Editorial
THE GLOBAL ECONOMY OUTLOOK
According to the World Economic Outlook Update by the
International Monetary Fund (IMF), global growth in 2015 will be
marginally weaker than 2014, with only a modest acceleration
expected in 2016. Global growth is projected at 3.3% in 2015,
with a gradual pickup in advanced economies and a slowdown
in emerging market and developing economies while growth is
expected to strengthen to 3.8% in 2016.
Growth in advanced economies is projected to increase from 1.8%
in 2014 to 2.1% in 2015 and 2.4% in 2016. Advanced economies
are expected to be driven by easy financial conditions, more
neutral fiscal policy in the euro area, lower fuel prices, improving
confidence and stronger labour market conditions.
Meanwhile, growth in emerging market and developing economies
is projected to slow from 4.6% in 2014 to 4.2% in 2015. The
continued slowdown in growth reflects several factors the
dampening impact of lower commodity prices (particularly in oil
exporting countries), tighter external financial conditions, structural
bottlenecks, rebalancing in China and economic distress related
to geopolitical factors. In 2016, growth in emerging market and
developing economies is expected to pick up to 4.7%, largely on
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account of the projected improvement in economic conditions in
a number of distressed economies, including Russia and some
economies in the Middle East and North Africa.
The distribution of risks to global economic activity is still tilted to
the downside. Near-term risks include increased financial market
volatility and disruptive asset price shifts, while lower potential
output growth remains an important medium-term risk in both
advanced and emerging market economies. Lower commodity
prices also pose risks to the outlook in low-income developing
economies after many years of strong growth.
The projected pickup in global growth, while still expected, has
not yet firmly materialized. According to the IMF, raising actual
and potential output through a combination of demand support
and structural reforms continues to be the economic policy priority.
Advanced economies should continue with accommodative
monetary policy to support economic activity and lift inflation back
to target while in emerging market and developing economies,
demand support should come from fiscal policy rebalancing aimed
at boosting longer-run growth, through tax reform and spending
reprioritization.
 MALAYSIA BUILDERS DIRECTORY 2016/2017

THE MALAYSIAN ECONOMY

In the second quarter of 2015, the Malaysian economy registered sub-sector also expanded at a slower pace, reflecting the
a growth of 4.9%, a slowdown compared to 5.6% in the previous completion and near-completion of large transportation and utility
quarter. Domestic demand expanded by 4.6% during the quarter, projects. On the other hand, growth in the special trade sub-sector
driven mainly by private sector expenditure (which grew by 5.7%) was slightly stronger, underpinned by activity for earth, land
following continued growth in consumption and investment clearing and land reclamation works.
activities. Although private consumption growth moderated from
8.8% in the first quarter to 6.4% in the second quarter due to
household adjustments to the implementation of goods and
services tax (GST), continued wage growth and stable labour
market conditions remained supportive of overall consumer
spending. Meanwhile, private investment grew 3.9%, supported
by continued capital expenditure in the manufacturing sector,
particularly in export-oriented industries.

Public sector expenditure expanded by 0.9% in the second

quarter, with a higher growth of 6.8% recorded for public
consumption, reflecting a stronger expansion in supplies and
services as well as sustained growth in emoluments. However,
public investment registered a negative growth of 8% due to the
decline in investments by public enterprises following the near
completion of a few large projects.

On the supply side, the major economic sectors registered more

moderate growth during the quarter. The lower growth in the
services sector was to the outcome of a slower expansion in most
sub-sectors while the moderation in manufacturing sector was
due to the performance slowdown in export-oriented industries.
Growth in the mining sector was affected mainly by the
lower production of natural gas. The construction sector also
registered lower growth, due to a moderation in real activity in the
residential, non-residential and civil engineering sub-sectors
while the agriculture sector turned around to record positive
growth amid higher production of palm oil.
Growth in the construction sector moderated to 5.6% in the second
quarter of 2015 compared with 9.7% in the previous quarter,
following slower expansion in the residential, non-residential and
civil engineering sub-sectors. The moderation in the residential
sub-sector was attributable to lower construction activity in
residential projects. Growth in the non-residential sub-sector was
also slower, but firm, supported by the construction of commercial,
education and healthcare buildings. The civil engineering
Source: Department of Statistics Malaysia, Bank Negara Malaysia and
Ministry of Urban Wellbeing, Housing and Local Government, 2015.
According to RHB Research Institute Sdn Bhd, the continued
volatility in the financial and currency markets along with
unresolved domestic political issues suggest that the Malaysian
economic outlook would remain challenging in 2016. In its recently
released Regional-Asean Economic Outlook report, the research
house said it expects Malaysias real gross domestic product (GDP)
to sustain at 4.9% in 2016, marginally higher than the estimate
of 4.8% in 2015. Going forward, the Malaysian government is
expected to introduce more measures to stabilise the weakening
ringgit while remaining on track to progressively reduce its
budget deficit target.

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 Editorial

PERFORMANCE OF THE CONSTRUCTION SECTOR

According to the Department of Statistics Malaysia, the total
value of construction work done in the second quarter of 2015 rose
8.2% year-on-year to RM27.24 billion. Despite the growth, annual
percentage growth for the quarter was the lowest among the
last 13 quarters. Compared to the first quarter of 2015, the value
of work done in the second quarter declined 5.2% although the
number of projects rose 2% to 10,074 jobs.

Source: Department of Statistics Malaysia, 2015.

In the second quarter of 2015, the highest percentage share was

contributed by the non-residential buildings sub-sector, which
recorded 34.6% of the total value of construction work done.
This was followed by the civil engineering (30.4%), residential
buildings (30.3%) and special trade (4.7%) sub-sectors.

Source: Department of Statistics Malaysia, 2015.

Selangor continued to register the highest value of construction
work done of RM6.61 billion (translating to a 24.3% share) among
the states. This was followed by Wilayah Persekutuan (RM5.16
billion or 18.9%), Johor (RM5.03 billion or 18.5%), Sarawak
(RM2.28 billion or 8.4%) and Pulau Pinang (RM1.47 billion or
5.4%). Together, these five states accounted for 75.5% of the total
value of construction work done. In terms of construction activity
by project owner, the private sector continued to dominate with
a share of 66.9% while the public sector accounted for 33.1% of
the value of construction work done in the second quarter of 2015.

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CONSTRUCTION SECTOR UPDATES
The construction sector may be the only bright spot in the current
Malaysian economy as the pipeline of projects to be awarded in
the second half of 2015 and up to June 2016 is expected to hold
steady on a stream of civil infrastructure jobs. The sector would
now shift to focus on new tenders for the public transport and
highway segments with the Mass Rapid Transit 2 (MRT 2) and
Light Rail Transit 3 (LRT 3) projects entering either prequalification
or award phases with the total value of jobs amounting to RM39
billion, according to a recent Star Newspaper report.
Construction of the 52.2km MRT Line 2 (Sungai BulohSerdang
Putrajaya) was initially slated to commence in June 2016 but
Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) expects work
to start as early as the first quarter of 2016 with the tender for
the first package to be out by end-2015. The MRT Line 2 will be
built in two phases Sungai Buloh to Batu with an anticipated
completion in July 2021, and Batu to Putrajaya with completion
expected in July 2022. Once completed, the line will have a total
of 36 stations. Out of the total stretch, 13.5km will run through
an underground tunnel, while a total of 11 stations out of 36
will be situated underground.
MALAYSIA BUILDERS DIRECTORY 2016/2017
Source: Department of Statistics Malaysia, 2015.
CIMB Research analyst Sharizan Rosely is optimistic about
the sectors outlook as channel checks revealed that overall job
visibility continues to look good on the back of mega public
transportation projects. He added that the sector has seen slight
recovery following the award and implementation of contracts
amounting to RM22 billion at both project delivery partner (PDP)
and turnkey levels in August and September 2015.
At the PDP level, the Penang government awarded the first
phase (estimated at RM10 billion) of the states RM27 billion
Penang Transport Master Plan (PTMP) to SRS Consortium led by
Gamuda Bhd. SRS Consortium is a triumvirate joint venture of
Gamuda Bhd (60%), Ideal Property Development Sdn Bhd (20%)
and Loh Phoy Yen Holdings Sdn Bhd (20%), appointed as the PDP
for PTMP projects. The PTMP is a massive effort to create new
road networks, improve present carriageways and pedestrian
ecosystem. It also includes significant upgrading of the states
public transport system by introducing new transport options
such as trams, a MRT system and water taxis. The first phase,
involving the construction of a 17.5km LRT line linking Komtar
to the Penang International Airport and a new highway from
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 Editorial

Bayan Lepas to Tanjung Bungah, is scheduled to take off in

the first half of 2017.

Government-owned public transportation operator Prasarana

Malaysia Bhd recently awarded the RM9 billion LRT 3 project
to the Malaysian Resources Corporation Bhd/George Kent Bhd
joint venture. The 36km LRT line 3 connecting Bandar Utama
to Klang will have 25 stations and is expected to be completed
in 2020.

In East Malaysia, Prime Minister Datuk Seri Najib Tun Razak

launched the Pan Borneo Highways second package on the
eve of Malaysia Day RM700 million Telok Melano-Sematan
stretch in Lundu district. The single-carriageway, scheduled for
completion in December 2018, will connect Telok Melano
village at Sarawaks southern tip with Sematan, about 110km
from Kuching. Earlier in March, the earth-breaking ceremony for
the projects first work package took place 43km stretch linking
Nyabau in Bintulu and Bakun in Kapit in central Sarawak
(expected to be completed in 30 months).

Announced in October 2014, the Pan Borneo Highway targets

to link all major cities in Sabah and Sarawak. The highway, which
stretches 1,663km (936km in Sarawak and 727km in Sabah), is
estimated to cost some RM27 billion. The government has
appointed state-owned Lebuhraya Borneo Utara Sdn Bhd (LBU)
as the PDP to design, implement, supervise and manage the
development and upgrading of roads.

Among the sizable non-PDP awards, Sunway Construction Bhd

was awarded a project to construct government office buildings
while Muhibbah Engineering Bhd and Mudajaya Group Bhd
were both awarded portions of the multi-billion ringgit refinery
and petrochemical integrated development (Rapid) project by
Petroliam Nasional Bhd (Petronas). The packages awarded to
Muhibbah Engineering and Mudajaya were estimated to be
worth RM400 million to RM950 million each. In the next six to
nine months, more packages from the Rapid project would be
due for award and this would help to sustain momentum in the
industry. As at end-September 2015, total infrastructure/civil
works-related jobs awarded in Rapid since 2012 have increased
to RM3.3 billion.
Meanwhile, Malaysias high-speed rail (HSR) connecting Kuala
Lumpur to Singapore is on track, with a new company known
as MyHSR Corp Sdn Bhd (a government-backed project delivery
company) expected to take the lead in making the RM38 billion
project a reality. Intended to deliver a fastest journey time of 90
minutes between Kuala Lumpur and Singapore, the 330km high
speed line would serve eight stations in total through a mix
of express and stopping services. According to the Land Public
Transport Commission (SPAD) chief development officer Dr
Prodyutt Dutt, the project would take about five years and the
contract should be out in 2017, with expected completion by 2022.

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THE PROPERTY SECTOR
The outlook for the Malaysian property sector has somewhat
softened, with cuts in sales targets, delays in new launches and
rescission of land deals among developers becoming the order
of the day. Alongside the rise in living costs, the weaker stock
market and currency are factors that will continue to weigh on
buying sentiment and property demand, which may only recover
towards the second half of 2016, according to Maybank Research.
The latest Property Industry Survey by the Real Estate and
Housing Developers Association (Rehda) also revealed a less
optimistic sentiment among local developers. Respondents of the
survey were 125 property developers, who are Rehda members.
For the first half of 2015, property sales fell 9% compared with
the same period last year. Out of the total 10,877 units launched
during the period (of which 10,550 were residential units), only
4,373 units or around 40% were sold. The best-selling property
MALAYSIA BUILDERS DIRECTORY 2016/2017
types were the double and triple-storey units while sales of
apartments and condominiums were disappointing, with only 779
units sold out of the 4,259 units launched.
The number of unsold units for the period rose 14% to 78% in
the first half of 2015 from 64% in the previous corresponding
period. The unsold units were mostly in Kedah, Penang, Selangor
and Johor; mainly in the RM500,000 to RM1 million price range.
Unreleased bumiputra lots and loan rejections by banks were the
top reasons for the unsold units, according to the Rehda Property
Industry Survey.
Loan rejections increased to 35% compared with 29% in the
previous half, mostly involving residential property priced
between RM250,000 and RM500,000, followed by those
between RM700,000 and RM1 million. These were mostly due
to ineligibility of income, lower margin of financing offered by
banks and buyers credit history. Additionally, more than 70%
of respondents indicated that costs had increased by up to
11%, due to factors such as the GST, rising material prices and
weakening ringgit.
While the broad cooling measures imposed on the property
sector had been effective at curbing excessive speculation in
the market and should not be lifted at the moment, some
industry observers and analysts opined that Bank Negara
Malaysia (BNM) should look into easing the current stringent
lending policy, especially for first-time house buyers in order
to reduce the rising number of unsold properties.
Among some of the broad cooling measures introduced by
BNM were the 70% loan-to-value (LTV) cap on a borrowers
third and subsequent property-financing facility, lowering of the
maximum tenure for property loans to 35 years from 45 years,
the abolition of developer interest bearing schemes, raising of
the real property gains tax and increasing the cap on foreigner
property purchases to RM1 million from RM500,000. The
responsible lending guidelines have also made lending more
stringent as more documentation is now needed for approval
of loans and approval is now based on the borrowers net
income rather than gross income.
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 Editorial

THE 11TH MALAYSIA PLAN (11MP)

For the 11th Malaysia Plan (11MP) running from 2016 to 2020, the inter-state tolled highway, which is expected to be completed in
government has outlined five philosophies, namely pro-growth, five years at a cost of RM7 billion.
pro-people, pro-business, environment friendly and emphasis on
nation building. Touted as the final leg in the journey towards The Gemas-Johor Bahru Electrified Double Tracking Project
realizing Vision 2020, the 11MP is deemed to be very critical. (EDTP) will see nearly 200km of parallel railway tracks, including
A total of RM260 billion worth of development expenditure will stations, depots, halts, yards, bridges and cover systems
be spent between 2016 and 2020, translating to an average of such as electrification, signalling and communications being
RM52 billion per annum, which is higher compared to an average commissioned. Construction of the 197km track started in
of RM44.7 billion during the 10th Malaysia Plan (10MP). September 2014 and is expected to be completed during the
11MP period at an estimated cost of RM8 billion.
Under the 11MP, the construction industry is estimated to
expand at a pace of 10.3% per annum, with a contribution of
RM327 billion to GDP by 2020. During the 10MP, the industry
has achieved an astounding average growth of 11.1% and
recorded RM157 billion worth of projects in 2014 (from RM102
billion in 2011).

Medium-term prospects for the construction industry have

been buoyed by a series of large-scale transport infrastructure
projects rolled out by the government under the 11MP. Among
some of the projects include the Pan Borneo Highway, Central
Spine Road, West Coast Expressway, Electrified Double Tracking
Project between Gemas and Johor Bahru as well as road works
for the Rapid project.
The Central Spine Road (CSR) is a high-impact infrastructure
project launched in 2008 under the 10MP and comprises six
main packages, estimated to be worth RM6.6 billion. The six
packages are Kuala Krai to Sungai Lakit Bridge (51km), Sungai
Lakit Bridge to Gua Musang (63km), Gua Musang to Kampung
Relong (107km), Kampung Relong to Raub (56km), Raub to
Bentong (60km) and Bentong to Simpang Pelangai (53km). As
of July 2015, four sections of the roads (about 10% of the overall
project) are open for public use.
Meanwhile, the West Coast Expressway (WCE) is a new
expressway that will be built on the west coast of Peninsula
Malaysia connecting Taiping in Perak to Banting in Selangor.
Approved in 2013, the 316km expressway is an alternative route
to the North-South Expressway and is the second longest
THE CEMENT INDUSTRY
Despite likelihood of mega infrastructure projects, outlook for
the cement industry in Malaysia remains uncertain as prices
and revenues come under pressure from intense competition
and overcapacity. Slowdown in the property sector also has a
negative bearing on cement demand. According to AllianceDBS
Research analyst Woo Kim Toh, the property development
sector makes up 50% to 60% of total cement demand in
Malaysia.
Demand is forecasted to increase between 3% and 4% this
year slower than last years 5% to 6% growth, according to
analysts covering the cement industry. However, lower energy
costs expected this year will provide some breathing space for
cement producers as energy costs make up about 30% to 40%
of production cost.
Compounding the situation is the additional capacity expected
to come on stream in the near future. For instance, YTL Cement
Bhd (a wholly-owned subsidiary of YTL Corp Bhd) will add
1.5 million tonnes or 8% capacity to the industry this year.
Market leader Lafarge Malaysia Bhd is in the midst of expanding

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 MALAYSIA BUILDERS DIRECTORY 2016/2017

the capacity of its plants in Rawang and Kanthan,

which will add 1.2 million tonnes to the industry.
Cahya Mata Sarawak (CMS) Group also announced
plans to boost capacity by nearly 60% by opening
its third grinding plant, which is due to be
commissioned in the first quarter of 2016. The move
is expected to raise the companys production to
2.75 million tonnes per year. CMS, Sarawaks sole
cement manufacturer, currently owns and operates
two cement plants boasting an annual combined
rated production capacity of 1.75 million tonnes.

However, there are also analysts who are

positive about the industrys outlook due to the
ongoing infrastructure projects announced by the
government in Budget 2015. If all projects are
implemented as scheduled, the demand for cement
would continue to be sustained but at this juncture,
most players are relatively conservative in revealing
their prices and new expansion plans.

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 Editorial
THE CONSTRUCTION INDUSTRY TRANSFORMATION PROGRAMME (CITP)
Malaysias construction industry will be transformed into a
modern, highly productive and sustainable industry by 2020
under the Construction Industry Transformation Programme (CITP)
blueprint launched in September this year. Spearheaded by the
Ministry of Works and Construction Industry Development Board
(CIDB), the CITP also aims to strengthen local construction
companies to compete with international players.
The five-year blueprint, which forms part of the 11MP, encompasses
18 initiatives under four strategic thrusts. The four thrusts
focus on ingraining quality, safety and professionalism into
the industry; ensuring environmental sustainability measures
are in place at the design, construction and subsequent
maintenance of buildings, cities and infrastructure; raising overall
productivity level of the industry; and focusing on improving the
competitiveness and subsequent ability of construction players
to internationalize.
To ensure quality, the CITP will push for adoption of the
Quality Assessment System in Construction (QLASSIC), which
measures the quality of workmanship in building construction.
The CITP targets to make QLASSIC a mandatory element in all
government projects by 2018. On safety and health, more stringent
requirements would also be introduced to significantly reduce
accidents and fatalities.
The CITP envisions the Malaysian construction industry as
a low carbon, sustainable building and infrastructure model,
especially to Asean member countries. Following this, a Centre
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of Excellence (CoE) for Sustainable Construction will be
established to develop, promote and implement sustainable
construction systems and practices. The blueprint also
addresses the challenge of irresponsible waste generation
where by January 2018, it will be mandated for contractors to
comply with waste management programmes, as part of the
requirement in Environmental Management Systems ISO14001
certification. This will be implemented in stages, starting with
G7 category contractors.
Meanwhile, productivity improvement will focus on three
key drivers workforce, technology and process. To reduce
dependency on foreign labour, the government has proposed to
enhance human capital development. Proposed measures include
streamlining construction-related courses, creating a training
map to chart progress towards a skill trade, conducting curricula
reviews and ensuring up-to-date industry training content.
Another aim that will help reduce dependency on foreign
workers is to induce faster adoption of Industrialized Building
Systems (IBS) by establishing economic mechanisms and
modern practices.
According to CIDB, the construction industry is expected to
maintain a double-digit growth this year and has surpassed
the performance of other economic sectors in the country. In
2012, at the height of the 10MP, the construction industry
achieved its peak growth of 18.1% and from then on, the industry
had maintained its double digit growth at 10.8% in 2013 and
11.8% in 2014.