(analytical papers) MALAYSIA AND CONSTRUCTION INDUSTRY PRESENT. Robby Dwikojuliardi ( )

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1 (analytical papers) MALAYSIA AND CONSTRUCTION INDUSTRY PRESENT Robby Dwikojuliardi ( robby_dj@ar.itb.ac.id ) CONSTRUCTION INDUSTRY and GST (Goods and Service Tax) IN MALAYSIA Nation building requires involvement and contributes of efficiency, productivity, cost competitive and environmentally friendly in construction industry. Nations be able to develop and utilized their resources more efficiently than others (PM Dato Seri Abdul bin Ahmad Badawi, 2007). 1 Malaysia has an obligation and responsibilities, taking place wealth nowadays for the future. In the mid global opportunities, increasing technological challenge should be a trigger for developing of construction industry strategy in Malaysia. Construction industry and private sector has assumes the important role in generating wealth and improving the quality of life through the government s socio-economic policies into social and economic infrastructures and buildings. 2 And further, creates a multiplier effect to other industries, in manufacturing, financial services, and professional services. To achieve the multifarious objectives in construction industry it is no longer sufficient to depend on the knowledge and experience of the past. The new dimension of construction calls for knowledge generation and better knowledge management (YB Dato Seri S Samy Vellu, 2007). 3 Construction sector, succeed being based on developing economic in Malaysia. Set up of the ASEAN economic in mid-2014 showed that over expecting in the beginning unstable. At this April, the Goods and Services Tax (GST) is likely to have minimal impact on the renovation construction sector during the initial phase of implementation of the new tax system. Construction Industry Development Board (CIDB) Malaysia Chief Executive Officer Datuk Seri Dr Judin Abdul Karim said the impact of any price hike on building materials would also depend on whether it is locally made or imported. "In the beginning, industry players may be unsure of the GST, and tend to increase prices of items. But, I am sure the government will take action to ensure no one takes advantage of the situation," he told a press conference. 4 1 Message from the Prime Minister, Master Plan of Malaysia Construction Industry Master Plan of Malaysia Construction Industry , p.11 3 Message from the Minister of Works, Master Plan of Malaysia Construction Industry "Programme on Strengthening Bumiputera Renovation Contractors Conference" through the CIDB National Accredited Renovators (CNAR), that was officiated by Works Minister Datuk Seri Fadillah Yusof (

2 The Real Estate and Housing Developers Association (REHDA) said the impending Goods and Service Tax (GST) will impact the local construction industry, especially on the joint venture (JV) developments between landowners and developers. Datuk Ng Seing Liong, REHDA s immediate past president and chairman of REHDA s task force on accounting and taxation, said once the GST is implemented, the land owners are expected to start charging six per cent to the developers. This six per cent is for construction cost service and landowner is not supposed to be involved in development. Now the government wants landowners to charge developers six per cent GST because they claim developers are providing construction service. Developers now pay high land cost to build houses. With the GST, they have to pay additional six per cent to the landowner as they own the land, Ng said. 5 Now, we can see that developing impact, between GST and Construction Industry in Malaysia give weight each other, more supporting from government and developing of infrastructure outside of the city with GST in Malaysia. ROLE OF CIDB AND BIPC IN CONSTRUCTION INDUSTRY MASTER PLAN OF MALAYSIA Construction industry has an obligation and a responsibility to ensure that development taking place today and pursuit of wealth today of the quality of life in the future. Understanding the importance of the stake holder role in construction industry, there is the institution of construction developing that has a strategic in construction of infrastructure in Malaysia, especially for contractors. The institution is The Construction Industry Development Board (CIDB) of Malaysia, was established under the ACT 520 (Lembaga Pembangunan Industri Pembinaan Malaysia/ LPIPM) on 24 th July 1994, as the governing body entrusted with the responsibility to provide effective leadership and coordination to industry s players, in Malaysia. The CIDB is a statutory body under the Ministry of Works, Malaysia, and has been given the authority to lead and develop the construction works, value for money, and responsive to consumers sentiment over construction performance (CIDB, 2007). In CIDB, it has been made mandatory for all local and foreign contractors to be registered in one of the seven grades of registration before undertaking their business operation in Malaysia. In the year 2000, CIDB introduced the ISO 9000 QMS (Quality Management Systems). Due to the grades based on 5 Datuk Ng Seing Liong (August 2014), The Real Estate and Housing Developers Association (REHDA) immediate past president and chairman, GST Will Impact Local Construction Industry, Building Materials Distributors Association of Malaysia (BMDAM) (

3 financial categories 6, from the smallest financial G1 ( 200,000 MYR ) to the largest financial G7 ( 10,000,000 MYR ) categories contractors. Malaysia has the Presidents and Chief Executive Officers (CEO) of the contractors and the master builders, who jointly organized in Building Industry President Council (BIPC) of Malaysia. Hence, on June 24 th 2003, CIDB and BIPC were organizing a roundtable on Establishing Priorities to Improve the Malaysian Construction Industry for the Future. The event was participated by CEOs of major construction and property development companies, presidents of professional institutes and building industry associations, as well as officers from various government departments. The roundtable identified and recommended measures to improve the construction industry in Malaysia, with the role of coordinating on recommended and 10 identified Working Groups (WGs) in : 7 1. Construction Industry Master Plan (CIMP) 2. Technology, Knowledge and Research & Development (R&D) 3. Local and Foreign Projects 4. Human Resources 5. Productivity and Quality 6. Safety and Health 7. Industrialized Building Systems (IBSs) 8. Building Materials 9. Payment 10. Finance Then, CIDB and BIPC consolidated those issues for each WGs to proposed and produced to be the first draft of consolidated of Master Plan, is the Malaysian CIMP (Construction Industry Master Plan) Framework Then, CIMP as a structure is organized into six sections to ensure that the construction industry is well positioned to support the nation s overall economic growth and to meet various challenges, such as the need to enhance productivity and quality along the entire construction industry value chain. STRATEGIC DIRECTIONS DAN RECOMMENDATIONS OF MALAYSIAN CONSTRUCTION INDUSTRY AS A ROADMAP OF MALAYSIAN CIMP 8 6 Buku Keperluan dan Prosedur Pendaftaran Kontraktor, CIDB Malaysia, cetakan Mac 2015, p.35 7 Master Plan of Malaysia Construction Industry , p Master Plan of Malaysia Construction Industry , executive summary, Strategic Direction of The Malaysian Construction Industry, p.10-57

4 CIMP outlines has vision and mission, 7 strategies thrusts and 21 specific recommendations. All guiding to development of Malaysian construction industry the following decades ( ). A strategy for Malaysian construction industry to be developed into sector that is able not only meet the challenges of international competition and seize the opportunities afforded in the global market place, but also to make a significant contribution to the nation s aspirations and the welfare of its people. 9 Developed as a means of charting the future direction of the industry, ensuring that it has the capacity to become a world class, innovative and knowledgeable global solution provider. Hence, CIDB strategic functions in developments are : 1. Construction Manpower Development : To produce knowledgeable skill full and proud construction personnel 2. Construction Business Development : To promote and improve construction business environment and capacity building 3. Construction Technology Development : To enhance construction quality, productivity, innovation and sustainable development. Quality in the construction industry will have to encompass more than contractors alone. Architects and engineers will have to be involved as well since for of the three contributing factors to the quality failures ( material faults, construction faults and design faults ), 50% of the failures can be attributed to design faults, while 40% are due to construction faults, and only 10% are because of material faults. 10 The endorsement of CIDB dan BIPC roundtable on June 24 th 2003, with Working Groups (WGs) on 10 identifications toward as the beginning of construction industry frame work in Malaysia. A few of strategic direction makes in vision, mission and critical success factors are as followed, seven thrusts have been developed and keys of performance to be succeeded to the overall CIMP that has been set up. The recommendation, has been developed to address key issues identified below : 11 STRATEGIC THRUSTS ST1 : Integrate the construction industry value chain to enhance productivity and efficiency ST2 : Strengthen the construction industry image RECOMMENDATIONS 1.1 Consolidate the industry 1.2 Standardise and integrate administrative practices and procedures 2.1 Enhance the professionalism of the construction industry 2.2 Enhance the procure-to-pay (P2P) strategy 2.3 Raise the sophistication level of the construction community 9 Master Plan of Malaysia Construction Industry , section Master Plan of Malaysia Construction Industry , CIDB Working Groups on Productivity and Quality, p.4 and p Master Plan of Malaysia Construction Industry , executive summary, Strategic Recommendations, p.12

5 ST3 : Strive for the highest standard of quality, occupational safety and health, and environmental practices ST4 : Develop human resource capabilities and capacities in construction industry ST5 : Innovate through research and development and adopt new construction methods ST6 : Leverage on ICT in the construction industry ST7 : Benefit from globalization including the export of construction products and services Enabling Recommendations 3.1 Foster a quality and environment-friendly culture 3.2 Enhance occupational safety and health 3.3 Adopt Malaysian Standard (MS) in the manufacture or import of building and construction materials 4.1 Enhance and enforce the use of skilled labour (building capability) 4.2 Nurture the desire to work in the construction industry amongst the local workforce (building capacity) 5.1 Continuously innovate construction processes and techniques 5.2 Stimulate R&D activities through resource-pooling initiative amongst key players and provision of R&D infrastructure 5.1 Encourage knowledge sharing for continuous improvement 5.2 Develop local construction software industry 7.1 Ensure industry sustainability in the liberalized environment 7.2 Market the construction industry in a focused, global manner 7.3 Ensure the financial services sector s development is in line with industry s needs 7.4 Develop complementary industries 1.0 Review and amend the tax, legal, and regulatory frame work 2.0 Redefine the structure and the role of CIDB 3.0 Reinforce Bumiputera entrepreneurs capabilities and equitable share in the construction value chain The table above based on a roadmap strategic in the developing of construction industry in Malaysia decade Hence, not only this frame work of CIMP will be recommended and established for improving Malaysia in the future, but also to make a significant contribution to the nation s aspirations and the welfare of Malaysian people in a decade. Those inputs are then divided into its elements and the activities to be implemented for each element were then identified and included into the time span of the roadmap in order to achieve the mission within stipulated time frame in CIMP ROADMAP OF FRAMEWORK AND PLAN IMPLEMENTATION 12 The strategies and the action plans of CIMP, need to be implemented using approach covering within 10 years period from 2006 to This has been adopted into the growth in capabilities construction industry of Malaysia. Implementation of the strategies address to be a roadmap of construction industry in Malaysia, and they are divided in 3 phases : 1. Phase 1 : ( ) Strengthen domestic capabilities in all key areas. This phase, the immediate priority seeks for resolving of construction industry, focuses as new strengths and capabilities to practice or external developments which perpetuate inefficiency and low growth rates in industry. 12 Master Plan of Malaysia Construction Industry , executive summary, Implementation Framework and Plan, p

6 2. Phase 2 : ( ) Further strengthen existing capabilities in all key areas to compete effectively with global peers. This 2 nd phase will focus to develop new capabilities and to build a strong foundation for industry to venture overseas. This is a strategy for competing effectively with its peers in the global marketplace. 3. Phase 3 : ( ) Increase presence and enhance stature in the global construction arena. The long term plans in this 3 rd phase will be a fulfillment of the vision to be a world-class, innovative, and knowledgeable global solution provider, to establish a secured footprint for the construction industry in global construction marketplace. SEQUENCING FRAMEWORK AS A ROADMAP PHASE 1 : Strengthen domestic capabilities in all key areas PHASE 2 : Further strengthen existing capabilities in all key areas to compete effectively with global peers PHASE 3 : Increase presence and enhance stature in the global construction arena The implementation of this CIMP (Malaysian Construction Industry Roadmap), will be monitored, reviewed and updated accordingly (if needed) by CIDB to ensure its relevance and applicability. Further, results and variances in performance will be analyzed and highlighted to the relevant stakeholders. All in process, CIMP needs more than just the CIDB and BIPC role. Hence it needs Working Committees (WCs) and Technical Workgroups (TWs), to comprise representatives from various backgrounds, such as the government, industry players, industry associations, etc. will be established to advise the following : 1. Recent and potential developing in the global and impacts on the local construction industry. 2. An independent opinion on CIMP implementation progress. 3. To revise the CIMP, when and where necessary to ensure relevance and applicability. Therefore, the organization of CIMP implementation is structured as the following : Master Plan of Malaysia Construction Industry , executive summary, Implementation Framework and Plan, p.63.

7 CIDB Secretariat CABINET COMMITTEE ON INVESTEMENT & INFRASTRUCTURE DEVELOPMENT M O W CIDB BOARD CIMP WORKING COMMITTEE TECHNICAL WORKGROUPS MONITORING & ASSESSMENT IMPLEMENTATION DISCUSSIONS Construction industry in Malaysia, has been developed in the last decade from 2006 to From focus as a new strengths and capabilities which perpetuate inefficiency and low growth rates in construction industry, focus to develop new capabilities and to build strong foundation to venture overseas to be a world-class, innovative, and knowledgeable global solution provider, achieve to establish a secured footprint in global construction marketplace. GST is one of programs from government that involved into Malaysian infrastructure development, to increase of the development quality starting from GST. In a decade of CIMP roadmap, actually seemed that Malaysia has been implemented all the programs. Hence, all stakeholder have owned the results of monitoring, reviewing and updating accordingly by CIDB to ensure its relevance and applicability. In order to results and variances in performance will be analyzed and highlighted to the relevant stakeholders nowadays to develop the construction industry of the future in Malaysia. REFFERENCES Buku Keperluan dan Prosedur Pendaftaran Kontraktor, CIDB Malaysia, cetakan Mac 2015, Malaysia.

8 Construction Industry Master Plan (CIMP) Malaysia , Executive Summary, first printing 2007, ISBN , Kuala Lumpur, Malaysia , Kuala Lumpur, Malaysia. Datuk Ng Seing Liong (August 2014) GST Will Impact Local Construction Industry, The Real Estate. and Housing Developers Association (REHDA) immediate past president and chairman, Building Materials Distributors Association of Malaysia (BMDAM), Malaysia. ( Dato Seri Najib Tun Razak, Prime Minister (2015) Pastikan Cukai Barangan dan Perkhidmatan Tidak Bebankan Rakyat, Jaminan Perdana Menteri, UTUSAN MALAYSIA, Pemangkin Fikiran Rakyat, bil : 77 Tahun 51, Selasa , 10 Jamadil Akhir 1436, Malaysia. ( Construction Industry Master Plan (CIMP) Malaysia , first printing 2007, ISBN Datuk Seri Fadillah Yusof, Works Minister (Dec 2014) GST to Have Minimal Impact on Renovation Construction Sector : in Programme on Strengthening Bumiputera Renovation Contractors Conference" through the CIDB National Accredited Renovators (CNAR), Works Ministry of Malaysia, Malaysia. ( iproperty.com (August 2014) GST Will Impact Local Construction Industry, Malaysia s no1 Property Website, Malaysia. ( Jonkers, Frans (June 1999) Malaysia 1999 : Country Forecast Report with Forecast Through end-2001, published by Business Monitor International Ltd, June 1999, chapter 6 : Key Economic Sectors (p ) ISSN , Malaysia. Zuhairi, A.H., Kamar, KAM., Zain, M.Z.M., Ghani, M.K., and Rahim, A.H.A. (2008) Industrialized Building Systems (IBSs) in Malaysia : The Current State and R&D Initiatives, Malaysian

9 Construction Research Journal (MCRJ) vol. 2 no. 1, ISSN , CREAM CIDB Malaysia, Malaysia.