MALAYSIA Overview on Malaysian Construction Sector (updated October 2012)

Istituto nazionale per il Commercio Estero Guida pratica MALAYSIA Overview on Malaysian Construction Sector (updated October 2012)

CONTENTS PAGE 1. Overview of the Malaysian economy 3 4 2. Government s support for the economy Setting up a Stimulus Package for the economy (2008/2009) 5 Liberalisation of the economy (since 2009) 5 6 3. End of 9 th Malaysia Plan Important era that helped construction 6 7 sector to grow 3.1 10 th Malaysia Plan 7 4. Development Trend In The construction sector, 20102011 8 9 4.1 Indicators of the construction sector 9 4.2 Number and value of projects awarded by different status 10 13 5. The 10 th Malaysia Plan and the impact on the construction sector 14 6. Projects Highlight 14 16 7. Tourism 16 17 7.1 Langkawi Tourism Blueprint (20112015) 17 8. Development in growth corridors 18 20 8.1 Update On Growth Corridors 20 22 Conclusion 22 Pg.2

1. OVERVIEW OF THE MALAYSIAN ECONOMY Despite the global economic crisis, the Malaysian economy continued to progress well at a pace of 5.1% during the first half of 2012 (as compared to 4.7% in the same period of 2011). Strong private consumption and robust private investment is currently sustaining the economy coupled with conducive financial market conditions, stable prices and a favourable labour market. At the moment, the Malaysian economy is driven by domestic demand. Private consumption grew in tandem with stable employment, income and lower inflation. In addition, supportive government policies such as the Tenth Malaysia Plan (2011 2015), Economic Transformation Programme (ETP) and the 2012 National Budget also played an important role in sustaining the strong growth. Project rollouts from the Economic Transformation Programme are ongoing and this will drive the economy further over the medium term. In the first half of the year, growth can be seen in most economic sectors especially the manufacturing and services sectors with significant result in construction. Backed by the ongoing implementation of various Government largescale projects, the construction sector is expected to improve significantly. Meanwhile, the agriculture sector is showing moderate growth due to lower output of crude palm oil due to the natural production down cycle and the mining sector is expected to recover with improvement in crude oil output and supported by a moderate increase in output of natural gas. The level of inflation is well retained and is expected to moderate between 2% to 2.5% in 2012. Although the country s continuous productivity improvement and capacity expansion is able to stabilize the inflation, however the recent increase in global food prices pose a risk to the Inflation outlook. Gross Domestic Product (GDP) by Sector : 2011 2013 (at constant 2005 prices) Change (%) Share of GDP (%) 2011 2012 1 2013 2 2011 2012 2013 Agriculture 5.9 0.6 2.4 7.7 7.3 7.2 Mining 5.7 1.5 2.7 8.8 8.5 8.3 Manufacturing 4.7 4.2 4.9 25.1 25.0 25.0 Construction 4.6 15.5 11.2 3.0 3.3 3.5 +Services 7.0 5.5 5.6 54.2 54.5 54.8 GDP 5.1 4.55.0 4.5 5.5 100% 100% 100% 1 Estimate 2 Forecast Note : may not add up due to rounding Source : Department of Statistics and Ministry of Finance, Malaysia / Economic Report 2012/2013 Pg.3

Meanwhile, the services sector grew at 5.8% in the first half of 2012. Domestic demand, increased travel activities, flourishing finance and insurance, good response to private healthcare and education services, real estate demand as well as encouraging wholesale and retail trade were some of the factors that contributed to this growth. The services sector is anticipated to remain resilient for the rest of 2012 with expansion of 5.5%. Similarly, the manufacturing sector also progressed well. In the first seven months of 2012, the output rose 5.2% and sales value of manufactured goods grew by 6.5%. The domesticoriented industries expanded by 8.6% during the seven months as compared to 6.5% of the same period of 2011, while the exportoriented industries grew 4.1% (JanuaryJuly 2011 : 2.8%). As for investments, both domestic and foreign approved investments reached RM56.1 billion (Euro 14.02 billion) in 2011. Below are some indicators of the performance of the major sectors : Manufacturing Production Index (January July) Exportoriented industries Electrical and elecronic products Chemicals and chemical products Petroleum products Wood and wood products Offestate processing Rubber products Paper products Textiles, apparel and footwear Change (%) Share (%) 2011 2012 2011 2012 2.8 4.1 75.9 75.1 4.8 1.6 26.4 25.5 5.5 9.9 19.0 19.8 9.3 7.1 15.9 16.1 6.9 4.6 3.1 3.1 6.3 6.7 3.6 3.2 15.4 3.6 3.7 3.6 14.8 7.8 2.7 2.4 14.8 7.1 1.5 1.3 Domesticoriented industries Nonmetallic mineral and other related products Fabricated metal products Basic metals Transport equipment Food products Beverages Tobacco products Others 6.5 27.1 26.1 2.5 10.4 1.9 12.6 2.3 14.8 8.6 6.6 11.2 6.9 13.7 12.5 0.0 24.9 10.0 24.1 3.8 5.1 2.5 4.6 4.9 1.7 0.3 1.2 24.9 3.9 5.3 2.2 5.0 5.2 1.6 0.3 1.2 3.6 5.2 100.0 100.0 Note : may not add up due to rounding. Source : Department of Statistics, Malaysia Economic Report 2012/2013 : Economic Performance and Prospects Pg.4

2. GOVERNMENT S SUPPORT FOR THE ECONOMY Ever since the global economic crisis started in 1998, the Malaysian Government had taken drastic steps to curb the economy from spiraling down further by taking up the following steps : a) Setting up a Stimulus Package for the economy ( period 2008 / 2009) During this period, the Government has taken immediate step to boost confidence in market place by implementing two stimulus packages of RM 7 billion (Euro 1.75 billion) and RM 60 billion (Euro 15.00 billion). The RM7 billion (Euro 1.75 billion) first Economic Stimulus Package announced on 4 November 2008 was aimed at compensating the shortfall in private sector demand and encouraged private spending. The fund was being spent on smallscale construction, maintenance of social infrastructure and public amenities and development projects that included the building of low and mediumcost houses as well as measures to boost private consumption. The RM60 billion (Euro 15 billion) second Stimulus Package announced on 10 March 2009 included wideranging measures to support domestic economic activities and strengthened capacity for future growth. Of the total, RM15 billion (Euro 3.75 billion) was allocated for fiscal injection, RM25 billion (Euro 6.25 billion) for Guarantee Funds, RM10 billion (Euro 2.50 billion) for equity investments, RM7 billion (Euro 1.75 billion) for private finance initiative and RM3 billion (Euro 0.75 billion) in the form of tax incentives. With the stimulus plan, the Government had successfully generated and increased construction projects in the country and inevitably kept the activities going. Source : Master Builders Association of Malaysia Construction Industry Development Board of Malaysia Bank Negara Malaysia Quarterly Bulletin, First Quarter 2009 b) Liberalisation of the economy (since 2009) Apart from the stimulus of RM67 billion (Euro 16.75 billion) injected into the economy, the Malaysian government has also liberalized the economy since 2009 to attract foreign investment. The liberalisation has been applied to the services sector with the aim of creating a condusive environment to attract investments, technology and create highervalue employment opportunities. The services sector is in fact an important component of the national economy, contributing 55% to the gross domestic product in 2008. The government then aimed to increase the target to 60%. Pg.5

Apart from that, *Bumiputera quota of 30% on equity ownership (which was previously imposed) in 27 services subsectors has been removed. Recognising the growth potential in the services sector, the government decided to immediately liberalise 27 services subsectors with no equity conditions imposed. Prior to this, companies in the services sector must offer 30% of its equity to bumiputeras. The subsectors involved were health and social services, transport, business, computer industry and most importantly tourism services. The tourism services encompassed the development of theme parks, convention and exhibition centers as well as hotels and resorts and became the driving force to boost the construction sector. Source : Prime Minister s Department New Straits Times news article 23 rd April 2009 * Bumiputera refers to the indigenous people of Malaysia 3. END OF 9 TH MALAYSIA PLAN IMPORTANT ERA THAT HELPED CONSTRUCTION SECTOR TO GROW The Malaysia Plan is a 5year economic programme set by the Malaysian government to run the country and improve the welfare status of its nation. The 9 th Malaysia Plan (9MP) was a fiveyear blueprint of the National Mission, which was a carefully constructed framework that comprised of policies and implementation plans for the nation during the period of 20062010. The 9MP outlined the policies and key programmes that were designed to accomplish the following objectives : To move the economy up the value chain To raise the capacity for knowledge and innovation and nurture first class mentality To address persistent socioeconomic inequalities constructively and productively To improve the standard and sustainability of quality of life To strengthen the institutional and implementation capacity During the period of 20062010, a total of RM220 billion (Euro 55.0 billion) was allocated for the 9MP, an increase of 17.6% over the 8 th Malaysia Plan. Of this, a development budget of RM200 billion (Euro 50 billion) was for Strategic Initiatives and RM20 billion (Euro 5.0 billion) for the Private Finance Initiatives (PFI) mechanism which supported the private sectorled growth strategy. Under the 9MP, the Government has further streamlined, adopted new approaches and mechanisms, to enhance the efficiency of the privatisation programmes. Pg.6

Technically, the funds for construction under 9MP should have been utilized and the period of 20112012 sees the execution and implementation of the projects. Source : Construction Industry Development Board of Malaysia (Construction Opportunities in the Ninth Malaysia Plan) Ninth Malaysia Plan 20062010 (Economic Planning Unit, Prime Minister s Department) The Star press article 10 th August 2009 3.1 10 TH MALAYSIA PLAN The Tenth Malaysia Plan (10MP) which runs from 20112015 focuses on shifting the economy to a high valueadded and high income economy through increase in productivity. This will be achieved through higher levels of input from human capital, adoption of new technologies and development of entrepreneurship to drive innovation and creativity. To achieve this, a few initiatives have been put in place including the Government Transformation Programme (GTP ; www.pemandu.gov.my/gtp/) and New Economic Model (NEM ; www.pmo.gov.my). For the implementation of these programmes, the Government has increased the gross development expenditure in the 10 th Malaysia Plan. Part of this expenditure will go towards spending on construction jobs. During this Programme, it is estimated that there will be 52 high impact projects worth RM67.2 billion (Euro 16.8 billion) that will be implemented via privatization or publicprivate partnership agreements. Some of the projects to be considered in the pipeline are toll highways, coal fired power plants, rail projects, airports expansion, public housing, development of the Malaysian Rubber Board land (3,300 acres), setting up of hospitals and university campuses, development of a Media City, development of integrated transport terminal and privatization of a sea port. Source : Article : Economic Highlights : The Tenth Malaysia Plan 20112015 by RHB Invest, dated 10 th June 2010. Pg.7

4. DEVELOPMENT TREND IN THE CONSTRUCTION SECTOR Generally, the Malaysian construction sector is divided into four subsectors ; residential, nonresidential, civil engineering and special trade works. Special trade works refer to mainly maintenance activities such as electrical, tiling, plumbing, painting and carpentry. Since the 1990s, the construction sector has undergone a series of ups and downs : In the period of 19891997, the construction sector registered a commendable growth of 14.3% visàvis economic growth of 9.2%. The boom was caused by the implementation of several largescale projects such as the Kuala Lumpur International Airport, Petronas Twin Towers, Sepang International Circuit and the development of Putrajaya and Cyberjaya which today stand as the country s famous iconic buildings. After this boom period, from 20002006, the number of construction projects escalated down tremendously as most of the largescale projects have been completed and contractors were going through a difficult time particularly after the Asian Financial Crisis. During this time, the construction sector grew marginally by 0.7%. However, construction of new infrastructure projects between 20072011 resulted in an average growth rate of 5.9%. During this period, the country saw many developments in the rail, road and housing sectors. The Government s stimulus package implemented during 2008/2009 also played an important role in reviving the construction industry and subsequently the economy as a whole. 2011 also saw recovery in the residential and nonresidential sectors. The public civil engineering projects moderated as compared to the private projects. Private sector construction activities have increased especially in the area of LNG regasification (oil & gas) and the development of oil terminal. Other activities that supported the growth of the construction sector included upgrading, repair and maintenance works of public buildings, construction of rural roads and works on improving the rural basic infrastructure. Due to favourable business activities and increased consumer spending, there was also demand for retail spaces, thus the number of shopping complexes and hotels also increased during this period. As for 2012, the sector expanded strongly by 18.9% in the first half of the year supported by strong activities in the residential and civil engineering subsectors. The future of the sector is foreseen to be robust given many construction projects in the pipeline. Some of these projects are such as : Pg.8

MY Rapid Transit (MRT) MRT is an integration of Light Rail Transit (LRT), Monorail and KTM Komuter (commuter train) and intra/intercity buses that will help alleviate traffic congestion. River of Life (aims to transform the Klang River into a vibrant and liveable waterfront with high economic value) Tun Razak Exchange (formerly known as the Kuala Lumpur International Financial District) Bandar Malaysia (affordable housing concept) LRT (Light Rail Transit) extension, and the Rubber Research Institute of Malaysia land development. Source : Economic Report 2012/2013 Economic Performance and Prospects, Ministry of Finance, Malaysia 4.1 Indicators of the construction sector : Construction Indicators 2011 2012 2Q 1H 1Q 2Q 1H Annual change (%) Housing approvals 14.1 22.1 75.6 126.9 101.7 New housing sales and advertising permits 11.6 17.7 12.5 13.9 13.2 Production 1 constructionrelated materials of 17.4 19.6 8.3 4.4 6.3 Basic iron and steel 0.2 6.1 10.9 1.0 4.9 Structural nonrefractory clay and ceramic products 11.1 8.9 3.3 9.1 6.1 Ready mix concerete 41.0 36.7 18.2 23.7 21.1 Loans for construction activity Approval Disbursement 1 Industrial Production Index 31.9 3.6 30.8 3.7 38.2 16.0 9.0 17.9 12.3 16.9 (2005=100) Source : Ministry of Housing and Local Government, Department of Statistics, Malaysia and Bank Negara Malaysia Source : Bank Negara Malaysia Quarterly Bulletin, Second Quarter 2012 Pg.9

4.2 Number and value of projects awarded by status of contractors and project category as of June 2012 Top row refers to value in Ringgit Malaysia million and bottom line in Euro million Exchange rate : Euro 1 = RM 4.00 Project Category Number of projects Project Local Contractors Government Private Projects Projects Foreign Contractors Government Private Projects Projects (RM mil) 2010 7,248 88,627.10 22,156.78 1,868 19,234.22 4,808.56 5,271 60,355.37 15,088.84 1 316.22 79.00 108 8,721.29 2,180.32 Residential 2,115 22,923.05 5,730.76 119 1,336.54 334.13 1,988 20,748.15 5,187.03 8 838.36 209.59 Non Residential 2,544 30,414.49 7,603.62 357 3,027.15 756.79 2,106 22,765.00 5,691.25 81 4,622.34 1,155.59 Social Ameneties 849 8,900.99 2,225.23 584 5,834.43 1,458.61 264 3,065.90 766.48 1 0.66 0.16 Infrastructure 1,740 26,388.57 6,597.14 808 9,036.10 2,259.02 913 13,776.32 3,444.08 1 316.22 79.00 18 3,259.93 814.98 2011 7,114 94,055.23 23,513.81 1,831 19,922.43 4,980.61 5,169 56,730.70 14,182.67 6 1,610.73 402.68 108 15,791.37 3,947.84 Residential 2,063 23,480.35 5,870.09 135 865.33 216.33 1,922 21,963.47 5,490.87 6 651.55 162,88 Non Residential 2,428 34,032.31 8,508.08 266 2,815.96 703.99 2,077 23,240.17 5,810.04 85 7,976.18 1,994.04 Social Ameneties 798 6,348.40 1,587.10 540 3,523.91 880.98 255 2,815.17 703.79 3 9.32 2.33 Infrastructure 1,825 30,194.17 7,548.54 890 12,717.23 3,179.31 915 8,711.89 2,177.97 6 1,610.73 402.68 14 7,154.32 1,788.58 2012 2,050 29,027.66 7,256.91 459 5,614.38 1,403.59 1,565 22,743.83 5,685.96 1 144.86 36.21 25 524.59 131.15 Residential 570 8,608.48 2,152.12 27 391.02 97.76 542 8,216.63 2,054.16 1 0.83 0.21 Non Residential 739 10,127.30 2,531.83 83 815.64 203.91 638 8,810.33 2,202.58 1 144.86 36.21 17 356.47 89.12 Social Ameneties 229 1,740.50 435.12 167 761.64 190.41 62 978.86 244.72 Infrastructure 512 8,551.38 182 3,646.08 323 4,378.01 7 167.29 Pg.10

2,137.84 911.52 1,094.50 41.82 may not necessarily add up due to rounding Source : CIDB Construction Industry Development Board, Malaysia 4.3 Number and value of projects awarded by status of contractors and work specialisation as of June 2012 Top row refers to value in Ringgit Malaysia million and bottom line in Euro million Exchange rate : Euro 1 = RM 4.00 Project Category Number of projects Project Local Contractors Government Private Projects Projects Foreign Contractors Government Private Projects Projects (RM mil) 2010 7,248 88,627.10 22,156.77 1,868 19,234 4,808.50 5,271 60,355 15,088.75 1 316.22 79.06 108 8,721 2,180.25 Building 4,649 60,650.23 15,162.56 822 9,526.34 2,314.08 3,772 47,664.58 11,916.14 55 3,459.31 8,648.27 Civil Engineering 1,911 16,594.07 4,148.52 867 8,428.48 2,107.12 1,025 7,703.18 1,925.79 1 316.22 79.06 18 146.19 36.55 Electrical 330 6,714.57 1,678.64 97 980.49 245.12 217 2,534.75 633.69 16 3,199.33 799.83 Mechanical 358 4,668.23 1,167.06 82 298.91 74.73 257 2,452.86 613.21 19 1,916.46 479.11 2011 7,114 94,055.22 23,513.81 1,831 19,922.42 4,908.60 5,169 56,730.70 14,182.67 6 1,610.74 402.68 108 15,791.36 3,947.84 Building 4,494 57,821.76 14,455.44 755 6,480.43 1,602.11 3,679 44,400.93 11,100.23 60 6,940.39 1,735.10 Civil Engineering 2,032 22,079.19 5,519.79 925 11,611.14 2,902.78 1,079 7,656.38 1,914.09 2 1,590.25 397.56 26 1,221.42 305.36 Electrical 285 8,374.48 2,093.62 54 964.17 241.04 221 1,239.75 309.94 4 20.49 5.12 6 6,150.07 1,537.52 Mechanical 303 5,779.80 1,444.95 97 866.68 216.67 190 3,433.64 858.41 16 1,479.48 369.87 2012 2,050 29,027.65 7,256.91 459 5,614.38 1,403.59 1,565 22,743.83 5,685.96 1 144.86 36.21 25 524.58 131.45 Building 1,347 19,641.57 4,910.39 230 2,265.32 566.33 1,099 16,863.52 4,215.88 1 144.86 36.21 17 367.87 91.97 Pg.11

Civil Engineering 579 7,333.67 1,833.42 206 2,640.90 660.23 368 4,539.23 1,134.81 5 153.54 38.38 Electrical 73 1,258.27 314.57 14 653.09 163.27 56 620.01 155.00 3 3.17 0.79 Mechanical 51 794.14 198.53 9 55.07 13.77 42 739.07 184.77 may not necessarily add up due to rounding Source : CIDB Construction Industry Development Board, Malaysia 4.4 Number and value of projects awarded by status of contractors and type of contract as of June 2012 Top row refers to value in Ringgit Malaysia million and bottom line in Euro million Exchange rate : Euro 1 = RM 4.00 Project Category Number of projects Project Local Contractors Government Private Projects Projects Foreign Contractors Government Private Projects Projects (RM mil) 2010 7,248 88,627.10 22,156.78 1,868 19,234.00 4,808.50 5,271 60,355.36 15,088.84 1 316.22 79.05 108 8,721.29 2,180.32 Conventional 6,975 81,785.47 20,446.37 1,785 18,217.12 4,554.28 5,089 55,060.22 13,765.06 1 316.22 79.05 100 8,191.91 2,047.98 Design & Build 180 4,619.86 1,154.96 67 851.25 212.81 110 3,444.79 861.20 3 323.82 80.96 Turnkey 85 2,057.25 514.31 13 145.84 36.46 67 1,705.85 426.46 5 205.56 51.39 Built, Operate & Transfer 6 39.27 9.82 3 20.03 5.00 3 19.24 4.81 Engineering, Procurement, Construction & Commissioning (EPCC) 2 125.26 31.31 2 125.26 31.31 2011 7,114 94,055.22 23,513.80 1,831 19,922.42 4,980.60 5,169 56,730.70 14,182.67 6 1,610.74 402.68 108 15,791.36 3,947.84 Conventional 6,867 87,009.66 21,752.41 1,746 18,394.93 4,598.73 5,022 55,313.14 13,828.28 5 627.49 156.87 94 12,674.10 3,168.52 Design & Build 146 4,109.00 63 1,290.34 76 777.68 1 983.25 6 1,057.73 Pg.12

1,027.25 322.58 194.42 245.81 264.43 Turnkey 78 2,684.40 671.10 20 230.56 57.64 52 397.89 99.47 6 2,055.95 513.99 Built, Operate & Transfer 4 26.03 6.50 4 26.03 6.51 Engineering, Procurement, Construction & Commissioning (EPCC) 19 226.14 56.53 2 6.60 1.65 15 215.96 53.99 2 3.58 0.89 2012 2,050 29,027.65 7,256.91 459 5,614.38 1,403.60 1,565 22,743.83 5,685.96 1 144.86 36.21 25 524.58 131.14 Conventional 1,936 26,673.12 6,668.28 421 4,496.58 1,124.14 1,492 21,622.73 5,405.68 1 144.86 36.21 22 408.95 102.24 Design & Build 66 1,531.25 382.81 34 1,092.17 273.04 30 394.60 98.65 2 44.48 11.12 Turnkey 26 722.91 180.73 2 17.34 4.33 23 634.42 158.61 1 71.15 17.79 Built, Operate & Transfer 12 63.84 15.96 2 8.29 2.07 10 55.55 13.89 Engineering, Procurement, Construction & Commissioning (EPCC) 10 36.53 9.13 10 36.53 9.13 may not necessarily add up due to rounding Source : CIDB Construction Industry Development Board, Malaysia Pg.13

5. The 10 TH MALAYSIA PLAN AND THE IMPACT ON THE CONSTRUCTION SECTOR Recently, the Malaysian Government has come up with several programmes such as the 1Malaysia concept, New Economic Model, Government Transformation Programme (GTP) and Economic Transformation Programme (ETP) aimed at improving the country s social status, integration, higher income status and economic transformation. The end of 2010 marked the end of 9 th Malaysia Plan and now the country is run by the 10 th Malaysia Plan which lasts from 2011 until 2015 (5year plan). The implementation of the development programmes and projects spillover (from the 9 th Malaysia Plan) will be realized through the Tenth and Eleventh Malaysia Plans (10MP and 11MP). Briefly, the Economic Transformation Programme (ETP) is a detailed programme on what needs to be done with Malaysian economy over the next ten years, to achieve highincome nation status target. It is anchored on a clear implementation roadmap with strong performance management and transparency. The Economic Transformation Programme (ETP) is anchored on 12 National Key Economic Areas (NKEAs), which are drivers of economic activities that have the potential to contribute to the growth of Malaysia. The 12 NKEAs are : oil, gas and energy ; communications content and infrastructure ; tourism ; palm oil ; business services ; financial services ; healthcare ; wholesale and retail ; education ; agriculture ; electrical and electronics ; and greater KL (dynamic city). As for the Six Government Transformation Programme (GTPs), they are : o Reducing crime o Fighting corruption o Improving student outcomes o Raising living standards of lowincome households o Improving rural basic infrastructure o Improving urban public transport 6. PROJECTS HIGHLIGHT Overall, in the 10 th MP, there is an allocation of RM230 billion (Euro 57.5 billion) development fund and RM20 billion (Euro 5.0 billion) facilitation fund where out of the RM230 billion (Euro 57.5 billion), 60% or RM138 billion (Euro 34.5 billion) will be spent on physical development to be undertaken directly by the construction sector. On the other hand, the RM20 billion (Euro 5.0 billion) facilitation fund will open doors to the private sector and investments worth RM200 billion (Euro 50.0 billion) is estimated to roll in which will involve the construction sector. Pg.14

In 10MP commencing 2011, the private sector will resume the role as the engine of growth. In 2011, private investment is estimated to expand 12.5% to RM86 billion (Euro 21.5 billion). The implementation of the 12 National Key Economic Areas (NKEA) is expected to generate investment exceeding RM1.3 trillion or Euro 0.3 trillion and create 3.3 million job opportunities. The private sector will finance 92% of the NKEA and the remaining by the Government. Government will intensify the PublicPrivate Partnership (PPP) and several PPP projects identified under the 10MP will be implemented in 2011 through private investment. Some of the projects are as follow : Mass Rapid Transit (MRT) system will be implemented beginning July 2011. Involves estimated investment of RM36 billion (Euro 9.0 billion) and will be the largest infrastructure project ever undertaken by the country. Covers 60 km and 35 stations and is expected to be completed by 2020. The MRT will generate 130,000 jobs during its construction. It is also expected to generate a gross national income of between RM34 billion (Euro 0.7 1.0 billion) per annum from 2011 to 2020 from direct construction and operations and another RM8 billion (Euro 2.0 billion) and RM12 billion (Euro 3.0 billion) as a result of its multiplier impact. Mixed development comprising residential properties, commercial properties, industrial and infrastructure facilities at the Malaysian Rubber Board s land measuring 2,680 acres. Estimated at RM10 billion (Euro 2.5 billion) and expected completion in 2025. Public projects involving upgrading and maintenance of schools, construction of new blocks, upgrading hospitals, flood mitigation programme, upgrading of rural infrastructure as well as construction of public houses for low income group. This project will come to a total of RM6 billion (Euro 1.5 billion) and it will be implemented through the Special Stimulus Package. RP2 (Second Rolling Plan) will be implemented starting 2012. The main initiatives under RP2 include the double tracking rail project, highway and road projects and the redevelopment of an old air base. RP2 will be allocated RM98.4 billion (Euro 24.6 billion) with RM49.2 billion (Euro 12.3 billion) each in 2012 and 2013. In 2012, the existing five regional corridors will also be further developed. Among the projects to be implemented are the construction of Johor BahruNusa Jaya coastal highway in Iskandar, Johor ; heritage tourism development in Northern Corridor ; agropolitan scheme in the East Coast Economic Region ; palm oil industrial cluster project in Sabah Development Corridor (East Malaysia) Pg.15

and Samalaju water supply in the Sarawak Corridor of Renewable Energy (East Malaysia). To develop Kuala Lumpur International Financial District (KLIFD) valued at RM26 billion (Euro 6.5 billion). The project which is aimed at strengthening the country s position in the financial services sector, will be developed in phases on a 30.35 ha piece of land using green technology to promote sustainable development. Major international banks and professional financial services firms will be located at KLIFD. To accelerate this development, the Government has proposed several incentives including income tax exemption as well as industrial building and accelerated capital allowance. Source : National 2012 Budget 10 th Malaysia Plan 7. TOURISM The tourism industry is one of the key economic growth sectors, contributing almost 12% to GDP. revenue generated from the tourism sector is estimated to increase to RM62 billion (Euro 15.5 billion) in 2012. In conjunction with Visit Malaysia Year 2013/2014, the Government has allocated RM358 million (Euro 89.5 million) under development expenditure, an increase of 42%, to target 26.8 million tourist arrivals. To cater to the expected influx of tourists to Malaysia in the next few years, there are many hotel projects in the pipeline. Particularly for hot tourists spots such as Pulau Langkawi, the island will be redeveloped. The Langkawi Five Year Tourism Development Master Plan will be launched with an allocation of RM420 million (Euro 105.0 million). The redevelopment includes restructuring the Langkawi Development Authority, setting up a park rangers unit, upgrading museums, beaches and small businesses as well as providing a more efficient transportation system. In addition, foreign investors are also targeting Malaysia as a suitable destination to expand their groups operations. Among the interested groups are France s Accor, the leading operator of hotels in the Asia Pacific which plans to expand its hotel fleet by opening 10 new hotels in Malaysia by end2014. Some of it will be ready as early as 2012. The range of hotels will include Pullman, Novotel and IbisStyle. With this development, it is expected that another 2,500 additional jobs will be created. Pg.16

Apart from that, Bulgari Hotel is also in talk with some interested parties on the possibility of opening up resort hotels in tourist attractions area such as Penang, Langkawi and Kota Kinabalu in East Malaysia. Source : News article from The Star (28 th September 2012) Budget 2013 : Tax breaks, affordable housing and cash for the needy. 7.1 LANGKAWI TOURISM BLUEPRINT 20112015 To boost tourism in Malaysia, the Government has set to develop the island of Langkawi to become one of the world s top ecotourism destination. The Langkawi Tourism Blueprint 20112015 was launched on 8 th December 2011 with an action plan of RM5 billion (Euro 1.25 billion). For this amount, 52% will be generated by the private sector. The plan aims to develop the island into a topnotch vacation destinations such as Bali, Mauritius, Hawaii and Maldives. With the implementation of the blueprint, it is expected that tourists arrivals in Langkawi will reach 3 million and boost the island s tourism income to RM3.8 billion (Euro 0.95 billion) in 2015. The blueprint will look into three areas for the plan to materialize, that is to offer the basic needs to the tourists including setting up hotels, restaurants, entertainment and attractive destinations while the second is to put in place good infrastructure to give tourists the feel good experience and thirdly to invest in community development and marketing. Source : National 2012 Budget Article Accor to add 10 hotels in Malaysia New Straits Times, 1 st Nov 2011 Article New Bulgari Hotel could be coming to Malaysia, www.homeguru.com.my, 27 th April 2011 Article Langkawi Action Plan The Sun, 9 th December 2011 Pg.17

8. DEVELOPMENT IN GROWTH CORRIDORS In the previous 9 th Plan Period, the Government has successfully developed and promoted growth in 5 designated economic corridors such as the ones stated below : Northern Corridor Economic Region (NCER) Development period : 2007 2025 Area : 17,816 sq km Strengths : agriculture, electrical & electronic, oil & gas, biotechnology, automotive, logistics infrastructure Web : www.ncer.com.my Iskandar Malaysia Development period : 2006 2025 Area : 2,217 sq km Strengths : urban development, educational facilities and R&D centers, logistic infrastructure, international resorts and theme parks, healthcare Web : www.iskandarinvestment.com ; www.iskandarmalaysia.com.my Sarawak Corridor of Renewable Energy (SCORE) Development period : 2008 2030 Area : 70,708 sqm Strengths : oilbased industry, aluminium, steel, glass, palm oil, tourism, timberbased, livestock, acquaculture and marine engineering Web : www.sarawakscore.com.my Sabah Development Corridor (SDC) Development period : 2008 2025 Area : 73,997 sqm Strengths : agriculture, furniture, biotechnology, oil & gas, sustainable materials, logistics Web : www.sdc.net.my East Coast Economic Region (ECER) Development period : 2007 2020 Area :66,736 sq km Strengths : agriculture & acquaculture base, bioresources (oil palm, tobacco), oil, gas and petrochemical, automotive/transport equipment, boat building Web : www.ecerdc.com As for the 10 th Malaysia Plan, the aim is to : Accelerate growth through collaboration with private sector to develop priority industries ; Focusing on selected sectors and clusters with definite competitive advantage to maximize impact and focus execution ; Creating more employment opportunities through encouraging more private investments and facilitating coordination between agencies and supporting ecosystems ; Identify major investors to spearhead development of the corridors ; and In view of this, RM978 million (Euro 244.5 million) has been allocated in the Budget 2012 for this purpose. Pg.18

Thus, the Malaysia s 5 Regional Economic Growth Corridors present great opportunities to the construction sector through the development of infrastructure. For the period of 20112015, the focus of each corridor are as follows : Iskandar Malaysia This corridor is located in Johor, a southern state in Peninsula Malaysia which has attracted investment worth RM59 billion (Euro 14.75 billion) as at February 2010 with 38% actualized in the area of manufacturing, properties, utilities, tourism and logistics. For the whole development period of 10 th Malaysia Plan, more investments will be channeled into the areas of education, healthcare, finance, creative industry, logistics and tourism. Among the projects now are the Johor Premium Outlet and MSC Cyberport City. The mentioned development will create economic spinoffs and thus boost the infrastructure projects including road construction in the city center, improvement in the public transport system and City Transformation Project. Northern Corridor Economic Region (NCER) As mentioned in the name itself, the area covers mainly 4 states in the northern region of Peninsula Malaysia. The states are Kedah, Pulau Pinang, Perlis and four northern districts in Perak. The nature of activities in this area are agriculture, manufacturing and services. The key targeted projects include : Transforming the area into technology driven and efficient food production hub. To move up the manufacturing value chain with highvalue added activities. To be a premier tourist destination. Leveraging on its modern and equipped logistics system to become a major trading center in this region. East Coast Economic Region (ECER) Covers the state of Kelantan, Pahang, Terengganu and a part of Johor. Rich with its natural resources, the ECER development plan during the 10 th Malaysia Plan would be to develop the sector of tourism, oil, gas and petrochemical manufacturing, agriculture and education. Specific focus is given to special gazetted area namely ECER Special Economic Zone (ECER SEZ). Sarawak Corridor Renewable Energy (SCORE) SCORE is known for its abundant resources for renewable energy especially hydropower. Located in the central region of Sarawak, the state boasts of many rivers that can be used to generate hydropower and thus is a target for investments in power generation. Among the projects to be developed are the development of Pg.19

Port City and Halal Hub, development of new heavy industry center, marine engineering and tourism. Greater private industries participation is likely to promote growth in these sectors. Sabah Development Corridor The Strategic Development Area (SDAs) has been targeted for the development of Sabah Corridor. Sectors involved are mainly Agrorelated including better production of food crops, livestocks, fisheries and aquaculture, halal products as well as utilizing biotechnology in the process. Apart from that, Sabah is also similar to Sarawak in having rich supply of oil and gas. Thus, one of the aim is also to develop its oil and gas cluster which involves setting up petrochemical complex, creating oil and gas support services, oil refineries and tank farms as well as power plants. Source : 2012 Budget Report 10 th Malaysia Plan 8.1 UPDATE ON GROWTH CORRIDORS Cumulative Investments in Five Economic Growth Corridors (RM billion) Exchange rate : Euro 1 = RM 4.00 End June 2012 1 Jan June 2012 Corridor Committed Realised Committed Realised SDC (Euro bil) 112.0 28.0 12.0 3.0 36.0 9.0 9.5 2.38 Iskandar Malaysia (Euro bil) ECER (Euro bil) NCER (Euro bil) SCORE (Euro bil) 95.5 23.75 32.7 8.17 25.9 6.47 24.6 6.15 41.4 10.35 22.0 5.5 25.9 6.47 9.4 2.35 10.7 2.67 11.9 2.97 8.5 2.12 3.4 0.85 3.6 0.9 1.0 0.25 8.5 2.12 1.7 0.42 1 From launching date of respective corridors until endjune 2012. Source : Unit Kerjasama Awam Swasta (UKAS) and respective corridors Source : Economic Report 2012 / 2013 Economic Performance and Prospects * UKAS Public Private Partnership Unit (Prime Minister s Department) The economic corridors have attracted substantial investments ever since they were launched. Many development projects have taken place during the 9 th Malaysia Plan Pg.20

and the current 10 th Malaysia Plan. These projects have provided growth opportunity to the construction sector due to their multiplier effects. In the first six months of 2012, the corridors have received investments for the following projects : Sabah Development Corridor (SDC) POIC (Palm Oil Industrial Cluster) in Lahad Datu and Sandakan Keningau Integrated Livestock Centre Sabah AgroIndustrial Precint at Kimanis Iskandar Malaysia ATT Tanjung Bin Terminal Phase 2 Dato Onn International Specialist Hospital At Iskandar, apart from the recently received projects, several other key projects have been progressing at various phases of development which include : Johor Premium Outlets (JPO) It was officially opened in December 2011 with over 80 designers and branded stores. LEGOLAND Malaysia Theme Park Opened in September 2012, it is the first LEGOLAND in Asia with seven unique themed areas. Pinewood Iskandar Malaysia Studios Expected to be operational by end2013. It aims to spur the development of Iskandar Malaysia as a regional and international film production hub. Educity It is a fully integrated knowledgebased hub comprising renowned universities and international schools. These include Newcastle Medical University, Netherlands Maritime Institute of Technology, Raffles University Iskandar, University of Southampton, University of Reading as well as international schools such as Raffles American School and Malborough College Malaysia. East Coast Economic Region (ECER) world s first bioisobutanol factory in Kertih BioPolymer Park, Terengganu tourism projects in Mersing, Johor Northern Corridor Economic Region (NCER) manufacturing in the Electrical &Electronics subsector Pg.21

Sarawak Corridor of Renewable Energy (SCORE) manufacturing in Samalaju Industrial Park Source : Economic Report 2012 / 2013 Economic Performance and Prospects, Ministry of Finance Malaysia CONCLUSION The Malaysian construction scene is set for great development with the ongoing implementation of the 10 th Malaysia Plan. Given the development allocations and facilitation funds, the industry is set to benefit from the abundant opportunities that will arise from the plan. These opportunities including high impact projects will create multiplier effects that will enhance the demand and domestic growth for the entire economy especially the construction sector. Niche sectors such as the development of green townships and sustainable living are also areas which Malaysia is pursuing. Apart from technology, human expertise is also needed to propagate the achievement of an high income economy. The industry needs to transform its resources in the area of knowledge, entrepreneurial, competency and innovation. As such, the opportunities for foreign collaboration and partnership is great. Pg.22