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Construction spending surges in Malaysia

Spending on construction projects in Malaysia is continuing to increase, with several new projects in the pipeline that each represent further advancement for the building sector.

In the first quarter of 2015 alone, construction spending in the country expanded 15.1% - rising to RM28.74 billion from RM24.97 billion in Q1 2014.

Key drivers

The catalyst for the drive has been the non-residential buildings sub-sector, which contributed the most thanks to a 34.8% share, though civil engineering (30.5%), residential buildings (29.9%), and special trades (4.8%) each made significant contributions.

Selangor is once again a key driver of activity, with Malaysia's official Statistics Department calculating the value of construction work done in the state at RM7.55 billion, which is more than a quarter (26.9%) of the total value of construction work done by all the states.

Close behind were Kuala Lumpur at RM5.14 billion (17.9%), Johor at RM4.79 billion (16.7%), Sarawak at RM2.21 billion (7.7%) and Penang at RM1.6 billion (5.6%), with these five states alone accounting for the significant majority (74.1%) of construction work done, in terms of value.

When compared with the final quarter of last year, construction spending expanded 6.1%, which is also faster than the 1.1% seen in Q1 2014.

The trend of the private sector dominating the sector is also continuing, with the Q1 2015 share standing at 68.4% as new projects increasingly get the green light.

Bright future

Further growth has also been forecasted in the country's Economic Planning Unit (EPU) as part of Prime Minister Datuk Seri Najib Tun Razak's much-vaunted 11th Malaysia Plan (11MP).

The five-year scheme is intended to make the construction, service and manufacturing sectors transform and grow, catapulting the country towards becoming a developed nation by 2020.

The importance of the construction sector is increasing due to greater demand for modern and efficient infrastructure, and is earmarked to grow 10.3 per cent a year by 2020, contributing RM327 billion - equivalent to 5.5 per cent of the gross domestic product.

This will be complemented by the introduction the Construction Industry Transformation Programme 2016-2020, which will see the sector underpinned by four key strategies; principally catalysing productivity by increasing the adoption of technology and the modernisation of construction methods.

Other key focuses will include boosting knowledge by increasing the quality of human capital, generating greater capacity, and boosting the capability of small and medium enterprises, as the country aims to make its construction industry stand out on the global stage.

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