News: Several Construction Contractors Bidding Below Cost For Survival

Dec 9, 2019

The slowdown of the Malaysian construction market after the 14th general election last year has become so dire that some contractors are making below-cost bids, just to keep employees on board.

It is for this reason that Gamuda Bhd prefers to seek contracts from overseas and aims to get 50% of its construction profit and revenue from international jobs for the next three years, reported The Edge Markets.

Gamuda Bhd managing director Datuk Lin Yun Ling said that a fifth of the company’s revenue and profit already comes from overseas contracts.

Read here: 5 Ways To Minimize Construction Costs In Malaysia

With the company deciding to make Australia its “second home market”, Lin said there would be “quite a few tenders in the pipeline.”

“We find that there are not enough big projects in Malaysia. Even if we look at big projects currently, more than half of them are actually done by Chinese contractors, and these Chinese state-owned enterprise contractors, if they want the project, they can easily tender even at a loss. So how are we going to compete with them? So we have no choice, we have to go overseas.”

Lin added that even if Chinese contractors are “are not exactly edging out” local contractors, their mere presence is a concern in an environment where the volume of projects has greatly decreased.

He added that the situation is now made worse by the stuttering Chinese economy.

“So when things slow down there (China), they (Chinese contractors) will go overseas,” he explained.

Lin further explained that countries like Australia have seen less competition from Chinese contractors due to their more strict safety requirements and regulatory compliance.

“The Australian system there is very British, which means the design and safety standards, and contract law is very stringent. Nine out of 10 of their (Chinese) contractors cannot speak English. But here, the Chinese contractor can enter more easily,” he said.

 

 

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Nizam Zakaria
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