CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 49 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials Steel Reinforcement Steel reinforcement was the only construction material to increase double-digit by 16.6% to RM2,437.19 per tonne (2015: RM2,089.64 per tonne) in 2016. This follows the safeguard measures introduced by the Ministry of International Trade and Industry on steel imports. A total of 13.42% of duties were imposed on imported steel wire rods and deformed bars in coils, as well as 13.9% of duties were imposed on steel reinforced bar. This was on top of the existing 5% imposed on steel imports. The safeguard measures were imposed for 200 days from 27 September 2016. All three regions showed the same price movement throughout 2016. The lowest steel reinforcement prices were all registered on January 2016 at RM1,728.07, RM1,85.84 and RM1,858.19 per tonne in Peninsular Malaysia, Sabah and Sarawak, respectively. The highest monthly steel reinforcement prices were recorded on December 2016 at RM2,842.97 and RM2,737.82 per tonne each in Sabah and Sarawak. Whilst steel reinforcement peaked at RM2,531.03 per tonne on April 2016 in Peninsular Malaysia, before moderating throughout 2016. After three consecutive years of dwindling prices, steel reinforcement price grew by 7.4% to RM2,159.41 per tonne (2015: RM2,010.47 per tonne) in Peninsular Malaysia. The prices did not differ much regionally. On average, Central Region, along with East Coast each recorded almost similar steel reinforcement prices at RM2,165.82 and 2,165.63 per tonne. Whilst, Southern and Northern Region had RM2,102.43 and RM2,203.75 per tonne of steel reinforcement prices in 2016. Figure 3.1.7.c | Price of Sand in Sabah Source : CIDB Figure 3.1.7.d | Price of Sand in Sarawak Source : CIDB

50 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials In Sabah, steel reinforcement was priced at RM2,542.77 per tonne. Kota Kinabalu had traditionally been the district with low steel reinforcement price compared with Sandakan and Tawau. Kota Kinabalu, Sandakan and Tawau each registered RM2,445.68, RM2,585.80 and RM2,596.84 per tonne of steel reinforcement prices in 2016. Steel reinforcement cost more in Sarawak. More than 20% of price increase were recorded in Kuching, Sibu and Miri, with an average of RM2,597.08, RM2,612.76 and RM2,618.29 per tonne each. Overall, Sarawak had a 22.5% of price increase at RM2,609.38 per tonne in 2016. Figure 3.1.8.a | Price of Steel Reinforcement in Malaysia Source : CIDB Figure 3.1.8.b | Price of Steel Reinforcement in Peninsular Malaysia Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 51 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials Figure 3.1.8.c | Price of Steel Reinforcement in Sabah Source : CIDB Figure 3.1.8.d | Price of Steel Reinforcement in Sarawak Source : CIDB Steel & Metal Sections There was an 0.8% increase in steel & metal sections price in Malaysia to RM3,177.24 per tonne (2015: RM3,150.78 per tonne). Steel & metal sections cost less in Sabah, than in Sarawak and Peninsular Malaysia. The low price in Sabah could be attributed to the steep drop in steel & metal sections prices trend since Q1 2016. Prices in Sarawak seemed to move closer to the average national prices. In contrast, steel & metal sections prices continued on a steady climb in Peninsular Malaysia throughout 2016. Peninsular Malaysia registered a 3.0% increase of steel & metal sections prices (2016: RM3,210.46 per tonne; 2015: RM3,118.17 per tonne). Steel & metal sections were the only material which was pricier in Peninsular Malaysia, than in Sabah and Sarawak. Southern Region had the most price increase at 7.4% to RM3,124.58 per tonne (2015: RM2,908.51 per tonne), against a moderate increase of 3.9% and 2.4% in East Coast and Northern Region respectively. The only price decrease was recorded in Central Region, where prices dropped by -1.6% to RM3,131.36 per tonne (2015: RM3,181.96 per tonne). Metal & steel sections price contracted marginally by 0.8% to RM3,151.52 per tonne (2015: RM3,177.08 per tonne) in Sabah. The highest and lowest monthly prices were also recorded in Sabah, at RM3,317.58 (January to April 2016) and RM3,036.98

52 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials per tonne (June 2016) respectively. In comparison to 2015 prices, metal & steel sections prices fell in Tawau (2016: RM3,160.59 per tonne; 2015: RM3,284.79 per tonne) and Sibu (2016: RM3,124.08 per tonne; 2015: RM3,245.18 per tonne), but increase in Kota Kinabalu (2016: RM3,169.89 per tonne; 2015: RM3,001.26 per tonne). Sarawak registered a slight steel & metal sections price increase of 0.4% to RM3,177.24 per tonne (2015: RM3,150.78 per tonne). All districts showed a similar price movement, though with differing price variances. The monthly prices range between RM3,020.00 to RM3,319.05 per tonne in 2016. The cheapest metal & steel sections can be found in Kuching at RM3,064.28 per tonne, against RM3,173.31 and RM3,271.60 per tonne in Sibu and Miri respectively. Figure 3.1.9.a | Price of Steel & Metal Sections in Malaysia Source : CIDB Figure 3.1.9.b | Price of Steel & Metal Sections in Peninsular Malaysia Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 53 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials Figure 3.1.9.c | Price of Steel & Metal Sections in Sabah Source : CIDB Figure 3.1.9.d | Price of Steel & Metal Sections in Sarawak Source : CIDB Timber Timber price opened at RM2,991.67 per tonne (January 2016), before ending higher at RM3,055.81 per tonne (December 2016). Cumulatively, timber price rose by 5.9% to RM3,031.75 per tonne (2015: RM2,861.98 per tonne). Timber cost much less in Sabah and Sarawak at RM2,637.32 and RM2,627.07 per tonne each, compared to RM3,830.86 per tonne in Peninsular Malaysia. All three locations had similar movement of prices, pointing to an upward trajectory for 2017. All four regions in Peninsular Malaysia showed almost similar timber price in 2014 and 2015, but deviated gradually in 2016. Timber prices were stable during Q1 2016 and started to increase towards the end of 2016. The Northern Region had the most expensive timber at RM4,020.29 per tonne in Peninsular Malaysia. The highest and lowest monthly timber prices were registered at Northern Region and East Coast, each at RM4,179.50 (June 2016) and RM3,601.11 per tonne (January to April 2016). Sandakan and Tawau had relatively cheaper timber prices at RM2,597.95 and RM2,575.41 per tonne. In the meantime, timber

54 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Prices of Major Construction Materials cost RM2,640.12 per tonne in Kota Kinabalu. Since Q2 2015, the variances in timber prices between Kuching and Sandakan/ Tawau had widened. Prices were higher in the beginning of 2016, but gradually decreased in Q3 2016. There were not much changes of timber price in Sarawak, and all three districts registered stable monthly prices. In fact, the highest and lowest monthly timber prices were not that different, at RM2,630.19 (June 2016) and RM2,632.12 per tonne (January to April 2016). Timber in Sibu was priced at RM2,555.89 per tonne, compared with RM2,640.12 and RM2,685.21 per tonne each in Kuching and Miri. Figure 3.1.10.a | Price of Timber in Malaysia Source : CIDB Figure 3.1.10.b | Price of Timber in Peninsular Malaysia Source : CIDB Figure 3.1.10.c | Price of Timber in Sabah Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 55 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Source : CIDB Figure 3.1.10.d | Price of Timber in Sarawak Wage Rates of Construction Personnel Construction personnel were commonly paid according to their daily wage rates. For this report, the analysis was based on the common wage rates unless stated otherwise. There are three categories of wage rates collected; the minimum (lowest); maximum (highest); and common (most usual) wage rates. The data were collected twice a year, with the collaboration of construction associations. The exercise involves gathering information from a minimum of five quotations at selected states, except for Perak, Melaka and Pahang where only a minimum of three quotations were required. The lesser quotations are due to the smaller resources capacity at the three states. The data are categorised according to locations as listed below: • Peninsular Malaysia: - Central Region: Selangor - Northern Region: Perak and Pulau Pinang - East Coast Region: Kelantan and Terengganu - Southern Region: Johor • Sabah: Kota Kinabalu, Tawau and Sandakan • Sarawak: Kuching, Miri and Sibu The wage rates were comprises of three major groups of construction personnel; 20 trade of construction workers; 15 trade of plant and machinery operators; and 6 trade of IBS component installers. There are two types of workers for construction personnel, the semi-skilled and skilled workers. Semi-skilled workers refer to construction personnel with level 1 of National Occupational Skill Standard (NOSS) certifications, while skilled workers refer to level 2 and 3 of NOSS certifications. Construction workers and IBS installers have both semi-skilled and skilled workers, except for plant and machinery operators where only skilled workers were allowed as specified under NOSS certifications. Construction Workers Skilled and semi-skilled workers wage rates grew by 3.2% to RM103.33 per day (2015: RM100.08 per day) and 4.6% to RM90.98 per day (2015: RM87.00 per day). Under the skilled category, Plumber – Reticulation had the highest wage rates at RM117.09 per day, while General Construction Worker – Building had the lowest wage rates at RM68.83 per day. Under the semiskilled category, Bricklayer and Building Wiring Installer each registered the lowest and highest wage rates at RM79.16 and RM110.96 per day respectively. In 2016, all categories enjoyed a strong wage rates growth, ranging between 0.3% to 6.4% for skilled workers, and between 3.0% to 5.5% for semi-skilled workers. Electrical Wireman PW2 and PW4, each registered moderate wage rate growth by 1.8% to RM2,454.59 per month (2015: RM2,412.37 per month) and 0.3% to RM3,174.75 per month (2015: RM3,166.32 per month).

56 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel The difference between the minimum and maximum wage rates was more prominent in skilled workers at RM40.31, compared with semi-skilled workers at RM34.54. On average, minimum wage rates range from RM52.79 to RM96.83 per day in the skilled workers, and RM63.83 to RM93.46 per day in the semi-skilled workers. On the other hand, maximum wage rates ranged from RM90.75 to RM147.69 per day for skilled workers, and RM93.47 to RM132.72 per day for semi-skilled workers. Figure 3.2.1.a | Skilled Construction Workers Wage Rates in Peninsular Malaysia Source : CIDB Figure 3.2.1.b | Semi-Skilled Construction Workers Wage Rates in Peninsular Malaysia Source : CIDB Construction workers were paid less in Peninsular Malaysia, compared with those in Sabah and Sarawak. Skilled workers and semi-skilled workers each earned RM97.94 and RM82.26 per day. Semi-skilled workers’ wage rates experienced contraction in two categories (Building Wiring Installer : -0.4%; General Welder: -1.0%) against eight categories in skilled categories (CarpenterFormwork: -4.5%; Roofer : -0.3%; Carpenter – Joinery : -1.5%; Steel Structure Fabricator : -2.2%; General Welder : -3.0%; Plumber - Building & Sanitary : -0.1%; Electrical Wireman PW4 : -4.4%; Electrical Wireman PW2 : -0.8%; Plasterer; -0.3%). There were similar wage rates within the four regions in Peninsular Malaysia. Skilled workers earned the best wages in Central Region at RM102.30 per day (Northern Region: RM100.04 per day; East Coast: RM99.22 per day; Southern Region: RM90.21 per day). While semi-skilled workers were paid more in the East

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 57 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Coast at RM88.53 per day (Central Region: RM80.54 per day; Northern Region: RM83.47 per day; Southern Region: RM76.51 per day). Central Region offered the best wages for Electrical Wireman PW2 and PW4, each at RM2,944.50 and RM3,293.00 per month. Central and Northern Regions each registered a drop in the average wage rates in the skilled category, each at -9.5% and 0.8%. Under the semi-skilled category, only Central Region posted an 8.7% fall in wage rates. Skilled workers had the highest and lowest wage rates in Central Region, at RM122.70 (Tiler) and RM62.80 per day (General Construction Worker – Building). In contrast, semi-skilled workers earned the most in the East Coast at RM108.56 per day (Building Wiring Installer), and were paid less in Central Region at RM67.15 per day (Concretor) (Appendix 3.1.1.a and 3.1.1.b). Figure 3.2.1.c | Skilled Construction Workers Wage Rates in Sabah Source : CIDB Source : CIDB Figure 3.2.1.d | Semi-Skilled Construction Workers Wage Rates in Sabah

58 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Sabah registered an increase of 6.3% to RM106.54 per day (2015: RM100.23 per day) and 7.9% to RM94.78 per day (2015: RM87.88 per day) in wage rates for skilled and semi-skilled construction workers respectively. Skilled workers in Sabah also enjoyed the highest wage rates, against those in Peninsular Malaysia and Sarawak. All districts in Sabah enjoyed strong growth in the wage rates for skilled and semi-skilled workers, notably semi-skilled workers’ wage rates in Sandakan which grew double-digit by 11.0% to RM88.48 per day (2015: RM78.74 per day). Tiler and General Construction Worker – Building earned the highest and lowest wage rates at RM129.95 (Kota Kinabalu) and RM66.84 per day (Sandakan) in skilled category. The most and least wage rates in the semi-skilled category were registered in Building Wiring Installer and Bricklayer at RM122.25 per day (Kota Kinabalu) and RM77.50 per day (Sandakan). Electrical Wireman PW4 in Kota Kinabalu also earned the highest compared with other districts/ cities in Malaysia at RM3,376.55 per month (Appendix 3.1.1.c and 3.1.1.d). Figure 3.2.1.e | Skilled Construction Workers Wage Rates in Sarawak Source : CIDB Figure 3.2.1.f | Semi-Skilled Construction Workers Wage Rates in Sarawak Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 59 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel At RM95.90 per day, semi-skilled construction workers earned the most in Sarawak. Meanwhile, skilled construction workers earned RM105.50 per day. All districts in Sarawak enjoyed positive wage rates growth, except for skilled plasterer in Sibu which fell by -1.2% to RM107.75 per day (2015: RM109.08 per day). Sibu also registered the highest growth in skilled Plumber - Building & Sanitary which rose by 7.2% to RM109.50 per day (2015: RM102.18 per day). All categories in semi-skilled workers enjoyed positive wage rate growth and that range from 0.5% to 6.5%. There was not much variance between the wage rates in the skilled and semi-skilled categories between the three districts in Sarawak. Among the district, Sibu had the lowest and highest paid for skilled and semi-skilled workers. General Construction Worker – Building and Plumber – Reticulation earned the most and the least wages at RM122.34 and RM66.09 per day each in the skilled category. On the other hand, Building Wiring Installer and Bricklayer had the highest and lowest wages at RM118.75 and RM78.92 per day, respectively in the semi-skilled category (Appendix 3.1.1.e and 3.1.1.d). Construction Plant and Machinery Operators Wage rates for construction plant and machinery operators grew positively, at 5.2% to RM101.81 per day (2015: RM96.77 per day). Tower Crane Operators posted the highest wage rates at RM123.01 per day against Slinger/ Dogger Operators which were paid the least at RM91.88 per day. Forklift Truck Operators had the highest growth at 8.6% while the lowest growth was observed on Mobile Crane Operators at 1.6%. Overall, construction plant and machinery operators registered strong wage rates in all three regions in 2016. On average, the highest wage rates for construction plant and machinery operators were RM108.66 and RM106.01 per day registered in Peninsular Malaysia and Sarawak, respectively. Sabah had the lowest wage rates at RM90.74 per day. Figure 3.2.2.a | Plant & Machinery Operators Wage Rates in Peninsular Malaysia Source : CIDB

60 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel All regions in Peninsular Malaysia posted an increase in construction plant and machinery operators’ wage rates, except for Northern Region which fell by -1.7%. East Coast had the highest wage rate growth at 10.9%, followed by Central and Southern Region, each at 7.5% and 3.5%. Construction plant and machinery operators earned the best wages in Central Region at RM128.75 per day. However, Southern Region paid the lowest wage rates at RM96.12 per day. Meanwhile, Northern Region and East Coast recorded moderate wage rates at RM103.16 and RM66.77 per day and RM106.22 and RM74.25 per day, respectively. Roller/ Compactor in Southern Region had the lowest wage rates at RM81.70 per day. Tower Crane Operators were paid the most in Central Region at RM161.05 per day (Appendix 3.1.2.a). Figure 3.2.2.b | Plant & Machinery Operators Wage Rates in Sabah Source : CIDB Each district in Sabah posted a positive increment in wage rates, which ranges from 2.0% to 9.3%. Overall, Kota Kinabalu, Sandakan and Tawau registered an increase of 5.5%, 5.2% and 7.2% in construction plant and machinery operators’ wages. In Sabah, Tower Crane Operators earned the most, at RM112.83 per day, whilst Wheel Loader Operators were paid the lowest, at RM80.76 per day. Among the districts, Kota Kinabalu was the best site for construction plant and machinery operators, with RM95.96 per day in wage rates. On the other hand, Sandakan had the lowest payout, at RM85.78 per day. Construction plant and machinery operators earned reasonably in Tawau at RM90.50 per day (Appendix 3.1.2.b).

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 61 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Figure 3.2.2.c | Plant & Machinery Operators Wage Rates in Sarawak Source : CIDB Construction plant and machinery operators in Sarawak saw the wage rate rise by 4.5%. All categories had consistent wage rate growth, notably Forklift Truck Operators which registered the highest increment at 5.5%. There were little differences between the wage rates growth among the districts in Sarawak, which points to a balanced demand of plant and machinery operators. The best wage rates in Sarawak were the Tower Crane Operators at RM124.02 per day. Forklift Truck Operators were paid the least at RM93.24 per day. Construction plant and machinery operators were more preferred in Sibu, after registering the highest wage rates in, at RM116.96 per day. In comparison, Kuching and Miri each registered RM99.19 and RM67.53 per day, respectively (Appendix 3.1.2.c). IBS Component Installer In 2016, IBS Precast Concrete Installers registered the highest common wage rates for both skilled and semi-skilled categories, each at RM152.84 and RM123.68 per day. In contrast, Roof Truss Installers – (Wood) had the lowest common wage rates for both skilled (RM125.37 per day), and semi-skilled categories (RM106.26 per day). All IBS components installers posted an increase in their wage rates, ranging from 7.5% to 10.2% for skilled workers, and ranging from 9.3% to 12.4% for semi-skilled workers. The differences between the minimum and maximum wage rates were more obvious in skilled workers. IBS Precast Concrete Installers and Lightweight BlockWall Installers had the most and least differences at RM71.97 and RM42.83 per day. Under semi-skilled workers category, the differences were much lesser at RM43.22 and RM38.17 per day, each registered under IBS Lightweight Panel Installers and Lightweight BlockWall Installers respectively. The larger differences between the minimum and maximum wage rates point to a larger deviation from the average wage rates, and vice versa.

62 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Analysing across the regions, IBS installers were much more demand in Sabah and Sarawak compared with Peninsular Malaysia. On average, skilled IBS component installers in Sabah and Sarawak each earned RM147.68 and RM144.54 per day against RM110.68 per day in Peninsular Malaysia. This were the same for semi-skilled workers. Semi-skilled IBS installers earn much better rates in Sabah and Sarawak, each at RM125.85 and RM123.83 per day, against merely RM88.68 per day in Peninsular Malaysia. IBS Precast Concrete Installers was the highest paid skilled worker in all three regions (Peninsular Malaysia: RM115.28 per day; Sabah: RM172.75 per day; Sarawak: RM170.50 per day). At the same time, semi-skilled IBS Precast Concrete Installers had the highest wage rates in Sabah and Sarawak, each at RM140.92 and RM139.61 per day. In contrast, semi-skilled IBS Lightweight Panel Installers had the highest wage rates in Peninsular Malaysia at RM90.80 per day. Figure 3.2.3.b | Semi-Skilled IBS Installers in Peninsular Malaysia Source : CIDB Figure 3.2.3.a | Skilled IBS Installers in Peninsular Malaysia Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 63 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Peninsular Malaysia had always registered low wage rates for IBS installers. For skilled and semi-skilled workers, IBS Precast Concrete Installers and Roof Truss Installers - (Light Steel Gauge) had the highest and lowest wage rates. The best wage rates were found around the East Coast at RM142.96 and RM113.04 per day for skilled and semi-skilled workers. Southern Region had the least wage rates for skilled and semi-skilled workers at RM83.55 and RM69.30 per day, respectively. Between the regions, the highest growth for skilled workers wage rates was registered in the East Coast which rose by 15.4% to RM130.60 per day (2015: RM113.18 per day), while Central Region dropped by -7.9% to RM106.99 per day (2015: RM116.18 per day). Both regions also posted the same results under the semi-skilled workers. Wage rates in the East Coast jumped by 16.6% to RM105.58 per day (2015: RM90.58 per day), against a decline of -1.4% to RM84.52 per day (2015: RM85.68 per day) experienced in Central Region (Appendix 3.1.3.a and 3.1.3.b). Figure 3.2.3.c | Skilled IBS Installers in Sabah Source : CIDB Source : CIDB Figure 3.2.3.d | Semi-Skilled IBS Installers in Sabah

64 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel The highest wage rates of IBS component installers is in Sabah. Tawau and Kota Kinabalu registered the highest and lowest common wage rates, both under the skilled and semi-skilled category. Skilled and semi-skilled IBS Precast Concrete Installers had the highest wage rates at Tawau, each at RM173.59 and RM143.17 per day. In Kota Kinabalu, skilled and semi-skilled Roof Truss Installers - (Wood) had the lowest wage rates at RM131.50 and RM111.20 per day. On a closer look, skilled and semi-skilled workers had robust growth in wage rates, notably in Sandakan and Tawau. The registered wage rates also do not vary much between the districts, unlike in Peninsular Malaysia. Based on the data collected, IBS Precast Concrete Installers and IBS Lightweight Panel Installers enjoyed better wage rates, both in the skilled and semi-skilled category (Appendix 3.1.3.c and 3.1.3.d). Figure 3.2.3.e | Skilled IBS Installers in Sarawak Figure 3.2.3.f | Semi-Skilled IBS Installers in Sarawak Source : CIDB Source : CIDB

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 65 CHAPTER 3 PRICE, WAGE AND HIRE RATES Wage Rates of Construction Personnel Skilled and semi-skilled workers registered the highest wage rates in Sarawak. Between the districts, Miri had the highest wage rates in skilled and semi-skilled categories at RM178.50 and RM145.50 per day, respectively. Both were recorded in IBS Precast Concrete Installers. In contrast, Kuching had the lowest wage rates for skilled System Formwork Installers (RM126.20 per day) and semi-skilled Lightweight BlockWall Installers (RM110.15 per day). Semi-skilled workers had more stable wage rates, in which the relative differences were less evident between the districts (Appendix 3.1.3.e and 3.1.3.f).

66 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Introduction/ World Economy

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 67 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Introduction CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Introduction World Economy Malaysian Economy Prospects Malaysian Construction Demand Property Market Projected New Value of Construction Work Estimated Value of Work Done in 2017 – 2018 68 68 72 76 78 85 90

68 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Introduction/ World Economy The current global economic landscape has become more challenging, from existing political disparities especially amongst developed countries. For instance, the G20 countries are more inclined on trade protectionist policies to the extent of constraining global trade and investments. Most countries are still adjusting to the drop in consumer demand and weakened investor confidence, following low commodity prices and trade competition. As an open economy, Malaysia is no exception to the challenging environment. Economic reform through the National Transformation Programme (NTP) since 2010 has succeeded in strengthening the resilience and competitiveness of the Malaysian economy. Since then, Malaysia continued to record robust annual GDP growth. In 2016, the economy registered a 4.2% growth despite global financial market uncertainties and weak import demand. World Economy In 2016, the world economy grew at 3.1%, the lowest growth since the 2008 Global Financial Crisis. The global economy landscape encountered low worldwide demand and weak commodity prices, as well as uncertainties in political developments and economic policies. The ambiguous economic environment impacted investors, hence leading to outflows of funds from rapidly developing countries. There are positive indications that the global economy will accelerate at a better rate in 2017 and 2018. It is projected to strengthen at 3.5% and 3.6% respectively. This is based on encouraging domestic demand, as well as consumer and business confidence in several developed and rapidly developing economies. Following the implementation of fiscal and monetary policies, the global economy is forecast to grow at a better rate than in the US, EU, Japan, China and some rapidly developing countries. It is also expected that world major commodities prices for crude oil, natural gas and agricultural products will improve. This will assist exporter countries in recovery, which had been previously affected by low commodity prices. Consumer and investor confidence will encourage consumer spending, investment, production and reduce unemployment. Table 4.1 | Projected Growth for Major World Economies Source: World Economic Outlook (WEO) Update April 2017, International Monetary Fund (IMF) Notes: e Estimate f Forecast t Target Despite of the positive outlook, the global economy is still susceptible to economic shocks. The vulnerability of slow growth is still imminent in developed countries. According to the 2017 World Economic Outlook (WEO), amongst the challenges to the world economic growth are: a) The insistence of the US in adhering to their trade protectionist policies Introduction

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 69 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 World Economy b) The uncertainty on the outcome of the UK Brexit negotiations. This scenario is likely to adversely influence trade sentiment, and consequently affect commercial activities and international investments. c) The difference in the US monetary policy with other developed countries will be more evident in 2017. This expectation will sway investors towards rationalisation of the financial market, and subsequently impact the capital flow stability. d) The continuous geopolitical unrest relating to internal conflicts, terrorist attacks and territorial claims. Rapidly developing countries and Asian countries show higher resilience with better prospects of recovery. The Asian region, especially China, India and Japan are expected to lead the global economic recovery. Domestic demand will likely to strengthen following utilisation of employment and efficient financing. Investments are estimated to strengthen with the implementation of proposed infrastructure projects and, the recovery of external demand. Regional trade amongst Asian countries are expected to expand with the consolidation of domestic demand. WORLD INVESTMENT According to the 2017 World Investment Report, world Foreign Direct Investment (FDI) decreased by 2% (2016: USD1.75 trillion; 2015: USD1.77 trillion) from the protective US monetary policy (US Federal Reserve hawkish policy), weak demand, low earnings of commodity exporting countries, fiscal policy measures, diminished profits of Multinational Companies (MNC) and world politics uncertainties. In 2016, the highest recipient of FDI was the US (USD391 billion), followed by the United Kingdom (USD254 billion), China (USD134 billion), Hong Kong (USD108 billion) and Singapore (USD62 billion). FDI inflows to developing Asian countries fell by 15.0% with the exception of China, which recorded a positive growth by 2.3%. Other regions experienced similar falls in FDI. Africa (-3.0%), Latin America and the Caribbean (-14.0%), both experienced declines in FDIs. On the other hand, inflows of FDIs increased in developed economies with the exception of European region. Overall, FDI grew by 5.0% as a consequence of increases in FDIs in developed economies such as the US, Japan and Australia. FDI benefited by developed economies form 59.0% of world FDI. Table 4.2 | World Largest FDI Beneficiaries by Economic Regions Source: World Investment Report 2017, UNCTAD Notes: f Forecast

70 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 World Economy United Nations Conference on Trade and Development (UNCTAD) projected a moderate and better growth rates for World FDI, in 2017 and 2018 respectively. This forecast has been made on the consideration of consumer assurance, trade sentiment and investor confidence. FDI inflow to the US increased by 12.4% (2016: USD391 billion; 2015: USD348 billion) following an increase of 18.7% (2016: USD360.8 billion; 2015: USD304.0 billion) in cross border Mergers and Acquisitions (M&As). In addition, the rising trend of commodity prices promises better income and economic demand within developing countries. This will spur world investment and trade activities. In 2017, World FDI investment is projected to grow around 3.0% to USD1.8 trillion (2016: 1.75 trillion). Table 4.3 | World Largest FDI Beneficiaries by Country Source: World Investment Report 2017, UNCTAD WORLD TRADE In 2016, world trade grew by 1.3% (2015: 2.0%; 2014: 2.7%), which was the fifth consecutive low growth since the 2008 world financial crisis. This has been a result of economic cyclical factors and a sluggish world economic performance. Amongst the economic cyclical factors are weak demand, uncertainty in economic and geopolitical environment. Economic restructuring measures undertaken by several developed countries have hampered growth and world trade liberalisation. Investment expenditure decreased in the US. Whilst in China, imports have been affected by changes in policy, from an investment-based to consumer-based expenditure policy. With the exception of a few Asian countries, developing economies are expected to experience slower growth on stagnant external demand, low commodity prices and uncertain world financial market. Low commodity prices and depreciation of exchange rates have affected incomes of commodity exporting countries, especially oil producers. Hence, impairing their capacity to import. Table 4.4 | World Goods Export and Import Source: Press Release No.791 and No.768, World Trade Organization (WTO)

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 71 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 World Economy The world economy is expected to recover in 2017, made possible by an increasingly robust domestic demand in developed countries, especially in Europe and the US. The recovery in Europe has been propelled by an accommodative monetary policy, as well as the increase in household expenditure. Meanwhile, the American economic recovery has been spearheaded by the increase in household wealth and brisk investment especially in oil rigging. Japan is expected to reap a larger economic benefit arising from a depreciating Yen against the USD, and the increase in world demand. The surge in the Chinese property market and the gradual recovery in world trade had intensified production and investment in China. The Asian region also derived benefits from the development in world trade that strengthened on increased export. Leading Indicators showed real trade had grown since 2016 and the momentum is expected to continue into 2017. The World Trade Organisation (WTO) forecasted world trade will increase at 2.4% and 4.0% in 2017 and 2018 respectively (2016: 1.3%). This is supported by the economic revivals of rapidly developing economies and emerging economies. The forecast is based on expected world economy recovery in 2017 and 2018, with the implementation of an effective economic policy by the government. World trade has strong growth potential, provided goods and services trade are not hampered by protectionist policies. WTO stated that there are evident risks in the widespread of anti-globalisation sentiments and populism political movements. During 2015 to 2016, more than 1,400 new protectionist measures were reported to have been implemented throughout the world. G20 member countries were the quickest in the implementation of new protectionist measures with 21 new forms of protection introduced per month since 2008, which later reduced to 18 protections per month for the period from May to October 2016. Gradual inflation increased in several developed countries resulted in protective monetary policies which, in turn, deterred short term trade growth. UK’s decision to withdraw from the European Union gave rise to an uncertainty in the future trade relations between the two parties. On the other hand, the US trade and monetary policies under the new president will create a new arrangement in the world economic and trade environment. Table 4.5 | World Goods Export and Import Source: Press Release No.791, World Trade Organzation (WTO)

72 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Economy Prospects The Malaysian economy grew moderately by 4.2% in 2016. The sluggish and uncertain world economic environment had been the outcome of fiscal and monetary policies. Domestic demand, supported by export will continue to drive economic growth. Domestic demand is made up of consumer spending, investment spending and export demand. The three growth components are expected to benefit from the recovery of world economic activities come 2017. Even if the global macroeconomic environment is still shadowed by uncertainties, the Malaysian economy is projected to remain stable. CONSUMER SPENDING National productivity is forecast to improve with the increase in private consumption and export growth. Meanwhile, public consumption is expected to grow moderately following the government’s commitment towards fiscal consolidation. Private consumption is projected to increase with the growth in investment and disposable household incomes. The stable employment market and higher wages are expected to boost consumption expenditure. Wages are forecast to increase moderately. The Malaysian Employers Federation (MEF) reported that employers expect an average wage increase of around 5.4% in 2017 (2016: 5.5%). The wage increase will be supported by export driven manufacturing sector. Meanwhile, the service sector wages will be sustained by domestic oriented manufacturing activities. The employment market is expected to remain low in 2017 on the basis of a sluggish and uncertain world economy, as well as cautious business sentiment. Despite the fact that employee numbers will continue to grow, the employment opportunities growth will not be able to absorb fresh market entrants, resulting in a projected increase in unemployment rate to around 3.6% - 3.8%. Households will continue to adjust their expenditure in response to inflationary pressures. Inflation prospects for 2017 remain unchanged from 2016 at 2.1%. Disposable household incomes are expected to increase through cash assistance and subsidies on basic necessities, extended to low and medium income earners. This is further boosted by an increase in the cash assistance Bantuan Rakyat 1Malaysia (BR1M); reduction of EPF contributions to 3.0% until December 2017; bonus and special festivities assistance to all civil servants (RM500) and pensioners (RM250); special assistance to farmers, fishermen and settlers at land development schemes; subsidies on the prices of essential basic goods and services; whilst the higher commodity prices will boost rural household incomes. Private consumption is projected to grow by 6.0% in 2017. Table 4.6 | Projected Malaysian Economic Growth Source: BNM 2017 Annual Report Notes: e Estimate f Forecast Malaysian Economy Prospects

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 73 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Economy Prospects INVESTMENT World FDI is projected to decelerate following the tightening of the US monetary policy (US Federal Reserve hawkish policy) and a weak world demand. This situation will create stiffer competition amongst countries to attract FDI. However, Malaysia has the ability to attract foreign investor with a friendly investment eco-system. Malaysia’s FDI inflow shrunk by 5.0% to RM41.2 billion in 2016 (2015: RM43.4 billion). This drop is considered minor in comparison to the reduction value in the developing economies’ FDI (14.0%). Private investments increased by 6.4% to RM211.5 billion in 2016 (2015: RM198.8 billion). In 2016, Malaysia has approved 4,972 investment proposals in the manufacturing, services and main economic sectors to the value of RM207.9 billion, with the potential of creating 153,060 jobs. Of the entire investment value, RM148.9 (72.0%) is domestic investment whilst RM59.0 billion (28.0%) is FDI (2015: 29.0%). The Malaysian investment ecosystem has been recognised as one of 17 economies that had undergone business transformation in East Asia and the Pacific. Malaysia is amongst the region’s member countries that recorded the best performance in terms of efficiency and quality business regulations. Based on the World Competitiveness Report 2015/2016, Malaysia ranked 25th amongst 138 most competitive countries in the world, 10th place in the Asia Pacific and 2nd in ASEAN, following Singapore in first place. The World Bank’s Ease of Doing Business Report 2016, indicated Malaysia in position 22 ahead of the Netherlands, Japan and Thailand. Malaysia is expected to remain the preferred investment destination based on the country’s record in protecting minority investors and government’s commitment to further improve and provide a competitive business environment. Foreign investors continue to benefit from a unique, competitive business eco-system in Malaysia and its regional synergies. Table 4.7 | Approved Investment Proposals Source: Malaysia Industrial Development Authority (MIDA) Malaysia takes a selective stance in picking investments by placing priorities on projects that promise significant impact on the domestic economy. The world investment is expected to remain challenging but Malaysia is poised to attract high quality FDIs through strategies and concerted efforts between organisations. The government’s business friendly policy is perceived as Malaysia’s readiness to provide a suitable platform within the national eco-system. This is further supported by political stability, strategic location, transparent regulations, open financial system and, talented as well as skilled human resources. With these advantages, Malaysia is certainly to stay competitive and profitable investment destination. Investment prospects in Malaysia remain bright for 2017 and 2018. This follows measures undertaken by the government to increase income, contain expenditure and reduce fiscal deficit, as well as ensuring sufficient liquidity through implementation of an accommodative financial policy. Investment is expected to increase by 4.1% in 2017, driven by private investments. The growth is marginally lower than 2016 (4.4%), based on cautious investor sentiments over prolonged uncertain economic environment. A large portion of the private investment

74 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Economy Prospects has been targeted for export oriented activities particularly in the manufacturing and services sectors. Public investment is forecast to increase by 1.5% (2015: -0.5%). Government Linked Companies (GLC) are also expected to incur high capital expenditure in major infrastructure projects, mainly in the public transport, utilities sub-sectors as well as oil and gas downstream sectors. Economic growth for Q1 2017 shows positive indicators with private investments charting an increase of 12.9% and public investments, a 3.2% growth. EXTERNAL TRADE World economy has been forecasted for improvement in 2017 and 2018, based on the assumption of prospective increase in world demand that will spur world trade. Amongst countries that are projected for better economic prospects include major trade partners such as US, China, Japan, ASEAN countries and a few European countries. Commodity exporter countries adversely affected by sliding commodity prices are also expected to contribute towards the increase in world demand following the trend of rising prices of major commodities in the world. As an open and liberal economy, Malaysia will reap benefits from the prospects of an improving world trade growth. Malaysian exports continued on positive growth (2016: 1.1%) and is projected for better growth (2017: 5.5%; 2018: 4.3%) in tandem with world trade recovery. The resurgence of developed economies alongside the rising trend of world commodity prices will further boost product demand especially for Electrical and Electronic (E&E) goods, and resource based products that form Malaysia’s largest export. E&E product export grew to 18.4% for Q1 2017 (1Q2016: 3.6%; 4Q2016: 7.7%), whilst resource based production particularly crude oil and palm oil leapt to 30.1% (1Q2016: 1.7%; 4Q2016: 5.6%). Imports are forecast to rise to 6.4% in 2017 (2016: 1.9%), which is higher than exports. Intermediary goods and capital form largest imports. This reflects a plan for the expansion of production capacity on an assurance of a rising world demand especially in the export oriented industry. Production capacity increased to 86.6% in the first quarter of 2017 in comparison to 76.4% for the same period in 2016. The year-on-year MIER CEO Confidence Index leapt to 14.3%. Capital import increased to 4.9% in 2016 (2015: -0.3%) and 4.2% in 1Q2017 (1Q2016: -12.7%; 4Q2016: 6.7%), thus revealing an intention to increase fixed capital investment in businesses. Gross imports are projected to grow by 4.4% in 2018 as targeted under the Eleventh Malaysia Plan (11MP). Whist the Malaysian export trade is forecast to improve in 2017 and 2018, the consistently negative balanced services trade can jeopardize the current trade surplus. Nautical and air transportation, insurance and professional services are somewhat still uncompetitive with international services. This situation may perhaps be offset by an increase in foreign tourists spending. Therefore, the growth of the tourism sector is vital in counter balancing the services sector in the short term. There are also concerns that the world trade recovery projected in 2017 and 2018 may fall short of expectations, on an environment that remains shadowed by risks, rampant trade protectionist sentiments, geopolitical tensions, unpredictable political situations in developed countries and the consequences of low foreign exchange rates to the US dollar. Any change in the world economy landscape will affect external demand.

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 75 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Economy Prospects Table 4.8a | Malaysia’s Export Market and Main Sources of Malaysia’s Imported Goods Table 4.8b | Export and Import of Malaysia’s Main Goods Source: Malaysia’s External Trade Performance for 2016 and March 2017, MATRADE Source: Malaysia’s External Trade Performance for 2016 and March 2017, MATRADE

76 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Construction Demand PROJECTED ECONOMIC GROWTH Malaysia’s economy has been forecasted to grow by 4.3% to 4.8% in 2017, almost hitting the 2018 targeted growth of 5.0% to 6.0% projected under the 11MP. All economic sectors are expected to show positive growth, especially in the manufacturing sector on the assumption of a revival of external demand and consolidation of domestic demand. There are positive indicators towards the recovery of both domestic and external demands, stabilising of the Ringgit against major foreign currencies, manageable inflation as well as favourable impact derived from prudent expenditure policy. The indications are seen in the rise in commodity prices, wage increases, sustainable employment of resources and the increase in disposable household incomes. Additionally, the strategy in a multiple economy, reduction in cost of living, the launch of high impact investments, adoption of a pragmatic monetary policy and the broadening of external market will further boost Malaysia’s economic potential and resilience. Table 4.9 | Malaysia’s Projected Economic Growth Source: Bank Negara Malaysia, Annual Report 2016 and Quarterly Progress, First Quarter 2016 Notes: a Actual f Forecast t Target The favourable Malaysian economy outlook is also concurred by world economic research organisations. Malaysian economy is projected to grow exceeding 4.0% based on expectations of positive outcomes from the economic transformation strategies. Prevalent resilience of Malaysia’s economy is expected to recover in tandem with a dynamic regional economic growth. Thus positive developments in the external economy will favourably impact the domestic economy chain. Table 4.10 | Projected Malaysian Economic Growth Notes: f Forecast t Target Malaysian Construction Demand Construction works are predicted to be lesser in 2017 and 2018 in comparison to 2016. This follows most large scale work packages, such as RAPID, Pan Borneo Highway and the East Coast Rail Link were awarded in 2016. Construction projects implementation is expected to intensify towards 2020. As of Q2 2016, the value of construction work contracts leapt to a high of 61.5% to RM229.0 billion in 2016 (2015: RM141.8 billlion). However, the volume of projects saw a reduction by 9.1% to 6,855 projects (2015: 7544 projects). The government will continue to support development programme with the implementation of several new infrastructure projects such as the KL- Singapore High Speed Rail, MRT3, LRT3, the extension and upgrading of several air and sea ports. Private developers will benefit from property developments in proposed new cities and townships under the 11MP, alongside the implementation of public transport infrastructure projects. Meanwhile, ongoing mega projects under construction such as RAPID, MRT2 and the Tun Razak Exchange will offer work opportunities for small contractors even though the larger part of main work contracts have been awarded. The large scale infrastructure and commercial projects implemented will saw a wider utilisation of technology and updated practices in their construction process. Considerable funding and more

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 77 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Malaysian Construction Demand efficient building process contributed to a higher quality of work. The construction sector is projected to grow by a minimum of 8.0% in 2017 by Bank Negara Malaysia and a minimum of 10.3% in 2018 under 11MP. GOVERNMENT PROJECTS The government will continue to ensure the continuity of a resilient economic environment. This is done through the implementation of high impact projects. Meanwhile people economy projects are more focused on ensuring social security net. In the people economy context, social security nets are incorporated in projects to ascertain the people’s welfare within the development process. This may include job opportunities, small businesses, cost of living, family welfare and community participation. Capital economy refers to Gross Domestic Product (GNP) growth. The growth may be induced by intensifying businesses and, implementation of big impact government projects with high added value so the people can achieve: a) Access to quality healthcare b) Ownership or rental of affordable home c) Safer living environment d) Production of world class talent resource e) Prevention and mitigation of natural disaster impacts f) Access to basic amenities and services g) Enhancement of innovation; and Government spending will be moderated following a commitment towards a fiscal deficit consolidation through public expenditure restructuring and prudent spending policy. However, implementation of high value added infrastructure projects will continue to generate inclusive and sustainable growth. The government is expected to continuously stimulate growth through public investment in specific sectors, particularly in large scale infrastructure projects. Large-scaled projects implemented on private funding initiatives are categorised as private projects. Several new government construction projects consisting of upgrading and maintenance projects to be implemented under 2017 Budget are listed in Appendix 4.1 INFRASTRUCTURE PROJECT Infrastructure development is vital in ascertaining the people have access to basic facilities and services such as transport, communications, electricity, clean water, tourism infrastructure, renewable energy projects and sewerage amenities. Priorities are given to expansion and improvement of existing basic amenities in ensuring effective and efficient infrastructure. The exercise will reduce operation cost, enhance productivity and improve overall competitiveness that contributes to economic growth. From the Tenth Malaysia Plan (10MP), the government has intensified the development of high value added infrastructure projects. The transportation infrastructure saw several upgrades in urban roads and additional construction of roads in high traffic areas. Among the ongoing, under construction, mega infrastructure projects are the MRT, telecommunications, River of Life, and the Pan Borneo Highway. The Sabah Development Corridor (SDC) has plans to increase its infrastructure investment to enhance inter-regional and international connectivity. This translates into an imminent land, sea port and airport network transformation. Following suit will be the High Speed Rail (HSR), the Klang Valley Double Tracking rail and the Penang Public Transport Infrastructure Master Plan projects. Several other transportation infrastructure and public infrastructure projects will be concurrently implemented in 2017 and 2018, to complement the development of new townships and regional economic corridors. Infrastructure development in rural areas will facilitate accessibility to public amenities, thus narrowing the development gap between the urban and rural sectors. Meanwhile, integration of transportation services in urban areas sees the utilisation of existing services. Beyond the enhancement in public transportation services; quality water supply, as well as sewerage systems have been proposed for improvement.

78 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market Among others, property market depends on consumer demand. However, the obscure economic environment made consumers to be more cautious in committing towards long term financial burdens. The rising prices also led to financial institutions tightening borrowing requirements to curb speculation. The adverse impact of these conditions resulted in a downtrend in the property market. According to the NAPIC 2016 Annual Report, property transactions decreased by 11.5% during the year (Q12017: 4.8%). This poses an oversupply situation in the property market. The number of unsold properties across all categories increased by 31.1% to 192,887 units in 2016. However, this does not affect the supply momentum in major cities and strategic locations. Table 4.11 | Property Market Transactions Volume Source : Property Market Report 2015 -2016, NAPIC Note : *** Minimal RESIDENTIAL In 2016, new residential units at various stages of construction in the market rose by 8.3% to 907,903 units (2015: 838,173 units). Of these, unsold units increased by 33.3% to 90,491 units in 2016 (2015: 67,865 units). The number of starts suffered a decline of 15.1% to 121,326 units (2015: 142,961 units). New launches for residential units fell by 9.8% to 52,713 units (2015: 58,411 units) following a market slowdown with lower sales performance from 42.1% in 2015 to 31.4% in 2016. As for new launches, affordable units priced below RM300,000 consisted 36.6% (sales performance: 35.2%), units priced between RM300,000 and RM500,000 made up 29.5% (sales performance: 34.5%), and luxury units priced above RM500,000 comprised 33.9% (sales performance: 24.5%). Transaction volume for 2016 charted a decline by 11.5% to 320,415 units (2015: 362,105 units). Table 4.12 | Property Market Transactions Volume Source: Property Market Report 2015 – 2016, NAPIC Property Market

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 79 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market The high price of residential units and soaring cost of living within an uncertain economic environment contributed to a weak market performance in 2016. Generally, most buyers can afford to purchase units priced lower than RM250,000. The average market price of residential units is RM300,000. The involvement of government agencies in supplying more affordable homes had pushed private developers into making adjustments to match the purchasing power of buyers. The tightening of borrowing requirements by financial institutions helped to reduce speculative purchases. According to Real Estate and Housing Developers (REHDA), about half of housing loan applications submitted was rejected. The 2016 NAPIC Malaysia House Price Index showed that prices had fallen to 5.5%. The residential property market is forecast to rebound following rising consumer confidence for the local and world economy in 2017 and 2018. REDHA’s 2H2016 Real Estate Industry Survey showed optimism in majority developers towards the property market prospects in mid-2017. Genuine buyers and first time home buyers will continue to secure loans with higher government housing loan limits ranging between RM200,000 and RM750,000. In 2016, the number of new development plan approvals increased by 11.3% to 120,089 units (2015: 107,938 units) propelling planned supply units by 5.8% to 601,671 units (2015: 568,937 units). The government will continuously offer affordable housing to the people. To facilitate home ownership, the regulatory framework was reviewed and various modes of funding were formulated. A people-friendly housing scheme for the underprivileged and low income households (B40) in urban and rural areas were implemented through such programmes as the Program Bantuan Rumah (PBR), Program Perumahan Rakyat (PPR) and Rumah Mesra Rakyat 1Malaysia (RMR1M). Meanwhile, the second generation settlers’ housing programme was implemented through the Federal Land Development Authority (FELDA) and Federal Land Consolidation and Rehabilitation Authority (FELCRA). Afforable housing for the middle income households (M40) were implemented through programmes such as Perumahan Rakyat 1Malaysia (PR1MA), Perumahan Penjawat Awam 1Malaysia (PPA1M) and Rumah Wilayah Persekutuan (RUMAWIP). To promote the development of affordable housing programmes, the government intends to provide several incentives alongside the implementation of a variety of residential projects under 2017 Budget. Amongst the residential projects included are: a) 5,000 units of MyBeautiful New Home an initiative led by Ministry of Urban Wellbeing, Housing and Local Government (KPKT) for the B40 group at a price range of RM40,000 to RM50,000 per unit. b) 9,850 new units and completion of 11,250 PPR units. c) 30,000 housing on government land at strategic locations at prices RM150,000 to RM300,00. d) 10,000 urban housing for rental being offered to the young at lower than market rates. e) 5,000 units SPNB’s Rumah Mesra Rakyat 1Malaysia. f) Completion of 30,000 1Malaysia Civil Servants Housing units to be sold at RM90,000 to RM300,000. The government announced additional PPA1M units will be constructed, from 100,000 units to 200,000 units. The government had provided several incentives to assist the B40 category purchase homes and encourage private developers construct more affordable homes. Amongst the incentives announced in 2017 Budget are the following: a) The government will fund RM20,0000.00 towards the purchase in a MyBeautiful New Home project whilst the rest will be paid via instalments by the owner. b) RM20,000 subsidies will be granted for each unit of SPNB’s Rumah Mesra Rakyat 1Malaysia. c) Special PR1MA homes step-up-end-financing scheme in collaboration with the Bank Negara Malaysia (BNM), EPF and 4 banks offering 90.0% to 100.0% housing loan margins. d) Provision of strategically located, un-utilised land bank for the development of PR1MA project. e) Stamp duty exemptions for instruments of ownership transfer and, instruments of mortgages on purchase of first homes during the period beginning 1 January 2017 to 31 December 2018.

80 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market Residential units from the 2017 Budget housing programmes will add more to the current supply, from projects already planned for in 2016. The presence of government agencies involved in the development of additional people’s housing, plus incentives available to private developers and potential buyers alike, is expected to fuel the residential market activities in 2017 and 2018. NON-RESIDENTIAL Non-residential property includes industrial, commercial, retail complexes, office space and hotels. The performance of this market segment is highly influenced by the prevailing economic environment. In 2016, transactions for non-residential property fell by 24.4% which comprise 9.2% of total market transactions. The market prospects for 2017 is expected not to change much from 2016, a situation that will gradually improve around 2018 on better economic recovery. On a cautious note, the market may experience challenges in an oversupply of completed units that will increase numbers of unsold units. In a chain reaction, there would be a decline in occupancy and accommodation. SHOPLOTS In spite of general slowdown trend in 2016, the shop market saw a reduction in the number of unsold units by 24.0% to 12,673 units (2015: 16,681 units). This was 14.2% of overall supply that included completed units and future supply. The situation led developers into slowing down starts and reducing new planned supply to 4.7% and 23.6% respectively in 2016. Shoplot development is complementary to new housing development project localities. Most shop occupants are small businesses. Their business survival very much depends on population density, the standard and style of community living as well as competition from neighbouring hypermarkets. The traditionally inclined business behaviour hinders shop lot properties’ growth whenever there is competition from nearby hypermarkets. The government is committed towards providing a conducive environment that promotes the growth of businesses including Small and Medium Enterprises (SME). The wholesale and retail industries target a stable spending in Malaysia by facilitating sector investment and helping small retailers strengthen their competitiveness. The wholesale and retail sector investment recorded RM6.4 billion in 2016 and approximately 50% of which amount were channelled to SMEs and the rest to bigger shop outlays. Advisory assistance and easy funding programmes were offered by relevant agencies. In an era of digital economy, shop Table 4.13 | Shop Market Performance Source: NAPIC Property Market Report 2015 -2016

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 81 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market occupants are encouraged to capitalise on the rapidly growing Information and Communication Technology (ICT) in adding linkages to the international e-commerce sector. Shop operators should accept and trust the e-commerce since it is the future landscape of businesses. E-commerce procurement and market coverage will actively speed up SME industry growth and viability to propel shop lot unit demand. Industrial property demand is projected for a positive turnaround in 2017 in line with an improved economic prospect and export demand recovery. Stakeholders will actively continue to attract and stimulate quality, high impact and value-added new investments. MIDA’s records showed approved proposals for new private investments rose to 7.7% totalling RM207.9 billion in 2016. Proposed investments for expansion and diversification of manufactured products also increased to 393 projects worth RM30.7 billion (2015: 296 projects; RM14.4 billion). There are expectations that more investment proposals will be realised in 2017 and 2018 following the gradual world economy recovery. The expansion in current operational plants, as well as investment proposals in 2015 are largely responsible for the demand in factory and warehouse space. As much as RM186.2 billion and RM214.8 billion worth of investments were realised in 2015 and 2016, which equates to 96.5% and 103.3% of proposed investments value in the respective years. Malaysia’s external trade is on the rise in 2017, especially for exports of manufactured goods. Exports of manufactured goods have been targeted to increase by 5.5% in 2017, and is expected to continue its growth momentum into 2018. Improvements in rail Table 4.14 | Industrial Property Market Performance Source: NAPIC Property Market Report 2015 -2016 INDUSTRIAL Industrial property refers to factory buildings and warehouses. The industrial property market in 2016 was stagnant following weakening economic environment and world FDI. The industrial property market formed 1.8% of total transactions recorded in 2016. This was a reduction by 20.4% in the number of transactions. There are 8,744 industrial property units including future supply units which brings about an addition of 8.4% to available stock compared to 2015 (103,868 units). Diminishing business sentiment plus the risk of a sluggish economy resulted in an increase in unsold units to 2,054 units in 2016 (2015: 2,061 units). The sentiment saw a decrease in volume of starts and new planned supply to 53.3% and 2.2% respectively in 2016.

82 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market transportation services and, the cargo handling and management facilities at marine and air ports have also boosted logistics services development. The positive development will invariably stimulate investments leading to demand for manufacturing plants and storage facilities or warehouses. On this note, unsold industrial units will be reduced. COMMERCIAL COMPLEX Demand of commercial complexes are driven by the people’s domestic income and foreign tourists’ spending. Commercial complexes rely on these consumer groups to offer a wide range of quality merchandise. Statistics showed that foreign tourists are big spenders during their visit. In 2016, Malaysia earned an RM82.1 billion revenue from the arrival of 26.8 million tourists. On average, each tourist spends RM3,158.00 in Malaysia. Income from tourism is generated via shopping activities, ecotourism, cruise and business events. Efforts to promote Malaysia as a duty-free shopping destination will be further boosted concurrently with an initiative to improve the Tourism Refund Scheme (TRS). Kuala Lumpur was placed amongst top 5 Best Destinations in a list of 25 world’s best shopping destinations by Expedia UK. The introduction of Visa-less and the e-Visa entrance for Chinese tourists brought great relief to the Malaysian tourism industry post flights MH370 and MH17 tragedies in 2015. Chinese tourist arrivals increased by 26.7% to 2.1 million in 2016 (2015: 1.7 million). Malaysia has plans to offer similar facilities to tourists with high purchasing power from other countries. Malaysia has also been described as “the most attractive and preferred destination” by entrepreneurs intending to conduct businesses within the South East Asian countries. The commercial complex property market is predictably slow and challenging on the expectations of an influx of new commercial complex entrants in 2017 and 2018. Available retail space increased by 5.9% to 14,638,039 square meters, through an additional 841,102 square meters was completed in 2016. Meanwhile existing retail space is projected to increase by 20.9% to 1,819,077 square meters on account of fresh market entrance in retail space to be completed in 2017. One of the main demand attractions for a commercial unit is consumer spending. However, consumers are seen to be more cautious amidst rising cost of living and bleak prospects for employment, thus triggering a slowdown in business activities. This sentiment has greatly affected demand for commercial space. The market potential in new entrants’ absorption rate fell to 3.5% (2015: 5.7%), which incidentally led to the decline in occupancy rate to 81.4% (2015: 82.4%). Developers took to a more rational stance by reducing starts units by 37.7% to 399,684 square meters and new plan proposals also decreased by 63.9% to 168,930 square meter. Due to the low volume in new planned units and starts units, planned supply remained high at 939,057 square meters (2015: 1,029,596 square meters). Table 4.15 | Commercial Complex Property Market Performance Source: NAPIC Property Market Report 2015 - 2016 Majority property market analysts are unanimous on the adequacy of commercial space available and rampant new entrants can result in an oversupplied market. There are suggestions from relevant parties to monitor and restrict approvals for new development proposals to avoid dumping. On the one hand, developers have their own marketing rationale and strategies

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 83 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market in continuing to build new, attractively designed, luxurious commercial complexes in strategic locations. These developers are optimistic in realisation of 36 million tourist arrivals by 2020 and in reaping RM168.0 billion revenue. Business activities are greatly supported by large-scale FDI inflows, development of new cities and increase in the numbers of high income earners. On top of this, infrastructure development particularly in public transportation is expected to raise property values and the density of inhabitants along the transportation route. This in turn activates business, and consequently the demand for new commercial complexes. OFFICE BUILDINGS Property market performance for typical office buildings lacklustred due to a weak trend in industrial properties market in 2016. The demand for both types of properties is closely inter-related within the current economic conditions. The situation curbs investor sentiment for a higher capital spending and, weakens the professional services sector. The extensive adaptation of advanced technology and innovations equates to a low manpower requirement as well as working space. The rising trend in employers engaging home-based employees has also impeded office space demand. The financial, as well as oil and gas industries are amongst those that have retrenched workers. There are 2,005,349 square meters of office space future supply in 2016. Their market entry will potentially increase available stock by 9.7% in 2017 to 22,753,682 square meters from 20,748,333 square meters. The current depressed economic climate saw take-up rates diminishing from 7.5% to 6.1% in 2016. This led to an increase in vacant units by 11.8% to 3,675,779 square meters (2015: 3,287,842 square meters). A total of 828,183 square meters in planned supply are expected for market inclusion. In view of a lacklustre business sentiment and the uncertainty in the world financial markets, developers have begun to slow down new developments. New office building starts and proposed new supplies declined by 24.9% and 22.7% respectively in 2016. Table 4.16 | Office Building Property Market Performance Source : NAPIC Property Market Report 2015 - 2016 2017 and 2018 are opportune times for investment. In 2015, the services sector’s approved investment proposals amounted to RM87.6 billion (3,559 projects) as compared to RM77.1 billion (3,518 projects) in 2016. The overall proposed investments in the services sector stood at RM141.2 billion, which have the potential to create 88,108 job opportunities in 2016. The development of 5 large-scaled investments, economic corridors in major as well as new cities in the near future will provide a fresh business landscape and potentially stimulate office space demand. This modern and efficient infrastructure development will invigorate the services business activities in fulfilment of demand from a high density population. The government promotes high value added service sectors as new sources of growth, such as financial and insurance services, tourism, MNC regional office operations, establishment of Research and Development (R & D), health, education centers; and business digitalisation industries. In line with this, the liberalisation of several domestic market sectors such as education, healthcare, professional and ICT services,

84 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Property Market shall create a conducive and attractive business environment for more foreign professional firms to expand their businesses in Malaysia. This will create additional, future demand for office space. HOTELS The hotel industry performance is closely linked to momentum in the tourism industry. There were several untoward incidences in 2015 that tarnished the hotel industry, such as street demonstrations, haze, floods, earthquakes, the loss of MAS flights MH307 and missile MH17, terrorist threats, and travel caution by some developed countries. The number of tourist arrivals declined to 25.7 million in 2015 (2014: 27.4 million), especially so for Chinese tourists. Meanwhile, the domestic population was faced with a rising cost of living following the fall in value of the Ringgit, low commodity prices, imposition of GST and the rationalisation of subsidies on a number of daily necessities particularly fuel. This situation prompted households to be more prudent when it comes to travel spending. The decline in tourist arrivals clearly impacted the room stays rate, which decrease by 61.0% (2014: 62.6%). This situation persisted into 2016. Investors resorted to delay development of new hotels, which showed in new starts and new development proposals to 49.0% (2016: 2,212 units; 2015: 4,340 units) and 43.2% (2016: 2,465 units; 2015: 4,342 units) respectively. Table 4.17 | Hotel Property Market Performance Source : NAPIC Property Market Report 2015 - 2016 One of the driver of national income, the tourism sector has a multiplier effect on economy. The tourism sector is the second highest contributor in foreign exchange income behind manufactured goods export. Hence, various efforts were made by stakeholders to revive foreign tourist confidence, especially those from China. Amongst the measures undertaken was the visa-less entries for Chinese tourists and the e-visa for tourists from selected countries. With the establishment of the ASEAN Economic Community (AEC), regional tourism activity is expected to heighten. Promotional campaigns have borne positive returns in the surge of tourist arrivals to 26.7 million in 2016 (2015: 25.7 million). Stakeholders are actively promoting Malaysia as the main regional tourism hub and destination. Malaysia’s strategic location in the centre of the South East Asian region; a harmonious multiracial population, diverse culture and religion, enchanting natural landscape alongside infrastructure facilities have given Malaysia an edge over other regional destinations. Malaysia is also concentrating on health and education tourism products, as well as world class conference, meeting and exhibition facilities such as the Kuala Lumpur Convention Centre, Putrajaya International Convention Centre and Kota Kinabalu Convention Centre. In 2016, 341 business events were conducted in Malaysia which included corporate meetings, promotional tours, conventions and exhibitions that attracted 127,849 international representations, generating an approximate RM1.5 billion. Efforts in promoting Malaysia as a main tourist destination are effectively supported by international acknowledgements such as Top Asian Destination by World Travel Awards 2016; The First Muslim Friendly Destination by MasterCard-Crescent Rating 2016; One World Hotel was awarded the Asia’s Leading Meetings & Conference Hotel; and Resorts World Genting was recognised as Asia’s Leading Themed Resort. Additionally, Zouk KL was awarded Nightspot of the Year by Hospitality Asia Platinum Award (HAPA); and Ipoh was listed in the Top 10 Best Asian Cities 2016 by Lonely Planet. 2017 will attract the arrivals of athletes and spectators through the hosting of 29th SEA Games, 9th ASEAN Para Games, Formula 1 Finale and Visit ASEAN@50 Golden Celebrations 2017. Tourist arrivals are expected to swell further on a weak Ringgit. The tourism industry is on track to achieve a

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 85 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Projected New Value of Construction Work target of 36 million tourist arrivals and revenue of RM168 billion by 2020. In 2020, the hotel industry is expected to require 37,000 additional rooms in the 4 and 5 stars categories. Projected New Value Of Construction Work Prospects for construction sector remains firm for 2017 and 2018. This follows the implementations of several new infrastructure projects and yet-to-award project packages from ongoing construction projects. Project values continue to rise with the implementation of National Key Economic Area (NKEA) programmes and Entry Point Projects (EPP) investments. As of quarter 2 of 2017, a total of RM229.0 billion has been recorded in 2016, an increase of 61.5% (2015: RM142.0 billion). While the number of projects decline by 9.1% to 6,855 projects (2015: 7,544 projects). From this amount, 22.2% or RM50.9 billion came from government projects, a two-fold increase from 2015 (RM24.7 billion) with 1,764 projects (2015: 1,901 projects). The rise in these construction projects were driven by infrastructure projects with a contribution of 60.0% (RM137.0 billion). The government is expected to continue with its capital and people centric economic programmes in the development of infrastructure and public amenities. The rise in external demand through FDI inflows will stimulate domestic trade and boost property sector demand. The impact from public transportation infrastructure and economic corridors development will encourage developers to explore development potentials in the surrounding locality. Given that properties are fixed assets that take time to construct, developers will continue to make new investments to meet expectations of a higher future demand. Developers will carry on developing properties in more strategic locations. The pro-business policy that provide various investment incentives and funding facilities by the government will fuel implementation of approved investments proposals. Government projects for 2017 and 2018 is expected to remain unchanged. Large scale investments are executed under Public Private Partnership (PPP) and partly managed by bodies dedicated to public development projects. These particular bodies are classified as private entities since they were incorporated under the Companies Act. Government investment is focused on providing for people’s welfare especially in rural areas, and priority has been placed on accessibility to amenities. Besides this, other physical projects to support economic opportunities are implemented by constructing and restoring basic infrastructure in rural areas via Desa Abad ke-21 Programme. Construction of main roads and housing programmes for rural poor will continue with higher allocations for Sabah and Sarawak. A total of 85% have been set aside for the implementation of projects under the rural housing aid programme, that will see construction of new houses and the restoration of houses for underprivileged families. The government announced several construction projects in 2017 Budget. Amongst those mentioned are listed in Appendix 4.1. Government projects are forecasted to contribute RM24.0 billion in 2017. In 2018, government projects are expected to slightly moderated to RM23.0 billion; with the assumption that 80.0% will be utilised as construction costs. Table 4.18 | Estimated Government Projects for 2017 Source: 2017 Budget

86 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Projected New Value of Construction Work Infrastructure projects form a government’s long term investment. Developments in infrastructure contribute towards Malaysia’s economic wealth. Requirement for infrastructure system is fundamental within new cities development plans and regional economic corridors. It is also vital in narrowing the development gap between urban and rural areas, especially in the improvement of basic amenities in Sabah and Sarawak. A total of three construction projects were awarded in 2016, namely the Sarawak Pan Borneo Highway, the Gemas-Johor Bahru Electrified Double Tracking Rail and the East Coast Expressway (ECRL) projects. Amongst the high impact projects soon to be implemented is the Kuala Lumpur-Singapore High Speed Rail (HSR), and possibly the Penang Transportation System Master Plan and, Phase II of the Pan Borneo Highway. There are still leftover work packages from projects MRT2, LRT3, Pan Borneo Highway and RoL that are under construction. Over that, there are new infrastructure projects in the pipeline that will be implemented in the near future. Infrastructure projects are projected to contribute RM90.0 billion for 2017 which will step up to around RM100.0 billion in 2018. RESIDENTIAL PROPERTY Residential property market has always maintained high demand with the increase of residents, income and financing facilities. A major challenge for developers is ascertaining affordable pricing. In the case of affordable houses, government determined the price of not more than RM300,000; however private developers fixed prices at not exceeding RM500,000 for these houses. According to NAPIC 2016 Property Market Report, transactions involving houses priced lower than RM300,000 declined to 217,556 units or 67.9% (2015: 247,639 units; 68.4%). Transactions for houses priced between RM300,001 and RM500,000 decreased to 51,676 units or 16.1% (2015: 54,127 units; 14.9%). Meanwhile the number of transactions for houses priced above RM500,000 also decreased to 51,192 units (16.0%) compared to 60,339 units (16.7%). According to Bank Negara Malaysia, there was a shortage by about 960,000 affordable houses in 2014. From 2015 to 2016, the population multiplied by 600,000 to 31.2 million (2014: 30.6 million) or an increase in households to 139,534. Assuming that these additional households comprise of middle and low income earners, then the number of affordable houses would be around 90,700 units. By derivation, the number of affordable houses required in 2016 would be approximately 1.05 million units. The number of affordable houses supply in the market for the same period was 275,055 units. This indicates a supply shortfall by 774,900 units in 2016. In 2017 and 2018, there will be an increase in households to 186,000 thus boosting demand for affordable houses to 895,800 units. The aim of the 11MP is to provide adequate, quality affordable housing for the underprivileged, low and middle income households. Therefore, there are 1.02 million units required by the year 2020. This translates into a market need for the construction of 255,000 affordable housing units per annum beginning 2017. The government announced the construction of 184,200 and 189,850 units of affordable houses each during 2016 and 2017 Budgets. This adds up the number of affordable housing units to a cumulative 374,050 units for 2016 and 2017. The amount includes the additional 100,000 units in the 1Malaysia Civil Servants Project (PPA1M) which had been announced outside of 2017 Budget in Putrajaya. The 2016 NAPIC Report recorded 121,326 units in various pricing level that had begun construction in the market. The figure does not include completed units nor under construction units as these were assumed to be for 2015 and 2016. This meant that a total of 252,724 units of affordable houses need be built to comply with the housing programme announced in the 2016 and 2017 Budgets. A minimum of 126,362 and 219,400 units of affordable houses must be built in 2017 and 2018 respectively. PR1MA reported 1.42 million candidates have registered to purchase a PR1MA home and there were 166,972 applicants for the purchase of a PR1MA home. PR1MA aims to construct 500,000 houses and have approved a total of 267,902 houses for construction, whilst aiming to complete 17,000 units in year 2017.

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 87 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Projected New Value of Construction Work There were 601,671 units under planned supply proposal and 120,089 new planned units in 2016. Based on a construction trend for residential units, approximately 129,400 new units will begin construction in 2017, followed by 128,400 new units in 2018. The residential property market indicated 65% of total transactions in 2016 will involve affordable units. The average price of a PR1MA house is between RM241,000 and RM257,100; and the average price for a luxury house is RM669,300. The construction cost for a PPR home in Kelantan is around RM188,600 per unit and this cost has been assumed as the construction cost of an affordable unit. In contrast, the cost of a PPR unit in Kampong Takek, Pulau Tioman has been quoted as RM403,000 per unit. Meanwhile the construction cost of a luxury house is estimated at 50.0% of its average price (RM335,000). Using conventional approach, it is estimated that residential projects would contribute RM30.0 billion in 2017 and remained unchanged at RM30.0 billion in 2018. Table 4.19 | Projected Construction Value of Residential Projects SHOP PROJECTS Shop units with heights no higher than 2½ and 3½ storeys formed 53.0% and 27.0% of total market transactions respectively. Most of the shop units in these categories had been built alongside new residential projects as complementary amenities for the local community. Most unsold units are located at un-strategic locations with low density population. The shop property market is projected to be sluggish in 2017 as a consequence of the increase in numbers of unsold units in 2016, which will gradually recover in 2018. Unsold units for 2016 stood at 12,673 units (14.2%) across all construction stages and un-built condition. In 2016, there were 419,975 new company registrations at the Registrar of Companies Malaysia (ROC), and 236,952 new companies were registered by June 2017. There are currently 7,815,322 companies in Malaysia. Of this count, 97.0% are SME companies and 88.0% are involved in services. A large portion of SME companies are involved in services activities within the retail industry. Shop units’ supply is currently facing competition from supermarkets. A total of 4,168 shop units were completed in 2016 whilst it is expected that 21,323 SOHO units will be supplied in 2017. This volume is unlikely to affect demand for shop units as demand for both types of properties are targeted to different market segments. SOHO units are more directed at small scale businesses than the shop unit market segment. The retail business landscape has evolved into a more modernised and efficient system that had benefitted from an ICT progression. The government is making efforts to develop a Digitalised Free Trade Zone to encourage SMEs participation in e-commerce businesses with an international market outreach. Direct benefits would be the access to a larger customer base that enhance sales potential. The e-commerce benefits are expected to boost business resilience and expansion. It is expected that there would be a small decline in new supply of shop units, based on supply trend and proposed planned new units from 2011 to 2016. This follows an assumption that there is adequate supply to meet current market demand for shop units. However, new supply of shop units is projected to increase to 14,400 and 14,000 units in 2017 and 2018 respectively. The anticipated increase is driven by the prospects of an economic recovery and intensification of residential development projects in the Klang Valley suburbs, particularly in areas along MRT and LRT routes; and in major cities such as Johor Bahru, Melaka and Penang. SOHO unit supply is projected at 3,000 units and 3,300 units for 2017 and 2018 respectively.

88 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Projected New Value of Construction Work INDUSTRIAL PROJECTS A total of RM207.9 billion for 4,972 proposed investment projects were approved in 2016 (2015: RM186.7 billion; 4,887 projects). A large portion (68.0%) were from the services sector (2016: RM141.2 billion; 2015: RM114.5 billion), and 28.0% were from the manufacturing sector (2016: RM RM58.5 billion, 2015: RM74.7 billion). Actual investments value for 2015 and 2016 were RM198.8 billion and RM211.5 billion respectively. There are positive vibes in the domestic and world economies in 2017, with more improvements in 2018. Malaysia are expected to maintain its position on attracting larger FDI inflows on the existing advantages in location, world class infrastructure, human resource talents, pro-business policies, political stability, friendly people and clear laws and regulations. The increase in external demand and rising consumer sentiment will stimulate business activities to propel the expansion in the employment market, and income. There is a certainty that this momentum will spur investors and businesses to realise their planned investments and expand their existing operations. MIDA aims to attract RM130.0 billion in investment proposals in 2017, of which RM55.0 billion is intended to come from the manufacturing sector. Most of the current investments being realised are in the form investment proposals that had been approved in previous years. According to MIDA, the average implementation rate for approved manufacturing projects in 2012 to 2016 is 82.0%. Based on this information, a sum of RM48.0 billion of investments will soon be realised in 2017 through the proposed investment of RM58.0 billion in 2016. A further RM45.0 billion is anticipated to be realised in 2018. A total of RM225.0 billion in private investments had been recorded in 2016, of which approximately 35.0% or RM79.0 billion were manufacturing sector investments. This investment is projected to grow at 4.0% and 9.4% respectively in 2017 and 2018. Consequently, manufacturing sector has the potential to attract RM82.0 billion and RM89.0 billion in investments for 2017 and 2018, as targeted in the 11MP. Based on observations made on proposed investments submitted to MIDA, the cost of production space or plant is estimated to be 30.0% of the proposed investment value. Using this as a yardstick, the construction value of industrial projects is approximately between RM14.0 billion and RM25.0 billion in 2017, and between RM13.0 billion and RM27.0 billion in 2018. Conservatively, industrial projects are projected to contribute RM14.0 and RM13.0 in construction work for 2017 and 2018 respectively. COMMERCIAL COMPLEX The Commercial property market is projected to be more robust in 2017 and 2018, with concentration on public transportation projects within the Greater KL/KV. Property prices along the MRT, LRT and vicinity of RoL projects are expected to increase. Since the liberalisation of several domestic industries, foreign investments have begun to make a presence in the wholesale and retail industries as well as in commercial property development. World economy have been forecasted to recover for 2017 and 2018. Commercial complexes developers will concentrate their development on new towns and residential projects in major cities in the Klang Valley, Johor Bahru, Melaka, Penang, and Port Dickson which will be developed as Malaysia’s Vision City. A total of 14 MoUs for property development valued at RM143.0 billion had been recently sealed with Chinese entrepreneurs, whilst 31 MoUs worth RM158.0 billion were jointly signed with India to develop Carey Island Maritime City and seaport. MIDA received 680 property development proposals worth RM26.9 billion in 2015. Overall, this increased to 911 project proposals at a value of RM64.1 billion in 2016. The growth in commercial space supply in 2017 and 2018 is anticipated to be stable in view of a high FDI inflow into the trade and infrastructure sectors. Based on supply trend and proposed new planned supply retail space units from 2011 to 2016, new retail units are projected to increase by 5.3% to 939,057 square metres in 2017 (2016: 420,700 square metres). Retail space unit supply is projected for a slowdown in 2018, after taking into account the numbers of

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 89 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Projected New Value of Construction Work completed units in the previous 3 years. Thus, the amount of new retail space supply bound for market entry in 2018 is projected at 343,700 square metres. OFFICE BUILDING The existing office space surplus offers an advantage to prospective tenants in securing more attractive rental rates. The decline in the value of Ringgit makes the cost of running businesses here more competitive than in other neighbouring countries. This aspect is expected to draw foreign businesses to Malaysia as aimed under liberalisation of selective services. There are currently several hospitals, institutions of higher education, financial services and insurance firms that are run by foreign professionals in Malaysia. According to MIDA, there are 211 regional offices or MNCs with approvals to establish their representative offices in Malaysia at an investment value of RM14.1 billion and a workforce of 2,611 in 2016. It is estimated 26,000 square metres of work space will be needed to accommodate the number of employees. This excludes the 475,200 square metres forecasted requirement for the Kuala Lumpur Internet City (KLIC), proposed in the Digital Free Trade zone. In 2016, there was 3.7 million square metres of vacant office space already in the market, with an additional supply of 2.0 million square metres about to be completed, plus 0.83 million square metres in proposed planned supply. With low take-up and absorption rates, vacant office space supply is bound to increase. Foreign businesses’ interests are specially inclined towards office buildings that are user and environmental friendly; characterised by iconic designs; and situated in strategic locations. The prospect for office buildings market is seen as positive with recovery in the domestic and world economies. FDI inflows will propel office space demand and consequently reduce vacant office space surplus, and induce the construction of more office buildings. Based on the supply trend and new planned units supply for retail space from 2011 to 2016, a projection for 284,100 square metres of new retail space was made in 2017. A further 284,600 square metres of retail space supply is projected for 2018 based on the prospects of a vigorous economic growth and; the commencement and functioning of a hive of urban development activities. HOTEL PROJECTS The hotel industry’s growth will escalate, spurred by the arrival of foreign tourists. As a supporting component of economic growth, the industry will launch more promotional activities and campaigns to attract tourist arrivals. Incentives granted to tour operators for tourist entries from selected countries will encourage the arrival of more foreign tourists. Several tourism awards have given Malaysia an edge as the preferred tourist destination for countries in West Asia, China, India and Europe. It has been estimated that Malaysia will need 37,000 hotel rooms with 3 and 4 stars rating to accommodate the targeted 36.0 million tourists in 2020. The increase in business tourism, transformation of main cities into world class metropolis, new and modern urban development as well as FDI inflows will encourage the development of new 5 and 6 starred hotels. The hotel industry currently faces competition from serviced apartments and rural home-stays. There were about 92,797 serviced apartment units nationwide in 2016, with the impending market entry of a further 150,751 units, whilst 106,834 new units have been planned for future supply. Concurrently, available hotel rooms stood at 212,437 units with an additional 24,443 units about to make a market entry and a proposed 18,521 rooms are planned for future development. However, the competition does not affect the hotel industry because serviced apartments are normally patronised by budget tourists in family groups or, long-termed-stay tourists. On the other hand, hotel customers consist of a diversity of tourists from all walks of life and packaged tour groups. Hotel accommodation provides meals service, conference and meeting facilities, entertainment facilities and other hospitality-related services. According to a May 2017 HVS.com Report, the hotel industry is capable of maintaining an

90 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Estimated Value of Work Done in 2017 – 2018 occupancy rate of around 62.0 % to 65.0% annually despite the entry of numerous new hotels and the competition from serviced apartment and home-stay services. Based on hotel construction trend for the recent 6 years and the favourable forecast on the prospects for a domestic and world economies recovery, it is expected that new hotel room growth will stabilise in 2017 and 2018. A total of 3,400 and 3,200 new rooms are forecasted each for 2017 and 2018; whilst 37,400 and 31,800 serviced apartment units are projected for 2017 and 2018 respectively. Table 4.20 | Construction Value of Non-Residential Units Construction project is expected to be at RM170.0 billion in 2017, and RM180.0 billion in 2018. Government projects’ contribution is estimated at 14.0% (RM24.0 billion) and 13.0% (RM23.0 billion) in 2017 and 2018 respectively. This is achievable with several infrastructure projects and committed investments to be implemented, in tandem with a more favourable world economic forecast. Table 4.21 | Construction Value of Non-Residential Units The above projection is based on gross estimation derived from CIDB’s observations and experience, as well as information acquired from mainstream sources and economic reports by various sources. The projection is made on the following assumptions: • A stable national political landscape • No change in macroeconomic and administrative policies • An improving world environment with continuous growth momentum • Identified projects are implemented according to schedule; and • Inflation and interest rates remain low Estimated Value Of Work Done In 2017 – 2018 Construction sector growth has been projected at 8.0% and 10.3% for 2017 and 2018. To achieve this growth, the construction sector will require approximately RM153.0 billion in new projects for 2017 and another RM169.0 billion in for 2018. Projected work done value is expected to derive from several infrastructure work packages, residential and commercial project developments. Work done or construction output value is equivalent to the value of work done on a project during the year. From output constants by CIDB, work done value for projects under construction rise by 7.6% to RM169 billion (2016: RM157 billion). The increase is

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 91 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Estimated Value of Work Done in 2017 – 2018 the result of the implementation of large scale projects, and the utilisation of advanced technology that promotes productivity. Work done for 2018 is expected to be at RM197 billion following the implementation of more new works in 2017 and 2018. (Figure 4.1) Figure 4.1 | Estimated Completed Work Value Until 2018 Notes: New Work Value Data for 2016 until June 2017 * Forecasted ESTIMATED RENOVATION WORK VALUE It is customary for new home owners to make renovations after purchasing a property from developers or individuals. This includes upgrading or extensions of space, improvement of features according to personal preference, as well as safety purposes. The value of renovation works depends on the residential and its owner’s social status. Gross estimates of renovation works can reach 20.0% to 50.0% of purchase price and, occasionally match the original purchase price if the property has been owned over a long period. Based on the reported number of completed residential units and those projected for completion in the 2016 NAPIC Property Market Report, expenditure on renovation works for newly purchased units is expected to be around RM24.0 billion in 2017 and, RM25.0 billion in 2018 (Table 4.22). These renovation costs have been calculated on the minimum rate of 20.0% of purchase price. Estimated renovation works cost for old residential units with ownership transferred titles, shop units, commercial complexes, industrial units and office space could not be made due to a lack of statistical data and information. Table 4.22 | Estimated Residential Renovation Work Value Source: NAPIC Property Market Report 2015-2016 Notes1 : Values are based on the average transacted value for residential units from developer to individuals in 2016 (RM398,800.00) and additional 5.0% increase in value for 2018 (RM418,700.0).

92 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 4 CONSTRUCTION INDUSTRY PROSPECTS 2017 Estimated Value of Work Done in 2017 – 2018 ESTIMATED MAINTENANCE WORKS At 2017 Budget presentation, the government granted allocations for upgrading and maintenance works on government buildings. This includes civil servants’ quarters, PPR units and roads. The estimated total expenditure on repairs and maintenance for 2017 is RM5.9 billion. The amount is projected for an 8.0% increase in 2018, considering the numbers and depreciation stages of old buildings. The estimation is based on available information in government expenditure. If the estimate is to include the private sector, the value would be definitely higher since there are much more privately owned buildings with higher frequency of maintenance works. Among others, maintenance on commercial buildings notably retail space, complexes, hotels, convention centres and highways. Overall, the renovation works and maintenance value is forecast to reach RM30.0 billion for 2017. Table 4.23 | Estimated Maintenance Expenditure for 2017 Source : 2017 Budget CONCLUSION The National Transformation Programme agenda has provided enablers and drivers for a national economic growth by combining the roles of public and private sectors. The accommodative monetary policy and government business-friendly policy has spurred the growth of new investments, particularly in manufacturing, services as well as construction sectors. The modernisation and upgrading of public transportation has generated a high demand in construction sector, based on the record high value of awarded contracts in 2016. The construction sector outlook for 2017 and 2018 remains positive. There is a high potential for large scale property construction in tandem with new transportation infrastructure development to support the regional economic corridors’ growth. Rapid progress in Greater KL/KV and Iskandar Malaysia will instigate growth in other economic corridors. Efforts to attract FDIs, as well as boost external demand and arrival of foreign tourists are projected to accelerate at indications of a world economic recovery that is expected during 2017. When this happens, growth will spread across all economic sectors to culminate in an overall robust economic growth for the nation.

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 93 CHAPTER 3 PRICE, WAGE AND HIRE RATES Introduction CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Introduction Definition of Competency Development Plan Development of Competency Efforts on Competency Conclusion 94 94 94 97 102 107

94 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Introduction/ Definition of Competency In this edition, an additional chapter has been introduced, focusing on the current issues in construction industry. For this publication, the focus is on competency in the construction industry. Competency in the construction industry has always been an interesting topic. Over the years, competency had been numerously deliberated particularly on the subject of training, institutions and standards. Beneath the different views and opinions, the government agencies and private stakeholders agreed that a solution is needed to address the issue. Definition Of Competency According to Lembaga Pembangunan Industri Pembinaan Malaysia 1994 (Act 520), Section 2(1) certification and accreditation is stipulated as: “certification” means a procedure by which the Lembaga (Board) or any person authorised by it gives written assurance that a process, practice or service conforms with specified requirements “accreditation” means a procedure by which the Lembaga (Board) or any personal authorised by it gives formal recognition that a body or person is competent to carry out a specific task relating to the construction industry At the same time, no worker can be engaged in the construction without accreditation or registration as construction personnel. CIDB is responsible for the accreditation of construction personnel. Under the Act 520, Section 33A (1) specified that: “No construction site supervisor or skilled construction worker shall be involved or engaged, or undertake to be involved or engaged as a construction site supervisor or skilled construction worker unless he is accredited and certified by the Lembaga (Board) and holds a valid certificate issued by the Lembaga (Board) under this Act.” The Construction Industry Development Board of Malaysia (CIDB) proposes to define construction skills’ competency as “the ability of a construction personnel to perform successfully the construction tasks within a certain work-scope in accordance to the required competency standards as specified in the National Occupational Skills Standards (NOSS) or other equivalent competency standards as recognised by CIDB”. This definition need to be discussed further with the construction stakeholders, but for the purpose of this article, this definition will be adopted throughout this document. Therefore, competency can be summarised as the ability of a personnel to perform tasks in accordance to the competency standards. The competency standards are the benchmarks established by subject-matter experts. In Malaysia, NOSS is applied as the principal reference of competency standards in the construction industry. For this article, competency is referred to level 1 to 3, or semi-skilled and skilled construction personnel. Construction personnel with competencies higher than level 3, such as Project Manager and Construction Safety & Health Officer are not covered in this article. Development Plan The Eleventh Malaysian Plan (11MP) The Eleventh Malaysia Plan (11MP) is a 5-year development plan from 2016 to 2020. A part of it describes the initiative by the government in which all contractors are encouraged to enhance their competency skills by undertaking training and development programmes. Under the 11MP, the construction sector is projected to expand by 10.3% and to contribute about 5.5% to the economy annually until 2020. Additionally, the construction industry employs approximately 1.2 million personnel or 9.5% of Malaysia’s total workforce. The growth in construction industry will be fuelled by the increasing demand from the housing industry as well as the planning and the implementation of the various infrastructural projects such as highways, water Introduction

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 95 CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Development Plan dams, sewerage systems, water networks, power plants, urban transportation systems, ports and airports. The strategies to enhance knowledge content in the construction industry include enhancing the quality of human capital, accelerating capacity and capability building of Small and Medium Enterprises (SME) contractors. Among key initiatives include fostering greater collaboration between CIDB, construction professional boards and training institutions to develop industryrelevant training modules, establishment of assessment centres and apprenticeship programme. Construction Industry Transformation Programme (CITP) Construction Industry Transformation Programme (CITP) was officially launched on 10 September 2015, and is implemented simultaneously along 11MP. It contains 18 initiatives across 4 strategic thrusts, to guide the transformation and continued development of the industry. The long-term plan was a first of its kind, with active participation between the government agencies and private stakeholders. The CITP is monitored by CIDB and highlights the direction of the construction industry under 4 strategic thrusts, and its initiatives. The 4 strategic thrusts are: 1. Thrust 1: Quality, Safety and Professionalism Ingrain the culture of quality, safety and professionalism into the construction industry. 2. Thrust 2: Environmental Sustainability Drive Malaysia’s environmentally sustainable construction. 3. Thrust 3: Productivity Double the industry’s productivity, matched with higher wages. 4. Thrust 4: Internationalisation Develop Malaysian champions to lead the action locally and globally. Competency falls under the third initiative, Productivity Thrust. Specifically, under Initiative P1: Continue investment in human capital development in construction. This initiative is expanded into sub-initiatives: • Initiative P1a: Streamline construction-related training programmes in Malaysia. According to CITP, Malaysian construction workforce is made-up of “largely low-skilled construction workforce, with the industry highly dependent on low skilled foreign workers. Industry productivity levels is one of the lowest in the economy and as compared with developed economies, with slow uptake on technology and modern practices”. Under CITP, the objective is to double the productivity with the corresponding increase in pay or wages. Part of the plan is to streamline training programmes and functions of TVET in the construction industry. • Initiative P1b: Strengthen reach, effectiveness and comprehensiveness of training. In this regard, the development of Training Map in competency will be made. A total of eight Key Performance Indicator (KPI), have been targeted for achievement by 2020. These include: a) All construction related training programs and institutions are to be streamlined and registered by CIDB by Q4 2018; b) Top 10 highly demanded skilled trades with training need be analysed, alongside analysis, occupational analysis and training maps by Q4 2018; c) 5,000 on-the-job apprentices to be produced by Q4 2020; d) 15,000 supervisory and management personnel (including QA/QC, site safety etc.) to be trained and certified by Q4 2020; e) 100,000 construction personnel to complete Continuous Professional Development training by Q4 2020; f) 100,000 construction personnel targeted for graduation in construction related skills and accredited by Q4 2020; g) 2 assessment centers in major foreign worker source countries established by Q4 2018; and h) 200 competency related documents completed and 200 trainers undergo train the trainer program by Q4 2020.

96 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Development Plan CITP recommended a broadening of the reach, effectiveness, and comprehensiveness of training and development for workers, professionals, and personnel in the industry. Key areas of enhancement involve conducting curricular reviews and development of improved curricular and training modules materials; to ensure that content is streamlined and up-todate with industry development and requirements. Efforts will be made in collaboration with industry experts to increase the quality of trainers and training providers. The Construction Industry Competency Blueprint (CICB) The Construction Industry Competency Blueprint (CICB) charts the direction of competency of construction personnel, and is currently being drafted . It is expected that CICB will become the principal guideline for construction industry. In essence, CICB will consist of the following components: a) The identification of the Construction Industry Occupational Titles (CIOT) in the construction sector. The CIOT are categorised according to the construction works by the subject matter experts. Among the works are Building, Power, Road, Marine/Waterways, Potable Water, Oil & Gas, Railway, ICT, Demolition and Sewerage. b) The formulation of the Competency Training Map as a reference for the construction personnel to advance or further their existing skills or competence. c) The review of the existing competency standards and the development of new ones. The competency standards are NOSS or its equivalent as recognised by CIDB. d) The assessment programmes and the implementations. e) The internal verification systems. f) The external verification systems. g) The training and implementations programmes by training providers. h) The certification and implementations programmes by assessment centres and training providers. i) The registration and accreditation of competent construction personnel by CIDB. j) The Competency Management System (CMS). k) The legal framework to support the assessments’ and verifications’ procedures. l) The Competency Advisory Council to monitor the progress and outcomes. There are 2 committees and a forum to present the findings; CITP–IWG & TWG Committee; and CICF. These committees along with subject-matter experts will continue to support and enhance the assessments, verifications and training aspects of the construction industry. Stage 1 a) The identification of CIOT in the construction industry. A total of 509 CIOT and 10 construction work were identified through industry workshop sessions. These were further categorised by subject-matter experts into Construction Industry Occupational Structures (CIOS). b) The next step is to develop the Competency Training Map, as targeted in CITP. The map will provide the direction for construction personnel for accreditation as CCP. Stage 2 a) The review of the existing competency development standards, NOSS. The existing NOSS need to be reviewed by subject matter experts under the guidance of experienced facilitators. There is a necessity for CIDB to develop new competency standards for newly identified CIOT as well

CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 97 CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Development of Competency as uncompleted NOSS documents. Currently, CIDB has identified 11 high-impact CIOT with NOSS, to be reviewed as soon as possible. b) The NOSS assessment system needs to be upgraded in tandem with the training, certification and accreditation procedures. Assessors will be the focal point in evaluating construction personnel. c) The internal and external verifications systems will be set-up simultaneously, to provide quality assurance in the assessment process. The verification processes will ensure that the assessment process is done in accordance with set procedures. d) The registration and accreditations of construction personnel under the CMS can be completed. This will be done by the establishment of the assessment, internal and external verification processes. Stage 3 a) TVET can proceed with the training programmes following the set-up of infrastructure for the assessments, internal and external verifications process. These training institutions will follow NOSS competency standard as guidelines in their training programmes. b) Only the accredited construction personnel will be allowed to work in the construction industry. This will ensure that the quality of workmanship is maintained; wages will increase; as targeted in CITP. Development Of Competency National Occupational Skills Standards (NOSS) The NOSS document is basically a set of documents with the following items: a) The CIOT. b) The description of the CIOT (Details in the scope of work for construction personnel). c) The step-by-step analysis of the tasks involved in the CIOT. d) The Construction Industry Occupational Structure (CIOS). The CIOS defines the levels of competency of each trade/ specialisation in the construction industry. e) The specific standards to be certified and accredited as CCP. With the application of NOSS, assessment centres will be able to design or formulate their own assessment structures. At the same time, NOSS is a valuable aid for training providers to prepare their trainees for the impending and upcoming assessments. In turn, each will complement each other, and would be able to produce their own training pathways, syllabi and training modules for CIOT. Review of the Existing Construction Related NOSS There is currently a total of 509 CIOT of existing and new occupations from level 1 to 3. This means that there are 509 NOSS that need to be reviewed or developed by the construction industry’s subject matter experts. NOSS will form the basis and the core of all the assessments and training exercises. A number of construction related NOSS have been developed by CIDB over a period of more than ten years. It is high time for some of these existing NOSS to be reviewed in order to keep them up-to-date. Among the measures to be taken include:

98 CONSTRUCTION INDUSTRY REVIEW & PROSPECT 2016/2017 CHAPTER 5 COMPETENCY DEVELOPMENT IN THE MALAYSIAN CONSTRUCTION INDUSTRY Development of Competency a) The competency assessments, verifications and training programmes of NOSS must also be consistent with CIOT. This will ensure that the construction personnel who are certified from these programmes will be registered or accredited as construction personnel . b) Update the existing NOSS in order to render them current, relevant and consistent. The new NOSS must also keep up with the new technologies, services and techniques applied in the training discipline. c) Examine the existing set of NOSS to ensure competency standards are sufficient and cover the requirement of a particular CIOT. The subject matter experts will provide their inputs in deciding whether the competency standards are according to their expectations. d) The subject matter experts need to check and verify that the existing NOSS for validity and relevance in the construction industry. If proven outdated or irrelevant, NOSS needs to be reviewed for updates. e) Decide on the standard formats to be utilised. This enables construction personnel to understand the conditions required for competent persons , as well as the requirements to advance their skills. f) In formulating NOSS, the competency standards must comply with the Principles of the Development of Competency Standards (SMART-VSC) guidelines which state these following rules: i. S: Specific This means the title of the competency standards must be specific. For example, CIOT for bricklayer. It must state clearly bricklayer and not bricklaying, the latter being the work description. The reference word “specific” also means the task stated in the CIOT must detail out the scope of work. CIOT will also be carried over to the training and eventually to the assessments. The competency assessments must be conducted based on the CIOT. Training providers are free to name their training modules, and whether to incorporate CIOT in the modules. Eventually, the construction personnel must state the competency standards they are going to be assessed for. ii. M: Measureable Methods, consistent with requirements of competency standard must be applied in measuring the performance of the construction personnel. A base and competency productivity level must be clearly stipulated. Both will act as reference in assessing the competency of a construction personnel. For example, the competency standards for a bricklayer is to lay 30 bricks per hour. The work will be assessed by the CCA. In order to assess a candidate bricklayer who may be undergoing assessment for level 1, the CCA must be a competent assessor with a level 3 qualification. In addition, the CCA must also be a subject matter expert who has achieved a level 3 qualification in bricklaying. iii. A: Achievable The competency standards must be achievable in a normal work setting by a competent person. Subject-matter experts must be from different backgrounds and experiences to obtain the right formula for the competency standards. The facilitator must be experienced to observe that no party will dominate or control the discussions. Competency standards which is skewed to the interest of a party will be invalid and rejected by construction industry stakeholders. iv. R: Realistic In practice, competency standards must also be realistic. Normal construction personnel must be able to perform the requirements under normal circumstances. The subject matter experts will be able to determine the level deemed to be “realistic” as far as the competency standards are concerned.