MBAM: Rising construction costs hurting industry

PETALING JAYA: Rising building material costs are haunting construction companies again. Local builders say construction costs may rise at a faster pace than earnings, prompting players to seek greater liberty to import building materials and equipment at lower tariffs.

Master Builders Association Malaysia's (MBAM) immediate past president Datuk Ng Kee Leen said construction costs here could rise by at least 15% next year if policymakers did not review their policies on imports of building materials and machinery.

"Construction cost could rise more than 15% in 2012," Ng told The Edge Financial Daily on the sidelines of MBAM's affiliate dialogue meeting last Friday.

According to MBAM, building costs in the country had risen by some 10% over the last one year due to the combined impact of rising inflation and material prices, apart from high import duties.

Ng, who is also executive director of Gamuda Bhd, said Malaysia's construction sector turnover was expected to see a 14% growth to some RM80 billion in 2012 compared with about RM70 billion in 2010.

His comments followed an earlier media conference by MBAM which wanted the government to further liberalise building material and equipment imports.

MBAM president Kwan Foh-Kwai said the association hoped policymakers would consider reducing import duties for more building materials including marble, tiles and aluminium-based components, apart from equipment like cranes and trucks.

For now, local builders can import steel products and cement at zero import duties. But players are lamenting that import taxes of 30% for other materials such as marble and tiles, are on the high side.

On the availability of construction equipment in the country, Kwan said the situation was baffling as there were not many manufacturers of these items here, and at the same time, imports of these items were not enough to meet local builders' requirements.

"We request the government to ensure that any price increase of construction materials must be within control and be fair and reasonable.

"Such price increases must be substantiated," said Kwan, who also indicated that MBAM would submit a proposal to the government within a month.

Kwan said rising expenses were stifling builders' profits as players were subject to fixed-price contracts. As such, the association hopes price variation clauses be introduced for construction jobs rolled out by the government and government-linked companies.

He said there would be cost overruns, delays and a higher risk of project failures when builders were unable to absorb the cost increases.

On the local construction sector manpower requirements, Kwan said MBAM hoped the government would consider relaxing its policies on foreign workers.

The association wants the Construction Labour Exchange Centre Bhd to expedite approval for work permits since the domestic building sector urgently needed workers for the implementation of jobs under the Economic Transformation Programme (ETP).

Malaysian policymakers have initiated concrete measures to spur the country's development. The government has put in place a strong policy framework via the New Economic Model to transform the country into a developed and high-income economy by 2020.

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