KUCHING,. Analysts expect a substantial allocation for developments in East Malaysia, especially for road projects, analysts observed.
“We expect quite a substantial allocation for developments in East Malaysia, especially roads. Sarawak for example, has a need for about 7,530km of new roads while 3,487km need upgrading, just to ensure that the whole state is fully connected.
“Over in Sabah, we can expect the federal administration to centre on the progress of the Pan Borneo Highway. It is now at 65 per cent completion stage, which way behind the 86 per cent that has been achieved in Sarawak,” said the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) in its market outlook report for 2023.
It also noted that for education necessities, allocations include RM1.1 billion for maintenance and upgrading of schools, RM1.2 billion for upgrading dilapidated schools in East Malaysia and RM430 million to build five new schools.
Healthcare projects include RM2.22 billion for the construction and upgrading of hospitals and clinics, including the purchase of new equipment, it added.
“The performance of the construction sector has somewhat tied with government policies, especially on the types of infrastructure projects it decides to pursue.
“The previous political seesaw caused the sector to be rather dull due to the lack of large projects, on top of the onslaught of the pandemic.
“With the government now led by Pakatan Harapan, we expect the policy makers to be more prudent in government spending, which could see potentially a lower planned gross development expenditure for 2023 in the re-tabled budget.
“The initial Budget 2023 tabled in October had the highest gross development expenditure in the nation’s history at RM95 billion, which was an increase of 32.3 per cent from Budget 2022.
“We can also expect potential reviews of plans in the pipeline, which could either delay the execution progress or even termination of plans,” MIDF Research projected.
Overall, the research team forecast a 4.8 per cent growth for the construction sector in 2023, a slight improvement over the expected 3.5 per cent for 2022.
“With the lifting of Covid-19 restrictions, most contractors have begun ramping up their activities to high operational levels.
“This was evident in 3Q22 as the sector maintained its second consecutive quarter of GDP growth at 15.3 per cent y-o-y. The value of work done rose 23.2 per cent y-o-y to RM30.5 billion, driven by work done on non-residential buildings (37.7 per cent), special trades activities (32.2 per cent), residential buildings (17.8 per cent) and civil engineering (14.6 per cent) subsectors.
“The issue of insufficient foreign labour, one which has hampered progress, is also abating as contractors are starting to receive the applied foreign workers,” it said.
Aside from that, it said that although it expected a possible delay in rollout of projects or potential terminations in 2023, the current outstanding order book levels for companies under its coverage are sufficient to tide them through the year.
“Job flows have been on the decline from RM283.02 billion in 2016 to RM91.35 billion in 2020. It rose to RM133.14 billion in 2021 and as of November 2022, RM117 billion of contracts have been awarded.
“There is a disparity in the value of projects versus the volume, which goes to show that although there were more contracts, the value of those jobs was smaller.
“Back in 2016, there were only 8,353 number of contracts awarded as compared to 10,133 as of November 2022. We expect the rollout of MRT3 to boost the quality of the job flows, especially at the second-tier level,” it explained.