Higher costs affecting construction sector

Monday May 12, 2008 The STAR
Higher costs affecting construction sector

StarBiz talks to Master Builders Association Malaysia president Patrick Wong about the challenges and outlook for the construction industry.

How do you see the performance of the construction industry this year?
There was a marked improvement in the construction sector, which grew 4.6% last year versus -0.5% in 2006, - 1.6% in 2005 and -1.9% in 2004. However, the continuous increase in fuel and construction material prices is proving to be an ordeal and it is hoped the construction industry will be able to tackle these challenges.
Many property developers are also delaying new projects due to the rising costs of construction materials. This is because property developers are unable to fix prices for their properties due to the current “uncontrollable” sharp increase in building material prices.
In addition, the Prime Minister recently said infrastructure projects under the 9MP might be delayed due to escalating costs.

What are the growth areas that can still support the industry and why?
All the country's development corridors are important growth areas that can support the industry. The Government should encourage more foreign direct investments to spur economic growth.

What are the challenges that hamper the growth in the construction industry?
One of the main challenges is the rise in building material costs especially essential building materials such as steel bars and cement. Prices of many construction related materials, machinery and transportation costs have also increased substantially and builders are facing critical problems. The uncertainty in supply of steel bars is another challenge.
Manpower and skills shortage – senior construction personnel, supervisory and skilled staff – are also hampering growth of the construction industry.
Another factor is the difficulty in ensuring feasible terms for modernisation, mechanisation and systemisation of the construction industry. We urge the Government to reconsider relaxing import duty imposed on system formwork and heavy construction equipment used in infrastructure and housing developments. At present, the duty is as high as 30% and sales tax at 10%, which adds to the higher cost of infrastructure construction.

How can we overcome these challenges?
We hope contractors can request for contract prices to be adjusted according to the market price of steel for all contracts from Government agencies and that the private sector will follow suit.
We have to push for and implement the Fair Trade Practices Act and Code of Ethics for millers and manufacturers to ensure local needs for steel bars are met first. We also need to attract more local professionals/supervisors to join and stay in the industry.
The education system should be reviewed to promote interest in the construction industry and to provide more construction-related subjects. More technical and industrial arts subjects should be offered.
MBAM hopes that the Government can further provide a financial assistance scheme to support the industry in innovation and technology to improve the quality and safety at the job site.

What is the outlook for construction companies in these challenging times?
Although the outlook is challenging in terms of building materials' pricing, supply of equipment, human resources and the global economic climate, we believe contractors and builders can rise to the challenges ahead. The key to success lies in having a positive mindset and enhancing both efficiency and productivity in the whole construction value chain.