The construction industry makes up an important part of the Malaysian economy. Although relatively small, it is extensively linked with many other parts of the economy, in particular with related industries such as those for basic metal products and electrical machinery. So construction can be described as some kind of an economic engine for Malaysia. Construction Sector contributes 5% to GDP and employs 9, 3% of overall workforce.
While GDP grew at an average rate of 5.46% from 2000 to 2007, the construction industry stagnated, recording an average growth of 0.7% over the same period. Output for the construction sector hovered around the RM 7 billion mark, but steadily shrank as a share of GDP, from 3.3% in 2000 to 2.5% in 2007 (refer to Table 1).
While GDP grew at an average rate of 5.46% from 2000 to 2007, the construction industry stagnated, recording an average growth of 0.7% over the same period. Output for the construction sector hovered around the RM 7 billion mark, but steadily shrank as a share of GDP, from 3.3% in 2000 to 2.5% in 2007 (refer to Table 1).
Table 1: Malaysian Construction Industry and the Economy
Source: Economic Reports 2003/2004, 2004/05 and 2005/06, Ministry of Finance, Bank Negara Annual Report 2006
Note: The GDP figure is net of imputed bank services charges and import duties
Based on the historical statistics, the Malaysian construction industry has consistently been the smallest contributing sector to the economy, contributing on average 3% to the total GDP. Even when compared to neighboring countries, the contribution of the Malaysian construction industry to the nation’s GDP is much lower as shown in Table 2.
Table 2: Construction Contribution to GDP (By Country)
While most businesses are subject to the ups and downs of a business cycle, the magnitude of the construction industry’s fluctuation is atypical. A review of GDP and construction growth trend over a 30-year period (1974 to 2004) reveals that the business cycle swings endured by the construction industry noticeably exceed those of GDP movements as shown in the diagram below.
Figure 1: GDP Growth of the Malaysian Economy vs. Construction Industry: 1974 - 2004
Source: Construction Industry Review 1999 – 2000, CIDB, Ernst and Young Analysis