TPPA will benefit Malaysian construction industry

Malaysia, Slider 16 Nov 2015
TPPA will benefit Malaysian construction industry

Maybank IB Research says that a key point on the Trans Pacific Partnership Agreement (TPPA) focuses on the liberalisation in government procurement, giving established construction players an advantage in bidding for future tenders locally and internationally.

“Malaysian contractors with strong international track record and niche expertise could benefit from wider market access under the TPPA if they could sustain their domestic cost structure,” it says.

The research house says that potential beneficiaries could include big cap firms such Gamuda Bhd, IJM Corp Bhd, WCT Holdings Bhd and Eversendai Bhd.

Locally, Maybank IB says that the TPPA only has a minor impact on the construction sector.

This is because small unlisted contractors and Bumiputera contractors would still be sheltered by existing measures.

Selected construction projects will also be exempt from TPPA terms, particularly Public Private Partnership (PPP) projects which include build-operate-transfer (BOT) and public work concessions.

Chapter 15 of the agreement lists 25 federal ministries in Malaysia and their subordinates that will be subject to liberalisation.

Among these, those who usually tender out the majority of government construction jobs are the Ministry of Works, the Ministry of Transport, and the Ministry of Energy, Green Technology and Water, says Maybank.

On the other hand, the value of government jobs as a percentage of total construction works in Malaysia has declined since 2010, accounting for less than 20% of total contacts awarded annually.

Government construction contracts average about RM21 billion annually during this period.

“The declining award values is because the federal government, in particular, has shifted towards alternative options in implementing projects including via the PPP model. And corporatised government entities,” says Maybank.

TPPA will benefit Malaysian construction industry.
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