Malaysia’s new cement price regime may lead to cost uncertainty - builders’ assn

Malaysia’s new cement price regime may lead to cost uncertainty - builders’ assn
22 June 2007

Malaysia’s new pricing mechanism for cement products, under which prices will be reviewed every four months, could lead to cost uncertainty for the construction industry, said Patrick Wong, president of the Master Builders Association of Malaysia (MBAM).  

"MBAM feels that the frequent price adjustments would be unfair to contractors and builders," Wong said in a statement, according to Bernama news agency. 
Construction contracts are generally run through a period of two to three years, he noted.  
If prices are reviewed every four months, terms of a contract will be adjusted about three to nine times depending on the duration of the contract, said Wong.  
Deputy Prime Minister Najib Razak said earlier that the new pricing mechanism will take effect from Jan 1 next year.  
The current practice, which reviews prices on an irregular basis, is not efficient, Najib said.  
Wong of MBAM said that contractors and builders must be allowed to incorporate price fluctuations clauses in all forms of contract to ensure that they can adjust to the price fluctuations accordingly.  
"We need to look at this very objectively with the interest of the construction industry in the long run," he said.  
Discussions and dialogues should be carried out to protect the interest of contractors and builders before the new pricing mechanism is implemented, he said. 
"Not only must views from the industry be consulted to ensure that the supply of cement will be constant once the APM (automatic price mechanism) is effected but the public should also be kept informed on how the APM for cement really works and what is the total impact to contractors, clients and the man in the street," Wong said.  
The association also urged the government to liberalise the market and let the actual demand and supply to decide the pricing.  
"By opening up the market, market forces will find its own equilibrium and this would cause the prices to be more stable," he said.  
Published under Cement News