EnglishPilihan EditorTwo Cents

Govt Review Of Mega Projects?

Certain infrastructure projects, notably the RM15 billion of flood mitigation projects, will likely be re-tendered while some new projects will be introduced, analysts said.

This is after the government has completed its review of certain previous job awards.

The massive RM50.2 billion Mass Rapid Transit 3 (MRT3) project is not expected to be affected, they said.

The government also would unlikely turn off the tap on ongoing projects such as Pan Borneo Highway, Sabah Sarawak Link Road, Central Spine Road and East Coast Rail Link.

“A case in point is the RM15b flood mitigation project which was purportedly awarded through direct negotiation.”

Lum believes that there is a strong case for the government to embark on counter-cyclical fiscal pump-priming to shield the economy from external slowdown with high-impact projects such as the MRT3 project.

“In the private space, a new wave of investment in semiconductor foundries and data centres by MNCs in Malaysia has been a shot in the arm for local contractors.”

Overall, Lum is bullish about the construction sectior given that the headwinds in terms of labour shortage and spikes in construction material costs are dissipating

“On the private sector front, there are growing opportunities in the construction of new semiconductor plants and data centres locally as multinational corporations (MNCs) diversify their manufacturing bases geographically (away from China) to de-risk.

“These contracts generally command better margins than the conventional building jobs as they are fast-track and technically more demanding.”

Lum said fo far, contractors under its coverage including Kerjaya Prospek Group Bhd, IJM Corporation Bhd and Kimlun Corporation Bhd had bagged such jobs in Penang and Melaka while Sunway Construction Group Bhd was actively bidding.

RHB Research said although the 15th general election (GE15) was over, thereby removing the political overhang on the sector, it still remained to be seen as to how the unity government would handle the country’s fiscal position.

It said the status of RM95 billion worth of development expenditure proposed before GE15 was pending the re-tabling of 2023 Budget.

“As such, we cannot discount the possibility of a review of infrastructure projects, mainly the MRT3, which could see a decrease in contract value, while project owners may postpone investment decisions until there is better policy clarity from the government,” it said.

RHB has maintained its “Neutral” call on the sector.

Meanwhile, MIDF Research said the performance of the construction sector had somewhat tied to government policies, especially on the types of infrastructure projects it decides to pursue.

It said the previous political seesaw had 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 policymakers 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 2023 Budget 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 2022 Budget. We can also expect potential reviews of plans in the pipeline, which could either delay the execution progress or even termination of plans,” it said. – NST ONLINE

  • Writer is NST Bussiness Journalist

BacalahMalaysia Team

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