A NATIONAL BUDGET 2020 WISHLIST by Dato’ Faris Yahaya, Group Chief Executive Office, ORANGEBEAM
It’s a sobering reality that construction is one of the least digitised industries today, especially when it is known for its notoriety in cost and time overruns. Every day we are exposed to newer technologies and its limitless impact to our industry. Adoption of new technologies can capture tremendous efficiencies for us. In fact, a recent World Economic Forum (WEF) report shows the industry stands to save “up to $1.7 trillion (RM7.1 trillion) in construction, engineering and design costs globally within the next decade” with full-scale digitisation.
We are learning that new technologies are fast maturing. About $18 billion (RM75.4 billion) was invested in construction technology between 2013 and early 2018, that tells us there is plenty to leverage and a lot to go around. However, acceptance within the industry is still low. Only a few large companies are using BIM despite push by the Construction Industry Development Board Malaysia (CIDB) for adoption of construction technologies and provision of testing, certifications and training for construction companies. Not to mention, their recent plans to develop a sector-specific Industrial Revolution 4.0 (IR4.0) roadmap.
Incentivise first movers and adopters
McKinsey research cited risk aversion as one of the areas of struggle for business leaders when it comes to tech adoption. This stands as the bane of innovation and business growth. Which is why we are calling for the government to support CIDB in its efforts to encourage adoption even more. What forward-looking companies need is a push in the right direction. First mover and adopters in the industry must be empowered and set as examples for the rest.
While we are appreciative of existing incentives by the government to encourage adoption of tech but currently, these are limited to certain sectors. We would like the government to consider extending them to other industries including construction, targeting at players who are looking beyond existing technologies like robotics and artificial intelligence (AI). Government can also consider allocations to relevant agencies to develop low-risk test bed opportunities for local players – to enable exploration of technologies and innovative solutions for building and construction. The industry needs technology research with long-term horizons and applied research that helps deploy existing and emerging technologies effectively and imaginatively, all towards improving profitability for the industry.
Accelerate IoT adoption for effective development of smart cities
We are truly supportive of the Malaysia Smart City Framework launched recently as it shows government’s commitment in developing and transforming existing cities to become smarter, safer and more sustainable. We are confident in the impact that Smart Cities will have to our economy – in driving efficiencies through automation and improving connectivity with Internet of Things (IoT).
However, it is imperative that Smart Cities development must be centred on creating values. Buildings constructed or retrofitted must be resilient and long lasting not only to sustain and protect national assets but manage the impact to our environment. While we are designing Smart Cities that would appeal to the changing demands of our communities, we also need to be mindful of the changing economics of infrastructure that requires the right combination of traditional construction and smart solutions.
Which is why for efficient development, more sectors should be included within the framework and not limiting or prioritising only technology or service providers and city managers or state governments. Strategic level of planning will require all parties within a city ecosystem to work together, especially the involvement of construction players as early in the planning stage as possible.
With construction technology coupled with connectivity, this mega city-level collaboration can be made possible. Today large construction projects can be digitised simply by harnessing the power of IoT and combining it with other collaboration tools. However, with the slow tech adoption across the construction supply chain, progress is sluggish. For the smart cities vision to take off, we call upon government to consider allocations to enable not just tech adoption, but specifically IoT adoption. When used in the development ecosystem, it can also potentially lower construction costs and create safer building practices.
Enabling alternative financing models
Core infrastructure projects are important because one, they provide many benefits for the people in the future, both directly and indirectly and two, they help reduce transportation cost of goods and this will result in closing the gaps in goods prices. However, local construction players are not having it easy with major infrastructure project, given the slow global economy outlook, tighter budgets and increasingly competitive bidding that lowers the sector’s margin further.
To top this, current financing models present risks for both construction players and clients. For example, with the Project Delivery Partner (PDP) model, clients ultimately bear risks that come with overruns and on the other hand, with the traditional turnkey model, contractors stand to lose out in similar situations. Today there are alternative models that may present a win-win situation for both sides, from peer-to-peer platforms to non-bank financing trends.
We urge government and regulators to render more support and funding to CIDB so that they can form an alternative financing task force, including research/studies – in developing a friendlier model to support construction companies that are struggling to keep afloat during global economic downturn. This is also an invitation to my fellow industry peers to rise to the occasion, connect with our partners across the value chain and together work on a holistic digitisation framework for the construction sector that we can present to the government. With Malaysia solidifying its position as one of the leading emerging markets today, it’s time for our sector to step up and create greater economic impact.