ii Foreword In the 10th Malaysia Plan, the Malaysia Productivity Corporation (MPC) had mandated to review all regulations affecting the conduct of business in Malaysia with the view to modernize business regulations. This is crucial in order for the country to move towards its national aspiration of becoming a high-income nation. Towards this, the MPC has embarked on a comprehensive review of existing business regulations with the focus on the 12 NEW Key Economic Areas (NKEA) which have been identified to have high growth potential. In this study, the research team led by Halimatus Saadiah Alias has been asked to examine the regulatory regimes of the construction sector with the aim of recommending options to remove unnecessary regulatory burdens. Through regulation governments can leverage their policy interests on businesses. Regulation can contribute to a range of social, environmental and economic goals. However, in practice, some regulations are not well designed and many regulations are not implemented efficiently or cost-effectively, and some regulations do not even adequately achieve the ends for which they are designed. Poor regulatory regimes invariably result in unnecessary regulatory burdens which will stifle business growth. For this particular study, the focus was on the construction phase up to its completion, which is the most complex part of the value chain and the most regulated. The study emulated the approach used by the Australian Government Productivity Commission (AGPC) and the team was guided by a regulatory expert previously from the AGPC, Ms. Sue Holmes. A comprehensive study of existing regulations governing the construction industry and their regulators was conducted. The regulations were correlated to the value chain. Engagements with the associations across the country including Sabah and Sarawak and one-to-one interviews were used in the study. Issues pertaining to regulations were selected and documented in the study report. From these issues and using principles of good regulatory practice, the team then formulated feasible options for further deliberation. These issues and options are
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ii
Foreword
In the 10th Malaysia Plan, the Malaysia Productivity Corporation (MPC) had mandated
to review all regulations affecting the conduct of business in Malaysia with the view to
modernize business regulations. This is crucial in order for the country to move
towards its national aspiration of becoming a high-income nation. Towards this, the
MPC has embarked on a comprehensive review of existing business regulations with
the focus on the 12 NEW Key Economic Areas (NKEA) which have been identified to
have high growth potential.
In this study, the research team led by Halimatus Saadiah Alias has been asked to
examine the regulatory regimes of the construction sector with the aim of
recommending options to remove unnecessary regulatory burdens.
Through regulation governments can leverage their policy interests on businesses.
Regulation can contribute to a range of social, environmental and economic goals.
However, in practice, some regulations are not well designed and many regulations
are not implemented efficiently or cost-effectively, and some regulations do not even
adequately achieve the ends for which they are designed. Poor regulatory regimes
invariably result in unnecessary regulatory burdens which will stifle business growth.
For this particular study, the focus was on the construction phase up to its completion,
which is the most complex part of the value chain and the most regulated.
The study emulated the approach used by the Australian Government Productivity
Commission (AGPC) and the team was guided by a regulatory expert previously from
the AGPC, Ms. Sue Holmes. A comprehensive study of existing regulations governing
the construction industry and their regulators was conducted. The regulations were
correlated to the value chain. Engagements with the associations across the country
including Sabah and Sarawak and one-to-one interviews were used in the study.
Issues pertaining to regulations were selected and documented in the study report.
From these issues and using principles of good regulatory practice, the team then
formulated feasible options for further deliberation. These issues and options are
iii
presented in this report for public consultation with relevant stakeholders in order to
develop concrete recommendations to reduce unnecessary regulatory burdens
imposed by construction regulations.
In the course of the study, the stakeholders including MPC have benefited greatly from
discussions and interviews with various companies, government officials and industry
associations. Valuable input and feedback were received from the AGPC expert,
MPC’s Board of Directors and other interested parties. The MPC is grateful for their
assistance and contributions.
The study was conducted in the MPC Head Office by the Smart Regulation Directorate
led by Mr. Zahid Ismail and overseen by me.
Dato’ Mohd. Razali Hussien
Director General, MPC
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Abbreviation
ACEM Association of Consulting Engineers Malaysia
AFTA ASEAN Free Trade Area
AGPC Australian Government Productivity Commission
AP Approved Permit
BAM Boards of Architects Malaysia
BCA Building and Construction Authority
BEM Board of Engineers Malaysia
BOWEC Building Operations and Works of Engineering Construction
BPKU Bahagian Pembangunan Kontraktor & Usahawan
BQSM Board of Quantity Surveyors Malaysia
BSC Balance Score Card
CCC Certificate of Compliance and Completion
CCD Contractor Continuous Development
CEPT Common Effective Preferential Tariff
CIDB Construction Industry Development Board
CIMP Construction Industry Master Plan
CIPAA Construction Industry Payment and Adjudication Act
CIS Construction Industry Standards
CITP Construction Industry Transformation Program
CLAB Construction Labour Exchange Centre Berhad
CMU Concrete Masonry Units
DOS Department of Statistics
DOSH Department of Occupational Safety and Health
EPU Economic Planning Unit
ETP Economic Transformation Programme
EC Energy Commission
EMP Environmental Management Project
FWCS Foreign Workers Compensation Scheme
GATS General Agreement on Trade in Services
GDP Gross Domestic Product
GST Goods and Services Tax
HDA Housing Development Act
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IBS Integrated Building System
IEM Institution of Engineers Malaysia
ISM Institution of Surveyors Malaysia
JBPM Jabatan Bomba Dan Penyelamat Malaysia
JKPP Jawatankuasa Perwakilan Penduduk
JKR Jabatan Kerja Raya
JMG Jabatan Mineral Dan Geosains
JPBD Jabatan Perancangan Bandar Dan Desa
JPP Jabatan Perkhidmatan Pembetungan
JTKSWK Jabatan Tenaga Kerja Sarawak
KLIA Kuala Lumpur International Airport
LA Local Authorities
LPIPM Lembaga Pembangunan Industri Pembinaan Malaysia
LPKP Lembaga Pelesenan Kenderaan Perdagangan
LTFMP Logistic And Trade Facilitation Master Plan
MPC Malaysian Productivity Corporation
MITI Ministry of International Trade And Industry
MHLG Ministry of Housing and Local Government
MBAM Master Builders Association of Malaysia
MNKT Majlis Negara Kerajaan Tempatan
MHA Ministry of Home Affairs
MOW Ministry Of Works
MRT Mass Rail Transit
MS Malaysian Standards
MSIC Malaysia Standard Industrial Classification
MOF Ministry Of Finance
M & A Memorandum & Articles of Association
MIDA Malaysian Investment Development Authority
NIOSH National Institute of Occupational Safety and Health
NKEAs National Key Economic Areas
NLTF National Logistics Task Force
NPDIR National Policy on the Development and Implementation of
Regulations
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NREB National Resources Environmental Berhad
OIC Organisation of Islamic Cooperation
OHS Occupational Health and Safety
OSC One Stop Center
OSHA Occupational Safety and Health Act
PAM Pertubuhan Akitek Malaysia
PBA Perbadanan Bekalan Air
PERKESO Pertubuhan Keselamatan Sosial
PKB Persatuan Kontraktor Bumiputera
PKIM Persatuan Kontraktor India Malaysia
PKK Pusat Khidmat Kontraktor
PPP Public-Private Partnership
PSDC Penang Skills Development Centre
PR1MA Perumahan Rakyat 1 Malaysia
PTP Pelabuhan Tanjung Pelepas
PUKONSA Pusat Khidmat Kontraktor Negeri Sabah
PUSPAKOM Pusat Pemeriksaan Kenderaan Berkomputer
PWD Public Works Department
RMR Rumah Mesra Rakyat
RURB Reducing Unnecessary Regulatory Burdens
RIA Regulatory Impact Assessment
SDBA Street, Drainage and Building Act
SC Securities Commission
SLA Service Level Agreement
SME Small Medium Enterprises
SOCSO Social Security Organisation
SPAN Suruhanjaya Perkhidmatan Air Negara
SPC State Planning Committee
SPKK Sijil Perolehan Kerja Kerajaan
SPNB Syarikat Perumahan Negara Berhad
STB Sijil Taraf Bumiputera
TNB Tenaga Nasional Berhad
TOP Temporary Occupation Permit
xvi
UBBL Uniform Building By-Laws
UTM University Teknologi Malaysia
UPKJ Unit Pendaftaran Kontraktor & Juruperunding
Glossary
CCD or Contractor Continuous
Development
A program that is designed to ensure contractors
registered with CIDB are continually well-informed
and knowledgeable.
Civil engineering
A professional engineering discipline that deals
with the design, construction, and maintenance of
the physical and naturally built environment,
including works like roads, bridges, canals, dams,
and buildings.
Closed Tender
Only pre-qualified or known bidders are allowed to
participate. Closed Tender are not advertised in
newspapers, as a result other bidder generally do
not come to know that such tender is floated. The
Lowest Bidder or L1 generally wins the contract.
Construction Industry
The industry concerning construction works.
Construction Manager
A construction manager is involved in personnel
management at the construction site. He is
someone who plans, coordinates, budgets, and
supervises construction projects from early
development to completion. He ensures that
materials are delivered on time and that tools are