Installation of streetlighting at Tol Kulai until junctions of Jalan Persekutuan MDK.T/5/2002: Construction of Monsoon drain at Kelapa Sawit Fasa 2 MDK. T/8/2002: Upgrading government department’s roads and roads at Kampung Baru Kulai MDK.T/4/2003: Upgrading the main roads of Taman Sri Kulai Baru via Taman Sri heading to Taman Putri and Gunung Pulai, Kulai MDK.T/5/2003: Construction and upgrading of concrete drain a Parit Konkrit from Ch.365m until Ch. 495m at Bt 21, Kulai, Daerah Johor Bahru MDK.T/6/2003: Upgrading the main existing sewerage plant at Jalan Air Hitam Bt 20, Mukim Senai/Kulai Johor Saleng 2. 3. 4. 5. 6 7. 8. 9. Source of funds MPK Allocation (RM’000) 274,700.00 Year approved 5.8.2002 Kulai MPK 399,241.50 24.10.2002 Kulai KPKT 442,309.00 26.9.2002 Kulai KPKT 485,800.00 7.11.2002 Kelapa Sawit Kulai MPK 747,839.50 15.8.2003 MPK 1,255,2217.50 19.6.2003 Kulai MPK 900,899.00 10.11.2003 Kulai MPK 789,635.50 4.4.2004 Kulai MPK 900,899.00 7.3.2004 Source: Adapted from Majlis Perbandaran Kulai (MPK), 2005 Indicators: KPKT - Ministry of Housing and Local Government MPK - Majlis Perbandaran Kulai 275 Appendix 4.12: Examples of Planning Agreement by Local Planning Authority to Securing Infrastructure Provision THE UNILATERAL UNDERTAKING is given this _____________________ day of ___________________________ 200 BY 1. _________________________________________ (“the Applicant”) TO 2. MAJLIS PERBANDARAN PULAU PINANG (“ The Council”) WHEREREAS: 1. The Council is the Local Authority for the purpose of the Local Government Act 1976 and the Street, Drainage and Building Act 1974 and the Local Planning Authority for the purposes of the Town and Country Planning Act 1976 in respect of the land described in the First Schedule (“the Land”). 2. The registered proprietor of the Land is ___________________________________ 3. The Applicant has simultaneoustly submitted an application dated ___________________ (“the Planning Application”) bearing Reference ________________ to the Council for permission to develop the Land in manner for the uses set out in the Planning Application and in the plans specifications and particulars deposited with the Council and forming part of the Planning Application more particular set out in the Second Schedule (“the Development”). 4. The Applicant has resolved vide their ______________ to furnish this Undertaking voluntarily. resolution ________________ on 276 NOW THIS DEED WITNESSETH as follows: 1. The Application is gratuitously voluntarily Undertaking to the Council to and willingly giving this irrevocable make a contribution of RM ________________________pursuant to Section 132 (1) of the Street, Drainage & Building Act 1974 towards the cost of beautification or construction or improvement or upgrading of any street, road side drain, culvert, footways within the area of the Council as a result of an increase in the density and/or an increase in the plot ratio of the proposed residential development above the permissible residential density and/or an increase in the plot ratio of the proposed nonresidential development above the permissible plot ratio notwithstanding and conditions or charges that may be imposed by the Council in Planning Application. 2. 3. This Unilateral Undertaking: i). is given by the Applicant to the Council; ii). shall be enforceable by the Council; iii). is executed by the Applicant as a deed. The Applicant shall indemnify and keep indemnified the Council against all actions, proceedings, liabilities, claims, costs, expenses and demands in relation to or arising out of the payment of the contribution to the Council. 4. The Applicant hereby agrees declares and undertakes that the contribution made under this Unilateral Undertaking shall remain enforceable agains the Applicant and the Applicant further agrees declares and undertakes that the Applicant shall be estopped from denying the validity of this Unilateral Undertaking and the payment of the contribution and shall not be entitle to restitution of the contribution. 5. The Applicant agrees that the contribution shall be administered by the Council at its absolute discretion pursuant to the provision of the Local Government Act 1976 and the Street, Drainage & Building Act 1974. 277 FIRST SCHEDULE SECOND SCHEDULE IN WITNESS WHEREOF the Applicant has caused its Common seal to be affixed to this Deed the day and year first before written. The Common Seal of ) ) ________________________ ) ) was hereto affixed ) ) in the presence of :- __________________________ Director ) _________________________ Secretary 278 BOARD RESOLUTION Whereas the company is desirous of obtaining planning permission to develop the Land known as ______________________________________ and for the uses set out in the Planning Application and in the plans specifications and particulars deposited with the Council, it is hereby resolved that; 1. The company do give an irrevocable undertaking to the Council to make a contribution of RM___________ pursuant to section 132 (1) of the Street, Drainage & Building Act 1974 towards the cost of beautification or construction or laying out or improvements or upgrading of any street, road side drain, culvert, footway within the area of the Council as a result of an increase in the density of the proposed residential development above the permissible residential density and/or an increase in the plot ratio notwthstanding any conditions or charges that may be imposed by the Council in the Planning Aplication and that the Company shall undertake not to challenge the validity of this irrevocable Undertaking, the contributions made thereof and how the contribution is administered. 2. The Company indemnify and keep indemnified the Council against all actions, proceedings, liabilities, claims, costs, expenses and demands in relation to or arising out of the payment of the contribution to the Council under the irrevocable Undertaking. 3. That (name of director) be appointed to execute the irrevocable Undertaking on behalf of the Company’s Comman seal be affixed to the irrevocable Undertaking. Dated this _____________________ day of __________________________ 200 ___________________________ __________________________ Director Secretary 279 Appendix C1: The distribution of local authority in Malaysia State City Hall City Council Municipal Council District Council Kedah Johor Kelantan Melaka Negeri Sembilan Pahang Perak Perlis Pulau Pinang Federal Territory of Kuala Lumpur Selangor Terengganu 1 1 1 1 1 - 3 6 1 1 3 2 3 1 2 - 8 9 11 1 5 9 11 - - 1 - 7 2 4 5 Sabah* Sarawak* 1 1 1 2 3 19 21 Total (N=145) 3 6 36 100 * These states are not included in the field survey (Source: Field survey, 2005) 280 Appendix C2: Set A1 - Local Authority Survey Respondent Code Department of Urban and Regional Planning Last edited: 24.01.06 Faculty of Built Environment Universiti Teknologi Malaysia. 81310, Skudai Johor Bahru. Johor. Phone No. 019 4446887 Fax No. 604 9284379 West Malaysia. Local Infrastructure Provision and Development Control System in Malaysia Set A1: Local Authority Survey INSTRUCTION FOR RESPONDENTS Thank you for being one of the research respondents. This research is conducted in fulfilment of the requirements for the award of the degree of Doctor of Philosophy. All of the information given will be treated confidentially. To complete this questionnaire, please read all the instructions then answer the questions. The main objective of the study is to identify the perceptions of developers and local authorities on off-site local infrastructure provision with reference to planning approval system in Malaysia. Off-site infrastructure will be referred to the infrastructure facilities needed outside proposed development areas. For the purpose of the study, it will refer to two types of infrastructure; i). Economic infrastructure usually refers to public utilities such as highways, drainage system and etc. due to their 'hard' engineering-based delivery networks, and ii). Social infrastructure refers to public amenities which include public facilities such as schools, public hospitals, police and etc. Therefore, this survey is designed to collect the appropriate data to answer the following research questions. i. ii. iii. iv. How does local authority secure its off-site infrastructure? How does planning approval system is used to secure off-site infrastructure? What are the problems related to off-site infrastructure provisions in obtaining planning approval? What are the opinion of developers and local authorities on the possible approach in securing off-site infrastructure provision?. Notes : Questions in Section B refers to information provided in Appendix 1 and 2 (the overleaf attached). Researcher’s Remarks Date of Interview : __________________ Date of questionnaire received : ___________________ 281 Section A : RESPONDENT PROFILE A1 Name of local authority : ____________________________________________________________________ A2 Type of local authority (Please ticks) City Hall Municipal council City Council District council A3 Name of representative : ____________________________________________________________________ A4 Year of experience : _________________________________________________________________________ A5 Current position held : _____________________________________________________________________ Section B : HOW PLANNING APPROVAL SYSTEM IS USED TO SECURE OFF-SITE LOCAL INFRASTRUCTURE? B1 Has this local authority ‘initiated’ any method to secure off-site infrastructure provision during planning approval process?. Yes No (If ‘YES’ please answer the following questions) i. State the name of the method (guidelines / approaches) : __________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ ii. How effective is the method? _______________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ iii. What are the reactions of developers: ________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 282 B2 During planning approval stage (if any), please describe any specific procedure applied to secure off-site infrastructure? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ B3 Would you suggest how planning approval system can be applied to secure adequate off-site local infrastructure?. __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ Section C : HOW LOCAL AUTHORITY SECURE ITS OFF-SITE INFRASTRUCTURE PROVISION? C1 Does your local authority get involved in the provision of off-site infrastructure? Yes No C2 Why private sector is used for off-site infrastructure provision? 1. To assess market needs 2. To raise necessary resources (e.g. financing) 3. Ability to identify and manage risks 4. To provide contemporary management skills and optimize performance 5. To improve the efficiency and quality of services 6. Efficiency improved when exposed to competition 7. Others (please specify) :_________________________________________________________ 1 0123 0123 0123 0123 0123 0123 0123 6. BOOT, BOO or BOT Schemes 7. Concession/ Franchise Agreements 8. Joint Venture (JV) 9. Full Privatization 10. Planning Requirements 11. Planning Contribution 12. Others (Please specify ): 2 0123 5. Public-Private Partnership (PPP) Please circle in relevant cells of the following table. Where 0 = Not applicable; 1 = Not Successful; 2 = Successful; 3 = Very successful. 1 - Construction of new local roads 2 - Local road maintenance 3 - Drainage 4 - Landscaping 5 - Recreation facilities Type of off-site infrastructure 0123 0123 4. Lease Contracts b. 0123 3. Service/ Management Contracts 0123 0123 2. Traditional Public Contracting a. 0123 Level of success 1 1. Complete Public Sector Delivery Type of delivery 6 - Parking facilities 7 - Incinerator plants 8 - Parks, gardens or open space 9 - Betterment of existing local infrastructures 10 - Other public utilities (e.g. Sewerage, monsoon drain, etc.) 11 - Other public amenities (e.g. market etc.) 12 - Maintenance of existing off-site infrastructure Please list type of off-site infrastructure delivered2 C3 For each type of the delivery methods listed below, would you please list the appropriate type of off-site infrastructure that can be delivered using this method? 283 283 ) ) 7. Full Privatization (Level of success = 9. Planning Contribution (Level of success = ) 8. Planning Requirements (Level of success = ) ) 6. Joint Venture (JV) (Level of success = 5. Concession/Franchise Agreement (Level of success = ) 4. BOOT, BOO or BOT Schemes (Level of success = ) 3. Public-Private Partnership (PPP) (Level of success = ) 2. Lease Contracts (Level of success = 1. Service/ Management Contracts (Level of success = ) Type of delivery Not Successful Successful/Very successful C4 From question B3, if you answered ‘1=Not Successful or 2/3= Successful/Very successful’ please describe the factors that contribute to the varying performance of the private infrastructure delivery 284 284 285 Section D: THE PROBLEMS RELATED TO OFF-SITE INFRASTRUCTURE PROVISION IN OBTAINING PLANNING APPROVAL D1 What are the problems related to off-site local infrastructure provision often faced by developers during planning approval stage. You may tick [ / ] more than one box. 1. Local authority is inconsistently considering planning permission for those projects involved with off-site infrastructure requirements. 2. High percentage of fund/land has to be allocated for public amenities. 3. Requirement to provide off-site infrastructure normally reflects the increase in development cost. 4. Less commitment from developers due to the perception that traditionally local authority have to provide those infrastructure. 5. Developers finds that the guidelines used by local authority to impose off-site infrastructure was not clear and against the present planning regulations. 6. Developers refuse and always use other channels (e.g. political channel) to avoid them from fulfilling the requirements. D2 What are the problems encountered by your local authority to secure off-site infrastructure provision? The problems i. ii. iii. iv. Suggestion to overcome the problems 286 Section E : THE PERCEPTIONS OF LOCAL AUTHORITY ON OFF-SITE LOCAL INFRASTRUCTURE PROVISION E1 What are the major drivers of private sectors involvement in off-site infrastructure provision? 1. Meeting initial requirements of local authority 2. Lowering local authority allocation on infrastructure 3. Improving quality of service delivery 4. Bring forward investment 5. Enable to reduce infrastructure cost 6. Local authority lacks of technical expertise to manage such project 7. Encourages economic development 8. Lowers local authority’s capital requirements 9. Access to private sector capital ‘ options’ 10. Use of private sector’s expertise 11. Broaden scope of services 12. Others (please specify) : E2 What are the Local Authority’s perceptions on off-site infrastructure provision 1. Development control process incurs additional development cost. 2. Developers are required to provide off-site infrastructure as a return from additional approval granted to developers. 3. The gradual improvement in off-site infrastructure provision is to exposed competitive market. 4. Indirectly planning gain has being practiced widely in securing off-site infrastructure in most local authorities in Malaysia and however the practice was improperly practiced. 5. The principal rationale of why off-site infrastructure provision has to be provided by local authority because of its ‘public good characteristics’. 6. Both private developers and local planning authorities (LPAs) are very keen in off-site provision through the concept of ‘planning obligation’ and not ‘planning gain’ which is claimed by private sector as the abuse of public rights. 7. Planning gain is about the ‘willingness’ of private developers to provide (to contribute) off-site infrastructure to local authorities in exchange of extra or maximum development approval. 8. Developers will provide on-site physical infrastructure and the public authority will provide off-site physical and other forms of infrastructure. 287 E3 What are the suggestions/opinions to secure off-site infrastructure? 1. (Act 133), is an efficient method to involve private sectors (property developers) in local infrastructure development. 2. There is a possibility that local authority use planning gain to secure its off-site infrastructure provision. 3. Most developers are willing to fulfill the requirements of off-site infrastructure within the catchments of proposed development. 4. Developers are keen to provide other infrastructure in the surrounding development area as it can make the development attractive to purchasers. 5. Developers should be allowed for maximum development in order to cope with the increased cost of development if the developer is willing to provide off-site infrastructure. However, the exercise must comply with other requirements. 6. A maximum development should be granted to those developments that are willing to provide off-site infrastructure. 7. Most property developers are willing to negotiate the requirements of off-site infrastructure as imposed by local planning authorities in order for them to get additional or maximum planning approval. 8. Some new developments will generate the ‘development impact’, therefore there is a need for local authority to impose extra charges (e.g. Development Impact Charge) for the use of infrastructure to reflect the use of resources. 9. The offer of off-site infrastructure by developer is likely to have a significant effect in loosing up planning permission from reluctant local planning authorities. 288 E4 What is your opinion on the appropriate type of delivery for the following off-site infrastructures. You may tick [ / ] more than one box. Construction of new local roads Local road maintenance Drainage Landscaping Recreation facilities Parking facilities Incinerator plants Parks, gardens or open space Betterment of existing local infrastructures Other public utilities (e.g. Sewerage etc.) Other public amenities (e.g. market, bus etc.) Maintenance of existing off-site infrastructure Others (Please specify) : _____________________ Section F : THE SUGGESTIONS ON HOW OFF-SITE LOCAL INFRASTRUCTURE PROVISION CAN BE SECURED BY LOCAL AUTHORITY? F1 In what form of contribution do you think the developers could provide off-site infrastructure. Where 1 = Not appropriate, 2 = Lease appropriate, 3 = Slightly appropriate, 4 = Appropriate, and 5 = very appropriate. 1. Financial contribution for existing off-site infrastructure improvement. 12345 2. Donating land or easements at no cost for off-site infrastructure facilities. 12345 3. Constructing infrastructure improvements to meet the needs of the proposed development. 12345 4. Leasing completed off-site infrastructure to local authority, or some other entity. 12345 5. Allowing public access and use of privately owned land and facilities. 12345 6. Selling land to a public authority at less than market cost for the purpose of off-site infrastructure facilities. 12345 7. Maintenance of public use facilities, either permanently or for some specified period. 12345 8. Paying fees to public authority towards the cost of operating and maintaining public land or 12345 Planning Approval Private Finance Initiative (PFI) Full Privatization Joint Venture (JV) Concession/ Franchise Agreements BOOT, BOO or BOT (Schemes) Through Public-Private Partnership (PPP) Lease Contracts Type of off-site infrastructure delivered Service/ Management Contract Type of delivery 289 facilities. 9. Existing road improvements (or provision). 12345 10. Provide urgently infrastructure at the other sites. 12345 11. Dedication of land for public use. 12345 12. Commuted payments for car parking. 12345 13. Provision of community buildings or facilities. 12345 14. Provision of drainage system. 12345 15. Other public building/facilities (e.g. community centre, public library etc.) 12345 16. Cash payment towards capital cost of constructing facilities or improvement. (Including commuted payment for construction of off-site parking space). 12345 17. Constructs infrastructure then dedicate for public use. 12345 18. Joint-funding to expand infrastructure capacity to serve subsequent development in surrounding areas. 12345 19. Others (Please specify) : ______________________________________________________ 12345 F2 Please tick [ / ] the level of appropriateness on how to encourage or promote private developer in offsite infrastructure provision. Where 1 = Not appropriate, 2 = Lease appropriate, 3 = Slightly appropriate, 4 = Appropriate, and 5 = very appropriate. 1. Local authority should have Infrastructure Priority Lists (IPL) used as check-list when come to the negotiation of infrastructure requirements between a local authority and a private developer. 12345 2. Introduce an attractive incentive. (e.g. ‘Fast-Track’ approval at planning stage). 12345 3. Introduce a proper and transparent method of developer’s contribution negotiation (planning agreements). 12345 4. Introduce an attractive infrastructure contribution scheme out-site of proposed development location. This might be applicable for proposed development located in the area where already have adequate number of infrastructure. 12345 5. Negotiation would be the best approach applied in order to achieve a ‘win-win’ situation between a private developer and a local authority. 12345 6. Public-Private Partnership (PPP) concept can be adopted as one alternative to secure off-site local infrastructure provision by local authority. 12345 7. Off-site infrastructure should be financed directly out of general tax revenues. 12345 8. Off-site infrastructure should be financed using a special fund generated by local authority (e.g. ISF provided under Act 133). 12345 9. Off-site infrastructure should be financed by project owner (e.g. developers). 12345 10. Off-site infrastructure should be financed by both parties; developer and local authority. 12345 290 11. The direct user of infrastructure might be charged and therefore revenues from such charges should be deposited into the so called ‘infrastructure fund’ and not into council general fund 12345 12. LPAs should initiate private developers to sign planning agreements on the purpose to require private developers to provide off-site infrastructure facilities in return of additional planning approval? (e.g. Unilateral Undertaking). 12345 13. Local authority needs to set up a special mechanism to expedite the planning approval of those projects involved with off-site infrastructure requirements. 12345 14. The cost incurred in providing off-site infrastructure should be shared with other utility bodies and should not be a burden to developers only. 12345 15. To overcome the possibility of excessive cost of development, a lower standard of materials could be permitted for the purpose of off-site infrastructure provision. 12345 16. The local off-site infrastructure can be secured from development approval stage by quantifying the ‘development impact’ as a result from the proposed development. 12345 17. The negotiation of contribution for off-site infrastructure by developers should be initiated properly and transparently by a local authority. 12345 18. There is a need for private sector to participate in off-site infrastructure provision to reduce the cost on public sector. 12345 F3 What suggestions would you put forward to ensure the success of private developers involvement in off-site infrastructure provision in your local authority?. _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ F4 Would you suggest the most effective methods to ‘justify’ the need of private sector (developers) to provide off-site local infrastructure? _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ 291 F5 Base on the previous sections, would you please name ONE of developers which is in favour to off-site local infrastructure provision approach. Please note that the recommended developer will be approached by the researcher for the Developers Survey. Name of Project Name of Developers (Address) Type of Contribution (e.g. Local road/market etc.) Contact Person (Phone/Fax) Public Once off Agreed contract fee Public Public Public Private Not applicable Public Public Public Not applicable Not applicable Public Public Public Public Public Public Public Infrastructure Ownership Contract Duration Basis for Private Operator Payment (All are performance based) Revenue Collection Responsibility (inc. invoicing & collection) Capital Investment Responsibility (inc. initial, upgrade & service expansion investment) Recurrent Expenditure Responsibility Commercial Risk i. Construction ii. Operation Risks (Cost) iii. Market Risks (Revenue) Example Non-commercial Risks Sectors Where Most Appropriate Traditional Public Contracting Complete Public Sector Delivery Characteristics These are uncommon but may include toll roads, wastewater treatment plants, health facilities, etc. Public Where limited capacity expansion is required An example is the outsourcing of leisure facilities to private management/ operation. These are common arrangements and include maintenance contracts, design and construct contracts, etc. Private operator (Public sector funds service expansion expenditure) Private 20 to 30 years Public sector guarantees to purchase a minimum level of output (based on unit cost of delivery) Public Public BOOT, BOO or BOT Schemes Public Low willingness to pay Private Private Private Private Public (private operator funds capital maintenance expenditure) Public (some private) Up to 30 years Unit cost plus margin (linked to estimated demand at contract inception). Public Lease Contracts Private Private Shared (guaranteed minimum custom) Public Where new facilities are required (e.g. toll roads) Private Public Public Private Public Public 5 to 10 years Agreed contract fee Public Service/ Management Contracts These agreements may cover water and electricity infrastructure networks, etc. but are uncommon at the local level.. Public Network based infrastructure (e.g. water) Private Private Private Private Private Private 20 to 30 years Similar to lease or BOOT contract Public Concession/ Franchise Agreements Appendix 1: Characteristics of Local Infrastructure Delivery Joint Where private capital is required immediately Private Public & Private Public and Private Public and Private Public and Private Joint Permanent Market driven (with regulation) Joint Joint Ventures/ Private Where competitive structure can be unbundled The most typical infrastructure privatization. (i.e. telecommunicatio ns infrastructure). Private Private Private Private Private Private Permanent Market driven (with regulation) Private Full Privatization Public Where new facilities/ infrastructure are required. Private Public Public Public Private Public Permanent Not applicable Public Planning gain contribution 292 292 Usually a short to medium term arrangement for a particular infrastructure facility, with the private operator accepting most commercial risks but with Council retaining capital expenditure responsibilities. An example is the outsourcing of leisure facilities to private management/ operation. Usually one of contracts for small components of the overall infrastructure network, with Council bearing virtually all risks. These are common arrangements and include maintenance contracts, design and construct contracts, etc. Summary Description Non-commercial Risk Bearer (policy, regulatory changes, etc.) Private operator Council Council Council Shared (guaranteed minimum custom by Council) Council Private operator 1. Construction (Cost overruns) 2. Operation Risks (Cost Variations) 3. Market Risks (Revenue Variations) Council Private operator Private operator Private operator Private operator Private operator Private operator Private operator Public Public Public Private Public Private operator Private operator Private operator Private operator Private operator Private operator 6. Recurrent Expenditure Responsibility Commercial Risk Bearer Private Private operator Private operator Private operator (Council funds service expansion expenditure) Private operator Council (Private operator funds capital maintenance expenditure) Council 5. Capital Investment Responsibility (inc. initial, upgrade & service expansion investment) Public Private operator Private operator Council Predominantly Council (some private operator) Council 4. Revenue Collection Responsibility (inc. invoicing & collection) Public Permanent Not applicable The infrastructure secured from private sector through planning gain approach as practiced under development control system (e.g. under Section 106 of the 1990 Town and Country Planning Act of U.K. planning system). The permanent sale of an infrastructure asset/ network to the private sector, usually accompanied with public sector price and quality regulation. The most typical infrastructure privatization. (i.e. telecommunications infrastructure). Usually a long-term contract for all components of an infrastructure network within a given area, with the private sector assuming all commercial risk and service expansion responsibilities. These agreements may cover water and electricity infrastructure networks, etc. but are uncommon at the local level.. Private operator Permanent Market driven (with appropriate regulation) Planning gain contribution Full Privatization Concession/ Franchise Agreements Council 20 to 30 years Similar to lease or BOOT scheme arrangements Council 20 to 30 years Council guarantees to purchase a minimum level of output (based on unit cost) Council Build Own Operate Transfer (BOOT) or BOO or BOT Schemes Usually a long term contract for a particular infrastructure facility where the private sector finances, builds and operates the facility with the assurance that Council will buy a minimum level of output. These are uncommon but may include toll roads, wastewater treatment plants, health facilities, etc. Council (mostly inapplicable) Council Council 3 to 30 years Unit cost plus margin Council 1 to 10 years Agreed contract fee Major Characteristics 1. Infrastructure Ownership 2. Contract Duration 3. Basis for Private Operator Payment Lease Contracts Service/ Management Contracts Type of Private Sector Involvement Appendix 2: The Characteristics of Basic Types of Private Sector Involvement in Local Infrastructure Delivery 293 293 294 294 Appendix C3: Set A2 - In depth Interview for Local Authority Survey Respondent Code Department of Urban and Regional Planning Phone No. 019 4446887 Fax No. 604 9284379 Faculty of Built Environment Universiti Teknologi Malaysia. 81310, Skudai Johor Bahru. Johor. West Malaysia. Local Infrastructure Provision and Planning Approval System in Malaysia Set A2: In depth Interview for Local Authority Survey Name of Local Authority : _____________________________________________ _____________________________________________ Date of interview: _____________________________________________ Researcher’s Remarks The researcher can be contacted at 019-4446887 or dani@uum.edu.my ©Dani Salleh UTM (Postgraduate research student) 295 The Background of Study It has been seen that most studies have shown that adequately provided infrastructure facilities are very important for urban development and it is clearly a necessary precondition for sustained economic development. The rising cost of infrastructure provision combined with the reduction allocation of public expenditure imposed by central government has had a significant impact on the capacity of the local authority to provide infrastructure as it did in the past. Therefore, it is important for the local authority to be proactive in identifying ways to generate additional financial sources to accommodate infrastructure requirement within the current practice. This requires the local authority to improve their sources of revenue and to find other alternative approach on how infrastructure facilities can be secured. Under the present practice of planning approval system in Peninsular of Malaysia, local authorities are allowed to impose such requirements. Therefore, the main objective of the study is to examine the possibility of using planning approval system to secure off-site infrastructure from private developer. For the purpose of this study the terms off-site infrastructure referred those infrastructure needed outside proposed development areas, which refers to two types of infrastructure; i). Economic infrastructure usually refers to public utilities such as highways, drainage system and etc. due to their 'hard' engineering-based delivery networks, and ii). Social infrastructure refers to public amenities which include public facilities such as schools, public hospitals, police and etc. Therefore, the purpose of this interview is to seek the perceptions from the respondent in order to understand the problems faced by developers regarding to provision off-site infrastructure. 296 Section A : THE APPLICATION OF PLANNING APROVAL SYSTEM IN SECURING OFF-SITE LOCAL INFRASTRUCTURE A1 How local authorities secure off-site infrastructure provision? __________________________________________________________________________________ __________________________________________________________________________________ Then, how effective is the method? __________________________________________________________________________________ __________________________________________________________________________________ A2 What is your opinion about the application of planning approval system to secure off-site infrastructure from developers? _________________________________________________________________________________ _________________________________________________________________________________ A3 In your opinion, what are the most appropriate methods of delivery of the following types of offsite infrastructure? Type of off-site infrastructure Methods of delivery 1. Construction of new local roads 2. Local road maintenance 3. Drainage (e.g. Sewerage, monsoon drain, etc.) 4. Landscaping 5. Recreation facilities 6. Parking facilities 7. Incinerator plants 8. Parks, gardens or open space 9. Betterment of existing local Infrastructures 10. Other public utilities 11. Other public amenities (e.g. market etc.) 12. Maintenance of existing off-site infrastructure Methods of delivery 1. Complete Public Sector Delivery 2. Traditional Public Contracting 3. Service/ Management Contracts 4. Lease Contracts 5. Public-Private Partnership (PPP) 6. BOOT, BOO or BOT Schemes 7. Concession/ Franchise Agreements 8. Joint Venture (JV) 9. Full Privatization 10. Planning Requirements 11. Planning Contribution 297 Section B: THE PROBLEMS RELATED TO OFF-SITE INFRASTRUCTURE PROVISION IN OBTAINING PLANNING APPROVAL B1 What are the problems which related to off-site local infrastructure provision often faced by developers during planning approval stage? _________________________________________________________________________________ _________________________________________________________________________________ B2 What are the problems encountered by your local authority when the planning permission subject to the fulfilment of off-site infrastructure? _________________________________________________________________________________ _________________________________________________________________________________ Section C : THE PERCEPTIONS OF LOCAL AUTHORITY ON OFF-SITE LOCAL INFRASTRUCTURE PROVISION C1 What is your perceptions of the following ‘statements’ regarding the practice of offsite infrastructure provision? i. Developers are required to provide off-site infrastructure as a return from additional approval granted to developers. __________________________________________________________________________________ __________________________________________________________________________________ ii. Both private developers and local planning authorities (LPAs) are very keen in off-site provision through the concept of ‘planning obligation’ and not ‘planning gain’ which is claimed by private sector as the abuse of public rights. __________________________________________________________________________________ __________________________________________________________________________________ iii. Planning gain is about the ‘willingness’ of private developers to provide (to contribute) off-site infrastructure to local authorities in exchange of extra or maximum development approval. __________________________________________________________________________________ __________________________________________________________________________________ iv. Developers will provide on-site physical infrastructure and the public authority will provide offsite physical and other forms of infrastructure. __________________________________________________________________________________ __________________________________________________________________________________ 298 Section D: SUGGESTIONS ON HOW OFF-SITE LOCAL INFRASTRUCTURE PROVISION CAN BE SECURED BY LOCAL AUTHORITY D1 In your opinion, how to promote the involvement of private developer in off-site infrastructure provision in your local authority? __________________________________________________________________________________ __________________________________________________________________________________ D2 Would you suggest the most effective methods to ‘justify’ the need to provide off-site local infrastructure? __________________________________________________________________________________ __________________________________________________________________________________ 299 Appendix C4: Set B1 - Developer Survey Respondent Code Department of Urban and Regional Planning Last edited: 16.01.06 Faculty of Built Environment Universiti Teknologi Malaysia. 81310, Skudai Johor Bahru. Johor. Phone No. 019 4446887 Fax No. 604 9284379 West Malaysia. Local Infrastructure Provision and Planning Approval System in Malaysia Set B1: Developer Survey INSTRUCTION FOR RESPONDENTS Thank you for being one of the research respondents. This research is conducted in fulfilment of the requirements for the award of the degree of Doctor of Philosophy. All of the information given will be treated confidentially. To complete this questionnaire, please read all the instructions then answer the questions. The main objective of the study is to identify the perceptions of developers and local authorities on offsite local infrastructure provision with reference to planning approval system in Malaysia. Off-site infrastructure will be referred to the infrastructure facilities needed outside proposed development areas. For the purpose of the study, it will refer to two types of infrastructure; i). Economic infrastructure usually refers to public utilities such as highways, drainage system and etc. due to their 'hard' engineering-based delivery networks, and ii). Social infrastructure refers to public amenities which include public facilities such as schools, public hospitals, police and etc. Therefore, this survey is designed to collect the appropriate data to answer the following research questions. i. What are the problems related to off-site infrastructure provisions faced by developers in obtaining planning approval? ii. What are the opinions of developers on the possible approach in securing off-site infrastructure provision? Notes : Questions in Section B refers to information provided in Appendix 1 and 2 (the overleaf attached). Researcher’s Remarks Date of Interview : __________________ Date questionnaire received : ___________________ 300 Section A : THE PROFILE OF DEVELOPER A1 Developer Particulars (Please specify) a). Name of Firm : ___________________________________________________________________________ b). Date of establishment : _____________________________________________________________________ c). Is there any particular section/department/division in charge of planning matters in your firm whenever dealing with Local Planning Authority. Yes No A2 Name of representative: _______________________________________________________________ A3 Year of experience: ___________________________________________________________________ A4 Current position held: _______________________________________________________________ A5 Status of ownership of the firm involved A6 Please state the average of development cost Sole Proprietorship (Sdn.) Less RM15 million Partnership RM15 million – RM30 million Public Listed Company (Bhd) RM30 million – RM45 million Family company RM60 million – RM75 million Semi-government RM75 million – RM90 million GLC (Government Link Company) RM90 million – RM105 million Joint-Venture Company RM105 million – RM120 million Other (Please specify): __________________ More than RM120 million and above A7 Please state the type of development your firm has been involved (for the period of the last 10 years) Type of development Residential Commercial Hotel Industrial estate Mixed development Resort Other (please state): Number of project Estimated development cost Involved with off-site infrastructure provision Cost of off-site infrastructure 301 Section B : WHAT ARE THE PROBLEMS RELATED TO OFF-SITE INFRASTRUCTURE PROVISION FACED BY DEVELOPERS IN OBTAINING PLANNING APPROVAL? B1 Does your firm involve with off-site infrastructure provision requirements?. B2 Based on your previous experience in obtaining planning permission, how long will it take to get the approval?. No Less than 1 years 3-5 years Yes 1-2 years More than 5 years 3-5 years B3 What are the common problems related to off-site infrastructure provision faced by developers during planning approval stage? Please indicate the degree of seriousness by circling the appropriate number. Where 1 = Strongly not agree, 2 = Not agree, 3 = Agree, and 4 = Strongly agree 1. Some developers face problem in obtaining the latest information on planning requirements, especially the requirement of on-site and off-site infrastructure provision. 1234 2. Many amendments have to be made. 1234 3. Not much information pertaining to planning standards or requirement. 1234 4. New planning requirements regards to off-site infrastructure provision are only informed after planning applications was submitted to LPAs. 1234 5. Delay in obtaining Planning Permission. 1234 6. Strict planning application procedure imposed by LPAs. 1234 7. Poor co-ordination between relevant technical departments. 1234 8. Inability to fulfill the related requirements as imposed by different approval authorities. 1234 9. Obtaining planning approval is considered a time consuming process. 1234 10. Planning approval process involves so much bureaucracy because many agencies have to be referred. 1234 11. Local authority is inconsistently considering planning permission for those projects involved with off-site infrastructure requirements. 1234 10. High percentage of fund/land has to be allocated for public amenities. 1234 12. The requirement to provide off-site infrastructure reflects the increase in development cost. 1234 13. Less commitment from developers due to the perception that traditionally local authority has to provide those infrastructures. 1234 14. Developers find that the guidelines used by local authority to impose off-site infrastructure are not clear and against the present planning regulations. 1234 15. Developers refuse and always use other channels (e.g. political channel) to avoid them from fulfilling the requirements. 1234 302 B4 What are the factors that may influence a developer’s decision in determining proposed project locations? Please ticks [ / ] the following factors accordingly. Most developers prefer to invest in areas with less possibility to be imposed with off-site infrastructure requirements. Have a good access to existing infrastructures In Local Planning Authorities which are proactive in negotiating the planning requirement pertaining to off-site infrastructure provision Others (please specify) : _______________________________________________________________ Section C : WHAT ARE THE OPINIONS OF DEVELOPERS ON THE POSSIBLE APPROACH IN SECURING OFF-SITE INFRASTRUCTURE PROVISION? C1 What do you think on the present practice of off-site infrastructure provision?. Reasonable. Not reasonable. Too lavish or high standard. Local planning authority has no right to impose such practice. The practice is only appropriate for large scale development. Any other comments : _______________________________________________________ C2 In percentage, how much development cost is allocated for off-site infrastructure if a project involves such requirement. C3 In your opinion, who should bear the cost of providing off-site infrastructure facilities? Less 10 percent The developer 10-15 percent The land owner 15-20 percent The buyer 20-25 percent The developers and the buyer 25-30 percent Local authority 30-35 percent Local authority and developer 35-40 percent Others (please specify) : _________ More 40 percent 303 C4 What is your opinion on the ideas / practices that require developers to provide off-site local infrastructure? Where 1 = Strongly not agree, 2 = Not agree, 3 = Agree, and 4 = Strongly agree 1. The local authority is inconsistently considering planning permission especially those projects involved with off-site infrastructure requirements. 1234 2. The gradual improvement in off-site infrastructure provision is due to competitive market exposure. 1234 3. Indirectly planning gain has been practised widely in securing off-site infrastructure in most local authorities in Malaysia but however the practice is improperly practiced. 1234 4. The principal rationale of why off-site infrastructure provision has to be provided by local authority because of its ‘public good characteristics’. 1234 5. Both private developers and local planning authorities (LPAs) are very keen in off-site infrastructure provision through the concept of ‘planning requirements’ which is justified by its development impacts and not through the ‘planning gain’ which is claimed by private sector as the abuse of public rights. 1234 6. Planning gain is about the ‘willingness’ of private developers to provide (to contribute) offsite infrastructure to local authorities in the exchange of extra or maximum development approval. 1234 7. Apparently the practice will result in additional development cost. This has to be absorbed in selling price which will burden property buyers. 1234 C5 What would you suggest on how a local authority can secure its off-site infrastructure? Where 1 = Strongly not agree, 2 = Not agree, 3 = Agree, and 4 = Strongly agree 1. It can be secured via planning approval process. 1234 2. Developers are required to provide off-site infrastructure as a return from additional approval granted to developers. 1234 3. High percentage of land has to be allocated for public amenities. 1234 4. The increase in cost of providing off-site infrastructure requirements reflects the total development cost. 1234 5. Most developers are willing to fulfill the requirements of off-site infrastructure within the catchments of proposed development. 1234 6. A developer should be encouraged to provide other urgently needed infrastructure in the surrounding development area as it can make the development attractive to purchasers. Then at the same time local planning authority should reasonably ‘entertain’ developers by facilitating the proposed development as far as it’s allowed under prescribed legislations. 1234 7. A developer should be allowed for maximum development in order to cope with the increased cost of development if the developer was willing to provide off-site infrastructure. However, the exercise must comply with other requirements. 1234 8. A maximum development should be granted to those developments that are willing to provide off-site infrastructure. 1234 9. A developer should be allowed to negotiate the requirements of off-site infrastructure as imposed by a local planning authority in order for them to get additional or maximum planning approval. 1234 10. Some new development will generate the ‘development impact, therefore there is a need for local authority to impose extra charges (e.g. Development Impact Charge) for the use of infrastructure to reflect the use of resources. 1234 304 11. The offers of off-site infrastructure by developers are likely to have significant effects in loosing up planning permission from reluctant local planning authorities. 1234 12. Based on the previous scenario, there is a possibility of local authority to use planning gain to secure its needed off-site infrastructure provision. 1234 13. Improvement Services Fund (ISF) provided under Building, Street and Drainage Acts 1974 (Act 133), is an efficient method to get the private sector (property developers) involved in local infrastructure development. 1234 C6 What are actually the measures taken when the planning application involves with off-site infrastructure? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ C7 What are the types of off-site infrastructures mostly needed by a local authority to be provided by a developer? 1 = Construction of new local roads 2 = Local road maintenance 3 = Drainage 4 = Recreation facilities 5 = Parking facilities 6 = Incinerator plants 7 = Betterment of existing local infrastructures 8 = Other public utilities (e.g. Sewerage, monsoon drain, etc.) 9 = Other public amenities (e.g. market, bus stop, etc). 10 = Maintenance of existing off-site infrastructure 11 = Others (Please specify) : _________________________ C8 In your opinion, what is the most appropriate approach for local authority to secure off-site infrastructure provision from private sector? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ 305 C9 Would you list the factors that constraint the active-involvement of private sectors in off-site local infrastructure provision? i. _________________________________________________________________________________ ii. _________________________________________________________________________________ iii. __________________________________________________________________________________ iv. _________________________________________________________________________________ C10 To what extend a property development is affected if developers are required to provide off- site infrastructure?. (e.g. tendency of developers to remove their proposed investments to another local authorities nearby). _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ C11 What are the major difficulties faced by a firm when off-site infrastructure is imposed by a local authority? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ 306 Section D: WHAT ARE THE DEVELOPERS PERCEPTIONS ON THE POSSIBILE APPROACHES IN SECURING OFF-SITE INFRASTRUCTURE PROVISION D1 What do you think are the most appropriate forms off-site infrastructure contribution? Where 1 = Not appropriate, 2 = Lease appropriate, 3 = Slightly appropriate, 4 = Appropriate, and 5 = very appropriate. 1. Financial contribution for existing off-site infrastructure improvements. 12345 2. Donating land or easements at no cost for off-site infrastructure facilities. 12345 3. Constructing infrastructure improvements to meet the needs of the proposed development. 12345 4. Leasing completed off-site infrastructure to a local authority, or some other entities. 12345 5. Allowing public access and use of privately owned land and facilities. 12345 6. Selling land to a public authority at less than market cost for the purpose of off-site infrastructure facilities. 12345 7. Maintenance of public use facilities, either permanently or for some specified period. 12345 8. Paying fees to public authority towards the cost of operating and maintaining public land or facilities. 12345 9. Existing road improvements (or provision). 12345 10. Provide infrastructure at the other sites. 12345 11. Provide public access. 12345 12. Public right of way on the developer’s land. 12345 13. Dedication of land for public use. 12345 14. Commuted payments for car parking. 12345 15. Provision of community buildings or facilities. 12345 16. Provision of drainage system. 12345 17. Other public building/facilities (e.g. community centre, public library etc.) 12345 18. Cash payment towards capital cost of constructing facilities or improvement. (Including commuted payment for construction of off-site parking space). 12345 19. Construct facility or improvement to specifications approved by public authority and then dedicate the completed facilities or improvement for public use. 12345 20. Joint-funding to expand infrastructure capacity to serve subsequent development in surrounding areas. 12345 21. Others (Please specify) : ______________________________________________________ 12345 307 D2 Please tick [ / ] the level of appropriateness on how to encourage or promote private developer in off-site infrastructure provision. Where 1 = Not appropriate, 2 = Lease appropriate, 3 = Slightly appropriate, 4 = Appropriate, and 5 = very appropriate. 1. Local authority should have Infrastructure Priority Lists (IPL) used as check-list when come to the negotiation of infrastructure requirements between a local authority and a private developer. 12345 2. Introduce an attractive incentive. ( e.g. ‘Fast-Track’ approval at planning stage). 12345 3. Introduce a proper and transparent method of developer’s contribution negotiation (planning agreements). 12345 4. Introduce an attractive infrastructure contribution scheme out-site of proposed development location. This might be applicable for proposed development located in the area already has adequate infrastructure. 12345 5. Negotiation would be the best approach applied in order to achieve a ‘win-win’ situation between a private developer and a local authority. 12345 6. Public-Private Partnership (PPP) concept can be adopted as one alternative to secure off-site local infrastructure provision by local authority. 12345 7. Off-site infrastructure should be financed directly out of general tax revenues. 12345 8. Off-site infrastructure should be financed using a special fund generated by local authority (e.g. ISF provided under Act 133). 12345 9. Off-site infrastructure should be financed by project owner (e.g. developers). 12345 10. Off-site infrastructure should be financed by both parties; developer and local authority. 12345 11. The direct user of infrastructure might be charged and therefore revenues from such charges should be deposited into the so called ‘infrastructure fund’ and not into council general fund 12345 12. LPAs should initiate private developers to sign planning agreements on the purpose to require private developers to provide off-site infrastructure facilities in return of additional planning approval? (e.g. Unilateral Undertaking). 12345 13. Local authority needs to set up a special mechanism to expedite the planning approval of those projects involved with off-site infrastructure requirements. 12345 14. The cost incurred in providing off-site infrastructure should be shared with other utility bodies and should not be a burden to developers only. 12345 15. To overcome the possibility of excessive cost of development, a lower standard of materials could be permitted for the purpose of off-site infrastructure provision. 12345 16. The local off-site infrastructure can be secured from development approval stage by quantifying the ‘development impact’ as a result from the proposed development. 12345 17. The negotiation of contribution for off-site infrastructure by developers should be initiated properly and transparently by a local authority. 12345 18. There is a need for private sector to participate in off-site infrastructure provision to reduce the cost on public sector. 12345 308 D3 What is your perception on the requirement of infrastructure provision under the concept of planning gain that might be imposed by local planning authority?. _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ D4 Would you please suggest the most appropriate methods of private delivery of off-site infrastructure that could be used in the future. Please circle in the relevant cells of the following table where 1= Not appropriate, 2 = Lease appropriate, 3 = Slightly appropriate, 4 = Appropriate, and 5 = very appropriate. Betterment of existing local infrastructures Other public utilities (e.g. Sewerage, monsoon drain, etc.) Other public amenities (e.g. market, bus stop, etc.) Maintenance of existing off-site infrastructure Others (Please specify) : _________ Planning Contribution (e.g. through Planning gain) Private Finance Initiative (PFI) Parks, gardens or open space Full Privatization Incinerator plants Joint Venture (JV) Parking facilities Concession/ Franchise agreements Recreation facilities BOOT, BOO or BOT (Schemes) Landscaping Public-Private Partnership (PPP) Drainage Lease Contracts Local road maintenance Service/ Management Contract Construction of new local roads Traditional Public Contracting Type of infrastructure Complete Public Sector Delivery Methods of delivery 309 D5 What would you suggest to ensure the success of the private sector involvement in off-site infrastructure provision in local authority?. _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ D6 Would you describe any WEAKNESSES of the present practice of off-site infrastructure provision and your SUGGESTIONS to ensure the success of private provision of off-site local infrastructure?. a). WEAKNESSES : _____________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ b). SUGGESTIONS : ____________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ Public Once off Agreed contract fee Public Public Public Private Not applicable Public Public Public Not applicable Not applicable Public Public Public Public Public Public Public Infrastructure Ownership Contract Duration Basis for Private Operator Payment (All are performance based) Revenue Collection Responsibility (inc. invoicing & collection) Capital Investment Responsibility (inc. initial, upgrade & service expansion investment) Recurrent Expenditure Responsibility Commercial Risk i. Construction ii. Operation Risks (Cost) iii. Market Risks (Revenue) Example Non-commercial Risks Sectors Where Most Appropriate Traditional Public Contracting Complete Public Sector Delivery Characteristics Public Where limited capacity expansion is required An example is the outsourcing of leisure facilities to private management/ operation. These are common arrangements and include maintenance contracts, design and construct contracts, etc. Private Private Private Private Public (private operator funds capital maintenance expenditure) Public (some private) Up to 30 years Unit cost plus margin (linked to estimated demand at contract inception). Public Lease Contracts Public Low willingness to pay Private Public Public Private Public Public 5 to 10 years Agreed contract fee Public Service/ Management Contracts Private Private Shared (guaranteed minimum custom) Public Where new facilities are required (e.g. toll roads) These are uncommon but may include toll roads, wastewater treatment plants, health facilities, etc. Private operator (Public sector funds service expansion expenditure) Private Public 20 to 30 years Public sector guarantees to purchase a minimum level of output (based on unit cost of delivery) Public BOOT, BOO or BOT Schemes These agreements may cover water and electricity infrastructure networks, etc. but are uncommon at the local level.. Public Network based infrastructure (e.g. water) Private Private Private Private Private Private 20 to 30 years Similar to lease or BOOT contract Public Concession/ Franchise Agreements Appendix 1: Characteristics of Local Infrastructure Delivery Joint Where private capital is required immediately Private Public & Private Public and Private Public and Private Public and Private Joint Permanent Market driven (with regulation) Joint Joint Ventures/ Private Where competitive structure can be unbundled The most typical infrastructure privatization. (i.e. telecommunicat ions infrastructure). Private Private Private Private Private Private Permanent Market driven (with regulation) Private Full Privatization Public Where new facilities/ infrastructure are required. Private Public Public Public Private Public Permanent Not applicable Public Planning gain contribution 310 310 1. Construction (Cost overruns) 2. Operation Risks (Cost Variations) 3. Market Risks (Revenue Variations) Non-commercial Risk Bearer (policy, regulatory changes, etc.) Commercial Risk Bearer 6. Recurrent Expenditure Responsibility 5. Capital Investment Responsibility (inc. initial, upgrade & service expansion investment) 4. Revenue Collection Responsibility (inc. invoicing & collection) Council Private operator Private operator Council Council Council Council Private operator Council (mostly inapplicable) Private operator Council Predominantly Council (some private operator) Council Council (Private operator funds capital maintenance expenditure) Council 3 to 30 years Unit cost plus margin Council 1 to 10 years Agreed contract fee Usually a short to medium term arrangement for a particular infrastructure facility, with the private operator accepting most commercial risks but with Council retaining capital expenditure responsibilities. An example is the outsourcing of leisure facilities to private management/ operation. Usually one of contracts for small components of the overall infrastructure network, with Council bearing virtually all risks. These are common arrangements and include maintenance contracts, design and construct contracts, etc. Summary Description Major Characteristics 1. Infrastructure Ownership 2. Contract Duration 3. Basis for Private Operator Payment Lease Contracts Service/ Management Contracts Type of Private Sector Involvement Shared (guaranteed minimum custom by Council Council Private operator Private operator Private operator Private operator (Council funds service expansion expenditure) Council 20 to 30 years Council guarantees to purchase a minimum level of output (based on unit cost) Council Build Own Operate Transfer (BOOT) or BOO or BOT Schemes Usually a long term contract for a particular infrastructure facility where the private sector finances, builds and operates the facility with the assurance that Council will buy a minimum level of output. These are uncommon but may include toll roads, wastewater treatment plants, health facilities, etc. Council Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Private operator Permanent Market driven (with appropriate regulation) Public Public Public Private Public Private Public Public Permanent Not applicable The infrastructure secured from private sector through planning gain approach as practiced under development control system (e.g. under Section 106 of the 1990 Town and Country Planning Act of U.K. planning system). The permanent sale of an infrastructure asset/ network to the private sector, usually accompanied with public sector price and quality regulation. The most typical infrastructure privatization. (i.e. telecommunications infrastructure). Usually a long-term contract for all components of an infrastructure network within a given area, with the private sector assuming all commercial risk and service expansion responsibilities. These agreements may cover water and electricity infrastructure networks, etc. but are uncommon at the local level.. Council 20 to 30 years Similar to lease or BOOT scheme arrangements Planning gain contribution Full Privatization Concession/ Franchise Agreements Appendix 2: The Characteristics of Basic Types of Private Sector Involvement in Local Infrastructure Delivery 311 311 312 Appendix C5: Set B2- In depth Interview for developer Respondent Code Department of Urban and Regional Planning Phone No. 019 4446887 Fax No. 604 9284379 Faculty of Built Environment Universiti Teknologi Malaysia. 81310, Skudai Johor Bahru. Johor. West Malaysia. Local Infrastructure Provision and Planning Approval System in Malaysia Set B2 – In depth Interview for developer Name of the firm: _____________________________________________ _____________________________________________ Date of interview: _____________________________________________ Researcher’s Remarks Date of Interview : __________________ Date questionnaire received : ___________________ 313 The Background of Study It has been seen that most studies have shown that adequately provided infrastructure facilities are very important for urban development and it is clearly a necessary precondition for sustained economic development. The rising cost of infrastructure provision combined with the reduction allocation of public expenditure imposed by central government has had a significant impact on the capacity of the local authority to provide infrastructure as it did in the past. Therefore, it is important for the local authority to be proactive in identifying ways to generate additional financial sources to accommodate infrastructure requirement within the current practice. This requires the local authority to improve their sources of revenue and to find other alternative approach on how infrastructure facilities can be secured. Under the present practice of planning approval system in Peninsular of Malaysia, local authorities are allowed to impose such requirements. Therefore, the main objective of the study is to examine the possibility of using planning approval system to secure off-site infrastructure from private developer. For the purpose of this study the terms off-site infrastructure referred those infrastructure needed outside proposed development areas, which refers to two types of infrastructure; i). Economic infrastructure usually refers to public utilities such as highways, drainage system and etc. due to their 'hard' engineering-based delivery networks, and ii). Social infrastructure refers to public amenities which include public facilities such as schools, public hospitals, police and etc. Therefore, the purpose of this interview is to seek the perceptions from the respondent in order to understand the problems faced by developers regarding to provision off-site infrastructure. 314 Section A : PROBLEMS RELATED TO OFF-SITE INFRASTRUCTURE PROVISION FACED BY DEVELOPERS IN OBTAINING PLANNING APPROVAL A1 What are the common problems which related to off-site infrastructure provision faced by developers during planning approval stage? ______________________________________________________________________________ ______________________________________________________________________________ A2 If your development involved with off-site infrastructure, how you going to manage the project? ______________________________________________________________________________ ______________________________________________________________________________ A3 Is there any influences on the developer’s decision in determining proposed project locations if one local authority practicing that planning approval only granted if the planning permission fulfill the requirements of off-site infrastructure provision? ______________________________________________________________________________ ______________________________________________________________________________ A4 How does off-site infrastructure requirements affect your development? ______________________________________________________________________________ ______________________________________________________________________________ Section B : DEVELOPERS’ OPINIONS ON THE POSSIBLE APPROACH OF USING PLANNING APROVAL SYSTEM IN SECURING OFF-SITE INFRASTRUCTURE PROVISION B1 Can you describes how present practice of off-site infrastructure provision? ______________________________________________________________________________ ______________________________________________________________________________ 315 B2 What is your opinion on the ideas / practices that require developers to provide off-site local infrastructure? ______________________________________________________________________________ ______________________________________________________________________________ B3 To what extend property development is affected if developers are required to provide off-site infrastructure? ______________________________________________________________________________ ______________________________________________________________________________ B4 What are actually the measures taken when the planning application subject with the off-site infrastructure provision? _______________________________________________________________________________ ______________________________________________________________________________ B5 Would you suggest how a local authority can secure its off-site infrastructure using planning approval system? ______________________________________________________________________________ ______________________________________________________________________________ B6 Do you agree that, the present practice of planning approval has being applying the requirements of off-site infrastructure? However, the practice was inconsistent among local planning authorities. Therefore, do you have any suggestions how to standardise the practices? ______________________________________________________________________________ ______________________________________________________________________________ B7 Can you elaborate further the main factors that discouraging the involvement of private developer in off-site local infrastructure provision? ______________________________________________________________________________ ______________________________________________________________________________ B8 Can you explain the problems faced by developer if the planning approval is subject to off-site infrastructure provision? ______________________________________________________________________________ ______________________________________________________________________________ 316 Section C: DEVELOPERS PERCEPTIONS ON THE POSSIBILE APPROACHES IN SECURING OFF-SITE INFRASTRUCTURE PROVISION C1 What do you think the most appropriate forms of off-site infrastructure contribution? ______________________________________________________________________________ ______________________________________________________________________________ C2 How to encourage or promote private developer in off-site infrastructure provision? ______________________________________________________________________________ ______________________________________________________________________________ C3 What is your perception on the requirement that required local planning authority to provide offsite infrastructure during planning approval stage? provision under the concept of planning gain that might be imposed by local planning authority? ______________________________________________________________________________ ______________________________________________________________________________ C4 Would you please suggest the most appropriate methods of private delivery of off-site infrastructure that could be used in the future? ______________________________________________________________________________ ______________________________________________________________________________ C5 What would you suggest to ensure the success of the private sector involvement in off-site infrastructure provision in local authority? ______________________________________________________________________________ ______________________________________________________________________________ C6 Would you describe any WEAKNESSES of the present practice of off-site infrastructure provision and your SUGGESTIONS to ensure the active-involvement of private developer in off-site local infrastructure? i. Weaknesses __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ ii Suggestions __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________