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Saturday, August 8, 2009

Building industry seen maintaining revenue

The local construction industry is expected to maintain its 2008 revenue of RM60 billion this year, despite the global economic downturn, says Master Builders Association Malaysia (MBAM).

MBAM president Ng Kee Leen said the sector expects to see some improvement in the second half of this year as the government starts awarding contracts under the RM60 billion stimulus package.

"The last four quarters have been slow for the sector. But going forward, we are optimistic as more tenders will be called. The big boys are hoping for contracts to build schools, hospitals, roads, highways and the low-cost carrier terminal," Ng said in Bandar Sunway, Selangor, yesterday.

"Although we see some light, we hope the government will speed up the process for awarding projects," he said.

The first stimulus of RM7 billion had benefited some 15,000 small contractors who were given contracts for building works, maintenance and repair, and the extension of schools.

Ng said the construction sector had a record breaking revenue of RM65 billion in 2007.

This figure could improve but there is concern now as the government has imposed the ad valorem stamp duty of 0.5 per cent for private and second-tier government construction contracts, which was proposed under Budget 2009.

This means ordinary service agreements are slapped with a 0.5 per cent stamp duty of the total contract value, whereas previously the stamp duty was fixed at RM10 for all types of contracts.

Ng said MBAM wants the government to review the stamp duty as it has resulted in serious cash flow constraints as contractors have to pay the fee up-front before they could get a hold of a contract.

"The money must be ready before they sign the contract. If the stamp duty is not paid, the contractors will not be able to get bridging loans and insurance. And, if they are government projects, the contractors would not be able to submit claims.

"There is inconvenience of doing business and also uncertainty. This is the voice from MBAM's 5,000 members, who command 70 per cent of the construction industry. We urge the government to revert to the previous practice of a RM10 flat fee for all types of contracts," Ng said.

He added that the stamp duty rate was exorbitant as contractors are also paying the Construction Industry Development Board (CIDB) a levy of 0.125 per cent on a construction contract.

The new ruling would cost the construction industry RM300 million more a year, or four times more than the CIDB levy of RM75 million per year.

Works Minister Datuk Shaziman Mansor had said in June that the government needs to relook the stamp duty of 0.5 per cent as it is having a negative impact on the construction sector.

The Building Industry Presidents' Council had a dialogue with the Ministry of Finance Inc in Putrajaya yesterday to present the impact of the new stamp duty rate, with the hope of reverting back to the old system.

The council members comprise MBAM, the Real Estate and Housing Developers' Association Malaysia, the Malaysian Institute of Architects, the Institution of Surveyors Malaysia, the Institution of Engineers Malaysia and the Association of Consulting Engineers Malaysia.

By Business Times (by Sharen Kaur)

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