AQS 1193

Principles of Estimating for

Building Works 1

Introduction
 Introduction to the Construction
Industry of Malaysia
• Malaysian Industrial Classification
• Structure, manpower and construction output
• Role of the quantity surveyor
• Statistics on construction
• Past performance
• Significance of Construction Industry to the
Economy
• Relationship with other economic sectors
• Future prospects
• Role of the industry towards economics
growth 2
 Malaysian Industrial Classification

The Malaysia Standard Industrial Classification (MSIC) 2008 Ver. 1.0 (Department of
Statistics Malaysia, 2008) provides twenty one (21) broader categories of the Malaysian
economic activities:
A Agriculture, Forestry and Fishing
B Mining and Quarrying
C Manufacturing
D Electricity, Gas, Steam and Air Conditioning Supply
E Water Supply, Sewerage, Waste Management and Remediation Activities
F Construction
G Wholesale and Retail Trade; Repair of Motor Vehicles, Vehicles and Motorcycles
H Transportation and Storage
I Accommodation and Food Service Activities
J Information and Communication
K Financial and Insurance/Takaful Activities 3
 Malaysian Industrial Classification

L Real Estate Activities

M Professional, Scientific and Technical Activities
N Administration and Support Service Activities
O Public Administration and Defence; Compulsory Social Security
P Education
Q Human Health and Social Work
R Arts, Entertainment and Recreation
S Other Service Activities
T Activities of Households as Employers, Undifferentiated Goods And Services-
Producing Activities of Households for Own Use
U Activities of Extra-territorial Organizations and Bodies

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 Malaysian Industrial Classification

Definition of construction

The Malaysia Standard Industrial Classification 2008 Ver.1.0

refers to construction as an industry which includes:

“general construction and specialized construction

activities for buildings and civil engineering works.

It includes new work, repair, additions and alterations, the

erection of prefabricated buildings or structures on the site and
also construction of a temporary nature”
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 Malaysian Industrial Classification

Based on the Malaysia Standard Industrial Classification

2008 Ver.1.0, the construction works can be categorized
into three (3) main categories:

1. Construction of buildings
2. Civil engineering
3. Specialized construction activities

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 Structure, manpower and
construction output
• Structure

From a broad and practical view the construction industry

comprises the following major sectors:
1. Owner/Developer sector
2. Consultant sector
3. Contractor sector
4. Material and Equipment Supplier Sector
5. Manpower sector
6. Finance sector
7. Approving sector 7
 Structure, manpower and
construction output
• Manpower

• The total workforce engaged in 2010 was 974,488 persons with an

increase of 422,733 persons (12.0 per cent) from 551,755 persons in
2005.

• In tandem with the expansion of total workforce, the total salaries &
wages paid also showed an increase of RM8.9 billion (12.7 per cent) to
record RM19.8 billion (2010) in comparison with RM10.9 billion (2005).

• The non-residential sub-sector contributed the highest percentage in

terms of employment with a total of 285,695 persons (29.3 per cent).
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 Structure, manpower and
construction output
• Manpower
o Employment by category of workers for 2011 (refer Economic
Census 2011 : Construction, Chart 4 page 18)

– construction/operative workers: 85.8 per cent

– clerical and general workers : 6.3 per cent
– technical and supervisory : 4.1 per cent
– managerial and professional : 3.8 per cent

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 Structure, manpower and
construction output
• Manpower

o Employment by sub-sector, 2010 (refer Economic Census 2011 : Construction,

Chart 3 page 16)

o Number of establishments, gross output and employment by employment size

group, 2010 (refer Economic Census 2011 : Construction, Table 6 page 17)

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 Structure, manpower and
construction output
• Construction output

• The construction sector in Malaysia posted a double digit growth

in 2010 with 11.1 per cent average annual growth of gross
output.

• The gross output in 2010 was RM91.3 billion, an increase of

RM37.3 billion as compared to 2005 with an average annual
growth of 11.1 per cent.

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 Structure, manpower and
construction output
• Construction output

• In year 2010, the construction sector in Malaysia was led by the non-
residential sub-sector. Its contribution increased to RM27.0 billion (29.6
percent) in 2010 as compared to RM10.8 billion (20.0 percent) in 2005.

• Construction activities were concentrated in the central region

consisting the states of Selangor, W.P. Kuala Lumpur and W.P. Putrajaya.
Combination of these three states registered RM46.3 billion (50.6 per
cent) to the gross output.

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 Structure, manpower and
construction output
• Construction output

o Key indicators of construction sector, 2005 and 2010 (refer Economic Census 2011
: Construction, Table 1 page 12)

o Performance of sub-sector in construction sector by value of gross output,

2005 and 2010 (refer Economic Census 2011 : Construction, Table 2 page 13)

o Gross output by region, 2010 (refer Economic Census 2011 : Construction, Table 4
and Chart 2 page 15)

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 Roles of the quantity surveyor

A Quantity Surveying graduates can work:

 As Quantity Surveyor in major Government Departments and Agencies.

 As Quantity Surveyor with contracting organizations, property and housing
developers, construction materials and plant and equipment manufacturers
and suppliers, etc.
 As Quantity Surveyor (or owner) in private consulting firm of quantity surveyors.
 As Quantity Surveyor (or Contract Officer/Manager) in Oil and Gas Firms.
 As Consultants to the financial and capital markets, banking and insurance
industries.
 As Academic or researcher or others.

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 Roles of the quantity surveyor

•Single rate approximate estimates •Supply chain management

•Cost planning •Facilities management
•Procurement advice •Legal services
•Measurement and quantification •Quality management
•Document preparation, especially bill of •Investment appraisal
quantities •Advice on cost limits and budgets
•Cost control during construction •Whole life costing
•Interim valuation and interim payment •Value management
•Financial statements •Risk analysis
•Final account preparation and •Subcontract administration
agreement •Technical auditing
•Settlement of contractual claims •Planning and supervision
•Environmental and sustainability •Project management
analysis •Administering maintenance programs
•Advice on information and •Advice on contractual disputes
communication technologies
Ref: Ashworth and Hogg (2007)
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 Statistics on construction

• Principal statistics of construction sector, 2000 - 2010 (refer Economic

Census 2011 : Construction, Table 1 page 47)

– Value of gross output 2010: RM 91 billion (RM 91, 341, 685, 000)

– Manpower 2010: almost 1 million (974, 488 persons engaged)

– Total salaries & wages paid 2010: RM 20 billion (RM 19, 841, 387, 000)

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 Statistics on construction

Source: DEPARTMENT OF STATISTICS MALAYSIA (2014). PRESS RELEASE REPORT ON SURVEY OF

CONSTRUCTION INDUSTRIES 2014

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 Statistics on construction

Source: DEPARTMENT OF STATISTICS MALAYSIA (2014). PRESS RELEASE REPORT ON SURVEY

OF CONSTRUCTION INDUSTRIES 2014

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 Statistics on construction

Source: DEPARTMENT OF STATISTICS MALAYSIA (2014). PRESS RELEASE REPORT ON SURVEY

OF CONSTRUCTION INDUSTRIES 2014 19
 Statistics on construction

Source: DEPARTMENT OF STATISTICS MALAYSIA (2014). PRESS RELEASE REPORT ON SURVEY

OF CONSTRUCTION INDUSTRIES 2014 20
 Statistics on construction

Source: DEPARTMENT OF STATISTICS MALAYSIA (2014). PRESS RELEASE 21

REPORT ON SURVEY OF CONSTRUCTION INDUSTRIES 2014
 Past performance
Annual growth rates of GDP and construction
With the exception of 1968-1969 and 1975-1977, in general, the growth of
construction output follows the trend of the economy although the peaks and falls
are more severe.

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 Past performance

The First Construction Cycle, 1959-1969/

The Early Years of Post-Independence

During the period between 1959 and 1969 the construction industry is
considered traditional. It represented a small and neglected sector often
regarded as a by-product of other activities in the economy.

Construction began to gain importance in the economy in the 1960’s

through its roles in the areas of reconstruction and modernisation.

The industry could be classified as craft-based, with low technology

relying on traditional skills. Low degree of mechanisation and off-site
fabrication of components. 23
 Past performance

The Second Construction Cycle, 1969-1976/

The First Decade of the New Economic Policy

The New Economic Policy was launched in 1970

Rapid expansion in construction due to increased demand for residential
construction and a high growth in private investment (e.g. manufacturing
facilities)

The rapid expansion led to an increase in imports of machinery and

equipment, and shortages of building materials and labour as well as
increased speculative activities and higher prices of buildings.

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As a result, the construction industry abruptly went into a recession in 1975.
 Past performance

The Third Construction Cycle, 1976-1987

The recovery of the economy from the world’s oil crisis of 1973-74 saw
the construction industry making rapid recovery.

There was a strong growth between 1981 and 1983 due to expansion in
physical infrastructure, heavy industrialisation, rapid development of oil
installations and continuing strong demand for housing.

However, the industry contracted to a negative growth during the mid-

eighties recession; from 11.61 per cent in 1983 to 4.18 per cent in 1984.
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 Past performance

The Third Construction Cycle, 1976-1987

- The Recessionary Years of the Mid-Eighties

Significant slowdown in overall construction activities

Growth of private investment was slower
Tightness in credit availability
the higher cost of mortgage loans
The temporary freeze on housing loans
Low occupancy of hotels, office spaces, luxury houses and apartments

Negative annual growth rates of the industry for 1985-1987

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 Past performance

The Fourth Construction Cycle, 1987-1998/

The Recovery Period

The recovery of the Malaysian economy in 1986 saw the

construction industry picking up very rapidly from 1988 onwards.

Between 1988 and 1996, real growth in construction GDP

averaged 12.33 per cent per annum. Once again the rate of growth in
construction exceeds the rate of growth in the total and once again the
construction industry of Malaysia is experiencing a boom.

Employment in the construction industry also rose significantly during

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the period between 1988 and 1996.
 Past performance

The Fourth Construction Cycle, 1987-1998/

The Recovery Period

The industry’s highest annual growth rate of 19.5 per cent recorded in
1990 was higher than the growth of construction industries in other
developed and developing regions.

The growth was further enhanced by the implementation of Vision

2020 in 1991

Among the major projects are: Petronas Twin Towers (1998);

Commonwealth Games Village; and North-South Expressway (1994)
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Significance of Construction Industry
to the Economy

The significance of construction to the economy may be

examined by using the following indicators:

• Construction as an industry contributing to GDP

• Construction as a major employer in the economy

• Construction as a major component of Gross Fixed Capital

Formation or GFCF (national income accounting category
representing the expenditure on fixed assets e.g. buildings,
plants and machinery which also refer to as investment). 29
Relationship with other economic sectors

The construction industry of Malaysia has strong backward as

well as forward linkages with the other sectors of the economy.

Backward linkages
exist when the growth of an industry leads to the growth of the
industries that supply it

The strong backward linkages of the construction sector with the

manufacturing sector suggest that growth in the construction
industry will induce growth in the manufacturing sector.
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Relationship with other economic sectors

Forward linkages
exist when the growth of an industry leads to the growth of the
industries that use its output as input, or when the output of an
industry helps propel another industry

The strong forward linkages that the construction industry has

with investment suggest that an investment-led growth economy
will induce growth in the construction industry.

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 Future prospects

The future prospects of the industry could be assessed in the

following key areas:
• Economic growth through industrialisation
• Population growth
• Urbanisation and economic prosperity
• Infrastructure development
• The challenge of sustainable development

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 Tutorial Questions

1. Identify the different types of contractor

(grade, category, specialization)

2. Discuss the followings:

a) Relationship between construction industry with
other industries
b) Relationship between construction industry and
the economy
c) Future prospect of the construction industry
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References
Ashworth, A., (2004). Cost Studies of Buildings (4th Edition). England: Longman.

Department of Statistics Malaysia (2000). Malaysia Standard Industrial

Classification 2000 (MSIC 2000). ISSN 1511 – 6824.

Department of Statistics Malaysia (2008). Malaysia Standard Industrial

Classification (MSIC) 2008 Ver. 1.0

Department of Statistics Malaysia (2012). Economic Census 2011 : Construction.

Department of Statistics Malaysia (2014). Press Release Report on Survey of

Construction Industries 2014.

Fadhlin Abdullah (2004). Construction Industry and Economic Development: The

Malaysian Scene. Universiti Teknologi Malaysia.

Khairuddin Abdul Rashid (2002). Construction Procurement in Malaysia –

Processes and Systems. IIUM: Research Centre.

Ministry of Finance, Malaysia. Economic Report 2010/2011.

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