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Wednesday, January 9, 2008

Q&A with UEM Builder MD: Infrastructure projects to shape construction sector

QUESTION: What will be the main challenges for the construction industry in 2008?

Ridza: The main challenges for the construction industry in Malaysia will be to overcome the issues related to the increase in price of construction materials such as bitumen, steel, cement and fuel. The increase of these raw materials is partially due to the global economic environment which, to a certain degree, is caused by the volatility of fuel prices. Another challenge will involve the shortage and loss of human resource/skilled workers in the construction industry to other parts of the world due to more attractive offers especially in the Middle East. These shortages of skilled manpower resources can affect the bottomline of the projects in terms of cost overruns and delays.

RIDZA: Ninth Malaysia projects bode well for the sector

Q: How do you plan to overcome these challenges?

Ridza: As one of the major players in the construction industry in Malaysia and nation-building partner to the government in delivering mega projects such as the PLUS Expressway, Malaysia-Singapore Second Crossing, National Sports Complex and Putra LRT, we have to do our part to contain the situation by reducing the company's construction cost through a more efficient way of conducting and improving operations.

One of the methods is by improvement of systems and processes with the use of information and technology (IT) to enhance efficiency.

As a leader, UEM Builders will endeavour to cascade these efficient methods to all the sub-contractors and suppliers for our projects. There is a critical need to cut red tapes, eliminate unnecessary bureaucracies, make fast decisions, communicate well through paperless methods and technology to execute works on the ground. A good example of innovation and technology in UEM Builders is the use of SMSes for approval and fast decision-making, which can be done anytime and anywhere. Hence, the use of IT in communications to obtain approval and to expedite decision-making processes on the ground with the objective of completing any project within the shortest time possible. This will help to a certain extent to counter the issues of the price increase. The challenges in the construction industry require the co-operation of the major players in the industry. The key players in the industry will also need to come together as a team to draw policies, strengthen and highlight construction issues especially in relation to the increase in material prices. For example, the reinstatement of price fluctuation clauses in the contract will enable the contractor to focus on the completion of the project. This will entail the support of the government as well as private sector in implementing such policies.

Q: What are the trends that can shape the construction industry in 2008?

Ridza: Infrastructure projects will be fundamental in shaping the construction industry in 2008. As such, the growth of this sector will be derived from the implementation of major transport-related infrastructural projects such as the Second Penang Bridge, Penang Monorail, Ipoh-Padang Besar double-tracking rail project and the extension of Ampang and Kelana Jaya light rail transit lines.

Efforts to develop southern Johor, on-going development in the Northern Corridor Economic Region together with the newly-launched East Coast Economic Region stand to add further impetus to the overall growth within the construction sector and many other related industries. However, we will need to overcome the inertia associated with major projects which requires strong commitment and skills of various decision makers, planners and engineers.

Q: What are the future prospects for the industry in 2008?

Ridza: Based on the Economic Report 2007/2008, the Malaysian economy is anticipated to strengthen further to between six per cent and 6.5 per cent, as against six per cent in 2007, with positive contribution from all industry sectors. The construction sector is also poised to strengthen further with a growth of 6.3 per cent (2007: 5.2 per cent). With the announcement of the corridors, there is a strong commitment to make the construction industry as the contributor to the Malaysian economic growth. As such, it is expected the future prospects for the industry in 2008 to be certain and bright, especially in the context of the Ninth Malaysia Plan projects proposed by the government which includes projects such as the Northern, Southern and Eastern Corridors Economic Region. However, there must still be a concerted effort by the government and private sectors to overcome issues, one of which is the escalation of material prices.

Q: How will the industry be affected by the expected rise in fuel and electricity?

Ridza:We foresee that the rise in fuel and electricity will definitely push the price of construction materials. This will have to be addressed by making provisions in the contracts and providing sufficient allowances for the price increase when undertaking the project. UEM Builders' other approach to mitigate the issue is by diversifying and broadening its base. We have plans to diversify into the construction of civil and engineering works for the oil & gas sectors and property development not only in Malaysia but overseas as well. We will use and ride the wave of these sectors to enable us to insulate ourselves from the potential increase of material prices. In addition, we intend to venture into smart partnership basis projects to reduce company's risks especially for oversea markets. Under this scenario, we will be able to manage our risk through a wider distribution of resources and spread our business portfolio into one of which is equitable and not place all the eggs into one basket.

By New Straits Times

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