Frost & Sullivan: Domestic Investments to Steer Malaysia Out of Troubling Times Ahead

Jan. 11, 2012 - PRLog -- Kuala Lumpur, Malaysia – 2011 saw Malaysia witness conservative growth in the environment and building technologies markets with sporadic high value and key development of projects, mainly bolstered by participation of domestic companies.

According to Melvin Leong, Frost & Sullivan Program Manager for Environment & Building Technologies, “Significant contribution and participation by the private sector is needed. Until 2020, the Malaysian Economic Transformation Programme (ETP) has targeted 92 percent of the investment to come from the private sector, of which 73 percent of the private investment will come from Domestic Direct Investment (DDI).”

The 10th Malaysia Plan 2011-2015 (10MP) projected that the overall construction sector to contribute to the national GDP with MYR19.78 billion (US$6.38 billion) by 2012, and MYR21.82 billion (US$7.04 billion) by 2015. The construction sector contributed MYR18.19 billion (US$5.87 billion) in 2010. The water sector, together with electricity and gas, is aimed to achieve MYR 17.56 billion and MYR 19.75 billion in 2012 and 2015 respectively. It accounted MYR 16.14 billion ($5.21 billion) in 2010.

In terms of industry specifics, ‘Green’ propositions are the key to successful breakthrough in the Malaysian environmental and building technologies markets in forthcoming years. The adoption of green technologies as decreed under the National Key Economic Area (NKEA) of business services will be pioneered in several sectors including buildings sector, and water and waste sector.

“As Malaysia is finalizing its roadmap for green technology, the anticipated key focus areas around the environmental and building technologies markets are centred on green buildings (design, materials, construction, and maintenance), new waste treatment options and management, efficient water treatment and supply, and water minimization equipment in buildings,” said Leong.

As with all previous economic recessions, the Malaysian building construction projects are affected along with other infrastructure construction projects. A falling building construction market will create a domino effect on other related markets.

“By effect, Malaysia is an importer of advanced building technologies and environmental technologies and equipment. As major currencies weakened in recent months, which translate to more affordable equipment and services, it serves to be good news for infrastructure project owners and end-users in Malaysia,” Leong added.

Nonetheless, Malaysia’s income is largely dependent on exports of resources, and finished goods and materials. Unless the domestic demand offsets the anticipated underperformance of exports in 2012, the overall market sentiment is likely to remain grim. Consequentially, public funding or any other financial means by the Malaysian Government is likely to be rationalized.

Leong continued, “Even if any financial assistance is available, it is very competitive and may not be substantial to mitigate rising cost in capital intensive projects. Instinctively, Malaysia has professed the importance and need for private and domestic investments and at the same time hails foreign investments in relevant opportunities in forthcoming years. Public-private partnership (PPP) is the model to be adopted in all opportunities under the ETP.”

The slowdown in building construction, traversed by expenditure cut and rationalization by both local private and public sectors, will adversely impede favourable opportunities in other building technologies applications such as building automation, lighting, air-conditioning, and other advanced building equipment and fittings.

The Malaysian environmental markets are likely to be spared from the economic chaos. Public expenditure may still be rationalized in 2012 for waste management projects, water and wastewater treatment projects, drainage, and urban irrigation works, but investors and stakeholders may take a breather as most economic setbacks have little or inconsequential direct effect on such national-interest projects.

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Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's research and consulting services empower clients to generate, evaluate, and implement effective growth strategies.