CIDB calls for clear labour policy

IT has been a busy year for the construction industry, as can be seen by the many construction activities in the Klang Valley.

"Construction is booming. We had a fantastic year in 2012," says Datuk Seri Judin Abdul Karim, chief executive of the Construction Industry Development Board (CIDB).

Even though the total number of projects shrank from 7,500 in 2011 to 7,142 in 2012, the value jumped to RM117 billion from RM99 billion. As at May 2013, the industry recorded about RM34 billion in project value. Overall, the value and volume of construction projects have seen significant growth since the beginning of the millennium.

But growth comes with its own set of problems, some of them long-standing.

Judin is concerned about the sustainability of current construction practices, particularly the heavy dependence on cheap foreign labour. As at Dec 31, 2012, a total of 1,547,516 people had registered to work in the construction industry, of whom 355,099 were legal foreign workers.

"Construction is thriving and we are seeing a strain in the supply chain, especially of labour. Countries where we used to get workers from such as Indonesia, are now seeing growth of their own and it's no longer easy to get workers from there. We had better get used to this because as our neighbours grow, cheap foreign labour will be harder to obtain. If our developers don't prepare themselves, they are in for a shock," says Judin.

Recently, the Malaysian Developers' Council (MDC) urged the government to review the foreign labour policy on the entry of skilled and semi-skilled labour from countries such as Indonesia, Vietnam, Myanmar and China to overcome the labour shortage.

MDC is made up of the Real Estate and Housing Developers' Association Malaysia (Rehda), the Sabah Housing and Real Estate Developers' Association and the Sarawak Housing and Real Estate Developers' Association.

However, Judin feels that while changing the policy will help in the short term, it is not sustainable.

"I think we need to bite the bullet and have a clear labour policy. We can't flip-flop. Today, we need more labour, we change the policy; tomorrow things are better, we change it again. In the end, we are neither here nor there. I say let's have a constant policy so that the industry players can plan and work towards it."

A key solution that CIDB has long championed is: the mechanisation of the construction industry.

Battling cheap labour

The Industrialised Building System (IBS) has been talked about for years. In 1999, the IBS Strategic Plan was introduced to work towards the adoption of the system in the private and public sectors. This was followed by the IBS Roadmap 2003-2010, and later the IBS Roadmap 2011-2015.

In 2008, all government projects were mandated to attain no less than 70% IBS content.

"The government is already committed to it. It is the private sector that needs to move forward. Some of the bigger developers are already using IBS content in some of their projects, but more needs to be done," says Judin.

A CIDB study conducted from June 2012 to January 2013 on the usage of IBS in the private sector in the Klang Valley revealed that 46% of developers were using it.

"We are doing much better in this area than we were before, but I think our problem is that cheap labour is still easy to get. The private sector is driven by profit, so everything a company does has to make business sense. It may be cheap for the project, but not the total cost to the country," Judin comments.

He observes, however, that as the country develops, the demand for quality and green features has increased. This has, in some way, pushed more developers to adopt IBS.

"There are developers moving away from labour-intensive work because they would rather have more assured quality. Using components that are built in the factory allows more reliable product quality. When you build the traditional way, you're subject to so many variations that can result in poorer quality work and products."

Mechanisation requires investment in machines and better supply of materials.

"We see that compared with manufacturing, the productivity level in the construction industry is low. If companies invest in machines, productivity can be increased but we need to give them more incentives to invest in machines. We have discussed reducing the taxes imposed on the purchase of such machines with the government," says Judin.

While some machinery such as crawler cranes and concrete mixing machines are exempted, taxes and duties of 5% to 30% — compared with 5% to 12% in neighbouring countries such as Singapore, Indonesia and Thailand — are imposed on the majority of them.

"We are in discussion with a few ministries, but there may be some sectors that are not promoting tax reduction as much as we are. There is a big picture issue we need to work on. The reduction is already agreed to in principle but we have not settled on the timeframe," Judin points out.

In terms of supply, he says there are more new materials but there is still a need to get more of them and prefabricated systems on stream in Malaysia. He cites two companies — Iris Koto (M) Sdn Bhd and Eversendai Corp Bhd — which have attracted attention for their building systems.

"Eversendai has been using fabricated steel structures and it's out to prove that using steel can be cheaper and better. Iris Koto has developed its own IBS system which allows houses to be built cheaper, faster and with minimal wastage."

Iris Koto is a joint venture between Iris Corp Bhd, Koto Malaysia Sdn Bhd and Ambitect Sdn Bhd. Eversendai Corp Bhd is an engineering company involved in fabrication design and erection of mechanical and structural work.

"The materials and technologies are coming in, but new ideas are not easy to accept because the construction industry is very fragmented. There is a lot of subcontracting in our industry, a lot of people have a vested interest in keeping things the way they are. People resist innovation because it breaks their supply chain. It's about personal economics," Judin observes.

He believes new materials and technology will change the industry and how it works.

"Awareness is not widespread. As awareness grows, people will see the advantages of using new materials and technology. Developers will see a reduction in cost, risk and uncertainty while quality is ensured.

"Most developed countries are familiar with mechanisation and prefabrication in construction. You don't have to look far — Australia is a good example. If houses can be built in a few days in Australia, why can't we do the same?" he asks.

But that's easier said than done — something that Judin acknowledges. While the government can dictate the use of IBS in the construction of its own buildings, it can't do the same with the private sector.

"There are many considerations when it comes to the private sector. The IBS Roadmap is something for the industry to work towards. The government should be the one pushing it in this direction," says Judin.

There are issues within the government as well, including differing operations and guidelines in land development matters among the states. Planning permission, building plans and endorsement of land development applications are handled by one-stop centres (OSCs) in each state. While CIDB doesn't have the power to impose rules, it does wield some influence.

"We are trying to influence the OSCs to make a certain percentage of IBS usage a condition for new developments. The state authorities have a lot of independence and there appears to be a variation on how things are done.

"One of the problems is structure — workers in the respective state agencies start and end their career in the same office. Firstly, the promotion opportunities are not good and secondly, they don't get exposure. It's hard to expect them to change when they are not exposed to other ways of thinking and working. The government is aware of the problem and needs to tackle this head-on," says Judin.

Green Pass

The CIDB has plenty of initiatives in the works. One which CIDB has already started work on is a green-rating tool for government buildings, tentatively named Green Pass.

Is there a need for another green-rating tool? Malaysia already has the Green Building Index (GBI) developed by the Malaysian Institute of Architects and Association of Consulting Engineers Malaysia. Rehda is developing another called GreenRE.

"The government is interested in immediate savings. The Green Pass which is being developed with the Public Works Department focuses more on energy efficiency and carbon emissions. It will also rate the construction stage. The government has so many buildings and there is a lot of wastage. The tool is meant for government buildings but we won't stop the private sector from using it," says Judin.

Green Pass will also look at the usage of a building. "A building with all the latest green features can still be poorly used.

"It's not necessary for all government buildings to be green-certified but at least we would know where each building stands in terms of performance and what needs to be done.

"Sometimes you can see the air conditioning and lights on in empty meeting rooms and bosses' rooms. These are low-hanging fruits that can be easily improved on. Space management is another aspect we will look at. It's not in our culture yet but it's important so we don't waste space," says Judin.

He says the rating tool will be internationally reviewed before it is released.

"We are working with a team of people to get international feedback. We have the Ministry of Energy, Green Technology and Water, Master Builders Association Malaysia and even the team behind GBI — among others, working with us as well."

Judin hopes the Green Pass will be launched by end-2013.

CIDB is also working on training contractors and workers for the oil and gas industry.

"The oil and gas industry is huge and there is a lot of work onshore that needs people. We have contractors complaining there are not enough jobs and people in the industry complaining there are not enough people. We are trying to move some of the stronger contractors into the industry, which has more stringent requirements," explains Judin.

CIDB is working with the government to create training programmes to bridge the gap and train these contractors to work in the oil and gas sector.

It is also looking at the creation of a registry for renovators in Malaysia, similar to the existing contractors' registry.

"We find that a lot of renovations are done by foreigners because people want it cheap. Then they suffer when the renovators do a poor job, or worse — disappear before completing the work. We want the renovators to be specialised and to be registered. We are getting the relevant authorities to make it compulsory for homeowners to hire only registered renovators," says Judin.

CIDB is working on the registry — CIDB National Accredited Renovators — which will be launched at a later date.

On the whole, Judin is optimistic about the construction industry. He expresses confidence in infrastructure projects such as the proposed Malaysia-Singapore high-speed rail link and the mass rapid transit (MRT).

"The MRT and high-speed rail will elevate the country to a more developed status. They will also change the construction industry and create new opportunities because once you start building rail lines, you won't stop. Look at the UK's underground trains, they started more than 150 years ago and they are still building!"

Judin sees potential for the MRT and rail link to expand beyond the Klang Valley. He believes that the experience gained in building rail links will give local companies the impetus to build in the region.

Summing up the future of the construction sector, Judin says, "There may not be as many new projects this year as last year, as many of the projects are underway, but I think we will see changes in terms of manpower and skills. It's an exciting time for the industry."

This story first appeared in The Edge weekly edition of July 8-14, 2013.

Looking for properties to buy or rent? With >150,000 exclusive listings, including undervalued properties, from vetted Pro Agents, you can now easily find the right property on Malaysia's leading property portal EdgeProp! You can also get free past transacted data and use our proprietary Edge Reference Price tool, to make an informed purchase.