Summary

The Malaysian construction industry has been severely affected by the disruption caused by the pandemic. The industry's output has shrunk, as construction activity was brought to a standstill across many parts of the country, owing to the containment measures. For example, in Jun 2020, over 5,000 sites were not yet operational of the 6,750 construction sites inspected by the Construction Industry Development Board (CIDB). In 2020, the value of construction work done contracted by 19.4% to RM117.9 billion as compared to RM146.4 billion in 2019. All sub-sector recorded a decline in the value of construction work done, where the Civil engineering sub-sector decreased 24.0%, Residential buildings sub-sector (-17.2%), Non-residential buildings sub-sector (-17.1%), and Special trades activities sub-sector (-2.1%).

The Government’s vision 2020 project has been a major boost to the construction sector supported by the government’s plan to improve the country’s transport network and tourism infrastructure and increase the volume of renewable projects. Moreover, government efforts to address the country’s housing shortage have helped the industry to witness growth during the review period.

In 2021, the industry is expected to recover, supported by investments in infrastructure, healthcare, education and renewable energy projects. In March 2020, the government announced plans to spend USD 472.8 million on infrastructure development projects.

Among the specific plans, the government intends to develop a transit-oriented mixed development on a 196.7ha area, which involves the construction of commercial centers, office complexes and 10,000 affordable housing units with an investment of USD 33.8 billion. However, there are downside risks to this forecast, given the possibility of a second wave of COVID-19, which could further extend the movement restrictions.

Key Market Trends

Investments in Infrastructure Sector to Boost Construction Activity

The Malaysian government has made considerable progress to expand and modernized its infrastructures throughout the country. This effort is evident by the five-year centralized economic development plan known as the Malaysia Plan, whereby public sector infrastructure development consistently holds the largest funding portion.

Among the revived mega infrastructure projects is the 640 km-long East Coast Rail Link project, which resumed work on July 25 2020 after a year-long suspension. The bulk of domestic demand for Malaysian steelmakers will likely come from the construction of the 20 stations planned for the rail project as there is no rail maker in Malaysia.

In addition to ECRL, other projects such as the Light Rail Transit 3, Mass Rail Transit 2, Electrified Double Track Gemas-Johor Bahru, Klang Valley Double Track Phase 2, Central Spine Road, Pan Borneo Highway, and Coastal Highway in Sarawak are expected to boost Malaysia's construction segment.

As of October, the ECRL project is on track for completion by the end of 2026, Darwis Abdul Razak, chief executive officer of Malaysia Rail Link, said.

The construction industry is expected to expand in 2021, as major infrastructure and affordable housing projects are revived and accelerated to meet deadlines. Most of the growth is expected to be fuelled by domestic investments. State investments and developments in Penang, Johor, and Negeri Sembilan will also help boost the construction industry in 2021.

The outlook for the construction industry seems more optimistic after the proposed 2021 Budget was unveiled on 6 November 2020. The annual Budget has always been the driving force for the construction industry. National infrastructure projects will also steer state governments and local businesses to focus their investments and resources on the development of business hubs and townships, lifting the construction industry as a whole.

Increase in Residential Constructions To Drive the Construction Market

In 2020, the value of construction work in Malaysia was valued at approximately 117.9 billion Malaysian ringgit, indicating a decrease from prior years due to the pandemic. The construction sector in Malaysia grew at a slower pace in 2019. In 2020, residential building construction by the public sector in Malaysia was valued at approximately 1.67 billion Malaysian ringgit. However, the public residential building construction market in Malaysia has been observing a strong growth until 2019 when it was valued at 1.9 billion Malaysian ringgit, rising from 1.46 billion Malaysian ringgit. In 2020, the value of residential building construction by the private sector in Malaysia was valued at approximately 37.26 billion Malaysian ringgit, down from 32.78 billion Malaysian ringgit in 2019.

The previous government had announced a total of 300,000 housing units through its various housing programs, such as 1Malaysia Civil Servants Housing project (PPA1M) which aimed to build 175,000 affordable housing units across the country, First House Deposit Financing, Program Rumah Mesra Rakyat, People's Housing Program (PPR), and Syarikat Perumahan Negara Berhad. These projects boost residential construction markets during the forecast period.

Competitive Landscape

The Malaysian construction market is less competitive due to the presence of major international players holding a large share of the total market. Furthermore, the residential and transport construction sectors have a huge potential for growth in the forecasted period which stimulates opportunities for other market players.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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