Bumiputera contractors: A wasteful national mission to date

WRITTEN BY Columnist KOON YEW YIN

This article is too important not to be read by more people. It is written by Koon Yew Yin, one of the founders of the three larger construction companies listed in Bursa Malaysia. These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd.

We certainly do not need more contractors - we must ensure that our resources are put into creating value to industry and economy, not creating layers after layers of profits being hived off.

Producing competitive Bumiputera contractors

As reported on May 1, 2005, Malaysia had one contractor for every 614 persons. Most likely there are more contractors by now. This ratio is again likely to be amongst the highest in the world and is obviously costing the public a significant amount of money besides affecting our overall economic performance.

I would like to pose a few questions which may appear unkind or insensitive but nonetheless need to be asked.

Out of hundreds of high-rise buildings in Kuala Lumpur does anyone know of any Bumiputera contractor who has won any of the building contracts through an open competitive tender process? Out of hundreds of kilometers of highway in Malaysia, can any Bumiputera contractor who won any part of the highway contracts through open tender be identified?

The answer to the above questions unfortunately is in the negative. The evidence is that all the government’s well-intentioned efforts in trying to produce competitive Bumiputera contractors since 1957 have failed.

Why this has happened needs to be openly discussed rather than swept under the carpet. In this note, I share my experiences as a contractor and my knowledge of why Bumiputera contractors have failed in the past and what needs to be done by the government to correct this unhealthy situation.

Facts of life in the contracting business

Contracting is a very difficult business yet it is so easy to register as a contractor.

To register as a Class F contractor one has only to show that he has RM5,000. He does not even require a pass in Lower Certificate of Education (LCE). But it will take at least 10 years to learn how to overcome all the inherent difficulties and become competitive and efficient. Continuously giving out lucrative and over-priced contracts without open tenders will only make the recipients less competitive.

Secondly, studies have shown that there are more failures and bankruptcies in contracting than in any other business, and also almost all construction projects are NOT completed within the original scheduled time.

The delay will cost the contractor more and that is why you can often see uncompleted buildings and abandoned projects which have been undertaken by inefficient contractors. There are many reasons for this peculiar phenomenon.

Note on the Author

I am a 76-year-old chartered civil engineer and one of the founders of the three larger construction companies listed in Bursa Malaysia. These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd.

I was a member of the Board of Engineers, Malaysia for three terms. I was also on the Sirim Board responsible in writing the Malaysian standard specifications for cement and concrete. In addition, I was the Secretary General of Master Builders Association, Malaysia for nine years.

These days, I am completely retired. My intention in writing this article is honourable. Many people may not like reading what I have written and the truth may be difficult to accept. Nevertheless, this is my considered analysis for the benefit of my country, the Bumiputera contractors and the construction industry.

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