The government is reviving the multi-billion ringgit Mass Rapid Transit Line 3 (MRT 3) under the Budget 2021 that will be a boon for construction companies.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz says the government has allocated RM15bil for transport infrastructure projects for 2021 as part of the government’s commitments that will benefit the people.
In his budget speech, aside the MRT 3 project, the government will fund projects like Pan Borneo Highway, Rapid Transit System Johor–Singapore, first phase of Klang Valley Double Track (KVDT) and Gemas-Johor double tracking.
In addition, he says the government with continue with the Kuala Lumpur–Singapore high-speed rail (HSR), subject to negotiations with Singapore.
It is worth noting that in 2018, the government shelved several billion ringgit worth of infrastructure projects namely MRT 3 and HSR due to the country’s financial woes.
“On the surface, it looks positive for the sector. The most significant project would be the revival of MRT 3 and HSR worth a total of RM80bil, ” says AllianceDBS Research Sdn Bhd analyst Chong Tjen San.
“What it lacks is the timing and the funding structure, which is likely to be addressed in the medium term recovery plan in December, ” he adds.
Rahim & Co International Property Consultants chief executive officer Siva Shanker reckons that the revival of the MRT 3 and HSR projects would spur the property sector from the multiplier impact from construction sector.
“The trickle down effect from the construction sector would spur many sectors of the economy and in turn that would boost the property sector.
“The property sector has been struggling since the beginning of this year. Good infrastructure projects would not only benefit the main contractors but also subcontractors, suppliers, and the logistics and services sectors, ” he says.
The MRT 3, known as the Circle Line, was planned to provide a loop link to the integrated public transport system in the Klang Valley by 2025.
The line, which was said to cost up between RM40bil to RM45bil to develop, would circumnavigated the city centre and included areas such as Ampang Jaya, KL City Centre, Jalan Bukit Bintang, Tun Razak Exchange, Mont’ Kiara and Sentul.
Meanwhile, on the HSR project Tengku Zafrul says that the government will continue the project as it is expected to generate “positive multiplier effect” to the country’s economy.
However, this is also dependent on continuing discussions with the Singapore government, he said in his Budget 2021 speech.
In 2018, both Malaysia and Singapore have agreed to postpone the construction of the HSR after a period of negotiations.
The HSR project was earlier reported to cost about RM60bil to RM70bil and will offer an express train service between Kuala Lumpur and Singapore.
The 350km rail line would reduce travelling time between Kuala Lumpur and Singapore to 90 minutes, compared with more than four hours by car.
Basically the government intends to continue with the HSR project because this project is able to generate a positive multiplier effect on the national economy.
However, this also depends on continuing discussions with Singapore.
Rakuten Trade Sdn Bhd research vice-president Vincent Lau says the revival of the infrastructure jobs will be a boon for construction stocks on Bursa Malaysia as well as catalyst for the economy, especially after the contraction in the economy in the second quarter of this year.
Malaysia recorded a 17.1% decline in the gross domestic product (GDP) in the second quarter of this year, the worst drop since the fourth quarter of 1998.
“The construction sector has a high multiplier impact to promote economic growth and positive spillover to other sectors. The allocation of RM15bil and additional infrastructure expenditure for Sabah and Sarawak would help with the economic recovery, ” Lau says.
Among his top picks include Gamuda Bhd, MMC Corp, Sunway Construction Group Bhd, HSS Engineers Bhd and IJM Corp Bhd.
It is worth noting that MMC Corp Bhd and Gamuda Bhd joint venture is the project delivery partner (PDP) for the MRT2 project.Meanwhile, Lee Heng Guie, executive director at The Associated Chinese Chambers of Commerce And Industry of Malaysia’s Socio-Economic Research Centre, points out that a timely disbursement of the Budget allocation would ensure positive spill-over on domestic demand.
“Any delay in the disbursement would trigger a renewed economic contraction if the private sector has not recovered to take up the slack, ” he says.
Interestingly, under the Budget 2021, Sabah and Sarawak will receive a separate allocation for development expenditure of RM5.1bil and RM4.5bil, respectively, for building and upgrading water, electricity, and road infrastructure, health and education facilities.
The government also allocated RM 3.8bil for various major roadworks in Peninsular Malaysia, including the upgrade of the Federal Highway and “central spine road” in Pahang and Kelantan.
Interestingly, the government announces RM2.7bil projects for rural areas such as RM 1.3bil for roads, RM630mil for water supply and alternative water supply, RM250mil million for rural electricity supply, RM355mil for housing aid programmes for the poor and RM121mil to install lamps and lights for village roads.
“We are also happy that RM2.5bil has been allocated for G1-G4 contractors which will serve as a life line especially for Bumiputera contractors.
“These small projects would benefit the industry at all levels especially for small time contractors.
“This serves as a great economy multiplier and we hope that this will revive the construction industry faster, ” says Master Builders Association Malaysia (MBAM) in a statement.