Builders upbeat on 2011 industry outlook

The Master Builders Association Malaysia (MBAM) expects raw material prices for the construction industry to increase this year but still at a manageable level.

Its president, Kwan Foh Kwai said, the association expects the increase to be less than 10 per cent.

If raw material prices increase by more than 10 per cent, than the industry players would look at alternative sources, he told reporters after the signing of a memorandum of understanding (MoU) between MBAM and Open University Malaysia (OUM) today.

"Raw material prices have always beeen subject to market forces. There will be increase (in prices) but within a reasonable percentage," he said.

On the 2011 outlook for the industry, Kwan said the MBAM is optimistic that the year would be good for the industry, backed by the implementation of projects under the 10th Malaysia Plan (10MP) and the Economic Transformation Programme (ETP).

On the MoU, he said both parties would work together to come up with educational and training programmes for the construction industry.

He highlighted that at present, there was a critical need to replenish the pool of skilled construction manpower, as a majority of the workers in it are already ageing.

According to Kwan, it is estimated that 35.1 per cent of local construction personnel would reach the age of 50 and above, seven years from now.

"The OUM programmes are specially developed and designed for working adults. The courses developed will incorporate knowledge and entrepreneurship skills which would be industry oriented," he explained.

Among the programmes are an Executive Diploma in Construction Project Organisation and Control, an Executive Diploma in Construction Management, an Executive Diploma in Project Management, an Executive Diploma in Contract Administration, an Executive Bachelor in Construction Supervisory Management, an Executive Bachelor in Integrated Contruction Project Management and an Executive Bachelor in Contract Management and Administration.

The Vice Chancellor of OUM, Prof Emeritus Tan Sri Anuwar Ali said, the programmes are expected to start next month.

By Bernama

Board expects buoyant building sector as 10MP projects roll out

The Construction Industry Development Board (CIDB) expects the construction sector to be buoyant next year as projects under the 10th Malaysia Plan (10MP) start to roll out from January.

But the government will be cautious in awarding contracts to mitigate the risk of being exposed to a second wave of global economic crises, said CIDB chief executive officer Datuk Hamzah Hasan.

Hamzah said the European debt crises and the slow US economic recovery was worrying and many countries are taking steps to reduce their expenditure in order to improve their budget deficit.

"Malaysia is taking similar steps in view of the expected crises. The impact will be felt in 2011 as what was experienced in 2009," he said.

He, however, said the impact will not be as great as last year due to continuation of projects from the Ninth Malaysia Plan (9MP), new jobs under the 10MP and more public-private partnership (PPP) projects coming up.

Under the 10MP, an amount of RM230 billion has been allocated for development, whereby 60 per cent, or RM138 billion, is for infrastructure.

Hamzah is bullish the industry will replicate this year's expected growth of 3.7 per cent in 2011. To achieve the target, it would need RM80.3 billion new projects next year, up from RM77.4 billion in this year.

He said projects like Matrade Centre, Warisan Merdeka, mass rapid transit and the Malaysian Rubber Board's land development in Sungai Buloh, worth RM70 billion, will contribute to growth next year.

This year, the government has announced projects to the tune of RM72 billion such as the LRT extension, the New LCCT terminal, power plants and luxury housing projects in Iskandar Malaysia.

"These are high-impact projects which will improve the business environment and private investment," he said.

In 2009, when the global economy hit the height of recession, Malaysia's construction sector was able to grow by 5.8 per cent because of completed jobs worth RM309 billion within four years of the 9MP.

"We expect by 2015, the sector will contribute 5 per cent to the country's gross domestic product, from the current 3 per cent," he said.

By Business Times

WCT bags Contractor of The Year Award

The Construction Industry Development Board (CIDB) has presented WCT Bhd with the Contractor of The Year Award during the Malaysian Construction Industry Excellence Awards 2010 (MCIEA 2010) last night.

WCT is a well-known name in the global construction market. Its mega projects abroad include the Abu Dhabi F1 Circuit, the New Doha International Airport, Bahrain City Centre, the Bahrain International F1 Circuit and Platinum Plaza in Ho Chi Minh, Vietnam.

"The group has reached the far shores of development, literally and metaphorically, making it an icon to the Malaysian construction industry," CIDB said in a statement.

The group, along with Sunway Construction Sdn Bhd and ShinEversendai Engineering (M) Sdn Bhd were also presented the International Achievement Award - Special Mention which honours the achievement of Malaysian contractors registered with CIDB for their outstanding and credible recognition in overseas construction venture.

WCT adviser Chua Siow Leng was presented the Prominent Player Award to recognise his more than two decades of contribution towards the betterment of the industry.

CIDB has named property developer Ireka Corp Bhd founder Lai Siew Wah as Chief Executive Officer of the Year.

Putra Perdana Construction Sdn Bhd was also recognised for its Energy Commission diamond building, bringing home the Innovation Award.

By Business Times

Rising building material, labour and hidden costs main concern for Johor developers

JOHOR BARU: Escalating prices of building materials, higher manpower costs due to shortage of labour as well as hidden costs are among the main concerns of property developers in Johor.

KSL Holdings Bhd executive director Ku Hwa Seng said these problems did not just apply to Johor. He believes that developers nationwide also faced similar predicament.

He said the infrastructure projects outlined in the 10th Malaysia Plan (10MP) and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

“The demand for residential properties in Johor, especially in the Johor Baru district, has improved as the economy gets better but developers might have problems kicking off new launches,’’ Ku told StarBiz.


Ku Hwa Seng says infrastructure projects outlined in 10MP and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

He said building materials prices had increased between 10% and 15% in the last 12 months while labour costs had risen by 50%, compared with two or three years ago.

Ku said that shortage of labour was still the main problem for construction companies.

Mahabuilders Bhd group chairman Mustapha Hassan said while the increase in the prices of building materials was relatively stabilised, the same could not be said for the labour costs.

“Like it or not, we still need foreigners to work at project our sites, locals are not interested or else many projects will be delayed not only the ones by the private sector but also by the public sector,’’ he said.

Mahabuilders is among the few in Malaysia specialising in acquiring and reviving abandoned property projects and labeled as a white knight the construction industry.

Among the company’s revived projects to date include Taman Baiduri Johor Baru, Skudai Villa, Indera Wangsa Larkin, Senai industrial park and Pandan City Johor Baru.

By The Star

Are mega projects necessary?

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

LAST month, the government fired the first salvo by launching seven mega projects under the Economic Transformation Programme (ETP). These projects are part of the 131 entry point projects identified under the government's ambitious roadmap to be carried out over the next 10 years.

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

Malaysia's economic performance will be affected by many factors including its economic and monetary policies as well as external and domestic demands.

In the past, most Asian countries prospered by adopting explicit industrial policies that focus on building its manufacturing prowess.

Apparently, the contours of the new industrial policy seem quite different today. There are four key policy parameters that the government needs to consider when designing new economic strategies - establishing sound industrial policies that cater to global demands; enhancing its human resource and capital development; adopting aggressive economic policies to strengthen its economic performance; and improvising the nation's physical and social infrastructure.

The goal of the government's economic strategies is simple - create jobs and increase its per capita income by accelerating the economy.

The Asian experience tells us that no country can accelerate its economic growth unless it is willing to invest in major infrastructure projects.

The major allocation to better roads, power supply, transportation and physical infrastructure is part of the government's grand strategy designed to stimulate the economy and restore both the private and public sector's confidence.

The multiplying effect will lead to more jobs being created as a result of the huge investments.

Indeed, investment spending in construction projects have a strong correlation to the rate of economic growth and future prospects.

Economists will agree that demand for construction projects reflects a healthy economy while declining growth implies an economy that is declining.

The construction of tall skyscrapers across many major cities such as South Korea's world tallest twin towers due for completion by 2014, Shanghai with its 121-floor skyscraper, and Mumbai with the 125-storey India Tower and 117-floor World One is a testimony of the importance of the construction sector as a measurement of a vibrant economy.

Since construction is often financed by borrowings that comprise short-term bank credit and long-term bond markets, the aggressive transactions within the capital market will rejuvenate market activities and ultimately lead to opportunities for reforms in the financial system, including improvement of corporate governance, reinforcement of regulatory and supervisory arrangements.

There will also be several visible effects on the economy. The government's active participation in the physical development of the nation directly implies the government's commitment towards improving the country's standard of living. The investments will also stabilise the investment climate while signifying a message of economic vibrancy to foreign investors.

The government has also not lost sight on other factors that contribute to economic growth. Economic growth can only occur when a country has sufficient human capital.

In today's industrial era, accumulation of a nation's wealth is no longer created by machines but human labour, thus the need for the economy to be knowledge-driven.

The knowledge to complement the government's economic agenda combined with the depth of technology embedded in the nation's human capital will decide on the success or failure of the economy. To instil a knowledge-driven economy is no mean feat because it involves major reforms that pervade at every facade of the economy - its social, educational and economic policies.

The ultimate mission is to create a "learning economy" where new technologies are applied and innovation remains the primary goal.

No efforts should be spared to ensure that the country's vision to foster life long learning is rigorously enforced at every level of our society.

The construction sector is seen as the first "battleground" for the government to instil its knowledge-driven economy agenda because of the massive manpower that will be utilised during the projects.

Already more than RM100 billion has been allocated for construction development that comes hand-in-hand with an additional RM1.5 billion on researches and development.

The government has also directly fostered competition among local construction firms by increasing the size of the construction sector while bringing pressure for organisations to innovate because technologies are needed in the wake of fierce competition among local companies.

Firms that aspire to win government-initiated projects will be forced to acquire and utilise advance technological know-how to compete locally, which in turn will mould local firms to be more internationally competitive in addition to generating higher returns and greater growth potential.

Competition will also breed innovation while technological knowledge will spread quickly across many firms to innovate.

In economic terms, the focus on construction development is seen as an attempt by the government to avoid "market mismatch" when supplies cannot fulfil the demand, as the economy becomes more vibrant.

In anticipation of future needs, the onus will be on the government to provide better quality residences to cater to the growing population of city dwellers that is expected to exceed more than 10 million over the next 10 years. There will be more demands for new commercial and retail properties, including better amenities, comprehensive civic facilities and an efficient transportation system.

There is a clear consensus that Malaysia needs an explicit industrial strategy to pursue its economic agenda and the government has identified 12 new key economic areas that need encouragement including the construction sector. The development of the city's physical infrastructure through investments in mega projects has been identified as the first thrust, a process that will revitalise the construction sector, spur the growth of SMEs, offer massive employment opportunities, increase net capital stock, improve labour efficiency and enhance the robustness of the capital market. Are these not enough reasons to justify the need for mega projects?

The writer is an associate professor with the Graduate School of Business, Universiti Sains Malaysia.

By Business Times

Contractors renew appeals for stamp duty waiver

CONTRACTORS have renewed their appeals to the government to waive stamp duties on construction-related contracts.

Two years ago, the government said it wanted to simplify stamp duty assessment by revising the rate on all construction services agreements that do not require collateral to 0.5 per cent of contract value.

This covered consulting contracts, operation and maintenance contracts and facilities services contracts. Therefore, a RM10 million construction contract would attract a total stamp duty of RM50,000.

After appeals from trade bodies the Finance Ministry gave a temporary relief by revising the stamp duty to a flat RM50 fee. But this ends at the end of the year.

"The reversion ... will inflate construction costs," Master Builders Association of Malaysia (MBAM) president Kwan Foh Kwai told reporters after Works Minister Datuk Shaziman Mansor launched the third Malaysian Construction Summit in Kuala Lumpur yesterday.

Eventually, these extra but unnecessary costs will be passed on to the government and the public because all construction contracts are either government jobs or packages awarded by property developers in the private sector.

MBAM also appealed to the government to table the Construction Industry Payment and Adjudication Bill for enactment at Parliament. The draft Bill, which was given to the Attorney General's Chambers in early 2007, has yet to make its way to Parliament.

This proposed new law is meant to minimise payment defaults in the construction industry via timely and cost-efficient recourse to adjudication.

By Business Times