In focus Asia

General economic overview

Following widespread slowdowns in the Asian economies during 2020, most economies bounced back in 2021 with large increases in GDP growth. China grew by 8.1 percent, India by 9 percent and Japan, where less of a deceleration was seen during the pandemic, grew by 1.6 percent.

Construction sector performance

Construction is increasing in all regions, but the capacity of the Asian workforce to service the increased workload is being pushed to its limit. Longer lead times and high workloads are causing tender prices to rise.

In 2021 several Chinese developers defaulted on loan payments, most notably Evergrande, as the Chinese government took steps to control the extreme debt levels in the sector. With residential property comprising 28 percent of the Chinese economy, there is concern the effect may spread through the whole Chinese real estate market and even have negative impacts internationally.

Progress of the environmental agenda

Energy demand fell during lockdowns, and it was hoped that when recovery came it would promote the use of more renewable energy sources. Recovery, however, has been quicker and stronger than expected and this has caused emissions to rise.

China is the largest consumer of energy and the rapid recovery from the pandemic has seen emissions increase by 740 million tonnes. China produced 33 percent of the world’s global carbon emissions in 2021, largely because of electricity production, relying heavily on coal-powered production. According to the International Energy Agency, China’s increase in emissions exceed the reductions made in the rest of the world during 2020/21.

India also saw coal-fired power reach an all-time high. Despite these setbacks, renewables are playing an ever-increasing role in energy production in the region. Electricity generation from renewables in China reached 2500 TWh in 2021 or 28 percent of the total generation of the country.

While most countries across Asia are early in their journey to amend building codes, Japan, South Korea, and China have policy commitments to achieve net-zero emissions by 2050 and 2060 respectively. Singapore has also set a target to work towards achieving net-zero emissions as soon as viable in the second half of the century.

Future outlook

The outlook for the region is best described as positive but cautious. Construction is likely to focus more on the industrial, science and technology industries, along with a steady pipeline of infrastructure.

However, higher producer prices and higher construction costs may impact projects where the business case is marginal. The construction sector may struggle to deliver the increasing workload without further cost rises. Also, a further challenge is the ability of the Chinese authorities and real estate sector to navigate away from its highly leveraged financial position to a more sustainable model, without negative impacts spreading to other sectors and overseas.

Spotlight on labour shortages – Malaysia

The disruption post pandemic along with the ongoing Russo-Ukrainian war has given rise to uncertainties and challenges – including ongoing labour shortages and inflation in the cost of materials. In 2022 and beyond, it will take time to manage the overall shortfall in resource, with labour shortages likely to persist for the foreseeable future. The sector is expected to remain just below pre-pandemic levels for a large part of the year as contractors are cautiously enthusiastic in securing works amid the current challenges. Industry and government data shows that Malaysia lacks at least 1.2 million workers (construction - 550,000) across manufacturing, plantation and construction, a shortage worsening daily as demand grows with the easing of pandemic restrictions.

Large scale projects are impacted by labour shortages such as the fit-out project for the new Miri upstream office, impacting progress in base building works. Border restrictions, quarantine requirements and associated COVID-19 safety measures on work sites and in workers’ accommodation, and the impact of the exodus of migrant workers back their home countries during the pandemic years have created probably the greatest short-term manpower challenges that the construction sector faces at this time.

One way to tackle this dilemma would be using prefabrication. When properly planned and implemented prefabrication offers contractors, commercial projects, and investors massive benefits. Onsite construction typically proceeds in a linear, sequential progression, creating opportunities to increase productivity, reduce idling time and optimize site activity that is subject to weather, infrastructure, and equipment.

Prefabrication is an opportunity to reduce on-site labor at a time when skilled worker availability and labor costs are a growing concern, transferring the production and assembly of packages to a controlled and potential safer off-site environment, opening the door for automation, reduction in wastage, energy usage, and environmental impact, if planned accordingly.