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Monday, July 14, 2008

Contractors see risk of abandoned projects

The construction industry wants the Government to resolve the current crisis immediately. Otherwise, its players may be forced to abandon their projects, leading to an entire collapse of the industry.

Escalating building material prices, which had increased by an average of 25% this year, and a serious shortage of workers would be a double blow to lead to this collapse.

Master Builders Association Malaysia (MBAM) president Ng Kee Leen in issuing this warning said the Government must stabilise the high material prices, in particular steel and cement, which were crucial for the construction industry.

Ng Kee Lean

MBAM, he said, had proposed to the Government to address the high prices of building material prices but no action had been taken so far.

“There is only so much that the MBAM can do. If this (rising costs) persists, the whole industry may collapse,” he said.

Ng said the industry also faced a serious shortage of workers. “In 2006, about 30,000 professionals from the construction sector left for Singapore to seek employment,” he said.

Meanwhile, MBAM secretary-general Yap Yoke Keong urged the Government to remove the 10% import tax on cement and impose export taxes to ensure sufficient domestic supply for the local construction industry.

“The MBAM submitted a memorandum to the relevant government agencies asking them to remove the import tax as it is not economically viable,” he said.

He added that many countries, including China and India, had imposed export taxes to help their own industry.

“We are surprised why such a practice has not been implemented in Malaysia,” he said, adding that political instability due to the outcome of this year's general elections had also affected the construction and property sectors.

“Because of the political situation, projects in certain states are not proceeding and many local developments face the risk of being scrapped.”

Yap said many construction players, especially those with sound financial standing, might have to go abroad as the local construction sector was shrinking.

Bina Puri Holdings Bhd chief operating officer Gan Hwa Kian said many contractors were cautious when tendering for projects on concerns that building material prices might continue to escalate.

He said many projects would be abandoned, as contractors could not afford to complete them. “The Government must step in and address this,” he said.

Al-Ambia Sdn Bhd executive director Tang Juang Yew said high material prices had eroded the profit margins of most construction companies.

“Construction cost in the last two months has increased between 18% and 22%. Developers will raise their prices and at the end of the day, it is the purchasers who will suffer.”

By The Star

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