MBAM wishes import duties for heavy construction machinery reduced, normalisation of foreign workers

KUALA LUMPUR (Oct 19): Master Builders Association Malaysia (MBAM) hopes to see a greater reduction in import duties for heavy construction machinery as well as a normalisation of foreign workers under the 6P Programme to Temporary Work Permit (PLKS) status, which can be renewed instead of deporting them back, in this Friday's Budget 2016 announcement.

MBAM president Matthew Tee said it is hoped that more reduction of import duties and more incentives, such as equipment tax reduction and tax holidays incentives, which will be given to industry players who adopt the use of Industrialised Building System, will also be included in the upcoming budget.

He said mechanisation is a way forward for construction players to reduce their dependency on the use of foreign labour and to increase productivity in the industry.

"At present, the duties and sales tax for construction machinery, such as hydraulic truck mobile cranes, amount to as much as 30%. This results in high cost of construction machinery and overall cost of running a business in Malaysia. No incentives are currently given to industry players to invest in new machinery," Tee told theedgemarkets.com.

Before mechanisation can be fully implemented in the construction sector, it has to rely on foreign workers. However, the players faced pressures when these workers are deported to their home countries.

Thus, Tee is calling on the government to normalise workers under the 6P Programme to PLKS status, which can be renewed every 12 months to a maximum of 10 years since the workers are now skilled and experienced and the industry has invested a lot in their training.

Tee is of the view that an extension of the 6P Programme is one of the ways to help the construction industry.

MBAM has appealed to the government through the Building Industry Presidents' Council.

"If the status of the foreign workers under the 6P Programme is not normalised, they will need to return to their home countries by January 2016. By then, an estimate of more than 100,000 construction workers registered under the 6P Programme will have to return to their homeland or become illegal," said Tee.

He said the impending deportation of the foreign workers is causing a scare in the industry. Without sufficient workers, the industry will be severely affected and it will cause delay to ongoing projects.

"Apart from that, the renewal of 6P, if implemented, should not be costly as the industry is feeling the pinch with costs escalation from regulatory interventions such as goods and services tax (GST) and external factors such as the decrease in the value of the ringgit," Tee added.

MBAM also welcomes any further reduction in Malaysia's corporate tax from the announced 24% in 2016, another item on its wish list, in order to be competitive and attractive among other Asean countries.

MBAM also hopes that the government will consider providing subsidy for the implementation of building information modelling (BIM) in the construction industry as the cost of the software is currently expensive.

BIM will enable an integration of process and technology to enable efficient life-cycle management of facilities, Tee added.

In addition, the extensive umbrella organisation that represents the Malaysian construction industry and services sector hoped that the government will ensure the timely implementation and monitoring of the construction industry transformation plan (CITP).

The CITP was recently launched by Prime Minister Datuk Seri Najib Razak on Sept 10, 2015 to boost the growth of the construction industry through the four strategic thrusts identified, which are quality, safety and professionalism; environmental sustainability; productivity; and internationalisation.

Apart from that, Tee noted that the strengthening of the civil service and key government institutions working closely with the private sector to eradicate corruption and expedite productivity should be an important factor that will assist in plugging the fiscal deficit gap.

Apart from policy improvements, MBAM also said it is vital for the government to improve on the stability of the monetary exchange.

Tee said financial instability and its effects on the economy can be very costly due to its contagion or spillover effects to other parts of the economy.

"Indeed, it may lead to a financial crisis with adverse consequences for the economy. Hence, it is fundamental to have a sound, stable and healthy financial system to support the efficient allocation of resources and distribution of risks across the economy.

"Not to mention, the cost of doing business in the construction industry increases due to higher cost to purchase raw materials and heavy machineries," Tee said.

He pointed out that the weakening ringgit has affected construction profit margins as it increases the cost of importing raw materials.

In order to tackle escalating cost, MBAM believes that this can be done by purchasing raw materials that are produced locally, such as steel bars, sand and cement.

"The depreciation of the ringgit to a 17-year low was an unexpected event. Contractors should take proactive action by having better planning and execution for projects that are in the pipeline. This will prevent any excess usage of resources that will lead to construction wastage.

"However, if the ringgit continues to weaken, it may cause an inflationary spiral effect, which is more damaging to the overall economy. MBAM hoped the newly formed Special Economic Committee will have solutions to stabilise and strengthen the country's economy growth," Tee added.