Worst is over for construction?

Increasing contract awards may indicate better days for the construction industry even as the government moves to evaluate some mega projects, said Hong Leong Investment Bank (HLIB) Research.

HLIB noted that domestic contract awards rose by 4 per cent year-on-year in value to RM4.8 billion in the first quarter of 2019, and 20 per cent over 4Q18, The Malaysian Reserve reports.

“The job awards increased mainly due to the resumption of major infrastructure projects after being reviewed by the government,” the research note read. “Recent positive news flow signified that the worst could be over for the construction industry.”

The government has resumed some mega projects following cost reviews. The potential revival of the East Coast Rail Link project and the approval of high-impact projects under the midterm review of the 11th Malaysia Plan, such as the Kulim airport, could help reignite the domestic construction industry, HLIB added.

The government has also given the green light for 121 infrastructure projects nationwide, worth RM13.93 billion, by the previous federal government, after price negotiations that resulted in cost savings RM805.99 million.

This is expected to give the industry a much-needed shot in the arm, as reported by The Edge.

“The announcement is definitely a great confidence booster for the construction industry, as the general sentiments before the announcement was that there were not many projects on the ground in the first quarter of 2019,” said Foo Chek Lee, president of Master Builders Association Malaysia (MBAM).

However, the domestic construction industry is expected to still remain challenging in the near term.

“We expect more domestic contractors to bid for foreign jobs, given the continued slowdown in the domestic construction landscape,” HLIB added. Industry players are also looking at projects in Sarawak due to the state government’s RM9 billion development budget, which is expected to come from state reserves. — Construction+