CENTRE OF STUDIES FOR QUANTITY SURVEYING

FACULTY OF ARCHITECTURE, PLANNING & SURVEYING

ECONOMIC CONSTRUCTION
(QSM506)
COURSEWORK 1:
DESIGN ECONOMIC & METHODS OF CONSTRUCTION
Prepared for:
Dr Norizan Ahmad
Prepared by:
Mohamad Jamil bin Abdul Rahim
Ali Mahdi bin Fauzee
Nurzarifa Shadiera binti Zakiuddin
Nazlin binti Mohd Zainal Abidin

2015139905
2014530485
2014335689
2014580387
Group:
AP224(3D)

Submission date:
20 April 2016

PREFACE

TABLE OF CONTENTS
Preface
Table of contents
1.0 Introduction
Definition economic construction
2.0 Basic Concept, Aim and Objectives of Policies and Initiatives
Monetary and Fiscal Policies
CIMPlan (2006-2015)
3.0 Strategies and the Implementation
Monetary and Fiscal Policies
CIMPlan (2006-2015)
4.0 Appendix
5.0 Conclusion
6.0 References

2
3
Page No

1.0 INTRODUCTION
DEFINITION OF CONSTRUCTION ECONOMIC
Construction economics deals with questions of the organizational forms of management
(specialization, cooperation, concentration, combination, and the creation of production associations)
and the planning of capital investment and construction production (forecasting and long-range, fiveyear, one-year, and routine operational planning of structure, location, and economic regionalization).
An important task of the discipline is to substantiate the transition to the planning and evaluation of
the performance of construction organizations on the basis of projects that are finished, turned over to
the customer, and ready to operate.
Construction economics conducts research in the economic efficiency of capital investments
and of scientific and technological progress in construction (factors, criteria, indicators, and planned
standards) as the decisive prerequisite for increasing labor and capital productivity, improving the
utilization of material resources, accelerating the growth of production capacities (primarily as a result
of the reconstruction, technical reequipping, and modernization of enterprises), achieving the earliest
possible use of new production capacities, and attaining projected technological and economic
indicators.
Construction economics works out the economic principles underlying construction planning,
the standardization of construction work, the industrialization of construction (with due regard to
time, ecology, urban planning, and the social and economic impact), and the lowering of estimated
costs and capital investments per unit of output. An important function of the discipline is to develop a
system of interrelated cost and physical standards (planning, production, estimated, accounting, and
statistical standards) for the technological and economic regulation and management of construction
production in all phases of the investment process.
Construction economics studies the resources of capital construction and the effectiveness of
their utilization, including questions relating to the development of the material and technical basis,
fixed capital stock and its reproduction, the creation of normative circulating capital in the
construction industry, the training and utilization of personnel, the organization and improvement of
labor productivity, the improvement of the wage system, and the organization of the system of
material and technical supply.
Construction economics substantiates economic methods of management and incentive in
capital construction: profit-and-loss accounting (economic accountability), financing and crediting of

construction, and the system of mutual settlements of accounts between participants in the
construction process, stemming from efforts to bolster the role of economic incentive in the
acceleration of scientific and technological progress.
Construction economics is associated with national economic planning, with a number of
special economic disciplines (finance and credit, statistics, accounting, and analysis of economic
performance), and with sciences that study the production technology of construction. It serves as a
necessary methodological basis for determining the effectiveness of technical solutions to problems in
the designing of construction projects and in the performance of construction work.
Construction economics is studied at a number of specialized scientific research institutes,
such as the Scientific Research Institute of Construction Economics, the Central Scientific Research
and Experimental Planning Institute of Automated Systems in Construction, and the All-Union
Scientific Research and Planning Institute of Construction Labour. Economics sections (laboratories
and departments) are found in virtually all planning and scientific research institutes working in the
various areas of capital construction. Publications in the field include the journal Ekonomika
stroitelstva (Construction Economics) and the newspaper Stroitelnaia gazeta (Construction
Newspaper); the publishing house Stroiizdat also publishes works on construction economics.
Questions in construction economics are widely discussed in the Soviet press.

2.0 BASIC CONCEPT, AIM AND

OBJECTIVES OF POLICIES
AND INITIATIVES
2.1 MONETARY POLICY
2.1.1 BASIC CONCEPT
Monetary policy is basically concerned with the monetary system of the country. It deals with
monetary decisions and measures and such non-monetary decisions and measures as have
monetary effects.The need for monetary policy is felt because money cannot manage itself.
Monetary management is, therefore, the main issue of monetary policy. Monetary policy is
usually defined as the central banks policy pertaining to the control of the availability, cost
and use of money and credit with the help of monetary measures in order to achieve specific
goals.

Types of Monetary Policies

A) Expansionary Monetary Policy

An expansionary policy is used to stimulate economic activities so as to bring the

economy out of a depression or recession. The government will act to increase the
money supply and reduce the interest rate.

Investment increase as firm also borrow heavily to finance their investment in plants
and machineries, the lower the interest rate the higher the probability of projects that
will exceed the internal rate of return, so investment increases when interest rate falls
adopted from Wan Ismail. N. (2013)

B)Contractionary Monetary Policy

In other hand, a contractionary policy is used to control inflation and to reduce a trade
deficit. The government will act to decrease the money supply and increase the
interest rate, its opposite manner of expansionary monetary policy adopted from Wan

2.1.2

Ismail. N. (2013)
AIM
The aim of monetary policy is to keep inflation in check. While fiscal policy is to
stimulate economic activity and sustain growth to ride out the effects of
the global recession.

2.1.3 OBJECTIVES
The objectives of implementing monetary policy is
Full Employment:
Full employment has been ranked among the foremost objectives of
monetary policy. It is an important goal not only because unemployment
leads to wastage of potential output, but also because of the loss of social
standing and self-respect.
Price Stability:
One of the policy objectives of monetary policy is to stabilise the price
level. Both economists and laymen favour this policy because fluctuations
in prices bring uncertainty and instability to the economy.
Economic Growth:
One of the most important objectives of monetary policy in recent years
has been the rapid economic growth of an economy. Economic growth is
defined as the process whereby the real per capita income of a country
increases over a long period of time.
Balance of Payments:
Another objective of monetary policy since the 1950s has been to
maintain equilibrium in the balance of payments.

2.2 FISCAL POLICY

2.2.1 BASIC CONCEPT
Government spending policies that influence macroeconomic conditions. Through fiscal
policy, regulators attempt to improve unemployment rates, control inflation,
stabilize business cycles and influence interest rates in an effort to control the economy.
Fiscal policy is largely based on the ideas of British economist John Maynard
Keynes (18831946), who believed governments could change economic performance
by adjusting tax rates and government spending.

Types of Fiscal Policies

A)Expansionary Fiscal Policy

An expansionary fiscal policy is used to stimulate aggregate demand (AD) so as to

increase income and reduce unemployment during recession or depression through an

increase in Government Spending (GS) and reduction in Tax.

The increase (GS) and reduction in tax will increase the income of the members of
society and increase the income household consumption of goods and services to
increase. The increase outputs, firm will have to employ more factors of production
such as labour, unemployment will fall adopted from Wan Ismail. N. (2013)

B)Contractionary Fiscal Policy

Contractionary Fiscal Policy is are to control demand pull inflation and reduce a trade
deficit , that means that export is less than import. Since one of the causes of inflation
is due to AD exceeding AS , we must reduce AD in order to control inflation. AD can
be reduced by reducing Government Spending and increasing Tax adopted from Wan
Ismail. N. (2013)

2.2.2 AIM
Fiscal policy is to stimulate economic activity and sustain growth to ride out the effects of the
global recession.
2.3.2 OBJECTIVE
The objectives of the fiscal policy of the government are as follows:

Resource Mobilization

Fiscal policy allows the government to mobilize resources for public expenditure and development.
There are three ways of resource mobilization viz. taxation, public savings and private savings
through issue of bonds and securities.

Resource Allocation

The funds mobilized under fiscal policy are further allocated for development of social and physical
infrastructure. For example, the government collected tax revenues are allocated to various ministries
to carry out their schemes for development.

Redistribution of Income

The taxes collected from rich people are spent on social upliftment of the poor and this fiscal policy in
a welfare state tried to reduce inequalities of income using resource allocation.

Price stability, control of Inflation, Employment Generation

Government uses fiscal measures such as taxation and public expenditure to stabilize the prices and
control inflation. Government also generates employment by speeding infrastructure development.

Balanced Regional Development

A large part of the government tax revenues are given out to less developed states as statutory and
discretionary grant. This helps in the balanced regional development of the country.

Balance of Payments
Using fiscal policy measures government tries to promote exports to earn foreign exchange. This
helps in maintaining favourable balance of trade and balance of payments
Capital Formation and National Income
Fiscal policy measures help in increasing the capital formation and economic growth. Increased
capital formation leads to increase in national income

Monetary policy involves changes in the rate of interest to influence the growth of aggregate
demand, the money supply and price inflation. Fiscal policy refers to the way the government
varies taxation and/or public expenditure to achieve its economic objectives (aggregate
demand, output and employment). These actions are under the control of the government.
Agreement about the targets of output and inflation creates a monetary-fiscal symbiosis,
yielding the ideal outcome despite disagreement about relative weights of the two objectives
(Dixit and Lambertini, 2001). A coordinated policy response to economic shocks increases
the speed of convergence to the steady state and leads the economy closer to the planned
target as compared to the outcome of the non-cooperative policy moves as noted by Tabellini
(1986). Dahan (1998) also stresses on the need for the monetary and fiscal policies
coordination after studying budgetary implications of central banks actions and monetary
implications of governments reactions.

Together with improved legal, accounting and

regulatory systems in the financial sector, these are the prerequisites for successful financial
liberalization (World Bank, 1989. If high fiscal deficits persist while the authorities are
undertaking the reforms of the financial sector, interest rates could reach very high levels and
adversely affect efficiency of the financial system.

2.3

CONSTRUCTION

INDUSTRY

MASTER

PLAN (CIMP) 2006-2015

2.3.1 BASIC CONCEPT
The vision of the CIMP 2006-2015 is the Malaysian construction industry shall be a world
class, innovative and knowledgeable global solution provider. Some people said, the
Malaysian Construction Industry shall be Among the Best in the World. CIMPs mission is to
be a dynamic, productive and resilient enabling sector, supporting sustainable wealth creation
and value creation, driven by technologically-pervasive, creative and cohesive construction
community. The Malaysian Construction Industry shall develop into a highly integrated and
productive industry that will benefit from equitable globalisation by providing
environmentally-friendly and sustainable processes and products, and leveraging on
information and communications technology
2.3.2 AIM
What the Construction Industry Master Plan (CIMP) aims to do in this context is to prepare
the Malaysian construction industry for a more penetrative global role.
2.3.3 OBJECTIVES OF POLICIES
To make the domestic construction service more productive, more effective, more
technologically-pervasive and less labour-intensive, and more confident to venture beyond
our shores, and thus become more resilient.

3.0 Strategies and the

Implementation
(between 2006-2015)

3.1 MONETARY POLICY

3.1.2 STRATEGIES IMPLEMENTED
Malaysian government conducts the nations monetary policy by changing interest
rates and adjusting the quantity of money. The central bank of Malaysia, Bank Negara
Malaysia uses interest rate targeting for the time being. By using monetary policy, BNM
can increase or decrease money supply as well as the interest rate. BNM will set
monetary policy base on different economy situation whether inflation or recession, by
increase or decrease the interest rate in order to achieve macroeconomic objectives.
Subsequently, monetary policy will influence aggregate demand of the country in terms of
three components, which are consumption, investment and net exports. Monetary policy
instrument that normally used by BNM is the interest rate at which the banks make overnight
policy rate (OPR. Besides changing the interest rates, BNM will be imposing open market
instrument to reduce or adding money supply in the market by selling or buying securities
adopted from ( Monetary Policy In Malaysia Economics, 2013).

Here are some examples of how Malaysian government set monetary policy to fight
recession and inflation. In a recession, real GDP is lower than potential GDP. This lead to
high unemployment due to some firms operating below normal capacity. To reach its goal of
high employment and overcome recession, the government needs to carry out an
expansionary monetary policy by increasing the money supply and decreasing interest rates.
Lower interest rates cause an increase in consumption, investment and net exports, which
increase the aggregate demand. Besides that, the governments will also reducing bank's
reserve requirement and also purchasing government bonds. At the end, real GDP increase to

the potential GDP and the price level rises then recessionary gap will be eliminated adopted
from ( Monetary Policy In Malaysia Economics 2013).

For example, during financial crisis on 1998, credit flow in Malaysia is slow.
Therefore, Bank Negara Malaysia had take action in increasing liquidity in banking system
and then increase the credit. In year 1998, government decreased the statutory reserve
requirements from 13.5% to 10% (February), 8% (July) and 4% (October).
However, in inflation, real GDP is higher than potential GDP. Therefore, BNM will
use a contractionary monetary policy to keep aggregate demand from expanding so rapidly
that the inflation rate begins to increase. BNM will impose an action to lower the inflation
rate and restore the price stability which by increasing the OPR. BNM will increase the target
OPR and sells securities and decrease the supply of reserves of the banking system, the banks
reduce deposits by decreasing loans and reduce the supply of money. The short term interest
rate increase and reduce the quantity of money demanded. Then, banks decrease the supply of
loans decreases the supply of loanable funds and the supply curve shift to the left. The
decreasing in investment will lead decreasing in aggregate planned expenditure. The
aggregate demand will be decrease therefore real GDP fall to the potential GDP and the price
level falls then inflationary gap will be eliminated.

3.1.2 THE IMPLEMENTATION

How monetary policy implement to improve Malaysia Economy at the scope of

Construction Sector or industry.

Interest Rate,
output product,

Economic activities,
Unemployment

Money SS,

Investment on project,

3.1.2a Increase the ability and probability of developers to invest construction new
project.
By decrease the interest by Bank Negara Malaysia, the ability of organization or developer to
constructed new project is high. The developer will take a chance to used Bridging financial
form domestic finance and international finance as borrower financial help for the project.
According to Price (1995) stated in Ahmad. K. (2012) bridging financial to a loan for under
construction property project. In the case of land purchasing, buying plant and machinery,
new technology construction product and material for the construction.
The direct impact is the construction industries activities will increase because of financial
supported for the organization to make a new development is higher tendency, the developer
take chance increase the number of investment to achieve their objective making a higher
profit form the development. For instance, constructed commercial building, mix commercial
building, housing scheme, and shopping complex.
The supply of money of injection of money in circulation financial is higher, this will give
force impact to firm increase their output within the speculate time, used maximum of output
production. By form increases output of production by firm this involve a lot of reproduction
or main power to produce the output production, job opportunities open to all person in their
own profession to generate individual income. The percentages of unemployment also will be
decrease accordingly.

3.1.2b Increase the ability to individual for loan thought by commercial bank.
Commercial Bank The biggest and the most important financial sources in Malaysia Ahmad.
K. (2012). There are two basic services provided by commercial bank as a place where
individual and companies deposit and withdraw their money whenever needed and as a place
that provided credit facilities for customer (loan). By decrease the interest rate by Bank
Negara Malaysia (BNM) the supply chain of money is higher, so the ability of individual or
companies to apply a loan for buying their own property increase. For example buying own
house, land, and commercial building.

The monetary policy can affect the construction sector especially the housing sector
depending upon the credit allocation and interest rate policy in the economy. Banks provide
credits at the concessional rates to the builders and house owners for undertaking new
housing projects.
According to Mallick. H. (2011) the government also asks the banks to relax the credit
constraints and interest rate ceilings for the construction of more houses in order to mitigate
the acute housing shortages in the urban and rural areas with growing size of population and
urbanization.

The aggregate of demand for construction product getting higher, this will give impact to
expansion of construction activities. The organization or developer take chance to supply
construction product to fulfill the demand form the individual to buying the own property for
investment or individual used. According Latif. R. (2013) the degree supply of housing
scheme from 2010 until 2014 getting higher because of new place have be redevelopment.

3.1.2c Output of firm increase and demand for labour also increase. (focus on design
team)The output of construction product going to be increase, this need required of
involvement all participating design team for construction new building or development. The
demand for professional design team for the project is more, so this open to job opportunities
to all design team such as Architects, Engineers, Quantity Surveyor, Land Surveyor and etc
this will generate to increase the individual income to involved in a project.

3.2 MONETARY POLICY

3.2.1 STRATEGIES IMPLEMENTED

Fiscal policy refers to the use of the government budget to influence economic activity.
Malaysian government's attempt to influence the economy by setting and changing taxes,
making transfer payments, and purchasing goods and services in order to achieve
macroeconomic objectives such as full employment, sustained economic growth, and price
level stability. The two main instruments of fiscal policy use by Malaysian government
are government taxation (revenue collection) and expenditure (spending). There are three
possible stances of discretionary fiscal policy, namely neutral, expansionary and
contractionary. However, how the Malaysia government set fiscal policy? The policy
response is depend on the economic situation, either it occur a recessionary gap, inflationary
gap, budget deficit or surplus. For instances, expansionary fiscal policy will be use during
recessions, which is tax cuts and increased government spending in order to increase demand
and economics growth while contractionary policy will be use during booms, which is
increased taxation and lower government spending to reduce demand and reduce inflation.
Here are some examples of how the Malaysian government has set fiscal policy. In a
recession, the government may decide to increase borrowing and spend more on
infrastructure spending. The idea is that this increase in government spending creates an
injection of money into the economy and helps to create jobs. There may also be a multiplier
effect, where the initial injection into the economy causes a further round of higher spending.
This increase in aggregate demand can help the economy to get out of recession.
For example, in year 1997 and 1998, the Malaysian economy had faced with a sharp
global recession. Therefore, Malaysian government had set an expansionary fiscal policy in
year 1998 to overcome the recession. The fiscal measures included a selective increase in
infrastructure spending, introduction of tax incentives to support private and domestic sector,
such as tourism and small and medium enterprises (SMEs), a higher allocation for social
sector development and a reduction in taxes. Government has increasing the development
expenditure of RM7 billion into agriculture, education and housing area development; and a
RM 5 billion in the infrastructure projects. (Ministry of Finance 2001, Bank Negara 2002)

In addition, government can also implement the tax cut policy in order to overcome
recession. Tax cut in service tax, sales tax, excise tax, export duties, import duties, income tax
or an increase in transfer payments, for example, unemployment benefits or welfare payments
will increase disposal income, therefore increase the purchasing power of households.
Reducing in the corporation tax will also raise the ability in the investment. Hence, aggregate
demand will increase and this will close the recessionary gap therefore increase economic
growth and reduce unemployment. adopted from ( Monetary Policy In Malaysia Economics
2013).
Other than that, expansionary fiscal policy also helps to reduce budget deficit. For
example, in order to reduce the budget deficit in 2012, which is 4.7% at GDP, a prudent fiscal
policy was implemented by Malaysian government. It is aim to promote domestic economic
activity and providing support to the economic transformation plan. In order to achieve the
objectives of full employment and sustained economic growth, government had emphasis on
the growth of private sector investment and consumption in the 2012 Budget. Hence, these
will increase the aggregate demand by increase the government expenditure on goods and
services on spy satellites, school, highways and the list goes on.
Furthermore, as a part of the Government's efforts to increase aggregate demand, a
large amount of fund was allocated for various forms of incentives and subsidies in order to
support the private consumption. For instance, some financial assistance programmed had
been introduced such as the cash assistance of RM500 to households with monthly income of
less than RM3, 000 as well as the SARA 1Malaysia scheme, RM100 schooling subsidy to all
primary and secondary students and the book voucher worth RM200 to all Malaysian
students in Form 6 and institutions of tertiary education. Households also continue to have
access to credit markets, especially for the purchase of durable assets, supported by more
sustainable financing and accommodative monetary conditions. Besides that, government had
also announced several policy measures to stimulate home ownership for the middle-income
group, including the 1Malaysia People's Housing Scheme (PRIMA). The Government will
continue to the budget from domestic sources, mainly through the issuances of Malaysian
Government Securities (MGS) and Government Investment Issues (GII), given the high
domestic savings and the ample liquidity in the financial system adopted from ( Monetary
Policy In Malaysia Economics 2013).

3.2.2 THE IMPLEMENTATION

Tax,

Government Spending,

Construction Activities,

income,

unemployment,

Facilities,

Aggregate of Demand

3.2.2a Government Expenditure Improve new facilities management .

Fiscal policy is the deliberate manipulation of government income and expenditure so as
to achieve desired economic and social objectives. Governments use fiscal policy to
influence the level of aggregate demand in the economy, in an effort to achieve economic
objectives of price stability, full employment, and economic growth.
According to Adedokun (1999) stated in Ayodeji. O. (2011) opined that government
plays a crucial role in determining demand for the construction industry either in output
or in its growth prospect because government as a client, buys over 75% of its output and
general economic measures have a powerful influence on the demand for construction
product.
By decrease the tax, government will increase the expenditure on facilities management
such in educational sector, infrastructure sector, agricultures sector and manufacturing
sector to fulfill the need of people. The large size of the public service sector in Malaysia
suggests potential room for trimming operating expenditures of the government Kim. A.et
al (2014) . In 2012 Malaysia has highest ratio of civil servants to the Malaysian
population in the Asia Pacific at 4.68 percent; consequently, wages to civil servants
composed a full third of government spending adopted from Kim. A.et al (2014).
3.2.2b Rationalizations of Tax .
The rationalization of tax from SST 10% to GST 6% will give impact to raw material for
the construction. The main major material such cement, sand, aggregate, lime, brick and
reinforcement bars per tones will have rationalizations the price from the government
service tax 6% cumulative from the total amount of product and per unit of the material,
this one of the step to control ceiling price of raw material for construction over the limit

of CIDB standard price. In addition this is one of step to avoid supplier of the material
take higher profit from rationalizations of tax.
By rationalizations the tax the raw material price has been standardized accordingly, this
give impact to attract individual, organization and developer to involved in construction
industry activities. The ability to make output in construction product will be increase.
However, one of partial bodies make political issues on this tax to get higher profit by
increasing the price of raw material.
This one of step to generate national income by rental or selling construction product to
foreigner the probability supply of money to our country will be increase. For instance,
construction mix commercial building can be used for residential, shop business lot and
office room. This can attract the foreigner to invest in Malaysia and make national income
from the construction activities product. For example at klang valley area many mix
commercial as be constructed such as KLCC mix function of building such office and
shopping mall.

3.2.2c Fuel subsidy impact to Productivity of Construction activities

Fuel subsidy rationalization plays an important role in improving Malaysias fiscal balance,
and progress on this area of reform provides a visible indicator of the governments overall
commitment to keeping debt at sustainable levels.
Government fuel subsidies stand out as a ripe area for reform, although political hurdles on
this issue remain challenging. Fuel subsidies make up about 2.7 percent of GDP, and energy
subsidies constitute about 55 percent of total subsidy expenditure, equivalent to 8.5 percent of
total government expenditures in fiscal year 2013, according to IMF staff estimates.23 The
following section elaborates on how fuel subsidies distort markets, generate deadweight
losses, and ineffectively assist the vulnerable.

The section concludes with specific

recommendations to enhance the rationalization process for various stakeholders involved.

3.3 CONSTRUCTION INDUSTRY MASTER

PLAN (CIMP) 2006-2015
3.3.1 STRATEGIES IMPLEMENTED
3.3.1a Integrate the construction industry value chain to enhance productivity and
efficiency.
By integrating the value chain of construction, productivity enhancement can be generated as
the various parties that make up the value chain of construction can integrate their functions
and save time both during development as well as during modifications. Communication is
also facilitated through the integration of value chain. The early identification of members of
the project team will also bring about greater understanding of the clients and projects
needs. Further, if the integration were to include public sector functions, such as approval and
issuance of certificates, the whole development process can be improved. Leveraging on the
powers of ICT, these processes can be managed in a productive and effective manner.
3.3.1b Strengthen the construction industrys image.
The poor image of the construction industry arises out of a number of weaknesses in the
industry and includes issues such as poor paymaster, a dirty, difficult and dangerous industry,
and a sunset industry. The image prevents it from attracting the best to its fore. To improve
the industrys performance attracting the best human capital is essential. To improve the
image of the industry all the weaknesses must be rectified. A respectable image of the
industry will also attract more locals to join the industry leading to a reduction of repatriated
funds by foreign workers.
3.3.1c Strive for the highest standard of quality, occupational safety and health, and
environmental practices.
Poor quality, accidents, and destruction of the environment have high costs to both the firms
undertaking the project as well as to society. These costs may be hidden or they may be real.
Environmental cost is especially heavy to the society if not addressed. In order to nurture a
dynamic construction industry these issues must be given priority as they affect the
productivity of the industry. The development of high quality industry players will also create

a barrier to entry in the market especially if such attributes are taken into consideration when
awarding projects.

3.3.1d Develop human resource capabilities and capacities in the construction industry.
Construction depends to a large extent on human skills. Even technology intensive
construction techniques depend on the skills of its workforce to utilise technology effectively.
As such, the development of human resource is one of the most critical aspects of improving
the productivity of the construction industry.
3.3.1f Innovate through research and development and adopt new construction
methods.
Research and development is an essential element if we want to maintain our lead in foreign
markets as well as develop new products or processes that can improve the productivity of
construction. In foreign markets any new construction methodology that provides competitive
advantages are easily copied by competitors especially those from the host countries. To keep
ahead of the competitors, new competitive technology must be developed. New products and
new processes are also needed to provide comparative advantage to Malaysias economy that
depends on the construction industry to provide the assets for production and other wealth
creation activities. If new methods and new materials are able to provide cost-effective
solutions, they shall contribute to the competitiveness of the local construction industry and
to the economy as these will result in productivity increase.
3.3.1g Leverage on information and communication technology in the construction
industry.
The powers of ICT have, as yet, not been fully tapped to benefit the construction industry, not
only in Malaysia, but all over the world. There are many more areas in the construction
industry that can capitalise on the powers of ICT and improve its performance. Currently,
even digital submission for approval by local authorities is at an experimental stage.
Integration of the various softwares needed in the construction industry to achieve interoperability is still being researched. Utilising the digital world to achieve mass purchase of
construction resources has also not been implemented. These are all activities that will

improve both the supply chain management as well as the integration of the value chain
leading to improvement in productivity.

3.3.1h Benefit from globalisation including the export of construction products and
services.
Globalisation is both a threat and an opportunity for the Malaysian construction industry. Not only
does it open doors to other markets, but it also requires that we open our doors to others. In this
context it is imperative that Malaysias construction service providers maintain their edge and
competitiveness to stave off greater challenges from other service providers from all over the world
and also to capture opportunities in other foreign markets. This strategic thrust will facilitate the
expansion of the construction market as well as the contribution to the GDP. However, as mentioned
above, foreign projects do not provide the multiplier effect to the economy as much as local projects
do.
3.3.2 THE IMPLEMENTATION

For productivity
Continuous improvement throughout the value chain from inception to operation to facilities
management.
For quality
Emphasis on quality in the use of manpower, materials, equipment and methods adopted.
For human resource
Creation of competent workers through skills-upgrading and knowledge enhancement.
For knowledge
Sharing of best practices to upgrade the level of knowledge of the construction community.
For innovation
Continuous research and development that is vital to introduce new and creative methods,
materials, tooling and equipment in example, construction technology.
For environmental practice

Sustainable practices are the keys to the well-being of future generations.

For industry sustainability
Generating new opportunities both in the domestic and overseas markets.
For professionalism
Enhancement of professionalism is key to the improvement of the image of the industry.

4.0 Appendix

5.0 Conclusion

6.0 References
1. Dahan (1998). The Fiscal Effects of Monetary Policy, IMF Working Paper No. 98/66.
2. Dixit, A. and L. Lambertini (2001). Monetary-Fiscal Policy Interactions and Commitment
versus Discretion in a Monetary Union, European Economic Review, 45, 977-987.
3. Tabellini, G. (1986). Money, Debt and Deficits in a Dynamic Game, Journal of
Economic Dynamics and Control, 10, 427-442.
4. World Bank (1989), World Development Report, World Bank, Washington D.C.
5. Sokolskii, V. A. Printsipy ekonomichnosti i ikh vyrazhenie v sovremennom stroitelstve.
St. Petersburg, 1910.
6. Khachaturov, T. S. Ekonomicheskaia effektivnost kapitalnykh vlozhenii. Moscow, 1964.
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