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Government Projects Spur Growth in Malaysia's Green Building Sector

While local clients continue to prioritise low costs over sustainability, a raft of major new government infrastructure projects has provided a renewed stimulus to the rise of environmentally-friendly construction practices across Malaysia.

Photo: Government projects are driving the hard-hit Malaysian construction industry.
Government projects are driving the hard-hit Malaysian construction industry.
Photo: Government projects are driving the hard-hit Malaysian construction industry.
Government projects are driving the hard-hit Malaysian construction industry.

The environmentally friendly approach to building is growing in importance in Malaysia, according to exhibitors at Kuala Lumpur's Greenbuild Southeast Asia exhibition. This is mainly being driven by a number of multi-nationals operating in the country and a series of government initiatives rather than by Malaysian companies. As the slowdown in privately-funded property construction has begun to bite, Malaysia's building industry has become heavily dependent on government spending, ensuring that official policies on environmental standards are increasingly to the fore.

Ryan Hitzman, Southeast Asia Export Manager at Kingspan, a UK and Irish roofing insulation firm, said: "We have seen an increase in the numbers of companies coming to Malaysia that are insisting on having green buildings. There are lots of companies coming to this region that have sustainable building practice requirements across the world. When they do business in Malaysia, they want to build to the same standards as they do elsewhere."

A number of other exhibitors also commented on the markedly different attitudes between companies headquartered overseas and those based in Malaysia. Lim Vin Tze, General Manager of Operations at locally-based Sunway Construction, said: "Local businesses will not pay the extra money to have green buildings, while overseas companies will. This is because they have to comply with their company-wide CSR policies."

While broadly in agreement with Lim's view, Hitzman thinks that, in certain circumstances, local companies are also prioritising greener buildings. He said: "We are starting to see an increase in high-rent residential construction projects wanting things like roof insulation. Being environmentally friendly has become a selling point for some developers. They are, however, doing this as much because it helps them to sell their buildings as because they want to be sustainable.

"Another area in which there has been some movement towards environmentally-sustainable construction is in buildings that are air-conditioned for long periods of time, for example malls and hospitals. These are looking to roof insulation as a means of reducing their running costs."

An important aspect of the global sustainable construction sector is the various certifications that buildings can be awarded to demonstrate their green credentials. Among these, LEED (Leadership in Energy & Environmental Design) is perhaps the best recognised. These certifications are well known in Malaysia but, again, it is primarily overseas-headquartered companies that demand environmentally-friendly compliant buildings.

Tan Kian Sin, Senior Marketing Manager at Acotec, a Belgian wall panel company, said: "Many local players in the Malaysian market are not that interested in green labels at the moment, though this may change. For projects in Singapore, for instance, you now have to have the green endorsement."

One area where progress is being made towards more environmentally friendly construction is in government sponsored infrastructure projects. Devaraj Govindarajoo, Senior Manager for Business Development at IJM Construction, a local building firm, said: "The CIDB [Construction Infrastructure Development Board] is working on a number of green building developments and we have delegates from our company working with them. The environmental standards required for the work are still under development at the moment. They are being taken very seriously, however, and in the future you will have to be certified under the CIDB index if you want to undertake government infrastructure work."

Photo: Hitzman – More green buildings in Malaysia.
Hitzman – More green buildings in Malaysia.
Photo: Hitzman – More green buildings in Malaysia.
Hitzman – More green buildings in Malaysia.
Photo: Sunway: Focussing on virtual design software.
Sunway: Focussing on virtual design software.
Photo: Sunway: Focussing on virtual design software.
Sunway: Focussing on virtual design software.

Public sector work is particularly significant, as the Malaysian property market is currently slowing, with government infrastructure projects now the major business driver for many construction companies. Highlighting this, Sunway's Lim said: "The property market is a little slow at the moment. Over the last two years, everyone was building residential property, but now there is an over-supply. At Sunway, we are scaling down our residential projects and looking more at infrastructure projects and roads as areas for growth."

A number of large infrastructure projects are in the pipeline in Malaysia, with work set to soon start on a second MRT (mass railway transit) line, as well as a third LRT (light railway transit) line, with both of these in the Greater Kuala Lumpur area. Work is also continuing on KL118 which, when completed in 2020, will be the fourth tallest building in the world.

A major reason for this significant government spending on infrastructure is a bid to boost the Malaysian economy. Bryan Lew, Manager at RS Concord, the southeast Asian offshoot of Finland's RS Steel, said: "The construction industry has a lot of positive multiplier effects in other sectors. Many of the government-funded projects in infrastructure, then, are an attempt to boost economic growth."

Although the majority of such infrastructure projects are still government funded, a number of private finance initiative (PFI) projects are also now on the agenda. Lim said: "Most of the spending on roads and transport is still coming from the government, but we have also have some projects partially-financed by the Sunway Group under a PFI deal. PFI in Malaysia is generally used in the construction of power plants and it is much less common for other infrastructure projects, such as roads."

Despite government attempts to boost the economy through infrastructure spending, the broader economic troubles in the country are nevertheless taking their toll, particularly with regard to a knock-on effect to its currency. Lim said: "One of our biggest problems is that the Malaysian Ringgit has taken a nose dive. This has made materials from overseas far more expensive than they were before."

Lim was not alone in this concern. Mohd Shafiqzuddin Ahman Sidek, a Sales Engineer at M.S.Time, a Kuala Lumpur-based crane and hoist company, said: "Business has been slower this year. This is due to the slowdown in the economy and, in particular, to the currency problems."

The falling Ringgit makes the cost of overseas materials more expensive, with many exhibitors asserting that the cost of a project remains the most important factor for clients. Lim said: "When clients have to choose between a project being done quickly to a very high quality or more slowly at a lower cost, they choose low cost almost every time."

In a bid to combat this, Sunway Construction has recently been making more use of virtual design construction software. Explaining the company's thinking, Lim said: "By making a virtual model of a project before we build it, we can identify potential problems before they emerge. This enables us to better plan a project's time scale and its cash flow, often resulting in savings in both areas."

Broadly agreeing, Lew said: "Selling our products in Malaysia requires a lot of client education, as a lot of contractors here still prefer the traditional ways of construction. The most significant problem when trying to convert contractors to using precast steel is the higher cost. We argue that the higher cost is offset by the shorter time of construction, as well as the increased safety. It remains a challenge to get people here, however, to pay for speed over cost. Cost is always the number one factor in this part of the world."

Photo: Kuala Lumpur’s new underground rail system heads the list of government-funded projects.
Kuala Lumpur's new underground rail system heads the list of government-funded projects.
Photo: Kuala Lumpur’s new underground rail system heads the list of government-funded projects.
Kuala Lumpur's new underground rail system heads the list of government-funded projects.

The Greenbuild Southeast Asia 2015 exhibition was held at the Putra World Trade Centre, Kuala Lumpur from 9-11 September. Around 10,000 industry professionals, from more than 60 countries, attended the event.

Geoff de Freitas, Special Correspondent, Kuala Lumpur

Content provided by Picture: HKTDC Research
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