BRITISH MALAYSIAN CHAMBER OF COMMERCE Malaysian Industry Report 2018 / 2019
CONSTRUCTION & INFRASTRUCTURE
ABOUT THE BRITISH MALAYSIAN CHAMBER OF COMMERCE
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stablished in 1963, the British Malaysian Chamber of Commerce (BMCC) has been driven by the sole ordinance of advancing bilateral trade relations between the United Kingdom and Malaysia. Over the past five decades, the BMCC has been a catalyst in providing Malaysian-based businesses with networking and exposure, knowledge exchange and bilateral trading support services. Today, the BMCC has firmly rooted itself as one of Southeast Asia’s most prolific Chambers. The BMCC is appointed by the UK’s Department for International Trade (DIT) to become their service delivery partner for British SME’s seeking to export or establish a presence in Malaysia. Embodied by dedicated sector specialists, the BMCC TRADE TEAM provide a range of customised services from market intelligence, business matching and event management to sourcing assistance of UK goods and services. The BMCC TRADE TEAM works with UK exporters focusing primarily on SMEs in offering bilateral trade assistance, serving principally as a one-stop platform providing a soft landing for UK firms in Malaysia through market research and knowledge exchange, legal and regulatory systems guidance, connecting clients or distributors, and risk management.
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This report serves as a preliminary introduction that highlights key features and factors relevant to the Professional Services sector in Malaysia. Information included in this report is the original work and property of the British Malaysian Chamber of Commerce (BMCC) and its department the Trade Team and is subject to copyright. No illustrations, photographs, graphics or text included in this report should be copied, reproduced or shared without prior written consent of its owner. Whereas every effort has been made to ensure that the information given in this document is accurate, the British Malaysian Chamber of Commerce nor its Departments (Trade Team) accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. © British Malaysian Chamber of Commerce Berhad
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UNDERSTANDING MALAYSIA’S CONSTRUCTION & INFRASTRUCTURE SECTOR Located in Southeast Asia, Malaysia is a federal constitutional monarchy consisting of two regions, Peninsular and East (Borneo) Malaysia, seperated by the South China Sea. Malaysia is known to be one of the most diversely congenial polyethnic and mutlti-cultural countries in the world. Population: 32 Million Ethnicities: Malay, Chinese, Indian Currency: Malaysian Ringgit (MYR) Ease of Doing Business: Rank 24 Average GDP Growth: 5 - 5.5% 2018 Construction Budget Allocation: MYR 61.44 billion
The Malaysian construction industry is
generally separated into two areas. One area is general construction, which comprises residential construction, non-residential construction and civil engineering construction. The second area is special trade works, which comprises activities of metal works, electrical works, plumbing, sewerage and sanitary works, refrigeration and air-conditioning works, painting works, carpentry, tiling and flooring works and glass works.
The construction industry makes up an important part of the Malaysian economy due to the amount of industry linked to it such as those for basic metal products and electrical machinery. Construction projects worth RM350bil are expected to come onstream over the next two to three years with the announcement of Budget 2018. Hence, the construction industry is very much a substantial economic driver for Malaysia.
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INTRODUCTION
Construction and Infrastructure in Malaysia has traditionally been a substantial driver of the nation’s growth, in which this trend is expected to continue to expand. This is clearly portrayed in the Malaysian 11th Plan, The Construction Industry Transformation Programme (CITP) 2016 -2020 as well as the current Budget 2018, worth RM 61.44 billion which covers about 22% from the total RM 280.25 billion budget announced in November 2017 indicating the significance of the industry as part of the country’s ambition to become a well-developed nation by 2020. In 2018, the construction industry is forecasted to grow at 7.5 %, supported by ongoing infrastructure projects.
Malaysia East Coast Rail Link
A positive trend is noticeable in the growth of construction industry across the 8th (2001 – 2005), 9th (2006 – 2010) and the 10th Malaysia Plan (20112015) where a total of 99,107 projects worth RM 1.3 trillion was recorded, wherein GDP attributed by the construction sector from 2006 to 2016 averaged at 7.4 %. While no new announcements being made on initiatives or tax reliefs for the construction industry in the coming year, 4 major sector drivers are prioritised which are public transport, roads, public housing and water infrastructure. The large majority of the budget allocation for construction are highly concentrated on rail including the High Speed Rail (HSR) and the East Coast Rail Link (ECRL).
The railway link infrastructure project will carry both passengers and freight from the West Coast of Peninsular Malaysia to its East Coast and vice versa. Pictured above CRRC Zhuzhou CJ6-type EMU proposed for inter-city rail line passenger services.
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Source: SPAD.GOV.MY Graphics: Straits Times
CONSTRUCTION BUDGET 2018 RM 95 m
RM 1 B Trade & Industries
RM 1 billion allocated for 5 main corridors, Development of South Perak Region & Bukit Kayu Hitam Duty Free Zone, construction of Port & Industrial park in Tok Bali, Kelantan and Access road to Baleh Dam, Sarawak
Transportation
RM 95 million to upgrade Penang & Langkawi International Airport, new airport in Mukah, expansion of airports in KB & Sandakan, new airport in Tioman and a bridger connection Labuan with mainland Sabah
RM 500 m
RM 2.2 b Agriculture
RM 500 million to improve irrigation infrastructure & upgrade plantation roads
Housing
RM 2.2 billion for many affordable housing like PR1MA, and home scheme for B40 households around the nation
RM 760 m
RM 132 m Public Order
RM 720 million for 11 police headquarters & 6 police stations. RM40 million to upgrade 5 hospitals, build 4 polyclinics and 1 hospital for arny veterans
Sports
RM 112 million for 14 new sports complex nationwide. RM 20 million to upgrade premiere sports schools
RM 37.34 b
RM 3.7 b Logistics
RM 110 million alternative road to Port Klang. RM 32 billion MRT2 line from Sg Buloh, Serdang to Putrajaya (52km,37 st). MRT3, LRT3, HSR. RM5 billion West Coast Highway from Banting, Selangor to Taiping. RM 230 million road from Raub to Bentong and Gua Musang to Kg Relong
Education
RM 2.5 billion for repair works via IBS, of which RM500 million to schools in Peninsular, RM1billion in Sabah & RM1billion in Sarawak. RM654 million to construct 4 preschools, 9 PERMATA centres, 48 primary schools & vocational colleges & 1 matriculation college. RM550m for nationwide school upgrades and maintenance
RM 4.6 b
RM 3.9 b Health
RM 1.4 billion for operational halls in 3 hospitals. RM100 million to upgrade hospital & clinics. RM1 billion to build 2 blocks for women & children at Terengganu and Putrajaya Hospital. RM 500 million for cancer centre in SP
Inclusive Development
RM1.1 billion for rakyat centric projects in Sarawak includes building upgrades of bridges, musolla, markets. RM 1 billion for communication infrastructure & broadband facilities in Sabah & Sarawak. RM 934 million for rural roads. RM 672 million for electricity in rural areas.
RM 83.5 m RM83.5 million to construct infrastructure for the first phase of DFTZ in Aeropolis, KLIA
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PUBLIC AND PRIVATE SECTORS Although the industry can be categorized in more specific micro sectors, it has always been generalised as a public or private projects. According to CIDB ‘Main Statistics on Construction Projects Awarded’, an increase of project numbers was recorded valued from 2015 to 2016 for both public at RM 51 billion in 2016, (a 51% increase) and private (RM178 billion in 2016, a 34.3% increase) sectors. The value has decreased however as of the first half of 2017 with public sectors recording RM 6 billion worth of projects while private was at a valuation of RM 34 billion. The figures clearly indicates the private sectors have dominated and steer the domestic demand.
The public sector has invested in various pub- lic transport projects, focusing on rail with the The Kelana Jaya and Ampang Line Extension Project was extended with 13 and 12 new sta- tions, respectively, in 2016. The LRT3 is a project that is currently being developed under the Urban Rail Development Plan by SPAD, which will cost an estimated RM10bn ($2.5bn) over a construction-to-operation period of 2016-20. The private sector continues to steer Malaysia’s do- mestic demand with the bulk of private investment driven by ongoing infrastructure projects. Growth in the construction sector continues to be propelled by the rail infrastructure projects, urban housing and affordable housing segments.
Construction Projects by Public & Private Sectors
Public
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Private
LOCAL AND FOREIGN CONTRACTORS
The majority of contracts and number of projects have historically been dominated by local contractors with opportunities aplenty for foreign players to become involved in.
China, which is Malaysia’s largest trading partner, has become a key player due to its overarching global ambitions underthe Belt & Road Initiative (BRI).
In recent years however, the local construction industry has been facing stiffer competition from foreign contractors. According to the Construction Industry Transformation Programme (CITP) 2016 - 2020, the local construction industry has been afflicted by several pertinent issues including safety and health, low productivity and competitive prices.
While local contractors are still dominating the industry, the increasing presence of foreign contractors on local contracts is set to continue in the future as the government is driving foreign direct investments into the country.
The CITP noted Chinese and Japanese contractors were the top two foreign players in the country in terms of number of contractors involved and value of projects awarded, with 153 and 189 projects bagged respectively between the years 2008 and 2015.
Construction Projects by Local & Foreign Contractors
Local
Foreign
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REGULATORY ENVIRONMENT Some of the highlighted guidelines especially for foreign contractors and players:
1. Registration of Construction Personnel In accordance with ACT 520, it is compulsory for construction personnel to be registered with CIDB including all construction site supervisors and skilled construction personnel as specified in the Third Schedule of Act 520, and to hold a valid CIDB issued certificate according to their respective trades and skills. Anyone found working without proper registration and accreditation papers could face a fine of not exceeding RM5,000. Likewise, the same penalty will also be imposed on employers of workers who are not accredited to carry out construction work. 2. Compliance Certificate for Construction Materials To regulate the quality of construction materials used in the construction industry, CIDB will now certify the construction materials available in the market as specified in the Fourth Schedule of the Act, and in accordance with the standards specified in the same Schedule.
KEY AUTHORITIES
Land Public Transport Commission (Suruhanjaya Pengangkutan Awam Darat) Plans, regulates and enforces all matters relating to land public transport in Peninsular Malaysia +603-2726 7000 | www.spad.gov.my
3. Safety of Buildings and Construction Works It is the contractor's duty to ensure the safety of the building and the construction works, whether during or post construction works. This regulation is applicable to all contractors, whether registered or not with CIDB. Likewise any person having the authority and power to manage or control any construction sites has the duty to ensure that the construction site and the means of entering and leaving the site are safe and risk free.
Construction Industry Development Board Enhancing capabilities and quality within the construction sector and emphasising professionalism, innovation and knowledge +603-4047 7000 | www.cidb.gov.my
Other Highlighted Issues
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In a recent news, it was announced it is mandatory for all private projects to use industrialised building system (IBS) for projects valued at RM50mil or more in three years' time starting from 2018. This will allow time for private players to get themselves ready. This is also one of the KPI under the productivity thrust of the Construction Industry Transformation Programme 2016-2020. IBS is going to benefit in terms of reduce the usage of building materials that are inflicting the environment as well as reducing the dependency on foreign workers.
Public Works Department (Jabatan Kerja Raya) Responsible for public works, highway authority, construction industry, engineers, architects and quantity surveyors +603 8000 8000 | www.kkr.gov.my
KEY STAKEHOLDERS Organisation
Overview
Contact
Eco World Development Group Berhad Public listed Malaysian company involved mainly in property development
+603 3344 2552 www.ecoworld.my
Gamuda Berhad Infrastructure concessions, property development, engineering and construction
+603 7491 8288 gamuda.com.my
IJM Land Berhad Property development, engineering and construction
+603 7985 8288 www.ijmland.com
IOI Properties Group Berhad Known For Developing Sustainable And Close-Knit Modern Communities
+603 8947 8888 www.ioiproperties. com.my
Mah Sing Group Berhad Proven track record of developing and completing prime residential and commercial projects strategically across Malaysia’s property hotspot
+603 9221 6888 www.mahsing.com.my
Naza TTDI Sdn Bhd Property development arm of the Naza Group known for acclaimed township of Taman Tun Dr Ismail and more than 14,000 residential and commercial units to date
+603 5101 5600 www.nazattdi.com
SP Setia Berhad A Malaysian property, infrastructure and business company
+603 3348 2255 www.spsetia.com.my
Sunway Berhad One of Malaysia’s largest conglomerates with core interests in property, construction, education and healthcare
+603 5639 8822 www.sunway.com.my
CONTACT US For any inquiries please contact the BMCC Trade Team: Tel: +60(0)3 2163 1784 / 1786 Email: info@bmcc.org.my Web: www.bmcc.org.my
E04C0, 4th Floor East Block Wisma Selangor Dredging 142-B Jalan Ampang 50450 Kuala Lumpur
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