Ways of Reviving Abandoned Construction Projects in Malaysia - Term Paper Example

Ways of reviving abandoned construction projects in Malaysia xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Malaysia has had the problem of abandoned projects since the 1980s. Reasons to why there is this issue are to do with finances, economics, legal and managerial and lastly the unforeseen risks. An abandoned construction is defined as a building that is not completed or if the building is not fit for human occupation. The Ministry of Housing and Local Government has set conditions that if they are not met then the building is declared to be abandoned and they are; No construction in the site for more than six months, the developer wounds up, the developer declares that they are unable to finish the construction they have started or lastly if the government itself declares it not occupational because it doesn’t follow the codes and conduct of housing or building. Malaysia ahs has two economic recessions that hit the country really hard and destroyed from their currency to their markets. But also due to the corruption in its government the problem will continue to be there also due to poor management of the structures and the need to maximize profits instead of just wanting to give your citizens the basic need which is shelter. The abandoned projects have a huge impact on investors and the stakeholders of the projects since they don’t know what will happen if they do invest in the projects but the key move to helping the country’s real estate to rise up again is by Rehabilitation, legislation (reserving the rights of the purchasers by giving them legal endorsements to the land) and lastly funding from both the government and others willing to help the country The construction sector in the government is a major tool that should be taken into considerations and their major problem is construction delays in that both the contactor and the project owner delay it for their own personal gains. But the government still is not taking the problem seriously since the construction sector is not that lucrative compared to manufacturing companies. This statement supports my theory the situation is supported with a speech announced by former Minister of Housing and Local Government, Datuk Seri Kong Cho Ha (2009): “The ministry is not in the position to take over abandoned projects as it will cost a substantial amount of taxpayers’ money. Also, they must understand that there are many unsolved problems associated with abandoned projects such as claims from buyers, bank borrowings and other liabilities, which are best left to the professionals to resolve. That is the reason why the ministry takes on the role of a mediator who looks for white knights to help revive abandoned projects.” And in retrospect the investors fear to invest on something that is risky since if the government is not seeing it as a good investment why should they? The implications that is has had on the country is immense since investors are afraid of investing in the company due to its riskiness for example their construction sector was 3.3% according to the GDP and half of the workers were foreign people and workers which poses a challenge to the wealth opportunities in the country1. The statistic behind the abandoned projects is as follows from the table below: State Total Abandoned Projects Until June 2008 Until February 2009 Number of Projects Number of Projects Number of House Units Number of Buyers Johor Kedah Kelantan Melaka N. Sembilan Pahang Perak Perlis Pulau Pinang Selangor Terengganu W.P. Kuala Lumpur 37 20 8 14 29 21 20 3 26 66 8 18 32 9 3 7 20 11 6 0 10 39 1 6 9,280 1,445 519 1,109 4,743 3,866 822 0 6,517 21,733 21 2,406 5,419 709 367 570 2,383 1,972 597 0 4,784 14,642 20 1,365 Total 270 144 52,461 33,376 Source: Ministry of Housing and Local Government In the table above it shows that the problem has been going on for the past two decades. The problem is still there and the government has to play a big role to help in the making the solution for the problem at hand. The crucial problem faced by house buyers is the monetary losses and difficulties in servicing the interest on housing loans they have taken as well as paying for monthly house rental. The abandonment has led to also environmental and social economic impacts in both the long term and short term. In the social scene it has led to increase in unemployment, conflicts between stakeholders and in the environmental scene it has led to landscape deterioration, increase in erosion in their lands since leaving of bare land or also leaving projects during their initial stages has also led to making the area look ugly. In the decrease of biodiversity lowers the tourism turnover since there is nothing to see when you come to the country hence no returns from other sectors other manufacturing industries. It also led to high garbage disposals in the abandoned sites which led to increase in pollution especially the half houses where some people living in since they lacked sewage plants thus the high risk of diseases in the area especially the chronic diseases for example cholera, diahorrea. Increase in illegalities since no jobs people look for a way to make a living hence criminal activities increase. Abandoned buildings are ideal places to trade, conceal, and consume drugs. Study shows that the evidence of drug use was found in 19% of the abandoned buildings in and also finds evidence of sexual activity and prostitution in 20% of the buildings in his study, and evidence of two different types of crimes against Property. One of the ways in reviving the constructions sector includes rehabilitation of the abandoned sectors and building them up. If the government doesn’t have the funds to help in the venture they should encourage foreign investment and accept grants given to them by other countries. For example the country is trying to rehabilitate the abandoned projects in Kuala Lumpur their capital city and it has deemed to be successful. Also by enhancing the legislation in that ownership reserving rights of the land are kept and thus given legal endorsements to do what they want with their land except it has to be profitable to the community at large. By developing a committee to deal with the legislation issues is a way forward to know which companies can be allowed to invest and the also deal with the construction sector only thus giving it priority. Encouraging non-profit organizations to invest in their cause will be a good capital investment on the resuscitation project. As long as the project is for a good cause since it’s giving shelter to its citizens the organization will lend a helping hand. Sustainability of the environment and economy will encourage investment in the country in terms of encouraging green housing in the area, promoting recycling in the area; building green architectural houses may also encourage foreign investment. Also by the scrutinizing and following the revival project closely not to have mishaps will put pressure in the resuscitation of the projects which will put everyone on their toes to get the work. Implementing and following through the laws set aside to help in this venture in this process is a step forward to make Malaysia advance and move forward. For example the laws in the constitution in the section: Companies Act 1965, Housing Development (Control and Licensing) Act 1966 and its regulations. (Act 118) and Uniform Building By-Laws 1984.Despite the needs of the citizen and making the world a better place at heart there are issues that need to be considered that will help the others rise up in that some project revivals have more internal rates of return (IRR) compared to others so it’s better to start reviving them thus the money after completion the government will get will help the rest resuscitate the rest. Reaching a common ground between the private sector and the government in this land issues and coming down to the same motives not that the private sector just wants to maximize profits but also to put considerations in the making citizens a priority in their motives towards a certain area. So as to avoid dispute and disagreements that may include the related parties, it is very important for project revivers to be very careful when it comes to dealing with contracts and documents and that there should be transparency and accountability between both parties. In conclusion, the process is that it will take time but the major part they need to do is to encourage foreign investment and luring them to develop their country since not all the funds can go to one sector but still they need to pay close attention to the sector. Also, encouraging sustainable architecture for example the diamond building in Malaysia is an example of sustainable architecture will also encourage foreign investments since that’s the direction to follow in this sector everything is about going green in the earth thus making it a better place. Implementation of the Islamic law where the owner of the house (Islamic Bank) to be liable and act As a guarantor and head for the completion of houses and also sustaining the build then sell at a reasonable interest rate increases the governments revenue and the owners. Since for most of the resuscitation will take place if foreign investment is in place luring them will have to be enhanced in terms of making good deals with the investors and the contractors so as to increase the rate of resuscitation. From the figure below the shows the formulation that is taking place in the resuscitation process in Malaysia: IRR- Internal Rate of Return Future Research The research has thrown up many questions that need further investigations to see the root cause behind the controversies between the owners and the government since their issues need to be resolved. Further research might explore ways of dealing with the situation at hand while still tending to the rest of the agendas at hand like the other industries. And investigating the root cause of the issue at hand hence coming up with a solution or a sense of direction to reduce the abandoned buildings. A future study on the implications would be a good ways of knowing how the problem has affected the country and given by the weight of the matter the government will give it more priority than other. Another possible area of future research is why the country suffered the two economic recession so as not for it to happen again their cause for development. Research Strategy Most of the findings were found through online research, library books and journals written by various people even about the Ministry of Housing and Local Government in Malaysia. The databases searched were books and journal which I have indicated on the bibliography below. Bibliography Abdul Rashid, K., 2002. Construction Procurement in Malaysia Processes and Systems -Constraints & Strategies, Kuala Lumpur: Research Centre, International Islamic University Malaysia. Arditi, D. & Chotibhongs, R., 2005. Issues in Subcontracting Practice. Journal of Construction Engineering and Management, 131(8), p.866 Awakul, P. & Ogunlana, S.O., 2002. The effect of attitudinal differences on interface conflicts in large scale construction projects: a case study. Construction Management and Economics, 20, pp.365–377. Baker, Judy L. (2000). Evaluating The Impact Of Development Projects On Poverty: A Handbook For Practitioners. USA: The International Bank For Reconstruction And Development/The World Bank. Chapman, R.J., 2001. The controlling influences on effective risk id entification and assessment for construction design management. International Journal of Project Management, 19, pp.147–160. Cheng, M.I., Dainty, A.R.J. & Moore, D.R., 2005. What makes a good project manager? Human Resource Management Journal, 15(1), pp.25–37. Chiang, Y.-H., 2008. Subcontracting and its ramifications: A survey of the building industry in Hong Kong. International Journal of Project Management Cooke-Davies, T., 2002. The “real” success factors on projects. International Journal of Project Management, 20, pp.185–190 Dahlan, N. H. M. (2011a). Legal Issues in the Rehabilitation of Abandoned Housing Projects of the Liquidated Housing- Developer-Companies in Peninsular Malaysia. European Journal of Social Sciences, 23(3), 392-409. Dahlan, N. H. M. (2011b). Rehabilitation of abandoned housing projects: a comparative analysis between the law and practice in Peninsular Malaysia and the Republic of Singapore. Commonwealth Law Bulletin, 37(1), 145-173. Divr., D., Lipovestky, Shenhar, A., Tishler, A., (1998). In search of project classification: a non- universal approach to project success factors. International Journal of Project Management, 27 (6), pp. 89-95. Fauziah Raji (2009). The Land Development Process under Privatization. In Ismail Omar. An Insight Into Property Development: Issue, Models and Processes. Malaysia: Universiti Teknologi Malaysia. Fellows, R. & Liu, A., 2008.Research methods for construction Third Edition., Wiley- Blackwell Gould, F.E., 2005. Managing The Construction ProcessThird Edition., Pearson Prentice Hall. Heng, N., 2011. Abandoned housing projects revisited. Sun2Surf. Available at: http://www.sun2surf.com/article.cfm?id=57219 [Accessed April 26, 2014] HBA (2010a). Abandoned Housing Project – A nightmare. Retrieved 25 April 2014 from http://www.iproperty.com.my/news/Abandoned-Housing-Project. Hussin, A. A. (1994). Housing finance and the Malaysian economy. Paper presented at the Regional Workshop on Housing Finance, Kuala Lumpur, Malaysia. Hillier, A. E., D. P. Culhane, T. E. Smith, and C. D. Tomlin. (2003) Predicting Housing Abandonment with the Philadelphia Neighborhood Information System. Journal of Urban Affairs 25 (1): 91-106. Holroyd, T., 2003. Buildability : successful construction from concept to completion, London: Thomas Telford Isa, Z. (2008). 10:90 Concept the findings of the BTS committee of the institution of surveyors, Malaysia. The Malaysian Surveyor, 42(3), 29 -37. Khalid, M.S., 2010. Abandoned Housing Development: The Malaysian Experience. PhD. Edinburgh: Heriot-Watt University. Lambeck, R. & Eschemuller, J., 2009. Urban construction project management, New York: McGraw-Hill Rajan, P., 2005. Most abandoned houses in Selangor. New Straits Times. Available at: http://www.hba.org.my/news/2005/1105/most.htm [Accessed April 26, 2014] Salkind, N., 2009. Exploring research 7th ed., Upper Saddle River N.J.: earson/Prentice Hall Wachsmuth, David (2008). From Abandonment To Affordable Housing: Policy Options For Addressing Toronto’s Abandonment Problem. Cities Centre: University of Toronto. Read More