Construction to Malaysia

(Last updated: 26 Jul 2007)

Trends and opportunities

The market

The Malaysian construction sector has recovered from the financial crisis with value-added growing by 3.1 per cent. The growth is mainly due to the implementation of several large public and privatised infrastructure projects and new investment in the residential sector – particularly low and medium-cost houses –to meet underlying demand. Excess supply, however, still exists in several segments of the property market.

In view of this, the Malaysian Government has given various incentives, such as the exemption of stamp duty, waiver of processing fee and higher margin of financing.

In the non-residential sector, the over supply situation and low occupancy rates for office and retail space continues to dampen building activity. Activities related to the construction of low and medium-cost residential properties are expected to remain strong.

Civil engineering activities are expected to continue to recover and strengthen given the fiscal stimulus and resumption of projects that were deferred. Consequently, the share of the construction sector to overall GDP is envisaged to remain at 3.4 per cent.

Opportunities

The construction industry in Malaysia falls into four broad sectors: office, retail, residential and construction/infrastructure.

Generally, the office sector has experienced a sharp dive in take up and occupancy rates since 1997. Other than owner occupied premises, new office space had a poor take up of less than 35 per cent. As for investment opportunities, continued demand is expected for prime office accommodation from the information technology and other new economy businesses in the media industry.

There was a slowdown in demand for retail space as many retailers were more selective in choosing complexes they wished to locate their businesses in. This trend has caused many shopping complexes to begin to refurbish their centres to include outdoor dining concepts. Overall, investment opportunities are expected to take a back seat in the next 12 months as impending supply of retail space is already expected to come on stream later this year.

The construction of residential buildings remains active and new housing schemes continue to be developed. The construction of low and medium-cost houses continues to be supported through the Malaysian Government’s housing program. Luxurious and high-end landed residential properties, such as semi-detached and bungalows are still in demand, however, on a selective basis depending on its price, location and accessibility.

The construction industry has been mainly supported by the development of infrastructure projects. There have been various road, railway and water-related projects that have been recently revived.

Tariffs, regulations and customs

It is compulsory for contractors in Malaysia to be registered with the Construction Industry Development Board. The board has wide-ranging responsibilities and has been established to develop the construction industry to be a major contributing sector to the Malaysian economy, capable of producing and delivering high quality construction works.

There are limitations on foreign engineers, architects, quantity surveyors, etc., practising in Malaysia.

To obtain a work permit, a Malaysian company must sponsor a foreigner. However, professional accreditation is very difficult to obtain and generally given for a specific project only.

Industry standards

The Construction Industry Development Board is appointed by the Standard and Industrial Research Institute of Malaysia Berhad (SIRIM) as the standards organisation for the construction industry in Malaysia.

Marketing your products and services

Market entry

Australian companies seeking to enter the Malaysian construction industry will need to locate a Malaysian partner. A Malaysian partner will understand the various government approvals required and will also generally have a better understanding of Malaysian business practices.

There are significant numbers of Australian engineering, architecture and other related companies operating in Malaysia and individual Australians working for Malaysian and multinational companies.
These people provide a good network for other Australian companies looking to enter the Malaysian market.

It is not uncommon for large construction projects to be awarded to consortia, often involving foreign companies, or for contracts to be subcontracted to many levels.

The Malaysian Government has privatised or is privatising many infrastructure projects and for these, the concession holder generally determines selection of contractors and suppliers. Government contracts for major projects are often determined on a selective tender basis, with bidding often limited to Malaysian companies as prime contractors.

The construction industry in Peninsular Malaysia is extremely competitive, with local companies having adequate capabilities in most areas and the government’s strong drive to use locally produced building materials. However, in specialist areas that requires technology and consultancy services (eg. tunnelling, construction of waste incinerators, large-scale open cast mining, etc.), Australian companies can offer their services.

To promote its building material products and services, Australian companies are encouraged to participate in the annual Malaysian International Building and Construction Exposition (MALBEX).

Initial efforts can be seen to promote e-procurement of building materials online in Malaysia. One such example is Binaonline.com, which will enable contractors and suppliers to virtually secure jobs or orders from any part of the world.

Links and industry contacts

Construction–related resources

Real Estate and Housing Developers' Association - www.rehda.com
Online Construction Sdn Bhd - www.binaonline.com

Building Materials Distributors Association of Malaysia - www.bmdam.com
Suite P4.02 4^th Floor BICMA Building Lot 2
Jalan 243/5lA
46100 Petaling Jaya
Selangor Darul Ehsan
Malaysia
Tel: (60 3) 7874 4989
Fax: (60 3) 7874 4761

Association of Consulting Engineers Malaysia - www.acem.com.my
63-2 and 65-2 Medan Setia 1
Damansara Heights 50490
Kuala Lumpur
Malaysia
Tel: (60 3) 255 0031
Fax: (60 3) 255 3499

Institution of Surveyors Malaysia - www.ism.org.my
3^rd Floor, Bangunan Juruukur
64 - 66 Jalan 52/4
46200 Petaling Jaya
Selangor Darul Ehsan
Malaysia
Tel: (60 3) 7956 9728
Fax: (60 3) 7955 0253

Government, business and trade resources for Malaysia

Construction Industry Development Board (CIDB) - www.cidb.gov.my
7^th Floor, Grand Seasons Avenue
No. 72 Jalan Pahang
53000 Kuala Lumpur
Malaysia
Tel: (60 3) 4044 8808
Fax: (60 3) 4045 1808

The Standard and Industrial Research Institute of Malaysia Berhad (SIRIM) - www.sirim.my
Construction and Building Materials Testing Section
Block 4 SIRIM Complex 1 Persiaran Dato’ Menteri
40911 Shah Alam
Malaysia
Tel: (60 3) 5544 6450
Fax: (60 3) 5544 6460

Department of Housing
City Hall, Kuala Lumpur
Jalan Raja Laut
PO Box 11022 50732
Kuala Lumpur
Malaysia
Tel: (60 3) 2693 8166
Fax: (60 3) 2698 4426

Malaysia Australia Business Council (MABC) - www.mabc.org.my
Construction, Manufacturing and Property Development Sub-Committee
3^rd Floor, Quest Business Centre
Wisma RKT
2 Jalan Raja Abdullah
50300 Kuala Lumpur
Malaysia
Tel: (60 3) 2695 3121
Fax: (60 3) 2695 3128

Media

The Star - www.thestar.com.my
New Straits Times Press - www.emedia.com.my
Malaysian National News Agency - www.bernama.com