Hopes for more IBS tax ben­e­fits in Bud­get 2017

> Low adop­tion of the sys­tem due to cheap labour, pro­pri­etary sys­tem does not help con­trac­tor’s costs

The Sun (Malaysia) - - SUNBIZ - BY EVA YEONG

PETALING JAYA: The gov­ern­ment should pro­vide more tax in­cen­tives for con­trac­tors who in­vest in the in­dus­tri­alised build­ing sys­tem (IBS) in or­der to in­crease the adop­tion rate, said Con­struc­tion In­dus­try Devel­op­ment Board Malaysia (CIDB).

“At the mo­ment, if you are do­ing res­i­den­tial houses and achiev­ing an IBS score of 50, then you are en­ti­tled to get a levy ex­emp­tion from CIDB. But the levy is not much, 0.125% of the con­tract value. So for ev­ery RM1 mil­lion project, it’s only RM1,250. It’s quite small and it only cov­ers res­i­den­tial houses,” said CIDB se­nior gen­eral man­ager of op­er­a­tion sec­tor Me­gat Kamil Azmi Me­gat Rus Ka­ma­rani.

The IBS score is awarded based on the type of struc­tural sys­tems used (max­i­mum 50 points), types of wall sys­tems used (max­i­mum 20 points) and other sim­pli­fied con­struc­tion so­lu­tions used (max­i­mum 30 points) in a project, with the higher score de­not­ing a higher use of IBS in the build­ing.

“Hope­fully we can have some other tax ben­e­fits for those in­vest­ing in IBS, that will mo­ti­vate them to in­vest more in IBS. I think the gov­ern­ment is pro­mot­ing IBS and I think there will be some men­tion of IBS in this com­ing Bud­get speech, es­pe­cially for hous­ing,” he said.

Me­gat, who spoke at the 12th Con­fer­ence on Status and Out­look of the Malaysian Iron and Steel In­dus­try or­gan­ised by the Malaysian Iron and Steel In­dus­try Fed­er­a­tion yes­ter­day, said the main rea­son for the low adop­tion of IBS is cheap labour.

He said labour cost in Malaysia is about RM100 per day com­pared with AU$70 (RM221.90) per hour in Aus­tralia.

In 2014, only 24% of pub­lic projects worth more than RM10 mil­lion achieved an IBS score of 70 de­spite in­struc­tion from the Fi­nance Min­istry that all gov­ern­ment projects must use IBS. In terms of pri­vate projects, only 14% have achieved an IBS score of 50.

“Some gov­ern­ment projects are in the ru­ral ar­eas where there is no sup­port for IBS. So there is an ex­emp­tion (from in­cor­po­rat­ing it in the project) if you have a prob­lem get­ting IBS sup­pli­ers or if the project is in a re­mote area,” he said.

Me­gat added that con­trac­tors are also re­luc­tant to adopt IBS be­cause un­der the pro­pri­etary sys­tem, most of the profit goes to IBS sup­pli­ers, which af­fects con­trac­tor mar­gins.

“The con­trac­tors are re­ly­ing on prof­its from this sec­tor but if the bulk of the cost goes to IBS sup­pli­ers, then there’s not much they are earn­ing. Un­less they them­selves are in­volved in IBS, that’s why we are pro­mot­ing for an open sys­tem rather than the pro­pri­etary sys­tem. Once the open sys­tem is in place, any­body can adopt the sys­tem,” he said.

Me­gat said CIDB is also in talks with lo­cal au­thor­i­ties to in­cor­po­rate IBS into their devel­op­ment or­der ap­proval whereby con­trac­tors have to ful­fill cer­tain re­quire­ments be­fore the project is ap­proved and awarded.

“That will in­crease pro­duc­tiv­ity, re­duce our de­pen­dency on for­eign work­ers, re­duce wastage and re­sults in good qual­ity of work,” he added.

Mean­while, CIDB is aim­ing to in­crease the ease of do­ing busi­ness in terms of deal­ing with con­struc­tion per­mits.

“Cur­rently for DBKL, it takes 74 days to is­sue a con­struc­tion per­mit. At some lo­cal au­thor­i­ties, it takes much longer. We need to re­duce that by 5% by 2020,” said Me­gat.

In com­par­i­son, Sin­ga­pore takes 26 days, South Korea 29 days and Qatar 58 days.

Over­all, the con­struc­tion sec­tor achieved RM83 bil­lion worth of new work as of Au­gust this year. Me­gat said it is on track to achieve the RM131 bil­lion tar­get this year. Last year, the sec­tor re­ported RM137 bil­lion worth of new works, lower than the RM144 bil­lion pro­jected. The pro­jec­tion for 2017 is RM138 bil­lion.

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