Construction sector in Malaysia

Posted on 26 August 2008

Source: SEAISI
The Malaysian economy remained resilient with a satisfactory GDP growth rate of 6.3% in 2007 and 7.1% in the first quarter of 2008. The services sector, which accounted for more than 50% share of total GDP, continued to be the main catalyst to the growth expanding by 8.0% in the first quarter of 2008, followed by the manufacturing sector (6.9%). The agriculture sector which is mainly driven by oil palm production, registered a 6.3% growth rate in the same period. The mining sector recorded a growth of 3.7%, supported by the higher production of crude oil.

Source: Department of Statistics, Malaysia

The construction sector, which is the main driver for steel consumption in the country, has seen its share of contribution to total GDP shrunk from 3.9% in 2000 to 3.0% in 2007. However, after three consecutive years of decline, the sector turned around in 2007 to record a positive growth rate of 4.6%. The momentum was maintained in the first quarter of 2008, with a growth rate of 5.3% y-o-y. The increase in construction activity in Malaysia was contributed mainly by civil engineering projects such as the construction of expressway, development of airfields, construction of power plants and other infrastructure activity by both private and government sectors. Civil engineering remained as the major contributor sector for construction industry in Malaysia with a share of nearly 40% of total output in the industry. Output from residential sector grew substantially from 16% in 1996 to reach 30% in recent years. More than 70% of the construction activities was carried out by the private sector. The majority of the construction works undertaken by the government was to build infrastructure including construction of roads, bridges, tunnels, highways, dams, drainage and sewage system and communication and power lines etc. Construction activities in Malaysia were concentrated in Selangor and Kuala Lumpur which together accounted for around 60% of the total gross construction output in the country.  

Source: Department of Statistics, Malaysia

According to the Department of Statistics of Malaysia, iron and steel materials contributed up to 23% of total materials used in the construction sector while the share of cement and concrete material was also 23%. The current tight supply and rising steel and cement prices could lead to a slowdown in construction works in Malaysia. According to a developer in Malaysia, steel bars have gone up to RM4,100 per tonne in August 2008, compared with RM3,500 per tonne in June while cement is sold at RM13.45 a bag compared with RM10.95. 

However, Mr. Chow Chong Long, President of Malaysian Iron and Steel Industry Federation (MISIF) contended that there was no steel shortage in the country as steel millers had continuously increased their capacity over the past few years.

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