CONSTRUCTION SECTOR POWERS AHEAD IN 2024, OPTIMISTIC OUTLOOK SEEN CONTINUING IN 2025

KUALA LUMPUR, Dec 10 (Bernama) – Malaysia’s construction sector further solidified its position as a key driver of economic growth this year, thanks largely to increased civil engineering infrastructure jobs.

Besides the continuation of the East Coast Rail Link (ECRL), Rapid Transit System (RTS) link rail and Pan Borneo Highway, the construction of data centres has added to the beefing up of construction activity.

It helped the sector grow 19.1 per cent in the first 11 months, with the buoyant sentiment leading to an optimistic outlook for the sector in 2025.

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For the first three quarters, a total of RM116.8 billion in work value was completed, with the civil engineering subsector leading the way, according to the Department of Statistics Malaysia.

The projects comprised strategic investments and initiatives focusing on connectivity, sustainability and digital transformation.

Thanks to the government’s emphasis on infrastructure development, it attracted substantial domestic and foreign investments, setting the stage for long term growth. 

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Upbeat sentiment 

The upbeat sentiment in construction was reflected in the Bursa Malaysia Construction Index (BMCI), which increased by a commendable 30 per cent to as high as 316.83 as of July 18, after starting the year at 193.83 on Jan 2.

Key developments this year included the mammoth ECRL project being 80 per cent completed by November while the RTS connecting Johor Bahru and Singapore was 83 per cent complete as of Aug 20.

As for the Pan Borneo Highway in Sabah and Sarawak, it is set to enhance regional connectivity with Phase 1B recently launched, promoting economic integration across the area.

The growth of the construction industry has closely aligned with advancements in digital technology, including big data and artificial intelligence (AI), which have significantly boosted demand for data centres.

The decision by global corporate giants like Microsoft, Amazon Web Services (AWS) and Google to pick Malaysia for their data centre expansion further reinforces the country's position as an ideal foreign investment destination. Pull factors included the country’s strategic location, robust infrastructure and supportive government policies.

Undeniably, the synergistic relationship between construction technology and data centres would position Malaysia as a leader in both sectors.

Strong presence

NTT Data, which pioneered the development of the CBJ 1 data centre in Cyberjaya in the early 2000s, now operates six data centres in the region.

Following NTT’s lead, other companies, including CSF Advisers, Basis Bay and AIMS Data Centre, have also established a strong presence in Malaysia.

Digital infrastructure has also seen a significant boost, with investments in hyperscale data centres such as the KUL2 facility in Cyberjaya and the AI-ready Iskandar Puteri data centre.

These projects support Malaysia’s vision of becoming a leading digital economy in Southeast Asia.

Second 5G contract hogs the limelight

The fifth generation (5G) infrastructure is another cornerstone of this strategy, aimed at enhancing nationwide connectivity and enabling smart cities.

The decision to award the second fifth generation (5G) cellular network technology to U Mobile hogged the corporate limelight in the later part of the year.

Digital Nasional Bhd is undertaking the first 5G network.

Water infrastructure projects, including the RM4 billion allocation for water management in Perak and flood mitigation systems in the Klang Valley, reflected the government’s commitment to addressing climate resilience and ensuring sustainable resource management.

Analysts said the focus on long-term projects such as transportation networks and renewable energy infrastructure has enhanced the sector’s resilience.

MIDF Amanah Investment Bank Bhd, in a research note, highlighted the importance of policy measures that attract foreign direct investment, particularly in the construction of industrial and residential properties.

Investments and partnerships

For the first nine months of 2024 (9M 2024), the value of contracts awarded for infrastructure projects exceeded RM41 billion, surpassing 2023’s RM36.7 billion.

Analysts have noted strong private-sector participation, with investments in non-residential projects such as commercial buildings, factories and warehouses reaching RM109 billion. They said the public-private partnerships (PPPs) have played a vital role, particularly in the development of rail and renewable energy projects.

Malaysia’s efforts to modernise its transportation networks and utilities have stood out in improving its competitiveness within the ASEAN region. “The sector’s resilience was further bolstered by private-sector involvement, which contributed over 60 per cent of the funding for infrastructure projects," it said.

Outlook for 2025 and beyond

After a buoyant 2024, the outlook for 2025 is optimistic, supported by the RM50 billion in allocation in Budget 2025 for infrastructure, with the key areas being sustainable urban transport, renewable energy and rural infrastructure upgrades.

The integration of digital technologies, such as artificial intelligence and smart grids will enhance efficiency and productivity in infrastructure development.

RHB Investment Bank Bhd emphasised the importance of maintaining policy consistency and fostering innovation in infrastructure projects to sustain investor confidence.

“Malaysia’s infrastructure strategy is well aligned with global trends, particularly in green and digital investments, making it a compelling destination for international stakeholders,” it said in a research note.

With a strong foundation laid in 2024, Malaysia’s infrastructure investment strategy is poised to deliver long-term economic benefits, positioning the nation as a competitive and sustainable player in the ASEAN region going forward.

– BERNAMA