Malaysia’s construction industry plays an important role in the nation’s economic growth. Besides public and private infrastructure development, the sector also plays a pivotal role in employment generation.
With RM86 billion allocated under Budget 2025 for development expenditure, the construction sector is set to continue with a positive outlook next year. Analysts even project the sector to return to its pre-pandemic level.
This year, the construction industry sustained its momentum with a positive growth of 22.9 per cent, reaching RM41.1 billion in the third quarter of 2024 (Q3 2024); compared to a 20.2 per cent increase, or RM38.9 billion, in Q2 2024.
The growth momentum, according to the Department of Statistics Malaysia, was primarily driven by a 42.6 per cent expansion in the special trade activities sub-sector, which continues to register accelerated growth. The residential buildings and non-residential buildings sub-sectors also gained momentum by expanding 27.8 per cent, and 27.7 per cent, respectively.
Malay Contractors Association Malaysia president Datuk Mohd Rosdi Ab Aziz said the government’s commitment through Budget 2025, to prioritise ongoing infrastructure projects rather than launching new mega-projects, had given a new lease of life to the industry, especially the smaller contractors.
“Almost 80 per cent of contractors registered with the Construction Industry Development Board (CIDB) are small, and medium-scale contractors,” said Mohd Rosdi, whose association comprises 70,000 registered, and 27,000 active members.
“The industry is set to be more robust (‘meriah’) in 2025 if what has been projected in Budget 2025 is followed through. This would mean there would be more projects, as the focus will be on medium-scale and small projects.”
Mohd Rosdi said given the current economic climate, he was confident there would be more opportunities for contractors in the industry, provided everyone, including the authorities, was more proactive.
“We hope that it’s not just a handful of contractors who will benefit in 2025. Smaller contractors will get jobs through these projects, and in return, will contribute to the nation’s GDP (Gross Domestic Product),” he said.
From an implementation standpoint, Mohd Rosdi hopes the rates for new government projects will be based on the new schedule, which was announced by the Works Ministry earlier this year.
“While there may be more project opportunities, we also need to be mindful that the profit margin enjoyed by contractors depends on the cost of raw materials.
“The cost of construction materials will continue to increase; at the same time, there are also some unscrupulous suppliers in the market. We hope the government is ready to review and revise the schedule of rates from time to time to ensure that contractors are not (financially) burdened.”
“Our association will also continue to be the eyes and ears of the ministry and CIDB. We hope both parties will also be more sensitive to the movements in the market as we gear up for 2025.”
Mohd Rosdi added the government already has an idea on how the diesel subsidy rationalisation exercise earlier this year had affected the sector, and as such, must be alert to the possible impact on the sector when the petrol rationalisation comes into play next year.
Elaborating on the rising cost of materials, Mohd Rosdi cited the cost of cement as an example, sharing that a 50kg packet of cement was previously RM19, but now costs RM22 per pack.
“The price of cement escalated in the early days following the diesel subsidy rationalisation. Although the price has since stabilised, it is still not at the pre-diesel rationalisation levels.”
“Contractors have to be aware of market trends when it comes to the price of raw materials. When you take up a job, it’s not just about looking at the price of the tender or the price of goods today, but also the possibilities that could arise in the future,” he said.
“We cannot be static. We cannot come up with excuses if we do not do projections, as there is no chance the price of goods will reduce in two years.”
Mohd Rosdi stressed there was a need for the government to reintroduce the variation of price clause (VOP).
“Following the diesel subsidy rationalisation, the government announced that it agreed in principle to reintroduce the VOP. However, to date, we have not heard much about this,” he said.
“We hope this (VOP) is brought back as it is fair to both contractors and the government.
“If the price of raw materials drops, then it will be cut from the price awarded to the contractor. If it increases, the difference will be added to the tender price of the project. It is a fair mechanism. It was used before, and there is a need to reintroduce this scheme.”
Mohd Rosdi added that his association had discussed several matters, including VOP, with Finance Minister II Datuk Seri Amir Hamzah Azizan in October.
“The minister had then said that he would discuss the matter with the Works Ministry and CIDB,” he added.
