10.2.10

Why Malaysia needs IBS - Internal Evaluation Report: Part 3

(Kamar, K. A. M (2010), The Critical Success Factors for the Implementation of IBS: A Case Study of Malaysia, Internal Evaluation Exam, University of Salford, Unpublished Report)

1. Malaysia is a country in South East Asia consisting of thirteen states and three Federal Territories, with a total landmass of 329,845 square kilometers. The capital city is Kuala Lumpur while Putrajaya is the seat of the federal government.

2. The population stands at over 28 million. The country is separated by the South China Sea into two regions, Peninsular Malaysia and East Malaysia. Malaysian borders Thailand, Indonesia, Singapore and Brunei. In 2008, GDP per capita (PPP) of Malaysia stands at USD 14,215, ranking in 48th in the world and 2nd in South East Asia, lagging behind neighboring Singapore with GDP per capita (PPP) of USD 49,288, ranking 3rd in the world. By comparison, Thailand has a per capita income of USD 7,703 (ranked 81st) and Indonesia with USD 3,975 (ranked 106th).

3. Construction industry is one of the important sectors in Malaysia providing infrastructure for development of other sectors. Before the current economic downturn, construction sector growth at 5.3% in 2007 and contributed 2.1% total Gross Domestic Product (GDP) of Malaysia (CIDB, 2008).

4. The industry provides job opportunities for 800,000 people which represented 8% of total workforce (CIMP, 2006). The construction industry is one of the productive sectors that constantly contribute to the economy. However, its growth rates 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).

5. This shows that the demand for construction is highly sensitive to the developments in other sectors of the economy.With high demand for construction activities, 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. As it is, the country is facing difficulties in attracting the right skills and talent to work in this sector.

6. To put that into perspective, the fact that the number of expatriates (referring to high skilled and knowledge workers) in Malaysia has been dwindling, while the number of foreign worker (referring to low or unskilled workers) is large and growing. There were an estimated 80,000 expatriates working in Malaysia in 1990s compared to present number of 38,000.

7. On the other hand, the average number of foreign workers had grown from one million in 1990s to more that three millions in the second half of 2008. The record shows that the actual number of foreign workers in Malaysia has increased from an estimated 0.5 million in 1984 to 0.63 million in 1997, 2.4 million in 1998, 1.9 million in 2006, and an estimated 2.2 million in 2007-2008.

8. 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 (CIDB, 2007). It is a huge number which distress the stability and growth of domestic economy and created social problems.

9. Foreign workers are usually unskilled when they first arrived in Malaysia and this impacted the productivity and quality of the construction industry. Cheap labour should not be made easily accessible, but reducing cheap labour may affect projects and in a short term, drive cost up.

10. In a nutshell, the construction industry in this country was already in a difficult situation hosting problems such as low quality works, delays, and wastages and suffer bad image due to past failures in project implementation (roof collapsed at Sultan Mizan Zainal Abidin’s stadium and leakage problem reported in several newly constructed government’s buildings among others).

11. The industry is also adversial and fragmented, the number of registered contractor is more than 50,000. That is a phenomenal number if one compare that to the population, yet lack of good resources is a major problem to the industry stakeholders and clients.

12. The new economic model aims to increased employees’ productivity through their own efforts in innovation and creativity. By putting emphasis on this new economic model, the government hopes employees will attain a higher level of competitiveness and eventually improve their standard of living.

13. In June 2010, Malaysia government will introduce a New Economic Model for Malaysia. Its aims to focus on innovation and knowledge based industry and move out from the middle income trap towards the developed nation by 2020. In this model government will continue to introduce measures to reduce dependency on foreign workers in all sectors. The effort has been started since 2007. At the height of the nation’s economic activity up to September 2008, there were about 1.9 million registered foreign workers whereby 200,000 had already been sent back to their home country upon expiry of their work permits.

14. At November 2009, the number of foreign workers stands at 1.56 million, which represent a reduction of 470,000 since 2006. Among the measures include the newly introduced policy that requires employers to pay for the cost of levy of their foreign workers, instead of requiring the foreign workers to pay for the levy themselves.

15. 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.

16. Industrialised Building Systems (IBS) has been introduced to modernise the industry and reduce dependency on foreign labour worked in the construction industry emulating the success in Finland, Denmark and Singapore.

17. The successful adoption of innovative building systems such as IBS is expected to have substantial social and economic even environmental benefit to the nation. As a labour becomes less and less accessible, the country will have to become less reliant on labour. The introduction of IBS, create another part of the supply chain in the industry with manufacturing of component and create new job as well.

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