Construction sector badly hit due to Covid-19

Bank Pembangunan Malaysia Berhad (BPMB), together with its strategic partner, China Construction Bank (CCB) (Malaysia) Berhad held their very first virtual knowledge sharing session on Infrastructure Financing: Challenges and Opportunities.

BPMB’s Sulaiman Abd. Rahim, Head of Business Banking Group stated that the construction sector has been hit at -44.5 percent of GDP growth.  On the back of the weak economic condition, which was further dampened by the pandemic, the Malaysian economy contracted by 17.1 percent in the second quarter of 2020.

He also mentioned that the inflation rate for this year is expected to be between 0.5 to -1.5 percent.

The Malaysian Institute of Economic Research (MIER) however has revised down its real gross domestic product (GDP) growth projection for 2020 to -5.5 percent amid a number of factors that weighed on the economy.

Investment in the private sector dropped by 26.4 percent, while in the public sector it dropped by 38.7 percent, he said specifically.

On the 11th Malaysia Plan for infrastructure projects, where the Government had allocated a development expenditure ceiling of RM260 billion,  only the first four projects are taken off, whereas the other four are still on hold.

Among the mega infrastructure projects under the plan are Klang Valley Mass Rapid Transit Line 2 (MRT 2), Light Rail Transit Line 3 (LRT 3), East Coast Rail Link (ECRL), Pan Borneo Highway, Kota Bharu Highway, Central Spine Highway from Kuala Krai to Simpang Pelangai, Rapid Transit System linking Johor Bharu and Singapore, and High Speed Rail (HSR) between Malaysia and Singapore.

Sulaiman pointed out that the Minister of Prime Minister’s Department, Mustapha Mohamed, mentioned that infrastructure projects will continue to be reviewed to minimise the gap between the rural and city folks.

“With various financial assistance provided to the rakyat, for the past 6 to 7 months, financial resources are very limited. However, the Government will do their level best to provide more allocation for the development and maintenance of infrastructure facilities,” he said.

Prior to the Public-Private-Partnership (PPP) concept, all government infrastructure projects were being financed by development expenditure allocations.

He further explained that, due to the unprecedented Covid-19 pandemic, the construction sector has been badly hit by stop-work orders during the first few phases of the MCO. It had to comply with stringent health and safety SOPs for workers and construction sites before resuming operations.  

“In the event the pandemic doesn’t subside in the next 6 -12 months, the global recession will become worse. The economy will not be sustainable, and the global growth could shrink by almost 8 percent

Due to this instability, the economic policy is uncertain and there are a lot of changes in the strategic direction of the Government and reduced foreign direct investment,” he added.

Additionally, he also highlighted specific issues such as terms of concession agreement, Government financial support, delay in regulatory approvals and land acquisition process, implementation weaknesses, budget allocation (delayed disbursement) and user acceptance.

Sulaiman also hopes that the Government will review the PPP approach, as it is slightly different than before, to ensure it would continue to contribute towards the country’s economic development.


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