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Malaysia Infrastructure Report Q3 2010
Business Monitor International, June 2010, Pages: 73
Business Monitor International's Malaysia Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Malaysia's infrastructure industry.
Malaysia scores well in our Project Finance Ratings, with an overall score of 62.4, which puts the country in third place, out of 13 countries. It scores particularly well in absolute terms for the Design and Construction category, but also holds its own in terms of Commissioning and Operating, particularly relative to other countries in the region. However, the country will need to significantly improve its regulatory environment if it is to ever challenge regional leaders Singapore and Hong Kong, which have overall Project Finance ratings considerably above 70.0.
Malaysia scores moderately in our Infrastructure Business Environment Ratings. The country is let down by a very poor score for its Infrastructure Market rating, which drags down the score for the ‘Limits of Potential Returns.’ By contrast, Malaysia scores much better in the ‘Risks to the Realisation of Potential Returns’ category.
The outlook for the country’s construction sector has improved over the last quarter, thanks to a general improvement in global economic conditions, driven by a faster than expected recovery (indeed, our Country Risk team has revised up GDP growth forecasts for Malaysia over the last quarter).,The faster than expected economic growth is partly due to a significant increase in government spending on infrastructure. As public infrastructure projects have come on-stream, government consumption has surged – hitting growth of 10.9% y-o-y in Q309, considerably greater than the 1.0% growth registered in the preceding quarter. This allays our earlier concerns about the government experiencing capacity related delays in the implementation of public infrastructure projects. As such, we have moderated our earlier estimate that the construction sector in Malaysia contracted by 4.5% in 2009; we now estimate that it contracted by a relatively mild 0.19%. Meanwhile, we now forecast that sector will revert to positive growth in 2010, reaching an annual rate of 2.5% (compared to our earlier forecast for a 0.4% contraction in 2010). Thereafter, we expect that construction sector growth will be in a range of 1% - 2.5% per year in real terms during the remainder of our forecast period.
Construction began on the MYR9bn (US$2.82bn) Pahang Selangor raw water transfer project in April 2010, according to The Star. The work is being carried out by Malaysia’s IJM Corp and UEM Builders, – together with Japan’s Shimizu Corp and Nishimatsu Corp. Once completed, raw water will be funneled through a 45km long (and 2.6m radius) tunnel, with a capacity of 1.89bn litres of water per day. This will make the tunnel the longest in Southeast Asia. The work involves boring through the Titiwangsa Main Range and is expected to be complete in 2014.
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