Construction:Allocations to spur developments
Infrastructure development remains a key to Malaysia’s economic growth. Budget 2018 will no doubt introduce allocations for major projects that could spur the economic growth of the country.
Maybank IB Research pointed out that infrastructure remains key mid- to long-term agenda and the infrastructure development is “by default” given the record RM137 billion infrastructure construction jobs awarded last year.
“With on-going and upcoming multi-year mega infrastructure projects such as Klang Valley Mass Rapid Transit 2 (KVMRT2), Klang Valley Light Rail Transit 3 (KVLRT3), Pan-Borneo Highway and East Coast Rail Line (ECRL), the rising trend in gross development expenditure (GDE) since 2015 should be maintained in Budget 2018, especially considering that of the RM260 billion GDE target under 11MP (2016-2020), RM42 billion was spent in 2016 and RM46 billion was allocated under Budget 2017, leaving RM172 billion for 2018 to 2020, equivalent to RM57.3 billion per annum,” it said.
It also highlighted that projects such as the Pan-Borneo Highway and ECRL are expected to be funded via issuances of government-guaranteed bonds - a key means of financing infrastructure in Malaysia.
“If not via existing special purpose vehicles (SPVs) like Danainfra and Prasarana (used for the funding of KVMRT and KVLRT projects), Budget 2018 may announce the setting up of new SPVs for governmentguaranteed funding of PBH and ECRL,” it added.
Maybank IB Research added, the momentum in infrastructure investment and spending would be further sustained by the expected start of the KL-Singapore High Speed Rail (KL-SG HSR) construction next year and the possibility of the implementation of KVMRT3 project being brought forward given the targets for the project getting the Cabinet’s nod is by mid-2018 and construction rollout is by late-2018 or early2019.
Meanwhile, the research arm of Affin Hwang Investment Bank Bhd (AffinHwang) believed that the government could allocate RM48 billion for Malaysia’s development expenditure, with an addition RM2 billion for contingency reserves.
It explained, “In the first two years (2016 to 2017) of the 11MP, the Federal Government has only disbursed about 34 per cent or RM88 billionn of the total RM260 billion, where development expenditure will likely be increased over the next three years.”
Aside from that, AmBank noted that construction activities would continue to benefit from the infrastructure activities, upgrading of road works, nonresidential activities like mixed commercial developments, and residential properties led by affordable housing programmes.
“Incentives are expected for contractors who adopt new building technologies such as the industrialised building system (IBS) and aluminium formwork system which help reduce wastage and save construction time, encourage contractors to invest in new construction machineries, and collaborate with the government to train skilled crane and machinery operators,” it added.