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Malaysia Infrastructure Report Q1 2011
Business Monitor International, Jan 2011, Pages: 91
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.
New data from the Malaysia Department of Statistics show that Malaysia's construction industry has continued to grow robustly in 2010, propelled by a two-year US$16bn stimulus plan initiated back in March 2009. The construction industry's value for the first nine months of 2010 grew by a real 5.0% year on-year (y-o-y), pushing the nominal industry value to MYR18.2bn (US$5.0mn). As such, we are confident that our full-year real growth forecast of 6.6% looks well on track, implying a nominal construction industry value of MYR24.3bn (US$7.5bn) in 2010.However, beyond the end of this year, we remain cautious about the prospects for Malaysia’s construction sector, on the basis of the following:
- We anticipate a slowdown will kick in during the second half of the year – in line with renewed slowdown in wider economic growth. Although the economy as a whole grew by an impressive 9.5% y-o-y in H110, we are forecasting that a hard landing in China will eat into economic growth in Malaysia during the second half of the year. This decline in exports will place fresh strain on central government revenues, which will constrain the government’s financial ability to invest in infrastructure over the medium term.
- In response to this lack of public funds, the government has initiated a number of plans to boost private sector participation in Malaysia’s construction sector. It has launched the US$444bn private sector-led Economic Transformation Programme, with specific focus on driving private investment in key sector such as infrastructure over the next ten years. However, we doubt private sector interest will meet the government's expectations given the allure of other South East Asian markets and continued global difficulties.
Considering these factors, BMI is pencilling in slower construction sector growth over the medium term. The construction sector is expected to average real growth of 6.1% per annum between 2011 and 2012.Under such a baseline scenario, we would expect the industry value to reach 3.3% of GDP in 2011 and2012, a more conservative projection than the government's 4.9% and 4.4% forecasts respectively. Looking further ahead, we expect sector growth to slow further, averaging 4.9% per annum between 2013and 2015, with the nominal industry value expected to hit MYR35.4bn (US$10.9bn) by 2015.
Business Environment
Malaysia’s positioning in our Business Environment league table has not changed over the last quarter. The country remains in seventh place, having moved up from ninth last quarter. Malaysia’s overall score (55.5) is supported by an increase in government support for infrastructure in the later months of 2009,but the country it is still let down by a poor score for its ‘Industry Rewards’ sub-category, which drags down the score for the overall ‘Rewards’ category. By contrast, Malaysia scores much better in the ’Risks’ category.
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