CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

In the year of 1998, global financial crisis occur (occurred) and causes (caused) many
country face on housing bubbles due to knock-on effect of 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
(affected) 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 countrys 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 (had) occur (occurred) since (a) 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 (given in 2014) by the president of Master Builders Association Malaysia
(MBAM), Matthew Tee Kai Woon, in 2014. This shortage can indirectly influence (the)
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 (compared) to the country (countries) like
Bangladesh, Vietnam, Philippines, Thailand and 11 countries more, our country (is
forced) 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 (Malaysians
attitude on being choosy over jobs, and) consideration that refuses (refuse) to perform
the jobs as they think that those jobs are low profile, physical and mentally suffer
( burdening/suffering). Dependencies (dependency on) to foreign workers in construction
areas may (be) 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 (on) Relationship
between Factors of Construction Resources Affecting Project Cost that had been (was)
done by our University, UTHM, FKEE on 25 th October, 2012 had rank (ranked) materials
shortage as number three (third factor)that can significantly effect on (affect a) project. It
would cause to cost overrun, delay of project (project delays) and so forth. The main
cause to shortage of materials is due to ineffectiveness of resources management as
mention (mentioned) 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 (happens), the cost of the materials would increase accordingly and thus the
whole 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 started to deduct the subsidy on fuel, increase toll
charges and will implement of GST in coming year. Implementation of above policies will
make negative influence to tourism sector and thus impacted the construction sector, for
example increasing the cost of materials and transportation, as construction is made
by the development of tourism. Due to these, the investor may not be interested to
fund in our country, causing decrement in tourism sector then the construction sector will
face financial stress. Although only 5% of sales tax will be charged on the building
materials that are classified as Second Schedule Goods (those materials which are not

CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

basic building materials such as bricks, cement, tiles) in coming year, but in long-term
view, it is actually costly and burden.
While there are so many issues arise, there should be a way to overcome with. From the
issues discussed above, we can see that the main challenge in construction industry is
to ensure anticipated growth. Government plays an important role in this circumstance.
Lets take Dubai as our model. In the early year of 1950s, Dubai is just a small poor
desert island with no any natural resources given. The population in that time is around
5000 only and it was unfamiliar by most of whole world. But nowadays, this country has
changed to a developed and modern country with whole world knows. People may think
that this rapid development may be due to the discovery of oil in 1960s, but in fact, in
these 10 years compared with other UAE countries, 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 makes their country as free trade zone, elects attractive liberal
policies, ensures 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 developing yearly with pretty GDP proven, but in
reality, the increment is just too slow to withstand and compete with other countries. To
ensure continual development in economic, Malaysia government should learn the
strategies taken by Dubai or the others countries. There are several reasons that foreign
investors refuse to fund in our country. First, Malaysia government tries to push for mega
investor due to some politicians issues. Second, there is some hidden rules if
someone wants to bid for 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 projects 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 costed over RM40billion under 10 th 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 generating economic
growth, increasing 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 there is 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 it is still not enough. Some efforts that government has done
is trying their 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 besides enhancing the development of construction economic. It could say that,
there is no reason for not using IBS. Yet, in this year 2014, IBS is still not the first
approach by contractor. The possible critical success factors that hinder the contactor to
implement IBS may be caused by Malaysian contractor themselves, who will only
improve their performance under constant pressure.
In conclusion, the future of the construction industry is still bright and it has a lot of
opportunities. To make sure that our construction sector can get anticipated growth,

CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

government should strengthen or amend the policy that can bring more investors to fund
in our country and promote 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 reserve
the number of skilled construction workers so that they can still continue to contribute
towards the economy.