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Construction And Real Estate Sector Spoiled For Choice |
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HOME >> NEWS >> Construction And Real Estate Sector Spoiled For Choice |
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 Unlike a decade ago when the construction and real estate sectors were hard hit by the financial crisis and its subsequent impact on the domestic market, they are now spoiled for choice, thanks to the current boom in Vietnam, Singapore and the Middle East as well as the strengthening ringgit.
"Now, they have the luxury of rejecting projects if margins are too low and not viable," said Deloitte KassimChan Tax Services Sdn Bhd's executive director Yee Wing Peng.
Over the years, Malaysian companies have become more enterprising and learned not to confine themselves to the home market, according to Yee.
"Now they go wherever there is an opportunity. Malaysian companies don't restrict themselves to a particular jurisdiction," he said.
Yee said Malaysian companies were going in a big way especially to Vietnam, given that the market was opening up after the country's accession into the World Trade Organisation, as well as the Middle East and Singapore.
Vietnam, which is Asia's second fastest growing economy with 8.4 percent gross domestic (GDP) growth in 2007, trailing only behind China, is fast emerging as the region's top foreign direct investment (FDI) destination with US$20 billion recorded last year.
According to Deloitte Vietnam Company Ltd's tax director Tuan Bui Ngoc, the real estate sector in Vietnam is vibrant and values could appreciate almost 50 percent within a year.
"Residential properties such as apartments are sometimes sold off while the projects are still at the paperwork stage," he said on the sidelines of a seminar, "Tax Strategies for Overseas Projects and Investments", organised by Deloitte here today.
Recent major Malaysian investments in Vietnam included those from Berjaya Kawat Group Bhd and Gamuda Corp, investing about US$10 billion and US$2 billion respectively, in real estate, financial services, and resorts and hotels.
So far, 232 Malaysian companies are involved in construction and real estate activities in Vietnam, with many of them having representative offices there to study the market, Yee said.
He said strengthening of the ringgit against the US dollar was an added advantage for the companies as they were able to get higher foreign exchange and boost the capital funding.
"There is so much to be gained from foreign exchange, especially when the profits are being remitted to Malaysia," Yee said.
Cheap labour is among the key points that attracted companies not only in Malaysia but globally to look at Vietnam, according to Deloitte Vietnam Company Ltd's senior tax manager Kevin Lam.
"It looks like the whole world is there. They queue up to enter the market," he said.
A non-skilled worker in the manufacturing sector in Vietnam earns around US$50 per month.
In addition, the government has also been proactive in attracting FDI with commitments to bring down the corporate tax to 25 percent within the next few years from the current 28 percent, Tuan said.
He said from 2009 onwards when the market is fully opened, the retail and distribution sector in Vietnam will be more attractive with changes enabling foreign investors to take up to 100 percent equity stake from the current 49 percent in selected sectors.
The robust construction and real estate sector is also having a spin-off effect, offering more opportunities for foreign investors in sectors like energy, Tuan said.
He said some big names in Malaysia have shown keen interest in the energy sector but declined to give further details, adding that matters were at a very preliminary stage.
However, like any other foreign market, Vietnam also has its challenges, Lam said.
"The rules and regulations are different. The main barrier could be the language. So, it is good have someone who speaks the language," he said.
As for Singapore, Yee said it is also fast becoming a hotspot for construction and real estate.
Among the latest was IOI Properties (S) Pte Ltd, a wholly owned unit of Malaysia's IOI Properties Bhd, which together with its joint venture partner Ho Bee Investment Ltd secured a 2.12-hectare land parcel in Singapore's Sentosa Cove for S$1.097 billion.
Some Malaysian companies are also establishing offices in Singapore to take advantage of the lower tax rates, Yee said.
He said they are using the Singapore offices to venture aboard as well as for joint efforts with companies in Singapore to enter a third market.
"The outlook for Singapore's construction and real estate sectors is good. The government has put in a lot of efforts to make Singapore a viable place for investments in a lot of sectors," said Deloitte & Touche's senior tax manager Chester Wee.
Source: http://www.bernama.com/ |
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