PETALING JAYA: MASTER Builders Association Malaysia (MBAM) is appealing to the government to reduce the import duty on heavy machinery and spare parts used in construction sector.
Malaysian import duties on building materials were regarded among the highest in Asean.
“The current import taxes of machinery equipment for the construction sector are as high as 20-25 per cent.
Ideally, in the Asean Economic Community spirit of freer movement of goods, they should be slashed to five per cent,” said Master Builders Association Malaysia (MBAM) president Matthew Tee.
He explained that reduction in import duties would lead to high productivity and encourage industry players to invest in high-capacity machineries.
"MBAM is only asking for a reduction of the duties on machineries that are not manufactured in Malaysia," he told reporters after the association's dialogue session with 26 other construction trade lobby groups, held here today.
A majority of the construction machinery in Malaysia is quite old, there would be huge opportunities for construction machinery companies to explore, penetrate and expand their businesses, to support the implementation of projects in the country.
"The MBAM is encouraging the use of newer machinery to improve efficiency and also for safety purposes, as older ones, may have a higher safety risk due to metal fatigue," he said.
“We have been putting our appeals since 2006. Effective 11th June 2015, the government had cut import taxes on three out of 10 tariff codes we had submitted," Tee said.
So far, the government has reduced the 10 per cent import duties to 5 per cent on machinery categorised under HS 8429.51.000, HS 8430.41.000 and HS 8431.43.000.
The remaining machinery under the seven tariff codes that are still slapped with import tax ranging between 20 and 30 per cent are HS 8704.10.211 for new dumpers designed for off-highway not exceeding 38 tonnes; HS 8705.10.000 for crane lorries; HS8705.90.000 for special purpose motor vehicles; HS 8429.11.000 for self-propelled bulldozers and track-laying; HS 8429.40.110 for vibratory road rollers; HS 8429.59.000 for excavators, shovel loaders, tamping machines; and HS 8430.69.000 for other moving, grading and boring machinery.
An uncertain global economic outlook and weak ringgit has hurt the bottomline of many contractors.
“At the start of the year when the ringgit was stronger, we had companies tendering for projects.
But now that the currency has weakened considerably, they are in a fix when it comes to accepting the award, as the cost of construction is now much higher,” Tee said.
He pointed out that profit margins within the competitive construction sector were already tight to begin with.
"Some members that are in a tough spot, as they are undecided as to whether or not to accept the jobs they had won,” he added.
It is now five months into the implementation of the Goods and Services Tax (GST) on April 1.
MBAM highlighted that many of its members face tight cashflow as they have yet to receive refunds despite waiting for at least three months after submitting their input tax claims to Customs.
"Some building material suppliers are operating on single digit profits margins. When they cannot get the refunds on time, they suffer."
Cash flow problems is having a negative chain effect. Some businesses are using reserve funds that are meant for future capital expenditure or have to borrow more money from the bank.
They end up paying more interest, leading to a rise in the cost of doing business.
MBAM also highlighted that contractors do not accept the Employment Insurance Scheme (EIS) proposed under the Budget 2015 as it is seen to be unecessarily raising cost of doing business.
While the well-intentioned EIS seeks to give temporary financial relief, reskilling and upskilling for retrenched employees, Tee said, "the implementation will punish good employers and reward the bad employers instead."
He explained that the EIS is not necessary as the current termination benefits are already sufficient. Excess funds from Social Security Organisation (SOCSO) and Human Resources Development Fund (HRDF) can be channelled for these purpose.