1117 A Cost Benefit Analysis For The IBS System in Malaysia

i
Dynamism and Sustainability through IBS

A cost-benefit analysis for the industrialised building system industry in
Malaysia
©
Construction Industry Development Board Malaysia 2018
All enquiries regarding this book should be forwarded to:
Chief Executive 
Construction Industry Development Board Malaysia
Level 10, Menara Dato’ Onn, 
Pusat Dagangan Dunia Putra, 
No. 45, Jalan Tun Ismail, 
50480 Kuala Lumpur, Malaysia
Tel: 603-4047 7000
Fax: 603-4047 7070
Email: [email protected]
Website: www.cidb.gov.my
ISBN 978-967-0997-27-8
No part of this publication may be reproduced or transmitted in any form or

by any means, whether mechanical or electronic, including photocopying
and recording without the written consent of CIDB.
ii
TABLE OF CONTENTS
FOREWORD x
PREFACE xi
ACKNOWLEDGMENT xii

EXECUTIVE SUMMARY 1
CHAPTER 1: INTRODUCTION 3

1.1 Definitions, Objectives and Scope 3
1.2 Context and Circumstances 14
CHAPTER 2: APPROACH AND METHODOLOGY 17

2.1 Research Framework 17
2.2 Chronology and Description of Research Activities 18
CHAPTER 3: BUSINESS PERSPECTIVES 22

3.1 Reduction in Completion Time and Costs Equal Improved Financial
Sustainability and Business Viability 22
3.2 Creation of New Business Opportunities 25
3.3 Customer Acquisition and Retention 26
3.4 Construction Players’ Qualms 27
3.5 Misgivings about Investing in Manufacturing Facilities for IBS Components 29
3.6 Strengths-Shortcomings Balance 31
CHAPTER 4: SOCIO-ECONOMIC AND POLITICAL PERSPECTIVES 32

4.1 Emergence of New and/or Expansion of Existing Sub-sectors 32
4.2 Expanding the GDP Base 34
4.3 Establishing Other Positive Spillover Effects 37
4.4 Unlocking Tremendous Export Potential of Selected IBS Segments 44
4.5 Propelling Innovation, Creativity, Productivity and Professionalism 46
4.6 Minimising Hidden Costs to the Economy 52
4.7 Enabling Property Ownership and Keeping Property Prices in Check 60
4.8 Occupational Destruction Triggers Income Loss and Unemployment 65
4.9 Less Foreign Labour Equals Lower Private Consumption 68
iii
CHAPTER 5: PUBLIC ADMINISTRATION AND GOVERNANCE
PERSPECTIVES 71

5.1 IBS Upholds Good Governance 71
5.2 IBS Helps Reduce Wastage, Leakage and Other Negative Elements 72
5.3 IBS Boosts Ease of Doing Business 76
5.4 IBS Contributes to the Nation’s Coffers 79
5.5 IBS Drives Harmonisation of Incentives 82
5.6 Permanent Loss of One Revenue Source 83
5.7 Ramifications for International Diplomatic and Economic Relations 86
5.8 Excessively Onerous Compliance and Enforcement Costs 88
CHAPTER 6: SUSTAINABILITY, SAFETY AND HEALTH PERSPECTIVES 92

6.1 Respect for and Anchorage of Legal and Institutional Underpinnings 92
6.2 Greater Cleanliness, Safety, Health and Sustainability-related Accomplishments 95
6.3 IBS Embraces Resource Savings and Eco-friendly Solutions 98
6.4 Better Working Environment and Living Conditions for Workers with
Prefabricated Solutions 102
6.5 Facilitating Greater Usage of Building Information Modelling (BIM) 105
6.6 Higher Usage of Utilities and Chemicals at IBS Component-making Plants
and Impact on Overall Resource Savings and Waste Management 106
6.7 Several Unresolved Accessibility, Connectivity and Logistics Issues in Rural Areas 107
6.8 Threats of Depletion of Finite Raw Materials and Natural Resources 108
CONCLUSION 111

Overall Strengths-Shortcomings Balance 112
Mapping with 18 CITP Initiatives 115
Policy Recommendations 117
APPENDICES 126
Appendix 1. Questionnaire for Category 1 122

GLOSSARY 165
REFERENCES 168
iv
LIST OF TABLES
Table 1.1 Various definitions of IBS 3
Table 1.2 Average IBS content in public- and private-sector projects (adapted from 15
a table on key performance indicators in the IBS Roadmap 2011– 2015 as
underscored in Research on IBS Adoption in Government and Private
Projects in Malaysia 2013)
Table 1.3 Levels and targets of average IBS content 2012–2015 in private-sector 16
projects by type of buildings (adapted from a table on IBS content for the
private sector in the IBS Roadmap 2011–2015 as underscored in Research
on IBS Adoption in Government and Private Projects in Malaysia 2013)
Table 1.4 Observed average IBS scores in public- and private-sector projects by 16
type of buildings in 2014 (adapted from a table on IBS scores based on
Research on IBS Adoption in Government and Private Projects in Malaysia
2013)
Table 3.1 Averages of survey findings for selected financial metrics 24
Table 3.2 Averages of survey findings for customer satisfaction scores (out of 100) of 29
IBS vs. CBM
Table 3.3 Comparative business performance between IBS and CBM 30
Table 4.1 Costs of ex-factory IBS products and components used by the construction 33
sector according to six clusters (RM’000)
Table 4.2 IOT mapping for Malaysia’s construction sector 2000 vs. 2010 (RM’000) 35
Table 4.3 Employment by categories of skills 2010–2020 38
Table 4.4 Monthly household incomes and consumption expenditure 39
Table 4.5 Predicted amount of nominal private consumption (RM’000) vs. the 2015 39
levels (positive impact)
Table 4.6 New definition of SMEs across sectors (effective 1 January 2014) 40
Table 4.7 CIDB’s new definition of SMEs in the construction sector 41
Table 4.8 CIDB’s contractor grades 41
Table 4.9 Breakdown of SMEs according to size 41
v
Table 4.10 Sectoral breakdown of SMEs 42
Table 4.11 SMEs by ownership 42
Table 4.12 SMEs and employment 42
Table 4.13 Key indicators of SMEs 43
Table 4.14 List of IBS component manufacturers and distributors, and IBS contractors 43
nationwide as at end November 2016
Table 4.15 Predicted combined export amount of IBS manufacturing segments with 47
the most export potential and total exports of manufactured goods vs.
2016 levels (RM million)
Table 4.16 Malaysia’s labour productivity per number of employment (2010=100) 48
Table 4.17 Key details of major global innovation-related indices 51
Table 4.18 Performance of Malaysia vs. the top-ranked country on global innovation- 52
related indices
Table 4.19 Distribution of foreign workers across economic activities in Malaysia 52
Table 4.20 Foreign workers’ annual remittances by country of destination (RM million) 55
Table 4.21 Flows of secondary income account, current account under balance of 55
payments (RM million)
Table 4.22 Predicted amount of annual remittances (RM million) vs. 2015 levels 56
Table 4.23 Annual federal government expenditure for public order and law 56
enforcement
Table 4.24 Non-citizens caught in serious crimes 56
Table 4.25 Non-citizens caught in property crimes 57
Table 4.26 Overall crime index involving non-citizens in all types of crimes 57
Table 4.27 Subsidies for selected consumer goods (controlled items) 58
Table 4.28 Selected statistics on patients and fee collection at MOH clinics and 58
hospitals
Table 4.29 Annual averages for selected public transportation data for 2000–2015 60
vi
Table 4.30 Annual growth of the Malaysian House Price Index (MHPI) (2000=100) and 61
its selected components
Table 4.31 Annual average growth rate for supply of properties by property types 62
and states 2010–2015
Table 4.32 Selected housing statistics 62
Table 4.33 Malaysia’s principal labour statistics 66
Table 4.34 Job creations by sectors under 10MP and 11MP 67
Table 4.35 Selected construction-related labour market statistics 67
Table 4.36 Selected annual statistics on population, foreign workers and national 69
accounts (in nominal terms)
Table 4.37 Predicted amount of nominal private consumption (RM’000) vs. 2015 69
levels (negative impact)
Table 5.1 Various estimates of direct and indirect economic costs of corruption 75
worldwide
Table 5.2 Key details of major global ease of doing business and competitiveness- 77
related indices
Table 5.3 Performance of Malaysia vs. the top-ranked country on global ease of 79
doing business and competitiveness-related indices
Table 5.4 New tariffs of foreign worker levy effective 18 March 2016 84
Table 5.5 Selected foreign worker-related data 84
Table 5.6 Predicted amount of levy collection (RM’000) vs. 2015 levels 85
Table 5.7 Bilateral trade vis-à-vis Indonesia, India and Myanmar (RM million) 89
Table 5.8 Predicted amount of Malaysian exports (RM million) in 2016 vs. 2015 to 89
Indonesia and India with corresponding decreases in number of registered
foreign workers
Table 6.1 Malaysia’s gross expenditure on R&D (GERD)-related data 99
Table 6.2 List of natural resources required by the construction sector facing risks of 109
depletion and probability of occurrence
vii
LIST OF FIGURES
Figure 1.1 IBS industry cuts across all five major sectors 4
Figure 1.2 Value-chain mapping for the IBS industry 5
Figure 1.3 Real growth performance of Malaysia’s GDP and five sectors (%) 5
Figure 1.4 Number of employed persons by sector (‘000) 6
Figure 1.5 Malaysia’s nominal value-add per employee, overall and by sector (RM) 7
Figure 1.6 Banking system’s year-end outstanding loans by sector (RM million) 8
Figure 1.7 Malaysia’s gross foreign direct investment (FDI) inflows by sector (RM 8
million)
Figure 1.8 Performance of the FTSE Bursa Malaysia Kuala Lumpur Composite Index 9
Kuala Lumpur Construction Index and Kuala Lumpur Property Index
(normalised on the basis of 4 January 1993)
Figure 1.9 Six clusters of the IBS component manufacturing segment 11
Figure 2.1 Overall research framework 18
Figure 3.1 Observed and/or estimated annual total amounts of CWD, adjusted CWD 25
and potential construction cost savings (RM billion)
Figure 4.1 Share of six manufacturing clusters of finished IBS products and components 33
out of total number of IBS manufacturers (%)
Figure 4.2 Malaysia’s population, GDP and GNI per capita 40
Figure 4.3 Malaysia’s selected major gross exports of manufactured goods (RM 45
million)
Figure 4.4 Malaysia’s major gross exports of construction-related manufactured 46

goods (RM million)
Figure 4.5 Malaysia’s sectoral labour productivity levels (RM) 48
Figure 4.6 Share of foreign workers out of total employment across sectors in Malaysia 53
(%)
Figure 4.7 Banking system’s top 10 categories of year-end outstanding loans (RM 63
million)
viii
Figure 5.1 Major categories of the federal government’s revenue (RM million) 80
Figure 5.2 The federal government’s direct taxes (RM million) 80
Figure 5.3 The federal government’s indirect taxes (RM million) 81
Figure 5.4 The federal government’s non-tax revenue (RM million) 81
Figure 5.5 Number of foreign workers in Malaysia by country of origin 86
Figure 5.6 Share of foreign workers out of total workers in Malaysia by country of 87
origin (%)
Figure 5.7 Total trade volume vis-à-vis Indonesia, India and Myanmar (RM million) 88
Figure 6.1 Amount of GERD by field of research (RM million) 99
Figure 6.2 Amount of GERD by socio-economic objectives (RM million) 100
Figure 6.3 Share of GERD out of total field of research (%) 100
Figure 6.4 Share of GERD out of total socio-economic objectives (%) 101
LIST OF BOX ARTICLES
Box Article 1 Adapted from pages 8, 18 and 19 from the 23rd Productivity Report 49
2015/2016
Box Article 2 Adapted from pages 96 and 97 from A Blueprint for Addressing the Global 64
Affordable Housing Challenge
Box Article 3 Adapted from page 72, CITP 2016–2020; news articles published by 104
Bernama, The Star Online and The Sun Daily on 26 April 2017
ix
FOREWORD
The construction sector has always been a significant contributor to Malaysia’s gross domestic
product (GDP). In the fourth quarter of 2016 (4Q 2016), the construction sector expanded by
5.1%, considerably faster than the overall GDP growth of 4.5% in real terms. With 9,791 registered
projects, the total value of construction works done was RM32.56 billion, an increase of 8.1%
compared with the same period in 2015. Of this value of construction works, building projects
had the highest share at 60.1% in total, with residential buildings at 29.5% and non-residential
buildings at 30.6%. The rest were civil engineering at 35.3% and special trade activities at 4.6%.
Private-sector projects made up 61.4% of the quarterly value of construction works done, almost
unchanged from the private-to-public ratios in previous years.
To the Construction Industry Development Board (CIDB) Malaysia, all these data suggest that
during its first year of implementation, the Construction Industry Transformation Programme
(CITP) 2016–2020 has begun to bear fruit. The CITP was developed in line with the strategic
thrusts of the Eleventh Malaysia Plan (11MP), envisioning a strong and sustainable construction
industry that will continue to be a major contributor to Malaysia’s economy. The CITP is aimed
at helping Malaysia realise its ambition of becoming a developed, high-income nation by 2020
through the transformation of the construction sector leveraging on these four Strategic Thrusts:
1. Quality, Safety and Professionalism - to be ingrained in the construction industry culture,
2. Environmental Sustainability - Malaysia’s increasingly environmentally friendly construction
practices to be a model for the emerging world, 3. Productivity - to more than double, matched
by higher wages, and 4. Internationalisation - Malaysian champions to lead the charge at
home and abroad.
Productivity-wise, the construction sector has been one of the sub-performers compared to
other sectors in Malaysia. Heavy reliance on low-skilled workers and limited adoption of new
technology and modern methods of construction such as the Industrialised Building System (IBS)
have been identified as among the causes of the relatively low productivity levels. In addressing
these issues, six initiatives have been proposed under the Productivity Thrust of the CITP, and
IBS has been put forward under Initiative P3: Accelerate Adoption of IBS, Mechanisation and
Modern Practices.
This cost-benefit analysis (CBA) on the IBS industry is one of the efforts listed under Initiative P3.
This study aims to highlight the potential positive impacts brought about by the IBS agenda,
which began in earnest with the IBS Roadmap 2003–2010. The main objective is to attract
various stakeholders of the Malaysian construction sector, in particular from the private sector,
to shift towards IBS in a big way. Greater IBS adoption should contribute to higher productivity
gains and ensure the success of CITP, providing a strong foundational platform for Transformasi
Nasional 2050 (TN50).
Dato’ Ir. Ahmad ‘Asri Abdul Hamid

Chief Executive
CIDB Malaysia
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PREFACE
The federal government has introduced a variety of mechanisms to increase IBS usage in
the Malaysian construction sector as a compelling alternative to the conventional method.
From Malaysia’s first national blueprint, the IBS Roadmap 2003–2010, followed by the second
master plan, the IBS Roadmap 2011–2015, IBS has gradually gained ground, especially for
public projects. Levy exemption for projects with a minimum of 50 IBS score was also offered to
boost the attractiveness of IBS and ultimately its usage in private projects. No doubt, among
the value propositions that IBS offers include better quality buildings and infrastructure, higher
worker productivity, low dependency on unskilled labour, less wastage, higher site safety, and
above all, lower total construction costs. More and more private construction companies and
property developers have begun to opt for IBS as the preferred method of construction, and
quite a number of them have also significantly invested in IBS component manufacturing,
either on-site or off-site.
At present, IBS continues to be the federal government’s main focus area apart from being
chosen as one of the 21 initiatives under the CITP 2016–2020. The first part of the IBS-specific
initiative aims to scale up further the IBS adoption in government projects while accelerating
IBS usage in private ones. Secondly, it also targets to deepen the IBS value and supply chain
through economic mechanisms. In support of the Initiative P3: Accelerate Adoption of
IBS, Mechanisation and Modern Practices, a CBA for the IBS industry in Malaysia has been
recommended.
The Construction Research Institute of Malaysia (CREAM), CIDB Malaysia’s research and
development arm, has been appointed to conduct the CBA. This study will provide an overall
picture of quantified pros and cons of the IBS agenda, both tangible and intangible with
estimated values. This will provide the industry with a clearer understanding of the benefits
of IBS, not only limited to its contributions towards individual construction projects and the
construction sector as a whole, but also its linkages with and spillover effects on all other sectors
in the economy, namely manufacturing, services, mining and quarrying, and agriculture and
forestry.
Datuk Ir. Elias Ismail

Senior General Manager
Technology Development Sector
CIDB Malaysia
xi
ACKNOWLEDGMENT
The authors and researchers of this CBA study acknowledge the contributions and support from
all parties involved, in particular the Construction Industry Development Board (CIDB) Malaysia,
the IBS Centre and its research and development arm, the Construction Research Institute of
Malaysia (CREAM) for providing guidance and the necessary funding to finance this research
project throughout the whole process.
The Department of Statistics of Malaysia (DOSM), the Malaysia Productivity Corporation

(MPC), the Malaysian Timber Industry Board (MTIB), the Ministry of Science, Technology and
Innovation (MOSTI), the Ministry of Natural Resources and Environment (NRE), the Ministry of
Human Resource (MOHR) and the Department of Occupational Safety and Health (DOSH)
also deserve a special mention for the invaluable help in understanding the big picture and
facilitating data gathering. Without the efforts and support of all parties, this study would not
have been a success.
xii
EXECUTIVE SUMMARY
Industrialised Building System (IBS) can be implementation of minimum wages (revisable
defined as “a technique of construction every two years in Malaysia since 2013), endless
whereby building components are foreign worker levy and continuous labour
manufactured in a controlled environment, shortage (in particular skilled construction
either on-site or off-site, and subsequently workers), IBS seems the perfect answer, being
transported, positioned and assembled the building system with the least labour input.
onto a structure, or in short, incorporated
into construction sites but with minimal The CBA is a systematic approach in making
additional site works”. IBS, therefore, a well-educated estimate or assessment
represents the concept of prefabrication by assigning values expressed in common
and prior manufacturing in a controlled monetary terms to a list of existing and/
environment, whether at a factory or or anticipated benefits and costs of a
even at a construction site of building project, programme or policy on its own
materials, structural components and other or in comparison with other alternatives,
construction elements that will subsequently accounting for all desirable and undesirable
be transported, positioned and installed onto effects on a particular industry, society and
structures at a site. economy as a whole. Not necessarily related
to hard, tangible, financial or numerical
Recognising its multitude of benefits, the information, the benefits of a project,
federal government began promoting programme or policy can exemplify gains,
the usage of IBS in earnest since early strengths, advantages, leverages, virtues,
2000s, especially among private property merits and opportunities, among others, while
developers, to improve construction practices, costs can be interpreted as losses, weaknesses,
deliver high-quality infrastructure, buildings disadvantages, shortcomings, drawbacks,
and properties for use by society, and bring flaws, deficiencies, risks and threats.
down construction costs as a way to keep
property prices in check. The Construction These benefits and costs, which can be direct,
Industry Transformation Programme (CITP) tangible or immediate and indirect, intangible
2016–2020 represents the culmination of all or potential effects, will be converted, to the
these unwavering efforts. extent relevant and possible, into present
monetary terms to provide an objective,
In many countries, IBS has proven its capability balanced and impartial framework in
of ensuring completion in record time of weighing up different impacts of a project,
a huge number of high-quality residential programme or policy and making an informed
properties, especially social housing for the decision. Some benefits and costs may be
mass population, at very reasonable costs. difficult to estimate with precision. Even when
This is particularly crucial for countries in full full quantification of impacts is not possible,
transformational phase from upper middle- a CBA is still useful in providing a clear and
income to developed, high-income status such results-driven decision-making framework with
as Malaysia in dealing with population growth, quantitative and qualitative information. In
urbanisation, infrastructure development and essence, a CBA may indicate the efficiency
housing demand (especially for good quality, of resource, time and effort allocation to a
sustainable, affordable and urban-centric project, programme or policy.
low- and medium-cost homes). Given the
1
Since a CBA is supposed to present the best costs is RM2.8321 billion. However, with the
estimates of benefits or desirable effects and addition of that desirable impact on private
costs or undesirable effects, they must be consumption, the final positive difference
measured or monetised, i.e. assigned values in is further enhanced to RM21.8111 billion
a common currency such as RM to the extent when comparing the sums of monetisable
relevant and possible. However, the selection benefits and costs of RM103.4964 billion and
of metrics of measurements and the possibility RM81.6853 billion, respectively. This lends even
of assigning values will depend a lot on the more credence to the rationale of promoting
availability and comprehensiveness of data and pushing for a far-reaching IBS adoption
(whether underlying or proxy), tangibility of instead of the Conventional Building Method
impacts and ease of monetisation. Eventually, (CBM).
the outcomes of this CBA study can be slotted
Adding the net benefits derived from the
under the following categories:
quantifiable and qualitative outcomes (the
list of desirable effects is considerably heavier
a. Monetisable category
than undesirable effects), which are either too
b. Quantifiable category difficult or even impossible to assign values in
(but not Monetisable) RM, would indubitably affirm the superiority
c. Qualitative category of IBS over any other building methods. Since
(but not Monetisable or Quantifiable) the combination of all three types of desirable
outcomes is considerably higher than its
Without the potential boost to nominal adversary, it can be concluded that the IBS
private consumption, estimated at RM18.979 industry has proven its ability to result in and
billion as a result of a hypothetical reduction maximise gains and advantages on a net
in low-skilled foreign workers, which in turn basis not only to the construction sector and
should broaden the skilled labour pool and the overall IBS value and supply chain, but
consequently raise salaries and wages among more importantly, to a multitude of aspects
Malaysians, the interim difference between of the Malaysian economy as a whole and its
monetisable benefits and monetisable society.
Socioeconomic and
Business Perspectives
Political Perspectives
Cost and/or Benefits
• Monetisable
• Quantifiable
• Qualitative
Public Administration Sustainability, Safety

and Governance and Health
Perspectives Perspectives
2
CHAPTER 1: INTRODUCTION
1.1 Definitions, Objectives and Scope
The Conventional Building Method (CBM) or building products, structural components,
Cast-In-Situ Construction Method (CISCM) techniques and elements. These products
can be defined as a construction approach and components, which include beams,
whereby activities of the whole construction columns, slabs and walls, among others, are
process such as formwork fabrication and conceived and planned prior to being cast
installation, bar bending, steel reinforcement, into form, manufactured on a large scale or
concrete placement, compaction, casting mass assembled and produced in a controlled
and curing are performed on-site. In contrast, or supervised environment, mostly at an off-
IBS is a construction process that fully or partially site factory, although on-site production using
utilises prefabricated and standardised innovative and clean technologies exists.
Table 1.1: Various definitions of IBS

Definition Reference
A construction technique whose components are manufactured CIDB Malaysia, 2003
in a controlled environment (on- or off-site), transported, positioned
and assembled onto a structure with minimal additional site works,
contributing to less wastage
A prefabrication process and construction industrialisation Kamar et al., 2011

concept
A method of construction established based on innovation and Abdullah and Egbu, 2009
rethinking of the best techniques of construction
Mass production of building components in a factory (off-site) or Chung and Kadir, 2007
at a construction site (on-site)
A construction system that is built using prefabricated Rahman and Omar, 2006
components
A construction method through the use of best construction Marsono et al., 2006 and
machineries, equipment, materials and extensive planning of Haron et al., 2005
the construction process
An integrated manufacturing and construction process with Lessing et al., 2005
a well-planned and efficient organisation and management,
preparation and control over resources used, activities and
results supported by the use of highly developed components
An industrialised system of components production or building Jaafar et al., 2003
assembly or both
The process of pre-assembly, organisation and completion of Gibb, 1999
the final project assembly before installation
A set of interrelated elements that act together to enable the Sanja, 1998
designated performance of building, which includes several
procedures (managerial and technological) for the production
and installation of these elements
An integrated system, including software and hardware, Junid, 1986
with which building components are planned, fabricated,
transported and assembled at sites
Source: Research on IBS Adoption in Government and Private Projects in Malaysia 2013, Construction Research Institute of
Malaysia (CREAM); IBS Roadmap 2003–2010
3
They will then be transported and placed, manufacturing and assembly layout and
positioned, installed or erected onto structures processes, and (v) allocation of materials,
at a construction site with minimal additional energy and other resources. The hardware
site works, although other finishing works may sphere, on the other hand, can be broken
be required. down into five major categories, namely
framing, panel, box, formwork and block work
Also known as Prefabricated Construction systems.
(PC), Modern Method of Construction (MMC)
or Off-site Construction (OC), IBS features Moreover, the IBS industry is unique as it cuts
quite a balanced combination between the across all five major sectors in the economy,
software and hardware spheres. The software although the value and supply chain seems,
sphere, which provides a foundation to in declining order, concentrated in the
create a conducive environment, usually manufacturing, services, construction, and
performs (i) a study of end-user needs and mining and quarrying sectors, and to a lesser
requirements, (ii) market analysis, (iii) design extent, the agriculture, forestry, fishing and
framework and standardisation of products hunting sector.
and components, (iv) establishment of
Figure 1.1: IBS industry cuts across all five major sectors
Agriculture, Mining & Manufacturing Services Sector Construction

Forestry, Fishing Quarrying Sector Sector
& Hunting Sector
Sector
IBS Industry
•1 •2 • 3 (a) •4 •5
• 3 (b)
• 3 (c)
Source: Jasmiza Solutions Sdn. Bhd. (JSSB)
Notes:
1. Products from the agriculture, forestry, fishing b. finished IBS products, components,
and hunting sector are used as inputs for the techniques and elements
manufacturing of finished IBS products and c. machineries and equipment for
components use by manufacturers of finished
2. Products from the mining and quarrying sector IBS products and components as
are used as inputs for the manufacturing of well as providers of services related
finished IBS products and components as well to ex-factory IBS products and
as of machineries and equipment components
3. Manufacturing activities produce: 4. Delivery of various services to complete usage
a. semi-finished goods as inputs for the of ex-factory IBS products and components
manufacturing of finished IBS products 5. Construction activities use finished IBS products
and components as well as of machineries and components
and equipment
4
Figure 1.2: Value-chain mapping for the IBS industry
GENERAL BUSINESS MANAGEMENT, STRATEGIC

PLANNING & FINANCE
HUMAN RESOURCE MANAGEMENT / HUMAN

CAPITAL DEVELOPMENT
TECHNOLOGY
RESEARCH & DEVELOPMENT
PROCUREMENT
SALES & MARKETING
TRANSPORTATION & LOGISTICS
End Customer
Input Processing & Distribution & Delivery &
Ingredients Production Services Consumption Usage
• Raw Materials • 3 (a) • Storage, • Construction
& Natural Machineries Transportation, Activities,
Resources from and Equipment Installation & Construction-
1&2 • 3 (b) Semi- Other Services related Services
Finished Goods Provided by 4 & Facilities
• 3 (c) Finished Management
IBS Products, in Delivering
Components, Buildings &
Techniques & Infrastructure to
Elements End Customers
Source: JSSB
Figure 1.3: Real growth performance of Malaysia’s GDP and five sectors (%)
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2011
2012
2013
2014
2015
2016
2017 MOF
-2.0
-4.0
-6.0
Agriculture Mining & Quarrying Manufacturing
Services Construction GDP
Source: Department of Statistics Malaysia (DOSM), Bank Negara Malaysia (BNM), Ministry of Finance’s
(MOF) Economic Report 2016–2017, JSSB
5
Although construction1 has long been ones related to housing, especially
Malaysia’s smallest sector as a share of the affordable homes, clean water supply
GDP, the 11th Malaysia Plan (11MP) has services and sewerage, among others
pegged a growth forecast of 10.3% per
The construction sector in Malaysia consists
annum from 2016 through 2020. After growing
of two major sub-sectors, namely general
by 7.4% in 2016, albeit at the slowest pace
construction activities and specialised
since 2011, the construction sector is still
construction activities. The general
projected to expand by at least 8% in 2017.
construction sub-sector can be broken
Thus, construction is set to remain the fastest-
down further into civil or heavy engineering
growing sector in the Malaysian economy for
(especially infrastructure and public works,
six years in a row since 2012. In fact, real growth
including public amenities and facilities),
of the construction sector has surpassed the
non-residential (commercial, industrial and
overall GDP since the fourth quarter of 2011
institutional) and residential. The specialised
(4Q 2011), equivalent to 21 consecutive
construction sub-sector or specialty trades
quarters of such outperformance up to 4Q
may include activities that provide services
2016.
such as mechanical and electrical works,
Among the major catalysts moving forward plumbing, glass works, air-conditioning,
for the construction sector include: painting, carpentry and tiling, among others.
a. New infrastructure projects, mostly
public transportation related such as 1
The process of constructing a building or infrastructure at
Mass Rapid Transit (MRT) Line 2 and Line a specified location for a known client. The construction
3, Light Rail Transit (LRT) 3, Gemas-Johor sector typically makes up about 5% to 10% of the GDP
double-tracking project, KL-Singapore in developed economies, although it could be larger in

developing ones. However, at constant 2010 prices, the
High Speed Rail (HSR), East Coast
construction sector accounted for 4.5% of the Malaysian
RailLine and Pan Borneo Highway as
GDP in 2016 and 4.0% on average from 2010-2016. Its
well as other high-impact projects contribution to the Malaysian economy is, in general,
allocated under the 11MP 12 times smaller than the services sector, 7 times smaller
b. Ongoing projects to provide new than the manufacturing sector and 2.2 times smaller
social amenities or upgrade existing than the agriculture sector.
Figure 1.4: Number of employed persons by sector (‘000)

15000
12000
9000
6000
3000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture Mining & Quarrying Manufacturing Construction Services Total
Source: DOSM, JSSB
6
The construction sector is Malaysia’s fourth a. The commodities sector comprising
largest employer behind the services, agricultural (farming, plantations,
manufacturing and agriculture sectors, in forestry, etc.) and mining activities -
that order. The construction sector has high Production and/or extraction of natural
forward linkage with other sectors, in particular resources and raw materials to be
the services sector, notably sub-sectors such subsequently transformed or converted
as government services, communications, into intermediate and finished goods
and real estate and business services. The and by-products, notably reusable in
construction sector has even higher backward the manufacturing, construction and
linkage, more prominently with agriculture, services sectors
mining and quarrying, and manufacturing b. The manufacturing sector - Processing
industries, given the ongoing need for non- and production of products,
metallic mineral products, basic metals, components, techniques and elements
fabricated metal products and construction- used in construction works such as
related equipment. wood-based products; manufacturing
of prefabricated metal products such
The construction sector’s interdependence as iron and steel; finished goods used
and interconnectedness with other sectors in the services sector, in particular
in the economy are illustrated by forward machinery, appliances and parts; and
linkage and backward linkage indexes of transport equipment, among others
0.79 and 1.10, respectively, as published by c. The services sector - Utilities;
the Malaysia Productivity Corporation (MPC) transportation, storage and installation;
in its Productivity Report 2014/2015. In short, finance and insurance; real estate and
the construction sector is particularly crucial, business services; safety, health and
given the intensity of multiplier effects (two quality control management (services,
times) due to the reliance of and interlinkages tools, etc.); IT systems and software;
with more than 120 industries in other sectors government services; and wholesale
vis-à-vis construction projects2, for example: and retail trade, among others
2
Page 16, CITP 2016–2020 publication
Figure 1.5: Malaysia’s nominal value-add per employee, overall and by sector (RM)
2,250,000.0
2,000,000.0
1,750,000.0
1,500,000.0
1,250,000.0
1,000,000.0
750,000.0
500,000.0
250,000.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture Mining & Quarrying Manufacturing Construction Services Overall
Source: BNM, DOSM, JSSB
7
Figure 1.6: Banking system’s year-end outstanding loans by sector (RM million)
1,600,000.0
1,400,000.0
1,200,000.0
1,000,000.0
800,000.0
600,000.0
400,000.0
200,000.0
0.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Primary Agriculture Mining and Quarrying Construction Manufacturing (including Agro-Based) Services Total
Source: BNM, JSSB
Figure 1.7: Malaysia’s gross foreign direct investment (FDI) inflows by sector (RM million)
139,500.0
119,500.0
99,500.0
79,500.0
59,500.0
39,500.0
19,500.0
-500.0
2008 2009 2010 2011 2012 2013 2014 2015 2016
Agriculture, Forestry & Fishing Mining & Quarrying (including oil and gas)
Manufacturing Construction
Services Total
Since the construction sector presents a providing construction- related

significantly high investment opportunity, ancillary services, companies providing
income generation and wealth creation consultancy and other support
potential according to a multitude of services such as turnkey and bespoke
indicators, it is, therefore, an important projects; civil, structural, electrical and
economic propeller with a multitude of mechanical engineering; architecture;
stakeholders and players at various stages of its design; quantity surveying; project
value and supply chain. Similarly, stakeholders planning and management; geology,
and value-chain participants involved in the archaeology and environment; and
IBS industry should include: health and safety.
a. Businesses involved in ordinary b. Producers, importers, distributors
construction activities and all and suppliers/vendors of raw
construction-related services to deliver materials, natural resources and semi-
buildings and infrastructure to end- finished goods that are used in the
customers, including builders, real estate manufacturing and production of
developers, contractors, companies finished IBS products, components,
8
Figure 1.8: Performance of the FTSE Bursa Malaysia Kuala Lumpur Composite Index3 Kuala
Lumpur Construction Index4 and Kuala Lumpur Property Index5
(normalised on the basis of 4 January 1993)
Source: Bloomberg
techniques and elements such as • Ministry of Works (MOW)/Kementerian

steel and aluminium makers, cement Kerja Raya (KKR)
manufacturers, glass makers, sand • Public Works Department (PWD)/
miners, timber and logging companies, Jabatan Kerja Raya (JKR)
producers of chemicals and chemical • Ministry of Finance (MOF)/Kementerian
products, etc. Kewangan
c. Manufacturers, importers, distributors • Economic Planning Unit (EPU)/Unit
and lessors of machineries and Perancang Ekonomi
equipment for the purposes of • Department of Statistics (DOSM)/
manufacturing and production as well Jabatan Perangkaan
as transportation, installation, erection • Bank Negara Malaysia (BNM)
and other services for use by finished • Securities Commission (SC)
IBS products, components, techniques • Bursa Malaysia
and elements • Ministry of International Trade and
d. Manufacturers, assemblers, importers Investment (MITI)/Kementerian
and distributors of finished IBS products, Perdagangan Antarabangsa dan
components, techniques and elements Industri
e. Providers of storage, transportation,
installation, erection and other services 3
Launched on 6 July 2009 to replace the Bursa Malaysia
for use by ex-factory IBS products, KLCI while inheriting its full history, the FBM KLCI Index
comprises 30 largest public-listed companies on Bursa
components, techniques and elements
Malaysia Berhad’s Main Board, according to full market
f. Public institutions, including ministries,
capitalisation.
government departments and
agencies, and statutory and oversight 4
Developed with a base value of 100 as of 16 October
bodies at every level of government 1991, the KLCON is a capitalisation-weighted index
comprising all stocks in the EMAS Index (KLEMAS)
(federal, state and local/municipal)
involved in the construction sector.
that implement policies and carry out
supervisory and regulatory, monitoring 5
Developed with a base value of 100 as of 16 October
and enforcement duties, such as: 1991, the KLPRP is a capitalisation-weighted index
comprising all stocks in the EMAS Index (KLEMAS)
involved in the property industry.
9
• Malaysian Investment Development • Local authorities/municipal councils/
Authority (MIDA) Pihak Berkuasa Tempatan (PBT)
• Malaysia External Trade Development • State agencies
Corporation (MATRADE) • Construction Industry Development
• Ministry of Urban Wellbeing, Housing Board of Malaysia (CIDB)
and Local Governments (MUWHLG)/ • National Property Information Centre
Kementerian Kesejahteraan Bandar, (NAPIC)
Perumahan dan Kerajaan Tempatan • Board of Architects Malaysia/Lembaga
(KPKT) Arkitek Malaysia (LAM)
• Ministry of Human Resources (MOHR)/ • Board of Quantity Surveyors Malaysia
Kementerian Sumber Manusia (KSM) (BQSM)/Lembaga Juru Ukur Binaan
• Ministry of Health (MOH)/Kementerian Malaysia (LJUBM)
Kesihatan Malaysia (KKM) • Board of Engineers Malaysia (BEM)
• Ministry of Home Affairs (MOHA)/ • Employees Provident Fund (EPF)/
Kementerian Dalam Negeri (KDN) Kumpulan Wang Simpanan Pekerja
• Ministry of Foreign Affairs (MOFA)/ (KWSP)
Kementerian Luar Negeri (KLN) • Social Security Organisation (SOCSO)/
• Ministry of Education Malaysia (MOE)/ Pertubuhan Keselamatan Sosial
Kementerian Pendidikan Malaysia (PERKESO)
(KPM) • Royal Malaysian Customs Department/
• Ministry of Higher Education (MOHE)/ Jabatan Kastam Diraja Malaysia
Kementerian Pendidikan Tinggi (KPT) (JKDM)
• Ministry of Agriculture and Agro-Based • Internal Revenue Board (IRB)/Lembaga
Industry (MOA)/Kementerian Pertanian Hasil Dalam Negeri (LHDN)
dan Industri Asas Tani • Malaysia Productivity Corporation
• Ministry of Plantation Industries and (MPC)
Commodities (MPIC)/Kementerian g. Industry or professional associations
Perusahaan Perladangan dan involved in the construction sector
Komoditi in general and the IBS industry in
• Ministry of Domestic Trade, particular, such as:
Cooperatives and Consumerism • Real Estate and Housing Developers’
(MDTCC)/Kementerian Perdagangan Association (REHDA)
Dalam Negeri, Koperasi dan • Master Builders Association Malaysia
Kepenggunaan (KPDNKK) (MBAM)
• Ministry of Energy, Green Technology • Institution of Engineers Malaysia (IEM)
and Water (MEGTW)/Kementerian • Association of Consulting Engineers
Tenaga, Teknologi Hijau dan Air Malaysia (ACEM)
(KeTTHA) • Malaysian Institute of Architects (PAM)
• Ministry of Science, Technology and • Royal Institution of Surveyors Malaysia
Innovation (MOSTI)/Kementerian Sains, (RISM)
Teknologi dan Inovasi (KSTI) • The Electrical and Electronics
• Ministry of Natural Resources and Association of Malaysia (TEEAM)
Environment (MNRE)/Kementerian • Building Materials Distributors
Sumber Asli dan Alam Sekitar Association of Malaysia (BMDAM)
• Department of Occupational Safety • Malaysian Iron and Steel Industry
and Health (DOSH) Federation (MISIF)
• State governments
10
• Malaysian Energy Professionals • National Consumer Complaints Centre
Association (MEPA) (NCCC)
• Association of Environmental • Consumers Association of Penang
Consultants and Companies of (CAP)
Malaysia (AECCOM) • Federation of Malaysian Consumers
h. End-customers, both domestic and Associations (FOMCA)/Gabungan
overseas, such as the public at large, Persatuan-Persatuan Pengguna
public institutions at every level of Malaysia
government, businesses whether • Education and Research for Consumers
government-linked investment Malaysia (ERA Consumers Malaysia)
companies/government-linked • Muslim Consumers Association of
companies (GLICs/GLCs), or privately Malaysia/Persatuan Pengguna Islam
held companies Malaysia (PPIM)
i. Institutions of learning, education and • Majlis Tindakan Ekonomi Melayu (MTEM)
skills development, such as universities,
On an object basis, it can be deduced that
colleges, vocational, technical and
the first five stakeholders and value-chain
youth development institutes, and
participants above are, in essence, the core
technical secondary schools
segments of the IBS industry. In addition, the
j. Financial institutions and financing
IBS industry can be further divided into seven
providers
segments based on economic activity as
k. Civil society, i.e. relevant non-
follows:
governmental organisations (NGOs)
a. Production of raw materials and natural
such as:
resources from the agriculture and
• National House Buyers Association
forestry sector as inputs for the
(HBA)/Persatuan Kebangsaan Pembeli
manufacturing of finished IBS products
Rumah (PKPR)
and components
Figure 1.9: Six clusters of the IBS component manufacturing segment
Cluster 1 Cluster 2 Cluster 3
• Precast • Steel • Formwork

Concretes Framing Systems
and Systems
Framing,
Panel & Box
Systems
Cluster 4 Cluster 5 Cluster 6
• Block Work • Prefabricated • Innovative

Systems Timber Systems
Framing
Systems
Source: CIDB, JSSB
11
b. Mining and extraction of raw materials • Chemicals and chemical products
and natural resources as inputs for b. Manufacturing of steel framing systems,
the manufacturing of finished IBS including steel beams and columns,
products and components as well as of portal frames, and roof trusses using
machineries and equipment mostly:
c. Processing and production of semi- • Steel such as hot rolls and cold rolls in
finished goods as inputs for the sheets
manufacturing of finished IBS products • Coating such as protective paint and
and components as well as of metallic coating (e.g. Zincalume)
machineries and equipment c. Production of formwork systems,
d. Manufacturing of finished IBS products, including tunnel forms, moulding forms
components, techniques and elements for beams and columns, walls, slabs and
e. Manufacturing of machineries and permanent steel formworks (metal
equipment for use by manufacturers of decks) using mostly:
finished IBS products and components • Steel and steel products
as well as providers of services related to • Aluminium
ex-factory IBS products and components • Engineered bamboo and timber
f. Provision of storage, transportation, • Plastics
installation, erection and other services d. Manufacturing of block work systems,
to complete the cycle of ex-factory including interlocking concrete masonry
of IBS products and components at a units (CMUs) and lightweight concrete
construction site blocks using mostly:
g. Construction activities • Sand and aggregates
• Cement
Having established the two approaches to • Chemicals and chemical products
categorising core segments of the IBS industry, e. Manufacturing of prefabricated timber
the manufacturing and production activities framing systems, including timber frames,
of processing and transforming a multitude of beams and columns, and roof
inputs into finished IBS products, components, trusses using mostly:
techniques and elements can be broken • Timber, both natural and engineered
down further into six clusters according to • Metal plates
structural classification aspects, capped with f. Production of other innovative systems
their respective major raw materials, natural (other than the five above), including
resources and semi-finished goods used. hybrid modular houses and other
a. Manufacturing of precast concrete volumetric units, dry wall-gypsum boards,
components, including beams, sandwich panels, bio-composite wall
columns and slabs; walls; 3-D or panels, wood-wool cement panels and
volumetric components such as cemboard dry walls using mostly:
balconies, staircases, toilets and lift • Sand
chambers; and permanent concrete • Cement
formworks using mostly: • Composite materials
• Sand and aggregates (granite, • Gypsum, both natural and synthetic
limestone, gravel, recycled concrete • Paper
and slags, among others) • Steel and other metal products
• Steel bars • Engineered timber
• Cement (produced by using limestone, • Chemicals and chemical products
sand, bauxite and iron, among others)
12
The objectives that the CBA aims to achieve direct and indirect, that IBS adoption
for the IBS industry include but are not limited could bring to the Malaysian economy
to the following: as a whole, including prospects for
growth, consumer spending, trade and
a. To objectively assess the strengths or investments; the overall supply and value
pros and weaknesses or cons of which chain of the IBS industry; public finances;
building method to be promoted, i.e. IBS labour market conditions; wage
vis-à-vis its alternative, CBM structure; household income levels;
b. To provide facts-driven and evidence- the Malaysian society at large; public
based justification(s) in executing the safety and health; and environment
IBS policy for the construction sector in preservation, among others
particular and the Malaysian economy b. Putting greater emphasis, to the extent
in general, equipped with its key possible, on buildings of all types6 instead
desirability, feasibility and success factors of infrastructure works and projects7
c. To frame the most appropriate and when it involves construction activities
relevant goals in promoting IBS usage c. Harmonising and converging the views
d. To provide up-to-date, accurate and and information from relevant IBS
pertinent information to the government industry stakeholders and value-chain
and relevant authorities at all levels as participants
well as the IBS industry stakeholders and d. Conducting the research using the most
value-chain participants in charting the appropriate methodology and
industry's strategic direction systematic approach, and achieving
e. To review roles and responsibilities of the desired results within the stipulated
each and every IBS stakeholder and timeframe and with the least errors
value-chain participant e. Analysing all information and data
f. To subsequently develop and obtained, which subsequently will be
recommend, to the extent possible, reworked and rewritten in an easy-to-
an appropriate action plan complete understand manner
with solutions to various issues, feasible
implementation measures, roadmap
of realistic targets or milestones and
adequate resources required (money,
people, technology and equipment,
among others) to ensure the success of
the chosen policy, i.e. IBS usage by the 6
Building categories include residential (landed such as
construction sector terraced houses and bungalows as well as high-rise such
as flats, apartments and condominiums), commercial
This research should aspire to ensure that the (shopping centres and office buildings, among
following dimensions or operations (but not others), industrial (factories and warehouses, among
limited to) are covered within its study scope: others), institutional or public (schools, universities,
stadiums, sports centres, clinics, hospitals, court houses,
government offices and public transportation stations,
a. As per the CITP recommendations,
among others) and utility (power stations, water
highlighting the ‘superiority’ of IBS over all treatment plants, telecommunications base stations
other building systems by objectively and sewerage treatment plants, among others).
reviewing all existing and potential 7
Infrastructure includes roads, bridges, railway tracks,
advantages and drawbacks, both airport runways and dams, among others.
13
1.2 Context and Circumstances 2011–2015 and the Construction Industry
Master Plan (CIMP) 2006–2015 reaffirmed the
The notion of PC, the earlier designation to IBS agenda and further intensified the CIDB’s
describe IBS, was first made popular in Western efforts to fast-track achieving all targets set.
Europe in the late 1950s or early 1960s. In view
of the difficulty faced by the CBM to cope Despite these concerted efforts and its
with the population growth explosion, rapid numerous advantages, IBS usage, especially
urbanisation and the consequent surge in in private construction projects, has still been
demand for homes and dwellings, the post- way far from the levels that have been
Merdeka Malaysian federal government observed in developed countries. Even
began to look into the IBS concept in the mid- compared to neighbouring countries such as
1960s. Thailand and Singapore, Malaysia is evidently
trailing behind, most probably because
In 1966, two pilot projects using precast there are areas where the public is still not
concrete elements took off to build high- convinced.
rise low-cost flats, namely the Pekeliling Flats
in Kuala Lumpur and the Rifle Range Road Given such a backdrop, the federal
Flats in Penang. Notwithstanding a variety of government decided to reiterate its
negative perceptions towards IBS, this maiden commitment to the IBS agenda by issuing a
debut marked the beginning of IBS usage Treasury/MOF Circular Letter No. 7 Year 2008
in housing development projects, ranging (Surat Pekeliling Perbendaharan Bil. 7 Tahun
from low-cost houses to premium bungalows 2008)8 , dated 31 October 2008, and the Action
as well as other non-residential types of Plan for IBS Implementation in Government
buildings, including commercial, industrial Projects (Pelan Tindakan Pelaksanaan IBS
and institutional. dalam Projek Kerajaan). These two initiatives
upped the ante for IBS usage by public
In 1980, some 2,600 units of living quarters at projects, replacing the Treasury/MOF’s earlier
the Lumut Naval Base in Perak were partially instruction dated 6 July 2005 requiring 50% IBS
built using IBS components. The construction of content in all government projects.
the 30-storey Dayabumi complex, completed
in 1984, resorted to prefabricated products
and components. Between 1981 and 1993,
many property developers adopted some
IBS elements to build low-cost houses and
even luxury bungalows in Selangor. From 1994
through 1997, implementation of hybrid IBS
was quite in vogue.
Since 1998, the CIDB has been aggressively

promoting and facilitating IBS implementation
in Malaysia’s construction sector, which
culminated in the launch of the IBS Strategic 8
Public sector projects worth below RM10 million, carried
Plan and the establishment of the IBS Steering out in far-off places, hence not easily accessible for IBS
Committee in 1999. Subsequently, the purposes and involve renovation and maintenance
Ninth Malaysia Plan (9MP) 2006–2010, the works instead of construction, are exempted from the
IBS Roadmap 2003–2010, the IBS Roadmap rules under this SPB.
14
Table 1.2: Average IBS content in public- and private-sector projects (adapted from a table
on key performance indicators in the IBS Roadmap 2011–2015 as underscored in Research on
IBS Adoption in Government and Private Projects in Malaysia 2013)
IBS Adoption Baseline Target by 2015

Government projects (buildings) 70% 70%
Private-sector projects (buildings) - 50% on average
Source: CIDB, CREAM
Furthering the intents and purposes of this and in Selangor, Penang and Johor by
circular, the Initiative P3: Accelerate Adoption 2020.
of IBS, Mechanisation and Modern Practices
under the CITP underscores the importance and Based on findings from an extensive and
imperativeness of accomplishing a CBA for the broad-based consultation with relevant
IBS industry in Malaysia. The CITP aims to reach stakeholders, the Malaysian Timber Industry
the following targets, as far as the content of Board (MTIB) published the IBS Roadmap
IBS products, components, techniques and for Timber 2013–2023 to complement the
elements in construction works and projects blueprint for national IBS objectives, notably
are concerned, in accordance with the by integrating timber and wood-based
CIDB’s most updated IBS Scoring System9: products into the IBS agenda, widening
their applications and expanding their
• All public sector-led projects worth variety available for market use.
RM10 million and above must achieve a
minimum of 70 IBS score Of late, a growing number of construction
• All private sector-driven projects worth players began to recognise the significance
RM50 million and above must achieve a and tremendous potential of IBS in view of:
minimum of 50 IBS score
Unfortunately, only 24% of public projects

worth RM10 million and above have attained
an IBS score of 70 in 2014 according to the 9
The IBS Content Scoring System (IBS Score) is a
Implementation Coordination Unit (ICU), Prime systematic and structured assessment system used
to measure in a consistent manner the content or
Minister’s Department Malaysia.
usage of the IBS products, components, techniques
and elements in construction works and projects.
Since private-sector projects typically The calculation is based on a predetermined
account for at least 60% of the overall value standard formula that comprises three major parts,
of construction works done in any given year, namely Score for Structural Systems (maximum 50
this directive or target can be expected to points), Score for Wall Systems (maximum 20 points)
provide a fillip to IBS utilisation nationwide. To and Score for Other Simplified Construction Solutions
(maximum 30 points), mostly outlined in CIS 18:2010
encourage further IBS adoption by the private
Manual for IBS Content Scoring System (IBS Score),
sector, the CIDB recommended one additional
a CIDB publication. Although no changes to the
requirement, namely projects worth over RM50 scoring calculation were proposed, the CITP 2016–
million must achieve a minimum 50 IBS score 2020 captures the essence similar to the Singapore
to deserve the issuance of the Development benchmark by recommending tightened IBS-related
Order (DO) in Greater Kuala Lumpur by 2018 requirements.
15
Table 1.3: Levels and targets of average IBS content 2012–2015 in private-sector
projects by type of buildings (adapted from a table on IBS content for the private
sector in the IBS Roadmap 2011–2015 as underscored in Research on IBS Adoption in
Government and Private Projects in Malaysia 2013)
Residential Residential Commercial Industrial Institutional

(landed) (non-landed) (shopping (factories and (schools)
centres and warehouses)
offices)
2012 - 50 50 50 50
2013 45 50 50 50 50
2014 45 55 55 55 55
2015 45 55 55 55 55
Source: CIDB, CREAM
Table 1.4: Observed average IBS scores in public- and private-sector projects by type of
buildings in 2014 (adapted from a table on IBS scores based on Research on IBS Adoption in
Government and Private Projects in Malaysia 2013)
Type of Buildings
Projects
Residential Non-Residential Social Amenities
Government projects Overall: 70 Overall: 80 Overall: 76
Private-sector projects Overall: 65 Overall: 63 Overall: 64
Landed: 61 Commercial: 67 Schools: 68
Non-landed: 70 Industrial: 62
Source: CIDB, CREAM
a. The ever-increasing demand e. Shifts in architectural trends and

for affordable housing and faster customer preferences towards
completion of projects higher material and natural
b. Escalating construction costs, one of resource optimisation, energy
the major factors for soaring property efficiency, green technology
prices and other ecological credentials
c. Subpar productivity gains in the
construction sector due largely to the A few buildings and structures using IBS include
labour intensity of the CBM, particularly the refurbished Bukit Jalil Sports Complex and
low-skilled workers Games Village, the Petronas Twin Towers and
d. Heightened concerns about labour stations of the LRT and MRT lines.
issues, especially related to safety,
health and general working conditions
16
CHAPTER 2: APPROACH AND
METHODOLOGY
Over the past 15 years or so, studies by way of 2.1 Research Framework
survey questionnaire conducted by the CIDB
and/or CREAM themselves or in collaboration In essence, comprising both quantitative and
with third parties mostly focused on (i) the qualitative research methods as well as macro-
levels of awareness and acceptance of scale and micro-scale analytical approaches
IBS in general, (ii) readiness levels, catalysts, to achieve the objectives as discussed in
challenges and key success factors for Chapter 1, this study was conducted by way
IBS adoption, (ii) advantages and usage of:
intensity of IBS products and components in a. Reviews of relevant domestic and
construction works and projects, and (iv) the international literature as well as access
implementation progress of various roadmaps of information databases available in
and blueprints for the construction sector in public domain, including Malaysia’s
general and/or IBS in specific. In contrast, this House of Representatives’ hansard
particular CBA study attempts to: archives
b. A standard and well-structured
a. Assess, in a systematic and data-driven questionnaire distributed among
manner, the positive and negative identified IBS stakeholders or value-
consequences of IBS adoption and chain participants but specific for each
usage, not only to the construction category of respondents; face-to-
sector (despite focusing more on face interviews and focus group
buildings, both residential and non- sessions to obtain primary data and
residential, instead of infrastructure), adequate information for case study
but to almost all aspects of society and comparisons, to the extent possible
the entire economy c. Secondary data analysis whereby
b. Provide, to the extent possible, a facts and findings are obtained from
summary of estimated pros and information and statistics generated,
cons of IBS adoption and usage as a collated and compiled by public
whole in order to ultimately affirm the institutions at every level of government,
‘superiority’ of IBS over all other building notably federal ministries, government
methods or systems agencies and statutory bodies that
c. Determine, to the extent possible, the maintain a specific database for these
most accurate structure, and entire data and statistics, which may or may
value and supply chain of the IBS not be accessible to the public
industry; identify its core segments and
clusters for each segment; approximate Findings emanating from the quantitative
their size and contributions to the and qualitative research methods as well
economy; and capture the various as macro-scale and micro-scale analytical
linkages between the IBS industry, approaches would then be grouped,
construction sector and other consolidated, aggregated and analysed
economic sectors in order to maximise further as well as cross-checked and verified
the net benefits to society and the to arrive at a conclusion comprising final
whole economy results and recommendations.
17
Figure 2.1: Overall research framework
Macro-Scale Approach Micro-Scale Approach
1. Literature Reviews 1. Structured Survey

Questionnaire
2. Access of Publicly Available
Databases 2. Face-to-Face Interviews
3. Direct Requests for Data and

Information from Selected
3. Focus Group Sessions
Public Institutions
Grouping, Consolidation, Cross-Checking

Aggregation, Evaluation and and Verification of
Analysis of Data and Information Findings
Final Results,
Conclusion and
Recommendations
Source: CREAM, JSSB
2.2 Chronology and Description of c. All manufacturers, importers,

Research Activities distributors and lessors of machineries
and equipment for use in processing
During the 16 August 2016 meeting at the
all inputs to ultimately manufacture
IBS Centre to present the Framework for the
and produce finished IBS products
Interim and Final Report of the CBA study, the
and components as well as to ensure
list of six categories of respondents and the
transportation, storage, installation,
draft survey questionnaire for each category
erection and other services for use
were approved by representatives from the
by ex-factory IBS products and
CIDB and CREAM. These categories are:
components, whether registered or
a. All construction players, being the not with the CIDB apart from relevant
major intermediate IBS users apart industry/professional associations, if
from relevant industry/professional any
associations, if any d. All manufacturers, assemblers,
b. All producers, importers, distributors importers and distributors of finished
and suppliers/vendors of raw IBS products, components, techniques
materials, natural resources and semi- and elements registered with the
finished goods for the purposes of CIDB apart from relevant industry/
manufacturing and production of professional associations, if any
finished IBS products and components, e. All providers of transportation, storage,
whether registered or not with the installation, erection and other services
CIDB apart from relevant industry/ for use by ex-factory IBS products,
professional associations, if any components, techniques and
elements, whether registered or not
18
with the CIDB apart from relevant Although there were six slightly different sets
industry/professional associations, if any of structured questionnaire for each category
f. Selected end-customers and relevant of respondents, the general skeleton of the
NGOs, notably KKR, JKR, KKBPKT, state questionnaire was laid out into six major parts
governments and PBTs, i.e. those not as follows:
listed under selected public institutions a. Background information
at every level of government for the b. Financial performance and customer
purposes of secondary data analysis relations or customer satisfaction and
loyalty (for Category 6 only; Appendix
The survey questionnaire was developed
6)
based on an intuitive list of existing and
c. Socio-economics
potential benefits and costs, both tangible
d. Human capital: Mindset, knowledge,
and intangible, which were itemised after
expertise and experience
undertaking thorough literature reviews. Any
e. Corporate governance and
effects deemed desirable are categorised
competitive forces
as benefits, while undesirable effects are
f. Safety, health and environment
considered as costs. The questionnaire for
each category of respondents, accompanied Since the purpose of conducting this survey
by the CIDB letterhead, was subsequently was precisely to capture raw data to enable
sent using the ordinary postal system by the estimations or value assignments in RM and
beginning of the fourth week of August 2016 not preferences or rankings10, most of the
to some 450 potential respondents in total. questions in the questionnaire were open-
ended, which would require deep thinking
Unlike most of the previous studies conducted
and cross-checking with various departments
by the CIDB/CREAM, the survey target
or divisions within an organisation. In total,
audience for this CBA study consisted of
some 20 organisations participated in the
business establishments or organisations
survey exercise, with only one organisation
instead of construction projects, since this
taking up the offer to have a face-to-face
study aims to identify and evaluate, to the
interview while the attempt to boost the
extent possible, all impacts of IBS adoption.
response rate by holding a series of focus
Focusing on construction projects would
group sessions was barely successful. While
make the CBA study too construction-centric,
respondents were promised a copy of the final
contrary to the very essence of the IBS industry
report of this study as a token of appreciation,
that cuts across all economic sectors.
no Contractor Continuous Development
As such, the definition for a potential IBS project (CCD) points were awarded for participation.
as 'a construction project bearing a project
value of at least RM10 million' did not apply in Initially given one month to respond to JSSB
this study, while the list of potential respondents with the duly filled-up questionnaire and
or the sample size was determined according the signed Consent Letter, the extension of
to their ability to provide crucial data and the deadline by another three months did
information that should meet the objectives not improve much the take-up rate among
of this CBA study insofar as they fall under IBS the respondents. As a mitigation measure,
stakeholders and value-chain participants as literature reviews and efforts to access
elaborated at length in Chapter 1. In fact, the databases available in the public domain,
questionnaire did not make any distinction
between construction of infrastructure and 10
Price-based revealed preference model vs. stated
buildings. preference model
19
notably for data and information from public • Ministry of Human Resources (MOHR)
institutions, were intensified to have an even • Ministry of Health (MOH)
better understanding of the IBS industry and to • Department of Occupational Safety
reduce an over-reliance on the primary data and Health (DOSH)
resulting from the survey exercise. • Ministry of Home Affairs (MOHA)
• Ministry of Foreign Affairs (MOFA)
As a matter of fact, the seeming under-par • Ministry of Education (MOE)
primary data, whether in terms of collection • Ministry of Higher Education (MOHE)
size or quality, is not really a concern since • Ministry of Agriculture and Agro-Based
availability of and accessibility to wide- Industry (MOA)
ranging secondary data reign supreme for • Ministry of Plantation Industries and
this CBA study in achieving its objectives. The Commodities (MPIC)
objectivity, impartiality and non-discrimination • Ministry of Energy, Green Technology
of secondary data will go a long way in and Water (MEGTW)
addressing concerns about subjective and • Ministry of Natural Resources and
biased findings of primary data analysis. Environment (MNRE)
• Ministry of Science, Technology and
By mid-October 2016, a special exercise
Innovation (MOSTI)
to gather specific data and information
• Malaysia Productivity Corporation
relevant to IBS from various federal ministries,
(MPC)
government agencies and statutory bodies
• Employees Provident Fund (EPF)
was set in motion by sending a letter on the
• Social Security Organisation (SOCSO)
CIDB letterhead via ordinary postal system to
the following recipients: The idea of this request for specific data
• Ministry of Works (MOW) and information, which could be otherwise
• Ministry of Urban Wellbeing, Housing ‘scattered’ and ‘hidden’ within this small
and Local Governments (MUWHLG) group of public institutions, was to gather and
• National Property Information Centre regroup these valuable data and information
(NAPIC) under one roof, namely the CIDB. By the
• Ministry of Finance (MOF) second week of December 2016, this special
• Economic Planning Unit (EPU) exercise among selected public institutions
• Inland Revenue Board (IRB) was reinitiated via email, together with the
• Royal Malaysian Customs Department scanned copy of the CIDB letterhead and
• Department of Statistics Malaysia the Excel spread sheets containing the entire
(DOSM) list of specific data and information requested
• Bank Negara Malaysia (BNM) but properly spread out to facilitate onward
• Securities Commission (SC) transmission directly to JSSB.
• Ministry of International Trade and
About half of these 30 recipients confirmed
Investment (MITI)
to return their responses, while three of them
• Malaysian External Trade Development
requested a face-to-face session at their
Corporation (MATRADE)
premises, which JSSB obliged by sending
• Malaysian Investment Development
representatives. Almost all of those who
Authority (MIDA)
confirmed their participation returned their full
• SME Corporation Malaysia (SME Corp)
or partial data and information as requested.
• Ministry of Domestic Trade, Cooperatives
In the interim, secondary data gathering was
and Consumerism (MDTCC)
stepped up, while proxy statistics and results of
20
past studies were considered after a certain e. Conclude with a sum of final net
cut-off date. benefits and distribution of all impacts
across society and the entire economy
All data and information, in particular from
primary sources, were grouped, consolidated,
A CBA is supposed to present the best estimates
adjusted, approximated and aggregated,
of benefits or desirable effects and costs or
where applicable. Given the low number of
undesirable effects. The selection of metrics of
eventual participants in the survey exercise,
measurements to evaluate any impacts would
using Excel was perfectly sufficient for
depend a lot on data availability and ease
analysis purposes. As a rule of thumb, no part
of evaluation. Given the difficulty of assigning
of the feedback compiled via the survey
values to certain impacts, particularly if they
questionnaire from primary sources will be
are intangible, not traded on a market or in
attributed to any individual or organisation
the absence of adequate data series, any
in the final technical report without their prior
assumptions made to arrive at those estimates
written consent detailing the areas or points
would be detailed to improve the analysis. In
for specific attribution. To the extent relevant
such cases, non-market valuing techniques
and possible, all data and information derived
can be considered, such as using market
from primary and secondary sources were
proxies with many similarities in characteristics
leveraged on in performing the following
to estimate the value of a non-market good
steps:
or service
a. Identify and predict all existing and
In addition, a detailed qualitative approach,
potential impacts, positive or desirable
supported by as much evidence and data
and negative or undesirable of IBS
as possible to enhance transparency and
adoption over a period of time using
integrity of the analysis, would also be
compounded annual growth rate
appropriate in lieu of RM values. In short, the
(CAGR), any regression methods
resulting estimations or value assignments for
(simple, linear, logistic and polynomial,
desirable (benefits) and undesirable (costs)
among others) or other modelling
effects in this CBA study shall fall under three
techniques, whichever applicable
categories:
b. Select the most appropriate
• Monetisable
measurements or metrics to estimate
• Quantifiable but not Monetisable
or convert impacts into a common
• Qualitative but not Quantifiable nor
temporal footing and currency in
Monetisable
a consistent manner, notably via
opportunity-cost analysis, cost- All results were interpreted, cross-checked
effectiveness analysis, cost-utility and validated for consistency and accuracy.
analysis, risk-benefit analysis, return-on- While the majority or the essence of findings
investment analysis, economic-impact from primary data analysis would be pieced
analysis, fiscal-impact analysis, welfare together to the extent possible in Chapter
analysis and sensitivity analysis, 3, some of its minor but still consequential
whichever applicable elements can be found in Chapters 4 through
c. Monetise these impacts by assigning 6 for cross-reference purposes. As such,
monetary values (in RM) to the extent the last three chapters, namely Chapters 4
possible through 6, would mostly interpret findings from
d. Discount future impacts to derive secondary data analysis.
present values where applicable
21
CHAPTER 3: BUSINESS PERSPECTIVES
This chapter attempts to assess the impacts of c. Substantial improvement to cash flows
IBS adoption from the business and corporate and eventually profit margins
viewpoints. Findings from primary data analysis
should provide the basis for this chapter but not If we deconstruct further the financial
by much. Given the multitude of challenges in performance of various IBS value-chain
obtaining primary data from the micro-scale participants at all layers from turnover (top
approach, especially via the survey exercise line) and costs right down to profitability
as elaborated at length in Chapter 2, data (bottom line), we should be able to identify
sufficiency, relevancy and reliability in this the following financial gains that IBS can bring
chapter could be limited. Sections 3.1 to 3.3 as opposed to CBM:
represent strengths and opportunities, while
Sections 3.4 and 3.5 draw our attention to a. Lower manpower-related costs and
shortcomings and risks associated with IBS. risks owing to more precise working
hours and less overtime costs; less
3.1 Reduction in Completion Time labour requirements, especially on-
and Costs Equal Improved Financial site, which are mostly filled by unskilled
Sustainability and Business Viability foreign workers given the higher degree
of mechanisation and automation at
It has been revealed by various studies in centralised plants to manufacture IBS
the past that IBS implementation may result products and components; and fewer
in significantly shorter project duration and work crew conflicts at construction sites
ultimately lead to cost savings for construction b. Lower total construction costs and
projects - given the potential for repetitive use project risks for builders, real estate
of various machineries and equipment for developers and contractors owing to:
different types of projects - to the advantage • Shorter construction period and timely
of construction players, particularly builders, project delivery to end-customers due
real estate developers and contractors, being to compressed project schedules
major IBS users apart from other participants in • Faster turnaround time for each on-site
the IBS value and supply chain. Subsequently, activity, especially due to simplified
these advantages for construction works and and systematic installation and
projects can be summarised as follows: erection processes and procedures,
and better sequencing of work flows
a. Faster average time to complete and scheduling of workforce
projects and deliver to customers thanks • Less costs and risks related to building
to higher automation, mechanisation materials owing to higher economies
and advanced technologies; various of scale and cost-effectiveness
simplified processes and procedures; with the mass production of IBS
and less vulnerability to weather components and elements at plants,
conditions and reduced requirements for on-site
b. Cost reductions that can be delineated storage of materials, hence lower risks
into various fronts, such as overall of misplacements, losses or thefts
manpower/payroll, building materials, • Timely and cost-effective delivery
machineries and equipment, waste of IBS components to construction
management and other overheads sites thanks to effective planning and
22
coordination as well as systematic October 2014 report entitled A Blueprint for
storage and transportation services Addressing the Global Affordable Housing
• Less wastage, especially in terms of Challenge revealed that total construction
unused materials and duplication of costs could be reduced by up to 30% and
workers completion time shortened by about 40%–
• Unique features that IBS epitomises such 50% if construction companies and property
as accuracy, precision and excellent developers resorted to industrial construction
organisation in almost all aspects, approaches such as IBS, value engineering
virtually weather- and accident-proof and efficient procurement methods.
construction approach, among others
c. Lower maintenance and depreciation The turnaround time for each on-site activity
costs of machineries and equipment should be faster with IBS since according to
for IBS manufacturers, as the highly MGI, 'many on-site construction activities can
repetitive and reusable nature of most be shortened by 20%–30% when incidental
machineries and equipment for a activities such as assembling tools and
long period makes the initial capital materials, collecting waste or even speaking
expenditure (Capex) worthwhile (for with supervisors are reduced, shifted to
instance, moulds to cast building other workers or eliminated'. Applying value
materials can generally last at least 10 engineering principles and introducing
years) capital productivity measures alone could
d. Contributions of a variety of tax reduce costs by 20%–30%. Meanwhile, MGI
incentives to profitability that the also estimated that builders of affordable
federal government provides to housing in developing economies typically
promote IBS usage and foster growth enjoy operating profit margins of 15%–20%.
of the IBS industry, including:
• Discounts on levy charges such as an Without a doubt, shorter duration to complete
exemption to the tune of 0.125% of the construction works and projects will bring down
total project value with a minimum IBS the overall construction costs, particularly
score of 50 for builders and contractors due to lower labour requirements. Since
• Accelerated Capital Allowances labour cost is estimated to account for up
(ACA) over three years on the purchase to 30% of total construction costs of a typical
of moulds used in the production residential project, findings from the survey
and manufacturing of IBS products, exercise among IBS value-chain participants
components, techniques and elements - which suggest that IBS adoption could lower
e. Enhanced efficiency and effectiveness requirements for workers, especially on-site,
as a result of integration of processes by at least 20% - would certainly bring down
and procedures, and hiring of skilled labour costs and eventually total construction
and specialised IBS workers costs. As an illustration, according to various
f. Easier for project clients to introduce studies, it is estimated that a typical 30-storey
value innovations in the business building would require a crew of 70 workers
strategy canvas (Blue Ocean Strategy) in a shorter time frame with IBS usage as
opposed to 400 workers and a longer period
It has been proven by various studies that under the CBM environment12.
IBS can reduce the building and completion
time of construction works and projects by 11
Productivity Report 2014/2015 published by MPC
30% on average11. For instance, a McKinsey 12
Page 27, Productivity Report 2015/2016 published by
Global Institute (MGI) study published in an MPC
23
Building materials typically make up between chain participants for the purpose of
30%–50% of total construction costs before the this CBA study (-25%) and the results
addition of logistics and transportation costs13. estimated by MGI (-30%) for reduction
Mass production at factories should help IBS in overall construction costs (and
manufacturers achieve economies of scale project risks)
and continuous quality improvements of IBS b. MGI’s estimates for typical operating
components and elements owing to lower profit margins among builders of
per-unit fixed costs, which are spread out affordable housing in developing
over a large number of goods produced, and economies of 15%–20%
reduced per-unit variable costs arising from
operational efficiencies and synergies. As a Taking the overall value of the construction
result, construction companies and property works done (CWD) published by DOSM
developers would enjoy cheaper building every quarter as the basis, two additional
materials, which they could pass on to end- assumptions are considered as follows:
customers. a. Full or extremely high IBS
implementation for all types of CWD
Assuming on average, total construction costs in all sub-sectors (residential, non-
and project risks could be lowered by 30% residential, civil engineering and
thanks to IBS adoption while maintaining gross special trades) with an IBS score of
or operating profit margins of construction at least 70 for both public-sector and
companies at 20%, deriving from the top end private-sector projects
of:
a. the average of findings from the survey 13
Page 91, Productivity Report 2014/2015 published by
exercise conducted among IBS value- MPC
Table 3.1: Averages of survey findings for selected financial metrics
Items Changes (+ denotes increase,

- denotes decrease) due to IBS
1. Total construction costs and risk for builders, real -25%
estate developers and contractors
• Manpower costs (on-site workers) -15%
- Labour requirements, especially foreign workers -20%
- Degree of mechanisation and automation +30%
• Construction period -20%
- Turnaround time for each site activity -20%
- Delivery time to end-customers -20%
• Building material costs and wastages -15%
• Waste management costs -20%
• Energy usage -40%
2. Utilities costs -33%
3. Maintenance and depreciation costs of -10%
machineries and equipment
4. Efficiency and effectiveness +10%
5. Cashflows +12%
Source: JSSB
24
Figure 3.1: Observed and/or estimated annual total amounts of CWD,
adjusted CWD and potential construction cost savings (RM billion)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Value of CWD Adjusted Total Value of CWD Potential Cost Savings
Source: DOSM, JSSB
b. The final value of construction works cheaper buildings that the clients or project
and projects charged to the clients or owners could pass on to end-customers.
project owners would usually comprise
total costs, direct and indirect, incurred 3.2 Creation of New Business
to complete construction projects and Opportunities
project risks such as variation orders
(VOs), fluctuations due mostly to In many ways, IBS and CBM are poles apart,
inflation and other relevant events that be it in philosophy, basic principles, processes
may result in claims for expenses or and procedures, competencies and skills sets,
losses, among others, and gross profit especially in the conceptual, design and
margins construction stages. IBS requires a high level
of collaboration among all parties involved to
To estimate the potential cost savings, attain:
calculations should be based on the annual a. Cohesive coordination and integration
adjusted total value of the CWD, which would of the architectural, civil and structural,
infer total construction costs and project risks mechanical and electrical aspects
without the pre-tax profit or mark-up amount. during the design stage
As a result, it is estimated that full or very high b. Good planning and precision in order
IBS adoption could have generated an annual to well execute the transportation,
cost savings of almost RM14 billion in 2008 and assembly and erection of
RM30.4 billion in 2016 or an average of RM20.25 manufactured components at the site
billion over a nine-year period. These cost during the construction stage
savings, if realised, would result in substantially
25
With a different approach to supply chain, • Improved construction quality, longer
planning, scheduling, handling and material building life and better finishing or
purchasing, for instance, IBS should bring workmanship owing to higher quality of
about fundamental changes to the way IBS products, components, techniques
construction activities are undertaken. Thus, and elements that are achieved
almost all of the following IBS value- and with advanced technology, modern
supply-chain participants from upstream practices and processes adopted,
to downstream shall unearth new business careful selection of building materials
opportunities and hence incremental revenue used and highly sheltered or controlled
potential with IBS adoption: production environment
a. Producers, importers, distributors and • Higher consistency and
suppliers/vendors of raw materials, standardisation, as designing is based
natural resources and semi-finished on standard template(s)
goods for use in IBS component • Easier but better quality control
manufacturing and production or assurance, hence lower risks
b. Manufacturers, importers, distributors of construction defects as well as
and lessors of machineries and preventive maintenance and repairs
equipment for the purposes of IBS b. Cost effectiveness and value for money
component manufacturing and for customers or end-users either due
production as well as for use by services to lack of valid reason(s) to pass on any
providers to, among others, transport, cost increases to customers or even
store, install and erect ex-factory IBS better, higher potential of transfer of
products and components construction cost savings to customers
c. Manufacturers, assemblers, importers as a result of:
and distributors of finished IBS products, • Lower Capex costs, given the suitability
components, techniques and elements of formwork, block work and framing
d. Providers of transportation, storage, systems for repetitive use
installation, erection and other services • Faster project completion and hence
for use by ex-factory IBS products, lower risks of cost overruns that end-
components, techniques and elements customers eventually may have to
e. Construction players, including builders, bear
real estate developers, contractors, • Lower labour costs, given the higher
companies providing construction- degree of machine utilisation at IBS
related ancillary services, companies manufacturing plants or reduction in
providing consultancy and other activities at project sites and hence
support services less on-site labour requirements
3.3 Customer Acquisition and Retention
IBS could contribute a great deal to customer 14

A term used in social science to describe man-made
loyalty and customer base enhancement, surroundings, places, spaces and landscape that
which reflects higher reputational gains provide the setting for human activities. Created and
modified by humankind, the built environment ranges
and customer/user satisfaction as a result
from buildings, physical infrastructure and transportation
of increased professionalism, productivity,
systems to water bodies and parks. As opposed to
effectiveness and efficiency vis-à-vis: natural environment, it has also been defined as 'the
a. Quality and durability aspects of the humanitarian-made space in which people live, work,
built environment14, which include: and recreate on a day-to-day basis'.
26
• Lower preventive maintenance and a. Insufficient demand for IBS-based
repair costs for building owners thanks buildings and properties from end-
to better finishing customers
c. Speed of construction or respect of b. Lack of understanding of customer
construction schedules, i.e. timely needs and requirements
completion or even ahead-of- c. Unfamiliarity with IBS or lack of previous
schedule completion of projects, technical experiences and expertise
thanks to a reduction in the duration of in IBS due to insufficient knowledge
each on-site activity since on-site works of or inadequate exposure to IBS
are mainly required to erect prefab technology, as the construction of
or ready-made components instead IBS-oriented buildings and projects
of producing them apart from the requires high degrees of accuracy,
possibility of simultaneous resumption precision and technical know-how
of foundational earthworks at in planning, coordination, designs
construction sites and manufacturing and installation/ erection, leading to
of precast elements at factories: continued preference for CBM
• Timely delivery of projects or even d. Misperceptions of higher overall
earlier, taking possession or occupation construction costs15 and project
of buildings thanks to less vulnerability risks, hence not economical or
to human errors, adverse weather feasible for small-scale construction
conditions, and supply interruptions of players, in particular those who may
electricity and water, among others not enjoy guaranteed continuity of
• Faster resumption of economic construction projects or the element
activities and income trickle-in arising of repetitiveness. These misperceptions
from the ahead-of-schedule use are deemed to be caused by:
of the completed buildings (and • The current procurement practice of
infrastructure) IBS components, whereby a substantial
d. Flexibility in the architectural framework advance must be paid upfront to IBS
of buildings and the design of manufacturers by contractors who
precast elements, overcoming the have been awarded the construction
issue of monotony or repetition of projects even before receiving the
designs as well as allowing different initial payment (a portion of the total
systems to produce their own unique contract value) from the clients or
prefabrication models project owners while local contractors
run short of cash most of the time,
3.4 Construction Players’ Qualms overwhelming them with a massive
financial burden16
As findings from the survey exercise among
IBS value-chain participants for the purpose
15
A groundless and even erroneous perception by
some quarters that IBS could cause a 10% cost increase
of this CBA study and literature reviews would
compared to CBM.
suggest, the relatively low take-up rate of IBS 16
According to a study by Nawi et al., 2007, a client
in Malaysia compared to many developed typically pays the contractor between 10% and 25% of
nations, and even some regional neighbours, the total contract value as an initial payment in a CBM
could be due to the reluctance to use IBS or project. However, according to Nawi et et al., 2005,
low acceptance/usage of IBS among builders, in an IBS-based project, the contractor is expected to
real estate developers and contractors led advance IBS manufacturers up to 75% of their Capex to
by: ensure on-time delivery of IBS components.
27
• Requirements to manufacture IBS fabrication at manufacturing facilities
components for very high quality or as well as project management,
super-grade materials, which may logistics, planning, coordination,
be in short supply in Malaysia; to assembly and erection of IBS
ensure an uninterrupted supply, IBS components at construction sites
manufacturers will have to import and f. Lack of R&D activities, new
assume a variety of risks, in particular technologies, support services and
related to foreign exchange losses and testing labs to render IBS more
non-delivery of materials according to productivity enhancing, innovative
specifications and creative
• Importation costs of foreign technology g. Unfounded fears of customer rejection
and expertise as well as purchase or or unjustified and unfavourable
lease of expensive machineries and public perceptions towards IBS-based
equipment by IBS manufacturers buildings in general and relatively poor
that could make way into the pricing demand from the public/ customers
structure of finished IBS products and reflecting bad publicity surrounding:
components • The misfortune of victims of abandoned
• Perceived higher adoption costs due construction projects, especially
mostly to lack of standardisation of IBS housing
component specifications17 • Perceptions of IBS suitability only
• Significantly higher wages for highly for high-rise buildings or changes in
skilled workers or those with machine- designs to allow IBS usage in other
oriented skills types of buildings would be costly are
• Contributions to a specific human among the causes of low popularity of
capital development fund for talent IBS among potential buyers, especially
pool deepening of landed residential properties
• Inadequacy in tax incentives as the • Perceived low-quality buildings,
CIDB’s levy exemption of only 0.125% of wrongly associated with the low-
the project value for housing projects cost image due to misunderstanding
with a minimum IBS score of 50% about the differences between
effective 1 January 2005 is not sufficient industrialisation and simplification of
to cover additional costs (for example, designs
a property developer or contractor of • Unsubstantiated blame as the cause
a housing project worth RM1 million is of cracks and leakages, which are
entitled to get only a paltry exemption in reality due to poor designs and
sum of RM1,250) technical inaccuracies
• Expenses incurred for storage, • Perceived inflexibility and
transportation, installation, erection uneconomicality to undertake
as well as other coordination- and renovations or changes
logistical-related limitations, particularly • Perceived limitations in terms of
if construction sites are far away from aesthetic value in architecture and
IBS manufacturers or suppliers designs, given the high standardisation
e. Shortage of on-site and factory-based
professionals trained and experienced
in IBS at reasonable pay, from general 17
The CIMP 2006ñ2015 estimated that costs of IBS
workers and designers to engineers building materials would be 10% higher than under CBM
and land surveyors for moulding and due to lack of standardisation.
28
Table 3.2: Averages of survey findings for customer satisfaction scores
(out of 100) of IBS vs. CBM
Items IBS CBM

1. Overall quality and durability of buildings 80 70
2. Prevalence of defects on buildings No major defects Several instances
reported of defects
reported
3. Degree of aesthetic value in architecture and 80 70
designs
4. Understanding of and knowledge about customer 80 80
needs and requirements
5. Speed of construction works and projects 70 70
6. Respect for project completion and customer 70 70
delivery schedules
7. Cost effectiveness and value for money in pricing of 70 70
buildings
8. Economicality and flexibility to undertake 80 80
renovations or changes
9. Suitableness and responsiveness to creativity and 80 80
innovation
Source: JSSB
• Unsubstantiated blame as the cause 3.5 Misgivings about Investing in

of impediment to creativity and Manufacturing Facilities for IBS
innovation, especially in designs due to Components
perceived rigidity and inflexibility of IBS
products and components Findings from the survey exercise among IBS
h. Limited availability and choice value-chain participants for the purpose of this
spectrum of IBS products and CBA study, and to a certain extent literature
components as a result of low reviews, would suggest that the low interest in
competition and quasi-monopolistic embarking on production or manufacturing
conditions within the IBS component activities of IBS products and components
manufacturing segment, which raise among investors can be attributed to the
issues related to economies of scale following factors:
and supply continuity for direct IBS users, a. Lack of understanding of customer
namely builders, real estate developers needs and requirements
and contractors - insufficient number b. Relatively low demand from direct
of available IBS manufacturers and/ IBS users, namely builders, real estate
or their overconcentration in certain developers and contractors
areas, too far from construction site c. Lack of previous experiences and
locations expertise in IBS due to insufficient
i. Wrongful perceived inconsistency in knowledge or exposure to IBS
quality of available IBS products and technology
components d. Absence of quality control
j. Mindset-related issues such as oversight, especially among smaller
resistance to change in general manufacturers due to lack of
enforcement by relevant authorities
29
Table 3.3: Comparative business performance between IBS and CBM
Building Methods
CBM Construction IBS Construction
Costs Higher labour, material, equipment Significant cost savings with lower
and other overhead costs expenditure on labour, materials,
equipment and other overheads
Speed Longer construction period due to Shorter construction period thanks
disaggregation of components, to easy installation and erection of
which are difficult to install and components, apart from lower risks of
erect, apart from higher risks of delays in project completion because
delays in project completion of faster turnaround time and free
from weather-related adversity
Wastage Wastage of materials such as steel, Wastage of materials such as timber,
bricks, cement, concrete and cement, brick, soil and concrete
timber estimated to be close to 10% estimated to be less than 5% of total
of total materials used in a project materials used in a project
Quality Higher risks of low quality and poor Potential of higher quality and better
finishing due to over-reliance on finishing thanks to mass production
workmanship/craftsmanship, which of standardised but meticulously
could lead to higher maintenance designed components in a controlled
and repair expenses, both environment, which could result
preventive and reactive in lower maintenance and repair
expenses, whether preventive or
reactive
Source: CIDB, CREAM
e. Perceptions of prohibitive cost These are among the barriers that may
factors, especially due to massive be holding back new investments into the
Capex requirements to build plants manufacturing segment of the IBS industry to
and purchase or lease expensive assemble and produce finished IBS products
machineries and equipment and components. The truth is, notwithstanding
f. Huge initial investment/capital outlay a rather high initial Capex, beyond a certain
required for potential manufacturers of breakeven point, the overall benefits of
finished IBS products and components industrialisation and mass production will kick
to reach economies of scale in and increase in tandem with the number
g. Shortage of skilled and semi-skilled of units of IBS products and components
workers at reasonable wages for manufactured.
the IBS component manufacturing
environment
30
3.6 Strengths-Shortcomings Balance
Project owners or clients could enjoy up to

RM30.4 billion in cost savings in 2016 from full
or very high IBS adoption that, if materialised,
can be passed on, all or partially, to end-
customers in the form of much cheaper
buildings.
The limited acceptance or reluctance

to adopt IBS among builders, property
developers and contractors due to a host
of factors has led to a rather low IBS take-
up rate in Malaysia compared to their peers
in the developed world and even some
neighbouring countries such as Singapore
and Thailand. This has a compounded lack of
interest among potential investors to consider
venturing into the manufacturing of IBS
products and components.
Since other advantages or desirable effects

and shortcomings or undesirable effects are
difficult to evaluate or not that straightforward
to estimate in the absence of credible proxy
data, a table on productivity in Research
on IBS Adoption in Government and Private
Projects in Malaysia 2013 has been reworded
and adapted to become a comparative
summary of business performances between
IBS and CBM, as demonstrated in Table 3.3.
31
CHAPTER 4: SOCIO-ECONOMIC AND
POLITICAL PERSPECTIVES
This chapter focuses more on the potential b. Services sector
socio-economic and political implications • Provision of transportation,
as a result of IBS adoption. Sections 4.1 to warehousing, storage, installation,
4.7 attempt to describe the strengths and erection and other services for use by
opportunities of IBS, while Sections 4.8 and 4.9 ex-factory IBS products, components,
point out its shortcomings and risks. techniques and elements
• Provision of R&D, consultancy and
4.1 Emergence of New and/or advisory services to support the
Expansion of Existing Sub-sectors development of new and expansion
of existing segments and clusters of the
The major economic upshot of full-fledged, IBS industry
if not very extensive implementation of IBS • Provision of continuous training and
would be the emergence of new and/or skills development for IBS professionals
sustainable expansion of existing sub-sectors and talents to increase the breadth
in other non-construction sectors, in particular and depth of the IBS industry
manufacturing and services, and their • Provision of monitoring, enforcement
respective sub-sectors: and accreditation services to ensure
that the quality of IBS professionals/
a. Manufacturing sector talents is superior and the quality of
• Assembly and production of finished the finished components are either
IBS products, components, techniques maintained or improved
and elements
• Production of semi-finished inputs that
will be combined together with other
raw materials and natural resources,
and transformed into finished IBS
components and elements
• Production of machineries and
equipment as part of the heavy industry
blueprint18 for use in:
° the processing and transformation
of raw materials, natural resources
and semi-finished goods into
18
As opposed to light industry, heavy industry is highly
capital intensive and requires workforce with advanced
finished IBS components and
technical knowledge and specific skills sets. Given its
elements
tremendous potential, capitalising on rising demand
° the provision of services to transport from domestic IBS players, efforts to promote the
and install/erect ex-factory IBS domestic production of machineries and equipment
components and elements at for use by the IBS industry will result in the emergence
construction sites, such as special of a new high-profile manufacturing sub-sector while
lorries, hydraulic truck mobile ensuring access to reasonably priced machineries and
equipment, not subject to high import duties, which
cranes and tower cranes, among
could go as high as 30% for certain types.
others
32
Table 4.1: Costs of ex-factory IBS products and components used by the
construction sector according to six clusters (RM’000)
Manufacturing Clusters of IBS Products 2009 2010 2012 2013

and Components
Pre-cast Concrete as well as Framing, 82,833 210,069 482,371 862,643
Panel and Box Systems
Steel Framing Systems 48,407 153,429 355,433 391,984
Steel Formwork Systems 25,584 55,491 143,722 377,882
Prefabricated Timber Framing Systems 22,252 85,514 150,037 124,016
Block Work Systems 17,699 124,187 341,426 254,892
Other Innovative Systems 0 0 0 51,544
Total 196,775 628,690 1,472,990 2,063,961
Source: DOSM
Figure 4.1: Share of six manufacturing clusters of finished IBS products and
components out of total number of IBS manufacturers (%)
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2009 2010 2012 2013
Pre-Cast Concretes Steel Framing Systems Steel Formwork Systems
Prefabricated Timber Framing Systems Block Work Systems Innovative Systems
Source: DOSM, JSSB
Since the IBS industry cuts across all five major products and components can be measured
economic sectors, it would make a lot of sense by considering the construction sector’s
to estimate the size of each IBS segment as expenditure on IBS products and components.
expounded in Chapter 1 to eventually arrive Assuming that 129.8% (the average growth
at the approximate value of the IBS industry as rate for the 2009–2010 period was at 219.5%
a whole in Malaysia. Unfortunately, relevant and the 2012–2013 period was at 40.1%) is
data sets to enable such an operation are few the CAGR for expenditure on IBS materials
and far between. Even if they are available, and components by construction players,
they are either too inadequate, infrequent the size of this IBS component manufacturing
or even inaccessible to allow meaningful segment (by expenditure approach) can be
calculations. estimated to be worth RM25.048396 billion
in 2016, accounting for about 9.1% of the
At present, it would appear that only the size manufacturing sector.
of the manufacturing segment of finished IBS
33
4.2 Expanding the GDP Base
Proper implementation of the IBS agenda or services; and observe relative importance
could unleash the potential for a more between industries as well as to compare
detailed, accurate and comprehensive price changes across industries.
picture of economic activities and an
enlargement of the GDP base, as collation IOTs are highly detailed matrices that describe
of value-add data to compute the GDP by production functions of individual industries as
sectoral approach could be more in-depth, well as the interactions among and between
thorough and hence effective owing to: producers and final users within the economy.
In other words, IOTs show inter-industry
a. Clearer demarcation of economic relations of how output of an industry may
activities. For example, activities at off- become input for another, i.e. flows of goods
site plants (and even on-site) related and services that make up the production
to the processing and transformation processes of industries or sale-and-purchase
of natural resources, raw materials relationships between producers and
and semi-finished inputs into finished consumers/users within the economy.
IBS products and components will
be adequately captured in the In short, IOTs demonstrate flows of
manufacturing sector, while building intermediate and final goods and services
activities in a strict sense (sensu defined according to industry outputs
stricto) using finished IBS products (industry by industry tables) or according
and components will be properly to product outputs (product by product
accounted for in the construction tables). A product-by-product IOT shows
sector how much each product is being used as
b. Reduction in risks of incomplete or input for the production of another product.
inadequate coverage of economic Similarly, it shows how much of each product
activities due to the existence of is consumed or used by different consumers
underground or shadow economy or or user categories (households, businesses,
the absence/under-coverage of newly government and non-profit organisations
emerging industries that would require serving households, among others).
advanced statistical methodology
and/or under-reporting of certain
economic activities by industry players,
more often for tax avoidance purposes
The Input-Output Tables19 (IOTs) would

eventually be useful to calculate estimates for
the size of all IBS segments and their individual
contributions to the overall GDP. IOTs can
be used to examine structural changes of 19
IOTs are part of the statistical and macro-analytical
the economy; track production capacity, framework to organise a copious amount of data and
information required to capture to the extent possible
productivity and changes in shares of labour
all economic activities that take place or goods and
and capital across industries; analyse direct,
services produced or income generated in the economy
indirect and induced effects from changes in after making use of all types of input in calculating the
the final demand for particular goods and/ GDP.
34
Table 4.2: IOT mapping for Malaysia’s construction sector 2000 vs. 2010 (RM’000)
2000 2010
Domestic Imports Domestic Imports
Production Production
Stone, clay and sand quarrying 1,397,110 3,431 2,223,557 231,640
Apparel 2,658 152 11,295 27
Footwear 55,640 50,623 - -
Sawmill products 823,015 246,160 - -
Other wood products 190,243 32,479 - -
Furniture 8,543 101 - -
Paper and board 84 - - -
Veneer sheets, plywood, - - 2,553,601 390,834
laminated and particle boards
Builders' carpentry and joinery - - 1,118,430 226
Printed products 268 - - -
Industrial chemicals 206 - - -
Paints and lacquers 217,281 - - -
Paints and varnishes - - 476,320 241,039
Soap and cleaning preparations 1,168 - - -
Other chemical products 800 - - -
Petrol and coal products 320,367 295,392 - -
Petroleum refinery - - 2,291,607 1,015,394
Rubber products 91,263 - - -
Plastic products 2,261 - 456,409 203,437
China, glass and pottery 890,994 1,158,925 - -
Sheet glass and glass products - - 302,395 167,882
Clay and ceramic products 459,222 389,743 1,716,414 750,438
Cement, lime and plaster 1,178,055 17,234 3,686,109 310,065
Concrete and other non-metallic - - 5,629,102 404,674
mineral products
Iron and steel products 3,138,798 1,797,201 7,193,792 4,914,328
Other fabricated metal and - 324 - -
fixtures
Structured metal products 777,768 21,115 - -
Basic precious and non-ferrous - - 54,387 665,924
metals
Casting of metals - - 1,591,475 218,149
Structural metal products - - 548,732 107,296
Other fabricated metal products 789,350 1,289,865 174,092 145,038
Industrial machinery 106,439 859,999 - -
General purpose machinery - - 469,396 1,127,129
Special purpose machinery - - 29,493 53,505
Household machinery 371,020 25,481 - -
Domestic appliances - - 22,097 221,015
Other electrical machinery 603,945 1,363,088 - -
35
Insulated wires and cables - - 138,645 1,006,418
Electric lamps and lighting - - 183,136 2,413,567
equipment
Motor vehicles 56,931 3,292 - -
Other products 22,728 10,470 - -
Other manufacturing - - 46,956 12,480
Repair and maintenance - - 23,219 -
Electricity and gas 139,324 - 272,789 1
Waterworks 33,164 - 91,752 131
Buildings and constructions 192,504 1,314,252 - -
Residential - - 4,469,082 70,833
Non-residential - - 860,791 491,761
Civil engineering - - 453,353 -
Special trade works - - 746,427 27,576
Wholesale and retail trade motor 2,358,292 - 5,523,705 31,217
vehicles
Hotels and restaurants 235,558 - - -
Restaurants - - 89,974 -
Transportation 770,053 2,068 - -
Land transportation - - 701,473 -
Air transportation - - 26,777 -
Highway, bridge and tunnel - - 5,786 -
operation services
Communications 239,467 - 5,577 5,357
Telecommunications - - 186,745 19,667
ICT and computer services - - 9,939 2,111
Banking services 84,772 - 192,479 8,953
Other financial services 52,515 - - -
Insurance 134,339 - 160,303 57,141
Real estate 742,007 - 1,517,541
Rental and leasing - 3,465 4,968
Professional services - - 1,079,864 554,326
Business services 586,183 1,039,045 90,127 -
Education - Private 9,994 - - -
Entertainment 173 0 - -
Repair motor vehicles 61,988 - - -
Other private services - - 13,383 34,578
Total Intermediate Input 19,615,402 10,321,352 47,441,990 15,923,557
Total Input 44,537,636 10,321,352 47,441,990 -
Total Output - - 91,361,903 -
Source: DOSM, MPC
36
Among the major highlights when comparing 4.3 Establishing Other Positive Spillover
IOTs for 2000 vs. 2010 include: Effects
a. Emergence of new line segments
or industries such as veneer sheets, Apart from the more direct GDP-related
plywood, laminated and particle impacts, i.e. economic growth, other positive
boards; builders’ carpentry and joinery; spillover effects from IBS adoption could be
basic precious and non-ferrous metals; on the cards, particularly in the form of:
casting of metals; structural metal
products; insulated wires and cables; a. Production of new employment
electric lamps and lighting equipment; opportunities and hence the creation
highway, bridge and tunnel operation of a new breed of construction
services; telecommunications; ICT and professionals while moving up the value
computer services; rental leasing; and and supply chain, notwithstanding
professional services the destruction of certain types of
b. Expansion of existing line segments occupations
or industries such as sawmill products b. Increase in wages, household
into sawmilling and planning of incomes20 and wealth creation,
wood, and drugs and medicines into especially among Malaysians, with the
pharmaceuticals, chemicals and deepening of the pool of knowledge-
botanical products intensive and skilled labour that is
c. Breakdown or sub-division of existing consistent with the developed, high-
line segments or industries into new ones income nation targets by 202021 and
such as buildings and constructions hence positive for consumer spending
into residential, non-residential, civil or private consumption
engineering and special trade works; c. Creation of new business opportunities,
transportation into land transportation, especially for small-medium enterprises
water transportation, air transportation (SMEs), a catalyst for entrepreneurship
and other transportation services;
hotels and restaurants into
accommodation and restaurants,
among others
d. Disappearance or exit of certain line
segments or industries such as rubber 20
In Malaysia, the four sources of income that can be
primary products, coconut, tea, crude received by or accrued to a household comprise income
coal, ice and knitted fabrics, among from gainfully paid employment; self-employment;
others various types of investments such as property, stocks
and unit trusts, and current or cash transfers.
21
As outlined in the Eleventh Malaysia Plan 2016-2020,
With the IBS industry cutting across a multitude
Malaysia is targeting a Gross National Income (GNI)
of industries in all five major economic sectors, per capita, or in short, per capita income of USD15,900,
future IOTs can be expected to reflect better exceeding the minimum requirement of USD15,000 to
structural changes of the Malaysian economy, join the league of developed, high-income nations on
taking into account the emergence and/ the back of an average real GDP growth of 5%-6%. As a
or rising importance of new and existing IBS result, the economy should create some 1.5 million job
opportunities.
segments.
37
Table 4.3: Employment by categories of skills 2010–2020
2010 2015 2020

(Estimated) (Forecasted)
Number Workforce Number Workforce Number Workforce
(‘000) (%) (‘000) (%) (‘000) (%)
Skilled 3,306.2 27.6 3,858.8 28.0 5,351.7 35.0
workers
Semi-skilled 7,291.9 61.0 8,530.7 61.9 8,927.2 58.4
workers
Low-skilled 1,360.4 11.4 1,391.9 10.1 1,013.1 6.6
workers
Total 11,958.5 100.0 13,781.4 100.0 15,292.0 100.0
employment
Source: Appendix A5-4, 11MP 2016–2020
As at end December 2015, the construction During the 11MP period, the number of skilled
sector provided significant employment workers is projected to increase by 6.8% on
opportunities for 1.3099 million people, average (+3.1% in 10MP), as opposed to 0.9%
accounting for 9.3% of Malaysia’s total for semi-skilled workers (+3.2% in 10MP) and
employed persons of 14.0677 million. -6.2% for low-skilled workers (+0.5% in 10MP).
However, the ratio of citizens to non-citizens This explains why one of the CITP’s initiatives
in the construction sector’s workforce was is to encourage continued investment in skills
43.1% to 56.9%, the most foreign worker- upgrading and human capital development
dominated compared to other sectors. with the objective of providing more than
With the emergence of new and/or further 30,000 skilled and certified graduates for the
expansion of existing sub-sectors, industries construction workforce by 2020.
and clusters as well as the creation of new
business opportunities thanks to IBS, the Based on findings from the Household Income
economy should observe: and Basic Amenities Survey (HIS & BA) and
the Household Expenditure Survey (HES) that
a. Creation of new types of occupations, the DOSM conducted over 12 months in 2014
both generalists and specialists, as shown in Table 4.4, consumer expenditure
including factory workers, designers tends to increase in tandem with the rise in
and engineers at IBS component household incomes, which count wages and
manufacturing facilities as well as salaries as the largest sources.
machinery developers, mould makers,
planners, erectors/installers and crane Consider the following assumptions and
operators, among others, at other calculate vis-à-vis the 2015 levels:
workplaces
b. Higher sophistication of existing jobs a. A 3.12% increase in total labour force,
such as IBS-certified talents and experts which represents a 20-year average
among ICT professionals, engineers, growth during the 1996–2015 period
designers, architects, quantity b. A more conservative reduction in the
surveyors, estimators, project managers number of registered foreign workers by
and even workers at construction sites 1%, 2% and 3% until the share of foreign
38
Table 4.4: Monthly household incomes and consumption expenditure
Median Monthly Mean Monthly Household Mean Monthly Household

Household Income Income Consumption Expenditure
2012 2014 CAGR 2012 2014 CAGR 2009 2014 CAGR
(RM) (RM) (%) (RM) (RM) (%) (RM) (RM) (%)
Overall 3,626 4,585 11.7 5,000 6,141 10.3 2,190 3,578 9.8
Urban 4,238 5,156 9.8 5,742 6,833 8.7 2,465 3,921 9.3
Rural 2,372 3,123 13.8 3,080 3,831 10.9 1,599 2,431 8.4
Source: DOSM
workers out of the total labour force is keeping the share of foreign workers out of the
down to around 13%, only about 2% labour force at 15% by 2020, a hypothetical
better than the 11MP target of 15% by reduction of 1% to the number of registered
2020, while anything beyond, namely foreign workers vs. the 2015 levels would
the 4% and 5% reductions, represent translate into a RM18.979 billion increase in
stress test or stretch goal situations the nominal private consumption amount.
c. GNI per capita22 as a proxy for
22
Average income earned per person or total income
household incomes
received both domestically and abroad [GDP plus
product taxes (minus subsidies) not included in output
As a result, the hypothetical amount of valuation plus net receipts from primary income
private consumption in nominal terms could (employee compensation and property income)
turn out as in Table 4.5. Taking the results that earned abroad by residents] divided by the number of
correspond the closest to the 11MP’s target of mid-year population.
Table 4.5: Predicted amount of nominal private consumption (RM’000) vs.

the 2015 levels (positive impact)
-1% -2% -3% -4% -5%
Labour Force 14,970,962 15,438,056 15,919,723 16,416,418 16,928,611
(million) at
+3.12%
Number 2,113,685 2,092,334 2,070,984 2,049,634 2,008,000
of Foreign
Workers
Share of 14.12 13.55 13.01 12.49 11.86
Foreign
Workers out
of Labour
Force (%)
GNI Per 37,192.19 38,740.19 40,336.49 41,982.59 43,680.05
Capita (RM)
Private 645,217.95 688,888.99 733,922.56 780,361.19 828,248.70
Consumption
Amount
(RM million)
Variance 18,978.95 62,649.99 107,683.56 154,122.75 202,009.70
(RM million)
Source: JSSB
39
Table 4.6: New definition of SMEs across sectors (effective 1 January 2014)
Sector Micro-Enterprise Small Enterprise Medium Enterprise

Manufacturing Amount of annual Amount of annual Amount of annual
sales/turnover sales/turnover from sales/turnover from
< RM300,000 or RM300,000–RM15 RM15 million–RM50
number of full-time million or number of million or number of
employees full-time employees full-time employees
<5 from 5–75 from 75–200
Services and Other Amount of annual Amount of annual
Sectors sales/turnover from sales/turnover from
RM300,000–RM3 RM3 million–RM20
million or number of million or number of
full-time employees full-time employees
from 5–30 from 30–75
Source: SME Corp, BNM
Figure 4.2: Malaysia’s population, GDP and GNI per capita
Given the irreversibility of mechanisation, forward to create new high-paying jobs that
automation, computerisation, digitalisation are consistent with workers’ rising skill sets. With
and robotisation, there is no choice but high IBS adoption, the IBS industry as a whole
to embrace this steadily emerging and can be expected to create new jobs, not
entrenching trend. In view of the intensity of only within the construction sector but also in
these characteristics within the IBS industry, no other sectors, especially manufacturing and
doubt such an advanced and technology- services.
based construction method is the way
40
Table 4.7: CIDB’s new definition of SMEs in the construction sector23
Type Definition Contractor Category

Micro-Enterprise Amount of annual sales/turnover G1
< RM200,000 or number of full-time
employees < 5
Small Enterprise Amount of annual sales/turnover from G1–G3

RM200,000–RM1 million or number of full-
time employees 5–19
Medium Enterprise Amount of annual sales/turnover from G4–G5
RM1 million–RM5 million or number of full-
time employees 20–50
Source: CIDB
Table 4.8: CIDB’s contractor grades24
Grade Minimum Paid-Up or Accumulated Capital Tendering Capacity

G1 RM5,000 < RM200,000
G2 RM25,000 < RM500,000
G3 RM50,000 < RM1 million
G7 RM750,000 No limit
Source: CIDB
Table 4.9: Breakdown of SMEs according to size
Size of SMEs Number of Establishments Percentage of Total

Micro-Enterprises 496,458 77.0%
Small Enterprises 128,787 20.0%
Medium Enterprises 19,891 3.0%
Source: SME Corp
23
Page 115, CITP 2016ñ2020 publication
24
Page 114, CITP 2016ñ2020 publication
41
Table 4.10: Sectoral breakdown of SMEs
Sector Number of Establishments Percentage of Total

Services 580,985 90.0%
Manufacturing 37,861 5.9%
Construction 19,283 3.0%
Agriculture 6,708 1.0%
Mining and Quarrying 299 0.1%
Source: SME Corp
Table 4.11: SMEs by ownership
Type of Ownership Percentage of Total

Individual 71.0%
Private Limited (Sdn. Bhd.) 18.4%
Partnership 8.5%
Others 2.1%
Source: SME Corp
Table 4.12: SMEs and employment
Number of People Employed Percentage of Total Employment

2013 5.1 million 57.5%
2014 6.2 million 65.0%
2015 6.6 million 65.5%
Source: SME Corp
42
Table 4.13: Key indicators of SMEs
2010 2015 2020 Overall 10MP Overall 11MP

(Estimated) (Forecasted) (Estimated) (Forecasted)
Contribution 262.9 372.0 578.6 1,605.8 2,420.8
to GDP
(RM billion;
2010=100)
Average 8.3 9.3 9.3 7.5 9.3
Annual
Growth (%)
Contribution 32.0 35.0 41.0 41.0 38.4
to GDP (%)
Exports 100.3 147.8 243.7 634.0 995.0
(RM billion;
2010=100)
Contribution 15.7 19.0 25.0 17.3 22.4
to Total
Exports (%)
Contribution 57.1 59.0 62.0 57.8 60.7
to Total 2013
Employment
(%)
Source: SME Corp, EPU, DOSM
Table 4.14: List of IBS component manufacturers and distributors, and IBS contractors
nationwide as at end November 2016
Number of IBS Manufacturers Number of IBS Contractors

and Distributors
Selangor 82 1,553
Johor 35 785
Negeri Sembilan 14 414
Perak 14 400
Sabah 13 299
Sarawak 13 508
Melaka 9 192
FT Kuala Lumpur 8 1,012
Kedah 8 472
Kelantan 7 544
Pahang 7 604
Terengganu 7 548
Penang 6 628
Perlis 1 172
Total 224 8,131
Source: IBS Digest Issue 2, 2016
43
Pending the final results of the Economic respective segments of the IBS industry should
Census 2016 (with 2015 as the reference subsequently consider forging consortia
year) conducted by DOSM since April 2016 or other forms of collaboration with their
and the Distributive Trade Census in 2014, the counterparts in Malaysia or abroad to pool
most recent official data on SMEs from the resources, expertise and technology in order
Economic Census 2011 revealed that there to increase their overall potential.
were 645,136 SMEs in 2010, representing 97.3%
of all business establishments in Malaysia or With continuous efforts to develop the IBS
98.5% based on the new definition effective 1 industry throughout the entire value and
January 2014. supply chain, particularly segments within
the manufacturing and services sectors,
Nonetheless, SMEs are estimated to have creation of new business opportunities will
contributed only 32% to Malaysia’s GDP in generate enough interest among SMEs to
2010 or 36.3% in 2015, most probably in great eventually participate in these emerging
part due to their meagre size, as micro- and/or expanding IBS segments. Given
enterprises accounted for 77% of these SMEs. more stringent criteria to qualify as SMEs
Their annual turnover based on gross output in the manufacturing sector, and to a
value was estimated at RM507 billion in 2010. lesser degree the services sector, superior
quality and more deep-pocketed SMEs are
Within Malaysia’s construction sector, expected with an increased ability to invest in
contractors are grouped into categories or advanced, productivity-driven, cost-saving and
grades according to specific size brackets: environment-friendly technologies to populate
small-sized contractors (G1 to G3), medium- the IBS industry. Streamlining Bumiputera SMEs
sized contractors (G4 to G5) and large- into certain areas of promoted IBS segments
sized contractors (G6 to G7). SMEs within and mimicking the CITP’s recommendation
the construction sector generally fall under for Bumiputera construction contractors27
the G1 to G5 categories. These sub-scale could enable the former to create niche
SMEs collectively account for about 90% of clusters within the IBS industry.
the total construction contractors. On the
other hand, most construction professionals, 4.4 Unlocking Tremendous Export
including architects, engineers and quantity Potential of Selected IBS Segments
surveyors, are sole proprietors. About 56% of
all construction-related firms are Bumiputera- In step with the CITP’s Internationalisation
owned, while two-thirds of G1 contractors are Strategic Thrust, a number of IBS segments such
Bumiputera-owned25. as the manufacturing of semi-finished inputs,
manufacturing of prefabricated building
As at end-November 2016, Malaysia had materials and other IBS components, and the
in total 224 IBS product and component production or assembly of machineries and
manufacturers (207) and distributors (17) as equipment for use by the IBS industry have
well as 8,131 IBS contractors, who are mostly the capacity to be turned into major export
SMEs. The uniqueness of the IBS industry that drivers.
cuts across all five major economic sectors
provides a good platform to step up the 11MP 25
Pages 114 and 115, CITP 2016-2020 publication
target of making SMEs contribute 41% to the 26
Chapter 8.14, 11MP
overall GDP by 2020 or 38.4% on average 27
Initiative P6: Advance SME/Bumiputera Capacity
during the 11MP period with 9.5 million jobs and Capability Building, Page 133, CITP 2016–2020
in all five major sectors26. SMEs within the publication
44
Figure 4.3: Malaysia’s selected major gross exports of manufactured goods (RM million)
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Textiles, Apparels & Footwear Wood Products Other Manufactures

Processed Food Rubber Products Optical & Scientific Equipment
Manufactures of Metal Machinery, Equipment and Parts Petroleum Products
Chemical and Chemical Products Electrical & Electronic Products Total
Source: DOSM, BNM
Leveraging on highly innovative technology It will also help prevent a saturated domestic
and highly sought-after talents, these market while allowing SMEs ample time and
segments could serve as breeding grounds space to consolidate and ensure a solid
to nurture and develop Malaysian champions footing and subsequently expand at a more
without compromising too much Malaysia’s sustainable pace. Spreading their wings
cost-effectiveness and price-competitiveness, regionally first should prove to be a good
especially to cater to demand within the strategy for larger companies and GLCs
Association of Southeast Asian Nations involved in the IBS industry to gain the much-
(ASEAN), provided strict compliance with needed international experience and market
international standards and best practices know-how before going one step further:
related to construction and IBS specifications global expansion.
is observed.
Electrical and electronics (E&E) industry has
Once the critical mass for domestic needs remained by far the manufacturing sector’s
is achieved, companies in a handful of IBS largest export segment, followed by chemicals
segments have the potential to sell abroad and chemical products, and petroleum
their surplus products and/or services, products. The biggest export potential among
especially in the Southeast Asian region, so IBS manufacturing segments only comes in
long as they meet customer requirements fourth position in Malaysia’s league of exports
and the needs of these overseas markets. of manufactured goods in 2016. In a nutshell,
This overseas foray will assist larger IBS-related IBS segments within the manufacturing sector
companies and GLCs in preparing themselves are (i) exports of semi-finished inputs, (ii) finished
for greater global competition, as Malaysia IBS products, materials, components and
remains committed to domestic market elements, and machineries and equipment
liberalisation while continuing to push for for use by the IBS industry that are likely to be
greater outbound market access. captured in machinery, equipment and parts,
45
Figure 4.4: Malaysia’s major gross exports of construction-related
manufactured goods (RM million)
60,000
50,000
40,000
30,000
20,000
10,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Non-Metallic Mineral products Iron & Steel Products Manufactures of Plastics

Transport Equipment Wood Products Other Manufactures
Rubber Products Manufactures of Metal Machinery, Equipment and Parts
Chemicals and Chemical Products
Source: DOSM, BNM
transport equipment, (iii) manufactures of b. The 50% increase represents a stress

metal, (iv) wood products, (v) manufactures test or stretch goal situation
of plastics, and (vi) iron and steel products
and non-metallic mineral products. These As a result, hypothetically, the total exports
are apart from other segments in the future, of manufactured goods could turn out as in
pending the emergence of new and/or sub- Table 4.15, resulting in an increase by as much
division of existing segments. as RM14.1695 billion.
There is tremendous IBS export potential in Apart from expanding and diversifying
three major manufacturing segments, namely Malaysia’s export base and spectrum,
machinery, equipment and parts; other IBS could also prove to be an excellent
manufactures; and transport equipment, not conduit for Malaysian businesses to make
to mention exports of IBS-related services, the most of globalisation, capitalising first
in particular transfer of knowledge, skills, and foremost on the ASEAN Economic
expertise and technology via training, skills Community (AEC), Regional Comprehensive
development, consultancy, advisory and Economic Partnership (RCEP) and other
other educational services. bilateral, multilateral or plurilateral free trade
agreements (FTAs) in order to transform
All other things being equal (ceteris paribus), themselves into global or at least regional
consider the following assumptions and champions.
calculate vis-à-vis the 2016 levels:
a. A more aggressive impact on 4.5 Propelling Innovation, Creativity,
merchandise export outlook, whereby Productivity and Professionalism
IBS brings about a 5%, 10%, 15% or 20%
increase to Malaysia’s combined export IBS is widely seen as a push-factor to enhance
amount (of machinery, equipment capacities and capabilities, an essential
and parts; other manufactures; and element (sine qua non) to catalyse innovation,
transport equipment) vs. the 2016 level creativity, productivity and professionalism
of RM70.8473 billion within Malaysia’s construction sector and the
46
Table 4.15: Predicted combined export amount of IBS manufacturing segments with the most
export potential and total exports of manufactured goods vs. 2016 levels (RM million)
2016 +5% +10% +15% +20% +50%

Levels
Combined Export 70,847.29 74,389.66 77,932.02 81,474.39 85,016.75 106,270.94
Amount of Three
Major Potential
Segments
(RM million)
Total Exports of 645,672.63 649,214.99 652,757.36 656,299.72 659,842.0 681,096.28
Manufactured
Goods
(RM million)
Percentage 0.55 1.10 1.65 2.19 5.49
Increase (%)
Variance +3,542.37 +7,084.73 +10,627.09 +14,169.46 +35,423.65
(RM million)
Source: JSSB
economy as a whole. This is particularly pivotal element of organisational leadership and

when the construction sector has the lowest management with basic principles, systems,
labour productivity28 level in Malaysia due to standards and best practices, tools and
the over-reliance on low-skilled foreign labour strategies to exceed or at least meet various
and limited modernisation or relatively low key performance metrics or key performance
usage of advanced construction techniques. indicators (KPIs). The purpose of an OE
framework is to achieve and improve these
With IBS, the construction sector will be deliverables, mostly related to work culture
more modern technology intensive and less and ethics, processes and procedures, cost
labour intensive, particularly by reducing structure, quality and reliability of products
overdependence on foreign and unskilled and/or services, and customer-centric
workers, apart from being much safer, requirements, among others.
cleaner, faster and well executed. This is due
to multiple aspects of standardisation and In designating an accelerated adoption
quality consistency of easily installed and of IBS as a major productivity stimulant, the
erected components that are produced CITP 2016–2020 in its Productivity Strategic
under controlled environment in a factory Thrust aims to raise the construction sector’s
setting, reduced vulnerability to weather productivity levels by 2.5 times to USD16,50029
conditions, less Variation Order (VOs), shorter per worker, matched by higher wages by
completion period due to all-weather
construction activities, and superior quality of
finished buildings (and infrastructure). 28
Labour productivity is one of the most crucial
In short, being a highly mechanised and determinants of the standard of living and long-run
economic growth potential. The higher the productivity,
automated technology-based construction
the higher household incomes and growth trajectory
approach and low-labour intensive with a
shall be. Stronger productivity gains will help Malaysia
specific focus on operational excellence (OE), achieve and retain its high income, developed nation
higher IBS usage will lead to higher productivity goals.
gains within the construction sector. OE is an 29
Assuming a conversion rate of USD1=RM3.7539
47
Figure 4.5: Malaysia’s sectoral labour productivity levels (RM)
120,000
100,000
80,000
60,000
40,000
20,000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Agriculture Manufacturing Construction Services Overall
Source: MPC
Table 4.16: Malaysia’s labour productivity per number of employment (2010=100)
Levels (RM’000) Average Growth (%)

2015 (actual) 2020 (targeted) 10MP (actual) 11MP (targeted)
Agriculture 53.54 68.8 1.32 3.6
Mining and N/A 1,210.0 N/A 1.1
Quarrying
Manufacturing 105.156 112.1 2.25 2.6
Construction 35.673 61.939 7.74 9.6
Services 66.346 83.4 2.13 4.1
Overall 75.538 92.3 1.2 3.7
Source: Rancangan Malaysia Kesebelas 2016–2020, “Pertumbuhan Berpaksikan Rakyat; MPC’s Productivity Report 2015-2016”
2020 in sync with the 11MP goals of creating frontier, and increase time and cost savings;
1.5 million new jobs, especially high-skilled while the processes driver attempts to make
and knowledge-based through productivity things work more efficiently and effectively
step-ups and foreign worker reduction. through better planning and management.
The CITP also recommended three key Shifts in architectural trends towards customer
drivers, namely workforce, technology and preferences for aspects related to higher
processes. The workforce driver focuses on natural resource and material optimisation,
human capital improvements to raise output energy efficiency and other eco-credentials
per worker; the technology driver deals would have a direct impact on demand for
with which and how technology can scale IBS-based buildings, which in turn would help
up overall output, expand the production boost productivity of the construction sector.
48
Box Article 1: Adapted from pages 8, 18 and 19 from the 23rd Productivity Report 2015/2016
Total Factor Productivity-Driven Labour Productivity Growth in Construction
The two major determinants of labour Productivity growth means more value
productivity are (i) total factor productivity is added to products and services and
(TFP), which measures increases in the subsequently will generate more incomes
qualitative aspects of labour and capital for distribution. To ensure a higher standard
inputs and the efficiency in the utilisation of living in Malaysia, higher TFP contribution
of these inputs, and (ii) capital intensity, towards economic growth is, therefore, a
which represents quantitative expansion prerequisite.
of physical capital per worker.
Throughout 2006–2015, the productivity
Being a measure of efficiency in the of all major economic sectors, except for
utilisation of inputs, TFP brings about agriculture, were mainly TFP driven. During
technological dynamism, while capital this 10-year period, the highest TFP growth
intensity refers to the utilisation of capital contribution to productivity was in the
among the workforce. Better quality inputs construction sector, and this was mainly
directly result in the generation of more due to the demand intensity resulting from
outputs, especially when inputs are utilised mega construction projects nationwide.
effectively and efficiently. Investments The adoption of more advanced
on capital alone would not reflect higher building practices and systems such as
productivity but must be complemented the IBS, Green Building Index (GBI) and
with efficient managerial practices and Building Information Modelling (BIM) also
work procedures, advanced machineries contributed to the improved performance
and technology and skilled labour. in construction.
Source: MPC
49
Thus, it can be intuitively deduced that IBS Investments in machineries and equipment,
is certainly an important productivity driver human capital formation as well as trade and
for the construction sector, although no investment openness are among the prime
specific study has so far been undertaken to factors influencing productivity growth trends.
objectively assess its contribution to the annual Through innovation, creativity and diffusion
productivity gains enjoyed by Malaysia’s of new technologies, each of these three
construction sector, particularly since the turn factors enhances productivity gains within the
of the 21st century. economy.
Estimating IBS’ contribution to the construction On the other hand, innovation and creativity,
sector’s productivity gains deserves a detailed led by increased dynamism of R&D
study on its own. Notwithstanding the absence initiatives would help boost productivity and
of an in-depth analysis to estimate productivity professionalism within the construction sector
of the IBS industry per se and its share within the in general but more specifically the IBS industry
construction sector, it has been established as a whole. For instance, the high compatibility
that the following factors could affect labour between sustainable and environment-
productivity of construction works and friendly solutions and IBS elements and
projects, whether directly or inversely: components means tremendous potential for
innovation and creativity to thrive, supported
a. Material delivery patterns and by a flurry of R&D activities.
practices
Among innovative solutions to emphasise
b. Weather conditions and geographical/
further may include recycled containers,
geological events - rain, inundation,
engineered timber products such as glued
droughts, winds, earthquakes and
laminated timber (glulam), laminated veneer
tsunamis, among others
lumber (LVL), self-compacting concrete
c. Temperature and humidity levels,
(SCC), prefab reinforcement cages and
especially during daytime
lightweight IBS blocks in the rapid construction
d. Repetitiveness and replication of
of affordable dwellings.
activities/tasks
e. Frequency of reuse of machineries and However, innovation- and creativity-based
equipment R&D activities require a huge amount of
f. Crew size or number of workers at a site capital, time and effort, although all these
g. Skills and experience levels of investments could prove worthwhile if we
construction workers manage to enhance our future capabilities
h. Daily working hours and scheduled and capacities, churn out products and
overtime, as extra work or excessive services with high-technology content but at
workload for an extended period reasonable prices for end-consumers, while
may result in productivity losses due to strengthening efficiency and effectiveness in
fatigue, poor focus and low morale general.
i. Frequency and size of VOs, which
may jack up project costs, negatively Should Malaysia become a developed,
affect work schedule and disrupt the high-income nation by 2020 as envisaged,
momentum of workers, among others its long-term viability, durability, stability and
j. Characteristics of each construction sustainability from almost all perspectives,
site and general activities - site location, especially socio-economic, will depend a lot
working environment and space, and on its ability and ingenuity to transform into
building type and size, among others an economy that accentuates productivity,
50
entrepreneurship, innovation and creativity most of the time to revitalise, reinvent and
(PEIC). reaffirm goals. A number of innovation indices
on a global scale exhibit the level or status
All four intersect with each other in the
of innovativeness, especially in the battle of
sense that I and C are among the tools to
ideas and wits, and the innovation friendliness
achieve productivity and entrepreneurship
of countries around the world.
excellence, while P, E and I require creativity
Table 4.17: Key details of major global innovation-related indices
Name of Index Publisher(s) or

Number and Measurement Metrics,
Producer(s)
Types of Countries Assessment Parameters or
Covered Contributing Factors
Global Innovation (i) INSEAD (founded 128 countries, (i) Innovation Input Sub-
Index (GII) in 2007) representing 97.9% Index comprising institutions,
(ii) Johnson Cornell of the global GDP human capital and
University and 92.8% of the research, infrastructure,
(iii) World world’s population market sophistication and
Intellectual Property business sophistication
Organisation (ii) Innovation Output Sub-
(WIPO) Index comprising knowledge
and technology outputs and
creative outputs
International (i) Boston 110 small and large (i) Innovation Inputs
Innovation Index Consulting Group countries as well as comprising fiscal policy and
(III) (BCG) 50 US states other government policies
(ii) National that include education,
Association of trade, intellectual property,
Manufacturers immigration, infrastructure
(NAM) and innovation environment
(iii) Manufacturing (ii)Innovation Performance
Institute (MI) comprising patents,
technology transfer, R&D
investments and other R&D
results; business performance
(labour productivity, total
shareholder returns, etc.)
and impact of innovation
(on employment growth,
investment, business
migration and economic
growth)
Bloomberg Bloomberg 78 countries (which R&D intensity, manufacturing
Innovation Index reported at least 6 value-added, productivity,
(BII) out of 7 categories high-tech density, tertiary
of measurement efficiency, researcher
metrics) concentration and patent
activity
Source: Respective websites and publications
51
Table 4.18: Performance of Malaysia vs. the top-ranked country on global
innovation-related indices
Name of Most Recent Top-Ranked Country Malaysia
Index Year Country Score Ranking Score
GII 2016 Switzerland 66.28 35 43.36
III 2009 Singapore 2.45 21 1.12
BIII 2017 South Korea 89.00 23 66.98
4.6 Minimising Hidden Costs to the (vs. the sector’s share of GDP) who fill the void
Economy left by uninterested locals30.
Being one of the world’s largest importers

30
Reluctance or even total lack of interest among
of foreign workers, Malaysia, especially
Malaysians to take up construction employment,
its construction sector, seems to have a
in particular on-site jobs, could be due to a variety
penchant for foreign workers as its major of negative perceptions such as menial, repetitive,
labour source. Underpinned by low-pay, low- unglamorous and low-status type of jobs; tough working
skilled workforce, Malaysia’s construction conditions (long working hours under the sun and
sector has long been synonymous with sometimes rain, intense physical exertion, workplace-
intensive labour usage, characterised by a related safety and health risks); too frequent relocations
away from home for too long and limited career
particularly high number of foreign workers
progression, among others.
Table 4.19: Distribution of foreign workers across economic activities in Malaysia
Year Construction Agriculture^ Manufacturing Services Domestic Total

Helpers
2000 68,226 200,474 307,167 53,683 177,546 807,096
2001 63,342 222,886 312,528 56,363 194,710 849,829
2002 149,342 298,325 323,299 64,281 232,282 1,067,529
2003 252,516 350,351 385,478 85,170 263,465 1,336,980
2004 231,184 384,473 475,942 93,050 285,441 1,470,090
2005 281,780 472,246 581,379 159,662 320,171 1,815,238
2006 267,809 477,497 646,412 166,829 310,662 1,869,209
2007 293,509 503,201 733,372 200,428 314,295 2,044,805
2008 306,873 520,867 728,867 212,630 293,359 2,062,596
2009 299,575 499,910 663,667 203,639 251,355 1,918,146
2010 235,010 497,711 672,823 165,258 247,069 1,817,871
2011 223,688 451,542 580,820 132,919 184,092 1,573,061
2012 226,554 457,350 605,926 138,823 142,936 1,571,589
2013 434,200 625,093 751,772 269,321 169,936 2,250,322
2014 411,819 488,090 747,866 270,048 155,591 2,073,414
2015 745,131 497,480 450,364 293,433 148,627 2,135,035
Source: MOHA, EPU
Note: ^ denotes inclusion of plantation activities
52
Figure 4.6: Share of foreign workers out of total employment across sectors in Malaysia (%)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Construction Agriculture Manufacturing Services^ Total
Source: MOHA, EPU, JSSB

Note: ^ denotes exclusion of domestic helpers
Instead of reducing the number of foreign The overall migrant labour statistics in
workers to 225,000 in 2015 as targeted in the Malaysia could be even higher if the illegal,
IBS Roadmap 2011–2015, the construction unauthorised or undocumented foreign
sector became the largest employer of workers were taken into account. Some
foreign workers compared to other sectors estimates suggest the combined tally of legal
or economic activities, with 745,131 migrant and undocumented foreign workers could
workers or almost 35% of total legal or easily exceed 4 million, which implies that the
documented foreign workers in Malaysia. number of undocumented foreign workers to
be around or slightly over 2 million.
Apart from the construction sector, foreign
workers are found in abundance in the The total documented and undocumented
agriculture and manufacturing sectors. foreign workers in excess of 4 million would
Looking back, the construction sector translate into an equivalent of 27.6% of the
experienced a sudden surge in foreign worker national labour force totalling 14.518 million
influx starting from 2002, and the rising trend people in 2015, a far cry from the 15%-limit set
persisted up to 2008 before easing slightly by the 11MP to achieve by 2020. The Master
between 2009 and 2012. In 2013, the tally Builders Association of Malaysia (MBAM)
of foreign workers in the construction sector estimated that in early 2016 the construction
swelled beyond the 400,000 mark for the first sector alone employed at least a quarter of a
time before reaching its highest so far in 2015. million undocumented foreign workers.
53
The Indonesian government’s unilateral move crime index, particularly in foreigner
in July 2015 to raise by 25% the wages of its enclaves, among others
citizens working in the Malaysian construction • Undue pressures on public
sector without consulting either the Malaysian infrastructure, amenities and services
government or the construction industry - usage of virtually free public goods
players could probably be the straw that and other highly subsidised goods
broke the camel’s back - the push-factor and services, especially access to
for Malaysia to urgently wean off its foreign healthcare and medical treatment,
labour dependency by increasingly resorting public transportation, education and
to advanced technology as well as highly training
mechanised and automated processes. • Re-emergence of dangerous and fatal
Indeed, owing to its high mechanisation and diseases that were thought to have
automation aspects, IBS can be counted on been eradicated such as tuberculosis
to result in fewer labour requirements for the (TB) and the emergence of new strains
construction sector, especially on-site workers of diseases such as Hepatitis B
who are mostly represented by foreign workers,
93% of whom are estimated to be low skilled b. Preventing negative consequences
or unskilled31. According to a strategy paper vis-à-vis domestic political landscape
that formed part of the 11MP, the number of and social stability and equilibrium
these low-skilled foreign workers in Malaysia (balance of powers among various
surged by 152% between 2000 and 2013. layers in society, national integration
and unity, racial and religious harmony,
A corollary to this is that IBS has been among others)
acknowledged as a potent answer in breaking
this vicious cycle while eliminating or at least Unfortunately, this CBA study was unable to
bringing down substantially several hidden obtain relevant data to shed light on several
costs to the economy, especially related to perceived concerns allegedly caused by
the overdependence on unskilled and semi- migrant labour, namely:
skilled foreign labour, particularly by: a. Losses of small business opportunities
a. Minimising risks or issues perceived to and erosion of job security for citizens
be associated with or brought about
by migrant labour such as:
• Huge foreign exchange outflows in the
form of remittances, mostly personal
transfers, which consist of all current
transfers, in cash or in kind, made or
received by resident households to or
from non-resident households32 31
Page 107, CITP 2016-2020 publication
• Concerns over losses of job security and 32
The international concept of 'remittances' is broader
small business opportunities among than that of personal transfers, encompassing the net
citizens income generated by short-term workers abroad, i.e.
Compensation of Employees in the Primary Account
• Risks of huge demographic shifts due
of the Balance of Payments (BoP) and measured net
to inter-marriages between locals and
of the expenses incurred abroad for travel, transport,
foreign workers taxes and social contributions. Three main measures of
• Social ills and public order or safety remittances are personal remittances, total remittances,
issues such as perceptions of rampant and total remittances and transfers to non-profit
incidents of crime and worsening institutions serving households (NPISHs).
54
b. Risks of huge demographic shifts due d. Implications for national integration
to inter-marriages between locals and and unity as well as domestic social
foreign workers through naturalisation33 stability and political landscape
of foreign workers and/or births of
children of mixed parents (Malaysian
and non-citizen parents)
c. Pressures on facilities and services
33
The legal act or process by which a non-citizen may
acquire citizenship or nationality of the host country,
related to education and training at
either by statute/law without any effort on the part of
government schools (pre-, primary and
the non-citizen individuals or they themselves apply from
secondary); government vocational the relevant authorities. The rules and regulations of
and skills development institutes; public naturalisation may vary across jurisdictions, which may
institutions of higher learning and include requirements such as minimum legal residency,
training centres as well as public knowledge of the national dominant language and/or
transportation facilities and services, culture, and an oath of allegiance, especially a pledge
to obey and uphold the country’s laws and even
especially land and riverain/sea
renouncement of any other existing citizenship(s).
modes of transportation
Table 4.20: Foreign workers’ annual remittances by country of destination (RM million)
2011 2012 2013 2014 2015

Total 15,704 18,358 22,717 28,208 34,753
Remittances
Indonesia 2,497 2,957 4,281 5,315 6,208
Bangladesh 2,490 3,032 3,234 3,806 4,621
Nepal 1,725 1,990 2,693 3,178 3,649
India 423 625 1,329 1,688 1,958
Philippines 398 561 819 965 1,125
Source: Written reply to a parliamentary question on 26 May 2016
Table 4.21: Flows of secondary income account, current account under

balance of payments (RM million)
Year Net Credit Debit
2010 -21,790 1,920 23,711
2011 -21,061 4,683 25,744
2012 -18,469 6,661 25,130
2013 -17,498 7,597 25,096
2014 -17,443 10,496 27,939
2015 -21,896 11,912 33,807
2016 -18,724 15,872 34,595
Source: BNM, DOSM
55
Table 4.22: Predicted amount of annual remittances (RM million) vs. 2015 levels
-5% -10% -15% -20% -50%

Labour Force 14,970,962 15,438,056 15,919,723 16,416,419 16,928,611
(million) at
+3.12%
Number 2,028,283 1,921,532 1,814,780 1,708,028 1,067,518
of Foreign
Workers
Share of 13.55 12.45 11.40 10.40 6.31
Foreign
Workers out
of Labour
Force (%)
Amount 25,835.31 23,962.86 22,090.42 20,217.97 8,938.31
of Annual
Remittances
(RM million)
Variance (RM 8,917.69 10,790.14 12,662.58 14,535.03 25,769.69
million)
Source: JSSB
Table 4.23: Annual federal government expenditure for public order and law enforcement
Year Amount (RM) Percentage of Operating Expenditure (%)

2011 7,453,165,342.93 4.08
2012 8,164,235,967.45 3.97
2013 7,924,125,057.70 3.75
2014 7,097,561,911.07 3.23
2015 8,922,457,731.26 4.11
2016* 9,095,288,597.27 4.33
Total 48,656,834,607.88 3.90
Source: Written reply to a parliamentary question on 6 April 2017
Note: * denotes preliminary statistics
Table 4.24: Non-citizens caught in serious crimes
Offences 2011 2012 2013 2014 2015

Homicide 90 69 449 575 244
Rape 72 69 203 188 126
Gang Robbery with 41 59 53 23 49
Firearms
Gang Robbery without 231 551 330 250 168
Firearms
Robbery with Firearms 7 8 2,815 2,371 1,739
Robbery without 54 185 814 651 592
Firearms
Causing Injury 182 212 806 1,281 956
Total 677 1,153 5,470 5,339 4,074
Source: Written reply to a parliamentary question on 27 October 2016
56
Consider the following assumptions and (BPM6), remittances are captured as outflows
calculate vis-à-vis the 2015 levels: in two subsets of the Current Account, mostly
a. A 3.12% increase in total labour force, in the Secondary Income Account and a
which represents a 20-year average markedly small portion in the Compensation
growth during the 1996–2015 period of Employees of the Primary Income Account.
b. A more aggressive reduction in the
number of registered foreign workers While the federal government has spent a
by 5%, 10%, 15% or 20% until the share of total RM48.56 billion to ensure public order
foreign workers out of the total labour and safety, and to enforce law with emphasis
force is down close to 10%, almost 5% on crime prevention and reduction as well
better than the 11MP target of 15% by as national peace, stability and security
2020, while anything beyond, namely from 2011 through 2016, there is no way we
the 50% reduction, represents a stress can apportion the amount specifically to the
test or stretch goal situation immigrant populace. Should we postulate that
a declining number of immigrants, especially
As a result, the amount of annual remittances foreign workers, could guarantee a reduction
could hypothetically be reduced by as much in the annual expenditure for public order and
as RM14.535 billion as demonstrated in Table law enforcement purposes, we are implicitly
4.22. Under the Balance of Payments (BOP) alluding that most immigrants, particularly the
based on the Sixth Edition of the BOP and undocumented ones, are criminals, or in other
the International Investment Position Manual words, more immigrants lead to more crime.
Table 4.25: Non-citizens caught in property crimes
Offences 2011 2012 2013 2014 2015

Thefts 267 349 2,148 3,533 3,020
Car Thefts 162 81 3,155 1,184 1,107
Motorcycle Thefts 468 283 1,078 2,077 1,366
Thefts of Vans/ Lorries/ 12 10 112 146 117
Heavy Machineries
Snatch Thefts 46 42 705 499 348
Burglary & Robbery 468 505 6,387 5,772 4,427
Total 1,423 1,270 13,585 13,211 10,385
Table 4.26: Overall crime index involving non-citizens in all types of crimes
Male Female Total

2011 2,027 73 2,100
2012 2,292 131 2,423
2013 17,810 1,245 19,055
2014 16,966 1,584 18,550
2015 13,065 1,394 14,459
57
Based on the number of foreign workers likely to commit crimes than those born in
and various data on foreigners implicated in the country of residence, there is a need to
criminal activities in Malaysia over the years, undertake a thorough research into exploring
there seems to exist a relationship, whether wider societal trends related to immigration
weak or strong, between immigration and patterns.
criminal offences, although linking migrant
labour, registered or otherwise, with increased Nonetheless, the federal government remains
levels of crime may be far-fetched at best. For committed to lowering crime rates as well as
example, despite the slight increase by almost increasing the personal safety perceptions
3% in the number of registered foreign workers and public confidence in law enforcement
to 2,135,035, all crime data involving non- agencies with the following 11MP targets: 5%
citizens showed a remarkable drop in 2015. reduction annually in crime index and 60%
hike in perceptions of personal safety.
In the absence of comparative data on
crimes committed by citizens and non- Without adequate data series, it was rather
citizens, it would be a fallacy to conclude that arduous to link the increase in the number of
immigrants pose a bigger threat to national foreign workers with the rise in subsidy sums in
security and public safety, although claiming a more statistically proper manner, although
immigrants are totally blameless in worsening intuitively, it can be safely deduced that the
overall crime statistics is far from the truth, too. relationship exists since foreign workers form a
Since the findings of some studies overseas sizeable domestic consumer base, which will
suggest that people born abroad are less be discussed further in Section 4.9.
Table 4.27: Subsidies for selected consumer goods (controlled items)
Consumer Goods Period Total Subsidy Amount Annual Average

Sugar 2009–2013 RM2.04 billion RM0.34 billion
Cooking Oil 2008–2015 RM8.18 billion RM1.0225 billion
Flour 2008–2015 RM1.25 billion RM0.15625 billion
LPG 2000–2014 RM20.89 billion RM1.39267 billion
Diesel 2000–2014 RM74.04 billion RM4.936 billion
Petrol 2000–2014 RM61.83 billion RM4.122 billion
Source: Written reply to a parliamentary question on 9 March 2017
Table 4.28: Selected statistics on patients and fee collection at MOH clinics and hospitals
2003 2015
Total inpatients and outpatients at 32.7 million 62.6 million
MOH facilities
• Number of inpatients at MOH 1.7 million 2.5 million
hospitals
• Number of outpatients at MOH 30.9 million 58.9 million
clinics and hospitals
Collection of medical treatment fees RM94,132,845.11* RM353,846,985.24
Source: Written reply to a parliamentary question on 8 November 2016
Note: * denotes 2000 as the base year
58
While the number of people getting treatment On top of that, potential sufferers or carriers
at MOH’s healthcare facilities continued to among undocumented immigrants whose
rise between 2003 and 2015 as demonstrated medical certificates issued in their countries
in Table 4.28, the share of non-citizen patients of origin are mostly falsified and unreliable
out of the total paying visits to MOH’s but subsequently slip through the cracks vis-
healthcare facilities has remained surprisingly à-vis the mandatory health screening tests.
negligible at only 2% during the same period. However, the fault lies more in the irresponsible
Although in terms of the number of patients, and profit-oriented agents and middlemen
non-citizens do not seem to exert substantial than the undocumented migrant workers
pressure on healthcare and medical facilities who are usually uneducated and naïve.
and services, especially at government clinics
and hospitals, any record on uncollected In a written reply to a parliamentary question
bills from them has not been made publicly in November 2016, MOH identified seven types
available. of viruses that made an appearance for the
first time or re-emerged (generally thought of
No doubt, globalisation and the resulting having been eradicated previously), namely
free movements of information, goods and SARS-COV, Chikungunya (Asian genotype
services, capital and particularly people strain), Chikungunya (Central/East African
could bring about much easier and faster genotype strain), Influenza A pdm 09, Avian
migration of dangerous, contagious and even Influenza H7N9, MERS-COV and Zika between
fatal diseases as well. A slew of news reports 2000 and 2016. This was done without
in recent years have warned of increasing specifying the extent of resources - namely
incidences of communicable diseases such public funds and civil servants deployed to
as TB, malaria, dengue fever, leprosy, cholera fight new strains and/or re-emerged diseases
and typhoid. Some of these infectious - or whether foreign workers have been
diseases, TB in particular, were previously identified as the primary vectors. Nonetheless,
thought to have been under control. this CBA study was unable to get hold of
any research conducted to prove that the
The Foreign Workers Medical Examination emergence of new strains of still prevalent
Monitoring Agency (FOMEMA), a private diseases and the re-emergence of previously
company owned by Khazanah Malaysia eradicated diseases in Malaysia could be
Berhad, tasked to screen and check the linked to the influx of migrant workers.
health status of all registered foreign workers in
Malaysia, revealed in early January 2016 that To conclusively shake off Malaysia’s cheap
about 10% of those who undergo the medical foreign labour addiction and transform it into
screenings and examinations are infected a knowledge-based and productivity-driven
with transmissible diseases, the most prevalent economy, the country must make clear-cut
ones being TB, Hepatitis B and even HIV/ changes to some areas of its immigration
AIDS. Taking into account FOMEMA’s data and human resource policies. This includes
of 1.2 million registered foreign workers on minimising new inflows of foreign workers,
average in Malaysia who undergo its health especially unskilled and low skilled, while
screening tests every year, Malaysians are allowing existing undocumented foreign
indeed exposed to higher risks of contracting workers and refugees to register with the
these infectious diseases, with at least 120,000 relevant authorities and legalise themselves
sufferers or carriers living among us. at reasonable costs; shifting immigration
59
Table 4.29: Annual averages for selected public transportation data for 2000–2015
Number of Users Maintenance, Upgrade and

Replacement Expenditure
Bus Services (Peninsular Malaysia) 250.8 million^ RM141.82 million^
Rail-based Transportation Services 37.3 million RM387.85 million^
Air Transportation Services 52.3 million N/A
Sources: Suruhanjaya Pengangkutan Awam Darat (SPAD), airport and STOLport operator(s) as derived from a written reply to a
parliamentary question on 20 October 2016
Note: ^ denotes a period from 2012 to 2015
focus towards high-skilled workers and Between 2010 and 2015, Malaysia’s annual
exceptional talents; introducing fixed growth rates on average for the supply of
contracts for documented foreign workers; properties in three main segments ranged as
and strengthening labour rights of foreign follows:
workers, including the rights to guaranteed a. Residential properties - 1.2% to 9.2%
social safety nets, adequate worker facilities b. Commercial properties - 1.6% to 13.6%
and amenities, and participation in trade c. Industrial properties - 0.0% to 9.4%
unions (which will result in higher wages for
foreign workers, dampening further demand With the full adoption or a very high usage (with
for them among employers). a minimum score of 70) of IBS components and
elements within the property development
4.7 Enabling Property Ownership and market, especially the residential segment, IBS
Keeping Property Prices in Check can be counted on to:
a. Ensure an adequate supply of houses,
The manifest relentless rise in house prices has especially social and affordable
been identified as one of the main causes of homes, due to an accelerated build
escalation in costs of living in Malaysia, notably rate of cost-effective housing schemes
in urban areas. This upward house outpricing on a very large scale that should more
can be tackled by ensuring an adequate than meet the ever-increasing housing
supply of quality and comfortable homes demand
at price ranges that are within the reach of b. Put a lid on property prices, the
the majority of Malaysians, both in rural and residential segment in particular, as IBS
urban areas, or in other words, development helps to reduce the overall construction
of more affordable and low-to-medium cost costs, especially wages of site workers
(but not substandard quality) dwellings, both and building materials
high-rise and landed. c. Enable the democratisation of housing
by narrowing the affordability gap34
Equipped with resource-efficient, cost-saving and ensuring increased accessibility
and productivity-enhancing technologies to ownership of all types of properties,
and techniques, IBS can be relied upon to especially residential and commercial,
increase the speed of construction and scale
of delivery of houses, especially affordable
housing, at reasonable costs. The extent of 34
Defined by MGI as the difference between the cost
impact would be even greater should all of an acceptable standard housing, which may vary by
private-sector builders, real estate developers location and what buyers, households in particular, can
and contractors adopt IBS in a big way. afford to pay using no more than 30% of income.
60
Table 4.30: Annual growth of the Malaysian House Price Index (MHPI) (2000=100) and its
selected components
Year MHPI Type of Residential Properties Selected States
(2000=10)
Terraced Semi- Detached High-rise Kuala Selangor Johor Penang Negeri Perak
Detached Unit Lumpur Sembilan
2000 6.0 6.7 6.3 5.3 1.9 10.6 5.9 11.1 2.2 6.3 4.1
2001 1.1 0.0 2.6 4.6 2.8 1.6 3.5 -12.3 2.9 4.2 6.0
2002 2.5 4.7 -0.6 0.8 -5.9 5.5 2.1 -4.1 -0.3 4.7 6.8
2003 4.0 2.9 4.0 1.3 15.1 0.9 2.8 2.1 12.6 2.3 4.6
2004 4.8 3.7 9.1 8.7 1.5 6.5 5.2 1.9 3.0 1.7 5.1
2005 2.4 2.1 3.5 4.1 1.0 6.5 0.7 -0.2 3.9 3.4 1.5
2006 1.9 1.6 1.3 6.1 1.2 5.3 0.3 0.7 1.9 0.9 3.6
2007 5.3 3.9 7.2 7.2 2.9 7.9 3.2 3.1 4.7 5.1 3.9
2008 4.7 4.9 4.1 6.3 2.4 4.4 4.6 -0.1 6.1 3.8 6.5
2009 1.5 2.0 2.1 -2.3 1.4 -2.5 -0.9 5.5 4.0 0.5 0.6
2010 6.7 6.5 7.6 7.4 6.2 12.2 9.0 2.7 3.5 3.8 5.1
2011 9.9 10.6 9.0 5.2 11.1 12.2 11.3 7.0 8.9 12.6 10.6
2012 11.8 11.1 9.2 11.8 21.4 11.1 16.4 8.5 12.0 6.8 10.7
2013 11.6 10.0 12.2 16.4 17.3 15.6 6.7 22.7 15.6 6.9 6.9
2014 9.4 10.9 7.5 7.5 10.7 10.4 9.7 13.1 13.3 11.8 10.6
2015 7.4 6.2 2.2 8.8 2.2 7.4 8.1 5.5 7.6 5.9 6.4
Source: NAPIC, BNM
among Malaysians whether for self- customers by 40%–50% and reduce total
occupancy/own usage or investment construction costs by 30%. The construction
purposes, as a result of adequate supply timeline compression should help raise the
of quality properties at reasonable rate of returns on a development project or
prices allow the developer(s) to sell a housing unit at
a lower price point. Examples in the MGI study
An October 2014 report by MGI, A Blueprint indicated that selling prices can be reduced
for Addressing the Global Affordable Housing by as much as 8% owing to cost savings
Challenge, argued that a concerted use of generated by a 40%–50% shorter construction
four largely market-oriented approaches - period.
namely lowering the costs of land (acquisition
at the right price, time and location), Unfortunately, despite already enjoying one
construction, operations and maintenance of the lowest construction costs in the world,
(or increased efficiencies), and financing (for in the face of fierce competition, Malaysian
buyers and developers) - could reduce the property developers and contractors seem
costs of affordable housing by 20%–50% and to have an undying passion for the low-cost
substantially narrow the global affordable business model in securing contracts in order
housing gap by 2025, a welcome news for to preserve profits as they are accustomed
households earning 50%–80% of median to plump profit margins, resulting in poor
income. quality buildings that may reflect attempts
to cut corners and an addiction to cheap
MGI also estimated that the combination foreign labour. Only through technology-
of productivity-enhancing and less-labour driven and less-labour intensive IBS as well as
intensive industrial construction techniques, continued mechanisation and automation
value engineering and efficient procurement will the Malaysian construction sector be
methods - characteristics that IBS represents able to constantly bring down costs without
- could shorten the delivery time to end- compromising quality and goodwill.
61
Table 4.31: Annual average growth rate for supply of properties by property
types and states 2010–2015
Average Growth Rate

States Residential Commercial Industrial
FT Kuala Lumpur 2.0 3.1 0.1
FT Putrajaya 9.2 13.6 0.0
FT Labuan 1.5 1.6 0.1
Selangor 2.0 3.7 2.0
Johor 1.6 1.7 1.3
Penang 2.6 1.7 0.9
Perak 2.2 3.5 2.2
Negeri Sembilan 1.2 2.0 3.1
Melaka 1.9 2.9 9.4
Kedah 1.9 1.8 3.4
Pahang 2.5 3.4 4.4
Terengganu 4.5 5.9 2.6
Kelantan 2.5 2.6 2.9
Perlis 2.8 3.5 5.5
Sabah 3.6 2.4 5.6
Sarawak 2.6 3.1 5.2
Source: Written reply to a parliamentary question on 23 May 2016
Table 4.32: Selected housing statistics
Number of Housing Units Approved Levels of Malaysian House Price Index

by KPKT in Peninsular Malaysia (2000=100)
2010 120,801 140.7
2011 159,653 154.6
2012 235,249 172.8
2013 177,568 192.9
2014 185,021 211.0
2015 138,279 226.7
Source: KPKT, NAPIC, BNM
62
Figure 4.7: Banking system’s top 10 categories of year-end outstanding loans (RM million)
1,600,000.0
1,400,000.0
1,200,000.0
1,000,000.0
800,000.0
600,000.0
400,000.0
200,000.0
0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Syndicated Loans Personal Loans Overdraft Trade Bills
Other Loans Foreign Currency Loans Revolving Credit Hire Purchase
Housing Loans Other Term Loans Total
Source: BNM
63
Box Article 2: Adapted from pages 96 and 97 from A Blueprint for Addressing the Global
Affordable Housing Challenge
The Government’s Critical Role in Ensuring IBS Adoption
Governments can help accelerate the use quality of these homes. The government
of industrial approaches to construction can play a role in supporting the housing
and make them practical and available industry in educating consumers and
for affordable housing with the following encouraging acceptance. This can be done
ways: through mechanisms such as government-
enabled certifications, quality assurance
1. Enabling scale. To help provide the programmes, consumer incentives and
scale that industrial techniques require, technical assistance programmes for
governments can work with the private builders.
sector to generate construction volumes
- through public-private developments, 4. Reducing financing risks. Governments
incentives for private development on large can play a large role in the financing ability
land parcels and other initiatives. It can also of construction companies. Lower financing
help create demand within specific areas costs or increased access to financing
to achieve the minimum scale required for pools can influence the risk appetite
capital investments in fabricating plants. of construction companies to invest in
Lastly, government schemes that reduce industrial scale construction methods.
end-user financing costs, enhance the
creditworthiness of targeted population 5. Standardising building codes. There
segments, or reduce search costs also act are many examples around the world where
as demand enablers. building codes vary considerably across
the country, regions and provinces, and
2. Pooling volume. For specific building sometimes even within cities. If governments
materials that can be standardised across would make the effort to promulgate uniform
vendors, governments can play a role building codes across cities, provinces or even
in pooling volume and allowing multiple across the entire country, the standardisation
developers and contractors to benefit from would help enable the growth of industrial
frame contracts for purchasing specific construction approaches.
building materials. Such volume contracts
can provide an option for procurement 6. Supporting innovation. Given the
of building materials at cheaper costs. limited innovation and knowledge sharing
The procurement efficiency initiative for within the construction sector, governments
affordable housing in the United Kingdom can play a key role in encouraging and
is an example of such an initiative. incubating innovation. This could be
through support in terms of innovation
3. Shaping consumer acceptance. for lower-cost building materials for the
Factory-produced houses still carry a stigma sector, housing technology incubators
in many markets. This negative perception and innovation centers set up through
is driven by lack of knowledge about the government support.
64
7. Improving competition and industry procurement programmes and ease the
structure. In many countries, the government rules for foreign players to enter the market
may need to improve the structure of and tie up with local developers. This will
fragmented construction and real estate enable both capacity and capability
industries so that they can take on affordable building in the market and accelerate
housing development. It can do so in a the introduction of new technologies
variety of ways. For example, governments and approaches. Governments can also
can encourage participation of smaller improve leasing companies’ access to
players in tenders for public projects so that funding and support the development of
these firms can build capacity over time specialised leasing companies to provide
and help open up competition to more machinery and equipment to affordable
players. It can also support participation housing developers.
by international developers in public
Source: McKinsey Global Institute
4.8 Occupational Destruction Triggers Not only could these negative effects prove
Income Loss and Unemployment to be rather modest and temporary, they are,
in fact, bearable adjustments that need to
With full IBS adoption, ‘destruction’ of certain be accepted as the transition price in order
3D (dirty, dangerous and demeaning/ to modernise and upgrade the construction
demanding/difficult), manual, low-skilled and sector and its workforce. Indeed, the average
low-paying jobs at construction sites - such survey findings for the purpose of this CBA study
as labourers or general workers for carpentry, would suggest that the destruction of certain
concreting, bar bending, welding, ironworking, types of occupations due to full IBS adoption
steel fixing, conventional formwork, bricklaying could eventually, on a net basis, result in:
and plastering, and to a certain extent, menial a. A 15% increase in income for
work at IBS factories - for Malaysians and Malaysians, but a 50% plunge in
foreigners alike could result in: income for foreign workers
a. A short-term loss of sources of income for b. A 10% increase in employment
existing workers, citizens and foreigners opportunities for Malaysians, but a 15%
alike as well as subcontractors involved decline for non-citizens
in CBM activities
b. A possible slight uptick to the job- To be fair, many labour-related issues are
loss data and unemployment rate in not specific to the construction sector alone.
Malaysia due to disruptions to the CBM The share of skilled workers out of the total
supply chain workforce has declined in many industries,
c. Transitory cost hikes for builders, real although the situation is more dire in the
estate developers and contractors construction sector as employers, mostly
if IBS manufacturers indiscriminately operating on a low-cost model, are not
incorporate all costs involved in factory- willing to pay more for higher skills to ensure
produced building components and quality, preferring instead to resort to a readily
elements into their pricing structure available pool of low-skilled but easily trained
following a halt to unjustified cheap and underpaid foreign workers for profit
labour maximisation.
65
Table 4.33: Malaysia’s principal labour statistics
Year Number (‘000) Percentage (%)
Labour Employed Working Unemployed Outside Labour Unemployment

Force Persons Less than Labour Force Rate
30 Hours Force Participation
Rate
2001 9,699.4 9,357.0 525.0 342.4 5,239.9 64.9 3.5
2002 9,886.2 9,542.6 516.7 343.5 5,473.8 64.4 3.5
2003 10,239.6 9,869.7 529.0 369.8 5,458.6 65.2 3.6
2004 10,346.2 9,979.5 599.3 366.6 5,730.5 64.4 3.5
2005 10,413.4 10,045.4 484.4 368.1 6,048.2 63.3 3.5
2006 10,628.9 10,275.4 471.9 353.6 6,205.1 63.1 3.3
2007 10,889.5 10,538.1 511.3 351.4 6,330.1 63.2 3.2
2008 11,028.1 10,659.6 470.7 368.5 6,575.7 62.6 3.3
2009 11,315.3 10,897.3 478.7 418.0 6,665.7 62.9 3.7
2010 12,303.9 11,899.5 503.0 404.4 7,023.0 63.7 3.3
2011 12,740.7 12,351.5 520.6 389.2 7,023.3 64.5 3.1
2012 13,221.7 12,820.5 589.3 401.2 6,927.4 65.6 3.0
2013 13,980.5 13,545.4 645.8 435.1 6,781.2 67.3 3.1
2014 14,263.6 13,852.6 534.8 411.1 6,821.0 67.6 2.9
2015 14,518.0 14,067.7 580.3 450.3 6,869.9 67.9 3.1
Source: DOSM, EPU
Malaysia’s immigration policies, which favour more and more by computerisation,

mostly low-skilled and cheap labour for most digitalisation and robotisation, a 2016 joint
3D jobs, are partly to blame for this foreign study conducted by the Oxford University and
hiring tendency in many sectors, especially the Oxford Martin School predicted up to 47%
construction. Malaysians themselves, even of jobs will disappear in the US within the next 25
low-skilled or with little work experience, years, while PricewaterhouseCoopers (PwC) in
seem to avoid the sector. The long-standing a 2017 study foresaw British jobs to be fewer by
unattractiveness of construction jobs has a lot 30% and the US to shed jobs by 38% by 2030s.
to do with the underlying societal mentality,
perceived limited construction career An MGI report from January 2017 entitled A
prospects and the cyclical nature of the sector. Future That Works: Automation, Employment
and Productivity suggests that about half
As a result, construction players have no choice of the existing jobs in the world are to be
but to turn to cheap foreign labour despite their automated by 2055, especially the physical
serious lack of skills. Subsequently, the already ones in highly structured and predictable
low wage levels of Malaysia’s construction environments as well as in data collection
sector are further depressed by this low-pay and processing, equivalent to almost USD15
foreign worker glut, making the sector even less trillion in lost wages. This automation, thanks
attractive to Malaysians, especially those with to technological change and emergence of
better skills and more experience, creating a high-tech and digital disruptors, could boost
vicious cycle. annual global productivity growth by 0.8% to
1.4% while causing huge implications for the
Regarding job destructions due to labour market worldwide.
mechanisation and automation, characterised
66
Table 4.34: Job creations by sectors under 10MP and 11MP
10MP 11MP
(Estimated) (Forecasted)
Number of Percentage Number of Percentage

Jobs (‘000) of Total (%) Jobs (‘000) of Total (%)
Agriculture, Forestry, Farming 11.2 0.6 -5.2 -0.3
and Fishing
Mining and Quarrying -0.8 -0.0 1.0 0.1
Manufacturing 430.7 23.6 318.6 21.1
Construction 77.9 4.3 40.1 2.7
Services 1,303.9 71.5 1,156.1 76.5
Total Employment 1,822.9 28.5 1,510.6 23.5
Source: Appendix A5-2, 11MP
Table 4.35: Selected construction-related labour market statistics
Year Number of Employees in Salaries and Wages Paid to Construction

Construction Sector ('000) Workers (RM'000)
2001 829.8 N/A
2002 905.1 9,108,167
2003 942.5 N/A
2004 890.8 9,284,764
2005 904.4 10,867,665
2006 908.9 N/A
2007 922.5 12,956,935
2008 998.0 N/A
2009 1,015.9 13,966,992
2010 1,082.7 19,841,387
2011 1,151.5 N/A
2012 1,174.7 22,433,961
2013 1,292.1 25,323,614
2014 1,277.7 N/A
2015 1,309.9 N/A
Source: DOSM, BNM, EPU
67
If the workforce shifts from agriculture to achieve the 11MP’s goal of capping the share
industrialisation in the developed world in of foreign workers out of the total labour force
the 20th century are of any guide, increased to 15% across the board by 2020.
automation and mechanisation should not
result in long-term mass unemployment. 4.9 Less Foreign Labour Equals Lower
While around 70%–80% of existing traditional Private Consumption
jobs, especially low-skilled, cheap and blue-
collar jobs may disappear over the next 20 The presence of fewer foreign workers in
years, many new-age occupations can be Malaysia due to less labour requirements in
expected as replacement. The global job all sectors in general and the construction
market will transform itself and adapt in time, sector in particular is not without adverse
while people displaced by mechanisation ramifications for the Malaysian economy.
and automation will find employment in Substantial impact would be felt on consumer
these new types of jobs, provided that spending or private consumption as millions
people change in tandem and learn to work of migrant workers form a considerably
alongside machines. significant base of consumers in Malaysia.
In nominal terms, private consumption as a
Indeed, the debate surrounding the centuries- share of GDP has been on a steady uptrend,
old battle between man and machines has from 48.1% in 2010 to 54.1% in 2015.
been too skewed towards the job-destroying
effects of technological revolution without Consider the following assumptions and
fully appreciating the gains in terms of calculate vis-à-vis the 2015 levels:
productivity, household incomes, spending a. A 3.12% increase in total labour force,
power, price declines for many items and which represents a 20-year average
even personal leisure time, which create new growth during the 1996–2015 period
demand and needs, new industries and new b. More conservative reduction in the
types of jobs. A study by Deloitte UK on census number of registered foreign workers
results for England and Wales from 1871 by 1%, 2% and 3% until the share of
through 2014 revealed that technology has foreign workers out of the total labour
been a ’great job-creating machine’, owing force is down to around 13%, only
to labour switching to futuristic industries of about 2 percentage points better than
the time or era. the 11MP’s target of 15% by 2020, while
anything beyond, namely the 4% and
Eventually, as observed in many developed 5% reductions, represent stress test or
countries, high labour costs would compel the stretch goal situations
construction sector towards more productive
and cost-effective construction methods As a result, the hypothetical amount of
such as IBS being increasingly mechanised, private consumption in nominal terms could
automated, technology-oriented and less- turn out as in Table 4.37. Taking the results that
labour intensive. The challenges are to lure correspond the closest to the 11MP’s target
skilled local workers back into the construction of keeping the share of foreign workers out of
sector while preventing intersectoral migration labour force at 15% by 2020, a hypothetical
of foreign labour from construction activities reduction of 1% to the number of registered
to other sectors, in particular agriculture, foreign workers against 2015 levels would
manufacturing and services, which could translate into a RM75.041 billion decline in the
negate much of Malaysia’s push to reduce nominal private consumption amount.
overdependence on migrant workers and
68
Table 4.36: Selected annual statistics on population, foreign workers and
national accounts (in nominal terms)
Year No. of Registered Mid-Year Private Consumption GDP

Foreign Workers Population (RM million) (RM million)
2010 1,817,871 28,589,000 395,245 821,434
2011 1,573,061 29,062,000 437,340 911,733
2012 1,571,589 29,510,000 482,238 971,252
2013 2,250,322 30,214,000 527,749 1,018,614
2014 2,073,414 30,598,000 579,985 1,106,466
2015 2,135,035 30,996,000 626,239 1,157,139
Source: DOSM, BNM
Table 4.37: Predicted amount of nominal private consumption (RM’000) vs. 2015 levels
(negative impact)
-1% -2% -3% -4% -5%

Labour Force 14,970,962 15,438,056 15,919,723 16,416,419 16,928,611
(million) at
+3.12%
Number 2,113,685 2,092,334 2,070,984 2,049,634 2,008,000
of Foreign
Workers
Share of 14.12 13.55 13.01 12.49 11.86
Foreign
Workers out
of Labour
Force (%)
Private 551,197.84 546,822.31 542,446.78 538,071.25 529,538.96
Consumption
Amount
(RM million)
Variance 75,041.16 79,416.69 83,792.22 88,167.75 96,700.04
(RM million)
Source: JSSB
4.10 Strengths-Shortcomings Balance for the 2009–2010 period at 219.5% and the
2012–2013 period at 40.1%).
IBS facilitates the emergence of new sub-
sectors and/or expands existing ones as the IBS provides many spillover effects to the
industry cuts across all five major economic Malaysian economy through the creation
sectors. While the value of the IBS industry as of new sub-sectors and/or the expansion of
a whole in Malaysia is unable to be estimated existing sub-sectors, industries and clusters,
at present in the absence of relevant data apart from the generation of new business
sets for other IBS segments, the size of the opportunities. With IBS, the economy should
manufacturing segment of IBS materials observe the creation of new types of
and components (demand approach) is occupations, both generalists and specialists,
estimated to be worth RM25.0484 billion in as well as higher sophistication of existing jobs.
2016 based on the assumption of 129.8% as During the 11MP period, the number of skilled
the CAGR for expenditure on IBS materials workers is projected to increase by 6.8% on
and components (the average growth rates average (10MP: +3.1%), 0.9% for semi-skilled
69
workers (10MP: +3.2%) and -6.2% for low-skilled addition, IBS-related services - in particular
workers (10MP: +0.5%). This will also lead to the transfer of knowledge, skills, expertise and
rise in household incomes and consumer technology via training, skills development,
spending in tandem. consultancy, advisory and other educational
services - command high export potential.
Indeed, reduction in low-skilled migrant All other things being equal (ceteris paribus),
workers is expected to deepen the pool assuming a more aggressive impact on
of knowledge-intensive and skilled labour merchandise export outlook - whereby IBS
in Malaysia, a booster for higher salaries brings about a 5%, 10%, 15% or 20% increase
and wages among Malaysians. Being to Malaysia’s combined export amount
the main source of Malaysian household (machinery, equipment and parts, other
income, a steady uptrend in salaries and manufactures and transport equipment)
wages would undoubtedly provide a fillip against the 2016 level of RM70.8473 billion -
to consumer spending. The assumption of total exports of manufactured goods could
only a 1% reduction in foreign workers, which increase by as much as RM14.1695 billion.
corresponds the closest to the 11MP’s target
of keeping the share of foreign workers out Much in sync with the CITP’s target in its
of labour force at 15%, would translate into Productivity Strategic Thrust to raise the
a hypothetical increase by RM18.979 billion construction sector’s productivity levels by 2.5
to the nominal private consumption amount. times to USD16,500 per worker matched by
However, on the flip side of the coin, having higher wages by 2020, IBS has been targeted
formed a sizeable consumer base in Malaysia, as an important productivity stimulant for the
an exodus of registered foreign workers could construction sector. In line with one of the
leave a vacuum in private consumption, 11MP’s goals, namely capping the share of
potentially causing a RM75.041 billion decline. foreign workers out of the total labour force
to 15% across the board by 2020, widespread
In general, SMEs in any segment of the IBS IBS adoption could be one of the catalysts in
industry should be encouraged to forge lowering the amount of annual remittances
consortia or other forms of collaboration with by as much as RM14.535 billion.
their counterparts in Malaysia or abroad to
pool resources, expertise and technology Full or significantly high IBS adoption with
in order to increase their overall potential. a minimum score of 70, notably within the
Streamlining Bumiputera SMEs into certain residential property development market,
areas of promoted IBS segments within its could:
entire value and supply chain, mimicking a. Ensure an adequate supply of houses,
the CITP’s recommendation for Bumiputera especially social and affordable homes
construction contractors, could enable b. Keep property prices in check,
the creation of niche clusters within the IBS especially the residential segment
industry. c. Narrow the affordability gap and ensure
increased accessibility to ownership
Consistent with the CITP’s Internationalisation among Malaysians of all types of
Strategic Thrust, exports of semi-finished inputs, properties, especially residential and
finished IBS products, materials, components commercial
and elements, and machineries and
equipment for use by the IBS industry are likely
to lead the charge once new IBS segments
emerge and/or existing ones sub-divide. In
70
CHAPTER 5: PUBLIC ADMINISTRATION AND
GOVERNANCE PERSPECTIVES
This chapter deals with the potential Governance, as described by the Worldwide
fiscal, good governance, geopolitical and Governance Indicators (WGI), a project of
diplomatic repercussions as a result of the World Bank Group (WBG), consists of
nationwide IBS adoption. Sections 5.1 to 5.5 traditional institutions by which the authority
aim to flag up the strengths and opportunities in a country is exercised, which includes the
of full IBS implementation, while Sections 5.6 process by which governments are selected,
through 5.8 seek to demonstrate what could monitored and replaced; the capacity of the
be shortcomings and risks engendered by government to effectively implement sound
such an agenda. policies; and the respect of citizens and the
state for the institutions that govern economic
5.1 IBS Upholds Good Governance and social interactions among them.
Good governance35, an indeterminate term Produced by Daniel Kaufmann of the Natural

commonly used to describe how public Resource Governance Institute and the
institutions conduct public affairs and manage Brookings Institution and Aart Kraay of the
public resources, can actually apply to various World Bank Development Research Group,
domains such as international relations, public these WGIs represent a set of aggregate and
sector (especially the government), socio- individual governance indicators for over 200
politics, corporate or business, private sector countries and territories over the 1996–2015
and voluntary organisations (including civil period for the six dimensions36 of governance,
society) at the global, national and local levels. namely voice and accountability, political
To promote good governance, reforms should stability and absence of violence, government
be undertaken within three major categories of effectiveness, regulatory quality, rule of law
institutions, namely the public sector, especially and control of corruption.
the government, including its agencies, statutory
bodies, subsidiary and associate companies; the Although interpretations of good
private sector; and civil society. governance may vary to a great extent
in different jurisdictions, organisations and
While the International Monetary Fund (IMF) contexts, inculcating and adhering to good
declared in 1996 that 'promoting good governance principles such as competency,
governance in all its aspects, including by
ensuring the rule of law, improving the 35
Governance is the process of interactions and decision-
efficiency and accountability of the public making among the actors involved in the public sector,
sector, and tackling corruption, as essential private sector, business and civil society spaces, through
elements of a framework within which which leadership and authority are exercised and by
economies can prosper', the United Nations which decisions made are implemented (or not).
36
These dimensions were derived based on 31 underlying
(UN) outlined eight characteristics of good
data sources produced by a variety of survey institutes,
governance, namely consensus orientation,
think tanks, NGOs, international organisations and
participation, rule of law, effectiveness and private-sector firms combining worldwide governance
efficiency, accountability, transparency, perceptions and expert assessments from survey
responsiveness, and equitability and respondents among a large number of companies,
inclusiveness. citizens and subject matter experts.
71
transparency, accountability and integrity, governance in Malaysia or vice versa would
especially in the conduct of public office require an entirely new study.
holders, management of public funds,
government procurement contracts and Still, with IBS, everything from planning and
concessions have been proven to contribute budgeting, management and decision
to a great extent towards, among others: making to monitoring and disclosures will be
a. Ensuring ethical, responsible and scientific, evidence based and fact driven.
sustainable management and decision Given its emphasis on the respect for rule of
making while encouraging other law, IBS adoption can be expected to be an
positive behaviours impetus for Malaysia to have an adequately
b. Arriving at well-informed (and arguably designed and developed regulatory and
better) decisions supervisory environment.
c. The best outcomes for the greater
good, equipped with oversight, control One of the CITP recommendations of
and monitoring mechanisms separating the IBS procurement from the main
d. Improving reputation and recognition contract will not only reduce the upfront costs
among the international/supranational to be assumed by contractors and remove
community, investors, customers, the a great deal of their financial burden but
community at large, the ecosystem will also effectively enhance transparency,
and other stakeholders accountability and integrity, especially in
e. Lowering the costs of accessing capital government contracts and concessions.
for the government, businesses and Given the high number of construction
people projects undertaken by Jabatan Kerja Raya
f. Restoring public trust and confidence in (JKR), it should provide leadership by piloting
political systems, public administration all government procurement contracts.
and institutions
g. Energising overall economic and 5.2 IBS Helps Reduce Wastage,
business vibrancy, sustainability and Leakage and Other Negative Elements
resilience
One major category of the benefits of abiding
Many studies with empirical evidence point by good governance principles is the potential
towards a strong correlation between of preventing, reducing and even eliminating
governance quality and successful economic any forms of abuse of power or responsibilities
development, particularly per capita income entrusted by the office or position held as
levels, although the question of causality well as misuse of funds and other resources,
remains whether governance components both in public and private sectors, all of
tend to enhance per capita income or vice which may be termed as mismanagement,
versa, higher per capita income increases misappropriation, mishandling, misconduct,
the demand for higher governance quality, misrepresentation, malfeasance and other
or perhaps the causality runs both ways. fraudulent activities.
Nonetheless, it is not within the scope of this
CBA study to determine the causality nor to IBS components and elements, which are
measure the impact of good governance pre-manufactured under a controlled
implementation on Malaysia’s economic and consistent environment, have to be
growth. On the same token, quantifying pre-ordered, i.e. designed, planned and
how IBS adoption influences the quality of measured according to the project and site
72
specifications prior to the commencement result of strategic misrepresentation of
of construction activities. As such, virtually the scope of budgets
all details, especially related to costs and b. Technical explanations as a result of
risks, are known well ahead. This should imperfect forecasting techniques and
go a long way in helping plug wastage, inadequate underlying data, among
leakage and other pervasive negative others
elements such as financial improprieties and c. Psychological explanations due to
irregularities, bid rigging, fraud, bribery, theft, over-optimism among forecasters or
graft, embezzlement, breach of trust, state number crunchers
capture and other corrupt practices and d. Escalation of commitments to a
scandals, notably in government procurement cause of action (the least explored
processes and procedures, and general possible cause), a theory grounded in
public administration. However, for public- social psychology and organisational
sector construction works and projects, the behaviour that suggests the tendency
following can contribute by way of: of people and organisations to
a. Significant cost savings and expenditure become locked-in in a particular
cutbacks for the government, for course of action, ever willing to splurge
example via reduction of VOs and/ just to make sure the venture succeeds
or additional rectification works, the
major causes of cost overruns that lead Wastage, leakage and corruption, whether
to over-budget situations, while petty or grand, could act as an additional
minimising recourse to labour, (regressive) tax on businesses, hence
especially low skilled increasing the cost of doing business or any
b. Reduction in construction period, transactions, which could lead to inefficient
hence less risks of losses, both financial use of resources, public and private. Since
and in-kind to be borne by the it has been established that these negative
government as the client elements may - (i) distort market and pricing
c. Elimination or at least minimisation of mechanisms, (ii) misallocate scarce resources
inexcusable delays, which are rampant and budget allocations, (iii) deter highly
in the conventional method of sought-after private investments, (iv) derail
construction economic growth, (v) bleed national coffers,
(vi) be a disincentive for taxpayers to pay
As opposed to cost escalation, a cost overrun taxes, (vii) perpetuate poverty and socio-
or cost increase entails unexpected costs economic inequalities, (viii) corrode public
incurred in excess of budgeted or planned trust, (ix) delegitimise the authorities, (x)
allocations due mostly to an underestimation undermine the rule of law and government’s
of actual costs during the budgeting process. basic functions, and (xi) cause civil strife,
The size of cost overruns may vary widely public unrest, violence and even political
depending on the point of reference in instability - they are not without implications
measuring them, including the difference for the public at large.
between costs at the time decision is made
and at final completion, and the difference Such additional costs are typically passed
between costs at contract award and at final on to consumers, one way or another, in
completion. There are four possible causes of particular if demand for the concerned
cost overruns: products or services is less sensitive to price
a. Political-economic explanations (the changes. Various studies conducted by PwC
most common cause historically) as a suggest that commodity-intensive industries
73
such as within the agriculture, mining and The same CITP recommendation mentioned
construction sectors, and to a certain extent in the previous section about decoupling IBS
some manufacturing clusters, are areas where procurement from the main contract provides
these negative elements could lurk. After all, a good illustration of how IBS can help address
demand for commodities in these industries leakage, wastage and other negative
is largely inelastic due to lack of alternatives, elements, especially in public administration.
either perfect substitutes or synthetics. As a client or project owner, JKR will handle
procurement of IBS components directly with
While it is both a demand and supply problem, IBS manufacturers/suppliers. With this type
corruption, defined at the broadest level of procurement policy, IBS manufacturers
as the 'misuse of office for unofficial ends' will submit detailed quotations directly to
or 'abuse of entrusted power for personal JKR, for instance, immediately eliminating
gains37' both in public and private sectors is any potential mark-up or overcharging by
not a developing world phenomenon alone, contractors. Overcharging is one of the
although its scale varies across countries. common forms of leakage and wastage of
Estimates for corrupt transactions annually public funds.
worldwide vary: USD1 trillion38 in global bribery
between the private and public sectors
(private firms and public officials/politicians
or MNCs and governments), according to
the World Bank Institute (WBI), the WBG’s
research arm; USD1.5–USD2 trillion39 in bribery
and public-sector corruption or roughly 2% of
the global GDP, according to the IMF; and
USD2.6 trillion40, equivalent to more than 5% of
the global GDP in worldwide corruption.
Due to its nature and definitional nuances,

37
Transparency International (TI)
it is almost impossible to measure the scale
38
The amount revealed in 2005 for actual bribes paid
and extent of corruption as well as assess its
worldwide in both industrial and developing countries
costs on the entire economy and ecosystem based on 2001-2002 worldwide surveys. Since it excludes
with high accuracy. Nonetheless, there is embezzlement of public funds, theft of public assets,
a number of in-depth and well-analysed, 'tainted procurement', among others, this amount
and substantiated statistics, especially represents only part of overall corruption transactions,
those compiled and published by TI such not covering all forms of corruption.
39
The amount was revealed in a May 2016 publication
as the annual Corruption Perceptions Index
entitled 'Corruption: Costs and Mitigating Strategies'
(CPI), the Global Corruption Barometer and
that may include an abuse of public office for private
the Bribe Payers Index as well as other less gains, tax evasion and arbitrary tax exemptions, among
internationally recognised such as the Global others, a 2015 extrapolation by Daniel Kaufmann based
Financial Integrity’s Report on Illicit Financial on his earlier estimate of USD1.1 trillion.
Flows and the Economist’s Crony-Capitalism 40
The amount is unverified but oft-cited by the WEF and
Index. Forbes.
74
Table 5.1: Various estimates of direct and indirect economic costs of corruption worldwide
No. Quotes Origins

1 Corruption is estimated to increase the Transparency International (TI); Page 4,
cost of achieving the UN Millennium 'The Anti-Corruption Catalyst: Realising
Development Goal on water and sanitation the MDGs by 2015'
by USD48 billion
2 Countries that score badly on the World Inferred from comparing the WBG’s
Bank’s Doing Business Indicators also score Doing Business Index 2010 against TI’s
badly on the Corruption Perceptions Index. Corruption Perceptions Index 2010
This suggests that highly corrupt countries
have difficulty attracting resources-
resources-business
3 Corruption adds 10% to the cost of doing Remark by the Secretary-General of the
business in countries, and up to 25% to the Organisation for Economic Coordination
cost of public contracts and Development (OECD) at the B20
Taskforce on Improving Transparency
and Anti-Corruption’s dinner; 10 October
2012
4 In 2012, the cost of private-sector corruption CSIS Project on Prosperity and
was estimated at over USD500 billion in 105 Development
developing countries, which only accounts
for 22% of the global GDP
5 International cartels have chalked J. M. Connor and C. G. Helmers; Page 2,
up aggregate sales of USD1.2 trillion 'Statistics on Modern Private International
and caused direct economic losses to Cartels 1990–2005' (November 2006)
consumers through overcharges of almost
USD500 billion
6 There is a 400% governance dividend Six Questions on the Cost of Corruption
of good governance and corruption With WBI’s Global Governance Director,
control: countries that improve on control Daniel Kaufmann
of corruption and rule of law can expect
on average, in the long run, a four-fold
increase in income per capita
7 Corruption constitutes a very substantial Six Questions on the Cost of Corruption
tax on investment. For instance, one study With the WBI’s Global Governance
on FDIs estimates that corruption is the Director, Daniel Kaufmann
equivalent of a 20% tax to foreign investors
8 64 million people were pushed into poverty World Bank; Page viii, 'Global Monitoring
by the economic crisis, which was in part Report: The MDGs After The Crisis'
caused by lax regulation, lack of financial
transparency and conflicts of interest
9 67% out of 144 economies surveyed by the WEF in its annual Executive Opinion
WEF identified corruption as one of the top Survey on the Top 5 barriers to
three challenges to conducting business in doing business; Page 33, 'Global
their country Competitiveness Report 2013'
10 In a survey of more than 1,000 executives, Ernst & Young; Page 5, '10th Global
almost one in five claimed to have lost Fraud Survey: Corruption or Compliance
resources-resources-business due to a – Weighing Costs' (2008)
competitor paying bribes
75
11 In a survey of more than 350 resources- Page 3, Control Risks, 'Facing Up to
resources-businesses worldwide, 35% of Corruption: A Practical Resources-
companies had been deterred from an Resources-Business Guide' (2007)
otherwise attractive investment because of
the host country’s reputation for corruption
12 More than a third of international resources- Simmons & Simmons; Page 10, Control
resources-business managers estimated Risk, 'Facing Up to Corruption: A Practical
corruption increases international project Business Guide' (2007)
costs by more than 10% while one-sixth
believed corruption inflates costs by more
than 25%
13 Countries weak in government US Aid; 'Promoting Accountability &
effectiveness, rule of law, and control of Transparency' (13 May 2013)
corruption have a 30% to 45% higher risk of
civil war
14 Based on a survey of 214 executives, 28% KPMG; Page 1, Global Anti-Bribery and
opted not to do resources-resources- Corruption Survey 2011
business in a country due to bribery and
corruption issues
15 75% of all those interviewed agree that Ernst & Young; 'European Fraud Survey
there is a commercial advantage to ethical 2011: Recovery and Integrity' (2011)
behaviour
16 More than half of the 70,000 people TI; Page 16, 'Global Corruption
interviewed in 69 countries for TI’s 2009 Barometer' (2009)
Global Corruption Barometer said they
were willing to pay more to buy from
corruption-free companies
Source: WBG, IMF, TI UK, Centre for Strategic and International Studies (CSIS), Malaysian Anti-Corruption Commission (MACC)
5.3 IBS Boosts Ease of Doing Business bureaucratic hurdles, including

simplification and even removal of
Improvement to public delivery system should ‘nice-to-have’ but unnecessary and
help raise ease of doing business in Malaysia obsolete regulatory, supervisory and
and enhance its long-term international legal requirements; minimising the
competitiveness – increasing its attractiveness number of relevant authorities at the
as an investment destination of choice federal, state and municipal levels for
among domestic and foreign investors alike, the construction sector in general and
in particular as a magnet for FDIs. Increased the IBS industry in particular
ease of doing business will help minimise b. Integration and automation of
opportunities for corrupt practices and all processes and procedures in
transactions as discussed at length in Section submitting and obtaining approval for
5.2. IBS-based construction permits such
as e-submission and e-approval for
Measures to encourage IBS adoption that substantial time and cost savings
would eventually contribute to the general c. One-stop registration and/or licensing
ease of doing business and eliminate costly of IBS players in all cross-sectoral
delays may include: segments (refer to Chapter 1, Section
a. Reduction in red tape and other 1.1 for further details on the five or
76
seven core segments of the IBS industry • Ensure greater nationwide uniformity in
based on object or economic activities, application of rules and regulations and
respectively) address issues arising from variations in
d. Establishment of a specific tribunal different states
as a recourse for disputes or appeals • Accelerate dispute resolutions at
related to the construction sector in reasonable costs that will significantly
general and the IBS industry in particular save time, money and effort
between regulators/supervisors and
industry players on a case-by-case Direct procurement of IBS components by
basis to: project owners or clients in one of the CITP
• Improve clarity and consistency in recommendations under the Productivity
interpretations of rules and regulations Strategic Thrust as discussed in Sections 5.1 and
in order to remove any ambiguity or 5.2 can also prove to be a good mechanism
potential related issues to raise long-term competitiveness of IBS
• Propose a review and a replacement component manufacturers and ensure
of rules and regulations considered demand predictability for IBS products,
archaic and no longer suitable for the components, techniques and elements.
21st century and beyond
Table 5.2: Key details of major global ease of doing business and
competitiveness-related indices
Name of Index Publishers or Definition(s) and Countries Measurement Metrics,

Producers Covered Assessment Parameters/
Criteria
Doing Business The World Ranking 190 economies 11 areas of the life of a
(DB) Bank Groupaccording to ease business: Starting a business,
(WBG) of doing business by dealing with construction
comparing them with one permits, getting electricity,
another and to ’distance registering property, getting
to frontier’ by sorting credit, protecting minority
the aggregate distance investors, paying taxes,
of each economy to trading across borders,
benchmark scores or enforcing contracts,
the best performance resolving insolvency and
observed on each labour market regulations
indicator with respect to
regulatory best practices
World International Benchmarking the 342 criteria are derived
Competitiveness Institute for performance of 62 from 4 principal categories
Yearbook (WCY) Management countries based on 342 of competitiveness
Development criteria measuring different factors, namely Economic
(IMD) facets of competitiveness Performance (83 criteria),
using two types of data: Government Efficiency
2/3 hard statistical data (73 criteria), Business
from national, regional and Efficiency (71 criteria) and
international organisations Infrastructure (115 criteria),
and 55 partner institutes broken down further into 20
worldwide, and 1/3 survey sub-categories of factors
data from almost 5,500
senior executives
77
Global World Assessing the 114 indicators that capture
Competitiveness Economic competitiveness concepts that matter for
Report (GCR) Forum (WEF) landscape (defined as the productivity and long-
set of institutions, policies
term prosperity, grouped
and factors that determine into 12 pillars, namely
the productivity levels of Institutions, Infrastructure,
an economy, which in turn Macroeconomic
sets the level of prosperityEnvironment, Health
that a country can and Primary Education,
achieve) of 138 economies Higher Education and
Training, Goods Market
Efficiency, Labour Market
Efficiency, Financial Market
Development, Technological
Readiness, Market Size,
Business Sophistication and
Innovation. These 12 pillars
are, in turn, organised into
3 sub-indexes that are
given different weights
in the calculation of the
overall index, depending on
each economy’s stage of
development, as proxied by
its GDP per capita and the
share of exports represented
by raw materials: Basic
Requirements, Efficiency
Enhancers, and Innovation
and Sophistication Factors
Business Economist Gauging the quality or A total of 91 indicators
Environment Intelligence attractiveness of the assessed by the EIU for
Rankings (BER) Unit (EIU), business environment in the last five years and the
part of The 82 countries between next five years contained
Economist 2009 and 2013 while in 10 separate criteria or
Group making projections for the categories, namely the
2014–2018 period, derived Political Environment,
mostly from national and Macroeconomic
international statistical Environment, Market
sources for the historical Opportunities, Policy
period (2009–2013) and towards Free Enterprise
from EIU’s assessments for and Competition, Policy
the forecast period (2014– towards Foreign Investment,
2018). Some indicators Foreign Trade and Exchange
are qualitative in nature, Controls, Taxes, Financing,
drawn from a range of Labour Market and
data sources and business Infrastructure. Each indicator
surveys adjusted by the EIU is scored on a scale of 1
for the 2009–2013 period (very bad for business) to 5
(very good for business)
78
Table 5.3: Performance of Malaysia vs. the top-ranked country on global ease of doing
business and competitiveness-related indices
Name of Most Recent Top-Ranked Country Malaysia

Index Year Country Score Ranking Score
DB June 2016 New Zealand 87.01 23 78.11
WCY 2016 Hong Kong 100 19 83.048
GCR 2016–2017 Switzerland 5.81 25 5.16
BER 2014 Singapore 8.65 19 7.56
Ultimately, the CITP under Quality, Safety and 5.4 IBS Contributes to the Nation’s
Professionalism, its first Strategic Thrust, targets Coffers
an improvement by 5 percentage points in the
World Bank’s ease of doing business indicator, A fully developed IBS industry across all its
especially when dealing with construction segments, in particular those found in the
permits41. Owing to various initiatives under manufacturing and services sectors, would
the 10MP, the following achievements in 2015 effectively give rise to an improved revenue
were observed: collection for the federal government,
a. A 59.5% reduction in the number of notably under the Tax Revenue category in
procedures to obtain construction both the Direct Taxes and Indirect Taxes sub-
permits, from 37 to 15 procedures categories.
b. A 37.5% reduction in the number of
business licensing types at the federal In the Direct Taxes sub-category, company
level, from 717 to 448 licences income and individual income taxes are
c. A 69.1% reduction in the number of the most likely to observe a significant jump,
business licensing types at the local on account of an increasing number of
authority level, from 1,455 to 449 licences sustainably profitable IBS-centric businesses
and an expanding pool of IBS professionals and
As an example, ICT services have contributed
talents with above-average compensation
towards improving the public delivery system.
packages. The Indirect Taxes sub-category,
To effectuate the Digital Government agenda,
on the other hand, will immensely benefit from
the Malaysian Administrative Modernisation
a greater intensity in consumer spending and
and Management Planning Unit (MAMPU)
transactions, an impetus for the Goods and
and various public-sector agencies have
Services Tax (GST) owing to higher household
accomplished three main categories of ICT
incomes, especially among those whose
initiatives, namely Infrastructure, Applications
family members are within the IBS workforce,
and Services. These ICT initiatives, especially
and higher export duties as a result of a
to consolidate and integrate a multitude of
successful export strategy for the IBS industry.
government services, have helped optimise
resource use and returns in terms of value
for money with cost savings estimated at 41
On page 66 in the CITP 2016-2020 publication, as per
around RM800 million in 2016. In total, some
the WBG’s DB Report 2015, a construction permit was
RM9.34 billion worth of savings have been reported to take more than 74 days to obtain in Kuala
generated from the implementation of value Lumpur, compared to 66 days in Hong Kong, 44 in United
management on 214 public-sector projects by Arab Emirates, 29 in South Korea and 26 in Singapore.
201542. 42
Page 9.4, 11MP
79
Figure 5.1: Major categories of the federal government’s revenue (RM million)
240,000
200,000
160,000
120,000
80,000
40,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Direct Taxes Indirect Taxes Non-Tax Revenue Non-Revenue Receipts
Source: MOF, BNM
Figure 5.2: The federal government’s direct taxes (RM million)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Company Income Tax Petroleum Income Tax

Individual Income Tax Stamp Duties Other Direct Taxes
Source: MOF, BNM
80
Figure 5.3: The federal government’s indirect taxes (RM million)
60,000
50,000
40,000
30,000
20,000
10,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Export Duties Import Duties Excise Duties
Goods and Services Tax Sales Tax Service Tax Other Indirect Taxes
Source: MOF, BNM
Figure 5.4: The federal government’s non-tax revenue (RM million)
60,000
50,000
40,000
30,000
20,000
10,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Licences and Permits

Petroleum Royalty Interests and Returns on Investments
Other Non-Tax Revenue
Source: MOF, BNM
81
Apart from the possibility of deepening the authorities to encourage all or selected
taxable income base vis-à-vis IBS-related groups of individuals and/or businesses to
businesses and their workforce under the spend on or invest in certain areas or pockets
Tax Revenue category, a new source of of the economy (e.g. priority economic
revenue could be in the offing for the federal activities, targeted goods or services and/
government in the form of specific registration or special geographical zones) by making it
and/or licensing fees. For instance, qualified easier for them to do so in a multidimensional
manufacturers of IBS components and approach - provision of a conducive and
elements as well as of machineries and facilitative environment; provision of various
equipment specific for IBS purposes may forms of assistance, support, reliefs and
be required to obtain specific licences or special treatment, including subsidies and
permits as a measure to control the quality of subventions; introduction of tax benefits;
IBS components and elements as well as of reduction of tax burdens and other liabilities,
machineries and equipment manufactured, among others, that may influence economic
not to mention as a quid pro quo for any tax behaviours and decisions.
and non-tax incentives granted.
The most common forms of tax incentives
While there were 207 IBS component include reduced company and/or personal
manufacturers as at end November 2016 and income tax rates; tax holidays (deduction of
8,131 IBS contractors (construction companies or exemption/exclusion from certain taxes
using IBS products and components in their for a limited period); investment credits or
construction works and projects), consider allowances; tax credit accounts; accelerated
this hypothetical scenario in the foreseeable depreciation of capital assets; favourable
future: Some 1,000 IBS component deductibility for certain types of expenditure;
manufacturers and 100 manufacturers special deductions or credits for reinvested
of various machineries and equipment profits; reduced rates of withholding tax on
specific for IBS purposes. Assuming RM15,000 remittances to home countries; reductions
and RM75,000 as the annual licensing in contributions to social security or pension
fees for IBS component manufacturers funds; reductions in sales and/or services taxes
and manufacturers of machineries and and/or GST/VAT; reduction in tariffs for export,
equipment, respectively, that would translate import, excise and/or customs duties; property
into a hypothetical annual revenue of RM22.5 tax-related reductions, other preferential tax
million (RM15 million + RM7.5 million) for the rates and treatment, deferral of tax liabilities;
federal government. This revenue item, which and creation of special economic zones.
has a direct relationship with the number
of businesses in operation and the fee level Besides tax considerations, economic
imposed, shall be reflected in the Licences decisions can also be influenced by non-tax
and Permits sub-category under the Non-Tax factors, also known as non-tax incentives,
Revenue category. including:
a. All aspects related to the operating
5.5 IBS Drives Harmonisation of environment such as the general
Incentives macroeconomic policy framework
in place; taxation system and foreign
Incentives, either tax (fiscal) or non-tax (non- exchange rules and regulations;
fiscal) can be defined as any enticement political stability; public administration
or attractive feature with a validity period with good governance; financial, legal,
offered by the government and/or relevant regulatory, supervisory and institutional
82
underpinnings and infrastructure; and Given today’s increased mobility of capital,
dispute resolution mechanisms, among labour, goods and services amidst increasing
others trade and investment liberalisation, no country
b. Accessibility to reasonably priced can design the taxation regime and dole
funding sources out tax and non-tax incentives in isolation,
c. Depth and breadth of the labour force hence the importance of keeping in step with
or availability of skilled workforce at international standards and best practices.
reasonable costs Although these incentives, particularly tax
d. Access to natural resources and raw incentives, could arguably bring about
materials at reasonable costs substantial benefits in various forms and do not
e. Size and efficiency of output markets require an actual government expenditure,
and distribution outlets they are not entirely without cost implications,
f. Size and purchasing power of the especially if we take into consideration factors
consumer base such as erosion of the tax base and foregone
g. Other forms of support and assistance or unearned revenue for the government;
distortionary effects of inefficient allocation of
Apart from the rather limited role of correcting scarce resources, either too much in priority
market failures, all these incentives are usually areas or too little in other non-favoured areas;
aimed at promoting domestic consumption enforcement and compliance costs; and
and industries, investment flows (particularly the possibility of corruption and other rent-
FDIs in developing countries) and/or exports, seeking behaviour, especially if the process
all of which will ultimately stimulate the overall is discretionary and based on subjective
economic growth. requirements.
In the presence of a coherent and structured 5.6 Permanent Loss of One Revenue
IBS agenda, we would effectively be able Source
to lay out and further enhance the entire
incentive package for the IBS industry that One main benefit of full IBS adoption is the
better reflects the overall industry needs, opportunity to reduce labour requirements,
the industry’s potential for long-term growth particularly the construction sector’s on-site
and competitiveness, each segment that is workers who are mostly low-skilled and low-
mapped with the nation's affordability (all for paid foreign workers. Nonetheless, a lesser
the purpose of promoting and anchoring the need for foreign workers would inevitably
IBS culture), and accelerating the industry's translate into a temporary reduction or even
growth across all segments. a permanent loss of one source of revenue for
the federal government through annual levies
Following a thorough review based on the imposed on registered foreign workers whose
criteria above, we will be able to identify rates or tariffs currently vary according to
which specific measures or incentives to sectors. Currently, this levy is deductible from
introduce, expand further, extend the validity wages of foreign workers.
period or even terminate. Eventually, a similar
exercise for other industries or sectors will go a As part of the restructuring of foreign workers’
long way in harmonising and streamlining the levy, the federal government announced
nation’s tax and non-tax incentives. on 31 December 2016 the quasi immediate
implementation of the Employer Mandatory
83
Table 5.4: New tariffs of foreign worker levy effective 18 March 2016
Previous Levy Regime New Levy Regime

Category Rates Category Final Rates Initially Proposed
Rates
Agriculture 2 RM410 2 RM640 RM1,500
Plantations 2 RM590 2 RM640 RM1,500
Manufacturing 1 RM1,250 1 RM1,850 RM2,500
Construction 1 RM1,250 1 RM1,850 RM2,500
Services 1 RM1,850 1 RM1,850 RM2,500
Source: MOHA
Commitment (EMC)43 by 1 January 2017. a. The annual average reduction of 32.5%

Following an outcry from business associations, in labour requirements, especially for
the mandatory imposition of foreign workers’ on-site works, which are dominated by
levy on employers has been deferred to 1 foreign workers. This figure was derived
January 2018. The one-year reprieve was from findings of the survey exercise for
granted to allow a major overhaul of the the CBA study (estimated figure of 20%)
‘ecosystem’, including the rights for employers and An Introduction of Industrialised
to hire foreign workers direct from sources Building System - Manual for Developers
without going through agencies that act as (estimated figure of 40%–50%).
middlemen, mechanisms of a security deposit However, the share of foreign workers
on foreign workers, and elimination of other out of the total employed persons in
bureaucratic hurdles. the construction sector hits 15%, the
reduction rate used is 14.26%.
It has been established that increasing the
levy tariffs and/or shifting the levy burden 43
The EMC aims to instill responsibility on employers for
from foreign workers to employers could their foreign workers by making them pay for these
annual levies. Armed with an undertaking letter that
be an effective strategy to encourage
will spell out the roles and responsibilities to be fulfilled
mechanisation and automation, the core
by employers from the application stage until the day
attributes of IBS, while scaling down the need the foreign workers return to their countries of origin, the
for foreign workers. To hypothetically see EMC seeks to ensure the wellbeing and safety nets of
through an environment of full IBS adoption foreign workers, including housing, proper registration
or at least very high IBS usage, consider the and recording of foreign workers to prevent them from
following three assumptions: becoming illegal, as well as other rights.
Table 5.5: Selected foreign worker-related data
Year Number of Foreign Workers with Valid and Active Amount of Levy Collections
Foreign Workers’ Temporary Employment Visit Pass
(Pas Lawatan Kerja Sementara/PLKS)
2011 1,573,061 RM1,807,559,238.97
2012 1,571,589 RM2,618,101,763.53
2013 2,250,322 RM2,423,003,405.28
2014 2,073,414 RM2,637,594,587.09
2015 2,135,035 RM2,254,148,205.66
Source: Written reply to a Parliamentary question on 27 October 2016
84
Table 5.6: Predicted amount of levy collection (RM’000) vs. 2015 levels
Reduction -32.5% -32.5% -32.5% -14.26% -32.5%

Rates
Number 1.3099 1.3099 1.3099 1.3099 1.3099
of Total
Employed
Persons (‘000)
Number 502,963 339,500 229,163 196,485 132,627
of Foreign
Workers Post
Reduction
Share of 38.40 25.92 17.49 15.00 10.12
Foreign
Workers
out of Total
Employed
Persons Post
Reduction (%)
Levy 930,481,550 628,075,000 423,951,550 363,497,250 245,359,950
Collection
Amount at
RM1,850 Post
Reduction
(RM million)
Variance Post 932,200 302,406,550 204,123,450 60,454,300 118,137,300
Reduction
(RM million)
Source: JSSB
b. Anything beyond, namely another would hypothetically obtain annual levy

32.5% reduction until the share collection worth RM930,481,550 (502,963
of foreign workers out of the total workers x RM1,850), RM628,075,000 (339,500 x
employed persons in the construction RM1,850), RM423,951,550 (229,163 x RM1,850)
sector nearly touches 10%, represents and RM363,497,250 (196,485 x RM1,850),
a stress test or stretch goal situation. respectively, equivalent to a cumulative
c. The number of total employed persons potential revenue loss of RM567,916,500 or
in the construction sector to stay nearly a 61% plunge compared to the 2015
constant at 1.3099 million people. level of RM931,413,750.
Using the number of documented foreign On the other hand, the positive outcome
workers of 745,131 employed by the behind this uninterrupted downtrend in
construction sector in 2015 as the basis, a 32.5% annual levy collections is the continuous
(and 14.26%) cutback would translate into retreat in the number of foreign construction
employment of only 502,963, 339,500, 229,163 workers with the possibility of reaching the
and 196,485 foreign workers, respectively. targeted 15% cap in the share of foreign
Assuming the new rate of RM1,850 as the per workers out of the total labour force (or
capita levy for foreign construction workers employed persons for simplification purposes)
remains unchanged, the federal government in the construction sector by as early as 2019.
85
Figure 5.5: Number of foreign workers in Malaysia by country of origin
2,500,000
2,500,000
2,000,000
2,000,000
1,500,000
1,500,000
1,000,000
1,000,000
500,000500,000
0 0
Indonesia Bangladesh
Indonesia ThailandThailand
Bangladesh Philippine PakistanPakistan
Philippine Myanmar Nepal Nepal
Myanmar India Others^Others^
India Total Total
Source: MOHA
Note: ^ denotes other significant sources of foreign workers such as Cambodia, China, Sri Lanka, Vietnam and Laos
5.7 Ramifications for International Trade-wise, among these top five foreign
Diplomatic and Economic Relations worker sources, only Indonesia, India and
Myanmar make the cut to be considered in the
This section attempts to discover whether an league of Malaysia’s major trading partners.
explicit government policy to trim the presence While Malaysia has consistently enjoyed a
of migrant workers in Malaysia, particularly by trade surplus vis-à-vis India and Myanmar, it
paring down the number of foreign new hires, is not always the case with Indonesia. Since
could sour diplomatic ties with countries that the bilateral trade with Myanmar is rather
provide migrant workers and to what extent insignificant, the focus can be trained on
the dynamics could have an impact on trade Indonesia and India alone, with India being
and investment relations with Malaysia. the larger export market for Malaysia most of
the time.
While Indonesia has perennially remained
Malaysia’s largest supplier of foreign workers, The following assumptions are considered
albeit a dwindling share to -40% since as a result of a hypothetical retaliation by
2014 from close to 75% in the early 2000s, Indonesia and India to changes in Malaysia’s
Bangladesh, Nepal, India and Myanmar have immigration and human resource policies,
alternated positions 2, 3, 4 and 5 between together with respective assumptions related
themselves. After a huge spike in 2010, Nepal to Malaysia-bound foreign worker inflows
has occupied the no. 2 spot since 2011, from Indonesia and India as well as Malaysian
followed by Bangladesh, Myanmar and India. shipments to these countries:
86
2,500,000
Figure 5.6: Share of foreign workers out of total workers in Malaysia by country of origin (%)
80.0
2,000,000
70.0
60.0 1,500,000
50.0
40.0 1,000,000
30.0
20.0 500,000
10.0
0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013^^ 2014 2015
Indonesia Indonesia
Bangladesh BangladeshThailand
Thailand Philippine Pakistan
Philippine Myanmar Nepal
Pakistan India Others^
Myanmar Nepal India Others^
Source: MOHA, JSSB

Note: ^ denotes other significant sources of foreign workers such as Cambodia, China, Sri Lanka, Vietnam and Laos
^^ denotes inclusion of foreign workers through the 6P Amnesty Programme44
a. Worst-case scenario: Reduction rate of between RM6.0764 billion and RM18.2293

Malaysian exports doubles that of billion. It is noteworthy to stress that these
foreign workers from Indonesia and simulated impacts on Malaysian exports are
India purely hypothetical and may not necessarily
b. Base-case scenario: Reduction rate be the case in reality, given a multitude of
of Malaysian exports matches that of other factors at play in making import-export
foreign workers from Indonesia and decisions.
India
c. Best-case scenario: Reduction rate of Since this is a conjectural guesstimate at
Malaysian exports halves that of foreign best, the lower bound value of the range
workers from Indonesia and India mentioned above, namely RM6.0764 billion,
d. Reduction rates of workers from seems more reasonable and prudent to
Indonesia and India based on the consider. This section does not attempt similar
terminology used to categorise simulations for possible impacts on Malaysia-
behaviours and responses of IT
systems and infrastructure under
different circumstances: performance 44
Launched in October 2011, the main objective
testing=10%, load testing=20% and was to resolve the long-standing issue of teeming
stress testing=30% undocumented foreign workers in Malaysia, including

those who have overstayed their work permits, by
registering and legalising them, allowing them to stay
As a rule of thumb, the impacts under the
another two or three years in employment, depending
base-case scenario may be considered, on which sector they were involved in. When it ended
whereby the combined Malaysian exports in 2014, some 521,734 foreigners were reported to have
to Indonesia and India could decline by been legalised under this programme.
87
bound FDIs since Indonesia and India (and to These regulatory costs, which may vary across
a lesser degree Myanmar) have never been industries or sectors and jurisdictions, usually
among the big capital exporters to Malaysia, include (i) all costs to establish a framework
and the effects on diplomatic ties are not of assessment criteria, (ii) paperwork and
straightforward to quantify. documentation, (iii) expenses related to
planning, implementation (staff, systems,
5.8 Excessively Onerous Compliance processes, procedures and technology,
and Enforcement Costs among others), administration, monitoring,
investigation and reporting of such
Regulatory costs applicable to industry compliance and enforcement, payments of
players (compliance costs) and borne by fines, penalties, damages and indemnities
regulators/supervisors (enforcement costs) for breaches or violation of laws, and (iv) any
refer to deployment of resources such as other expenditure incurred in order to ensure
funds/budget allocations and workforce. This, adherence to such laws, rules and regulations,
in other words, means money, time and effort standards and best practices. Apart from costs
spent in conforming to a variety of laws, rules in monetary terms, there could be impacts
and regulations governing an industry and/or on reputation, brand, goodwill, reliability,
the production of merchandise or provision credibility and authority, which are a lot more
of services as well as a set of standards, complicated and subjective to measure.
guidelines, best practices and codes of
conduct in place. In short, to industry players, In the absence of attempts thus far to assess
regulatory costs comprise compliance, and these regulatory costs or burdens to both
direct and indirect socio-economic costs, industry players and regulators/supervisors
while for regulators and supervisors, they in the Malaysian context, relevant statistics
include costs related to policy formulation, for the US economy are presented in this
enforcement/policing, intervention and other section to put things into perspective. In its
general administration expenses. 2015 Report to Congress on the Benefits and
Figure 5.7: Total trade volume vis-à-vis Indonesia, India and Myanmar (RM million)
70000
60000
50000
40000
30000
20000
10000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia-Malaysia India-Malaysia Myanmar-Malaysia
Source: DOSM, BNM
88
Table 5.7: Bilateral trade vis-à-vis Indonesia, India and Myanmar (RM million)
Year Indonesia India Myanmar

Gross Gross Trade Gross Gross Trade Gross Gross Trade
Export Import Balance Export Import Balance Export Import Balance
2004 11,639 15,964 -4,325 11,457 4,631 6,826 568 405 164
2005 12,540 16,553 -4,013 15,137 4,169 10,968 930 506 424
2006 14,916 18,166 -3,250 18,783 4,884 13,899 607 459 147
2007 17,749 21,379 -3,630 20,204 7,067 13,137 721 476 244
2008 20,703 24,177 -3,475 24,728 10,278 14,450 1,042 584 458
2009 17,235 23,019 -5,784 17,306 7,872 9,433 723 497 226
2010 18,090 29,390 -11,300 20,934 7,978 12,956 1,181 732 448
2011 20,841 35,113 -14,272 28,154 10,191 17,963 1,710 715 995
2012 27,609 31,095 -3,486 29,325 11,803 17,522 2,176 567 1,610
2013 33,110 27,944 5,167 25,735 16,346 9,389 2,261 624 1,636
2014 31,758 27,728 4,029 31,893 13,340 18,553 2,634 547 2,087
2015 29,104 31,000 -1,896 31,660 15,139 16,521 3,065 687 2,378
2016 27,659 29,427 -1,769 32,006 16,647 15,358 3,925 824 3,101
Source: DOSM, BNM
Table 5.8: Predicted amount of Malaysian exports (RM million) in 2016 vs. 2015 to Indonesia
and India with corresponding decreases in number of registered foreign workers
-10% -20% -30%

Indonesia India Indonesia India Indonesia India
Number 752,369 125,776 668,772 111,801 585,176 97,826
of Foreign
Workers
Worst-case Scenario
Amount of 23,283.3 25,328.4 17,462.5 18,996.3 11,641.7 12,664.2
Exports
(RM million)
Variance 5,820.8 6,332.1 11,641.7 12,664.2 17,462.5 18,996.3
(RM million)
Base-case Scenario
Amount of 26,193.7 28,494.4 23,283.3 25,328.4 20,372.9 22,162.3
Exports
(RM million)
Variance 2,910.4 3,166.0 5,820.8 6,332.1 8,731.2 9,498.1
(RM million)
Best-case Scenario
Amount of 27,649.0 30,077.5 26,193.7 28,494.4 24,738.5 26,911.4
Exports
(RM million)
Variance 1,455.2 1,583.0 2,910.4 3,166.0 4,365.6 4,749.1
(RM million)
Source: JSSB
89
Costs of Federal Regulations and Unfunded A series of regulatory and supervisory
Mandates, the US Office of Management and developments over the past few years,
Budget (OMB) pegged the cumulative costs particularly in the aftermath of the Global
of 120 selected major rules and regulations for Financial Crisis in 2008–2009, have conspired
industry players during the 2004–2014 period to redefine and radically change the
at between USD68.4 billion and USD102.9 compliance and enforcement landscape in
billion (in 2010 USD). Other governmental many industries and across many jurisdictions.
assessments before and after the 21st century Arguably, overburdening an economy
from the OMB, Government Accountability with even more regulatory mandates and
Office (GAO) and Small Business Administration restrictions carries the risks of curtailing
(SBA) also suggested aggregate annual costs economic growth and stifling job creation.
in the hundreds of billions of USD, some even
in excess of USD1 trillion in today’s USD. On Over-regulation or too many unnecessary
the other hand, the National Association of rules and regulations may jack up compliance
Manufacturers (NAM) estimated total annual costs, which could be too burdensome for
regulatory costs to industry players in the US industry players and to their budgets, staff,
economy to the tune of USD2.028 trillion (in systems and even overall business strategies.
2014 USD) in its 2014 report based on 2012 data. Over-regulation or overly complex regulation
could also make it harder for the relevant
Notwithstanding other estimates of authorities to monitor and enforce, as
considerably higher than the NAM’s USD2 opposed to adequately targeted regulatory
trillion, the Competitive Enterprise Institute (CEI) and supervisory regimes, which may increase
came up with an estimate of USD1.886 trillion overall regulatory costs on taxpayers. For
in across-the-board annual regulatory costs example, compliance and enforcement costs
to industry players using a more conservative have a direct relationship with the complexity
approach. The St. Louis, Missouri-based of the tax regime and the system of fiscal
Weidenbaum Centre and the Washington incentives (in terms of qualifying and reporting
D.C.-based Regulatory Studies Centre requirements and different schemes).
tabulated the annual regulatory agency
enforcement costs at USD63 billion. Combined, 5.9 Strengths-Shortcomings Balance
both sides of regulatory costs would amount to
USD1.949 trillion (USD1.886 + USD63 billion) in Given its emphasis on the respect for the rule
2015. As a result, the combined tally of these of law, IBS adoption will be an impetus for
US regulatory costs accounted for 10.8% Malaysia to have an adequately designed
of the US nominal GDP in 2015, estimated and developed regulatory and supervisory
at USD18.0367 trillion45 or 52.8% of the US environment. The CITP recommendation of
federal government’s expenditure in 2015 decoupling IBS procurement from the main
worth USD3.68846 trillion. To complete the contract provides a good illustration of how
picture, the Mercatus Centre estimated that IBS can help address leakage, wastage
the 2012 US economy (nominal GDP worth and other negative elements, especially in
USD16.155 trillion) would have been 25% or public administration. Many measures to
USD4.034 trillion larger had total regulatory encourage IBS adoption would eventually
burdens remained constant since 1980 based
on a 'formal economic growth model from
microeconomic foundations, particularly the
45
US Commerce Department’s Bureau of Economic
Analysis (BEA)
influence of regulation on firms’ investment
46
US Office of Management and Budget
choices'.
90
contribute to the general ease of doing
business and enhance Malaysia’s long-term
competitiveness.
Apart from the possibility of deepening the

taxable income base vis-à-vis IBS-related
businesses and their workforce under the
Tax Revenue category, registration and/
or licensing fees could potentially become
a new source of revenue for the federal
government. Considering a hypothetical
backdrop of the presence of some 1,000
IBS component manufacturers and 100
manufacturers of various machineries and
equipment specific for IBS purposes in the
foreseeable future while assuming RM15,000
and RM75,000 as the annual licensing fees for
players of these two segments, respectively,
the federal government would be able to
generate new annual revenue stream worth
at least RM22.5 million, which will be reflected
under the Licences and Permits sub-category
of the Non-Tax Revenue category.
With a coherent and structured IBS agenda,

we would be able to lay out and further
enhance the entire incentive package for
the IBS industry that better reflects the overall
industry needs and the potential for its long-
term growth and competitiveness, and
maps out each segment with the nation's
affordability.
On the other hand, fewer new foreign hires

as a result of lower labour requirements in
the construction sector with an extensive IBS
adoption could cause the federal government
to temporarily or even permanently lose one
source of revenue: the annual levies imposed
on registered foreign workers. Assuming there
is no change to the rate of per capita levy for
foreign construction workers at RM1,850, the
cumulative revenue losses could potentially
be as high as RM567,916,500.
91
CHAPTER 6: SUSTAINABILITY, SAFETY AND
HEALTH PERSPECTIVES
This chapter covers all issues in the areas of providers, consumers and the public at
safety, health and environment as well as large, the federal government is able to aim
resource efficiency with regard to the usage its policy interests and overarching agenda
of IBS in construction works and projects. on businesses in all segments of the IBS
Sections 6.1 to 6.5 intend to symbolise the industry through such frameworks or regimes.
strengths and opportunities brought about by Therefore, this regulatory, supervisory and
IBS adoption, while Sections 6.6 to 6.8 attempt monitoring oversight can contribute to a wide
to depict the shortcomings and risks that may range of socio-economic, environmental and
need to be overcome. even political goals.
6.1 Respect for and Anchorage of 1. List of acts and enactments relevant to
Legal and Institutional Underpinnings the IBS industry:
a. Factories and Machinery Act 1967 or
Players in all segments of the IBS industry Act 139
are bound by law to comply with (i) a set of b. Factories and Machinery Act
diverse acts and enactments, (ii) rules and (Amended) 2006 or Act A 1268
regulations, (iii) orders and ordinances that c. Occupational Safety and Health Act
are mandatory, (iv) guidelines, codes of 1994 (OSHA 1994) or Act 514
conduct, standards and best practices that d. Petroleum (Safety Measures) Act 1984
are more voluntary in nature domestically or Act 302
and internationally in respect to safety, health, e. Workers' Minimum Standards of Housing
environment friendliness and sustainability, and Amenities Act 1990 or Act 446
among others.
2. List of rules and regulations relevant to
The existence of well-established regulatory, the IBS industry:
supervisory and monitoring frameworks or a. Regulations under the Petroleum
regimes as well as other legal and institutional (Safety Measures) Act 1984
arrangements are crucial to ensure public • Petroleum (Safety Measures)
confidence in the IBS industry and to safeguard (Transportation of Petroleum by
its overall soundness and stability, particularly Pipelines) Regulations 1985
from the perspectives of public and employee b. Regulations under the Factories and
safety and health; reliability, quality and Machinery Act 1967
effectiveness of goods produced and services • Factories and Machinery (Steam
rendered by the IBS industry; management of Boiler and Unfired Pressure Vessel)
impacts that the IBS industry may cause on Regulations 1970 (Amendment) 2014
the environment and equilibrium; efficiency • Factories and Machinery (Person-In-
and cost-effectiveness of technologies used Charge) (Amendment) Regulations
by the IBS industry, among others. 2014
• Factories and Machinery (Special
Apart from addressing concerns of various Scheme of Inspection) (Risk-Based
IBS stakeholders, in particular regulatory Inspection) Regulations 2014
authorities, goods producers, service
92
• Factories and Machinery (Noise • Occupational Safety and Health
Exposure) Regulations 1989 (Use and Standards of Exposure of
• Factories and Machinery (Mineral Dust) Chemicals Hazardous to Health)
Regulations 1989 Regulations 2000
• Factories and Machinery (Asbestos) • Occupational Safety and Health
Regulations 1986 (Safety and Health Officer) Regulations
• Factories and Machinery (Building 1997
Operations and Works of Engineering • Occupational Safety and Health
Construction) (Safety) Regulations 1986 (Classification, Packaging and
• Factories and Machinery (Leads) Labelling of Hazardous Chemicals)
Regulations 1984 Regulations 1997 (Revoked)
• Factories and Machinery • Occupational Safety and Health
(Compounding of Offences) Rules 1978 (Safety and Health Committee)
• Factories and Machinery Regulations 1996
(Compoundable Offences) Regulations • Occupational Safety and Health
1978 (Control of Industrial Major Accident
• Factories and Machinery (Certificates of Hazards) Regulations 1996
Competency Examinations) Regulations • Occupational Safety and Health
1970 (Employers' Safety and Health General
• Factories and Machinery Policy Statements) (Exception)
(Administration) Regulations 1970 Regulations 1995
• Factories and Machinery (Notification
3. List of orders and ordinances relevant
of Fitness and Inspections) Regulations
to the IBS industry:
1970
a. Orders under the Factories and
• Factories and Machinery (Electric
Machinery Act 1967
Passenger and Goods Lift) Regulations
• Factories and Machinery (Exemption
1970
to Petroliam Nasional Berhad) Order
• Factories and Machinery (Fencing of
2013
Machinery and Safety) Regulations
• Factories and Machinery (Exemption
1970
of Certificate of Fitness for Hoisting
• Factories and Machinery (Safety,
Machine) Order 2015
Health and Welfare) Regulations 1970
b. Orders under the OSHA 1994
• Factories and Machinery (Steam
• Occupational Safety and Health
Boiler and Unfired Pressure Vessel)
(Prohibition of Use of Substances) Order
Regulations 1970
1999
• Factories and Machinery (Person in
Charge) Regulations 1970
(Safety and Health Officer) Order 1997
c. Regulations under the OSHA 1994
4. List of Codes of Practice relevant to the
(Classification, Labelling and Safety
IBS industry:
Data Sheet of Hazardous Chemicals)
a. For Chemical Management
Regulations 2013
• Industry Code of Practice On
Chemicals Classification And Hazard
(Notification of Accident, Dangerous
Communication 2014
Occurrence, Occupational Poisoning
• Industry Code of Practice on Indoor Air
and Occupational Disease)
Quality 2010
Regulations 2004
93
b. For Industrial Hygiene • Guidelines on Preventing and
• Industry Code of Practice for Safe Responding to Drugs and Alcohol
Working in a Confined Space 2010 Problems in the Workplace 2004
c. For Occupational Health • Guidelines on First Aid in the Workplace
• Code of Practice on Prevention and (2nd Edition) 2004
Eradication of Drug, Alcohol and • Guidelines on Reproductive Health
Substance Abuse in the Workplace Policy and Programmes at the
2005 Workplace 2002
• Code of Practice on Prevention and • Guidelines on Medical Surveillance
Management of HIV/AIDS at the 2001
Workplace 2001 • Guidance for the Prevention of Stress
d. For Transportation and Violence at the Workplace 2001
• Code of Practice for Road Transport d. For HIRARC
Activities 2010 • Guidelines for Hazard Identification,
• Code of Practice on Safety, Health and Risk Assessment and Risk Control
Environment for Transportation Sector (HIRARC) 2008
(SHE Code) 2007
6. List of rating systems, tools or
5. List of guidelines relevant to the IBS certifications relevant to the IBS
industry: industry:
a. For Building, Construction and a. Green Building Index (GBI)
Engineering Works b. Malaysia Carbon Reduction and
• Guidelines For Approval of Design Environmental Sustainability Tool
Scaffolding 2016 (MyCREST)
• Calculation Loading of Scaffolding c. Safety and Health Assessment System
2016 in Construction (SHASSIC)
• Guidelines for Public Safety and Health d. Quality Assessment System in
at Construction Sites 2007 Construction (QLASSIC)
• Guidelines for the Prevention of Falls at e. Certifications issued by internationally
Workplaces 2007 recognised bodies such as the British
• Guidelines on Trenching for Standards (BS) and International
Construction Safety 2000 Standards Organisation (ISO) such
• Guidelines on Occupational Safety as ISO 14000 for environmental
and Health in Tunnel Construction 1998 management and ISO 9000 for quality
b. For Industrial Safety standards, among others
• Guidelines On Safe Use Of Press
Nonetheless, all these benefits brought
Machines 2015
about by effective regulatory, supervisory
• Guidelines on the Safe Use of Lifts and
and monitoring regime must be adequately
Escalators 2010
balanced with any associated costs. For
c. For Occupational Health
instance, poorly designed, inconsistent,
• Guidelines for the Protection of
overly complex or excessive regulations
Employees Against the Effects of Haze
tend to be implemented inefficiently or
at Workplaces 2013
non-cost-effectively, failing to achieve their
• Guidelines on Occupational Health
intended purposes. Such mediocre regulatory
Services 2005
94
and supervisory regimes could invariably • More effective and efficient construction
result in unnecessary burdens on industry site management
players in various ways such as higher costs, • Less negative externalities on the
inefficiencies and delays, among others, surrounding locality and community
which will eventually stifle their growth. due to construction works in the form
of water, air and soil pollution as well as
No two industries deserve a similar regulatory,
noise and traffic disturbances
supervisory and monitoring attention. Certain
• Easier, more environment-friendly
industries require more stringent and rigid
processes and procedures
regulation to reduce systemic risks that
• Systematic storage and just-in-time
could be catastrophic to the entire system or
(JIT) delivery of IBS components to
market. Take the financial services industry as
construction sites, hence reduced risks
an example. Given the uniqueness of financial
of bulky and/or hazardous materials that
institutions and increasingly stiff competition
could trigger accidents or catastrophes
among them across borders, high volatility
• Less usage of timber formworks or other
of global financial markets, increased
materials at project sites and fewer
diversification of their range of products and
on-site activities, hence less material
services, this industry, which includes a variety
wastage, pollution and other adverse
of segments (banking, insurance, interbank,
environmental repercussions
capital and derivatives markets are among
• Less on-site wet trades, especially when
the major ones) is heavily regulated and
concreting is involved
supervised in almost all jurisdictions. However,
the IBS industry is completely different. It is With IBS, requirements for workers, especially for
virtually free from such systemic risks and most on-site works, could be reduced by at least 20%
probably, can do without the same ironclad (compared to CBM), according to the average
regulatory, supervisory and monitoring in the findings of the survey exercise among
arrangements despite having to endure 21st IBS value-chain participants conducted for
century challenges, just like any other industry. the purpose of this CBA study, or by about
40%–50% according to An Introduction of
6.2 Greater Cleanliness, Safety, Industrialised Building System – Manual for
Health and Sustainability-related Developers published in 2014. Construction
Accomplishments sites employing fewer workers are usually
faced with lower risks of Occupational Safety
IBS allows latitude for greater compliance and Health (OSH) issues, which could be very
with cleanliness, safety, health and green costly if they strike.
standards and practices, given less on-site
non-building activities, especially wet works in
the presence of:
a. Much-reduced labour requirements
b. More controlled working environment
and much-improved living conditions47/
housekeeping practices at construction
sites
c. Neater, cleaner, safer/less hazardous 47
Poor living conditions/bad housekeeping practices
and more organised construction sites, pose a threat to the public health in general, being
a hotbed for vector-borne diseases such as dengue,
especially during construction owing to,
Chikungunya, leptospirosis, Japanese encephalitis and
among others:
malaria, among others.
95
Since any OSH risk may lead to downtime or outcome - 100% of large infrastructure projects
even a definite stoppage of activities, IBS, to exceed sustainability requirements with a 4
which can ensure greater compliance with Mt CO2-equivalent reduction per year51. After
safety, health and sustainability regulations all, environmentally sustainable construction
and guidelines, is what the construction would appear as one of the most suitable
sector needs, from the economic, business, performance criteria for IBS with green or eco-
socio-humanistic and socio-ecological friendly buildings and infrastructure as the
perspectives. Although the usage of relatively major upshot in the form of environmentally
new methods may to a certain extent responsible, resource efficient and minimal
increase the risks of human error at the design, waste structure as well as application of
manufacturing and installation/erection processes and appliances throughout a
phases, this type of human error is not deadly building’s or infrastructure’s life cycle from
in nature, unlike freak and fatal accidents at planning, design, construction, operation,
construction sites using CBM. This is in line with maintenance, renovation/upgrade and
one of the CITP’s targets to reduce worksite demolition. Making IBS one of the underlying
fatalities and injuries by 50% under the Quality, conditions in urbanisation and infrastructural
Safety and Professionalism Strategic Thrust. building framework may indirectly help
incorporate disaster risk management into the
As the Malaysian construction sector
country’s development planning.
generates a lot of waste, of which little is
recycled, the construction and demolition
(C&D) waste aggravates the problem
of rapidly depleting capacity of landfills.
Illegal and irresponsible dumping by certain
construction players has long been one of the
major causes of environmental degradation.
With IBS, wastage of timber, followed by
cement, brick, soil and concrete, is estimated
to be less than 5% of total materials used48 . This
will go a long way in reducing the contribution
of construction waste to landfills, apart from
addressing irresponsible dumping of C&D
waste.
48
Page 22, An Introduction of Industrialised Building
It is one of the CITP’s goals to transform System – Manual for Developers, published in 2014 by
CIDB Malaysia
Malaysia’s construction sector into an
49
Less than 2% of buildings and infrastructure in Malaysia
environmentally sustainable one, increasingly
are assessed for environmental sustainability with
characterised by (i) sustainability-rated building rating systems such as the GBI. Among those
buildings and infrastructure49, which are assessed, less than 50% have been rated. Page 86, CITP
resilient to natural catastrophes, (ii) buildings 2016-2020
with low carbon emissions50 and energy usage, 50
Malaysia’s CO2-equivalent emissions are relatively
and (iii) low volume of C&D waste (particularly high, with the ratio of GDP to CO2 among the world’s
lowest. Malaysia’s GDP per CO2 tonne is USD1,500 vs.
that ends in illegal and irresponsible dumping).
Singapore’s USD3,700. Malaysia’s growth in CO2 of 5%
Once in place, the next step is for Malaysia’s is faster than most emerging economies: Indonesia’s
4.6% and the Philippines’ 1%. Page 87, CITP 2016-2020
environmentally sustainable construction to
publication
become a model for the emerging world, 51
particularly the ASEAN region with one key
96
Since IBS is a pathway to environmentally developing holistic and systematic guidelines
sustainable construction excellence, and performance criteria that incorporate
it is therefore part of the overall green sustainability concepts and objectives in all
and sustainability52 agenda. Being highly IBS applications.
technology driven, energy efficient, more
The WEF’s Global Risks Report 2016 named
carbon neutral and less-labour intensive,
climate change as one of the biggest risks to
IBS is expected to play a significant role in
life on Earth, estimating that climate change
achieving Malaysia’s target of reducing per
could wipe USD2.5 trillion off global financial
GDP emissions of greenhouse gases (GHGs)53,
assets under a business-as-usual track of GHGs
especially carbon dioxide (CO2), also known
and other man-made emissions, but that loss in
as the carbon emission intensity, by up to
value could be almost 10 times bigger, hitting
40% by 2020 and 45% by 2030 against the
USD24.2 trillion under a worst-case scenario.
2005 levels, a commitment first pledged in
Fighting climate change effects is, therefore,
December 2009 at the UN Climate Change
urgent since it is estimated that global warming
Conference, dubbed the Copenhagen
could cost the world more than USD2 trillion a
Summit, and subsequently reiterated at the
year in lost productivity by 2030 as it becomes
same conference in New York in December
too hot to work in many economic sectors,
2014. The landmark Paris Agreement on
making it harder for people to accomplish
Global Warming, negotiated through the UN
their jobs, especially in the world’s poorest
and approved by 195 countries in December
nations, notably the lowest paid and most
2015, reaffirmed the global warming threshold
heat-exposed occupations in construction
of within 2°C (or 3.6°F), i.e. to prevent global
and agriculture sectors, as revealed by the
average temperatures from rising more than
findings of Tord Kjellstrom, researcher for the
2°C above the levels before the dawn of the
Health and Environment International Trust
world’s First Industrial Revolution.
After all, being among the world’s largest

users of energy and water as well as 52
Efficient use and management of limited resources
producers of emissions and waste, residential such as water, land, energy and natural resources as
and commercial buildings bear heavy well as overall management of resulting waste, whether
environmental responsibility. In Malaysia, they solid waste, effluents or emissions of air pollutants
consume 15% of the total energy and are (hazardous gases, toxic metals, particulates, free
radicals, radioactive pollutants, etc). The organising
among key contributors to GHGs54, which
principle for sustainability is sustainable development,
some estimates show as high as 40% as a
which comprises four interconnected domains, namely
result of fossil fuels used to generate electricity ecology, economics, politics and socio-culture. The
or direct use for building operations. It is also Sustainable Development Goals (SDGs), officially
estimated that buildings produce 40% of known as Transforming our World: the 2030 Agenda for
global wastes and consume 16% of water Sustainable Development is a set of 17 Global Goals
sources55. with 169 targets covering a broad range of sustainable
development issues. Spearheaded by the UN, the final
Nonetheless, the acceptance and relevance document was adopted by its 193 member countries
of IBS as an integral part of the sustainability as a successor to the Millennium Development Goals in
September 2015.
framework still leaves much to be desired in 53
Six main GHGs are carbon dioxide, methane, nitrous
Malaysia, which warrants a thorough study
oxide, hydro fluorocarbons, per-fluorocarbons and
into sustainability issues related to IBS design, sulphur hexafluoride.
operations, construction and maintenance 54
Page 87, CITP 2016ñ2020
of buildings and infrastructure towards 55
Du Plessis, 2002; Sisson et al., 2009; UNEP-SBCI, 2010b
97
New Zealand, in the Asia-Pacific Journal of levels of precision and accuracy in terms
Public Health in July 2016. of usage of materials and resources as
well as better workmanship
The International Energy Agency (IEA),
e. Higher resource efficiency in terms of
together with the International Renewable
usage of energy and water
Energy Agency (IRENA), estimated in a
f. Low carbon emissions and carbon
March 2017 report entitled Perspectives for
footprints as the factory setting
the Energy Transition: Investment Needs for
to manufacture IBS products and
a Low-Carbon Energy Transition that the
components enables the use of
global transition towards a decarbonised
renewable energy such as solar power
energy environment - with efforts such as
and reduces overdependence on
investments in renewable and clean energy
fossil fuel-generated energy
to reduce carbon emission intensity by 85%
in order to slow climate change to within
According to an article entitled Towards
2°C of the world’s pre-industrial levels - would
Adoption of Prefabrication in Construction
yield annual economic benefits in the form of
published in the Building and Environment
reduced negative externalities of up to USD10
journal, a conventional project that involves
trillion and eventually boost the world GDP
concreting and bar bending work may
by USD19 trillion while creating 6 million jobs
cause average waste levels of 20% and 25%,
worldwide by 2050.
respectively. In contrast, if the same project
adopts IBS, the average waste level for
6.3 IBS Embraces Resource Savings both may drop to 2%, equivalent to a waste
and Eco-friendly Solutions
reduction of up to 90%.
With IBS, we can expect significant cost

Apart from helping to expedite rebuilding
savings on better resource use as well as
efforts, IBS could also help lower expenditure
waste efficiency and management thanks to:
to reconstruct, repair and/or rehabilitate,
a. Naturally less usage of building materials
especially basic infrastructure, public
at construction sites and probably
amenities and dwellings, after natural
off-site as well, hence potential
disasters. Owing to its superior resource and
minimisation of waste, particularly due
energy efficiency, lower material intensity and
to reduced on-site waste generation
higher potential for the application of the 3R
b. Significant waste reduction, especially
concept, IBS helps bring down expenditure on
unnecessary C&D waste (dumped
waste management, which entails collection,
materials) given less on-site non-
separation and categorisation, removal,
construction activities as materials
transfer/transport, treatment and disposal of
are precast or prefabricated at IBS
C&D waste towards reducing adverse effects
factories and hence lower expenditure
of waste on safety, health, environment and
on waste disposal and treatment as
general aesthetics.
well as improved safety at construction
sites
With the removal of energy subsidies as part
c. Execution of the principles of the 3R
of the Subsidy Rationalisation Programme
(reuse, recycle and reduce) concept
(SRP), a subsidy reform plan initiated in July
d. High degree of automation and
2010 to strengthen public finances and boost
machine utilisation in manufacturing
economic efficiency, IBS could provide the
IBS products, components, techniques
answer as far as solutions are concerned with
and elements should help increase
energy-efficient features throughout the life
98
cycle of buildings. Higher levels of precision could lower costs by as much as 25%–30%
and accuracy brought about by IBS would also across key spending categories, depending
mean more efficient usage of materials and on the type of building materials.
other resources (such as utilities, consumables
and works done by third parties), which are As part of the nature preservation and
part of intermediate input that typically makes environmental sustainability agenda,
up about 60% of total construction costs56. Malaysia is also blessed with greater
opportunity to use sustainable materials,
Coupled with IT-based material procurement particularly in the production of IBS products
and handling systems such as Material and components and in construction
Requirement Planning (MRP), JIT, Total Quality activities such as usage of palm kernels as
Management (TQM), zero inventory, LEAN and replacement aggregates for lightweight IBS
a few others, effective and efficient material blocks and bamboo formwork at construction
management should result in significant cost-
savings and productivity gains. A study by MGI 56
Page 105, Productivity Report 2013/2014, published by
estimated that procurement best practices MPC
Table 6.1: Malaysia’s gross expenditure on R&D (GERD)-related data
Year Current Expenditure Capital Expenditure Total GERD GERD-GDP Ratio

(RM million) (RM million) (RM million) (%)
2008 5,134.10 936.7 6,070.80 0.79
2009 5,873.90 1,326.00 7,199.90 1.01
2010 6,732.50 1,778.20 8,510.70 1.04
2011 6,674.00 2,748.00 9,422.00 1.03
2012 8,559.48 2,053.33 10,612.82 1.09
2014 10,265.06 3,706.50 13,971.56 1.26
Source: MOSTI
Figure 6.1: Amount of GERD by field of research (RM million)
14,000.0
12,000.0
10,000.0
8,000.0
6,000.0
4,000.0
2,000.0
-
2008 2009 2010 2011 2012 2014
ICT Engineering and Technology
Natural Sciences Agriculture and Forestry
Biotechnology Medical and Health Sciences
Social Sciences Economics, Business and Management
Humanities Total
Source: MOSTI
*Figures for 2013 not available
99
Figure 6.2: Amount of GERD by socio-economic objectives (RM million)
14,000.0
12,000.0
10,000.0
8,000.0
6,000.0
4,000.0
2,000.0
-
2008 2009 2010 2011 2012 2014
Sustainable Economic Development Advanced Experimental and Applied Science
Society Advancement of Knowledge
Environment Defence and Security
Total
Source: MOSTI
Figure 6.3: Share of GERD out of total field of research (%)
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
2008 2009 2010 2011 2012 2014
ICT Engineering and Technology Natural Sciences
Agriculture and Forestry Biotechnology Medical and Health Sciences
Social Sciences Economics, Business and Management Humanities
Source: MOSTI
sites. Indirectly, greater usage of sustainable Asian countries as follows:

materials would also help promote domestic a. South Korea at no. 1 with 4.29%
R&D activities. b. Japan at no. 3 with 3.59%
c. Singapore at no. 15 with 2.20%
According to the IMD’s WCY 2014, Malaysia d. Thailand at no. 51 with 0.48%
has been ranked the world’s no. 31 with a e. Philippines at no. 58 with 0.14%
gross domestic expenditure on R&D (GERD)- f. Indonesia at no. 59 with 0.08%
to-GDP ratio of 1.26% compared to other
100
Figure 6.4: Share of GERD out of total socio-economic objectives (%)
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
2008 2009 2010 2011 2012 2014
Sustainable Economic Development Advanced Experimental and Applied Science
Society Advancement of Knowledge
Environment Defence and Security
Source: MOSTI
Malaysia’s annual GERD jumped 736% from Although MOSTI does not provide the
RM1.6715 billion in 2000 to RM13.9716 billion specific breakdown of GERD for both IBS
in 2014. There are two ways to categorise and sustainable materials, it can be safely
GERD, namely by fields of research (FoR) and deduced that both form part of Engineering
by socio-economic objectives (SEOs). The and Technology, the second largest domain
nine domains under the FoR category are as of the annual GERD in 2014 based on the FoR
follows in a descending order of importance category. Under the SEO category, on the
in terms of spending amount: other hand, both are likely to be found in two
a. ICT largest areas, namely Sustainable Economic
b. Engineering and Technology Development and Advanced Experimental
c. Natural Sciences and Applied Sciences.
d. Agriculture and Forestry
e. Biotechnology Assuming that roughly 10% of the annual R&D
f. Medical and Health Sciences spending in the Engineering and Technology
g. Social Sciences domain is allocated to areas related to IBS
h. Economics, Business and Management and sustainable materials combined, this
i. Humanities would translate into a GERD worth RM342
million, equivalent to 2.45% of the total GERD
On the other hand, the SEO category consists in 2014. As an indication, the 11MP targets the
of the following areas in a descending order overall GERD-GDP ratio of at least 2.0%57 by
of importance in terms of spending amount: 2020 from only 1.26% in 2014.
a. Sustainable economic development
b. Advanced experimental and applied Under the 10MP and 11MP, the federal
sciences government has been financing and will
c. Society continue to financially support a multitude
d. Advancement of knowledge
e. Environment
f. Defence and security 57
Page 8.14, 11MP
101
of waste-to-wealth initiatives and projects g. It enables the use of engineered
related to sustainable materials using timber-based structural materials such
materials from renewable sources and as glulam and LVL
the latest technology available. All these h. Timber has high intrinsic attractiveness
efforts will contribute a great deal towards (aesthetic values, warm feeling,
preserving environmental equilibrium and etc.) and is flexible for designs and
ecosystem. renovations

Timber, timber-based structures and Little wonder that timber and its derived
other timber products, being one of the products are widely and effectively used as
major categories of natural resources IBS-compliant materials in many developed
in the construction sector, have long nations such as North America, Europe,
been associated with sustainability and the UK, Australia, New Zealand and Japan.
environment friendliness, safety/health and Conforming to the right specifications such
strength, sturdiness and flexibility as well as grades, species and dimensions as well
as energy savings and aesthetics. Timber- as world-class quality assurance systems,
based components and elements such guidelines and best practices, timber could
as engineered timber products are ideal prove a star material for IBS and any modular
for 21st century construction with their high coordination approaches.
performance against natural catastrophes
such as fire and earthquake, with timber’s Timber frame systems remain popular
appropriate dimensions, superior strength to among self-builders because they are fast,
weight ratio, and aesthetic value with pleasant convenient and almost hassle free. As the main
and warm effects. Among the advantages of components are fabricated and assembled
timber and its products compared to other in the factory and then transported to
IBS-compliant components and elements construction sites under the IBS regime, roofs
include: and walls are erected far quicker compared
a. Abundance of timber sources in to a conventional masonry system.
Malaysia’s rainforests with 2,500 species
in total, with just over 100 species used Another major selling point of timber frame
b. It is the only 100% renewable raw houses is the insulation aspect of the walls,
material that stores carbon instead of especially the new standard dubbed by
emitting it many timber farmers as super insulation. With a
c. Manufacturing of wood-based timber main frame, buildings are constructed
products is less energy consuming than using a sustainable resource, especially if the
other types of building materials timber source is certified to have originated
d. Timber-based IBS is one of the most from renewable, carefully managed forests.
environment-friendly building systems
and forms part of the Green Building 6.4 Better Working Environment and
Index (GBI) Living Conditions for Workers with
e. Lightweight and easy to handle Prefabricated Solutions
compared to other materials
f. High resistance to fire with little non- The usage of IBS components and
toxic smoke (in case of fire) as well prefabricated solutions has been proven
as more solid in case of earthquakes to create better working environment and
compared to alternative materials much-improved living conditions, particularly
such as stone, brick and concrete for the construction personnel owing to:
102
a. Reduction of tools, equipment and Q2: Improve Workplace Safety and Workers’
materials (TEMs) at construction sites Amenities58 under the Quality, Safety and
This is made possible with the Professionalism Strategic Thrust.
application of simplified methods of
construction based on prefabricated Prefabricated solutions, a facet of IBS, should
components as an alternative to in- help put in place a minimum set of standards
situ methods. With reduced TEMs to guarantee workers’ safety, welfare and
and required on-site measurements, wellbeing, together with other more stringent
wastages are also minimised. All these OSH requirements. Better treatment of
should lead to a cleaner and neater construction site workers, mostly foreigners,
working environment. is one of the contributing factors towards
ensuring public order, safety and peace of
b. Presence of safer working platforms for mind of the rakyat as a whole. Apart from
site operations integrating the construction sector into the
Once installed, prefabricated slab coverage of the Workers’ Minimum Standard
components can act as a sturdy of Housing and Amenities Act 1990 (Act 446),
working platform for construction making usage of prefabricated solutions
workers to perform other trades and in providing housing and amenities for site
activities. In addition, IBS staircases, workers mandatory should be considered.
usually made of precast concrete or
steel, offer faster, easier, sturdier and
safer access in between floors during
the construction stage.
c. Usage of prefabricated solutions

These include cabins, bathroom pods
as well as lightweight steel structures
and precast concrete buildings as
part of the workers' quarters, mostly
temporary structures at construction
sites.
Utilisation of IBS facilitates the rapid and

high-quality construction of facilities and
amenities, which may include dwellings,
restrooms, shelter sheds, seating, dining areas,
access to drinking water, changing rooms,
washing facilities, lockers and storage facilities
for personal belongings, either as temporary
or permanent structures. For illustration,
MRT Corp's Centralised Labour Quarters
(CLQs) were mainly constructed using IBS
components. These CLQs have served their
purpose of providing better working and living
environment for site workers with facilities and
amenities of higher standards. This is one of the
18 initiatives outlined by the CITP in Initiative
58
103
Box Article 3: Adapted from page 72, CITP 2016–2020 and news articles published by
Bernama, The Star Online and The Sun Daily on 26 April 2017
CLQs for Workers for the Construction of SBK and SSP Lines
Company: Mass Rapid Transit Corporation in September 2016, and is scheduled to be

Sdn. Bhd. (MRT Corp) ready by July 2021, with full operations a
year later.
Total construction cost of CLQ complexes
that have been or are currently being built: MRT Corp’s CLQ concept has set a good
RM270 million precedent and very high standard for
all Malaysian construction companies
Total number and locations of CLQ to emulate, being the first of its kind in
complexes: 13, of which three are in Sungai Malaysia with each complex containing
Buloh, Selangor; one in Jalan Cochrane, not only proper accommodation but also
Kuala Lumpur; and nine in Serdang, facilities of a mini township. All 13 CLQs,
Selangor which can accommodate up to 9,300
workers, are equipped with state-of-the-art
Maximum capacity: 9,300 beds security systems that require workers to pass
through a 10-point facial recognition at
Facilities: Spacious cabins, bathrooms, the entrance. This is in addition to a safety
cafeterias, sundry shops, laundry services, manual for emergencies to ensure safety of
clinics/nursing rooms for simple medical the workers and CLQ complexes.
attention, mussola/prayer rooms, and
entertainment and recreational facilities Following the adoption of the Malaysian
Standard (MS) of Temporary Construction Site
Maximum number of workers in each cabin/ Workers’ Amenities and Accommodation
room: 5 to 6 (MS 2593:2015), only up to five or six workers
are assigned to each room or cabin at
Current number of workers at CLQ these CLQs for additional comfort instead
complexes: 600 people of eight previously. Indeed, the MS used
MRT’s CLQ concept as its prime template
Number of countries of origin of workers in formulating the MS 2593:2015 before
currently lodged at CLQs: 12, including the Labour Department adopted it as a
Bangladesh (majority), Indonesia, Pakistan, guideline effective January 2016.
China, Nepal and Myanmar, apart from a
few Malaysian nationals The CLQ concept is considered as the best
way to manage foreign construction site
First introduced in 2012 to house workers for workers in Malaysia, providing them with
the construction of the MRT Sungai Buloh- workers’ basic rights such as safe, clean,
Kajang (SBK) line that began in 2011 and comfortable and convenient place of
on course to be completed by July 2017, residence to rest and have recreational
MRT Corp continues with the CLQ concept activities outside of working hours. Happy
for the construction of the Sungai Buloh- and well-rested workers will be able to work
Serdang-Putrajaya (SSP) line, currently at well, eventually raising the construction
6.2% completion since the work resumed sector’s productivity.
104
In view of the success of MRT’s CLQ model, recent examples include Petronas for its
other construction companies are slowly Refinery and Petrochemical Integrated
implementing a similar concept for their Development (RAPID) project in
construction works and projects. Most Pengerang, Johor.
Source: CITP 2016-2020 publication; Bernama’s “MRT’s Centralised Labour Quarters a Model for Other Construction Firms”; the Star
Online’s “Envoys Visit MRT Corp’s Centralised Labour Quarters”; and the Sundaily’s “Indonesian, Bangladesh Embassies Satisfied
with New Centralised Labour Quarters”.
6.5 Facilitating Greater Usage of opposed to 71% in the United States, 65% in
Building Information Modelling (BIM) Singapore and 39% in the United Kingdom,
according to a CIDB survey conducted in 2014
As defined by the CIDB, BIM is a modelling and the 'Business Value of BIM for Construction
technology and an associated set of processes in Major Global Markets: How Contractors
to produce, communicate, analyse and use Around the World Are Driving Innovation With
digital information models throughout the Building Information Modelling', McGraw Hill
construction project and building life cycles, Construction 201459.
comprising various stages such as the Planning
and/or Design (PD), Construction and Facility The crux of the matter is, as a digital
Management (FM); in short, from the earliest representation of physical and functional
conceptions to demolition. characteristics or shared knowledge resource
for information of a facility or building, BIM
At the PD stage, BIM offers intelligent and can be considered as part and parcel of
effective transfers of information between the highly mechanised and automated,
project stakeholders. Therefore, similar to technology-driven IBS. Under Initiative P4 of
IBS, BIM offers greater certainty between the CITP's Productivity Thrust, at least a 40%
design intent and the final constructed and implementation rate of BIM Stage 2 (when two
operated building. During the Construction or more construction disciplines use the same
stage, BIM promotes better collaboration digital model to collaborate in a project)
and coordination, thus reducing project has been set as a target for public projects
risks, unbudgeted changes and (time and valued above RM100 million. Subsequently,
material) wastage, among others, while the same target will be gradually extended
increasing productivity, speed, safety, quality to private projects. The CITP also sets a target
and sustainability from the economic, social for the development of a standard BIM library
and environmental perspectives. At the FM containing IBS and other building components
stage, BIM provides a centralised database offered by local suppliers.
for the whole life cycle of asset management,
hence offering a better formulation of a plan IBS, together with its componentised
to maintain facilities in a more cost-efficient, construction approach, can be expected
safer and greener manner. to facilitate an increased usage of BIM
within the Malaysian construction sector,
Despite its ability to reduce the need for rework as fundamentally, BIM is structured and
and redundancies due to careful design, geared towards usage of components and
planning, selection and implementation, information.
hence the potential for substantial cost
savings and productivity gains, BIM adoption
in Malaysia is still low. It is only at 10%, as
59
105
The parameters of a BIM project are a single Production and assembly of some IBS
file concept (sharing of a digital information components also use a significant amount
model), intelligent building components of chemicals and chemical products. As a
(components with information), decision- result, the non-environment-friendly wastage
making tools (changes easily identified for require proper and unique disposal methods
decision making), automated generation that could have cost implications to a certain
and updating of report (automatic project extent, notably for cash-strapped and less
documentation) and data in the building sophisticated IBS manufacturers.
models. Any BIM software that contains a
library of IBS components with information Since the Malaysian construction sector is
will definitely simplify the model generation traditionally heavily inclined towards concrete
process and ultimately construction activities as the base construction material, precast
and post-construction operations. concrete is the most common IBS type, and
mould oil, as an example, is an important
6.6 Higher Usage of Utilities and material used in the production of IBS
Chemicals at IBS Component-making components in Malaysia. Mould oil is required
Plants and Impact on Overall Resource as the release agent to prevent the cured
Savings and Waste Management concrete products from being attached to
the formworks. Typically, the construction
Conversion of raw materials and semi- sector still uses two types of release agents -
finished goods into finished IBS components a physical barrier (mineral oil-based) and a
and elements at production plants as chemical reactive (vegetable oil-based and
well as heavy-duty usage of machineries other proprietary products). While vegetable-
at construction sites may require high oil based products are biodegradable and
consumption of utilities, especially energy non-toxic, mineral-oil based products can
and water. As an illustration, the production pollute the soil, water and air if not properly
of steel components for both hot-rolled and collected and disposed. The oil is also poor
cold-formed steel requires massive energy in biodegradability characteristics and
consumption. Hot rolling involves forming steel technically hazardous to workers. Other
billets at extreme temperatures, usually above potentially hazardous chemical wastes in IBS
1000°C so that the steel can be formed into production include paint, lacquer and epoxy.
the required shapes and sizes. Hot-rolled steel
is typically used as the I-shaped beams and The application of JIT or Lean Management
columns for steel structures with long spans. principles is crucial to ensure overall resource
savings and reduction of wastage in the
The production of cold-formed steel, on the production of IBS components. Since IBS-
other hand, involves another round of forming based construction involves three main stages
of the produced hot-rolled items. Even - production, transportation, and installation
though this stage requires much lower energy or erection - IBS components and elements
consumption, as it is being done at room will also be subjected to multiple handling
temperature, it also involves usage of heavy processes using lorries, cranes and other
machineries during the process of shaping heavy-duty lifting equipment.
the flat steel sheets into the required C- or
Z-shaped IBS cold-formed channels, usually As highlighted many times in various earlier
used for roof trusses, and more recently in sections, proper planning and coordination is
Malaysia, for walls and floor frames. very crucial for IBS projects to be successful.
Production, transportation and installation or
106
erection must be properly planned in advance despite the completion of the East Coast
in order to avoid unnecessary additional Expressway Phase 2 (Lebuhraya Pantai Timur
handling processes. JIT implementation can Phase 2). It is even more challenging for
help prevent double-handling at the plants, projects in Sabah and Sarawak to consider
where IBS components are manufactured, using IBS components given the unavailability
and at the sites, where construction activities of IBS manufacturers within reasonable
take place. For instance, double-handling distance. Rural areas in states where IBS
may entail having to unload IBS components manufacturing plants and facilities are few
and shift to a temporary storage while waiting and far between have the least incentive to
for the clearance to install components at a resort to IBS-based construction projects, as
particular on-site area. No doubt, avoiding IBS does not only involve the transportation
double-handling will help lower energy of bulky components but also mobilisation of
consumption by heavy machineries at cranes and other specialised lifting or hoisting
construction sites. of equipment to construction sites.
6.7 Several Unresolved Accessibility, As at 31 March 2017, 52% of the IBS

Connectivity and Logistics Issues in manufacturers registered with the IBS Centre
Rural Areas under the Assessment of IBS Status (AIS)
programme are located in Selangor and
IBS could prove to be more suitable and Johor. As such, it is not a surprise that workers
advantageous for projects in urban areas with adequate experience and knowledge in
as opposed to rural areas. In other words, IBS are concentrated in Selangor and Johor.
the location of construction sites and This backdrop makes IBS-based projects
the availability of or accessibility to IBS more viable in Selangor and Johor than
components and elements may affect their elsewhere in Malaysia. It is also worth noting
demand, as a great deal depends on the that IBS plants in Selangor cater to demand
communication and connectivity conditions in the Klang Valley comprising Selangor, Kuala
(land, riverain and sea transportation network) Lumpur and Putrajaya as well as some parts
and logistics. A study by Warszawski (1999) of Melaka and Negeri Sembilan, while those in
revealed that the suitable distance between Johor count construction companies in Johor
the IBS fabrication plant and a construction site and Singapore as their major clients.
should be within the radius of 50km to 100km.
The high cost of transporting IBS components Some of the IBS components that are produced
and elements from manufacturing plants based on the Modular Coordination principles
to construction sites could prove to be so (increments of 300mm or 3 Modulor for
prohibitive that it curtails the growth of the IBS horizontal dimensions) such as the lightweight
industry. IBS manufacturing plants could be so wall panels (600mm typical width), hollow core
far from construction sites that transportation, slabs (1200mm typical width), and precast
shipping and logistical costs would easily wipe slabs (2400mm typical width), among others,
out any potential savings gained from IBS are able to maximise the space in trailers, as the
adoption. lorries themselves have been internationally
set to carry 2400mm in maximum width. For
While the west coast of Peninsular Malaysia is non-standard components that differ greatly
well connected by the North-South Highway, in sizing combinations such as beams and
high transportation cost is still an issue for columns as well as full-height walls, the option
construction projects in the east coast states could be rather limited.
such as Kelantan, Terengganu and Pahang,
107
In addressing the issue of a limited number 6.8 Threats of Depletion of Finite Raw
of manufacturers in certain states, under Materials and Natural Resources
CITP, the federal government is targeting
more companies to venture into the IBS Natural resources are resources that exist
manufacturing segment equipped with AIS without actions of humankind as a separate
by offering financial and technical supports. entity such as air, atmosphere, raw fresh water,
One alternative solution is for builders to look sunlight, land and minerals; living organisms
into the possibility of organising on-site casting. such as vegetation and animals; and
With this approach, IBS manufacturing is resources that must be processed beforehand
undertaken on-site rather than at off-site such as metal ores, petroleum and most
permanent factories. Lifting equipment and forms of energy. In fact, every man-made
trailers are still required with this option, but product is composed of natural resources at
transportation and logistical costs can be its fundamental level. Some natural resources,
minimised. known as ubiquitous resources such as sunlight
and air, can be found everywhere, although
Instead of setting up a full-fledged and most resources are localised resources since
covered factory as well as using overhead or they only exist in small sporadic areas. Natural
gantry cranes, casting of IBS components can resources can be further classified in different
be done in an open area and supported by ways - inexhaustible vs. exhaustible/finite
mobile cranes. Ready-mixed concrete (RMC) resources, renewable vs. non-renewable
suppliers can be good substitutes for concrete resources, biotic vs. abiotic resources,
batching plants. This will reduce the costs of potential vs. actual vs. reserve, and stock
setting up on-site casting facilities, eliminating resources, among others.
the requirement for skill batchers, concrete lab
and aggregate bays. A study by the MPC in Although it is more commonly used in
2015 concluded that the breakeven quantity reference to farming, fishing, mining,
for an on-site casting facility is only 252 units water usage and fossil-fuel consumption,
of 20 x 70 terrace houses. It proves that for resource depletion typically occurs when the
a medium-sized property development, the consumption or usage of a resource is faster
on-site casting is viable to be considered than it can be replenished or when its rate
as an option. Nonetheless, manufacturing of usage exceeds the rate of replacement.
IBS components outside a factory still has Threats of depletion of natural resources due
limitations in terms of types of IBS components to uncontrolled mining of base materials
that can be produced on-site, relatively such as sand, granite and bauxite as well as
lower productivity, vulnerability to weather the issues surrounding non-sustainable timber
conditions and quality control issues. harvesting are real and present dangers for
the continuity of the IBS industry.
108
Table 6.2: List of natural resources required by the construction sector facing risks of depletion
and probability of occurrence
Natural Probability of Occurrence Remarks
Resources
Facing
Depletion
Risks
1 Raw Water Medium Even with a high rainfall rate distribution
of 971 billion cubic metres (BCM) and a
surface precipitation rate of 494 BCM
annually, water resources in Malaysia could
be negatively affected if not managed
properly. Long and severe droughts and
extreme pollution could cause interruptions
to the treated water supply.
2 Forest High Development, especially erection of
Ecosystem infrastructure and buildings, in forest
areas will affect the forest ecosystem with
implications for sources of food, water,
timber, herbal plants and carbon stock.
3 Forest Fauna High Overdevelopment in forest areas can
disrupt the natural habitat and lead to
Biodiversity forest fragmentation, which in turn will
in terms of bring down the fauna population due
species and to changes in the environment and
genetics difficulty to obtain food.
4 Rock Low Although reserves of rock aggregates
Aggregates are abundant, the resource sterilisation
risk exists as a result of development
in surrounding areas (where rock
aggregates are mined) or reserves of
rock aggregates sit on forest reserve
and/or water catchment areas, which
makes it almost impossible to extract.
5 Sand and Low Although reserves of sand and gravel
Gravel are abundant, the resource sterilisation
risk exists as a result of development
in surrounding areas (where sand and
gravel are mined) or sand and gravel
reserves sit on forest reserve and/or
water catchment areas, which makes it
almost impossible to extract.
6 Limestone Low Although limestone reserves for cement
(for cement) manufacturing are abundant, the
resource sterilisation risk exists as a result
of development in surrounding areas
(where limestone is mined) or limestone
reserves sit on forest reserve and/or
water catchment areas, which makes it
almost impossible to extract.
Source: Ministry of Natural Resources and Environment of Malaysia
109
6.9 Strengths-Shortcomings Balance
IBS can ensure greater compliance with safety,

health and sustainability regulations and
guidelines in line with one of the CITP’s targets
to reduce worksite fatalities and injuries by 50%
under the Quality, Safety and Professionalism
Strategic Thrust, as requirements for workers,
particularly for on-site works, could be
reduced from as low as 20% to as high as
40–50%, according to various studies. With
IBS, wastage of timber, followed by cement,
brick, soil and concrete is estimated to be less
than 5% of the total materials used.
Since IBS is a pathway to environmentally

sustainable construction excellence, it is
therefore part of the overall green and
sustainability agenda. Being highly technology
driven, energy efficient, more carbon neutral
and less labour intensive, IBS is expected to
play a significant role in achieving Malaysia’s
target of reducing per GDP emissions of GHGs,
especially CO2, by up to 40% by 2020 and
45% by 2030 against the 2005 levels. Given its
superior resource and energy efficiency, lower
material intensity and higher potential for the
application of the 3R concept, IBS helps bring
down expenditure on waste management
towards reducing adverse effects of waste
on safety, health, environment and general
aesthetics.
Assuming around 10% of the annual R&D

spending in the Engineering and Technology
domain is allocated to areas related to IBS
and sustainable materials combined, that
would translate into a GERD worth RM342
million, equivalent to 2.45% of total GERD in
2014. IBS is seen as an important enabler of
the construction of high-quality facilities and
amenities in record time, either as temporary
or permanent structures, in tandem with
one of the CITP’s initiatives, namely Improve
Workplace Safety and Workers’ Amenities
under the Quality, Safety and Professionalism
Strategic Thrust.
110
CONCLUSION
The CBA originally sets out to provide an of adequate government intervention and
overall picture or a summary of quantified market-oriented mechanisms.
positive and negative consequences of a
The time is now for the construction sector
proposed project, programme or policy,
to realise that the low-cost business model is
both quantitative/tangible and qualitative/
no longer tenable as Malaysia moves closer
intangible with appropriately estimated
to join the league of developed economies.
values. A CBA should, therefore, enable us to
This means a different ballgame for Malaysia
evaluate whether the present and/or future
in virtually all industries and sectors. As we
advantages of a project, programme or policy
are at the dawn of the Fourth Industrial
outweigh or trail its shortcomings (and by how
Revolution, to further improve our long-
much) as well as to rank various alternative
term competitiveness, cost-effectiveness,
projects, programmes or policies to the extent
productivity gains and income enhancement,
possible, once the individual cost-benefit ratio
all sectors must embrace industrialisation,
is established. The underlying idea is for the
mechanisation, automation and robotisation.
benefits to exceed costs for any difficulties
On the same token, an overly labour-intensive,
faced and risks assumed to be worthwhile and
resource-dependent and waste-laden
to justify the decision taken. For this purpose,
methodology must make way for a plant-
this particular CBA study for the IBS industry
based, energy-efficient, resource-saving but
was conducted adopting both the macro-
new-age job-generating technology such as
scale and micro-scale approaches by way of:
IBS in construction activities.
a. Literature reviews ranging from reading
IBS- and construction sector-related The interim difference between monetisable
articles, research reports, books and benefits and monetisable costs is estimated
other publications, to digging of the at RM2.8321 billion in the absence of the
archives of parliamentary hansards hypothetical boost to nominal private
and reviews of websites of relevant consumption worth RM18.979 billion,
organisations reflecting the impact of reduction in low-
b. A structured survey exercise, face- skilled foreign workers on the skilled labour
to-face interviews and focus group pool, and consequently the salary structure
sessions to obtain primary data among Malaysians. Nonetheless, the final
c. Requests of statistics and information positive difference ballooned to RM21.8111
from selected federal ministries, billion once this desirable effect on consumer
government agencies and statutory spending was added to the equation.
bodies as well as access to their Indeed, leaving aside the potential double-
databases if available in public domain edged sword impacts of reduction in foreign
for secondary data analysis workers on private consumption, the positive
difference between monetisable benefits
While full or partial IBS adoption has to deal
(RM84.5174) and monetisable costs (RM6.6443
with several stumbling blocks - in particular
billion) is at a staggering RM77.8731 billion. Still,
related to cost and incentive considerations,
judging from the monetisable outcomes alone
addiction to cheap foreign labour, economies
without taking into account the quantifiable
of scale, general industry preparedness
and qualitative outcomes, this CBA study has
and public acceptance - these obstacles
proven the superiority of IBS over any other
are surmountable with the right balance
building methods.
111
Overall Strengths-Shortcomings Balance
Summary of Monetisable Outcomes for the IBS Industry
Benefits/Desirable Effects Costs/Undesirable Effects
Brief Descriptions Amount Brief Descriptions Amount

Business Perspectives
Potential cost savings RM30.4 billion - -
that could be passed on
to end-customers, all or
partially.
Subtotal RM30.4 billion Subtotal Nil
Socio-economic and Political Perspectives
Emergence of new and/ RM25.0484 billion Hypothetical decline in RM75.041 billion
or sustainable expansion private consumption as
of existing sub-sectors in a result of fewer foreign
non-construction sectors, workers who form a
especially manufacturing sizeable consumer base
and services sectors. in Malaysia.
Estimated size in 2016 of the
manufacturing sub-sector
of finished IBS products and
components, equivalent
to about 9.1% of the
manufacturing sector.
Hypothetical increase RM18.979 billion - -
to the nominal private
consumption amount as a
result of reduction in low-
skilled migrant workers,
which should deepen the
skilled labour pool and
correspondingly boost
salaries and wages for
Malaysians, which is a
catalyst for consumer
spending.
Export potential of the RM14.1695 billion - -
IBS industry, especially
segments in manufacturing
and services sectors, which
implies a hypothetical
increase in exports of
manufactured goods.
Potential reduction in RM14.535 billion
remittances with fewer
foreign workers.
Subtotal RM72.7319 billion Subtotal RM75.041 billion
112
Public Administration and Governance Perspectives
Potential new source of RM22.5 million Potential reduction in RM0.5679 billion
revenue in the form of annual levy collection
licensing fees in the near with fewer registered
future, to be reflected foreign workers, whether
under the Licences and a temporary or even a
Permits sub-category of permanent loss of one
the Non-Tax Revenue revenue source for the
category. federal government,
which implies a
hypothetical cumulative
plunge in revenue by
almost 61% vs. the 2015
level.
Potential decline in RM6.0764 billion
exports to Indonesia and
India, Malaysia’s two
major foreign worker
sources and trading
partners in a hypothetical
retaliation to changes in
Malaysia’s immigration
and human resource
policies.
Subtotal RM0.0225 billion Subtotal RM6.6443 billion
Sustainability, Safety and Health Perspectives
Potential R&D spending RM342 million
on IBS and sustainable
materials, equivalent to
2.45% of total GERD in 2014.
Subtotal RM0.342 billion Subtotal Nil
Grand Total RM103.4964 Grand Total RM81.6853
billion billion
Source: JSSB
113
Summary of Quantifiable and Qualitative Outcomes for the IBS Industry
Source: JSSB
114
Mapping with 18 CITP Initiatives
To steer the construction sector transformation, 9. Reduce irresponsible waste during
the CITP 2016–2020 outlined 18 core initiatives construction (E5)
(and their specific recommendations) under
four Strategic Thrusts, namely Quality, Safety 10. Continue investment in human capital
and Professionalism (Q1 to Q4); Environmental development in construction (P1)
Sustainability (E1 to E5); Productivity (P1 to P6); a. Streamline construction-related training
and Internationalisation (I1 to I3) as follows: programmes in Malaysia
b. Strengthen reach, effectiveness and
1. Increase emphasis on quality and comprehensiveness of training
implement quality assessments (Q1)
11. Enhance control and balance of
2. Improve workplace safety and workers’ workforce supply (P2)
amenities (Q2) a. Implement regular industry manpower
a. Regulate minimum level of construction planning
workers’ amenities b. Introduce mechanisms to raise skills mix
b. Improve level of OSH at construction for intake of foreign workers
sites
12. Accelerate adoption of IBS,
3. Improve ease of doing business by mechanisation and modern practices
addressing regulatory constraints (Q3) (P3)
a. Streamline and enhance contractor a. Drive scale of IBS adoption via public-
registration sector projects
b. Strengthen OSC for all construction b. Propel IBS supply chain via economic
permits/approvals mechanisms
c. Consider setting up a tribunal for
construction permit dispute resolutions 13. Roll out technology advantage across
d. Enhance culture and practices by project life cycle (P4)
learning from decided construction a. Facilitate BIM adoption in the
cases construction industry via regulation
b. Establish reference centre to support
4. Promote and raise awareness of CITP the development and adoption of BIM
initiatives (Q4) and modern methods
c. Implement competency and learning
5. Drive innovation in sustainable management system
construction (E1)
14. Enhance availability of strategic
6. Drive compliance with environmental information via the National
sustainability ratings and requirements Construction Industry Information
(E2) Centre (NCIIC) (P5)
a. Enhance price and cost information on
7. Focus on public projects to lead the property resources
charge on sustainable practices (E3) b. Enhance awareness and certainty on
upcoming construction demand
8. Facilitate industry adoption of c. Integrate construction-related data into
sustainable practices (E4) the NCIIC
115
15. Advance SME/Bumiputera capacity 18. Support consortia formation and
and capability building (P6) strengthen overseas market intelligence
(I3)
16. Internationalise construction practices a. Facilitate consortia formation to
and standards (I1) promote the scale of Malaysian players
a. Introduce a Malaysian standard for b. Ensure focused targeting of high
construction specifications potential export markets
b. Heighten enforcement of compliance
with mandatory material standards In the CITP 2016–2020, notwithstanding
c. Enhance and expand adoption of the potential interrelationships with IBS in other
Malaysian Civil Engineering Standard chapters and initiatives, specific mention of IBS
Method of Measurement (MyCESMM) was only observed in the core initiative no. 12
according to the above list or the Initiative P3
17. Strengthen access to financing for under the Strategic Thrust entitled Productivity.
Malaysian industry champions going More precisely, the areas that the Initiative P3
abroad (I2) elaborates on are aligned with this CBA study
as follows:
Linking the CBA Study to the CITP
Productivity Strategic Thrust: Initiative P3 Cost-Benefit Analysis for the IBS Industry in
Malaysia
1 CITP captures the essence similar to Chapter 1: Introduction
the Singapore benchmark without Section 1.2: The Context and Circumstances
proposing changes to the IBS score
calculation
2 Recommendation of decoupling IBS Chapter 5: Public Administration and
procurement, separating it from the Governance Perspectives
main contract Section 5.1: IBS Upholds Good Governance
Section 5.2: IBS Helps Reduce Wastages,
Leakages and Other Negative Elements
Section 5.3: IBS Boosts Ease of Doing Business
3 Introduction of economic mechanisms Conclusion
to improve viability of IBS Policy Recommendations
4 Alignment with national programmes, Chapter 4: Socio-economic and Political
especially RMK11, towards raising Perspectives
productivity through greater adoption Section 4.5: Propelling Innovation, Creativity,
of automation - 2.5 times increase in Productivity and Professionalism
productivity to USD16,500 per worker
5 Heightened roles of key stakeholders Conclusion
and collaboration with the industry Policy Recommendations
6 Undertaking a CBA to encourage IBS The purpose of this CBA study
adoption
7 Finalising a variety of tax incentive Conclusion
proposals Policy Recommendations
Source: CITP 2016–2020, JSSB
116
Policy Recommendations
We can never emphasise enough the addition to targets recommended by
importance of convincing and securing the the Initiative P3: Accelerate Adoption
buy-in from private-sector players, in particular of IBS, Mechanisation and Modern
on the demand side of the equation since the Practices under the CITP 2016–2020;
private sector typically takes up more than any potential adverse effects on stock
60% of the total value of construction projects levels and prices should be addressed
and works in any given year. After years of by the strategic stockpiling framework,
pushing for voluntary adoption of IBS, perhaps at least in the short term
it is about time for the federal government to b. Making a minimum level of IBS score
consider introducing compulsory elements as one of the prerequisites vis-à-vis
where possible, especially when it involves builders, real estate developers and
private-sector players. After all, it is imperative contractors, particularly from the
for the demand of IBS products and private sector, for:
components to reach a critical mass in order • Issuance of Development Order
for the setting up of IBS plants throughout (DO), Certificates of Completion
the country to be a viable and sustainable and Compliance (CCCs) and/or
business venture in the long run. Certificates of Practical Completion
(CPCs)
Apart from this private sector-driven • Project financing applications from
prerequisite for the IBS agenda to meaningfully financial institutions
succeed, it is also crucial to reformulate and • Compliance with environmental
reframe a blueprint specific for the IBS industry sustainability ratings and requirements
and all its segments by making it more policy c. Devising a comprehensive framework
oriented, holistic and all-encompassing, for stockpiling strategies to mitigate
complete with ambitious but attainable, the construction sector’s boom-bust
measurable goals and a strategic action cycle, including the establishment
plan on how to achieve them over the short, of a strategic national stockpile or a
medium and long term. The overarching national repository of critical building
vision is to build a highly solid, competent, raw materials such as sand, cement,
reliable and sustainable IBS industry across all granite and steel as well as IBS
segments for a more effective contribution to components themselves that will help
the Malaysian economy as a whole. adjust and regulate the stock of IBS
components and ensure prices of IBS
Goals and initiatives may include: components remain within orderly and
stable ranges, preventing excessive
1. Whetting further the appetite for and
catapulting the ‘superiority’ of IBS
solutions, especially aimed at boosting 60
Financing and operational arrangements, typically
the demand side of the equation with long-term in nature, between the public authority
and one or more private-sector parties whereby the
emphasis on private-sector players by:
latter completes a public project or provides a public
a. Making it mandatory for all public-
service while assuming substantial funding, technical,
private partnership60 (PPP or 3P) operational and other types of risks. As such, PPP can
projects worth at least RM50 million to be closely related to concepts such as privatisation and
achieve a minimum of 70 IBS score, in contracting out/outsourcing of government services.
117
out-of-equilibrium conditions due to a. The Ministry of Works (MOW) and
sudden jump in demand or sudden all other relevant ministries and
shortage of IBS components and vice government agencies in the driving
versa seat, since the IBS industry cuts across
d. Introducing tax breaks, specifically for a variety of industries in all five major
purchasers of IBS-based buildings and economic sectors and given the strong
properties, valued at above a certain interconnectedness between these
amount and reducing further stamp sectors and construction activities
duties charged on these transactions; b. The CIDB-CREAM in an enabling and
and a tax holiday for IBS manufacturers facilitative role as well as IBS industry
expanding existing and/or building players, professional associations,
new qualifying IBS manufacturing research institutes and academia
plants61, among others
e. Harmonising all tax and non-tax 3. Developing the entire value and supply
incentives for the entire IBS industry, chain of the IBS industry from production
in particular if the threshold levels of of raw materials and semi-finished
compulsory IBS adoption are increased goods right up to manufacturing of
f. Introducing more ease of doing finished IBS products and components
business measures such as fast-track with a holistic and extensive supply-
approvals for IBS projects, in particular chain development framework through
applications with an IBS score of 70; enhanced vendor development,
regulatory, supervisory and monitoring consortia formation , overseas market
62
simplifications to avoid stifling over- intelligence (including market entry

regulation but not to the extent of an strategies) and access as well as
absolute oversight-free environment, provision of a highly conducive and
including elimination of overly complex facilitative operating environment and
and unnecessarily burdensome rules other competiveness strengthening
and regulations; and reduction of efforts. To further improve and sustain
bureaucratic hurdles related to the conducive operating environment,
cross-state border transportation especially for direct users (demand
of raw materials for IBS component perspectives) and producers
manufacturing, among others (supply perspectives) of IBS products,
components, techniques and elements,
g. Tightening the safety, health and measures may focus a great deal on
sustainability processes, procedures how to lower costs of doing business
and requirements with specific across the IBS value and supply chain
manuals, guidelines, codes of conduct, related to:
standards and best practices for all
segments of the IBS industry, especially
manufacturing and production,
transportation and installation of 61
finished IBS components and elements 62
Higher scale and synergies can be derived through
formation of consortia and other collaborative models
2. Heightened roles and responsibilities of between domestic and overseas players, SMEs and
large companies alike thanks to pooling of resources,
key stakeholders while ensuring
sharing or transfer of expertise and technology and
effective collaboration and
division of focus areas, among others.
coordination between:
118
a. Accessibility to cost-effective capital a. The processing and transformation of
via soft loans, easy financing schemes, raw materials and semi-finished goods
revolving funds and special grants, into finished IBS products, components,
among others, to facilitate the techniques and elements
establishment of new startups, defray b. The transportation, installation/erection
the liquidity burden on contractors who and other services of finished IBS
have to provide upfront deposit or products, components, techniques
advance payment for IBS component and elements onto structures at
procurement63, purchase of expensive construction sites
machineries and equipment, among
others 5. Intensifying boosters, specifically to
b. Accessibility to reasonably priced IBS further strengthen the IBS component
products and components for direct manufacturing segment, in particular
IBS users, in particular builders, real to increase accessibility to and
estate developers and contractors availability of finished IBS products,
c. Accessibility to reasonably priced components, techniques and elements
machineries and equipment, especially for the construction sector in rural
for direct IBS producers such as areas in Peninsular Malaysia as well as
component manufacturing companies large parts of Sabah and Sarawak with
and providers of all IBS-related efforts such as:
services by aggressively undertaking a. Provision of easy financing schemes by
recommendation no. 4 below or financial institutions and special
lowering import duties64 on qualifying grants and/or soft loans by relevant
machineries and equipment65, making government agencies
it cheaper either for new business b. Introduction of tax breaks or tax
ventures to buy new ones or existing holidays on profits of IBS component
business establishments manufacturers beyond a certain
to replace outworn and obsolete ones, threshold and/or purchases of raw
all of which will help improve materials and semi-finished inputs and/
productivity, effectiveness and or purchases of machineries and
efficiency equipment
d. Accessibility to abundant and c. Establishment of a one-stop centre
affordable natural resources, raw (OSC) for registered IBS component
materials and semi-finished inputs manufacturers
e. Sourcing of skilled or at least semi-skilled d. Accreditation and certification of IBS
workers at reasonable costs manufacturer
f. Accessibility to transportation, logistics,
storage, maintenance and other 63
related services at reasonable costs 64
Effective 11 June 2015, import duties for three tariff
codes, namely HS 8429.51.000, HS 8430.41.000 and HS
8431.43.00 have been slashed to 5% from 10%, although
4. As part of the heavy industry66 agenda
import duties for the remaining seven tariff codes as
aggressively pushing for the creation
requested by MBAM to remain between 20%-30%.
and expansion of a high value-added 65
manufacturing sub-sector of producing 66
While it helps an economy to move up the value chain
machineries and equipment with an and achieve the developed nation status, a heavy
extensive and highly SME-friendly value industry can be more cyclical in nature, particularly in
and supply chain, especially for use in: terms of capital investments and employment.
119
e. Streamlining the payment methods, sustainable materials in construction
processes and procedures to reduce projects and works, accompanied with
risks of cash flow crunch and other more rigorous rules and regulations
causes of business failure among IBS
manufacturers c. Developing and setting a certain
f. Increasing standardisation of designs threshold for the content of SRR, part-
and finished IBS products, components, recycled and/or sustainable materials
techniques and elements as an eligibility condition for soft loans,
easy financing schemes, revolving
6. Invigorating R&D activities by: funds and special grants
a. Offering specific incentives in the form d. Introducing taxation mechanisms on
of grants and/or tax breaks for IBS- excessive C&D waste beyond certain
oriented R&D activities to develop new thresholds to be determined to ‘force’
technologies and techniques that will usage of SRR, part-recycled and
spur further creativity, innovation and sustainable materials
productivity e. Establishing dedicated recycling plants
b. Forging collaboration and cooperation for C&D waste on a standalone basis
with other centres of research or in collaboration with existing landfill
excellence, research institutes and operators, both public and private
think tanks
8. Developing, up-skilling and deepening
7. Encouraging usage of salvageable, the domestic pool of IBS talents and
recyclable and reusable (SRR) and professionals by:
part- recycled materials for construction a. Devising a detailed and forward-
such as aggregates, plastics, glass, looking manpower framework and
pulverised fuel ash, wood-based planning specific for the IBS industry
products, cardboard, plasterboard, in all segments to enable effective
gypsum, concretes, metals (in particular resource allocations and development
steel, aluminium and copper), organics, of demand-responsive, requirement-
newspapers, bottle bricks and shipping matching and world-class training
(steel) containers, among others, as well modules and curriculum contents; and
as sustainable materials that can be to minimise labour demand-supply
grown on a large scale in plantations or mismatches, among others
found in abundance in the Malaysian b. Constantly reviewing current
and regional tropical forests such as requirements for manpower and skills
timber, bamboo and kenaf, among sets, and anticipating future needs
others, by: across all segments of the IBS industry
a. Introducing a specific bonus or reward c. Incentivising IBS-related training and
system in construction-related skills development efforts undertaken
certifications, especially the GBI, to for the workforce of all categories
ensure the construction of energy- of stakeholders and value-chain
efficient, low carbon and economically, participants, in particular those
socially and environmentally involved in IBS-related construction,
sustainable buildings and infrastructure manufacturing and services activities,
b. Formulating specific government including lowering the costs of securing
policies that recommend or require official accreditation and certification
usage of SRR, part-recycled and for staff
120
d. Encouraging structured and specialist d. Reduce Malaysia’s overdependence
apprenticeship programmes jointly on foreign labour, especially unskilled
developed by the CIDB, industry workers, while ensuring minimal
players and academia migration from one sector to another
e. Introducing an inter-company e. Step up national productivity to be on
secondment programme across the par with the developed world
IBS industry f. Upgrade the knowledge and skills of
f. Imposing stricter rules and regulations the Malaysian workforce
related to the hiring of foreign g. Boost the national wage structure and
workers and making it much costlier ultimately household incomes
in order to push businesses to seek
higher productivity and efficiencies
in technology-based and advanced
approaches such as IBS as well as to
give priority to citizen workers in building
their workforce
9. Revolutionising the Malaysian economy

as a whole by industrialising,
mechanising and automating further
its base and structure across all
sectors, characterised by an even
greater usage of futuristic and green
technology and cyber-physical
systems for long-term sustainability
instead of short-term gains, as the world
is at the dawn of the Fourth Industrial
Revolution67 in order to:
a. Accelerate Malaysia’s climb upwards
the global value chain
b. Achieve higher material and resource
optimisation as well as energy and
waste efficiency in order to help:
67
According to the WEF, the First Industrial Revolution
• Lower overall operating and production
leveraged on water and steam power to mechanise
costs (a contributing factor towards production. The Second Revolution resorted to electric
keeping inflation in check) power and division of labour to enable mass production.
• Minimise wastages and leakages in all The Third Revolution capitalised on electronics and IT
aspects to automate production. Building on the foundations
• Lessen carbon emissions, carbon strengthened by the Third Revolution, especially the
digital revolution, the Fourth Revolution will perfect that
footprints and other adverse impacts
revolution and intermix and amalgamate a variety of
on the environment
technologies into one, blurring the lines further between
c. Ensure cleaner, safer and more physical, biochemical and digital spheres while
conducive business, working and living disrupting even further many aspects and approaches
environments with higher quality of life in business and human life.
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APPENDIX 1: QUESTIONNAIRE FOR
CATEGORY 1
Questionnaire for Construction-related Companies
I. BACKGROUND INFORMATION
1. Full business or establishment name as well as date(s) of establishment/incorporation and

commencement of operations.
2. List of ALL core activities and/or products and services that your organisation undertakes
and/or sells and provides.
3. Geographical (Malaysia and/or abroad) and spatial (urban and/or rural) distribution in terms
of value (RM) and/or percentage (%) of your organisation:
(a) core activities __________________

(b) products and/or services __________________
(c) turnover __________________
4. Total number of headcount at your organisation as at 31 July 2016 or the latest possible date
(to be indicated).
5. Breakdown of your organisation's workforce in numbers and percentage (%) as at 31 July

2016 or the latest possible date (to be indicated) for:
(a) executive/management vs. non-executive/unionised staff __________________

(b) unskilled vs. semi-skilled vs. skilled/specialised workers __________________
(c) citizens vs. foreigners __________________
6. The average IBS score of your organisation's construction works and projects for the last five
(5) years as at 31 July 2016 or the latest possible date (to be indicated) according to the
CIDB's most updated IBS content scoring system.
II. FINANCIAL PERFORMANCE AND CUSTOMER RELATIONS
1. Indicate changes (+/-) in general that your organisation has experienced from 2010 through
2015, i.e. in the last calendar year (e.g. 2015) vs. the previous year (e.g. 2014) in terms of value
(RM) and/or percentage (%) for:
(a) order book or outstanding customer orders __________________
122
(b) cash flows __________________
(c) turnover __________________
(d) gross earnings __________________
(e) tax incentives (the exact type(s) and amount to be specified) __________________
(f) net earnings __________________
(g) specific efficiency and effectiveness metrics (to be specified) __________________
(h) specific project risks (to be specified) __________________
(i) overall business risks __________________
2. Indicate changes (+/-) brought about by IBS that your organisation has experienced from
2010 through 2015, i.e. in the last calendar year (e.g. 2015) vs. the previous year (e.g. 2014) in
terms of value (RM) and/or percentage (%) for:
(b) cash flows __________________
(c) turnover __________________
(d) gross earnings __________________
(f) net earnings __________________
(h) specific project risks (to be specified) __________________
(i) overall business risks __________________
(a) staff costs/payroll including salaries, allowances and benefits __________________
(b) costs of utilities - water, electricity, sewerage,
telecommunications, Internet __________________
(c) debt payments or loan servicing __________________
(d) insurance and legal costs __________________
(e) promotional, marketing and advertising costs __________________
(f) purchase of machineries and equipment __________________
(g) maintenance, depreciation and amortisation costs of
machineries and equipment __________________
(h) rental payments on lease of machineries and equipment __________________
(i) purchase of or rental payments for premises __________________
123
(j) costs of building materials including raw materials,
natural resources and semi-finished goods __________________
(k) overall construction costs __________________
(l) others, if any (to be specified) __________________
4. Indicate your organisation's pricing structure components for construction works and projects
in terms of percentage (%).
5. In the event of indiscriminate incorporation by IBS manufacturers, assemblers, importers and

distributors of all costs involved into their pricing structure, indicate:
(a) instances when your organisation has to bear the brunt
(b) the impact on your overall construction costs and delivery costs to customers or final
prices for customers in value (RM) and/or percentage (%)
6. Acquisition and retention of your organisation's customers thanks to IBS in terms of:
(a) value (RM), frequency (number of times) and number of
customers for new orders _____________________
(b) value (RM), frequency (number of times) and number of
customers for repeat orders _____________________
7. Comparing IBS to Conventional Building Method (CBM), indicate your organisation's

estimated satisfaction for:
(a) quality of construction and finishings in value (RM)
and/or percentage (%) _____________________
(b) risks of defects on buildings and infrastructure
in value (RM) and/or percentage (%) _____________________
(c) longevity of buildings and infrastructure in number of years _____________________
8. With the adoption of IBS, indicate the value (RM) and/or percentage (%) on average of your
organisation's:
(a) savings of overall construction costs which are
transferable to customers __________________
(b) reduction in project risks __________________
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9. With the adoption of IBS, indicate your organisation's record vis-à-vis respect of project
completion and customer delivery schedules in terms of:
(a) reduction in average time (weeks or months) for each
on-site activity and total on-site activities of construction projects __________________
(b) percentage (%) of ahead-of-schedule and on-time
completed and customer delivered projects out of total __________________
10. With the adoption of IBS, indicate estimates of your organisation's understanding of customer
needs and requirements in terms of percentage (%) out of 100%.
11. Based on your organisation's customer feedback, indicate estimates of public satisfaction
towards IBS-based vs. CBM-based infrastructure and buildings in terms of value (RM) and/or
percentage (%) for the following aspects:
(a) overall quality of infrastructure and buildings __________________
(b) probability of cracks and leakages __________________
(c) degree of aesthetic value in architecture and designs __________________
(d) economicality and flexibility of undertaking renovations/changes __________________
(e) suitableness and responsiveness to creativity and innovation __________________
III. SOCIOECONOMICS
1. Was your organisation established to bank on any opportunities within the IBS industry? If
YES, detail out these opportunities as well as your progress and success stories since
inception.
2. Detail out statistics each year from 2010 through 2015 of your organisation's dealings
with small- and medium-enterprises (SMEs):
(a) number of establishments __________________
(b) segments, industries or sectors within which these SMEs operate __________________
(c) nature of transactions/dealings __________________
(d) average value (RM) of transactions/dealings __________________
3. Indicate estimates in value (RM) the potential of overseas demand for your organisation's
products and/or services, if any.
125
4. Indicate estimates in value (RM) the potential of creativity and innovation for your
organisation's products and/or services, if any.
5. Indicate estimates for the reduction in prices of infrastructure, buildings and properties
completed by your organisation for customer delivery thanks to usage of IBS products,
components, techniques and elements in terms of:
(a) value (RM) __________________
(b) percentage (%) __________________
IV. HUMAN CAPITAL: MINDSET, KNOWLEDGE, EXPERTISE AND EXPERIENCE
1. Indicate the optimal and average number of workers at your construction site(s) according
to the size of project(s).
2010 through 2015, i.e. in the last calendar year (e.g. 2015) vs. the previous year (e.g. 2014)
in the workforce size for:
the workforce's mean and median monthly salary for:
4. With the adoption of IBS, detail out either at your organisation specifically or observed in the
country in general:
(a) all types of new occupations or professions created
(b) all types of new occupations or professions destroyed
126
5. Indicate your organisation's estimates of changes (+/-) in value (RM) and/or percentage (%)
for the impact of 4 (a) and (b) above on:
(a) sources of income of Malaysian and foreign workers __________________________
(b) Malaysia's overall labour force and employment __________________________
6. With the adoption of IBS, indicate estimates of currently observed total labour savings or
labour reduction on average at your organisation in terms of:
(a) value (RM) __________________
(b) number of workers __________________
(c) percentage (%) for (a) and (b) __________________
7. With the adoption of IBS, indicate projections of total labour savings or labour reduction on
average at your organisation in the medium term, in terms of:
(a) value (RM) __________________
(b) number of workers __________________
(c) percentage (%) for (a) and (b) __________________
8. With the adoption of IBS, provide the breakdown of currently observed labour savings or
labour reduction on average at your organisation in terms of value (RM) and number of
workers for:
9. Indicate your organisation's estimates of changes (+/-) in terms of value (RM) and percentage
(%) for:
(a) currently observed productivity and professionalism __________________
(b) projected productivity and professionalism in the medium term __________________
10. Indicate your organisation's estimates for risks of human errors at the design, manufacturing
and installation/erection phases in terms of value (RM) and probability.
127
11. Indicate your organisation's estimates of changes (+/-) for the impact on IBS acceptance
and ultimately usage in terms of value (RM) and/or percentage (%) due to:
(a) lack of familiarity with, knowledge of and awareness about IBS __________________
(b) shortage of IBS trained construction professionals
at reasonable wages __________________
(c) misperceptions that IBS could lead to higher overall construction
costs and project risks (and list the real causes of such
misperceptions) __________________
(d) general resistance to change __________________
V. CORPORATE GOVERNANCE AND COMPETITIVE FORCES
1. Indicate estimates for annual contributions of IBS on average at your organisation in terms
of value (RM) to:
(a) the conduct of good corporate governance __________________
(b) the reduction of wastages, leakages and other
negative elements in construction works and projects __________________
2. With the adoption of IBS, indicate estimates of the reduction in your organisation's construction
works and projects in terms of value (RM), number of man-days and percentage (%) for:
(a) variation orders and/or additional rectification works __________________
(b) construction period __________________
(c) incidences of delays __________________
3. Indicate in what way the IBS implementation contributes to the nation's public delivery
enhancement and your organisation's estimates of this contribution in terms of value (RM)
and percentage (%).
4. With the adoption of IBS, indicate changes (+/-) to the amount of levies on foreign workers
that your organisation has paid from 2010 through 2015, i.e. in the last calendar (e.g. 2015)
vs. the previous year (e.g. 2014) in terms of value (RM) and percentage (%).
5. With the adoption of IBS, indicate the amount of expenses in value (RM) that your organisation
has to incur in order to:
(a) outline an implementation framework to ensure
consistency with international standards and best practices __________________
128
(b) comply with all relevant rules and regulations __________________
6. Describe levels of competition within your segment of the IBS industry in Malaysia:
(a) total number of competitors, specifying whether
domestic or foreign __________________
(b) top 3 segment leaders and their headquarters or
centre(s) of activities __________________
(c) barriers to entry - startup costs, capital intensity, tax restrictions, regulatory burden
and other government constraints, intellectual property, agreements with distributors
and/or suppliers, etc __________________
(d) balance of supply - inventory management,
price-setting powers - economies of scale,
supply adequacy, cut-throat competition, etc __________________
VI. SAFETY, HEALTH AND ENVIRONMENT
1. List all international and domestic guidelines, standards and best practices as well as acts
and enactments related to safety, health and environment that your organisation has to
comply with.
2. Indicate estimates in value (RM) the extent to which IBS enables your organisation to comply
better with cleanliness, safety, health, sustainability and "green" guidelines, standards and
best practices while specifying how it works.
3. List all IBS products and components made of sustainable materials (relevant certifications
shall be indicated) that your organisation uses in construction works and projects as well as
indicate estimates of their usage in terms of:
(a) value (RM) __________________
(b) percentage (%), i.e. share of overall construction costs __________________
4. Indicate your organisation's overall spending on research and development (R&D) and R&D
spending on sustainable materials in terms of:
(a) value (RM) _________________
(b) percentage (%), i.e. share of total expenditure or overall R&D
spending respectively _________________
129
5. Indicate cost savings on resource use and waste management that your organisation
currently enjoys in terms of:
(a) value (RM) __________________
(b) percentage (%), i.e. share of total operating expenditure __________________
6. Indicate your organisation's spending on prefabricated solutions in providing high-standard

facilities and amenities for workers in terms of:
(a) value (RM) __________________
7. Comparing IBS to CBM, list all machineries and equipment that your organisation works with
and indicate estimates of the impact of their usage on health, safety and sustainability
aspects in terms of value (RM) and percentage (%)
8. Comparing IBS to CBM, indicate differences in usage of utilities by your organisation notably
energy and water in terms of:
(a) value (RM) __________________
(b) respective measurement metrics __________________
9. Indicate differences between urban and rural areas for your organisation's IBS-based
construction works and projects in terms of:
(a) value (RM) __________________
(b) ratio (%) __________________
10. List all natural resources used by your organisation that are faced with depletion threats and
indicate estimates in terms of value (RM) and probability of risks of natural resource depletion.
130
CATEGORY 2
Questionnaire for Producers, Importers, Suppliers and/
or Distributors of Raw Materials, Natural Resources
and Semi-Finished Goods for the Purpose Of IBS
Manufacturing and Production

(a) core activities _________________
(b) products and/or services _________________
(c) turnover _________________
(to be indicated).
5. Breakdown of your organisation's workforce in numbers and/or percentage (%) as at 31 July

a) executive/management vs. non-executive/unionised staff _________________
b) unskilled vs. semi-skilled vs. skilled/specialised workers _________________
c) citizens vs. foreigners _________________
6. Minimum amount (RM) of initial investments/capital outlay to reach reasonable economies

of scale as well as number of years to break even and/or recoup investments.
131
(a) order book or outstanding customer orders _________________
(b) cash flows _________________
(c) turnover _________________
(d) gross earnings _________________
(e) tax incentives (the exact type(s) and amount to be specified) _________________
(f) net earnings _________________
(g) specific efficiency and effectiveness metrics (to be specified) _________________
(h) overall business risks _________________
(b) cash flows _________________
(c) turnover _________________
(d) gross earnings _________________
(f) net earnings _________________
(a) staff costs/payroll including salaries, allowances and benefits _________________
telecommunications, Internet _________________
(c) debt payments or loan servicing _________________
(d) insurance and legal costs _________________
(e) promotional, marketing and advertising costs _________________
(f) purchase of machineries and equipment _________________
132
(g) maintenance, depreciation and amortisation
costs of machineries and equipment _________________
(h) rental payments on lease of machineries and equipment _________________
(i) purchase of or rental payments for premises _________________
(j) costs of raw materials, natural resources and semi-finished goods _________________
(k) others, if any (to be specified) _________________
(a) value (RM), frequency (number of times)
and number of customers for new orders _________________
(b) value (RM), frequency (number of times)
and number of customers for repeat orders _________________
III. SOCIOECONOMICS
1. Was your organisation established to bank on any opportunities within the IBS industry? If YES,
detail out these opportunities as well as your progress and success stories since inception.
2. Detail out the following statistics each year from 2010 through 2015 of your organisation's
dealings with small- and medium-enterprises (SMEs):
(a) number of establishments _________________
(b) segments, industries or sectors within which these SMEs operate _________________
(c) nature of transactions/dealings _________________
(d) average value (RM) of transactions/dealings _________________

3. Indicate estimates in value (RM) the potential of overseas demand for your organisation's \
4. Indicate estimates in value (RM) the potential of creativity and innovation for your organisation's
1. Indicate your organisation's optimal and average number of workers.
133
(a) executive/management vs. non-executive/unionised staff _________________
(b) unskilled vs. semi-skilled vs. skilled/specialised workers _________________
(c) citizens vs. foreigners _________________
country in general:
(a) all types of new occupations or professions created __________________
(b) all types of existing occupations or professions destroyed __________________
(a) sources of income of Malaysian and foreign workers _________________
(b) Malaysia's overall labour force and employment _________________
6. Indicate your organisation's estimates of changes (+/-) in terms of value (RM) an/or
percentage (%) for:
134
(b) shortage of IBS-trained construction
professionals at reasonable wages __________________
(c) misperceptions that IBS could lead to higher overall
construction costs and project risks (and list the real causes
of such misperceptions) __________________
1.Indicate estimates for annual contributions of IBS on average at your organisation in

terms of value (RM) to:
(b) the reduction of wastages, leakages and other negative elements __________________
and/or percentage (%).
vs. the previous year (e.g. 2014) in terms of value (RM) and/or percentage (%).
consistency with international standards and best practices __________________
(a) Total number of competitors, specifying whether
domestic or foreign _________________
(b) Top 3 segment leaders and their headquarters
or centre(s) of activities _________________
135
(c) Barriers to entry - startup costs, capital intensity,
tax restrictions, regulatory burden and other
government constraints, intellectual property,
agreements with distributors and/or suppliers, etc _________________
(d) Balance of supply - inventory management, price-setting
powers - economies of scale, supply adequacy,
cut-throat competition, etc _________________
comply with.
3. List all sustainable materials (relevant certifications shall be indicated) that your organisation
works with and indicate estimates of their usage in terms of:
(a) value (RM) _________________
(b) percentage (%), i.e. share of total expenditure __________________
(a) value (RM) _________________
(b) percentage (%), i.e. share of total
expenditure or overall R&D spending respectively _________________
5. Indicate changes (+/-) to your organisation's spending on natural resources and waste
management from 2010 through 2015, i.e. in the last calendar year (e.g. 2015) vs. the previous
year (e.g. 2014) in terms of:
(a) value (RM) _________________
(b) percentage (%), i.e. share of total operating expenditure _________________
136
(a) value (RM) _________________
7. Comparing IBS to Conventional Building Method (CBM), list all machineries and equipment
that your organisation works with and indicate estimates of the impact of their usage on
health, safety and sustainability aspects in terms of value (RM) and percentage (%).
(a) value (RM) _________________
(b) respective measurement metrics _________________
137
CATEGORY 3
Questionnaire for Manufacturers, Importers, Distributors
and/or Lessors of Machineries and Equipment for IBS
Manufacturing and Production

(a) core activities _________________
(b) products and/or services _________________
(c) turnover _________________
4. Total number of headcount at your organisation as at 31 July 2016 or the latest possible
date (to be indicated).

(a) executive vs. non-executive staff _________________

138
(b) cash flows _________________
(c) turnover _________________
(d) gross earnings _________________
(f) net earnings _________________
(b) cash flows _________________
(c) turnover _________________
(d) gross earnings _________________
(f) net earnings _________________
(a) staff costs/payroll including salaries, allowances and benefits _________________
telecommunications, Internet _________________
(c) debt payments or loan servicing _________________
(d) insurance and legal costs _________________
(e) promotional, marketing and advertising costs _________________
(f) purchase of machineries and equipment _________________
139
costs of machineries and equipment _________________
(h) rental payments on lease of machineries and equipment _________________
(i) purchase of or rental payments for premises _________________
(j) costs of raw materials, natural resources and semi-finished goods _________________
(k) others, if any (to be specified) _________________
(a) value (RM), frequency (number of times)
and number of customers for new orders __________________
and number of customers for repeat orders __________________
III. SOCIOECONOMICS
2. Detail out the following statistics each year from 2010 through 2015 of your organisation's
dealings with small and medium enterprises (SMEs):
(a) number of establishments _________________
(b) segments, industries or sectors within which these SMEs operate _________________
(c) nature of transactions/dealings _________________
(d) average value (RM) of transactions/dealings _________________
4. Indicate estimates in value (RM) the potential of creativity and innovation for your
organisation's products and/or services, if any.
140
country in general:
(b) all types of existing occupations or professions destroyed _________________
(a) sources of income of Malaysian and foreign workers __________________
(b) Malaysia's overall labour force and employment __________________
6. Indicate your organisation's estimates of changes (+/-) in terms of value (RM) and/or
percentage (%) for:
(a) currently observed productivity and professionalism _________________
(b) projected productivity and professionalism in the medium term _________________
141
(c) misperceptions that IBS could lead to higher
overall construction costs and project
risks (and list the real causes of such misperceptions) _________________
(d) general resistance to change _________________
of value (RM) to:
consistency with international standards and best practices _________________
(a) total number of competitors, specifying
whether domestic or foreign __________________
(b) top 3 segment leaders and their headquarters
or centre(s) of activities _________________
142
(c) barriers to entry - startup costs, capital intensity,
agreements with distributors and/or suppliers, etc _________________
price-setting powers, economies of scale, supply
adequacy, cut-throat competition, etc _________________
comply with.
works with and indicate estimates of their usage in terms of:
(a) value (RM) _________________
(a) value (RM) __________________
(b) percentage(%), i.e. share of total
expenditure or overall R&D spending respectively _________________
(a) value (RM) __________________
143
(a) value (RM) _________________
7. Comparing IBS to conventional building method (CBM), list all machineries and equipment
that your organisation produces, supplies and/or works with as well as indicate estimates of
the impact of their usage on health, safety and sustainability aspects in terms of value (RM)
(a) value (RM) _________________
(b) respective measurement metrics _________________
144
CATEGORY 4
Category 4: Questionnaire for Manufacturers,
Assemblers, Importers and/or Distributors of Finished IBS
Products, Components, Techniques and Elements

(c) turnover __________________


145
1. Indicate changes (+/-) that your organisation has experienced from 2010 through 2015, i.e. in
the last calendar year (e.g. 2015) vs. the previous year (e.g. 2014) in terms of value (RM) and/
or percentage (%) for:
(b) cash flows __________________
(c) turnover __________________
(d) gross earnings __________________
(f) net earnings __________________
(h) overall business risks __________________
2. Indicate changes (+/-) that your organisation has experienced from 2010 through 2015, i.e. in
the last calendar year (e.g. 2015) vs. the previous year (e.g. 2014) in terms of value (RM) and/
or percentage (%) for:
(a) staff costs/payroll including salaries, allowances and benefits __________________
telecommunications, Internet __________________
(c) debt payments or loan servicing __________________
(d) insurance and legal costs __________________
(e) promotional, marketing and advertising costs __________________
(f) purchase of machineries and equipment __________________
costs of machineries and equipment __________________
(h) rental payments on lease of machineries and equipment __________________
(i) purchase of or rental payments for premises __________________
(j) costs of raw materials, natural resources and semi-finished goods __________________
(k) others, if any (to be specified) __________________
3. Indicate your organisation's pricing structure components for ex-factory IBS products
and elements in terms of percentage (%).
146
(a) value (RM), frequency (number of times) and
number of customers for new orders __________________
and number of customers for repeat orders __________________
5. Indicate estimates of your organisation's understanding of customer needs and requirements

in terms of percentage (%) out of 100%.

towards IBS-based infrastructure and buildings in terms of value (RM) and/or percentage (%)
for the following aspects:
(a) overall quality of infrastructure and buildings __________________
(b) probability of cracks and leakages __________________
(d) economicality and flexibility of undertaking renovations/changes __________________
(e) suitableness and responsiveness to creativity and innovation __________________
III. SOCIOECONOMICS
1.Was your organisation established to bank on any opportunities within the IBS industry? If YES,
2. Detail out statistics each year from 2010 through 2015 of your organisation's dealings with
small- and medium-enterprises (SMEs):
147
5. Indicate estimates for the reduction in prices of completed infrastructure, buildings and
properties for customer delivery taking into account prices of IBS products, components,
techniques and elements manufactured by your organisation in terms of:
(a) value (RM) __________________
(b) percentage (%) __________________
country in general:
(b) Malaysia's overall labour force and employment __________________

148
6. Indicate your organisation's estimates of changes (+/-) in terms of value (RM) and/or
percentage (%) for:
construction costs and project risks (and
list the real causes of such misperceptions) __________________
1. Indicate estimates for annual contributions of IBS on average at your organisation in terms of
value (RM) to:
3. Indicate changes (+/-) to the amount of levies on foreign workers that your organisation has
paid from 2010 through 2015, i.e. in the last calendar (e.g. 2015) vs. the previous year (e.g.
2014) in terms of value (RM) and/or percentage (%).
149
(a) outline an implementation framework to ensure consistency
with international standards and best practices __________________
domestic or foreign __________________
or centre(s) of activities __________________
agreements with distributors and/or suppliers, etc __________________
(d) balance of supply - inventory management, price-setting
powers - economies of scale, supply adequacy,
cut-throat competition, etc __________________
comply with.
3. List all chemicals and chemical products, and sustainable materials (relevant certifications
shall be indicated) that your organisation uses to manufacture/produce IBS products,
components, techniques and elements as well as indicate estimates of their usage in terms
of:
(a) value (RM) __________________
150
(a) value (RM) __________________
(b) percentage(%), i.e. share of total expenditure
or overall R&D spending respectively __________________
(a) value (RM) __________________

(a) value (RM) __________________
7. List all machineries and equipment that your organisation works with and indicate estimates
of the impact of their usage on health, safety and sustainability aspects in terms of value (RM)
8. Indicate changes (+/-) to your organisation's spending on or usage of utilities notably energy
and water from 2010 through 2015, i.e. in the last calendar (e.g. 2015) vs. the previous year
(e.g. 2014) in terms of:
(a) value (RM) __________________
151
CATEGORY 5
Questionnaire for Providers of Transportation, Storage,
Installation and Other Services for Use by Ex-Factory IBS
Products, Components, Techniques and Elements

(a) core activities _______________________
(b) products and/or services _______________________
(c) turnover _______________________
(to be indicated).

(a) executive/management vs. non-executive/unionised staff _______________________
(b) unskilled vs. semi-skilled vs. skilled/specialised workers _________________________
(c) citizens vs. foreigners _________________________

152
(b) cash flows __________________
(c) turnover __________________
(d) gross earnings __________________
(f) net earnings __________________
(b) cash flows __________________
(c) turnover __________________
(d) gross earnings __________________
(f) net earnings __________________
(a) staff costs/payroll including salaries, allowances and benefits ____________________
telecommunications, Internet ____________________
(c) debt payments or loan servicing ____________________
(d) insurance and legal costs ____________________
(e) promotional, marketing and advertising costs ____________________
(f) purchase of machineries and equipment ____________________
153
costs of machineries and equipment ____________________
(h) rental payments on lease of machineries and equipment ____________________
(i) purchase of or rental payments for premises ____________________
(j) costs of raw materials, natural resources and
semi-finished goods ____________________
(k) others, if any (to be specified) ____________________
(a) value (RM), frequency (number of times) and
number of customers for new orders ____________________
(b) value (RM), frequency (number of times) and
number of customers for repeat orders ____________________
5. Indicate estimates of your organisation's understanding of customer needs and requirements

in terms of percentage (%) out of 100%.

towards IBS-based infrastructure and buildings in terms of value (RM) and/or percentage (%)
for the following aspects:
(a) overall quality of infrastructure and buildings ____________________
(b) probability of cracks and leakages ____________________
(c) degree of aesthetic value in architecture and designs ____________________
(d) economicality and flexibility of undertaking
renovations/changes ____________________
(e) suitableness and responsiveness to creativity and innovation ____________________
III. SOCIOECONOMICS
(a) number of establishments ____________________
(b) segments, industries or sectors within
154
which these SMEs operate ____________________
(c) nature of transactions/dealings ____________________
(d) average value (RM) of transactions/dealings ____________________
5. Indicate estimates for the reduction in prices of completed infrastructure, buildings and
properties for customer delivery taking into account tariffs of your organisation's rendered
services in terms of:
(a) value (RM) ____________________
(b) percentage (%) ____________________
(a) executive/management vs. non-executive/unionised staff ____________________
(b) unskilled vs. semi-skilled vs. skilled/specialised workers ____________________
(c) citizens vs. foreigners ____________________
(a) executive/management vs. non-executive/unionised staff ____________________
(b) unskilled vs. semi-skilled vs. skilled/specialised workers ____________________
(c) citizens vs. foreigners ____________________
155
country in general:
(a) all types of new occupations or professions created ____________________
(b) all types of existing occupations or professions destroyed ____________________
(a) sources of income of Malaysian and foreign workers ____________________
(b) Malaysia's overall labour force and employment ____________________
(%) for:
(b) projected productivity and professionalism in the medium term ___________________
(a) lack of familiarity with, knowledge of and
awareness about IBS ____________________
(b) shortage of IBS trained construction professionals at
reasonable wages ____________________
construction costs and project risks (and list
the real causes of such misperceptions) ____________________
(d) general resistance to change ____________________
of value (RM) to:
(a) the conduct of good corporate governance ____________________
156
(b) the reduction of wastages, leakages and
other negative elements ____________________
(a) outline an implementation framework to ensure consistency
with international standards and best practices ____________________
(b) comply with all relevant rules and regulations ____________________

domestic or foreign ____________________
or centre(s) of activities ____________________
agreements with distributors and/or suppliers, etc ____________________
price-setting powers - economies of scale,
supply adequacy, cut-throat competition, etc ____________________
comply with.
157
3. List all sustainable materials (relevant certifications shall be indicated) that your
organisation uses to transport, store, install and erect IBS products, components, techniques
and elements as well as indicate estimates of their usage in terms of:
(a) value (RM) ____________________
(b) percentage (%), i.e. share of total expenditure ____________________
(a) value (RM) ____________________
(b) percentage(%), i.e. share of total
expenditure or overall R&D spending respectively ____________________
(a) value (RM) ____________________
(b) percentage (%), i.e. share of total
operating expenditure ____________________

(a) value (RM) ____________________
(b) percentage (%), i.e. share of total operating expenditure ____________________
7. List all machineries and equipment that your organisation works with and indicate estimates
of the impact of their usage on health, safety and sustainability aspects in terms of value (RM)
and percentage (%).
158
8. Indicate changes (+/-) to your organisation's spending on or usage of utilities notably energy
and water from 2010 through 2015, i.e. in the last calendar (e.g. 2015) vs. the previous year
(e.g. 2014) in terms of:
(a) value (RM) ____________________
(b) respective measurement metrics ____________________
9. Indicate differences between urban and rural areas for your organisation's transportation,
storage, installation and erection services of IBS components and elements in terms of:
(a) value (RM) ____________________
(b) ratio (%) ____________________
159
CATEGORY 6
Questionnaire for End-customers
1. Full business or establishment as well as name date(s) of establishment/incorporation and

(c) turnover __________________

(a) executive/management vs. non-executive/unionised staff ___________________
(b) unskilled vs. semi-skilled vs. skilled/specialised workers ___________________
(c) citizens vs. foreigners ___________________
6. The content of IBS products, components, techniques and elements in your organisation's
infrastructure, buildings and real estate properties as at 31 July 2016 or the latest possible date
(to be indicated) according to the CIDB's most updated IBS content scoring system.
160
II. CUSTOMER SATISFACTION AND LOYALTY
1. In the event of indiscriminate incorporation by IBS manufacturers, assemblers, importers

and distributors of all costs involved into the pricing structure of factory-produced building
components and elements, indicate the impact on delivery prices to your organisation and/
or final prices for the public in terms of:
(a) value (RM) __________________
(b) percentage (%) __________________
2. Comparing IBS to Conventional Building Method (CBM), indicate your organisation's levels of
satisfaction in percentage (%) out of 100 for:
(a) overall quality and durability of infrastructure and buildings __________________
(b) prevalence of defects (cracks, leakages, etc) on infrastructure
and buildings __________________
(d) understanding of and knowledge about customer needs
and requirements __________________
(e) speed of construction works and projects __________________
(f) respect for project completion and customer delivery schedules __________________
(g) cost-effectiveness and value-for-money in pricing of infrastructure
and buildings __________________
(h) economicality and flexibility to undertake renovations/changes __________________
(i) suitableness and responsiveness to creativity and innovation __________________
III. SOCIOECONOMICS
1. Among all five (5) identified core segments of the IBS industry, indicate the Top 2 that your
organisation deems will emerge as or command:
(a) the largest share within the industry and/or growth leaders in
the near future, the reason(s) of these views and the
breakdown into clusters respectively __________________
(b) the most export potential __________________
161
2. Acknowledging that the IBS industry cuts across various industries in all five (5) major sectors,
indicate your organisation's estimates for:
(a) the size of the IBS industry (RM billion) __________________
(b) the share (%) of the IBS industry of the Malaysian economy
or its contribution to the GDP __________________
4. Indicate your organisation's estimates in terms of value (RM) and/or percentage (%) or
number of workers arising from the impact of full IBS implementation on:
(a) requirements for foreign labour __________________
(b) social stability and equilibrium, and domestic political landscape __________________
country in general:
(b) Malaysia's consumer spending/private consumption __________________
(c) Malaysia's overall labour force and employment __________________
162
(%) for:
5. Indicate your organisation's estimates in value (RM) and probability of risks of human errors at
the design, manufacturing and installation/erection phases.
(b) shortage of IBS trained construction professionals at
reasonable wages __________________
(c) misperceptions that IBS could lead to higher overall construction
costs and project risks (and list the real causes of such
misperceptions) __________________
of value (RM) to:
(a) outline an implementation framework to ensure consistency with
international standards and best practices __________________
163
comply with.
focuses on as well as indicate estimates of their usage in terms of:
(a) value (RM) __________________
(b) percentage (%), share of total expenditure __________________
4. Indicate cost savings on resource use and waste management that your organisation
currently enjoys in terms of:
(a) value (RM) __________________
5. Comparing IBS to CBM, indicate differences in your organisation's spending on or usage of

utilities notably energy and water in terms of:
(a) value (RM) __________________
indicate estimates in terms of value (RM) and probability of risks of natural resource depletion
164
GLOSSARY
ACEM Association of Consulting Engineers Malaysia

ASEAN Association of Southeast Asian Nations
BEM Board of Engineers Malaysia
BIM Building Information Modelling
BMDAM Building Materials Distributors Association of Malaysia
BNM Bank Negara Malaysia
BOP Balance of Payments
BQSM Board of Quantity Surveyors Malaysia
BS British Standards
CAP Consumers Association of Penang
CBA Cost-Benefit Analysis
CBM Conventional Building Method
CCC Certificate of Completion and Compliance
CCD Contractor Continuous Development
CIDB Construction Industry Development Board
CIMP Construction Industry Master Plan 2006–2015
CISCM Cast-In-Situ Construction Method
CITP Construction Industry Transformation Programme
CMUs Concrete Masonry Units
CREAM Construction Research Institute of Malaysia
CPC Certificate of Practical Completion
CPI Corruption Perceptions Index
CSIS Centre for Strategic and International Studies
CWD Construction Works Done
C&D Construction and Demolition
DO Development Order
DOSM Department of Statistics Malaysia
DOSH Department of Occupational Safety and Health
EMC Employer Mandatory Commitment
EPF Employees Provident Fund
EPU Economic Planning Unit
ERA Education and Research for Consumers Malaysia
EU European Union
FM Facility Management
FOMCA Federation of Malaysian Consumers Associations
FOMEMA Foreign Workers Medical Examination Monitoring Agency
FTA Free Trade Agreement
GBI Green Building Index
GDP Gross Domestic Product
GLCs Government-Linked Companies
GLICs Government-Linked Investment Companies
GNI Gross National Income
165
GST Goods and Services Tax
IBS Industrialised Building System
ICT Information and Communications Technology
IEA International Energy Agency
IEM Institution of Engineers Malaysia
IRB Inland Revenue Board
IRENA International Renewable Energy Agency
ISO International Organization for Standardization
JIT Just-in-Time
JKR/PWD Public Works Department
JSSB Jasmiza Solutions Sdn. Bhd.
KPIs Key Performance Indicators
LAM Board of Architects Malaysia
LRT Light Rail Transit
MACC Malaysian Anti-Corruption Commission
MAMPU Malaysian Administrative Modernisation and Management Planning Unit
MATRADE Malaysia External Trade Development Corporation
MBAM Master Builders Association Malaysia
MDTCC Ministry of Domestic Trade, Cooperatives and Consumerism
MEPA Malaysian Energy Professionals Association
MGI McKinsey Global Institute
MIDA Malaysian Investment Development Authority
MISIF Malaysian Iron and Steel Industry Federation
MITI Ministry of International Trade and Investment
MOA Ministry of Agriculture and Agro-Based Industry
MOF Ministry of Finance
MOFA Ministry of Foreign Affairs
MOH Ministry of Health
MOHA Ministry of Home Affairs
MOHR Ministry of Human Resources
MOSTI Ministry of Science, Technology and Innovation
MOW Ministry of Works
MMC Modern Method of Construction
MPC Malaysia Productivity Corporation
MRP Material Requirement Planning
MRT Mass Rapid Transit (Malaysia)
MTEM Majlis Tindakan Ekonomi Melayu
MTIB Malaysian Timber Industry Board
MUWHLG Ministry of Urban Wellbeing, Housing and Local Governments
MyCREST Malaysia Carbon Reduction and Environmental Sustainability Tool
NRE Ministry of Natural Resources and Environment
HBA National House Buyers Association
NGOs Non-Governmental Organisations
NCCC National Consumer Complaints Centre
166
OECD Organisation for Economic Coordination and Development
OC Off-site Construction
OHSAS Occupational and Safety Management Systems
OSC One-Stop Centre
PAM Malaysian Institute of Architects
PC Prefabricated Construction
PPIM Muslim Consumers Association of Malaysia
PwC PricewaterhouseCoopers
QLASSIC Quality Assessment System in Construction
R&D Research and Development
REHDA Real Estate and Housing Developers’ Association
RISM Royal Institution of Surveyors Malaysia
RM Ringgit Malaysia
RMC Ready-Mixed Concrete
RMK11/11MP Rancangan Malaysia Kesebelas or 11th Malaysia Plan
SC Securities Commission
SCC Self-Compacting Concrete
SHASSIC Safety and Health Assessment System in Construction
SMEs Small and Medium-sized Enterprises
SME Corp SME Corporation Malaysia
SOCSO Social Security Organisation
TEEAM The Electrical and Electronics Association of Malaysia
TFP Total Factor Productivity
TI Transparency International
TQM Total Quality Management
WBG World Bank Group
WIPO World Intellectual Property Organisation
UBBL Uniform Building By-Laws
UN United Nations
USD United States Dollar
WEF World Economic Forum
167
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1117 A Cost Benefit Analysis For The IBS System in Malaysia

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Dynamism and Sustainability through IBS

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CHAPTER 2: APPROACH AND METHODOLOGY 17

CHAPTER 3: BUSINESS PERSPECTIVES 22

CHAPTER 4: SOCIO-ECONOMIC AND POLITICAL PERSPECTIVES 32

CHAPTER 6: SUSTAINABILITY, SAFETY AND HEALTH PERSPECTIVES 92

Appendix 1. Questionnaire for Category 1 122

Table 1.1 Various definitions of IBS 3

Table 3.1 Averages of survey findings for selected financial metrics 24

Table 3.3 Comparative business performance between IBS and CBM 30

Table 4.3 Employment by categories of skills 2010–2020 38

Table 4.4 Monthly household incomes and consumption expenditure 39

Table 4.7 CIDB’s new definition of SMEs in the construction sector 41

Table 4.8 CIDB’s contractor grades 41

Table 4.9 Breakdown of SMEs according to size 41

Table 4.11 SMEs by ownership 42

Table 4.12 SMEs and employment 42

Table 4.13 Key indicators of SMEs 43

Table 4.16 Malaysia’s labour productivity per number of employment (2010=100) 48

Table 4.17 Key details of major global innovation-related indices 51

Table 4.19 Distribution of foreign workers across economic activities in Malaysia 52

Table 4.24 Non-citizens caught in serious crimes 56

Table 4.25 Non-citizens caught in property crimes 57

Table 4.27 Subsidies for selected consumer goods (controlled items) 58

Table 4.32 Selected housing statistics 62

Table 4.33 Malaysia’s principal labour statistics 66

Table 4.34 Job creations by sectors under 10MP and 11MP 67

Table 4.35 Selected construction-related labour market statistics 67

Table 5.5 Selected foreign worker-related data 84

Table 6.1 Malaysia’s gross expenditure on R&D (GERD)-related data 99

Figure 1.2 Value-chain mapping for the IBS industry 5

Figure 1.4 Number of employed persons by sector (‘000) 6

Figure 1.9 Six clusters of the IBS component manufacturing segment 11

Figure 2.1 Overall research framework 18

Figure 4.2 Malaysia’s population, GDP and GNI per capita 40

Figure 4.4 Malaysia’s major gross exports of construction-related manufactured 46

Figure 4.5 Malaysia’s sectoral labour productivity levels (RM) 48

Figure 5.2 The federal government’s direct taxes (RM million) 80

Figure 5.3 The federal government’s indirect taxes (RM million) 81

Figure 5.4 The federal government’s non-tax revenue (RM million) 81

Figure 5.5 Number of foreign workers in Malaysia by country of origin 86

Figure 6.1 Amount of GERD by field of research (RM million) 99

Figure 6.2 Amount of GERD by socio-economic objectives (RM million) 100

LIST OF BOX ARTICLES

Dato’ Ir. Ahmad ‘Asri Abdul Hamid

Datuk Ir. Elias Ismail

The Department of Statistics of Malaysia (DOSM), the Malaysia Productivity Corporation

Cost and/or Benefits

Public Administration Sustainability, Safety

Table 1.1: Various definitions of IBS

A prefabrication process and construction industrialisation Kamar et al., 2011

Agriculture, Mining & Manufacturing Services Sector Construction

Source: Jasmiza Solutions Sdn. Bhd. (JSSB)

GENERAL BUSINESS MANAGEMENT, STRATEGIC

HUMAN RESOURCE MANAGEMENT / HUMAN

RESEARCH & DEVELOPMENT

SALES & MARKETING

TRANSPORTATION & LOGISTICS

double-tracking project, KL-Singapore in developed economies, although it could be larger in

Figure 1.4: Number of employed persons by sector (‘000)