28TH ACF COUNCIL MEETING REPORT
12th February 2009 (Thursday)
1400 hours -1800 hours
The Sultan Hotel
Jakarta, Indonesia
COUNTRY REPORT BY MASTER BUILDERS ASSOCIATION MALAYSIA
OVERVIEW OF MALAYSIA’S ECONOMY IN 2008
The Malaysian economy registers a growth of 4.7% in third quarter of 2008, down 2.4% and
2% respectively compared to the first quarter (7.4%) and second quarter (6.7%) of 2008. It
was predicted that the GDP this year to be at 5% amidst the sharp deterioration in the global
economic and international financial environment. Table 1 showed Malaysia Gross Domestic
Products (GDP) Growth Rates1.
Table 1: GDP Growth Rates
Similarly, the construction sector down from 5.3% to 3.9% and hit 1.2% in the first quarter,
second quarter and the third quarter respectively for this year as a result of weaker activity in
the residential and civil engineering segment couple with higher prices of building materials.
According to CIDB Malaysia’s census, a total of 3,542 projects worth RM42.8 billion (US$11.88
billion)2 was awarded as at 3rd Quarter 2008. The said amount has shown no significant
differences as compare to the same period in 2007 where a total of 3,725 projects worth
1
Department of Statistic, Malaysia (updated as of 30th November 2008)
2
Exchange rate RM1.00 = RM3.60
RM39.07 billion (US$11.16 billion) was awarded3. The main deterioration of growth in the
construction sector may attribute to the facts that the real value of projects deteriorates due
to higher prices of building materials. Statistic on GDP Growth is attached as per Appendix 1.
The main challenge faced in 2008 was to overcome the increase in prices of construction
materials especially cement, bitumen, steel and fuel. The increase was partially contributed
by rising fuel prices and also unscrupulous parties who are trying to profit from such the
situation. The other main challenge was the loss of skilled manpower resources to overseas
construction markets as well as the difficulty in getter locals to join the construction industry.
Nevertheless towards end of 2008, the above issues were less significant due to the global
economy slowdown.
PROSPECTS IN 2009
The crisis in US and Europe will definitely make an impact on the global economy and on the
Malaysian economy in 2009. Last November the Government has announced a RM7 billion
(US$1.94 billion) stimulus package to reinforce the economy, strengthen national resilience
and maintain economic growth momentum in face of the global financial crisis. The
Government has reduced its 2009 projected GDP growth from prior forecast of 5.4% to 3.5%
and revised its fiscal deficit target from 3.6% to 4.8%, while the construction GDP is targeted
to growth at 3.5% in 2009. The industry is certainly looking forward to the additional stimulus
packages (yet to be announced by the Government soon before mid February 2009) which
aim to boost the country’s economy by raising domestic demand in dealing with the global
crisis.
Prices of most construction building materials are likely to remain stable in 2009 amid slowing
demand and lower production costs on falling commodity prices. It was predicted that prices
of all construction materials would eventually drop closer to the levels before the fuel hike in
June last year. However, it is important to note that due to various Governments in the world
are in the effort of saving their economy via various stimulus packages, building materials
prices such as steel might face upward pressure again.
ISSUES RELATING TO BUILDING MATERIALS AND THE VARIATION OF PRICE CLAUSE
BUILDING MATERIALS
Demand created in growth regions such as Middle East, Brazil, Russia, India and China
resulted in huge inflow of investment in infrastructure development and real estate. Arising
from demand created by these markets, commodities’ speculators see it as “golden”
opportunity, thus pushing all commodities to record breaking and unrealistic prices. The
construction industry is probably the worst hit by the huge jump in crude oil prices and with it
the opening of a pandora box unleashing across the board increases in the price of almost
everything. Building material prices soared to unrealistic heights.
3
Exchange rate RM1.00 = RM3.50
Diesel was increased 63% from RM1.58 (US$0.45) per litre to RM2.58 (US$0.74) per litre on
5th June 2008. In tandem with diesel price increase, all building materials were being raised
by 30% - 60% overnight. Steel bar prices have gone from an industry high of RM4,100.00
(US$1171.45) per tonne to an average of about RM1,900.00 (US$542.86) to RM2,100.00
(US$600) depending on sizes per metric tonne effective 25 th November 2008 according to a
circular by Malaysian Iron and Steel Industry Federation (MISIF).
In the eye of observer of non construction industry, the announcement of steel bars
liberalization by the Government on 12th May 2008 was seems to help the construction
industry by lowering the local prices to regional prices. However, local millers has took
advantage of the lack of understanding in the importation process and further raised the
price to RM4,000.00 (US1142.86) per tonne in June 2008 and reaching as high as RM4,100.00
(US1171.45) per tonne in July 2008, while the regional steel bar prices were hovering around
RM3,100.00 (US885.71) to RM3,600.00 (US$1028.57) per tonne. Nevertheless with much
determination and effort, MBAM is scheduled to bring in the first batch of steel bars
(approximately 20,000 tonne) by February 2009 from Thailand via land.
Meanwhile the Government liberalise the cement industry on 5 th June 2008 with the
intention to ease the local cement supply pressure by scrapping the ceiling prices, reduce the
import duties from 50% to 10% and subsequently duty free by 15th November 2008. Regret
to note that, immediately after the removal of Government Ceiling Price (GCP), cement prices
has jumped by 10% from RM12.00 (US$3.43) per 50kg to RM13.25 (US$3.79) per 50kg and
subsequently rose further to RM14.00 (US$4.00) per 50kg. In comparison to the prices in
year 2007, as of August 2008 cement prices has increased by 30%. Details are as per Table 2 –
Prices of Cement (1990-2008).
Table 2: Prices of Cement (1990 – 2008)
Item
Unit
1990 –
1995
1996 –
19.12.06
20.12.06 –
2007
*Before
05.06.08
Aftermath
05.06.08
** 01.08.08
RM10.85
price increase
1 bag @
RM14.00 Cement
RM9.10
RM9.90
were
RM12.00
RM13.25
50 kg
RM15.00
backdated to
01.12.06
Note: * Unofficial grey market price for bag cement
** Official price announced by Lafarge Cement only, however at some places, contractors are
paying RM18.00 (US$5.14) – RM25.00 (US$7.14) per 50kg bag
Despite higher prices, there is a persistent shortage in cement supply during the 2nd quarter
on average waiting period between 2 to 3 weeks. This has caused delays at construction sites
and incurred unnecessary costs to contractors.
While the import of cement is allowed by the Government, MBAM cautioned that
importation of cement may face several constraints such as quality compliance, logistics etc
and that imported cement may not necessary be cheaper in view of rising sea-freight charges.
Nonetheless, MBAM would consider importing cement if the local prices remain
uncompetitive.
Major Building Materials Indicative Price (2006-2008) is as per Appendix 2.
CONTRACTS & PRACTICE
Variation of Price (VOP)
Material prices have been on an uptrend since early 2008, causing contractors’ overall costs
to increase by more than 20%. Many contractors have asked for a revision in their contract
prices following the spike in prices of essential building materials then.
As a result, the Government has agreed to adjust the price of construction material following
increases in construction material and fuel costs in to ease the burden on contractors in July
2008.
The materials that come under VOP scheme can be categorised under:
1) Civil Works - 11 items, 2) Building Works - 15 items, 3) M & E Works - 7 items.
These items are such as steel, cement, bitumen, premix, sand, gravel, guardrail, fabric
reinforcement, copper, water and sewerage pipes, diesel and petrol, cables, switchgear,
generators, etc. The said ruling is applicable for projects implemented after 1 st January 2008
including design & build projects on 50:50 cost sharing basis. For conventional mechanical
and electrical (M&E) works, the VOP was expanded for materials such as copper and steel,
effective 1st January 2008.
The above move had benefited to most local construction companies with local government
projects.
Construction Industry Payment and Adjudication Act (CIPAA)
A main issue affecting the construction industry has always been the problem of delayed as
well as non-payment. Partly because of the complexity of construction work and partly
because of financing issues, there are bound to be disputes relating to non-payment.
Remedies such as suspension of work and direct payment are difficult to be properly and
lawfully exercised unless there are expressed provisions in the contract and the disputes are
resolved by an independent third party.
The existing related statutory laws such as the Malaysia Contracts Act 1950, Sale of Goods Act
1957 and Arbitration Act 2005 can be applied generally and are not efficient enough to deal
with current problems. To address the problem, various recommendations were made during
a construction industry roundtable in June 2004 which was chaired by the former Works
Minister Datuk Seri S. Samy Vellu. One recommendation was for the creation of a Malaysian
Construction Industry Payment and Adjudication Act (CIPAA).
Based on the feedback, certain parties (Malaysia Bar Council and Attorney General’s Office)
have some strong reservations on the proposed Act. Nevertheless MBAM will continues urge
the Government to facilitate the speedy enactment of CIPAA as the Act will help contractors
across the board from Grade G7 to Grade G1 to survive during this difficult period where
banks may adopt more prudent lending policies and the overall expected outlook for 2009
does not seem promising.
MANPOWER RESOURCES
Training Construction Workers
At a paper presentation4 at the 1st Malaysian Construction Summit 2008 held on 6th June
2008, it was reported that 31.5% local construction personnel will reach the age of 50 years
and above in 10 years from now. Table 3 showed the Local Workforce Based on Registration
Category & Age.
Table 3: Local Workforce Based on Registration Category & Age
Age at 31.12.2007
Category
Total
< 31
31-40
> 40
General worker
108,44
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 & Professional
11,020
21,436
34,710
67,166
Sub Total
18,085
34,104
52,298
111,487
191,445
134,401
176,647
Total
502,493
(38.1%)
(26.7%)
(35.1%)
Note: There are about 300,000 legal foreign construction workers in addition to 391,000 local
workforce (43%) of the total construction workers.
In view of this the Government has directed Construction Industry Development Board (CIDB)
to train at least 100,000 skilled construction workers in technical fields such as welding,
management and safety in 2009. Construction workers are encouraged to obtain skills
certification through accreditation and skills training conducted by CIDB. The cost of
accreditation and skills training for local workers will be borne by CIDB. The announcement is
in line with MBAM's constant call to address the shortage of skilled construction workers in
this country, as well as the need to increase the quality of trained construction workers.
MBAM is still awaiting further announcement from CIDB Malaysia.
Skills Enhancement Programme
MBAM’s proposal with regards to the Skills Enhancement Programme for “Kepala” or
“Foreman” was recently accepted by CIDB Malaysia and will be commencing soon. The
objective of the programme was to train the “Kepala” and enhance their skills and efficiencies
at construction site. Subsequently the skills, knowledge and experiences will be passed down
to their subordinate workers. This on-the-job training will focus on the current skills needs or
practices in construction with the emphasis on developing appropriate worker attitudes,
discipline, teamwork, good housekeeping, weaknesses in practice such as to reduce re-works
by doing first time right as well as safety awareness. Upon completion of this programme, it
is targeted to train at least 7,680 foremen at sites.
4
Paper presented by Chief Executive of CIDB Malaysia, Datuk Ir. Hamzah Hasan
Industrialised Building System (IBS)
Malaysia dependence on foreign labour is extremely high at present with some estimated 2.2
million workers. There are about 312,000 legal construction workers as at 31 st July 2008.
Table 4 showed Total Foreign Workers in the Construction Sector. The Government would
continue adopting IBS in a move to reduce dependency on foreign labour while improving the
efficiency of the nation's construction industry. Effective 1st September 2008, all Government
projects tender above the value RM6.9 billion (US$1.92) must apply at least 70% of IBS. It
was announced that a total of 406 projects totaling RM9.4 billion (US$2.69 billion) would
adopt IBS with 189 of the projects having been tendered out. Additional 121 projects under
the IBS would be tendered out between 2009 and 2010.
Table 4: Foreign Workers in the Construction Sector
Year
Total in the
Construction
Country
**2015e
1,500,000
180,000
*2015
1,530,000
200,000
*2010
1,850,000
285,700
2008 (31 July 2008)
2,109.954
312,573
2007 (October)
2,106,100
302,400
2006
1,869,209
267,809
2005
1,815,238
281,780
2004
1,470,000
na
2003
1,057,156
269,900
** Ministry of Human Resources Target Ceiling
* Economic Planning Unit forecast on Workforce Need
na – not available
Share of
Construction (%)
12.00
13.10
15.40
14.81
14.40
14.33
15.30
na
24.70
Updated on 22 December 2008
MACHINERY RESOURCES
MBAM urges the Government to reduce the import duty and sales tax on heavy machinery
and spare parts used in construction on a systematic basis within two years until it is 5%-10%
for import duty and 5% for sales tax. Import duty and sales tax are still required to avoid large
scale dumping of second-hand machinery in Malaysia and MBAM is aware that AFTA will
come into effect from 2010 onwards. But AFTA has little effect on construction equipment
which is largely purchased from European countries and China.
MBAM has proposed to the Government that heavy equipment classification be split to
distinguish the sectors they are used as follows:
(i)
Heavy equipment for construction, logging, mining, power generation and material
handling
(ii)
Heavy equipment for air, marine and road transportation
(iii) Heavy equipment for manufacturing and industrial sector
Currently, the abovementioned heavy machineries are still lumped together. However, heavy
machineries used in construction can be distinguished under The Malaysian Trade
Classification and Customs Duties Order No. 84.26 to 84.31. The situation is also similar with
spare parts for these equipments. Considering that they are lumped together with the
automobile industry under the Customs Duties Order, it is advisable that they be separated as
the import duty and sales tax is there to promote the local automobile industry.
GOING GLOBAL
Malaysian builders continue to make their presence felt in the global construction market and
secured RM12,576.61 million (US$3,593.32 million) in 2008 for 20 projects. Table 5 showed
Oversea Project Undertaken by Malaysian Contractors from Year 1986-2008.
Prospects are still fairly good for companies having prior experience and financial capabilities
going overseas even though there may be some impact of the global slowdown. There are a
number of local companies that have done well such as IJM Corporation, WCT, Gamuda,
Sunway, Ireka and Bina Puri Holdings, Zelan to name a few.
Table 5: Overseas Projects Undertaken By Malaysian Contractors (Year Awarded 1986 To 2008)
Year
Item
Awarded
Completed
Projects
Total
Nos.
Amount
(RM Mil)
Current Projects
Total
Nos.
Amount
(RM Mil)
Total Projects
Total
Nos.
Amount
(RM Mil)
Amount
(US$ Mil)
1
19861991
7
61.71
1
23.75
8
85.46
24.42
2
1992
4
128.88
0
0.00
4
128.88
36.82
3
1993
6
21.76
0
0.00
6
21.76
6.22
4
1994
11
796.26
0
0.00
11
796.26
227.50
5
1995
23
3,136.37
0
0.00
23
3,136.37
896.11
6
1996
23
807.27
0
0.00
23
807.27
230.65
7
1997
24
1,632.07
0
0.00
24
1,632.07
466.31
8
1998
27
867.60
0
0.00
27
867.60
247.89
9
1999
37
716.19
0
0.00
37
716.19
204.63
10
2000
24
2,134.63
0
0.00
24
2,134.63
609.89
11
2001
34
2,444.21
0
0.00
34
2,444.21
698.35
12
2002
54
4,891.67
2
220.50
56
5,112.17
1,460.62
13
2003
38
1,976.20
8
3,760.99
46
5,737.19
1,639.20
14
2004
21
2,888.07
0
0.00
21
2,888.07
825.16
15
2005
30
2,930.54
14
7,354.06
44
10,284.60
2,938.46
16
2006
22
2,937.17
27
29,871.82
49
32,808.99
9,374.00
17
2007
9
509.88
39
18,142.74
48
18,652.62
5,329.32
18
2008
6
15.49
14
12,561.12
20
12,576.61
3,593.32
19
2009
0
0.00
1
1,020.66
1
1,020.66
291.62
106
72,955.64
506
101,851.61
29,100.46
TOTAL
400
28,895.97
Source: International Division, CIDB Malaysia
APPENDIX 1
GDP Growth (2002 to 2008)
Year
Quarter
Real GDP
2002 2003 2004
2005
Year Year Year 1st
2006
2007
2008
2nd 3rd
4th Year 1st
2nd 3rd
4th Year 1st
2nd 3rd
4th Year 1st
2nd
3rd
9MP MidTerm Review
4.1
5.3
7.1
6.1
4.1
5.3
5.2
5.2
5.9
6.2
5.8
5.9
5.9
5.5
5.7
6.7
7.3
6.3
7.4
6.7
4.7
6.0
Manufacturing 4.0
8.2
8.8
5.7
3.1
5.7
7.9
5.1
8.5
8.4
7.1
7.1
7.8
2.0
1.5
3.3
5.6
3.1
7.0
5.6
1.8
3.5
Services
4.1
4.1
6.7
6.8
6.0
7.3
5.9
6.5
5.9
6.6
6.5
6.5
6.4
9.7
9.2 10.5 9.1
9.6
7.9
8.2
7.1
7.9
Agriculture
3.0
5.5
5.0
6.1
3.3
0.9
-1.5
2.5
7.4
5.6
6.2
6.4
6.4
2.2
-0.9
0.7
6.9
2.2
6.3
6.0
3.0
4.4
Mining
3.7
4.8
4.1
3.4
-1.5
3.4
-2.0 -0.8 -1.3 -1.2 -1.2 -0.2 -0.9 -0.6
7.7
2.3
7.2
4.2
3.7
-0.5
-0.3
3.4
Construction
2.3
1.9
-1.9 -2.4 -2.0 -1.4 -0.6 -1.6 -1.9 -0.5 -0.4
4.8
4.7
4.7
5.5
5.3
3.9
1.2
5.8
0.6
-0.5
Source : Central Bank of Malaysia (BNM), Department of Statistics, Malaysia & CIDB Malaysia
Updated on 28th November 2008
4.0
APPENDIX 2
MBAM Survey on Major Building Materials Indicative Price
Material
Purchase Price
4Q2007
1Q2008
RM
RM
Unit
2006
RM
1Q2007
RM
2Q2007
RM
3Q2007
RM
tonne
tonne
24.00
22.00
24.60
22.60
25.00
24.00
25.00
24.00
26.00
24.80
tonne
24.00
25.00
25.20
25.50
– Grade 40
– Grade 30
m3
m3
152.00
140.00
153.00
144.00
169.00
146.00
– Grade 25
– Grade 20
Reinforcement bar
Mild steel
6 mm - 10mm
12 mm
16 mm - 25mm
High tensile
6 mm - 10mm
12 mm
16mm - 25 mm
Mesh fabric reinforcement
A6
m3
m3
132.00
126.00
136.00
129.00
tonne
tonne
tonne
1,828.33
1,828.33
1,717.33
tonne
tonne
tonne
Concrete work
Sand
– Washed
– Unwashed
Aggregate
– Coarse aggregate (20mm)
Ready-mix concrete (normal mix)
A8
Brickwork
Common clay brick
Cement sand brick
Cement
Ordinary Portland cement (OPC)
Ordinary Portland cement (OPC)
Roofing
Clay Roof Tile
Concrete Roof Tile
2Q2008
RM
12/6/2008
RM
3Q2008
RM
4Q2008
RM
27.00
25.50
31.00
29.00
34.00
31.00
28.00 - 43.00
28.00 - 34.00
28.00 - 40.00
26.00 - 36.00
26.00
26.65
28.10
33.00
28.00 - 38.00
25.00 - 35.00
165.90
148.00
174.00
156.20
186.80
167.20
190.70
170.00
234.00
219.00
217.00 - 242.00
195.00 - 220.00
210.00 - 240.00
192.00 - 218.00
138.70
133.00
142.00
135.00
147.70
140.00
160.00
151.20
162.00
155.30
200.00
192.00
167.00 - 211.00
178.00 - 203.00
160.00 - 209.00
175.00 - 201.00
2,135.00
2,098.00
2,031.00
2,177.00
2,170.00
2,087.00
2,200.00
2,200.00
2,122.00
2,540.00
2,540.00
2,349.00
3,183.00
3,066.00
3,025.00
3,850.00
3,808.00
3,718.00
4,050.00
4,050.00
3,910.00
3,600 - 4,100
3,300 - 4,100
3,250 - 3,900
2,100 - 3,250
1,835 - 3,250
1,835 - 3,250
1,855.00
1,815.00
1,743.00
2,175.00
2,135.00
2,070.00
2,200.00
2,230.00
2,135.00
2,522.00
2,579.00
2,385.00
2,578.00
2,474.00
2,396.00
3,169.00
3,115.00
3,028.00
3,920.00
3,882.00
3,720.00
4,050.00
4,000.00
3,950.00
2,750 - 4,200
3,250 - 4,200
3,080 - 4,100
2,600 - 4,000
2,600 - 3,950
2,450 - 3,900
m2
4.46
5.00
5.00
5.20
6.00
7.25
9.00
10.00
6.70 - 15.00
5.10 - 15.00
m2
7.88
8.50
8.60
8.80
10.55
13.00
16.00
17.80
11.00 - 26.70
9.10 - 26.70
piece
piece
0.24
0.14
0.24
0.14
0.24
0.14
0.25
0.16
0.25
0.16
0.25
0.17
0.26
0.18
0.29
0.20
0.23 - 0.32
0.18 - 0.25
0.25 - 0.315
0.185 - 0.23
50kg/bag
Bulk/Tonne
10.10
200.67
10.95
219.00
10.95
219.00
11.65
219.00
11.13
219.00
12.00
219.00
13.25
265.00
14.50
290.00
14.25 - 17.00
285.00 - 340.00
13.25 - 16.00
265.00 - 320.00
piece
piece
2.90
1.15
2.90
1.15
3.00
1.20
3.00
1.25
3.10
1.25
3.20
1.26
3.20
1.26
N/A
1.60
1.21 - 4.50
1.15 - 2.00
1.21 - 4.50
1.18 - 2.00
Carpentry
Sawn timber
"1" x 2"
"2" x 3"
"2" x 4"
Plywood (WBP)
12mm x 4' x 8'
Paint
Emulsion Paint:
First Grade
Commercial Grade
Enamel Paint
Primer (water-base)
Primer (oil-base)
Weatherproof External Paint
External Work
Crusher-run
Bitumenious Mix:
Dense Bitumen Macadam
Asphatic Concrete Bitumen Course
Asphatic Concrete Wearing Course
Compiled by : MBAM
2nd December 2008
tonne
tonne
tonne
660.00
633.00
635.00
700.00
635.00
698.00
720.00
640.00
700.00
740.00
644.00
700.00
786.70
646.00
710.00
769.50
648.00
618.70
776.00
650.00
646.00
910.00
800.00
900.00
720 - 900
580 - 900
610 - 900
730 - 900
580 - 950
590 - 980
sheet
43.00
43.50
44.00
44.00
44.50
45.35
46.00
48.00
43.00 - 54.00
42.00 - 53.00
5 litre
5 litre
5 litre
5 litre
5 litre
5 litre
75.00
28.00
82.00
82.00
N/A
85.00
75.00
36.00
85.00
85.00
50.00
88.00
75.50
38.00
85.50
85.50
N/A
N/A
75.50
40.00
87.00
87.00
N/A
N/A
76.00
45.00
88.00
88.00
46.00
86.25
76.00
47.60
88.50
88.50
N/A
85.00
76.50
47.60
90.50
90.50
N/A
85.00
N/A
N/A
N/A
N/A
N/A
91.00
58.00 - 95.00
58.00 - 85.00
70.00 - 92.00
63.00 - 80.00
58.00 - 113.00
59.00 - 110.00
68.00 - 100.00
62.00 - 96.00
85.00 - 105.00
45.00 - 110.00
60.00 - 128.00
62.50 - 128.00
tonne
17.00
17.00
17.50
18.70
20.50
22.15
22.90
25.00
22.00 - 31.00
21.50 - 31.00
tonne
tonne
tonne
N/A
N/A
N/A
N/A
N/A
N/A
1,480 - 1,900
150.00 -197.00
146.00 - 200.00
1,200 - 1,500
124.00 - 184.00
134.00 - 188.00
115.00
120.00
122.00
117.00
130.00
130.00
118.50
132.60
134.40
125.00
133.00
135.00
117.00
125.00
135.00
117.00
129.00
139.00