Productivity is the primary engine of growth towards Malaysia’s high-income target. Despite being an important sector, the construction industry has one of the lowest productivity levels in the economy. The relatively low productivity is a reflection of the limited adoption of new technology and practices and the reliance on low skilled workforce.

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There are six key issues impacting productivity within the construction industry and are listed below:

1. Largely low-skilled workforce and inadequate or mismatch in training and development

Lack of training and development contribute to the large proportion of low-skilled workforce in the industry. This is mainly due to employers unwilling to invest into upskilling of workforce, gaps in training modules given the dynamic nature of the industry and weaknesses in manpower planning, where skill requirements go undiagnosed.

2. Over-reliance on low-skilled foreign labour

Malaysia employs 13% foreigners, of which 25% are registered as workers in the construction industry. Malaysia turns to foreign workers due to the reluctance of locals to enter the industry based on the perception that it is a challenging work environment with limited career progression.

Industry players are also quite often enticed by the short term financial benefits of hiring low cost foreign workers. This acts as a disincentive for the industry to adopt practices that will drive productivity in the longer term.

3. Limited adoption of modern practices, mechanisation and IBS

Limited modernisation of construction methods and practices is evidenced in Malaysia’s low take up of Industrialized Building Systems (IBS) even though it is a globally recognized means to increase productivity.

While the government has been making significant efforts to encourage IBS adoption, several challenges remain, such as:

  • Definition: The current definition of components qualifying as IBS is vague and lacking in standard.
  • Lack of Training: Design Consultants have not received adequate training on how to incorporate IBS into their designs and are therefore forced to redesign for manufacturing and assembly which leads to delays.
  • Cash Flow: Contractors who are awarded IBS contracts face cash flow issues during procurement of IBS components. IBS manufacturers typically require large deposits upfront before components are delivered to the project site and contractors will need to pay the deposits even when clients delay payment, which limits their cash flow.
  • High import Duty: IBS manufacturing equipment and installation machinery are imposed with high import duty which presents another barrier to IBS adoption for both manufacturers and contractors.

4. Limited adoption of information technology such as BIM

The value of BIM (Building Information Modeling) is that it reduces the need for rework and redundancies, leading to cost savings. It also provides the project team with ease of retrieval of information and increase coordination of documents as well as ensuring constructability of the design, which improves productivity. However, the adoption of BIM in Malaysia is at a low rate of 10% in contrast to Singapore at 65%.

The challenges faced in BIM implementation in Malaysia are:

  • Lack of skilled talent: Malaysia lacks a ready pool of skilled talent who are able to prepare plans in BIM and effectively utilise it to liaise with other stakeholders across the value chain.
  • High cost of adoption: It is costly to purchase the BIM software and to upgrade hardware to be compatible with the BIM software.
  • Requirement of mindset changes: Adopting BIM requires changes to the current ways of working.
  • Lack of a standard object library: There is a lack of a standard object library for design consultants to refer to, thus limiting the access to information.
  • Lack of guidelines: Limited availability of usage guidelines customised to the Malaysian landscape. Without such guidelines, the complexity of implementation cannot be simplified.
  • Local authorities not equipped: Local authorities and regulators are not yet equipped with BIM-ready hardware and software to receive plans in BIM and process permits and approvals effectively.
  • Local authority staff not trained: Staff at local authorities have not fully trained and generally have limited awareness of the benefits of BIM adoption.
  • High need for collaboration and integration: Successful BIM implementation requires strong integration, collaboration and coordination among various disciplines, including integration with the operations of a building, such as facility management.

5. Lack of data and information-driven decision-making

There have been many limitations that have prevented advancement of data-driven decision-making in the industry:

  • Access: Lack of awareness of the benefits of data sources amongst industry players.
  • Accuracy: Currently data is not updated frequently and only a few reliable sources that provide comprehensive and consistent information.
  • Breadth: Lack of comprehensive data set that includes all upcoming construction projects, price and cost and other important construction metrics.
  • Depth: Lack of detailed and optimised analyses on data set that could be used to generate robust products to guide decision-making within the construction industry.

The CITP recognizes the importance of making accurate data available to the public to ensure effective decision-making process.

6. High proportion of sub-scale SMEs, including Bumiputera SMEs and entrepreneurs

The Malaysian construction industry is highly fragmented, with subscale SMEs collectively making up 90% of total contractors and the majority of the professional firms (architects, engineers and quantity surveyors) are sole proprietors. This fragmentation occurs because of low entry requirement driven by registration criteria that is not stringent, and therefore easier for small contractors to fulfil.

The other challenge is low specialization among Bumiputera contractors who may not offer high quality services, which is worrying as they account for 56% of the construction industry.

Furthermore the subscale nature of the majority of industry players restricts the ability to invest in technology and the building up of a high-calibre workforce.

Therefore it is important for the CITP to guide the development of government sector programmes such as ‘carve-out and compete programs’ to uplift the performance of these vendors and in turn increase productivity levels in the long term.

The CITP aims to underpin productivity in the construction industry through the drivers of workforce, technology and processes. The main outcome for 2020 is to increase productivity by 2.5 times which amounts to a target value-add of USD 16,500. This increase will be matched by higher wages based on increased efficiency leading to reduced costs.

The focus on productivity is aligned with the High Income goal of the 11th Malaysia Plan, as it works towards enabling higher output from the same inputs or the same or lesser input.

More than doubling productivity, matched by higher wages

Three key drivers underpin productivity in the construction industry: workforce, technology and processes.

The workforce driver relates to human capital improvements to increase output per worker. The technology driver relates to how technology can increase the production frontier and raise efficiency. The process driver relates to how the process can be made more efficient and effective through better planning and management.

As of 2015, six productivity-related issues still plague the construction industry:

  1. Largely low-skilled workforce and inadequate or mismatch in training and development
  2. Over-reliance on low-skilled foreign labour
  3. Limited adoption of modern practices, mechanisation and IBS
  4. Limited adoption of information technology such as BIM
  5. Lack of data and information-driven decision-making
  6. High proportion of subscale SMEs, including Bumiputra SMEs and entrepreneurs

The CITP initiatives to manage the issues are listed below:

Initiative P1: Continue investment in human capital development in construction
Initiative P2: Enhance control and balance of workforce supply
Initiative P3: Accelerate adoption of IBS, mechanization and modern practices
Initiative P4: Roll out technology advantage across project life-cycle
Initiative P5: Enhance availability of strategic information via National Construction Industry Information (NCIIC)
Initiative P6: Advance SME/Bumiputera capacity and capacity building

Initiative P1
Initiative P2
Initiative P3
Initiative P4
Initiative P5
Initiative P6

Productivity contributes to the High Income goal by enabling higher output from the same inputs, or the same output from fewer inputs

Measure for productivity is the average value in RM contributed by each worker