“the key issues in the malaysian construction industry ... · malaysian construction industry:...

“The Key Issues in the

Malaysian Construction

Industry: Public and Private

Sector Engagement”

During Persidangan Pegawai Kanan

KKR

dan

Agensi 2011

By:

Mr. Aziz Tan Sri Bahaman

MBAM Vice President

Thursday, 5th May 2011

Hotel Equatorial, Penang1

Presentation Outline

• Construction Growth 2001-2010

• Construction Outlook for 2011

• Key Issues of the Construction Industry

• Conclusion

2

Overview

9th Malaysia Plan (9MP) was envisaged to ensure that the economy

will be more focused on capital and services and the private sector

would be the main engine of growth.

However by the end of 9MP, the economy did not grow at 6% per

annum during the 5 year period as envisaged. (Average annual

growth was about 3.2%)

Real commitment and a realistic execution plan has to be devised to

ensure the success of the 10th Malaysia Plan (10MP) which also

charts a 6% growth target.

.

3

Sustainable Construction Growth

Source: BNM Yearly Reports 4

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Real GDP 0.3 4.1 5.3 7.1 5.2 5.9 6.3 4.6 -1.7 7.2

Manufacturing -5.8 4.0 8.2 8.8 5.1 7.8 3.1 1.3 -0.3 11.7

Services 5.8 4.1 4.1 6.7 6.5 6.4 9.6 7.3 2.6 6.9

Agriculture -0.9 3.0 5.5 5.0 2.5 6.4 2.2 3.8 0.4 1.9

Mining -0.8 3.7 4.8 4.1 -0.8 -0.9 4.2 -0.8 -3.8 0.2

Construction 2.1 2.3 1.9 - 1.9 -1.6 -0.5 5.5 2.1 5.7 5.3

Source: CIDB Quarterly Statistical Bulletin

5

YearTotal Projects Value GDP

(RM mil) (%)

2002 48,312.55 2.3

2003 49,559.88 1.9

2004 52,694.36 -1.9

2005 54,277.08 -1.6

2006 60,926.99 -0.5

2007 94,416.83 5.5

2008 85,837.08 2.1

2009 73,413.55 5.8

2010 58,346.28 5.3

6

TOTAL CONSTRUCTION PROJECTS VALUE VS GDP

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Year / Quarter

To

tal

Pro

jects

Valu

e (

RM

mil

)

-3

-2

-1

0

1

2

3

4

5

6

7

GD

P (

%)

Total Projects Value (RM mil) GDP (%)

2011 Outlook for Construction Industry

The outlook for the construction industry looks positive in year

2011 with the launching of the 10th Malaysia Plan (10MP) &

Economic Transformation Program (ETP) with many entry

point projects to be launched under the 12 National Key

Economic Areas (NKEAs). The growth anticipated for the

construction industry is to be within expectation in the region of

5% - 6%.

7

8

What are the Key Issues of the

Construction Industry?

Challenges of the Construction Industry

The challenges of the construction industry are to

ensure that we attain and are able to sustain the

anticipated growth. As such timely & successful

implementation of the entry point projects under the

NKEAs is required.

9

Key Issues of the Construction Industry

Timely dissemination of information on

projects

The Government to kick off all the proposed 2011

budgeted projects on time to balance up the gestation

period and growth anticipated for the construction

industry. As such besides the approval of the Mass

Rapid Transit (MRT) system for the improvement of

the public transport at the Klang Valley, other projects

such as the highway projects and Greater KL Plan

need to be approved and rolled out too.


10

Public Private Partnership (PPP)The Government is putting emphasis on PPP under the 10MP.

However, there are several concerns that need to be addressed.

Provision of Assurance on Good Investment

With the implementation of ETP and Public Private Partnership (PPP),

the private sector is supposed to play a bigger role in the

implementation of projects whereby the major responsibilities are

moved from the public to the private sector. PPP in fact transfer

massive amount of risk from the public sector to the private sector

resulting in few companies with strong technical capabilities and

financial strength willing to undertake projects involving PPP. As

such, the Government needs to provide some form of assurance and

more incentives to the private sector in order for them to be willing to

invest in these projects proposed by the Government as we move

forward to the development as a high income nation.

11


PUPLIC PRIVATE PARTNERSHIPS (PPP)

Fair and transparent bidding process for projects

There is a need for more transparency in the award of projects with

implementation of open tender systems for bidding of Government

projects. MBAM appreciates the announcement that all works will be

implemented by open tenders which will reduce wastage and generate

more value for money. We hope that with the adoption of proper

tender evaluation criteria, more competent contractors and the related

supply chain will benefit from these contract packages.

12


PUPLIC PRIVATE PARTNERSHIPS (PPP)

Land Issues

The Government should sort out land issues instead of the contractor

to sort out the matter when it comes to PPP projects.

Compensation/Grant

Compensation or grants should be considered for bidders since it can

be quite costly for bidders to submit proposals. By considering

compensation or grants, more companies may consider proposing and

bidding for PPP projects which will eventually benefit the rakyat.

13


HIGH NUMBER OF CONTRACTORS

There is a high percentage of contractors but only about 12% are

actually running construction business. There is an urgent need

to regulate the number of contractors.

There is a need to limit number of contractors, raise standards

of registration and pre-qualification of contractors to ensure

quality delivery from capable and committed contractors – fewer

but stronger players.

Key issues in Construction Industry

14

Number of Registered Contractors

as of 1Q,2011

Source: CIDB15


State Total

Contractors

Registered

Contractors Registered By Contractor Registration Grade

End of Period G1 G2 G3 G4 G5 G6 G7

Johor 6,523 3,291 979 1,155 346 324 136 292

Kedah 3,506 2,128 513 360 123 144 66 172

Kelantan 3,327 2,311 297 311 81 146 48 133

Melaka 2,204 1,113 341 365 113 126 41 105

Negeri Sembilan 3,423 2,239 401 438 93 129 42 81

Pahang 3,703 2,166 477 579 163 151 49 118

Pulau Pinang 3,268 1,375 567 640 133 206 96 251

Perak 4,374 2,618 591 627 161 190 76 111

Perlis 1,205 972 86 71 22 28 4 22

Selangor 10,247 4,413 1,143 2,090 561 809 271 960

Terengganu 3,630 2,297 316 385 150 221 80 181

Sarawak 7,286 4,686 886 922 149 214 83 346

Sarawak 2,999 1,248 525 469 141 186 91 339

Wilayah Persekutuan 8,180 1,916 827 2,080 493 1,061 387 1,416

1st Quarter or Year 2011 63,875 32,773 7,949 10,492 2,729 3,935 1,470 4,527

HUMAN RESOURCES AND MANPOWER ISSUES

• The massive roll-out of projects will require numerous skilled workers, both local

and foreign to ensure its successful completion, considering the complexity and

fast-track nature of the projects.

• There is an urgent need to provide quality construction industry-based training to

meet the construction industry’s needs especially for the up skilling of the current

local construction workforce.

• The Government to train local workers to replace foreign workers as well as to

reduce the total number of foreign construction labour to 200,000 by 2015 as per

the Government’s long term policy on reducing the reliance on foreign workers.

16


• Need to stop flow of competent human resources out of the country, especially in

the professional, managerial, supervisory and skilled labour segments of the

construction job markets.

• Need to breed interest in construction related careers and to do this Government

should continue to teach construction related skills in vocational schools.

• Industrialized Building Systems (IBS), Mechanization and other labour saving

methodologies must be encouraged in order to drive yield of construction workers

to achieve a higher income economy.

• Need to prepare for free flow of workers within ASEAN countries by 2015.

17

Key Issues of the Construction Industry?

Category Age At 31.12.2007 Total

< 31 31-40 >40

General Worker 108,544 58,377 68,247 235,168

Semi-skilled Worker 24,623 8,897 7,527 41,047

Skilled Worker 40,193 33,023 41,575 114,791

Sub-total 173,360 100,297 117,349 391,006

Supervisor 7,065 12,668 24,588 44,321

Construction Managers & Prof 11,020 21,436 34,710 67,166

Sub-total 18,085 34,104 59,298 111,487

Total 191,445

(38.1%)

134,401

(26.7%)

176,647

(35.1%)

502,493

Note:

1) 35.1% local construction personnel will reach the age of 50 years and above in 2017.

2) There are about 300,000 legal foreign construction workers in addition to 391,006 local workforce

(43% of the total construction workers)

Source: 1st Malaysian Construction Summit 2008 – 6th June 2008, Paper presented by Datuk Ir Hamzah Hasan,

Chief Executive, CIDB

Local Workforce Based on Registration

Category & Age


18

Construction Payment & Adjudication Act (CIPAA)The industry needs CIPAA. Mentioned of this proposed act has been traced

back since it was brought up at an Industry Roundtable Meeting in 2005 by

the Minister of Works.

CIPAA will be able to resolve all issues regarding payment problems, late

payment, under payment and non receipt of payment in the construction

industry.

If CIPAA was made a reality, it would provide the contractors an alternative

avenue to resolve the disputes quickly and at affordable costs. Existing

dispute resolution mechanisms in the Construction Industry such as

Arbitration and Litigation are time - consuming and are often expensive.


19

• There are opportunities overseas but there are challenges too.

• Need to secure financing for company going overseas.

• Opportunities to foster closer co-operation among the construction contractors

and thereby promote joint ventures and joint operations for enhancement of

Malaysian construction contracting capabilities and also to help promote

mutual consultation among construction contractors and thereby encourage

exchange of information and know-how for improvement of construction

technology and management, upgrading of construction labour skills and

standards.

• Promotion of Malaysian construction services overseas through international

trade exhibitions.

GOING GLOBAL


20

21

GOING GLOBAL

(Source: CIDB’s Construction Quarterly Statistical Bulletin as of 31 March 2011)

Overseas Projects Awarded To Malaysian Contractors

By Year 2000~1Q2011

2,105.69 2,443.04

6,145.05

3,733.982,950.27

9,554.2210,189.88

19,551.31

9,467.37

14,010.57

1,491.03

58.50-

5,000

10,000

15,000

20,000

25,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q2011

Year

Va

lue

(R

M M

illio

n)

22

GOING GLOBAL

(Source: CIDB’s Construction Quarterly Statistical Bulletin as of 31 March 2011)

Overseas Projects Awarded to Malaysian Contractors By Country

Year 1986 ~ 1Q2011

17,689.99

12,076.21

11,132.13

8,091.51

5,277.75 5,059.27

3,489.00

2,781.23 2,699.44 2,719.43 2,429.322,002.00 1,905.59 1,819.00

13,077.36

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Ind

ia

Sa

ud

i A

rab

ia

UA

E

Qa

tar

Lib

ya

Ch

ina

Su

da

n

Ba

hra

in

Vie

tna

m

Ind

on

esia

Th

aila

nd

Ira

n

Bo

sn

ia

He

rze

go

vin

a

So

uth

Afr

ica

Oth

er

Country

RM

Millio

n

23

Number and Value of Projects Taken by Malaysian Contractors Overseas

Number & Value of Projects Undertaken by Malysian Contractors in Global Market

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

2005 2006 2007 2008 2009 2010 1Q2011

Year

Valu

e (R

M m

) ASEAN

India

Middle East

Africa

Others

Conclusion

MBAM hopes that with the launch of the 10MP, and the

implementation of the Entry Point Projects with the ETP, we will be

able to see a better growth in the second half of the year 2011 for

the construction industry.

In year 2011, building materials manufacturers will still have the

potential to produce sufficient building materials to support the

growth of the construction industry and there is still room to match

capacity with demand for raw material prices as we move towards

liberalization.

In addition, with the implementation of the Competition Act with

effect from year 2012, we will move towards more healthier

business environment with no cartel of services.

The Government must take the initiative and role to facilitate and

provide the infrastructure and ensure the human talent is available.

24

Thank You

25

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