Malaysia's construction boom faces its biggest test [WATCH]
KUALA LUMPUR: Malaysia's construction industry is heading into what could be one of its most consequential periods of growth, with a swelling pipeline of public infrastructure and private investment promising more work, but also exposing the structural weaknesses that have long held the sector back.
The challenge is no longer simply about building more. It is about whether Malaysia can build better, faster, safer and more profitably, said Construction Industry Development Board (CIDB) chief executive Ahmad Farrin Mokhtar,
For decades, construction growth has often been measured by the value of contracts awarded, kilometres of roads completed or the number of towers rising across the skyline. But as Malaysia prepares to enter 2027, the industry's next test will be defined by a different set of measures: productivity, technology, skilled manpower, safety, sustainability and the ability of contractors to deliver increasingly complex projects without sacrificing margins.
Ahmad Farrin believes the industry is approaching an inflection point.
Securing projects is no longer the only challenge, he told Business Times.
The industry must be able to deliver projects more efficiently, safely and sustainably, while improving productivity and reducing dependence on labour-intensive methods, he said.
Ahmad Farrin said Malaysia's construction sector is being pulled into a new era of demand driven not only by traditional roads, railways and buildings, but also by data centres, advanced manufacturing facilities, renewable-energy infrastructure, logistics hubs and increasingly sophisticated urban developments.
These projects require capabilities that go far beyond conventional construction, he said.
They demand digital coordination, specialised engineering, advanced project management, precision manufacturing and a workforce capable of operating in a far more technology-intensive environment.
At the same time, contractors must contend with rising material and labour costs, supply-chain disruptions, climate risks, tighter safety standards and increasingly thin margins, Ahmad Farrin said.
The result is a defining question for the industry: Can Malaysia's construction sector transform fast enough to capture the next wave of growth?
GROWTH IS COMING, BUT IT WILL BE MORE DEMANDING
The industry is entering 2027 from a position of relative strength.
According to the Statistics Department, the value of construction work done rose 12.5 per cent to RM178.6 billion in 2025.
Momentum continued into the first quarter of 2026, when construction work done increased 8.5 per cent year-on-year to RM46.5 billion. Civil engineering accounted for RM15.9 billion, or 34.2 per cent of the total.
The government is also expected to channel about RM58 billion in development expenditure in 2027, with 70 per cent earmarked for basic development projects.
That provides an important measure of continuity for infrastructure and construction activity.
Ahmad Farrin expects civil engineering and infrastructure to remain key growth drivers, supported by transport, connectivity, water, flood mitigation and other essential public infrastructure projects.
Utilities and basic infrastructure should also see sustained demand as urban centres and economic corridors expand, he said, adding that this includes water supply, sewerage, drainage, electricity distribution, telecommunications and climate-resilient infrastructure.
But the industry's next phase of growth will not be driven by government spending alone. Private capital is becoming an increasingly powerful force, he said.
Ahmad Farrin said industrial and non-residential construction is expected to benefit from Malaysia's continued investments in manufacturing, data centres, logistics, renewable energy and other higher-value industries.
Non-residential building activity grew 12.7 per cent in the first quarter of 2026, highlighting the growing contribution of private-sector investment to the construction pipeline.
Affordable housing will remain socially important, although its expansion will depend on land availability, financing, demand, project pipelines and implementation by federal and state agencies.
"Overall, we expect growth to be broad-based, with public infrastructure providing continuity and private industrial investment supporting diversification," Ahmad Farrin said.
But the industry faces several risks that could disrupt this trajectory.
Global economic uncertainty and geopolitical tensions can disrupt supply chains, drive up imported material costs and weaken investor confidence.
Climate risks are also becoming an increasingly important part of construction planning.
Extreme heat can affect worker productivity and safety. Water shortages can disrupt site operations. Severe weather can delay schedules and damage infrastructure.
Ahmad Farrin said contractors can no longer treat these events as isolated disruptions.
They need stronger resilience at both project and corporate levels.
That includes tighter financial and cash-flow management, diversification across clients and project segments, and more rigorous risk assessments before taking on projects.
"Supply-chain planning is equally important. Companies should diversify critical sources of materials, increase the use of locally available products that meet required standards and adopt procurement systems that provide earlier visibility of price and delivery risks."
Companies should diversify critical sources of materials, increase the use of locally available products that meet required standards and adopt procurement systems that provide earlier visibility of price and delivery risks.
Contracts, meanwhile, need to allocate risks more fairly and include mechanisms for dealing with exceptional changes in material prices, project scope and delivery conditions.
Climate adaptation will require practical changes on construction sites, including heat-stress management plans, flexible work schedules and better systems for anticipating weather-related disruptions.
Meanwhile, Ahmad Farrin said technology is increasingly becoming part of this resilience strategy.
Building Information Modelling (BIM), digital project-management platforms, drones, sensors, artificial intelligence and data analytics can help contractors identify design conflicts before work begins, monitor progress in real time and detect emerging delays or cost pressures earlier.
But technology alone will not solve the industry's productivity problem.
The more fundamental issue, Ahmad Farrin said, is how projects are prepared before construction begins.
Projects should have clear scopes, sufficiently developed designs, realistic cost estimates, appropriate procurement strategies and reliable information on sites and utilities before they are awarded.
"Inadequate preparation often results in variations, disputes, delays and cost escalation during delivery," he said.
Digital tools can then help project owners and contractors maintain control.
BIM, digital dashboards and common data environments can improve coordination, track milestones and provide early warnings when costs or timelines begin to move off course.
"For public sector projects, this should be supported by strong project governance, with clear accountability and regular monitoring against agreed cost, timeline and delivery milestones so that potential issues can be identified and addressed at an early stage," Ahmad Farrin said.
LOWEST PRICE MAY NO LONGER MEAN BEST VALUE
One of the industry's biggest shifts may need to occur in procurement.
For decades, construction contracts have often been shaped by the pursuit of the lowest initial price.
Ahmad Farrin said rather than focusing primarily on the lowest initial price, project owners should place greater weight on contractor capability, past performance, financial strength, safety, quality and proposed delivery methods, he said.
He said the industry needs to move towards whole-life value by considering operating, maintenance and environmental costs, rather than simply the upfront construction price.
That means looking beyond the initial cost of construction and considering the long-term operating, maintenance and environmental costs of an asset.
The shift could prove particularly important as Malaysia embraces more complex infrastructure and buildings that must perform efficiently over decades.
Fair and timely payment throughout the supply chain will also be critical.
Productivity can also be improved through greater use of IBS, mechanisation, automation and other modern construction methods.
These technologies, he said, can reduce reliance on labour-intensive site activities, improve consistency and give contractors greater control over schedules and resources.
He said CIDB's assessment systems are intended to reinforce these improvements. The Quality Assessment System for Building Construction Works (QLASSIC) provides an objective measure of workmanship quality, while the Safety and Health Assessment System in Construction (SHASSIC) evaluates safety and health performance through documentation, site inspections and personnel interviews.
He added that such systems help establish more consistent and measurable standards across the industry.
CONSTRUCTION IS MORE THAN A SECTOR
Beyond immediate project delivery, Ahmad Farrin said CIDB sees digitalisation, IBS, sustainability and workforce development as critical to the industry's long-term competitiveness.
"Construction is an enabling industry. It provides the infrastructure, housing, industrial facilities, hospitals, schools, utilities and digital infrastructure required by every major area of the economy," he said.
That makes construction one of the foundations of Malaysia's broader economic ambitions.
A data centre cannot operate without reliable power, water and connectivity. A manufacturing investment cannot proceed without factories, logistics networks and supporting infrastructure. Economic corridors require roads, railways, utilities and housing.
Ahmad Farrin said the quality and efficiency of the construction sector therefore influence the competitiveness of almost every other industry.
This is why CIDB's transformation agenda stretches beyond traditional issues such as contractor registration and compliance.
Its priorities now include BIM, IBS, automation, digital maturity, skilled-personnel accreditation, sustainability and international competitiveness.
The agenda is anchored by the National Construction Policy 2030 and the Construction Industry Transformation Programme 2030, or CAP30.
The programme sets measurable targets for the industry over the next five years.
By 2030, Malaysia aims for 50 per cent of building projects valued above RM40 million to attain green ratings.
CAP30 is also targeting an 80 per cent achievement score for both the Quality Assessment System for Building Construction Works (QLASSIC) and the Safety and Health Assessment System in Construction (SHASSIC).
The programme aims for full accreditation of construction personnel and greater international recognition for Malaysian construction companies.
Malaysia also aims to strengthen the international competitiveness of its construction industry, with CAP30 setting targets linked to global competitiveness rankings and recognition in overseas markets.
THE SKILLS RACE
Technology will only be as effective as the people capable of using it.
As construction becomes more sophisticated, the industry will need more BIM modellers, machinery operators, safety specialists, supervisors, technicians and skilled tradespeople.
That makes workforce development one of the most critical elements of the industry's transformation.
CIDB, through Akademi Binaan Malaysia and industry partners, is supporting technical and vocational education and training, accreditation, upskilling and reskilling.
But for CIDB, the objective is not simply to fill vacancies.
It is to create a workforce capable of moving into higher-skilled and better-paying construction careers.
The challenge is particularly important as Malaysia continues to grapple with labour shortages and dependence on foreign workers.
Ahmad Farrin said greater recognition of construction as a skilled and technology-enabled profession could help attract more Malaysians into the industry.
For smaller and medium-sized contractors, however, the transition could be more difficult.
Larger companies may be able to invest in software, machinery, automation and specialised talent.
Smaller firms often face higher barriers, including upfront costs, limited access to financing and uncertainty about whether technology investments will generate sufficient returns.
Ahmad Farrin identified five areas requiring greater attention: wider digital adoption, higher productivity among smaller and medium-sized contractors, development of a stronger local skills base, consistent safety and quality performance, and the integration of sustainability and carbon management into mainstream construction.
Budget measures, he said, should therefore focus on building capability rather than simply providing short-term relief.
Targeted incentives, financing and industry support could help smaller companies invest in automation, IBS, BIM, machinery and digital project-management systems.
Better visibility over future public project pipelines would also allow contractors to plan their workforce, material requirements and financing needs more effectively.
THE INDUSTRY'S MOST IMPORTANT TEST
For all the talk of technology and productivity, safety remains the most fundamental measure of whether the industry is truly transforming.
Construction remains one of Malaysia's higher-risk sectors, Ahmad Farrin said.
The Department of Occupational Safety and Health reported 68 construction-site deaths in 2023, followed by 66 in 2024 and 35 deaths up to October 2025.
These figures reinforce that construction remains a high-risk sector and that every fatality is one too many, Ahmad Farrin said.
Technology is increasingly being deployed to reduce those risks.
According to Ahmad Farrin, BIM can identify hazards during the design stage, allowing problems to be eliminated before construction begins.
Drones can inspect difficult or dangerous areas without exposing workers to unnecessary risks, while sensors and connected devices can monitor equipment, environmental conditions and restricted zones.
Wearables, geofencing, mobile inspections, digital permit-to-work systems and AI-enabled image analysis can provide earlier warnings of unsafe conditions.
He said Malaysia has also strengthened its preventive approach through the Occupational Safety and Health (Construction Work) (Design and Management) Regulations 2024.
The regulations place greater responsibility on clients, designers and contractors to manage risks from the planning and design stage rather than leaving safety primarily to workers once construction begins.
Ahmad Farrin said CIDB's SHASSIC system provides another mechanism for assessing safety and health performance through documentation, site inspections and interviews.
Yet, he warned that technology cannot substitute for leadership.
Sustained improvement will require leadership commitment, competent supervision, better planning, strict compliance, accredited personnel, stronger subcontractor management and a willingness to stop work when conditions are unsafe, he said.
"Technology can support these measures, but it cannot replace a strong safety culture."
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