Government Projects

Malaysia

Economic News

22 Jul 2010
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As part of the Ninth Malaysia Plan (9MP), a host of new government building projects will be tendered in the coming months. The projects are the first in a succession of the government planned public works and infrastructural improvements.



On July 18, Abdullah bin Haji Ahmed Badawi, the prime minister, provided a detailed announcement of the projects in the pipeline. Planned are 880 construction projects divided among the 21 government ministries, and worth around R15bn ($4.08bn). Among the projects are the construction of education facilities, water supply projects, bridges, roads and the Integrated Transportation Terminal in Gombak, Selangor.



"This is but an initial list of projects under the 9MP. The government will announce other projects from time to time once it has received all the information needed from the relevant ministries," Abdullah said in a statement.



Over half of the projects listed are geared towards one of the primary goals of the 9MP: the cultivation of Malaysia's human capital. Education projects include the construction of more than 450 primary and secondary schools. Also to be tendered are upgrades to university polytechnic complexes in universities and the construction of the Advanced Technology Training Centre in Jerantut, Pahang.



Although most of the projects are planned for the seven states including the federal territories of Kuala Lumpur, Labuan and Putrajaya, there is a fairly even distribution of spending allocation across all the states.



A total of 455 projects of the 880 released by the government will be under the 9MP funding allocation, and the remaining 425 will be private finance initiative (PFI) projects. Under the PFI schemes, the government will pay contractors in lease instalments over long periods of time, a method that is easier in the long term for both parties.



Abdullah indicated that in some cases, the government would give precedence to proposals that are structured as PFIs. He has also not ruled out the possibility of the government assisting companies in securing funds for PFI projects.



The announcement of these new projects is particularly welcome news for contractors. The Malaysian construction industry has struggled in recent years, registering eight quarters of reduced profits due mainly to cutbacks in public works. A majority of Malaysian builders depend on government contracts.



Smaller building firms, the hardest hit during the recent slump, are likely to reap the greatest benefit, as much of the expenditure is for smaller-scale projects that are within their capabilities. "The projects are also not meant to be large, because they are meant to give opportunities to the private sector, and will allow many opportunities for them to take part," Prime Minister Abdullah said at a press conference on Wednesday.



Although some observers are not convinced that the projects will be large enough to significantly impact the construction sector, this is only the first wave of projects. Even if the initial phase does not excite the industry to the degree anticipated, the gradual announcement of subsequent projects under the 9MP will lead to sustained activity, and foster long-term growth in the sector.



Moreover, given the construction industry's many linkages, it is likely that the projects will stimulate other sectors in the economy including manufacturing and services.



As other sectors will be stimulated, the new projects are expected to have a broad economic impact. Large public and private spending resulting from the new projects will likely boost GDP, and help counter the risk of the economy slowing down in the second half of the year.



However, the economic benefit will depend significantly on how quickly the tendering process can proceed. According to Abdullah, tender notices will be circulated in three months.



It appears that the government is serious about getting these projects underway as soon as possible. A statement posted on the web site of the prime minister's office pledged to expedite the tender process. He urged all ministries and government agencies, together with the Public Works Department, to speed up the process of designing and issuing documents for tenders so that the projects could be implemented quickly.



Abdullah also indicated that the Implementation and Co-ordination Unit would monitor the process closely. The unit has adopted a new methodology, stressing good practices and processes in planning and execution of the projects, to prevent delays.



As chairman of the National Implementation Action Body, Prime Minister Abdullah said that he would personally monitor the implementation of the projects.



The 9MP was launched in March 2006, and the announcement of its initial works projects had been much anticipated. Under the five-year plan, the government has allocated R200bn ($54.34bn) for development projects while another R20bn ($5.43bn) will come under the PFI.

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