Malaysian Construction Industry: Issues and Challages

(Kamar, K. A. M (2010) A Project Management Guideline for the Implementation of IBS, IEM Professional Engineer Report, Unpublished Report)

The projects today are far more complicated than ever before. They involve larger capital investments, embraces several disciplines, widely dispersed project participants, tighter schedules and stringent quality standards. The changing construction environment is also influenced by factors other than the project management requirements. The examples of such factors are:

1. The economical forces; this factor may significantly affect the client organisation and subsequently can impact the initial objectives of their projects. The construction growth rates in Malaysia fluctuates between extremities that varies from as high as 21.1 percent in 1995 to as low as -24 percent in 1998. Since the 1990’s, the contribution of the construction sector to the GDP also fluctuated albeit at a more stable rate varying from a high of 4.8 percent in 1997 to an estimated low of 2.7 percent in 2005 (CIDB, 2008). This shows that the demand for construction is highly sensitive to the developments in other sectors of the economy. This is worsen by the decline in Foreign Direct Investment (FDI) for 18% in Q42009 compared to the same period last year and recent government policy to reduce public spending. Moreover, the property market is yet to recover from global recession with soft demand recorded in Grade A office and high-end condominium in Klang Valley hot spots.

2. With high demand for construction activities in previous years, the industry has attracted a huge number of foreign workers into this country to take up employment on site as unskilled labour doing manual jobs. According to Construction Industry Development Board (CIDB) Malaysia, 69% (552,000) out of total 800,000 of registered workers as at June 2007 is foreign workers. It is a huge number which distress the stability and growth of domestic economy and created social problems. The locals are reluctant to join the industry due to the low salary scheme being offered to foreign workers and wrong image projected by the industry. Therefore, government put in place measures to encourage industries to move-up the value chain and, where possible, to automate and mechanise their operations and in areas where automation and mechanisation was not possible, efforts were being made to replace foreign workers with skilled workforce.

3. Increases in project complexity; project complexity has increased due to extent of scope and fragmented parties around the world having to communicate with one another for efficient project execution. The complexity of the projects is reflected by the large number of specialists who contribute to the decision-making process

4. The need to achieve faster results with the given resources; this factor places severe time pressures on the entire project team

5. Rapid changes to project scope to expand benefits; some scope changes take place very rapidly before even realising the benefits of the changes

6. New procurement practices; the emergence of new procurement practices changes the way the team members are interrelated. For example, procurement schemes such as Private Finance Initiative (PFI) and partnering have impacted construction project management. Such schemes bring the government and the private sector firms together in large-scale infrastructure projects in which very high quality standards, tight schedules and cost targets are aimed at. With the government’s greater involvement in standardising contractual procedures for PFI schemes, the commitments of all parties have become clearer and more visible.

7. Client sophistication; this has become a major driver for productivity improvements in construction. Clients demand higher quality end products and services at lower price. This has created a buyers market whereby firms compete for projects at lower margins and hence demand better project management practices to enforce tighter control on the projects activities.

8. Globalisation of the marketplace; many industries are facing a lot of pressure due to this factor. Tariff barriers are virtually falling and labour has become more mobile. Further, due to productivity improvements and advantages in economies of scale, some foreign firms are capable of competing with local firms on price, quality and delivery. Thus, the involvement of Malaysian contractors in oversea projects particularly on Middle East, Africa and India is significant. This is due to declining in Foreign Direct Investment (FDI) to Malaysia and the government policy to reduce government spending on mega projects. However, to venture to the oversea market, the Malaysian firms must be able to compete with others and become a total solution provider to the clients. They must also capable to offer competitive price. Thus, it requires immense knowledge, skills and expertise in management of project. One of the recommendations is to pile up knowledge on the latest innovation in construction such in IBS and automated and mechanised construction

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