Overview
Malaysia’s drive to become a competitive market and spur economic growth, emphasises the need to enhance both productivity and efficiency in the region’s construction sector – despite global challenges of escalating capital and overhead costs.
Based on our International construction market survey 2023, Malaysia’s construction costs are positioned among the most competitive globally. Meanwhile, in the regional context, it ranks slightly higher than emerging markets such as the Philippines, Indonesia, Vietnam and India. However, it remains notably well below other more developed countries in Asia, presenting a distinctive advantage to Malaysia.
The alignment of various factors, including initiatives such as the Madani economy, Twelfth Malaysia Plan, National Energy Transition Roadmap (NETR) and New Industrial Master Plan (NIMP) 2030, highlight a dedicated effort to improve the quality of life, ensure equitable access to infrastructure and wealth across the country and embrace technology for enhanced efficiency and accelerated innovation. These endeavors collectively indicate an ongoing commitment to capital investment and construction projects within the country.
Construction: a critical catalyst
The construction sector in Malaysia accounted for 3.6 percent of the total national gross domestic product (GDP) in 2023. This indicated a positive growth trend, with value increasing by 6.0 percent compared to figures recorded in 2022. Momentum is expected to continue into 2024 following the recent announcement of large infrastructure projects in Budget 2024 and the total approved private investment of MYR330bn in 2023 compared to MYR265bn in 2022.
Leveraging manufacturing and foreign investment
The services and manufacturing sector has shown significant growth, with both sectors contributing more than 97 percent of the total approved private investments as of 2023. Malaysia’s strategic location in Southeast Asia, business-friendly environment and cost competitiveness have made it a location of choice for major data centres, high-tech and manufacturing projects.
While COVID-19 pandemic-related challenges, such as supply chain disruptions and material lead time are easing, the sector is still facing challenges in balancing costs and benefits involving the rise in construction overheads.
This includes compliance to new regulations to improve workers’ accommodation standards and demands for increased wages as re-hired foreign workers return to the country in response to the economic rebound.
Skilled labour shortages could worsen and will continue to have an impact on the sector as more construction projects are expected with much competition for similarly skilled labour in the region.
Monitoring inflation
Inflation is also a trend to watch in 2024, as Malaysia moves towards weaning off subsidies. More recent measures include the discontinuation of targeted electricity tariff discounts and expectations around scaling back of fuel subsidies for selected income groups later this year.
Stable and optimistic
Overall, the picture is stable and optimistic, with Malaysia expected to achieve moderate GDP growth, between 4.0 and 5.0 percent, this year. Growth factors include a shift to domestic demand and higher tourism activities, with a healthy portfolio of in-flight and prospective mega projects in the pipeline.
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