Malaysia Construction Issue and Challenges

CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES In the year of 1998, global financial crisis occur and causes many country face on housing bubbles due to knock-on effect on economic downturn resulting a negative impact on the development in construction sector. According to Asian Development Bank Institute (ADBI), one of the two sectors that had been felt strongly due to this impact was falling to the construction sector. In the year of 1998, the overall GDP was recorded a negative 7.4% from a peak of 10% in 1995 whereas construction sector growth was recorded a huge declination from a cliff of 21.1% in 1995 to negative 24% in 1998. From this fact, we can clearly understand that the relationship between a country’s economic trend and construction sector growth are interdependence. To discuss the title of “Issues and challenges in Malaysia Construction”, we should look for the issues that occur since couple years ago and not yet resolved until nowadays. The main issue in construction industry is facing the labor and materials shortage regard to the speech by the president of Master Builders Association Malaysia (MBAM), Matthew Tee Kai Woon, in 2014. This shortage can indirectly influence whole the construction value chain especially in term of cost. With the information given by Official Population Clock, Malaysia on 11Sept, 2014 had recorded a total 35,404,000 of population. Due to less population compare to the country like Bangladesh, Vietnam, Philippines, Thailand and 11 countries more, our country force to search on the labor workforce from outside to replace the vacancy. This replacement causing many employers relies much on foreign labor especially in the construction sector. Scenario above arises closely due to the Malaysian consideration that refuses to perform the jobs as they think that those jobs are low profile, physical and mentally suffer. Dependencies to foreign workers in construction areas may apparently cheaper in term of wages, but in fact it could contribute to several problems particularly on productivity and quality of work. Besides, shortage of materials should also be valued. A study of “Relationship between Factors of Construction Resources Affecting Project Cost” that had been done by our University, UTHM, FKEE on 25th October, 2012 had rank materials shortage as number three that can significantly effect on a project. It would cause to cost overrun, delay of project and so forth. The main cause to shortage of materials is due to ineffectiveness of resources management as mention by Mochal (2003). Besides, it would also relate to those manufacturers mothballed kilns during a drop in sales during the recession. As we know about the concept of supply and demand in economic, once shortage of materials happen, the cost of the materials would increase accordingly and thus whole of the construction supply chain will be manipulated. Apart from above, the government policy should also be one of the considerations. In this early year of 2014, government start to deduct the subsidy on fuel, increase toll charges and will implement of GST in coming year. Implementation of above policy will make negative influence to tourism sector and thus impact to construction sector like increasing the cost of materials and transportation, as construction is made by the development of tourism. Due to these, the investor may not interest to fund in our country and cause to decrement in tourism sector resulting construction sector face on financial stress. Although only 5% of sales tax will charge on the building materials that classified as Second Schedule Goods (those materials that is not basic building materials such as bricks, cement, tiles) in coming year, but in long-term view, it actually costly and burden. While so many issues arise, there should be the way to overcome with. From the above issues discussed, we can see that the main challenge in construction industry is to

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CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES ensure for anticipated growth. Government plays an important role in this circumstance. Let’s take Dubai as our model. In the early year of 1950’s, Dubai is just a small poor desert island with no any natural resources given. The population in that time is around 5’000 only and it is unfamiliar by most of whole world. But nowadays, this country is change to a developed and modern country with whole world knows. People may think that this rapid development may due to the discovery of oil in 1960’s, but in fact, in these 10 years compare with other UAE country, the income of the Dubai GDP due to oil is just 6% with overall 230%. To ensure for the continuing growth in construction sector, Dubai government make their country as free trade zone, attractive liberal policies, political and economic stability and so forth to capture much interest of international investors to set up business on their country. By doing this, the tourism sector will be developed and so to drive the growth of others sectors. Yes, all of us know, our country is every year getting develop with pretty GDP proven, but in reality, the increment is just too slow to withstand and compete with others country. To make sure on continuing develop in economic, Malaysia government should learn the strategies taken by Dubai or the others countries. There are several reason that foreign investor refuse to fund in our country. First, Malaysia government tries to push for mega investor due to some politician’s issues. Second, there is some “hidden rules” if want to bit government project. Third, Malaysia is not the cheap labor country compare to others neighboring countries. It is necessary for our government to make a change because a lot of Mega project like MRT is required to drive labor productivity and push the GDP. Although, we cannot make our country as free trade zone, but there is a way to increase this productivity by looking at the policies and framework so that Malaysia can adapt with global economic environment. With the example MRT project that costing over RM40billion under 10th Malaysian Plan and ETP, it required about 130,000 construction skilled workers to ensure successful completion. Since mega project can bring a lot of benefits to a country such as generate economic growth, employment opportunities, bringing better services and so forth, thus, government should put more effort on the strategies to attract foreign investor to fund in our country. Once a lot of capital inflows to our country, all the limited resources can be solved. It cannot be denied that our government has done some incentive work and support to push up the economic but yet it is still not enough. Some efforts that government done is try the best to persuade all construction industry implements IBS in their constructive method. This can be shown by introducing IBS Roadmap 2003-2010 with the ambition that all building industry can achieve 100% usage of IBS by the year of 2010. As we know, by using this approach, the labor and resource shortage can be resolved beside can enhance the development of construction economic. It could say that, there is no reason for not using IBS. Yet, in this year 2014, IBS still not the first approach by contractor. The possible critical success factors that hinder the contactor implement IBS may cause by Malaysian contractor themselves that will only improve their performance under constant pressure. In conclusion, the future of the construction industry is still bright and has a lot of opportunities. To makes sure that our construction sector can get anticipated growth, government should strengthen or amend the policy that can bring more investor to fund in our country and promoting all contractor to use IBS as their approach. Although there is a need to limit the number of foreign workers, a proper balance where there is a gradual limitation of foreign workers in this country must be juxtaposed with the need to

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CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES reserve the number of skilled construction workers so that they can still continue to contribute towards the economy.

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