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Challenging times for CIDB
The Construction Industry Development Board (CIDB) wants to transform the construction industry — an objective that is in line with the government’s vision of turning Malaysia into a high-income economy by 2020. Some would deem this a bold declaration but CIDB’s senior general manager, chief executive office, Abdul Latif Hitam says the board is well aware of the daunting task ahead. He acknowledges the challenges that CIDB faced in some of its past efforts.
“Change is a scary thing for many people,” he says, shaking his head. “Over the years, some of our initiatives and programmes have borne fruit but, unfortunately, some have not.”
However, with construction playing a key role in the government’s Economic Transformation Programme, there is little time to dwell on the past.
The 10th Malaysia Plan (10MP) for 2011 to 2015 is expected to have a significant impact on the construction industry, which is expected to grow 3.7% a year compared with GDP growth of 6% a year.
CIDB was recently asked by the government to rejuvenate the Construction Industry Master Plan Malaysia 2006-2015 (CIMP) and adjust it to achieve Vision 2020. CIMP is a 10-year strategic road map aimed at transforming the Malaysian construction industry into a world-class, innovative and knowledgeable global solutions provider.
“Construction is labour-intensive in a way but if we want to embark on more productive action and achieve better quality of work, we have to look at automation, technology and innovation,” says Abdul Latif.
To accomplish these goals, CIDB has identified two key strategies which it hopes will change the construction industry for the better — the private sector’s adoption of the Industrialised Building System (IBS) and the creation of a local skilled construction workforce.
Industrialisation of construction
IBS, a construction method that utilises structural components or a building system that involves prefabricated components and on-site installation, is not new to Malaysia.
In fact, the first two IBS projects in the country were launched in 1966 — the Pekeliling Flats in Kuala Lumpur and Rifle Range Road Flats in Penang.
In 1999, the IBS Strategic Plan was launched to promote the system’s usage in the industry. This was followed by the IBS Roadmap 2003-2010, a blueprint to industrialise the construction industry by 2010.
The government took the lead in 2008 by mandating that all public-sector projects must attain no less than 70% IBS content.
Yet, four decades after its introduction, the adoption of IBS still remains low.
The objective of IBS is to increase the quality of buildings for end users while bringing about a faster completion time with fewer site workers.
Abdul Latif recalls a construction site he saw from his hotel room in Australia. “I could see from the hotel room how clean and orderly the construction site was. IBS is not only a way to increase safety and cleanliness, but it also creates a more pleasant working environment.”
In Malaysia, he says, it has always been left to the private sector to adopt IBS.
“The earlier thinking was that the industry does not need additional laws and that the people in the industry would educate themselves, but we have come to realise this is not the case. This is one of the reasons CIDB was set up,” he explains.
This is set to change with the IBS Roadmap 2011-2015, a continuation of the IBS Roadmap 2003-2010.
The new blueprint has two goals, one of which should be easily achieved — maintaining the existing 70% IBS content rule for public-sector buildings through 2015.
The other goal, however, might ruffle a few feathers.
According to Rofizlan Ahmad, head of unit (project), by 2015, all private-sector projects must attain at least 50% IBS content.
“The developers and project owners must show that 50% of their projects have IBS content upon submission for approval of a project,” says Rofizlan.
The implementation will be gradual, starting in 2012 through various local authorities such as the Kuala Lumpur City Hall, Petaling Jaya City Council and Iskandar Regional Development Authority.
Rofizlan points out that Malaysia will not be the first to impose such a requirement in the region; Singapore has, since 2005, required all government and private-sector projects to have at least 60% IBS content.
“Being part of the government, our priority is the end user. We want to ensure quality and safe products for the end user. It is best for us to have certain stringent laws that will make the players toe the line,” says Abdul Latif.
Seeing that the private sector accounts for 55% to 60% of total value of projects carried out by the construction industry, getting it to embrace IBS would certainly change the industry. The figures are based on average yearly project value from 2005 to 2008 and provided by CIDB.
Interestingly, the IBS Roadmap 2011-2015 notes that many Malaysian developers apply IBS to overseas projects to ensure faster completion so that the cost of overseas labour and financing can be reduced.
But at home, attempts to promote IBS have met resistance from the industry.
Datuk Michael Yam, president of the Real Estate and Housing Developers’ Association, is sceptical that the IBS goal for the private sector can be achieved by 2015.
“There is the issue of economies of scale for widespread use. The downstream also needs the numbers to make it work,” he observes.
Yam believes that the capital cost of investment and uncertainty about the extent of use have added to the non-adoption of the system in the private sector.
According to CIDB, the estimated incremental cost of IBS is about 10% of a traditionally constructed development.
“The industry needs to respond to market forces. You can force the adoption but if it is impractical, it will not work,” insists Yam.
One of the key issues that needs to be looked at before IBS can be successfully adopted by all parties is standardisation, he says.
“Right now, we can’t even decide whether our measurements should be in feet or metres. How can we expect the manufacturers to standardise the components?” he asks.
CIDB is aware of the issue. In fact, the standardisation of component specifications is one of the two main reasons the private sector has resisted IBS, the other being the lack of skilled workers, says Abdul Latif.
The government has conceded that past efforts to promote IBS have largely centred on training and publication, paying little heed to tough and critical areas such as standardisation and control over the influx of foreign workers.
Abdul Latif acknowledges that the current IBS manufacturing base is inadequate to support the construction industry should the private sector adopt the system.
“Aside from standardisation, we are proposing an open system to ensure the IBS manufacturing sector is not monopolised by a few big companies,” he says, adding that he hopes more demand will mean more players.
“When there is competition, the prices will be more competitive,” he observes.
The action plan of the IBS Roadmap 2011-2015 involves increasing the availability of quality controlled and standardised IBS products through the standardisation exercise, setting up a task force to proactively review the registration process, registering all IBS manufacturers, and assessing the impact of IBS on private-sector projects to convince the developers in the country that IBS is financially justifiable.
Also, says Abdul Latif, as in the case of most initiatives where persuasion is needed, incentives can be an important factor. The non-cash incentives CIDB has proposed include a higher plot ratio, stamp duty exemption and fast lane approval for IBS projects.
But these incentives and proposed steps may not take away the sting of the enforcement in 2015. Says Yam, “In many developed countries, it took many years for IBS to gain a foothold. We are just a few years away from 2015. It would be unwise for CIDB to rush this and expect the industry to follow very quickly.”
“We already expect resistance from the developers on the enforcement of IBS by 2015, but I believe the public will accept IBS and pay more if they are able to see quality products made with IBS components in the market. This will then create demand,” says Abdul Latif.
To Yam, it is a matter of understanding the market. “I think IBS adoption will happen eventually. CIDB has enough firepower to work with the private sector to conduct studies and research, and gain an understanding of what the market needs before pushing ahead with its IBS agenda.”
However, he admits that it is a difficult situation. “It is a chicken and egg situation. If you do not enforce, it might not succeed and if you do, it may come across as too harsh.”
Upping the skills
To Abdul Latif, competence goes hand in hand with IBS, which he views as the way forward and a way to reduce industry dependence on unskilled foreign labour.
“Competence needs to be upgraded to increase salaries. As salaries go up, the negative perception people have of construction work will change,” he stresses.
“Our society views construction workers as low class, unlike in Australia where construction workers are well paid and well respected.”
In 2003, the government had announced its aim to reduce the number of foreign workers in the industry from 75% to 15% by 2010. Unfortunately as at 2008, the figure remained at a high 44%.
Abdul Latif believes this is due to the easy supply of unskilled labour and the shortage of local workers.
“Foreign workers are doing jobs the locals do not want to do because they see it as difficult, dangerous work with low salaries,” laments Abdul Latif.
The action plan of the IBS Roadmap 2011-2015 has identified several measures to overcome this problem, including developing a skills blueprint to identify the training needs of the private sector, guided by a skills council with input from the private sector; carrying out a pilot IBS apprentice programme for a three-year contract upon graduation; and centralising the oversight of foreign labour to enable better planning and monitoring.
CIDB has already proposed to implement a levy system for foreign workers, in which the levies for unskilled foreign workers will increase from RM1,200 per year per worker in 2011 to RM1,800 per year per worker in 2015.
Even though CIDB is supposed to be expanding the industry, Abdul Latif says its focus has mostly been on the contractors that are required by law to register with the board.
“But in our function, we have to look at the whole value chain, which is wide. It is a multi-knowledge chain, from architects to construction workers, where you can have zero base knowledge to PhD holders,” says Abdul Latif.
There is a need to gather more data to formulate policies and strategies to achieve CIDB’s goals, he adds.
CIBD will be tabling amendments to Act 520 or the CIDB Act sometime this year, which will include the compulsory registration of all construction personnel with the board. At the present time, the regulation imposed by CIDB under the Green Card programme is a measure to enhance safety levels and awareness for contractors and those who work on site.
“The new regulation means all personnel, from project manager to worker, will have to be registered before they can enter the site. This will provide us with useful data, such as the number of people in each trade, to examine what is lacking and track better,” says Abdul Latif.
Currently, CIDB imposes a levy of 0.125% on construction work with a contract worth more than RM500,000. The levies are CIDB’s main source of income, totalling RM94 million, which represents 56% of its RM167 million revenue in 2009.
Taking aside management expenditure and operating costs, the bulk of its expenditure goes to skills training courses for contractors and the construction industry, which amounted to more than RM100 million in 2009.
The skills training programmes for local construction personnel and skills training programmes for school leavers are fully sponsored by CIDB while the Customised & Continuous Professional Development Training Programme for contractors is partly subsidised.
Looking at 2020
Abdul Latif sees a tough road ahead for CIDB but is nonetheless determined to see its plans to change the construction industry through.
“We have a lot on our plate right now. Our job is to support the government and serve the people by meeting the end users’ requirements and we are findings ways to achieve these as effectively as possible,” he says.
He admits that although CIDB has been in existence for more than a decade, many are still not sure what it does or even know it exists. Awareness is now important, especially considering CIDB’s plans to industrialise the construction industry which will affect property buyers.
“It is our own shortcoming that we have not promoted CIDB well. We are embarking on a marketing exercise to let the public know who we are and gather their feedback on the industry,” says Abdul Latif.
He has no doubt that CIDB will face resistance from certain parties but he believes the industry can no longer afford to stay where it is now.
“In the 1970s and 1980s, we thought we were a tiger in the region. Decades later, we are still where we were back then. It’s the same with the industry. Resistance or not, we have to move forward,” concludes Abdul Latif.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 845, Feb 14-20, 2011
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