Malaysian builders predict lower profits with higher labour standards under TPP

In its analysis of the overall impact on the construction industry in Malaysia, PwC said the TPP has a “neutral” impact as there are both positive and negative consequences for this sector. — Reuters pic
In its analysis of the overall impact on the construction industry in Malaysia, PwC said the TPP has a “neutral” impact as there are both positive and negative consequences for this sector. — Reuters pic

KUALA LUMPUR, Dec 3 — The Malaysian construction industry believes profits will dive due to the expected rollout of higher labour standards when the country signs the Trans-Pacific Partnership (TPP) agreement, a cost-benefit analysis by consultancy firm PricewaterhouseCoopers (PwC) has shown.

PwC provided data showing that Malaysia is currently among nations with the lowest rating for their compliance to collective labour rights, and noted that the country would be obligated under the TPP to adopt rights under an International Labour Organisation declaration in 1998 that would possibly drive up labour costs.

“Construction companies in Malaysia believe that a 1-week strike arising from labour issues would significantly affect business revenues.

“Construction firms believe that Malaysia’s participation in the TPP would raise labour standards to be more in line with the Global Rights Index, and this could increase labour costs,” the consultancy firm said in its report released today.

Citing the International Trade Union Confederation’s (ITUC) Global Rights Index, PwC showed that Malaysia is ranked in the lowest group in cluster 5 where there is “no guarantee of rights”, while other countries who negotiated in the TPP were placed in cluster 2 which covers “repeated violation of rights” (Japan, New Zealand), cluster 3 for “regular violation of rights” (Singapore, Australia, Chile, Canada) and cluster 4 where there is “systematic violation of rights” (Peru, Mexico, US).

“Malaysia’s rating is due to restrictions on selected workers in forming or joining a union, limitations or bans on collective bargaining in certain sectors, and limitations on rights to strike,” it said.

The report also featured an international construction cost comparison by consultancy firm EC Harris in 2013, which had used UK as the benchmark at 100 for the total cost range that covers site labour cost, construction materials, machinery and equipment use.

In its highlight of selected TPP nations, the report showed Malaysia’s average construction cost as ranging from 39 to 49, against the higher costs of the US (77-120), New Zealand (90-121), Singapore (101-120), Japan (107-137), Australia (103-160).

“TPP countries practising stronger labour rights appear to have higher construction cost compared to Malaysia,” PwC said in its comment on the data.

In its analysis of the overall impact on the construction industry in Malaysia, PwC said the TPP has a “neutral” impact as there are both positive and negative consequences for this sector.

PwC’s final report on the cost-benefit analysis of Malaysia joining the TPP is titled “Study on Potential Economic Impact of TPP on the Malaysian Economy and Selected Key Economic Sectors” and has been posted on the Ministry of International Trade and Industry’s website.

On October 5, Malaysia and 11 other nations — US, Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore and Vietnam — concluded negotiations on the TPP.

Malaysia has yet to sign the TPP — the full text of which was released publicly on November 5.

On August 13, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said that after the TPP text goes public, each country will have to go through its own domestic process over 90 days to get the public to buy-in on the deal.

For Putrajaya, that means finalising and releasing cost-benefit analyses — conducted by PwC and the Institute of Strategic and International Studies (ISIS) Malaysia — and also tabling the agreement text in Parliament for debate and approval.

Malaysia will not be part of the TPP even if it gets cold feet after signing by choosing not to ratify the agreement, Mustapa had said.

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