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Challenges In Malaysian Construction Business

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Overcoming the current debacles to move forward

Construction industry in Malaysia has witnessed an impetus upward trend since a decade ago due to tremendous growth in number of projects undertaken by this brick and mortar industry, as well as the advanced technology and measures adopted. The government has been willing to listen to feedback on policies, and elaborating on ways to overcome the impending monopoly of construction materials, because these are the factors that will jeopardise the interst of both property developers as well as buyers.

Ban Lee Hin Group group chairman, Dato’ Tony Looi Chee Hong said “Contractors supervise their projects very closely each month. If the project exceeded our budget, then we will immediately call for a meeting with the project teams for troubleshooting, to determine the wastage, workers’ low productivity levels or other related challenges.”

He said the team will carry out risk analysis based on the weekly / monthly comparison reports. The contractors will try to minimise the expenses by referring to the analysis, and to optimise the workforce, by allocating the manpower, plants machineries rationally. This to make sure the schedule delivery is achieved for the clients. Concurrently, a report will be submitted with cost impact analysis and seeking for client’s consideration on compensation within reasonable supporting measures.

Looi said “There are changes globally every day. If we remain the same, we won’t be able to compete with others and eventually will be eliminated from this industry.” Hence, Looi always urge his human resources department to arrange for staff trainings in areas of skill development and even to the extent of restructuring the company’s organisation. He added that, by working out business initiative and strategies, the company would be able to juggle between fulfilling the market needs, to improve on safety, while being more alert to market changes. He said it would be safer to be well prepared prior to unwanted pitfalls in the construction industry.

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Looi also reiterated that in this business, the top factors that make up a good workmanship of construction can be categorised as below:

To optimise productivity by constantly evaluating skills / performances, and to assign tasks to the team according to their strength.

To keep tab on the work progress, in order to ensure that the respective teams adhere to the disciplines. By supervising the workers during each briefing, team leaders will be able to improve the team leadership, as well as to cultivate the spirit of teamwork.

Equipped with knowledge via a standard of procedure handbook, to facilitate the skills learning amongst each other in the team.

Significantly, Looi said that their project safety officer will conduct a safety or toolbox meeting twice a day. If the officer comes across any worker not adhering to the safety guidelines by wearing required equipment, the worker will be penalised by a warning letter and deduction in wages. That worker will be requested to attend a safety induction and pass a technical examination before being allowed to continue working at the site.

“If the worker failed the test, he will in turn be assigned to be the next leader for the day for safety briefing and by then he will learn from the mistake and on the importance of wearing a full gear at site. We are proud to say that we are a zero-accident construction company and is certified by occupational health and safety management system specification (OHSAS),” said Looi.

C3Also, there are challenges brought upon by sub-contractors, for example when they request for higher compensation in the event that some undesirable incidents take place. For situations like this, Looi added that the terms of contract could not be changed, but they will be advised to submit proper supporting documents for verification and further evaluation. If sufficient supporting documents are provided, the contractor can always find ways to offer a reasonable solution.

Looi emphasised that elements such as construction cost, the location of land as well as the type of property development will all affect the price of property. He added “The sophistication the construction methodology involved, the specification of the material used, are all factors that will push the selling price of the property higher. Furthermore, as most of the materials used are imported from overseas, distributors and suppliers will have to hike their price as well. A lot of things are tied to the global economic volatility actually.”

Hence, Looi said construction development especially residential projects might exceed the needs based on the current population especially in the next couple of years. While the economy might bloom when we welcome foreign investors with opened arms, certain restrictions must be enforced to maintain the affordability of the offerings according to the capabilities of local residents.

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Like any other industries, construction industry does face many challenges. One of the challenges of the Malaysian construction industry are the problems of manpower shortages and the need to complete construction projects in time.

Master Builders Association Malaysia (MBAM) president, Foo Chek Lee said that adoption of Industrial Building Systems (IBS) in the construction projects have helped to improve speed and reduce usage of manpower. As a result, it will lead to less rework and faster deliverable times that benefit owners and the industry at large.

Foo raised the point that the industry is constantly facing shortages of skilled manpower, with up to 15,000 ongoing projects being affected at any given time. Currently, the industry has employed approximately 1.2 million workers. While the population of Malaysia stands at 31.7 million, the unemployment rate stays low at just 3.4%. As such, there is shortage of skilled workers to fill the vacancies in the industry. The industry is further burdened with the difficulty in recruiting migrant workers, as it is now getting more tedious task due to constant change of Government policies as well as the recent increase in cost.

“We have been vocal on our members’ need of having more trained skilled workers to reduce our dependency on foreign workers,” opined Foo. However, MBAM are grateful that the government has introduced the Technical and Vocational Education and Training (TVET) programmes that provides essential skills to prepare youth for the labour market, and that will create precious human capital for nation building. More than 330,000 trainees will benefit through programmes which includes RM585 million for TVET training equipment and RM350 million to finance various TVET training programmes.

“MBAM is also doing its part by embarking on Work Based Learning initiatives with Politeknik Ungku Omar, as well as our Construction Occupational Competency Development (COCD) related programmes which are essential to reskills and update our trade supervisors,” remarked Foo.

MBAM is also facing the challenge of improving safety awareness and providing proper safety training to industry players by actively running the Site Safety Supervisor programmes that are critical to enhance level of safety. In fact, the Safety and Health Assessment System in Construction (SHASSIC) should be implemented at the site to safeguard the safety and wellbeing of the workers. The benchmark will ensure accidents and loss of life minimisation and improve workmanship and apt quality of work.

MBAM notes that to resolve obstacles faced by the industry, better communication and engagement must be carried out with industry players. Through constant dialogues with various Government agencies and Ministries as well as industry stakeholders, MBAM can communicate with the relevant authorities to protect and promote the interest of its members. Foo remarked “MBAM have been actively working together with Construction Industry Development Board Malaysia (CIDB) to nurture more local skilled workers to fill in the void that the industry is facing. Through our programmes such as Construction Continuing Professional Development (CCPD), Construction Occupational Competency Development (COCD) and Site Safety Supervisor Course, it is hope that it will help to produce more professional and reduce our dependency toward unskilled foreign labour.”

Another critical issue of concern for the industry is the need to raise the quality and delivery of projects. By promoting the adoption of Quality Assurance System (QLASSIC), MBAM hopes this will also help ensure the quality of the project executed by the construction companies. Furthermore, MBAM is urging the construction companies to have at the very least an ISO certification on quality. This inevitably will instil the confidence of the house buyers on the quality of the projects and the material used.

On another front, MBAM has been championing the reduction in import duties for heavy construction machineries. Foo said “The government should consider relooking at the current mechanism to encourage construction industry players to bring in new machineries. High import duties for some heavy machineries were reduced from 10% to 5% by the government in year 2015, however MBAM believes it is still insufficient for the contractors to fulfil the mission towards mechanisation in this sophisticated industry.” The initiative is vital as it would encourage people in the business to purchase newer construction machineries that will have more safety features, reducing construction time and increasing occupational safety and health while enhancing productivity at work sites.

This will also attract the locals to join the skilled worker market here. It is very important for our local contractors who can be competitive by offering competitive prices and services, as the current machineries used by the contractors are old and not efficient. Ultimately, frequent breakdown may result in unnecessary downtime, and may even lead to construction accidents and fatalities besides higher costs.

Another challenge to note is that the unfavourable Malaysian Ringgit exchange rate has caused the price of material to be more expensive, and this is a concern to the construction industry. The recent steel bar price hike is a good example of the impact due to Ringgit’s fluctuation. MBAM expressed concern over the rising price trend of steel bar after the government began levying the preliminary safeguard duty. We are urging the government to review the safeguard duty at the end of the safeguard period which is in early April 2017.

As at the third quarter of 2016, construction industry contributed 7.9% of the GDP of Malaysia. and expected a growth of 8.3% in 2017. The construction industry also supports the growth of around 140 other downstream industries. Thus, it is hoped that all construction industry players will work closely with the Government to ensure sustainable growth for the nation and the rakyat.

The general manager of Construction Industry Development Board’s (CIDB) safety, health, environment, quality (SHEQ) division general manager, Ahmad Farrin Mokhtar said, “The construction sector has one of the highest record of fatalities with 89 fatalities in 2014 and 140 in 2015, From January to October 2016, the number of fatalities were 58. Under the Construction Industry Transformation Programme (CITP), one of the goals is to half the rate of fatality in the construction industry by the year 2020, from 10.94 per 100,000 workers in 2015.”

Since construction requires workers to be at high places, and it involves lifting and movement of very heavy objects, and many of these activities are happening concurrently in the same construction site. Unscrupulous contractors may skimp on safety equipment’s to save cost or save time. Nevertheless, there are companies which are quite exemplary in terms of safety guidelines and policies implementation, which have prioritised the maintenance of safety at construction sites.

Besides, there are also plenty of other challenges, including limited emphasis on workmanship quality and assessments; limited levels of safety awareness and enforcement; bureaucratic and regulatory issues; low resilience of construction work to natural disasters; high carbon emissions, energy use and construction waste; a low rate of technology adoption that results in one of the lowest productivity rates across economic sectors; outdated construction methods as well insufficient bumiputra participation.

Consequently, increased competition by foreign players in the country, as well as the numerous constraints faced by Malaysian companies venturing abroad, have brought upon a high accident and fatality rate. Besides, limited integration of health and safety aspects in the work culture, poor quality buildings and collapsing infrastructure, and delays in approvals of construction permits are some of the major issues in the industry today that affect the public, businesses, workers and consumers.

Ahmad reiterated that illegal dumping of construction and demolition waste, and the extensive cost of repairing buildings and infrastructure damaged due to natural disasters are key issues to be tackled. The construction industry has one of the lowest productivity levels in the economy. The relatively low productivity reflects the limited adoption of new technology and practices and the reliance on low skilled workforce.

“The Construction Industry Transformation Programme (CITP) was launched by the Prime Minister on 10th of September 2015, with the primary objective of transforming the construction industry towards becoming highly productive, environmentally sustainable, with globally competitive players and a focus on safety and quality standards,” Ahmad remarked. In conclusion, he said the features four strategic thrusts are Quality, Safety of and Professionalism, Environmental Sustainability, Productivity and Internationalisation should elevate the industry in Malaysia to a comfortably sustained level.

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