COVID-19: CIDB’s initiatives to ease burden of the construction industry

On 7 May 2020, the Minister of Works announced that the Construction Industry Development Board (‘CIDB’) has introduced short-term and long-term initiatives (‘CIDB Initiatives’) with the objective of easing the burden of construction industry players affected by the Movement Control Order (‘MCO’)1. Prior to this, CIDB had already published on 27 April 2020 several initiatives in the form of deferred payment of levy and certain exemptions in relation to contractor registration requirements2. The introduction of the CIDB Initiatives, which includes additional measures by CIDB, will be welcome news to the construction industry.
 
Deferred Payment of Levy
 
Pursuant to section 34(2) of the Lembaga Pembangunan Industri Pembinaan Malaysia 1994 (‘CIDB Act’), a contractor is required to pay to CIDB a levy for each and every project which he undertakes3. Levy is calculated at the rate of 0.125% of the contract sum and must be paid within 30 days of the notice of imposition of levy issued by CIDB.
 
Under the CIDB Initiatives, CIDB has implemented two measures to assist contractors in managing their payment of levy:
 
  1. Deferred payment of levy by a period of two months (such period being inclusive of the standard 30-days payment period) for construction projects commencing at any time between 1 January 2020 to 31 May 2020; and
 
  1. With effect from 1 June 2020 until 31 December 2020, contractors may apply to make payment of the levy in instalments by up to a maximum of six instalments.
 
Contractors should take note that the abovementioned initiatives are only applicable for private sector projects.
 
Relaxation of Contractor Registration Requirements
 
Section 25(1) of the CIDB Act provides that any person who carries out, or who undertakes to carry out, construction works must be registered with CIDB as a contractor. The registration is only valid for a period ranging from a minimum of one year to a maximum of three years4, and an application for renewal of registration must then be made within 60 days prior to the date of expiry of the registration and received by CIDB no later than 30 days before the said expiry date.
 
The CIDB Initiatives allow for, among others, the relaxation of certain contractor registration requirements:
 
  1. Exemption from obtaining Continuous Contractor Development points for applications for renewal of local contractor registration made between April 2020 to December 2020;
 
  1. Postponement of the requirement for Micro Competitiveness Rating for Enhancement (MCORE) assessment for renewal of registration for Grade 1 contractors. This requirement, which was scheduled to take effect on 1 May 20205, is now postponed to 1 January 2021; and
 
  1. Exemption from the requirement to attend and pass CIDB’s Contractor Integrity and Ethics Course, Business Management Course and/or Facilities Management Course for applications for renewal of local contractor registration made between 1  April 2020 to 31 December 2020.
 
It is worth highlighting that in CIDB’s publication of 27 April 2020, CIDB had introduced a fifty percent (50%) exemption from the amount of Continuous Contractor Development points for applications for renewal of local contractor registration for 2021. This particular exemption, however, has not been addressed in the CIDB Initiatives.
 
Fees and Validity of Contractor Personnel Registration
 
All employees carrying out construction work are required to be registered as construction personnel in accordance with section 33 of the CIDB Act. Registered construction personnel will be issued a Construction Personnel Card which will be valid for the period stated therein, and are required to apply for a renewal prior to the expiry date.
 
In a move to assist contractors with their costs in relation to their employees, CIDB will be implementing the following measures:
 
  • CIDB will conduct skills training for local construction personnel free of charge until the end of this year;
 
  • Waiver of fees for participating in the Skills Competency Assessment for local construction personnel until this year;
 
  • Discount of fifty percent (50%) for fees for assessment of foreign construction personnel until the end of this year;
 
  • Discount of fifty percent (50%) for training fees in relation to CIDB’s supervision and management programmes; and
 
  • Validity period of Temporary Construction Personnel registration will be extended from two months to six months.
 
Reduction in Fee for Certification of Importation of Construction Materials
 
Pursuant to the Customs (Prohibition of Imports) Order 2017, the import of certain construction materials as listed in the Fourth Schedule thereof is prohibited unless such import is accompanied by a Certificate of Approval issued by the Chief Executive of CIDB. Under the CIDB Initiatives, the fee for obtaining a Certificate of Approval will be reduced from RM1,000 to RM750 with effect from 15 May 2020 until 31 December 2020.
 
Commentary
 
It is clear the CIDB Initiatives will assist construction industry players with managing their costs at both operational and project levels. Whether these initiatives will achieve the aim of easing the construction industry’s burden arising from the effects of MCO, as well as that of the Covid-19 pandemic, remains to be seen.
 
Our Construction and Engineering Practice Group will continue to keep you updated on the latest developments.
 
If you have any queries, please contact our Mr. Richard Khoo (Partner) at richard.khoo@skrine.com or Ms. Rachel Chiah (Associate) at rachel.chiah@skrine.com.
 
 

1 The full text of the Minister of Works’ announcement is available here.
2 Our Alert on the earlier initiatives by CIDB is available here.
3 The requirement to pay levy only applies to construction contracts that have a contract value exceeding RM50,000.
4 This validity period only applies to registration as a local contractor. Registration as a foreign contractor is issued on a project-to-project basis, and is valid for the duration of the relevant project.
5  The circular issued by CIDB in relation to the imposition of the MCORE requirement on Grade 1 contractors (available here) originally stated that this requirement would take effect from 1 April 2020, not 1 May 2020.