Malaysian construction industry on the mend

After more than a year of deferred projects and high material costs, prospects for the local construction industry is improving, bolstered by the fall of material prices such as steel from its 2008 peak of RM4,000 a tonne to around RM2,000 a tonne last June, according to Sharil Ridza Ridzuan, the managing director of Malaysian Resources Corporation Berhad (MRCB).

Besieged by strong crude oil price of US$147 per barrel and material costs last year, the local construction industry is set for better times now that a clearer political wind is apparent with the Prime Minister Datuk Seri Najib Tun Razak administration, according to CIMB Research. With the efficient launching of projects under the 9th Malaysia Plan (9MP), the state of the industry is improving. However the government has to be quicker in the implementation of the 9MP, said Datuk Foo Chu Jong, the managing director of Prinsiptek Corporation Berhad.

"We can definitely look forward to better times, especially with cheaper material prices now."

- Shahril Ridza Ridzuan,
Group Managing Director of MRCB

 Construction industry players are confident that the sector is on the way to recovery.

Rising joint ventures in Indian construction

Due to the highly fragmented nature of the Indian construction sector, there has been an increasing number of joint ventures between industry players to handle complex infrastructure projects. Being the second largest economic activity after agriculture, with a workforce of 33 million people, the industry is full of unorganised players who work on a subcontract basis.

With the government's Rupee10tr (US$20.76) 11th 5 Year Plan launched in 2007 and set to run till 2012 to boost the construction industry, more subcontractors are expected to enter the industry over the next three years. Due to the prevalence of subcontracting, 20% to 40% of construction costs are due to subcontractors, with raw materials accounting for the other 30% to 50%.

Sime Darby to invest in oil palm in Sarawak

Malaysia: Sime Darby Plantation Sdn Bhd is to invest RM100m for the development of oil palm plantations in Julau's Native Customary Rights (NCR) land in Sarawak. The project, a joint ventureship with land owners from 109 longhouses, would cover an area of about 20,000 hectares, according to Mohd Helmy Othman Basha, the head of the corporation's Plantation Agency and Consultation.

He said that the project's preparatory work will begin after the company has done and submitted the Social and Environmental Impact Assessment to the relevant authority. He added that the project will bring job openings, business opportunities, dividends and bonuses from harvested crops, as well as more roads. Under the joint venture, Sime Darby will own 60% equity, the land owners hold 30% and the Land Custody and Development Authority (LCDA) will receive the remaining 10%.

Overseas investors eyeing Japan's property

Carlyle Group, Blackstone Group LP and Lone Star Funds may initiate purchases of Japanese property in the first half of 2010 in anticipation of future price declines, with the country's commercial land prices having fallen 4.7% to a three-year-low in 2008, with the worst decline of 5.4% recorded in Tokyo, Osaka and Nagoya. Overseas investors like Blackstone and Lone Star Funds, which are keen to invest in Japanese property firms that require financing, may wait for property prices to worsen before entering the market.