FOREIGN exchange fluctuations, pressure on margins and a bevy of infrastructure initiatives available back home are among the factors more Malaysian contractors are exploring domestic opportunities, according to the International Federation of Asian and Western Pacific Contractors’ Associations (IFAWPCA).
This comes despite continuing challenges in the domestic scene ranging from manpower shortages to issues in safety and health regulatory frameworks affecting regional players as well, with cross-border collaboration as the focus of the federation’s upcoming 44th IFAWPCA Convention.
CIDB has counseled the formation of consortiums of mid-tier contractors to facilitate overseas ventures, says ‘Asri
“Malaysian ventures overseas have historically been driven by local players who have already made a name for themselves domestically,” says Construction Industry Development Board (CIDB) Malaysia chief executive Datuk Ahmad ‘Asri Abdul Hamid.
“When the number of available local projects declined around the year 2000, these contractors pursued projects in other markets. After expanding their capacity and competitiveness there, they are returning to Malaysia as contract availability continues to increase in recent years,” he adds.
Coming full circle
The value of domestic projects awarded to local contractors has grown from RM94.4 bil in 2007 to RM229 bil in 2016, according to CIDB in its latest Quarterly Statistical Bulletin. Conversely, overseas contracts have fallen from RM18.6 bil to RM1.2 bil over the same period.
India has led the way in terms of “friendliness” to Malaysian players, with RM18.5 bil worth of contracts awarded from 1986 up to Q2 2017. The United Arab Emirates, Saudi Arabia and Qatar have been cordial as well, awarding RM12.8 bil, RM12.5bil and RM12.3 bil respectively.
“If domestic construction picks up, international ventures tend to decrease. In terms of regional attractiveness, Thailand, Brunei and Indonesia present proximity in terms of climate and culture while reducing logistical costs,” says IFAWPCA president and Bina Puri Holdings Bhd group executive director Datuk Matthew Tee.
Tee’s IFAWPCA presidency has revolved around the fostering of intra-member communications and post-convention action plans to accelerate progress
“Brunei has the benefit of a stable political and economic environment, while Thailand experiences frequent political changes. Meanwhile, countries in the Middle East, while offering substantial rewards, can be more challenging due to the distances involved,” he adds.
There are several routes available to domestic contractors interested in securing projects overseas, ranging from participation in open tenders, joint ventures with local players and the purchase of a stake in a local company, to the incorporation of a company subsidiary or associate.
“In exploring international markets, you need to know your client, and you must be able to sustain operations overseas. There will certainly be ‘tuition fees’ involved, which are the upfront costs you’ll absorb in negotiating the learning curve in a new market,” says Tee.
“In terms of mid-tier companies, these players often have difficulty competing in overseas markets due to their limited capacity. So one of CIDB’s focus areas now is exploring how to group these companies into consortiums to complement each other’s strengths and open up new horizons,” elaborates ‘Asri.
Domestic issues, regional perspectives
Closer to home, while some quarters have projected downward pressure on costs of construction due to a strengthening ringgit, Tee counters that this has not translated to an actual decrease in expenses, particularly in terms of steel prices.
This is reflected in increases across the board in the Department of Statistics Malaysia’s Building Material Cost Index for February 2018, with the exception of Perak for cement and metal sections, and the central region for ceiling materials. Index increases for steel components ranged from 0.8 to 5.1 points, depending on region.
Tee also notes that the issues facing regional contractors broadly reflect the same challenges that domestic contractors face in Malaysia today, with tardy payments and manpower as key concerns, despite the differences in demographics and scale between IFAWPCA members.
“Thailand has a population of nearly 70 million, more than twice that of Malaysia. However, they see shortages in domestic labour supply for their construction sector as well,” says Tee.
“They have workers coming in from Laos, Myanmar and so on, because locals just don’t want to venture into the field. Even South Korea has an illegal migrant worker population of more than 250,000.”
Established in Manila in 1956 with eight founding members, IFAWPCA was founded to foster cooperation, collaboration and the exchange of ideas between contractors in the wake of World War II, with an eye towards addressing such issues regionally.
Pooling regional resources
Today, the federation’s roster has swelled to 19 nations, ranging from Asean members such as Singapore, Cambodia and Thailand to those in neighbouring regions such as Mongolia, Bangladesh and Bhutan.
Having taken his current role on June 2, 2017, Tee’s primary goals during his tenure have revolved around strengthening the deliverables set from one IFAWPCA convention to the next.
Tee says one of the focus has been on catalysing communication between members, including social media and messaging group interactions. “We’re also working on an IFAWPCA app and board member profiles, to facilitate networking and cross-border collaboration.”
Tee shares that federation goals during his presidency have been broken down into a secretariat task matrix with more than 35 items, grouped into interest areas such as conditions of contract, construction business development and temporary investments.
The task matrix, which measures progress on deliverables from the period between the 43rd IFAWPCA Convention in Seoul in June 2017 up to the Singapore Midterm Meeting in January 2018, is 63% complete, leaving about eight months to complete the remainder before the upcoming IFAWPCA Convention in November (see sidebar).
Driving regional partnerships
The 44th International Federation of Asian and Western Pacific Contractors’ Associations (IFAWPCA) Convention, themed Strategic Alliance with Innovation and Human Capital, is set to attract more than 1,000 domestic and international participants. The convention will be held at Kuala Lumpur Convention Centre from Nov 12 to Nov 16.
The convention, to be co-located with the Building & Construction Exhibition 2018 showcasing regional building expertise and capabilities, also marks the transition of the IFAWPCA presidency to the Maldives, the next hosting nation as determined alphabetically.
“The IFAPWCA Convention is an important platform where members can absorb, learn and share experiences towards taking proactive action to resolve problems in respective countries,” says IFAWPCA president Datuk Matthew Tee.
“In addition, the event will create the opportunity for exhibitors and visitors from 20 countries to meet in one location under one roof to explore new business opportunities and smart partnerships,” he adds.
In total, the convention will offer 320 exhibition booths, with about 120 exhibitors representing more than 25 business segments expected to attend. A programme of two keynote addresses and two forums is planned, with topics ranging from Challenges Impacting Profits to Emerging Trends and External Threats and Opportunities.
The IFAWPCA Industry Awards 2018 will also be held in conjunction with the event, with categories ranging from Builders Awards for Building Construction and Civil Engineering Construction to individual recognitions such as the IFAWPCA-Choi Fieldman, IFAWPCA-Atsumi, Yeoh Tiong Lay-IFAWPCA Awards.