Dear MBAM Members and Visitors

The New Year 2010 is upon us and let us welcome the future, its promises hopes and aspirations. I sincerely believe that together we can move forward and ahead to meet the challenges ahead and emerge stronger on a united front and bring the construction and development industry in Malaysia to even greater heights.

Construction Industry Outlook 2010: Challenges and Opportunities

Malaysia is fortunate that there is a revival in the industry in terms of growth. The construction sector is improving in performance with GDP contribution of 1.1%, 4.5% and 7.9% in the first quarter, second quarter and third quarter respectively as a result of Government’s effort in rolling out a succession of projects under the various stimulus packages launched by the government. We do hope that this trend will continue with the abundance of work to be done under the various stimulus projects such as the building of low and medium-cost houses and the upgrading, repairing and maintenance of public buildings and rural works as well as under the Public Private Partnership (PPP). As we reach the tail end of 2009, let us ponder the industry outlook for private for 2010 honestly so that we can face the challenges ahead in store for us and achieve reasonable and rational measures of success as members of the Malaysian Construction Industry.

I would like to touch on some areas as highlighted below that would require the attention and responsiveness of all Association Members. These issues are:

A. Building Materials Supplies and Prices
B. Contractual and Policy Issues
C. Machinery and Equipment Related Issues
D. Human Resources Development
E. Improvement to MBAM Secretariat Services

A. BUILDING MATERIAL SUPPLY AND PRICES

It is important that the stability of price and supply of essential building materials such as steel, cement, timber, aggregates and ready-mixed concrete is constant and the prices stabilised. The need for price stability and reliable supply of building materials to the construction sector cannot be underemphasized.

The Government needs to enforce a Fair Trade Practices Act to control unethical business practices and ensure a healthy construction environment. This Act will allow the Government to act against those involved in profiteering, monopolistic business and cartels, and those players conspiring to determine prices which can cause disturbance especially when it comes to building material prices. The Association is observing this situation closely and is responding to our members as we keep them apprised of the latest updates and looks forward to feedback and sudden trend of rising prices or shortage of building materials if any.

B. CONTRACTUAL AND POLICY ISSUES

1. CONSTRUCTION INDUSTRY PAYMENT AND ADJUDICATION ACT (CIPAA)
CIDB is reviewing and refining the proposed Act through an industry consultation to finalise a draft bill. MBAM members have been asked to participate in this industry consultation which had taken place on 15th October 2009 and the Association hopes that there will be no further delay to the enactment of CIPAA.

2. AMENDMENT MADE TO THE FIRST SCHEDULE OF THE STAMP ACT 1949
Through many dialogues and appeals to various Government agencies, the Treasury has finally relented to the matter in its latest announcement made on 9th September 2009 that the said ruling has been deferred to 2011. The Tax Analysis Department, MOF has advised that effective 15th September 2009 to 31st December 2010, all service agreements would be imposed a stamp duty of RM50.00. After 1st January 2011, all service agreements which include construction contracts will be levied at an ad valorem stamp duty of 0.5% of the total contract sum. MBAM would like to appeal to the Government to consider a nominal stamp duty of RM50.00 per document regardless of tiers and contract sums for all construction contracts beyond 2011.

The Government must ensure consistent and predictable policies in the future to avoid a repeat of the Amendments to Stamp Duty Act 1949 which imposed a huge increase, which has caused tremendous hardship and confusion to the construction industry.

3. REAL PROPERTY GAIN TAX (RPGT)
MBAM is thankful that the goverment has  made  amendment to the Real Property Gains Tax (RPGT), which will be reimposed next year at 5% but now applicable only to transactions involving properties sold within five years from their purchase.

The Government had previously wanted to impose the RPGT across the board, irrespective of the number of years of ownership, as announced in Budget 2010.to MBAM hopes to see stronger growth in the property sector next year following the amendment but will continue to appeal for the complete removal of the RPGT.

C. MACHINERY ISSUES
MBAM has constantly urged the Government to reduce duty of import for heavy machineries and equipment. MBAM also propose to the Government that heavy equipment classification be split to distinguish the sectors they are used as follows:

1. Heavy equipment for construction, logging, mining, power generation and material handling
2. Heavy equipment for air, marine and road transportation
3. Heavy equipment for manufacturing and industrial sector

MBAM  had suggested that the Government reduce the import duty and sales tax for heavy machineries used in construction on a systematic basis within 2 years until it is reduced to 5-10% for import duty and 5% for sales tax. The reduction of import duties for these heavy machineries would at the very least allow local supplier to be more competitive in terms of their price range and would allow the consumer (in this case, the local construction industry) more options. The Association will continue to urge the Government to consider the reduction in 2010.

D. HUMAN RESOURCES AND MANPOWER ISSUES
MBAM has constantly urged the Government to consider outsourcing the task of training skilled construction personnel to organizations such as MBAM which is willing to assist for the long term betterment of the construction industry. CIDB must continue to emphasize more on providing quality construction industry based training and strive to tailor the training provided to meet the construction industry’s needs especially for the up skilling of the current local construction workforce. MBAM sees the importance of helping the Government train local workers to replace foreign workers as well as to reduce the total number of construction labour to 200,000 by 2015 as per the Government’s long term policy on reducing the reliance on foreign workers. By providing quality and skilled human resources, more private investments could be encouraged as Malaysia forged towards a high income and productive economy in the next decade.

E. IMPROVEMENTS TO SECRETARIAT SERVICES
Following the 7th MBAM Brainstorming Meeting which involved MBAM Council Members and Secretariat Staff on 7th November 2009 in Awana Genting, MBAM will be putting the proposed plans into action to steer the Association to better growth and achievement.

I am sure if there is a will, commitment and team work we will be able to elevate MBAM to the next level and in the long term MBAM members and the construction industry in general will stand to benefit from the seeds of ideas that were conceptualized. We welcome any ideas from MBAM members and the public to ensure that we will continue to be relevant and achieve more for MBAM.

CONCLUSION:-

I believe MBAM members can rise to the challenges ahead. The key to success lies in a positive mindset and by enhancing both efficiency and productivity in the whole construction value chain. MBAM members can rise to the challenges ahead.  I hope as we embrace the coming New Year, we are fully prepared to meet the challenges and will energetically cast our mark effectively and successfully in the construction business in 2010 by yielding better financial results and improving business volume.

May the year 2010 bring for you continued success, prosperity, good health and abundance of happiness, and for us more opportunities to work together. With that I wish all MBAM members A Happy New Year 2010!

YBhg. Dato’ Ng Kee Leen
President
MBAM