Phase 1 of the Sabah Pan Borneo Highway remains incomplete more than a decade after its inception, with project delays contributing to a cost increase exceeding RM1 billion, according to the latest Auditor-General’s Report. The audit, presented in Parliament on October 5, 2026, highlights significant setbacks affecting the highway’s construction and governance.
As of March 2026, only four out of 35 work packages, valued at RM567 million, have been completed, while the remaining 31 projects, worth RM16.319 billion, are still ongoing. Among these, nine work packages are classified as sick projects, and 13 others are behind schedule. The initial plan, developed in 2015, anticipated a construction period of 69 months, running from April 2016 to December 2021.
The report details a series of issues that have hampered progress, including delays in securing project sites, utility relocations, changes in design, insufficient project oversight, and non-compliance with regulations and contractual obligations. It points to weaknesses in planning, inter-agency coordination, and comprehensive monitoring as critical factors contributing to extended timelines and cost overruns.
Development targets and the provision of improved road infrastructure for Sabah residents have been adversely affected. The project’s overall contract cost has risen from RM17.91 billion to RM18.96 billion. Specifically, the cost of Phase 1A has increased to RM11.323 billion, surpassing the original budget ceiling of RM10.336 billion by nearly RM987 million or 9.5%. The report cautions that further government funding approval will be essential to complete the project.
Several irregularities and issues were identified with financial management. These include commencement of site work before the environmental impact assessment was approved, delays in finalizing contract documents, and payments on preliminary work items considered inappropriate. The audit also found that RM6.03 million in government funds were used to cover levies typically payable by contractors, and the government absorbed RM32.95 million in bond and insurance costs resulting from discrepancies between contractor payments and government disbursements.
Additional irregular payments totaling RM163.64 million exceeded authorized limits due to protracted contract finalization, while expenditures exceeding contract values amounted to RM0.89 million. Payments involving 19 invoices, amounting to RM4.08 million, remain outstanding.
The report underscores lapses in managing contract variations, adherence to approval thresholds, project timeline monitoring, and addressing contractor delays and non-compliance. It stresses the need for improved governance to mitigate financial and legal risks.
In contrast, the Sarawak segment of the Pan Borneo Highway shows more positive results. Ten work packages have been completed, and another package has reached near completion at 99.9 percent. Preliminary assessments by the Sarawak Public Works Department, supported by the audit findings, suggest the project has stimulated economic and social activities within the corridor, benefiting sectors such as commerce, agriculture, tourism, and construction, along with facilitating new road development and increased revenue generation.