RI laborers feel the pinch as work in KL declines

RI laborers feel the pinch as work in KL declines

Liau Y-Sing, Reuters/Kuala Lumpur

Construction worker Andi Suyandi is finishing up a building job
in the Malaysian capital, perhaps his last for a while.

"I don't have any work lined up after this," said the 30-year-
old Indonesian, peering out from under a hard hat as he laid
tiles at Kuala Lumpur's US$146 million convention center.
"I don't know where my next job will come from. There is less
work these days."

Malaysia's construction industry has hit tough times. Spoon-
fed for more than a decade by state projects, and flooded with
cheap imported labor, the industry had become accustomed to
growing revenues and healthy profit margins.

But in the past two years, the government has cut spending to
rein in state debt and even cheap labor is harder to find, thanks
to an official crackdown this year on illegal workers, especially
from Indonesia, Malaysia's larger, poorer neighbor.

The once-booming sector is expected to shrink for the second
straight year in 2005 due to the decline in government projects,
the temporary shortage of foreign labor and rising material
costs, which have been inflated by record-high crude oil prices.

The sector's contribution to the economy has fallen by half
since 1995, when the industry grew by a sharp 21.1 percent. Last
year, the sector contracted 1.9 percent.

Times are now so bad that some of the country's 60,000
contractors have been forced out of business.

"We are short of work. We have to survive, so we do other
things. When you are cornered, there are many things that you can
do," said Roslan Awang Chik who heads a group representing 7,500
ethnic-Malay building contractors.

Boom times

Construction became a big business in Malaysia in the 1980s
when the government forked out billions of dollars to build
roads, bridges, ports, schools and hospitals as part of a plan to
transform the economy's agrarian base into an industrial one.

The building boom extended into recent years as Malaysia spent
heavily to pull its economy out of the 1997 Asian financial
crisis, which killed many private-sector projects.

The state-led building spree created a whole new skyline in
Kuala Lumpur, crowned by its soaring 88-story twin towers, and
spawned dozens of supporting industries and thousands of jobs.

It also formed an important pillar of Malaysia's push for a
fairer distribution of wealth in favor of its ethnic Malays, who
make up about 55 percent of the population, but own only about a
fifth of its listed equity. State construction contracts have
been the making of many Malay businessmen.

But the binge has taken its toll: Malaysia has run a budget
deficit since 1998 and international rating agencies warn that
further fiscal loosening may hurt its sovereign credit standing.

Prime Minister Abdullah Ahmad Badawi has put the government on
a thrift drive since he took over in October 2003, slashing
public spending on infrastructure and scrapping a $3.8 billion
rail project.

Such fiscal austerity has halted Malaysia's building boom,
leaving too few jobs for too many contractors.

"The government still receives requests, demands and even
threats to dish out more work through pump-priming as was done
previously," Prime Minister Abdullah said in July. "But in any
sentence, there is a full stop. In every book, there's an ending.
The government has to take a stand based on reality."

Still, Malaysia plans to revive 8 billion ringgit ($2.1
billion) of previously abandoned projects and speed up execution
of 35 projects valued at 2.4 billion ringgit to help builders.

Urge to merge

As jobs run dry, the government is urging construction
companies to merge, saying it is difficult to look after each
contractor's needs, given the large number of firms.

Medium-sized infrastructure firm IJM Corp Bhd struck a deal in
May to buy a 25 percent stake in property firm Kumpulan Europlus
Bhd for $8.7 million, in what is seen as a trend for builders
going forward.

"The whole pot is getting smaller. The restructuring of the
industry is imminent," said Ramli Ahmad who heads listed
construction company PECD Bhd

Ramli expects the restructuring to ultimately result in 5-10
construction firms that can compete globally.

Builders are also searching for more jobs abroad, looking
beyond places such as India which has in the past provided
Malaysian firms with toll road projects.

Gamuda, Malaysia's largest construction firm, is building a
$550 million hydro-electric power plant in Laos. It will also
partner WCT Engineering Bhd to set up $504 million of airfield
systems and facilities in Qatar.

For construction workers like Suyandi, the future is even more
challenging. Suyandi hails from the tsunami-devastated province
of Aceh, where many families rely more than ever on income sent
home from the construction sites of Malaysia.

REUTERS

GetRTR 3.00 -- SEP 23, 2005 08:41:36