Govt urged to stabilise building material prices

A TRADE association has warned that the building material crisis could threaten the entire economy if it is not solved quickly.

Master Builders Association of Malaysia (MBAM) president Ng Kee Leen said that prices of building materials, especially steel bars, were rising too fast.

"If the government does not take immediate action to stabilise the prices, a negative chain of events can, and will, happen," he told reporters at a press conference in Kuala Lumpur yesterday.

He said the government should cover the ground and see why many contractors were not taking or bidding for jobs, and why contractors were giving up jobs after clinching them.

"If there is no remedial action now, this crisis in the construction sector can cascade into the banking sector and pull the whole economy down."

Ng said that many small contractors, who had taken up jobs at last year's pricing, were now forced to either wind up or give up the jobs.

This means that developers will suffer because they cannot hand over the partially completed houses to buyers, who in turn will lose out because they have to pay their housing loans without actually taking possession of the properties.

Building material suppliers, too, will suffer because the contractors may not be able to pay them, Ng added.

Asked about the government's decision to incorporate a price-fluctuation clause in contracts from May 12 this year, Ng said: "It doesn't solve problems for jobs undertaken before that date.

"The solution is to stabilise steel bar prices because contractors are also unsure about taking on jobs offered by property developers.

"Given the present scenario, we definitely cannot meet the 5.5 per cent growth forecast for the construction sector."

Ng said that banks will be hit as well if they have to grapple with mounting non-performing loans when the contractors cannot pay up, and this could threaten the entire economy.

He recommended that the government set aside at least RM1 billion for a three-month stockpile of steel bars.

"Should the steel bar price jump higher than the current RM4,300 per tonne, the government can then release this stock for local consumption, at least for some of the government projects, so that contractors are not forced to abandon the jobs halfway due to a lack of funds."

Also present at the press conference was Chartered Institute of Building Malaysia (CIOB) president Isaac Sunder Rajan.

The CIOB and MBAM will jointly organise the International Construction Conference 2008 from August 27 to 29.

The three-day conference in Kuala Lumpur will focus on project management of mega-sized projects and contractual claims.

By New Straits Times (by Ooi Tee Ching)