Constructors likely to gain from Budget 2023, GE15
KUCHING: The construction sector stands to gain from several boosts like higher gross development expenditure from the upcoming Budget 2023 as well as the highly anticipated General Election 15 (GE15).
In the upcoming Budget 2023 to be announced on October 7, Kenanga Investment Bank Bhd (Kenanga IB) forecast a higher gross development expenditure of RM90 billion versus FY22’s RM76 billion thanks to the absence of Covid-related funds in the previous Budget 2022 worth RM23 billion.
“Based on our channel checks, we also understand that there is unused gross development expenditure from Budget 2022,” it said.
“We understand that projects have been held back as tender prices put in by contractors did not meet (i.e. exceeded) budgets for most projects (due to soaring labour and material costs).
“The rollout of new public project will come handy at a time when order-books of most contractors are fast depleting.”
Kenanga IB also anticipates for a new wave of jobs after GE15 from its ground checks that a new wave of awards of public infrastructure projects is more likely to hit the market after the GE15, rather than before.
These will include MRT3, Pan Borneo Sarawak Phase 2, Pan Borneo Sabah, Central Spine Road and various flood mitigation and hospital projects. “It is critical for the government to start rolling out new jobs as most key on-going infrastructure projects are already at their tail
Based on our channel checks, we also understand that there is unused gross development expenditure from Budget 2022.
Kenanga IB
end including MRT2, LRT3, Pan Borneo Phase 1,” it opined.
“The tenders for the three civil packages under MRT3 will close Sep 2022 (delayed from Aug 2022) and we anticipate the award of contracts in early next year.”
On the private sector front, it believed there were opportunities in the construction of new semiconductor plants and data centres locally as multi-national corporations diversify their manufacturing bases geographically (away from China) to de-risk.
“We gathered that these contracts could be sizeable - between RM1 billion to RM1.5 billion each. However, the same cannot be said for the office and high-rise residential segments given the persistent oversupply.”
Given fiscal constraints, mega projects could be implemented via public finance initiative (PFI) or deferred payment models, Kenanga IB said,
“For instance, contractors of MRT3 may fund the project during the first two years of construction, only to be paid the entire amount in equal monthly instalments during the third and fourth years,” it explained.
“Other projects that are likely to be carried out via these models are a flood mitigation project in the west of Klang Valley (reportedly with a price tag of RM5 billion to RM15 billion, depending on proposals by various bidders), PJD Link, Bangi Putrajaya Highway and Kuala Lumpur Northern Dispersal Expressway also known as KL Node).”