ISSUES PAPER
REGULATORY REVIEW ISSUE PAPER:
PROFESSIONAL SERVICES TO
BUILDING INDUSTRY
29 October 2014
PROFESSIONAL SERVICES TO BUILDING INDUSTRY
Table of Contents
1.0
TERMS OF REFERENCE ........................................................................................... 4
1.1
What the MPC has been asked to do? ........................................................................................ 4
1.2
Conduct of the review................................................................................................................... 4
1.3
Timing ........................................................................................................................................... 4
1.4
Contacts ....................................................................................................................................... 5
2.0
INTRODUCTION ......................................................................................................... 6
2.1
What is this study about? ............................................................................................................. 6
2.2
The Professionals Servicing Building Industry ............................................................................. 7
2.3
Defining Regulations .................................................................................................................... 8
2.4
Controls in Professional Administration ....................................................................................... 9
2.5
Regulations in Delivering Professional Services to Building Industry .......................................... 9
2.6
Professional Services Regulators .............................................................................................. 11
2.7
Intervention by Government and Agencies ................................................................................ 11
3.0
RESTRICTIONS ON COMPETITION ........................................................................ 12
3.1
Market Failure ............................................................................................................................ 12
4.0
VALUE CHAIN IN PROFESSIONAL SERVICES ...................................................... 13
4.1
Entry Requirement of Professional Registration ........................................................................ 14
4.2
Setting up of Practice ................................................................................................................. 15
4.3
Registration of Business ............................................................................................................ 16
4.4
Service Registration with Government ....................................................................................... 17
4.5
Non- profession Statutory Registration ...................................................................................... 18
4.6
Dealing with Construction Permit ............................................................................................... 18
4.7
Completion / Termination of Practice ......................................................................................... 19
5.0
EXPECTATION AND DEMAND IN PROFESSIONAL SERVICES............................ 20
5.1
Expectation in Professional Services Serving Building Industry ................................................ 20
5.2
Investment in Technology .......................................................................................................... 21
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5.3
Demand in Professional Service Serving Building Industry ....................................................... 21
6.0
LIBERALISATION OF PROFESSIONAL SERVICES ............................................... 22
7.0
FEEDBACK AND SUGGESTION ............................................................................. 23
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PROFESSIONAL SERVICES TO BUILDING INDUSTRY
15 OCT 2014
REGULATORY REVIEW ISSUE PAPER:
PROFESSIONAL SERVICES TO BUILDING INDUSTRY
1.0
TERMS OF REFERENCE
1.1
What the MPC has been asked to do?
The 10th Malaysia Plan has mandated Malaysia Productivity Corporation (MPC) to
carry out regulatory review in view of making it easy to do business in Malaysia. In relation to
this, the Malaysia Service Development Council (MSDC) has asked the MPC to review the
Professional Services to Building Industry. This review process will draw on the expertise
and perspectives of public sector and private sector leaders, who will help identify key issues
and the appropriate solutions. While it is not one of the 12 National Key Economic Areas
(NKEAs), it contributes all of them.
1.2
Conduct of the review
The study will emulate the approach used by the Australian Government Productivity
Commission (AGPC) and the team will be guided by a regulatory expert Ms. Sue Holmes.
The team will select a sample of practices providing engineering, architecture, planning and
surveying services to the building industry across the country. The team will interview the
senior management personnel to identify the regulatory issues of concern. Based on the
principles of good regulatory practices, the team will formulate feasible options for further
deliberation. These issues and options will be subject to further consultation with relevant
stakeholders in order to develop concrete recommendations that will reduce unnecessary
regulatory burdens. Figure below summarizes the study process for this review.
1.3
Timing
This review commenced in May 2014 and has started with canvasing interested
parties about concerns with written regulation and its administration. The review process is
anticipated to be completed in 2015.
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1.4
Contacts
Interested parties are welcomed to participate in this review. You can contact the
persons below on matters relating to this review.
Mr. Muhammad Zaid Malek
(Administrative matters)
Tel: 03-7960 0173
Email: mzaid@mpc.gov.my
Mr. Mohammed Alamin Rehan
(Other matters)
Tel: 03-7960 0173
Email: alamin@mpc.gov.my
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2.0
INTRODUCTION
In the Tenth Malaysia Plan (2011-2015), Malaysia Productivity Corporation (MPC) is
commissioned to review the regulations currently practiced by the Government and agencies
in which includes the regulations governing the professionals servicing the building industry.
These regulations must be adhered by the professionals, regardless of its effectiveness,
productiveness and costs involved. These regulations will be assessed and analysed with
the focus for modernising business regulations. Any redundancy, unnecessarily burdensome
and outdated regulations will be identified and reduced while retaining efficient ones in order
to achieve a dynamic, modernised business ecosystem.
A good regulations reform shall give direct or indirect economic, social and
environmental benefits to the citizens and businesses, whereby, the government need to
carefully balance between the cost implication and the benefit to the public as not to allow
the cost burdens overshadows the benefit to the public. Over-regulating can sometimes
happened in addressing issues, thus make it inefficient in delivering services to the public.
2.1
What is this study about?
This issues paper is intended to assist people preparing a submission to the MPC’s
inquiry on Professional Services to Building Industry in Malaysia. It provides some general
background information and raises questions that can assist in preparing a submission. The
issues addressed in this paper and the guiding questions cover only a portion of the possible
issues. In preparing a submission, participants are encouraged to comment on any they
believe are relevant to the inquiry. In making recommendations for future policy and program
settings, MPC will be considering options for improving the regulations related to registration
of professional services and the conduct of professional service as directed by the TOR.
Professional services industry covers the activities of various professions in
accordance with their professional codes of conduct. For the purpose of this review, the
scope of inquiry will be narrowed down to the professional service that are directly related to
building industry, which are the Architects, Engineers, Quantity Surveyors, Town
Planners and Land Surveyors (the said Professional). These professionals provide
services to the building industry and also other sectors such as education, transportation,
infrastructure, tourism etc. Hence, any improvements in regulations system of these
professional services will add value to these sectors and this linkage will ultimately generate
multiplier effect for the economy.
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2.2
The Professionals Servicing Building Industry
In Malaysia context, the definition of these professionals can be described as:
Architect – The Architect is a registered professional in building industry who
provides architecture consultation services that includes preparation of building
design, preparation of planning submission document, supervision of construction
works, performs as the lead consultant in a building project, and also responsible as
the Principal Submitting Person in obtaining building plan approval. Architect may
also provide additional services as required by the client such as landscape plans,
cost management and interior design.
Engineer – The Engineer is a registered professional that provides engineering
services in various fields of works include building constructions, infra-structures,
manufacturing, mining, automotive and etc. In building industry the field of
engineering services are divided into civil engineering, structure engineering,
mechanical engineering and electrical engineering. A consulting engineer are entitled
to provide engineering services and advice in connection with project feasibility study,
planning, survey, design, construction, commissioning, operation, maintenance and
management of engineering works or projects1.
Quantity Surveyor – The Quantity Surveyor is a construction professional, qualified
and adequately trained to advise on all aspects of construction costs, financial and
contractual administration. An expert on the cost and management of construction
projects, whether building, civil or heavy engineering2.
Town Planner – A town planner is a professional who works in the field of land use
planning for the purpose of optimising the effectiveness of a community's land use
and infrastructure. A town planner formulates plans for the development and
management of urban and suburban areas, typically analysing land use compatibility
as well as economic, environmental and social needs.
Land Surveyor – A land surveyor is a professional person with the academic
qualifications and technical expertise to practise the science of measurement; to
assemble and assess land and geographic related information; to use that
information for the purpose of planning and implementing the efficient administration
of the land, the sea and structures thereon; and to instigate the advancement and
development of such practices3.
1 Registration of Engineers Act 1967 (Act 138).
2 Royal Institute of Surveyors Malaysia, QS Division – (http://www.rism.org.my/ContentPages/QS
2 Royal Institute of Surveyors Malaysia, QS Division – (http://www.rism.org.my/ContentPages/QS
Division Background.aspx).
3 Royal Institute of Surveyors Malaysia, GLS Division – (http://rism.org.my/ContentPages/GLS
Division Background.aspx).
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Under the laws of Malaysia, the practice of these professions are governed by their
respective acts listed as shown in the following table.
Profession
Architect
Regulator
Board of
Architects
Malaysia
Relevant Acts
Architects Act 1967
Institution / Association
Malaysian Institute of
Architects (PAM)
Engineer
Board of
Engineers
Malaysia
Registration of Engineers Act
1967
Institute of Engineers
Malaysia (IEM), Association of
Consulting Engineers
Malaysia (ACEM)
Quantity
Surveyor
Board of Quantity
Surveyors
Malaysia
Quantity Surveyors Act 1967
Royal Institution of Surveyors,
Malaysia (RISM)
Town Planner
Board of Town
Planners Malaysia
Town Planners Act 1995
Malaysian Institute of Town
Planners (MIP), Malaysian
Town Planners Association
(PERSADA)
Land
Surveyor
Board of Land
Surveyors
Malaysia
Licensed Land Surveyors Act
1958
Royal Institution of Surveyors,
Malaysia (RISM), Association
of Authorised Land Surveyors
Malaysia (PEJUTA)
Figure 2.1 The profession regulators, relevant acts, institutions and associations.
The main objective of the professional acts is to govern the practice of professionals
in the interest of the public and the nation. However, there are instances where overregulating of these professions lead to unnecessary burden to the business and public.
Unnecessary taxing acts, rules and regulations need to be reviewed to make business
easier and to boost the growth of productivity.
2.3
Defining Regulations
Regulations - are acts, laws, by-laws, rules or directives prescribed and maintained
by an authority, especially to regulate conduct. A good regulatory system should has a set of
regulations which are clear to be adhered by the practitioners, administratively efficient,
enforceable and legitimate.
Regulatory burdens – are the extra requirements, activities and costs that
practitioners some deliver or bear in order to comply with the acts, laws, by-laws, rules or
directive implemented by an authority. The extra requirements usually demand extra efforts,
time and cost from the practitioners, thus impose costs and often decrease the productivity
of the practitioners.
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Unnecessary regulatory burdens – result from regulatory burdens which are required
to achieve the objectives being addressed by a regulation. They arise from inefficient and
redundant rules or directives or from poor administration by the regulatory authority. These
unnecessary encumbrances either impose a much higher cost than any benefit they provide
or the benefit could be achieved at a lower cost to business.
2.4
Controls in Professional Administration
The regulation and administration of professional practice by the professional boards
are made with the authority provided under an Act of Parliament. Through the professional
Acts, the relevant boards regulate the practice of its professional members and makes
regulations, rules and by-laws to be adhered by its members.
Although the Federal Government holds the highest authority in the legislative
structure, state governments and local governments are also empowered to issue gazette
with regard to the state and municipality regulations, rules and by-laws as long as it does not
contradict the Act of Parliament.
Besides the Act of Parliament, gazetted regulations and rules, it is also common for
the regulators to issue other form of controls such as technical and non-technical statement
of policies, practice guidelines, circular letters, letters of instructions, desk instruction,
technical instructions and etc. These form of controls shall not constitute a law under the
legislation, but it forms the administrative procedure required to be fulfilled by the
practitioners. The administrative controls may be introduced by the regulators from time to
time to facilitate the administration of the practice of its members. Nevertheless, the
administrative controls should not be implemented in any way contrary to the acts or
gazetted rules, regulations or by-laws.
2.5
Regulations in Delivering Professional Services to Building Industry
Through this review, MPC is expected to collect data on the issues related to
Professional Services to Building Industry from the setting up of the professional practice to
the final completion or termination of the professional practice. Various acts and regulations
imposed at different stages of registration and approval required to be adhered by the said
Professional as illustrated in the following table (Figure 1.2).
Several registration processes are required at different stages in setting up and
delivering the services by the said Professional. The process of professional registration with
the governing board for delivering of professional services may varies between the
professions. However, the statutory registration requirement for non-professional task such
as registration for collecting government service tax and registration of company would be
similar with other services.
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Profession
Processes:
Setting up of
practice
Architect
Architects
Act 1967
Quantity
Surveyor
Town Planner
Relevant regulations
Registration of
Quantity
Town Planners
Engineers Act
Surveyors Act
Act 1995
1967
1967
Engineer
Land
Surveyor
Licensed Land
Surveyors Act
1958
Registration
of business
Registration of Business Act 1956, Companies Act 1965,
Partnership Act 1961, Limited Liability Partnerships Act 2012,
Companies Regulations 1966, Registration of Business Rules 1957, Limited Liability
Partnerships Regulations 2012
Service
registration
with gov.
Financial Procedure Act 1957,
Government Contracts Act 1949,
Ministry of Finance - Treasury Instructions - (AP) 166 to 206 and 229 to 300,
Treasury Circular Letter 2/2011- S/K.KEW/PK/P/1100/000000/165/23 Jld. 9 SK 1 (4),
Nonprofession
statutory
registration
Tax collection:
Service Tax Act 1975, Service Tax Regulations 1975, Service Tax Order 2000
Goods and Services Tax Act 2014, Income Tax Act 1967,
General:
Local Government Act 1976, Business Premise and Signage Licensing,
Employment Act 1955, Immigration Act 1959/63, Foreign workers permit, East
Malaysia work permit
Delivery of
professional
services
Architects
Registration of
Quantity
Town Planners Licensed Land
Act 1967
Engineers Act
Surveyors Act
Act 1995 &
Surveyors Act
& other
1967 & other
1967 & other
other
1958 & other
regulations
regulations
regulations
regulations
regulations
under the
under the Act
under the Act
under the Act under the Act
Act
National Land Code 1965, Street, Drainage and Building Act 1973, Town and
Country Planning Act 1976, Uniform Building By-laws 1984, Occupational Safety
and Health Act 1994, Local Government Act 1976, Various utilities services acts and
other regulations under these acts.
Dealing with
const.
permit
Completion
or
termination
of practice
Architects
Act 1967
Registration of
Engineers Act
1967
Quantity
Surveyors Act
1967
Town Planners
Act 1995
Licensed Land
Surveyors Act
1958
Registration of Business Act 1956, Companies Act 1965,
Partnership Act 1961, Limited Liability Partnerships Act 2012,
Figure 2.2 Various acts and regulations imposed to the professional at different stages of
registration and approval for delivering professional services.
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2.6
Professional Services Regulators
Through the provisions of the respective acts, the professional boards are
empowered to make rules and regulations to self-regulate the practice of the said
Professional. The members of professional boards consist of professional members of the
profession, in a way, the profession are governed by its own appointed professional
members. These professional boards are also the custodians of the respective professional
acts. The professional boards also have the authority to prescribe academic qualifications
and practical experience requirements for the graduates to register as the professional
members. After obtaining approval of professional registration from the Boards, the said
Professional may establish their practice in accordance with the rules and regulation set by
the Boards.
With the approval of registration of the professional practice, the said Professional
are allowed to deliver professional services to the building industry. However, besides the
requirement for registration under the professional acts, there are a lot more registration
requirements, rules and regulations imposed by various parties and agencies need to be
fulfilled by the said Professional. Some of these regulations and registration requirements
occurred from uncoordinated implementation of various regulations by different agencies,
which may not be necessary, hence, it creates unnecessary regulatory burden to the public
and professional.
2.7
Intervention by Government and Agencies
The present professional acts generally are sufficient to govern the practice of the
said Professional and to protect the interest of the public. However, in some cases there are
lack of enforcement by the professional boards, thus, it requires the government through
various agencies to impose new regulations to enforce the practice of the said Professional.
As an example, a Civil Engineer registered with Board of Engineer Malaysia is qualified to
deliver the civil engineering services in Malaysia, however, in some cases there are other
regulations that require the Civil Engineer to be registered with local authority and National
Water Services Commission (SPAN) before he can deliver the water related services.
In a situation where the government senses inefficacy of regulation by the
professional boards, the Government may introduce additional measures to stiffen the
regulation. Frequently, the introduction of additional regulations are meant to protect the
interest of the public and to improve the administration of the professionals, however,
sometimes they may not work as intended. Therefore, the regulators have to carefully
simulate and analyse any proposal for new regulations before its implementation to avoid
redundancy and overlapping regulations by multiple agencies which may possibly be
unnecessary burdens to the said Professional and public.
Through this review, the respondents are encouraged to give feedback and
suggestion to the MPC on their experience and concerns in dealing with these regulations.
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3.0
Restrictions on Competition
Implementation of professional self-regulation by the professional board allows
discretion to restrict entry and imposes additional requirements in term of training
programmes and other qualifications in selection of prospective candidates. The rules and
regulations are frequently set up by the professional bodies, reflecting the better capacity of
the bodies to know what is required to establish competency.
While professional bodies have the greatest capacity to judge competency, they can
face two types adverse incentives: one is to be too lenient on its members when assessing
poor performance; and the other is to apply entry requirements which are too stringent in
order to reduce competition and to increase capacity of current members to charge higher
fees due the resulting lower numbers of professionals.
Over-regulating with stringent requirement imposed for the graduate to register as the
professional members or preventing other occupational group from delivering the similar
service by an occupational group will groom unhealthy growth of monopoly by a particular
interest group. This will restrict competitions in offering the professional services and causes
unnecessary increase in compliance cost for building development projects.
3.1
Market Failure
Extensive controls and monopolisation by an interest group may sometimes have a
greater effect to the community and causes market failure. Market failure is an economic
situation when the quantity of a product supplied by supplier does not equate the demand by
consumers. This usually happens as a result from a lack of certain economically ideal
aspects, which prevents equilibrium in demand and supply.
In professional services, both over regulating of professional services and over
protecting professional group will break the economic equilibrium. In a case where the
profession is over protected, entry to the profession are controlled and number of
professional practitioners to serve the needs of the people will be too low, thus, it create
higher demand for the services which directly increase the competition in getting the
services, subsequently, will results in higher cost to the people. In a situation where the
market equilibrium is broken, government’s intervention are required to put the public
interest back to priority and to restore the balance between the supply and demand for the
services. There is another conceivable outcome where a market participant may be made
better-off without making someone else worse-off.
Therefore, the regulators have to be cautious in prescribing selecting criteria for entry
to these professions and in regulating the delivery of professional services, thus to carefully
differentiate the useful barriers from the anti-competitive barriers. If there is such element of
control imposed through any regulation contributing to these effects unnecessarily, the
professionals or the people need to highlight for further review of the regulation.
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4.0
Value Chain in Professional Services
The value chain of the process in professional services regulations at different stages
of registration and approval required to be adhered by the said Professional as illustrated in
the following Figure 3.1. The figure shows a general summary of the stages of process
involving various regulators and government agencies in registering and regulating the said
Professional in delivering their services.
In the whole process of delivering the professional services, the said Professional
may encounter numerous regulations other than the registration of the professional practice.
These may include the regulations in charging professional fees, rules in delivering services,
contract administration, professional risk and indemnity, etc.
Figure 4.1 Professional services regulation value chain diagram from the setting up to the
closure of professional practice.
Most of the regulatory issues faces by the said Professional in building industry are
the processes in dealing with construction permit. These processes consist of a wide range
of procedures from application for planning permission to certification of building completion
by the Principal Submitting Person. In many cases the process may also include the
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application for approval related to land matter such as land conversion, sub-division,
amalgamation, surrender and alienation of land. Subsequent to the needs, a special task
force Focus Group in Dealing with Construction Permit (FGDCP), was set up to look into
improving the procedures in dealing with construction permit in Peninsular Malaysia.
4.1
Entry Requirement of Professional Registration
Prior to acceptance of registration as professional member with the professional
boards, a graduate must undergo specialised training consisting of recognised education
programme, practical experience and professional examination or interview to qualify for the
registration. Professional board may prescribe their own entry rules and requirement to be
fulfilled by the prospective professional.
*1
Engineering
*2
Quantity Survey
*3
*4
T. Planning
Land Survey
*5
Field of Study
Architecture
Higher
Education
B. Architecture
or equivalent
(min 5 years)
B. Engineering
or equivalent
(min 4 years)
B. Quantity
Surveying or
equivalent
(min 3 years)
B. Town
Planning or
equivalent
(min 3 years)
B. Surveying
or equivalent
(min 3 years)
Under Grad.
Practical
Experience
Compulsory
(min 6 months)
Compulsory
(min 8 weeks)
Not required
Not required
Not required
Post Grad.
Practical
Experience
Compulsory
(min 24 months)
Compulsory
(min 36
months)
Not required
Compulsory
(min 24
months)
Practical
Experience
Report/
Certificate
Experience Log
Book and
Report
Submission
Certificate of
Training
Not required
Proof of
prescribed
practical
experience
Compulsory
(min 24
months
Articled Pupil)
Schedule 8 –
Statement of
Training Form
Oral
Examination
/Interview
Part III Oral
Examination
YES – various
disciplines
Not required
Compulsory
interview after
passing MIP
written exam.
Not required
Written
Examination
Part III
Professional
Examination
Professional
Assessment
Exam. (PAE)
ISM Direct Final
Exam
MIP Course and
MIP
Examination
Part I, II & III
LJT
Examination
Entry requirement for professional registration
Source: *1 – Board of Architects Malaysia
*2 – Board of Engineers Malaysia
*3 – Board of Quantity Surveyors Malaysia
*4 – Malaysian Institute of Planners
*5 – Board of Land Surveyors Malaysia
Figure 4.2 Entry requirement for different professional board registration.
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Professional boards shall set the criteria for assessment and accreditation of
programmes offered by institutions of higher learning. Graduates who have accomplished
their study from the accredited programme shall be allowed to apply for registration as
professional members after fulfilling the practical experience and examination requirement
prescribed by the professional boards. Other graduates who have completed their study
from unrecognised programmes will not be able to register as the graduate members of the
professional boards, unless after going through either additional trainings, courses,
examination or interview as determined by the professional boards. For example, Board of
Quantity Surveyors Malaysia requires graduates from unrecognised programme to attend
‘topping up’ courses before they can be admitted as graduate members of the profession.
Upon registration as Graduate Members, or ‘Articled Pupil’ in the case of land
surveyor, the graduates in Architecture, Engineering, Town Planning or Land Surveying are
required to gain practical experience and sit for the written or oral examination. Most of the
examination and interview will be conducted by the professional boards. However, for town
planning graduates, the examination and interview are conducted by Malaysian Institute of
Planners (MIP). After passing the written examination, MIP shall conduct interview to select
the qualified Graduate Town Planner candidates for professional registration. In the case of
quantity surveyors, the board of Quantity Surveyors Malaysia (BQSM) does not requires the
candidate to have formal practical training experiences, instead, the Graduate Quantity
Surveyors are required to pass the written examination to apply for professional registration.
4.2
Setting up of Practice
The initial task by the said Professional in delivering the professional services is the
requirement to be registered with the professional board and to set up a professional
practice. There are several forms of professional practice can be set up in accordance with
respective professional Acts. The provisions under the Acts allow the boards to register
individual entitlement as a professional.
However, the registration of practice as partnership and multi-discipline practice are
not mentioned in the Town Planners Act 1995 and the Licensed Land Surveyors Act 1958. A
Registered Town Planner or a Licensed Land Surveyor is allowed to practice under
individual registration capacity, contrarily, the Professional Architect, Engineer and Quantity
Surveyor are required to setup a firm (professional practice) before the services can be
offered to other party.
The professional acts prohibit the registration of public corporation as a professional
practice, thus it bound the numbers of shareholders to the limit as allowed under the
Companies Act. A corporation or a firm is also prevented from being a shareholder in the
professional practice. Hence, indirectly imposes restriction to the merging of larger company
and formation of professional consortiums with big numbers of shareholders.
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4.3
Registration of Business
Besides registration with the professional board for the professional practice,
companies and business entities are required to be registered with the Companies
Commission of Malaysia (CCM). Exemption are only given to sole-proprietorship setup
where the registration with CCM is not necessary if the practice is registered with the
professional board. The list of acts and regulations in registration of company or business
are as follow:i.
ii.
iii.
iv.
v.
vi.
vii.
Registration of Business Act 1956;
Companies Act 1965;
Partnership Act 1961;
Limited Liability Partnerships Act 2012;
Companies Regulations 1966;
Registration of Business Rules 1957; and
Limited Liability Partnerships Regulations 2012.
Regulator
Regulations
Professional Board
Professional Acts
CCM
Reg. of Business Act
1956
Companies Act 1965
Individual / Sole
Proprietor
Compulsory
Registration
Optional
Registration
n/a
Partnership
Compulsory
Registration
Compulsory
Registration
n/a
Body Corporate
Compulsory
Registration
n/a
Compulsory
Registration
Compulsory
Registration
n/a
Compulsory
Registration
Not allowed
n/a
Compulsory
Registration
Multidisciplinary /
Consortium
Public
Corporation
Figure 4.3 Registration requirements for setting up business.
The usual type registration of professional firm with CCM are either partnership or
body corporate, whereby the registration of sole-proprietor practice with CCM is optional.
Conventionally, the registration of body corporate (private limited company) are governed
under the Companies Act 1965, and the registration of partnership practice is governed
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under the Registrations of Business Act 1956. The conventional partnership setup has no
limitation of risk of liability, however, a recently enacted Limited Liability Partnerships Act
2012 shall give options for practitioner to setup their partnership practice with limited liability
under the Limited Liability Partnerships Act.
Architect
Aug 2014*1
Engineer
Aug 2014*2
Quantity
Surveyor
Aug 2014*3
1,980
11,194
1,010
304
444
Sole
Proprietor
1,076
1,013
165
n/a
n/a
Partnership
99
203
48
n/a
n/a
Body
Corporate
244
994
110
n/a
n/a
Multidisciplinary
41
24
15
n/a
n/a
1,460
2,234
338
304
369
Profession
Date of data
Active
Professional
Members
Total
Registered
Practices
Source: *1 – Board of Architects Malaysia
*2 – Board of Engineers Malaysia
*3 – Board of Quantity Surveyors Malaysia
*4
*5
Town Planner
Oct 2014*4
Land
Surveyor
Aug 2014*5
– Board of Town Planners Malaysia
– Land Surveyors Board Malaysia
Figure 4.4 Numbers and types of practices registered with the professional boards.
4.4
Service Registration with Government
Besides registration with the professional board for the professional practice, the
firms also need to be registered with Ministry of Finance (MOF) as a prerequisite for
delivering professional services to the government and its agencies. The registration for
supply of goods and services could be done online through electronic procurement system
(e-perolehan). Upon completion of registration, the professional firm will be issued with a
certificate of registration detailing the type of services that the firm are entitled to offer to
government.
The hurdle in the registration system is the limitation of a single registration
entitlement for every individual person. Any person or business owner who is registered with
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MOF under any company names, shall be prevented to be registered with another company
name under the system, hence, the second company will not be able to be registered unless
the company appoints new directors and these directors are not registered with MOF.
Further details are available at: http://home.eperolehan.gov.my.
4.5
Non- profession Statutory Registration
In carrying out the business, the said Professional also required to comply with other
statutory requirement and registrations, i.e. registration for collection of Government Service
Tax, registration of business premise and signboard with local authority, registration of
international foreign workers permit, registration of workers permit from west Malaysia,
employee income tax collection and deduction etc.
As an example, the said Professional are required to collect on behalf of the
Government, the service tax due for the services received by the service getter (the client).
Before they are able to collect the service tax on behalf of the Government, the said
Professional are required to obtain the license from the Royal Malaysian Customs
Department. The obligation to pay the Government Service Tax lies on the service getter,
however, the obligation to collect the service tax lies on the said Professional. Under the
regulations, regardless whether the said Professional has actually collected the service tax
or not, they are obliged to pay the tax on behalf of the service getter within a stipulated
period. Delivery of Professional Services
4.6
Dealing with Construction Permit
All modern economies regulate the use of land and the construction of buildings for
several reasons. The objectives are achievable through rigorous control of building codes,
zoning and land use. During the development planning stage, a good development control is
very important in ensuring a harmonious society development and to keep the balance
between the economic growth and the social growth. Good regulations ensure safety is
addressed, while minimising burdens on business such as making permit approval process
efficient, transparent and cost effective.
Dealing with the construction permit is one of the main task under delivery of
professional services. Due to continuous delays in dealing with construction permit, in 2010,
PEMANDU had initiated the Property Development Lab to study and analyse REHDA’s
concerns in dealing with property development. Property Development Lab were carried out
which resulted 22 key initiatives have been presented to the Prime Minister (REHDA, 2010).
Four out of the 22 initiatives relate directly to the building permit, which are:
Initiative 1:
Initiative 3:
Initiative 10:
Initiative 11:
Streamlining Approval Process,
Pre-consultation,
Building Plan Approval Elimination,
PSP Self-Certification.
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Most of the initiatives have been implemented by various agencies under the federal
government including Ministry of Housing and Local Government, and Federal Department
of Town and Country Planning. However, the highlighted four initiatives were not
implemented pending detail deliberation and setting up of proper mechanism for
implementation. The push for improvement in construction and property development
environment further continues with the establishment of various technical working groups
and focus groups that collaborate the efforts of the public and private sectors. An example of
close collaboration between private and public sector is demonstrated through the
establishment of Focus Group on Dealing with Construction Permit (FGDCP) by PEMUDAH
(2012) and later the introduction of OSC 3.0 plan submission system in June 2014.
Besides the OSC procedures in dealing with construction permit, the said
Professional need to deal with various regulations related to land development, planning
permission and construction permit which includes the following acts:
i.
ii.
iii.
National Land Code 1965 (Act 56)
Town and Country Planning Act 1976 (Act 172)
Street, Drainage and Building Act 1974 (Act 133)
The three main acts on land, planning and buildings empower the regulators to
formulate various regulations, by laws and orders in regulating the activities related to land
developments, planning permission and building constructions. However, these are not the
only acts empowering the establishment of regulations governing the land development and
building construction, there are also provisions under other acts empowering the regulator to
establish several regulations related to land development and building construction.
4.7
Completion / Termination of Practice
Upon retirement or termination of professional practice establishment, the practitioner
may opt to terminate their practice license with consent from the respective professional
boards. Termination of practice license may be in form of voluntary termination of practice by
the professional or by regulatory enforcement by the professional boards. Professional
boards may exercise its power to cancel the professional registration through provisions of
the Acts.
Voluntarily termination by the said Professional can be done by informing to the
respective professional boards his intent for retirement, cancellation of registration or closure
of practice. Supporting document such as evidence for completion of all works under his
supervision, and discharge from responsibility from the ongoing works (Letter of Release)
are required to be presented together with the application. Voluntarily cancellation of
registration may also be opted by the said Professional by not renewing the annual
subscription, thus results the cancellation of registration by professional boards through
enforcement of regulations.
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Upon acceptance of application to terminate professional registration, the said
Professional shall cease practice and discontinue the professional services. However, the
Architects and Engineers, remains individually responsible for the completed works that they
have previously certified even though after they ceased operation. Although the Company
Acts 1965 allow limited liability imposed on private limited company (body corporate), under
present laws, individual Architect or Engineer performs the role of Submitting Person (SP)
shall carry professional liability personally for life.
5.0
Expectation and Demand in Professional Services
In the 2011 World Development Indicators, services sector accounted for almost
71% of global GDP in 2010 and is expanding at a quicker rate than the agriculture and the
manufacturing sectors. In Malaysia, services sector contributed 57.7% to the GDP in 2010,
although most of developed nations have an average of 70-80% contribution of services
sector to GDP. In the 10th Malaysia Plan, it is targeted the services sector to contribute 65%
of the GDP by 2020. This will require services to grow by 7.2% p.a. with an average annual
investment of RM45.8 billion.
Although it is forecasted that the service sector will be the major contributors to the
future world economy, but in Malaysia the professional services sector may not be the
biggest contributor. The demand in professional services serving the building industry
fluctuates depending on economic climates and it varies from one profession to another.
Besides direct contribution to the GDP, the said Professional services serving the
building industry play major roles in nation development through their contribution in other
various sectors. Hence, any improvements in these professional services will add value to
the respective sectors and this linkage will ultimately generate multiplier effect for the
economy. As an example, a service rendered by the said Professional in a hotel project may
not be seen as a major contribution to the economic development, but the multiplier effect
from the hotel project is providing the platform for other economic activities and future
economic opportunities though hospitalisation services, tourism, transportation, retails,
manufacturing and etc.
5.1
Expectation in Professional Services Serving Building Industry
Professional services serving building industry provides high value design tasks and
also function as the links to connect fragmented building industrial production processes
between manufacturing and services. Continuous improvement of knowledge intensive
workforce will provide high ability to compete and create opportunities for higher income
generation. This is consistent with Malaysia’s aspiration to avoid the middle-income trap and
become a high income nation by 2020. The said Professional need to prepare themselves to
achieve high level of competitiveness and to be able to compete in a bigger market base.
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Although some architects and engineers have started using Building Information
Modelling (BIM) in their offices, the use of BIM has yet becoming essential in development
project. Nowadays, larger corporations and government agencies insist the use of BIM in
their development project, thus, creates pressure to the said Professional to accord the
clients’ expectation as not to miss the boat. Currently, the use of BIM is not regulated and
there is no national standard has been set up. Many agencies and professional practices
use their own ways of implementing BIM and the rest just adopt some of foreign BIM
protocols. The needs for BIM standard are urgent, and it has to be ready before the local
authority imposes compulsory uses of BIM in building plan submission.
Beside BIM, Geographic Information System (GIS) is another essential technology in
Land Surveying and Land Planning. Both BIM and GIS are the future potential information
technologies with high potential for integration. The success of these technology integration
will be the determining factor in the way the said Professional do their works in the future.
5.2
Investment in Technology
Among the major investment made by the said Professional is the investment in
technology which include the computer hardware and software. The future professional
services to building industry will be very much depending on technology and it will not be an
option anymore. Currently, some professionals serving the building industry have reservation
in the type of software to purchase as there are issues with inter-platform compatibility and in
some cases the sale of the software are monopolised by certain dealer or supplier.
In this case, the Government should play a role as an enabler to stimulate growth for
the professional services, by creating a good policy and infrastructure to allow competition
and development of open platform software to provide a good environment for the industry.
5.3
Demand in Professional Service Serving Building Industry
The expected demand in the said Professional services can be estimated by
comparing the professional to population ratio in studied country. There is clear evidence of
a global skills shortage that is particularly acute in the developing world. In 2011, Manpower
Group’s annual Talent Shortage Survey found that 45% of Asia-Pacific employers had
difficulty filling job vacancies due to a lack of available talent. About three-quarters of
employers globally cited a lack of experience, skills or knowledge as the primary reason for
this struggle to hire appropriate workers.
In Malaysia, PAM has reported that the ratio of a single architect to number of
population of more than 1:15,000 is far below the ratio of an architect to population in most
developed country. Members of PAM raised their concern on shortage of architects to serve
the need of the growing population. The ideal ratio of an architect to population should be
between the ratios of 1:3000 to 1:4000 based on sampling in some European and western
economies. The similar shortage in man power also faced by engineering and surveying
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professions. Contrarily, the resources in town planning profession is not worrying the
profession as the source of talents in town planning profession are at the profession comfort
level.
Based on UNESCO global engineering report, the demand for engineering talent is
increasing and is estimated that 2.5 million new engineers and technicians will be needed in
sub-Saharan Africa alone if the region is to achieve the UN Millennium Development Goal of
improved access to clean water and sanitation. Meanwhile, experts predict the global market
for climate change solutions such as low carbon products and renewable energy systems
will rapidly reach US$1 trillion dollars and continue to grow. At the same time, the shortage
of engineers is marked in many countries. Germany reports a serious shortage of engineers
in most sectors, and in Denmark, a study showed that by 2020 the labour market will be
lacking 14,000 engineers. And although in absolute numbers the population of engineering
students is multiplying world-wide, percentages are dropping compared to enrolment in other
disciplines. In Japan, the Netherlands, Norway and the Republic of Korea, for example,
enrolment decreases of 5 to 10% have been recorded since the late 1990s.
6.0
Liberalisation of Professional Services
In a move to spur economic growth and attract foreign direct investment (FDI), the
government has taken measures to ensure an efficient and competitive business
environment via its Competition, Standards and Liberalisation (CSL) Strategic Reform
Initiatives (SRI). The Ministry of International Trade and Industry (MITI) is entrusted to lead
all efforts pertaining to the liberalisation exercise. Covering the services and financial
services sector, the liberalisation exercise was undertaken in stages. The initial stage
commencing in 2009 saw nine sub-sectors being liberalised and a further 18 sub-sectors
were liberalised in 2011, allowing up to 100% foreign equity participation in phases. The 18
sub-sectors include the Architectural, Engineering and Quantity surveying services
The Organization for Economic and Cooperation Development (OECD) foresees a
substantial increase in foreign investment if foreign equity restriction is removed. As at end
2013, Malaysia’s share of FDI is below par compared to other ASEAN countries. By 2015,
the services sector is expected to contribute up to 70% of the country’s gross domestic
product (GDP) with targeted average real annual growth rate to be 7.2% between 2011 and
2015. Based on figures for the first half of 2012, 67.5% (RM 52.5 billion) of total investment
toward the GDP came from the service sector investment. With such a high percentage
contributing to the national GDP, a smooth liberalisation process for the professional
services sub-sector is crucial for the country to achieve its aspiration as a developed
economy by year 2020. Any acts and regulation for each respective professional service
need to be in line with and in support of the liberalisation move.
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7.0
Feedback and Suggestion
MPC is seeking feedback from public and private sector to assist this regulations
review. Below are some of the information sought that will help in our review:
What are your opinions?
1. Which regulations concern you the most? Why?
2. Which regulations are the hardest to comply with?
3. Which regulations do you think are too burdensome given what they are trying to
achieve?
4. Do you think any regulations are not justified at all?
5. Are some regulatory requirements inconsistent?
6. Do you consider inspectors and other regulatory administrators do a good or a poor
job? In what ways?
7. Do you find inspectors and administrators are consistent in their decisions?
8. Do you find they are helpful or unhelpful in advising you how to comply? Are there
any publicly available guidelines?
9. How long do regulators take to respond to applications, etc.?
10. Do you have any suggestions for reducing the burden of compliance of regulations?
11. Some practice guidelines, technical instructions, circular letter and other form of
administrative controls implemented by the regulators are not gazetted, do you have
trouble in knowing when they have been issued and in accessing them?
12. Is there any administrative controls implemented by the regulators which you believe
are unnecessary?
13. What is your view over statutory non-professional task to the professional
practitioners such as government service tax collection?
14. What is your opinion on the academic qualifications and practical experience
prescribed by the professional board for the graduates to register as the professional
members, is it justifiable or otherwise?
15. What is your opinion of the self-regulation practiced by the professional boards to
regulate its members?
16. Do you think that the regulations imposed by the professional boards are efficient in
protecting the public interest?
References
PEMUDAH. (2012). PEMUDAH Annual Report 2012. In S. T. F. t. F. B. (PEMUDAH) (Ed.), (pp. 75).
Kuala Lumpur: Special Task Force to Facilitate Business (PEMUDAH).
REHDA. (2010, 31 May 2014). PEMANDU Property Development Lab Report. 2010. Retrieved 31
May 2014, 2014
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