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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, 5
th
May 2011
Hotel Equatorial, Penang
1
Presentation Outline
Construction Growth 2001-2010
Construction Outlook for 2011
Key Issues of the Construction Industry
Conclusion
2
Overview
9
th
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 10
th
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
Year
Total 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
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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
T
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P
r
o
j
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c
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s

V
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(
R
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m
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)
-3
-2
-1
0
1
2
3
4
5
6
7
G
D
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 10
th
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%.
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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.
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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.
Key Issues of the Construction Industry
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.
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Key Issues of the Construction Industry
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
Key Issues of the Construction Industry
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.
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Key Issues of the Construction Industry
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: CIDB
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Key Issues of the Construction Industry
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 industrys 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 Governments long term policy on reducing the reliance on foreign workers.
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Key Issues of the Construction Industry
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.
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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: 1
st
Malaysian Construction Summit 2008 6
th
J une 2008, Paper presented by Datuk Ir Hamzah Hasan,
Chief Executive, CIDB
Local Workforce Based on Registration
Category & Age
Key Issues of the Construction Industry
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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.
Key Issues of the Construction Industry
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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
Key Issues of the Construction Industry
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GOING GLOBAL
(Source: CIDBs 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
3,733.98
2,950.27
9,554.22
10,189.88
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
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GOING GLOBAL
(Source: CIDBs 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
2,429.32
2,002.00
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
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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
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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.
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Thank You
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