Friday 29 Mar 2024
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KUALA LUMPUR: As the private sector property development market slows down, public sector infrastructure projects will continue to drive growth, forecast at 9.6% in 2014, for the construction sector, opined the Master Builders Association Malaysia (MBAM).

The country has seen a noticeable surge in government projects in the last few years, with notable ones being the construction of the first rail line of the expansive Mass Rapid Transit (MRT) project in the Klang Valley and the Pengerang Integrated Petroleum Complex in Johor.

Additionally, at least half a dozen expressways are now being integrated into the Malaysian landscape. They include the Sungai Besi-Hulu Klang Expressway, Damansara-Shah Alam Elevated Expressway, the East Klang Valley Expressway and the Kinrara-Damansara Expressway.

Further down the pipeline are government-backed projects including the Tun Razak Exchange development, the Warisan Merdeka skyscraper, the redevelopment of the Pudu Jail site and the remainder of the MRT network.

As a result, Matthew Tee, MBAM president, is “very optimistic” that the construction industry will be “robust” for the next five years.

Despite the growth forecast for the industry, Tee expects industry players to continue facing challenges going forward, adding that the sector is already “not a lucrative one” as it sees only low single-digit profit margin in competitive tenders.

“It is only going to get more competitive. A lot of players are still entering because it is the fastest way to access seed capital in terms of property development,” he added.

He also noted that there have been “too many cooling measures since 2012”, which caused private-sector driven construction works to slow down and property transactions to decline.

“It is now very difficult for first time buyers to get loans,” Tee said, adding that it would be better for the property market to be governed by the laws of supply and demand than state-backed initiatives.

“Looking at it now, [the industry] is predominantly sustained by the public sector. [For industry growth], it has to be [driven by] both the public and private sectors,” he said.

The industry will also have to deal with the impact from the upcoming Goods and Services Tax (GST), which will come into force next April.

Tee said there are contractors and developers who are not fully aware of the implication of GST but have nevertheless gone ahead and priced in an additional 6% to their contracts, further driving up construction costs.

He added that the industry still faces labour shortage due to the glut of government projects and that MBAM is discussing with the Works Ministry to iron out some of the difficulties in bringing in foreign, skilled, construction labour.

In anticipation of the upcoming Budget 2015, Tee said he has proposed to the government to reduce import duties on heavy construction machinery.

Import duties of construction machinery here range between 10% and 25%, significantly higher than the 0% to 5% rates enjoyed by other countries in the region.

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