Political tension builds, construction flounders


Crest Builder Holdings Bhd managing director Eric Yong (pic) said what the construction players were looking at was the speed at which mega projects can be rolled out and how fast they can actually commence work in order to get the economy running. Yong also highlighted that a lot of private tenders had been deferred as developers are being very cautious.

PETALING JAYA: The last thing any construction company wants to hear is a shift of the powers-that-be, especially after it has happened twice in just three years.

And when there was an inkling of a third change happening, the market reacted, drowning most construction counters in a sea of red.

When news broke yesterday that opposition leader Datuk Seri Anwar Ibrahim was to have a presser at noon linked to a majority in the Parliament, the KL Construction Index, which opened at 162.66 points, started declining.

The index rebounded slightly after the midday break but it finished the day lower at 158.71 points after a barrage of statements by both sides of the political divide.

An analyst pointed out that it has been a dull and stagnant three years since 2018 for the construction industry when the first change in Putrajaya happened with Pakatan Harapan beating Barisan Nasional in the general election.

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“This was considerably bad because the government tried to review everything and the whole country came to a standstill.

“The second round in February this year would have given us more economic stability but unfortunately we were hit with the Covid-19 pandemic and then the movement control order (MCO), ” he said.

AllianceDBS Research said in a report yesterday that the propensity to pump prime has to happen irrespective of the potential for snap elections.

“The more ideal scenario would be a slew of contract roll-outs that will lead to more job creation and higher GDP growth in the run-up to general elections, ” it said, adding that the second quarter gross domestic product (GDP) contraction of 17% would be a precursor to a more aggressive allocation for infrastructure spending in Budget 2021.

It drew similarities to what the country went through in 2008 during the global financial crisis and expected the government to whip out the 2008 playbook and roll out high-multiplier infrastructure projects.

The research house said the economic recovery plan slated for October 2020, Budget 2021 in early November and the 12th Malaysia Plan in January 2021 will be closely watched to gauge the government’s willingness to pump prime the economy and which projects are deemed priority.

“In April 2020, Umno called for the revival of MRT 3 and Kuala Lumpur-Singapore High Speed Rail (HSR) to help create jobs and revive the economy.

“We believe both these projects will be featured in the upcoming Budget in November and potentially earlier in the Medium Term Recovery Plan to be tabled in Parliament in October, ” it said.

Mudajaya Group Bhd managing director and chief executive officer James Wong however felt that there may be some limitations to projects that the government can spend on.

He said this was due to a great air of uncertainty on three main factors – political stability of the incumbent government, the pandemic and the fluctuations of commodity price, particularly oil which affects the ringgit.

“The impact of Covid-19 has seriously undermined the government coffers thus, rolling out projects under Budget 2021 or 12MP will be constrained, ” he said.

On how industry players were coping in the current economic climate, Wong said there have been many tenders but few awards.

“While we are busy with existing projects, our order book replenishment has been impacted, ” he said.

Crest Builder Holdings Bhd managing director Eric Yong said what the construction players were looking at was the speed at which mega projects can be rolled out and how fast they can actually commence work in order to get the economy running.

Yong also highlighted that a lot of private tenders had been deferred as developers are being very cautious.

While the construction industry typically contributed up to 5% of the GDP, which is a rather small portion, AllianceDBS stressed that its multiplier effect on the economy was huge.

It is deemed crucial for the growth of other industries such as building and construction materials, iron and steel, heavy machinery and financial services.

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