CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

In the year of 1998, global financial crisis occur and causes many country face on
housing bubbles due to knock-on effect on 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 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 occur since
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 by the president of Master Builders Association Malaysia (MBAM),
Matthew Tee Kai Woon, in 2014. This shortage can indirectly influence 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 to the country like Bangladesh, Vietnam,
Philippines, Thailand and 11 countries more, our country 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 consideration that refuses to perform the jobs
as they think that those jobs are low profile, physical and mentally suffer. Dependencies
to foreign workers in construction areas may 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 Relationship between
Factors of Construction Resources Affecting Project Cost that had been done by our
University, UTHM, FKEE on 25th October, 2012 had rank materials shortage as number
three that can significantly effect on a project. It would cause to cost overrun, delay of
project and so forth. The main cause to shortage of materials is due to ineffectiveness of
resources management as mention 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, the cost of the materials would increase accordingly and thus whole of the
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 start to deduct the subsidy on fuel, increase toll
charges and will implement of GST in coming year. Implementation of above policy will
make negative influence to tourism sector and thus impact to construction sector like
increasing the cost of materials and transportation, as construction is made by the
development of tourism. Due to these, the investor may not interest to fund in our
country and cause to decrement in tourism sector resulting construction sector face on
financial stress. Although only 5% of sales tax will charge on the building materials that
classified as Second Schedule Goods (those materials that is not basic building
materials such as bricks, cement, tiles) in coming year, but in long-term view, it actually
costly and burden.
While so many issues arise, there should be the way to overcome with. From the above
issues discussed, we can see that the main challenge in construction industry is to

CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

ensure for 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 is unfamiliar by most of whole world. But nowadays, this country is
change to a developed and modern country with whole world knows. People may think
that this rapid development may due to the discovery of oil in 1960s, but in fact, in these
10 years compare with other UAE country, 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 make their country as free trade zone, attractive liberal policies, 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 every year getting develop with pretty GDP proven,
but in reality, the increment is just too slow to withstand and compete with others country.
To make sure on continuing develop in economic, Malaysia government should learn the
strategies taken by Dubai or the others countries. There are several reason that foreign
investor 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 want to
bit 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 project 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 costing over
RM40billion under 10th 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 generate economic growth, 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 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 yet it is still not enough. Some efforts that government done is
try the 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 beside
can enhance the development of construction economic. It could say that, there is no
reason for not using IBS. Yet, in this year 2014, IBS still not the first approach by
contractor. The possible critical success factors that hinder the contactor implement IBS
may cause by Malaysian contractor themselves that will only improve their performance
under constant pressure.
In conclusion, the future of the construction industry is still bright and has a lot of
opportunities. To makes sure that our construction sector can get anticipated growth,
government should strengthen or amend the policy that can bring more investor to fund
in our country and promoting 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

CONSTRUCTION INDUSTRY IN MALAYSIA: ISSUES AND CHALLENGES

reserve the number of skilled construction workers so that they can still continue to
contribute towards the economy.