KDN PP 11720/4/2013 (032270)

THE

VOL.62

APRIL-JUNE 2015

L E M B AG A J U R U TE R A M A L AY S I A

B OA RD OF E NGI NEERS MALAYSIA

INGENIEUR
M A G A Z I N E O F T H E B O A R D O F E N G I N E E R S M A L A Y S I A

ENGINEERING
PRACTICE

Cover photo by Ir. Fong Chew Chung

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INGENIEUR
9

CONTENTS

5 Presidents Message

International Forum

BEM News

30 Boao Forum for Asia Annual

Conference 2015

The Registration of Engineers

(Amendment) Act 2015

Update

7 Publication Calendar

32 Recent Amendment to
Uniform Building By-Laws on
Demolition of Buildings

Cover Feature

Guidelines

Announcement

Transforming the Construction

Industry
14 QLASSIC - Giving Quality
Workmanship a Good
Name

36 Accessibility and Facilities

for the Build-Environment for
Persons with Disabilities in
the Asia-Pacific Region

Special Report

20 Services Sector Blueprint

27 Cross Border Trade in
Science, Engineering &
Technology Professional
Services
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77

Engineering & Law

14

42 Employers Rights to Set-Off Payment

Claims by Contractor
Feature

48 5S Five Keys to a Total Quality

Environment
56 Lean Product Design
62 District Cooling Systems Industry: Is
Regulatory Framework the Answer?
Corporate World

68 Huawei Globalisation
Investment

30
66

71 Taking Greater KL to New Heights

74 Guidelines for Principal Hub Incentive
Engineering Features

77 1400-year old Stone Arch Zhaozhou

Bridge, Hebei, China
Engineering Nostalgia

80 Raja Laut Road 1967

68
80

INGENIEUR
LEMBAGA JURUTERA MALAYSIA
BOARD OF ENGINEERS MALAYSIA

EDITORIAL BOARD

2014-2015
PRESIDENT

EDITORIAL BOARD

BOARD MEMBERS

YBhg. Dato' Ir. Hj Annies bin Md Ariff

YBhg. Dato' Ir. Hj Annies Bin Md Ariff

YBhg. Datuk Wira Ir. Md Sidek bin Ahmad

YBhg. Dato' Ir. Dr. Abdul Rashid bin Maidin
YBhg. Dato' Prof Ir. Dr. Hassan bin Basri
YBhg. Dato' Ir. Zainor Rahim bin Ibrahim
YBhg. Dato' Ir. Lim Chow Hock
Ir. Dr. Abdul Majid bin Dato' Abu Kassim
Ir. Prem Kumar Vasudevan
Ir. Mohtar bin Musri
Ir. Zuraimi bin Sabki
Ir. Yahiya bin Ag Kahar
Ir. Tan Yean Chin
Ir. Gopal Narian Kutty
Ir. Gunasagaran Kristnan
Ir. Prof Dr. Mohd Zamin bin Jumaat
Ar. Dr. Tan Loke Mun
Sr. Nik Zainal Alam bin Hasan

ADVISOR

CHAIRMAN

YBhg Dato Prof. Ir. Dr. Hassan bin Basri

EDITOR

YBhg. Dato Ir. Fong Tian Yong

EDITORIAL MEMBERS

Prof. Ir. Dr. K S Kannan

Ir. Prem Kumar
Ir. Chan Boon Teik

PUBLICATION OFFICER

Pn Nik Kamaliah Nik Abdul Rahman

SECRETARY

Ir. Ruslan bin Abdul Aziz

REGISTRAR

Ir. Hizamul-din bin Ab. Rahman

The Ingenieur is published quarterly by the Board of Engineers Malaysia (Lembaga Jurutera Malaysia) and
is distributed free to registered Professional Engineers. The statements and opinions expressed in this
publication are those of the writers. BEM invites all engineers and readers to contribute relevant articles and
views to the Publisher.
PUBLISHER
Lembaga Jurutera Malaysia
Tingkat 17, Ibu Pejabat JKR, Jalan Sultan Salahuddin, 50580 Kuala Lumpur.
Tel: 03-2698 0590 Fax 03-2692 5017
e-mail: nikkamalia@bem.org.my
website: www.bem.org.my
DESIGN AND PRODUCTION: Inforeach Communications Sdn Bhd
PRINTER: Art Printing Works Sdn Bhd, 29 Jalan Riong, 59100 Kuala Lumpur, Malaysia

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PRESIDENTS MESSAGE

ENGINEERING
PRACTICE

he recent amendments to the Registration

of Engineers Act call for higher requirements
for local practising engineers who may be
facing competition from foreign firms following
liberalisation. Taking a positive view in looking
beyond our shores, the market is suddenly
expanding many fold. However, the demand for
standards and competency from our practising
engineers will be correspondingly high.
Engineering service is one among the services
liberalised under the ASEAN Economic Community.
It is also among the programmes listed under the
Five-year programme for Economy and Trade Cooperation 2013-2017 between the Government of
Malaysia and China. With more bilateral or multilateral trade in service agreements in sight, more
liberalisation of trade in services involving the
engineering sector may be expected.
The recently concluded BOAO Forum for the
Asia Annual Conference 2015 focused among
its agenda on the Overland Development Belt
and Maritime Silk Road initiatives and the Asian
Infrastructure Investment Bank (AIIB). The
introduction of these new sources of fund will
translate into massive infrastructure development
programmes stretching across Asia, Europe and

Africa involving construction or upgrading of roads,

ports, railways, telecommunication and other
engineering facilities. These matters are also
among the declarations from the APEC Leaders
2014 that called for strengthening connectivity
in the Asia-Pacific region as well as facilitating
the Global Value Supply Chain. The opportunities
available to the engineering fraternity are thus
huge and lucrative as the new world order.
However, bigger market size means bigger pool
of international competitors. It is up to our local
players to brand themselves with a higher level
of professional engineering practice to share that
piece of the pie or be left irrelevant.
To keep our engineers abreast of the
development around our region, the Publication
Committee introduced a new section called
International Forum in this issue. Salient points
of important forums that have an impact on the
regional economy will be published as engineers
have to take cognizance of the new trade order to
realize new opportunities beyond our shores.

Dato Ir. Hj. Annies bin Md Ariff

President, BEM

BEM NEWS

INGENIEUR

THE REGISTRATION OF
ENGINEERS (AMENDMENT)
ACT 2015

he Registration of Engineers (Amendment)

Act 2015 received Royal Assent on February
12, 2015 with February 24, 2015 as a date
of publication in the Gazette. The Act will come
into force on a date to be appointed by the Minister
by notification in the Gazette.
The passing of the amended Act is a milestone
for the engineering profession in Malaysia as it
marks the start of the liberalisation of engineering
services. Various barriers against entry for
foreign engineers and foreign firms will be lifted.
In particular, this applies to countries which
Malaysia has committed International Free Trade
Agreements with, namely ASEAN countries, China,
Australia, Republic of Korea, Chile, Pakistan,
Japan, New Zealand and India. In reciprocity, these
markets are expected to be open to Malaysian
engineers and firms.
The inclusion of the registration of Engineering
Technologists and Inspectors of Works as part of
the amendments to the Act, is to ensure quality of
engineering works at all levels and phases.
The Board will also introduce a new licensing
system for Professional Engineers who wish to be
Submitting Persons in the consultancy practice,
by providing a new category of registration under

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the Act, i.e. Professional Engineer with Practising

Certificate.
Within one year after the Act comes into
force, existing Professional Engineers must
decide whether to maintain their registration as
Professional Engineers or apply to be registered
as Professional Engineers with a Practising
Certificate. Existing Professional Engineers will
be exempted from the Professional Competency
Examination (PCE) provided that they apply for
their Certificate within this one-year period. New
Professional Engineers admitted after the Act
comes into force will have to pass the PCE if they
wish to be Submitting Persons in the consultancy
practice.
The Board will make a public announcement
once the operation date of the Act has been
endorsed and gazetted by the Minister of Works.

N.B. The Act A1479 Registration of Engineers

(Amendment) Act 2015 can be accessed from
e-Federal Gazette (Attorney Generals Chambers
of Malaysia) official portal at http://www.
federalgazette.agc.gov.my/eng_main/main_akta.
php?jenis_akta=Pindaan

KDN PP 11720/4/2013 (032270)

THE

VOL.61

JANUARY-MARCH 2015

L E M B AG A J U R U TE R A M A L AY S I A

BOARD OF ENGI NEERS MALAY S IA

INGENIEUR
M A G A Z I N E O F T H E B O A R D O F E N G I N E E R S M A L A Y S I A

GLOBALIZATION

The Ingenieur is published quarterly by the

Board of Engineers Malaysia. The following
are the themes for the coming issues.
Vol. 63 July Sept. 2015
Capacity Building
Vol. 64 Oct Dec. 2015
Waste Management
Articles and editorial contributions relevant to
the themes are welcomed, but the decision to
publish rests with the Editorial Board.
Advertising inquiries are also welcomed.
Please refer to the BEM advertisement in
this issue for the latest rate card and booking
form.

ANNOUNCEMENT

PUBLICATION CALENDAR

COVER FEATURE

INGENIEUR

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Interview with CIDB Chief Executive,

Dato Sri Prof. Ir. Dr Judin bin Abdul Karim

TRANSFORMING THE
CONSTRUCTION INDUSTRY
The Construction Industry Transformation Programme will run
in parallel with the 11th Malaysia Plan (2016-2020). Board of
Engineers Malaysia (BEM) met Construction Industry Development
Board (CIDB) Chief Executive, Dato Sri Prof. Ir. Dr Judin bin Abdul
Karim to find out what lies ahead and how the construction
industry can be transformed into a world class sector.

ato Sri Prof. Ir. Dr Judin bin Abdul Karim sees

a challenging journey ahead in transforming
the construction industry through the
soon-to-be launched Construction Industry
Transformation Programme (CITP), which runs
parallel with the 11th Malaysia Plan (2016-2020).
Over the past 10 years, following the
Construction Industry Master Plan 2006-2015
(CIMP), many Government programmes were
introduced to improve safety, productivity and
quality in various aspects of the construction
industry. However, the image of the industry
still leaves much to be desired. It continues to
be plagued with long-standing issues like overdependence on foreign labour, construction
mishaps and complaints on poor quality houses.
How can the industry be transformed?
Historical practices need to change, declares
Dato Sri Judin, referring to professional practices
in the construction value chain which do not work
towards quality assurance. He says it begins
with integrity of various professionals engaged in
construction. Who is doing the work? Who got
paid for it? he asks, calling for professionals
to bear responsibility and accountability in all
aspects of work. Professionals need to uphold
standards and move away from scarce resources,
he adds.
Dato Sri Judin acknowledges that some areas
of change require alignment with Government

INGENIEUR

Dato Sri Judin sharing a light moment with BEM Board Member Ir. Prem Kumar.

policies. One of these is the issue of taxation

on construction machinery which contributes to
higher costs and deters the use of Industrialised
Building System (IBS). He notes that there are
talks with the Ministry of International Trade and
Industry to iron out this dichotomy.
Will there be any new pieces of legislation?
Dato Sri Judin believes that the Occupational
Safety and Health Act 1994 and the Uniform
Building By-Law 1984 already spell out the
penalties for many offences. However, he points
out that the standard of housing for foreign
construction workers is generally deplorable.
As such, he reveals that there will be legal
amendments to incorporate minimum standards
of housing for foreign workers.
Similar to the CIMP, the new transformation
programme also focuses on productivity,
safety and quality improvements. However,
there is added emphasis on sustainability and
internationalisation.
In the area of productivity, Dato Sri Judin
reveals that the Malaysian Productivity Corporation
(MPC) will work with CIDB in a move to set up
a Single Submission Authority to deal with all

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channels for construction projects. If realised, this

would be a giant leap in speed and productivity for
the construction industry.
According to Dato Sri Judin, there is a push
from the private sector towards quality assurance.
He states that big developers and consultants are
keen to differentiate themselves using quality. As
such, the Qlassic scheme, a tool to assess and
track workmanship for buildings, proposed by
CIDB will get wider support. If developers want to
ensure it happens, it will happen, he stresses. In
time to come, this scoring system is expected to
be used to rate developers and be tied to Sales
& Purchase agreements. This may serve as a
catalyst for other developers and contractors to
climb up the quality ladder.
Benchmarking would be difficult without uniform
standards. In this context, Dato Sri Judin reveals
that CIDB is working towards a National Standard
Specification which will streamline standards of
workmanship in all states in the country.
Aligning with Malaysias aim of being
a developed nation by 2020,
Malaysian
construction industry players need to up their ante
to be world-class. The CITP thus incorporates

sustainability and internationalisation among

four of its major thrusts. We need to raise
standards at home so that they can compete
overseas, comments Dato Sri Judin. CIDB will
be implementing apprenticeship programmes
to transfer skills of international construction
players to local counterparts as well as training
programmes developed in partnership with worldclass players to further build the expertise of
Malaysian companies.
Besides being competitive, companies have
to embrace sustainability as there is worldwide
concern about environmental degradation
and the need to conserve resources for future
generations. Dato Sri Judin notes that CIDB is
working with Harvard University to come out
with a Sustainability Rating Tool. This will assess
sustainability in terms of design, construction and
subsequent maintenance of buildings, cities and
infrastructure. The Government sector is expected
to take the lead and introduce it gradually to the
private sector.
Besides the CITP, Dato Sri Judin touched on
other topics. Here are excerpts from the interview:
It is almost 10 years since the Construction
Industry Master Plan (CIMP) 2006-2015 was
launched. Would you like to highlight the
achievements, milestones and shortfalls?
CIMP had 21 strategic recommendations to be
implemented over the 10 year period up to 2015.
About 95% of the identified activities have been
implemented and the strategic recommendations
have resulted in a number of achievements
including, the introduction of programmes to
improve the performance of the industry such as
the Safety & Health Assessment in Construction
(SHASSIC), Contractor Performance Assessment
Framework, Green Performance Assessment
System and many more. However, more can be
done to improve the construction industry and CIDB
together with Works Ministry (KKR), is now taking
the lead in engaging relevant Ministries, agencies
and the private sector in the development of the
Construction Industry Transformation Programme
(CITP). Lessons learnt from the CIMP experience is
taken on board in developing CITP including:1. Identifying and prioritising only key
initiatives that are aligned with the overall
national agenda and will 'move the needle',

2. Putting in place a strong governance body,

and
3. Including the industry from the planning
phase to collaboratively drive changes.
We understand that CIDB is planning to launch
their Construction Industry Transformation
Programme (CITP). Can you elaborate on the
new focus and strategic thrusts?
There are four strategic thrusts under the CITP
which together will transform the industry from
one that is perceived as 'dirty, difficult, dangerous'
today to an industry that is clean, with a highly
capable workforce and providing careers that are
coveted by local Malaysians.
The strategic thrusts focus on:
1. Raising the overall productivity level of the
industry;
2. Ensuring Environmental Sustainability
measures are in place in the design,
construction and subsequent maintenance
of our buildings, cities and infrastructure;
3. Focusing on improving the competitiveness
and subsequent ability of our construction
players to internationalise; and
4. Improving the overall Quality, Safety and
Professionalism in the industry.
We understand that the CIDB Act was amended
in 2011. What are the salient points and what
does it aspire to achieve?
Some of the important aspects of the amendments
to Act 520 are to increase CIDB's scope to regulate
standards on materials, quality and safety. These
include CIDB having the authority to penalise
contractors that consistently do not comply with
regulations and standards; and to audit for and
ensure use of standard-compliant materials,
whether local or import, in construction.
How would you assess the capability of the
Malaysia construction industry compared with
ASEAN countries and beyond?
Malaysian construction companies are generally
considered competitive within the ASEAN region,
but we still have a long way to go when compared to
competitors in more developed markets including
the Asian countries such as Japan and Korea. CITP
focuses on growing Malaysian companies' capacity
and competitiveness by driving and supporting

11

INGENIEUR
compliance to more stringent quality requirements
and getting international certifications such as
OHSAS 18001 and ISO 14001, all in addition to
raising productivity and market share. By 2020,
our target is to transform Malaysia's construction
industry to be at par with the very best of ASEAN
competitors.
There has been much publicity on IBS which
is also one of the items in the Construction
Industry Road Map. Have we achieved the
target? What are the issues and challenges?
The level of IBS adoption today is not something
we are fully satisfied with. An important part of
CITP will be to further drive IBS adoption in the
industry. The main challenge for IBS adoption
is the inadequate take-up; costs of many IBS
components are not yet at the level that will move
the industry; while IBS suppliers generally have
not achieved scalable demand. CITP aims to break
this vicious cycle. Firstly, we will build scalable
demand for key IBS components leveraging public
projects with a different contracting approach.
Secondly, we will implement various economic
mechanisms to help lower the net cost of IBS
adoption for the industry. Thirdly, we plan to
require IBS adoption in the private sector to
further increase the scale, and effectively lower
construction cost for the whole industry in the
longer term.
The presence of foreign contractors especially
from China is increasing in numbers and size?
What is the impact on local contractors and
what can we learn from them?
Competition is inevitable. We are opening up our
economy and international players will invest and
compete in our local market. What is important
is that we learn from our competitors and
continue to grow our competitiveness against
these international players. Under CITP, we plan
to have programmes to facilitate and strengthen
our Malaysian companies including the SMEs. We
are implementing apprenticeship programmes to
help transfer skills of international players to local
counterparts as well as training programmes
developed in partnership with world-class
players in construction and its vertical industries
to further build the skill set and expertise of
Malaysian companies.

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From CIDBs database, the number of Malaysian

contractors venturing overseas has dropped
drastically since 2010. Why do you think this is
so, and how do we encourage our contractors to
venture overseas?
One of the reasons is that the domestic market
has had enough demand to serve Malaysian
construction companies. However, it is critical
that Malaysian companies continue to grow their
presence in the international market. Otherwise,
many will face challenging times when the local
construction industry slows down.
As part of CITP, we will be supporting such
expansion overseas especially in markets which
we will prioritise where Malaysian companies will
have opportunities to grow. We are also developing
financing mechanisms and hope to work with
partners such as EXIM bank.
With the formation of the Malaysian Export
Council in December 2014, is there any role for
CIDB in promoting our construction industry
overseas?
Yes, CIDB hopes to have CITP as part of the
agenda under the Malaysian Export Council.
Many incidences of work site accidents were
reported over the last few years. What is CIDBs
role in mitigating such incidences which do not
augur well for the local construction industry?
CIDB will be partnering with various agencies
to tackle safety related issues. First, we are
enhancing our safety training curriculum in
partnership with world-class players in the field.
The courses will be interactive, and offered
in the languages and context that all workers
can understand and relate to. Secondly, we are
increasing the number of trained and accredited
safety and health officers, safety site supervisors,
and working with DOSH to also increase safety
inspectors to provide the right level of guidance
on construction sites. Furthermore, we are
enhancing the training curriculum of these safety
professionals to better cater to the specific needs
of construction sites. In addition, we will be
working with key regulators to encourage industry
players to include safety compliance as an
important aspect of their operations. CIDB will also
be launching promotion campaigns to inculcate
safety as the overriding priority in everyone's mind.

Dato Sri Judin and CIDB partners launching the International Construction Week 2014

For quality of the construction particularly the

housing sector, is there any new strategy to
improve it. How effective is QLASSIC?
QLASSIC is an effective tool to assess and track
workmanship of contractors for buildings. We plan
to facilitate adoption of QLASSIC and make it one
of the standard ways of measuring performance.
For example, QLASSIC information can be
provided in sales and purchase agreements for
consumers to know the quality of the buildings/
houses they purchase; QLASSIC scores can also,
be part of assessing applications for contractor
financing and that can potentially lead to better
interest rates for those with high scores. Overall,
we are increasing the transparency on contractors'
performance for the benefit of consumers and the
public, so that they understand their full rights to
receive higher quality housing.
For the 11th Malaysian Plan (2016-2020) which
will end on the target date that Malaysia aspires
to be a developed a nation, will there be any
input from CIDB for the above five-year plan.
CITP is very much aligned with the 11th Malaysia
Plan (RMK11). CITP will run in parallel with this
Malaysian Plan, and contribute to achieving
several of RMK 11 priorities.

As part of CITP, we will be

supporting such expansion

overseas especially, in
markets which we will
prioritise where Malaysian
companies will have
opportunities to grow.

13

COVER FEATURE

INGENIEUR

GIVING QUALITY
WORKMANSHIP
A GOOD NAME
By Construction Industry Development Board

Malaysia has enjoyed a strong run in the

construction industry since independence
in 1957. From an average RM51 billion
construction output in 2001 - 2005, it
contributed RM128 billion in 2012 and
RM131 billion in 2013. In 2014, construction
work for 6,927 projects worth RM136 billion
were kicked off, of which 78% involve private
sector participation. It is clear that the nation
has come a long way in just 50 years and will
continue to move strongly till the end of the 11th
Malaysia Plan (2016-2020).
While the figures are exceptional and
the industry has continued adopting great
technological advances, there are still certain
aspects that appear to be lacking and cannot
be ignored such as quality workmanship.
The focus here is primarily on the quality of
workmanship of building projects.
Before 2006, there was no regulation that
standardised the practice of workmanship and
the quality of workmanship fluctuated from one
developer/project to another with numerous
complaints from property owners on various
defects. As a proactive approach, CIDB formed

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a technical committee comprised of various

industry players and stakeholders to undertake
the development of the quality assessment
system to regulate the practice as well as to
deliver a product of good value to the end-user.
The end result was the Quality Assessment
System for Building Construction Works or
QLASSIC (pronounced as Q-lasik), which is an
independent method to assess and evaluate
primarily on the quality of building projects that
is based on a standard called CIS 7:2006. The
standard was further improved and enhanced to
suit current industrial practices, resulting in the
publication of CIS 7:2014.
SCOPE OF QLASSIC
The standard sets out the quality of workmanship
for various aspects of construction for the
general building works. QLASSIC covers four
main components: Structural works, Architectural
works, M&E works and External works.
Assessment of workmanship is carried out based
on this standard and marks are awarded if the
workmanship complies with the standards. These
marks are summed up to give a total quality score
(%) for the building project.

IS QLASSIC REALLY NECESSARY OR EVEN

IMPORTANT?
From industry input, it was found that QLASSIC
has benefitted the industry in many ways.
Construction industry players who have started
using QLASSIC find that they cant do without it.
The initial assessment is usually quite low, ranging
between 50% and 60% (the ideal score is above
70%). After the first assessment, they challenge
themselves to do better and better. The good
news is, they have!!
When put into practice, the benefits are farranging such as:Motto Doing things right the first time and
every time is a motto that encourages developers
and contractors to carry out actual works right
from the beginning. The result? Less money is
spent on rectification and correction works.
Yardstick QLASSIC enables developers/
contractors to measure their performance.
Example of one prominent developer; in its first
project it scored poorly at 58%. Equipped with
knowledge and further understanding of QLASSIC,
the developer scored 65% in the subsequent
project, and improved further to 76% in another
development. This demonstrates continuous
improvement with subsequent projects, and the

Allocation of weightage for components of building construction work

according to building category
Residential Building

Non Residential Building

Category C

Category D

Commercial
/ Industrial
building)

(Public, Commercial
/ Industrial building)

Category A

Category B

(Landed
housing)

(Stratified
housing)

(%)

(%)

Structural works
Architectural works
M&E works
External works

15
70
5
10

20
60
10
10

20
55
15
10

20
50
20
10

Total score

100

100

100

100

Component

(%)

(%)

Note: Category C is without centralised cooling system, Category D is with centralised cooling system

15

INGENIEUR
developer striving to create a product with quality
workmanship.
High regard The QLASSIC measurement
defines the intention and seriousness of being a
good developer as it requires investment of time
and skill to score higher. It also demonstrates a
developers intention to be responsible and the
desire to deliver high quality workmanship.
Credible When shared openly with the public,
the scoring measurement shows the developers

and contractors to be credible and trusted in the

publics eyes.
Reputable contractors A reputable
developer has shared that QLASSIC is a reliable
tool in determining and awarding contracts to
contractors. In fact, some players have stipulated
in the contract the score that must be achieved
(usually 70% and above) as a way to gauge their
workmanship and criteria for awarding future
contracts.
Marketing tool High QLASSIC scores enables
developers to use it as part of its advertising and
promotion tool for new projects. It is also a good
time to educate the public on the significance of
high QLASSIC scores, simultaneously earning the
potential buyers trust and confidence.
Partnering Encouraging a collaborative
attitude between developer, consultant and
contractor will bring them together to achieve
shared goals and improve cost, time and quality.
This approach has definitely shown positive results
through the QLASSIC score testament.

GRAPH 2 : QLASSIC AVERAGE SCORE

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Thoughts and
observations on
QLASSIC
I&P Group Sdn. Berhad
Dato Ir. Jamaludin Osman
Group Managing Director
Embarking on QLASSIC
We embarked on QLASSIC in 2008 as we
recognised that it is one of the tools to gauge
the quality of workmanship of our products.
Benefit to end-user
Purchasers or owners are always happy to
receive a building that is well constructed. As
such, QLASSIC is a good tool to be used to
ensure the desired quality is achieved.

NAZA TTDI SDB BHD

Megat Roslan Abdul Rahman
Chief Development Officer

Perbadanan Kemajuan Negeri Selangor

(PKNS)
Ir. Hj. Abdul Ghani Hashim
Deputy General Manager
We introduced an incentive programme to
contractors for all our projects. We now have
imposed penalties to show that we are serious
about our quality. So, if the contractors do
not achieve our minimum target, they will be
penalised.
QLASSIC made mandatory?
Of course it should be made mandatory, if only
for the sake of the end-users. The developer
has to be responsible and profesional in
constructing quality products before handing
over the keys to purchasers.

Benefitting from QLASSIC

It opened our eyes, in terms of catching up with
the big boys. We are still on the learning curve
because the construction industry is far and
wide ranging. You are only as good as your last
project and you need to do better in your next
one. The only way to do that is to benchmark
yourself against something, and we think that
QLASSIC is that benchmark.

Sunway Construction Sdn. Berhad

Kwan Foh Kwai
Managing Director

Future of QLASSIC
QLASSIC will provide the nation a platform
to go international. There are already many
Malaysian companies that have international
presence. But we now come equipped with
quality so we are able to compete with the best
internationally.

Message to the industry

I would like to encourage smaller contractors to
improve, not just the big boys, so that the whole
industry will also improve.

QLASSIC training as investment

The QLASSIC training for our staff is not a
cost, but an investment. We take it as part
and parcel of continuous improvement, so we
cannot deem it as a cost factor.

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INGENIEUR

DEFECTS: WHAT TO LOOK OUT FOR?

From something as small as your door creaking to something as major as cracks in the walls, defects are
an anathema. QLASSIC assesses and evaluates a wide range of workmanship quality in new buildings.
Here are a few examples on what you should not be accepting.

Misalignment of the wall

squareness (exceeded 4mm
over 300mm)

Rough jointing around the M&E

fittings

Corrosion/rusty marks on door

hinge

Incomplete grouting around the

soap holder in toilet

Unevenness of the internal wall

(exceeded3mmover 1.2m)

Wall tiles sound hollow when

tapped using a tapping rod

Inconsistent joint size between

tiles on the wall

Rough jointing between ceiling

tee and ceiling board

Stain mark found on the

window glass

Photos courtesy of Canaan Building Inspection & Rectification Services

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QLASSIC JOURNEY

UPDATE, UPGRADE AND ENJOY QUALITY

CONSTRUCTION

As QL AS SIC is a voluntar y as ses sment

method, generating lots of buy-in and QLASSIC
champions are critical succes s factors.
Generally, developers are keener to adopt
QLASSIC as they would like to deliver good
quality products to the end user. This move
will further push contractors to utilise skilled
workforce, modern techniques and proper
supervision in order to achieve desired results.
It is also thought that adopting QLASSIC will
increase the overall cost of construction. The
irony is that good quality products were meant
to be delivered to the end user in the first place.
CIDB has launched a communication
campaign to create awareness amongst industry
players as well as educating the public on good
quality workmanship. More developers and
contractors are expected to adopt QLASSIC.
The trend had already started with signing of
MoUs with 10 serious players in October 2014,
including Dewan Bandaraya Kuala Lumpur
(DBKL).
The call is for more industry players, big and
small, to update and upgrade their knowledge
on QLASSIC as well as to put the knowledge into
practice. This will ensure that industry players will
not only be relevant, but also enjoy a piece of the
construction industry pie while the nation pursues
its ambition to become a developed nation in
2020 and beyond.

Introduced in 2006 with the standard CIS

7:2014
Low pick up by the industry and only
serious players adopted it as the standard
was not mandatory
2006-current day - Serious players
improved their workmanship and created
teams for internal assessments before
the formal assessment
July 2014 A communication campaign
began to create awareness among
industry players, the public and the media
October 2014 - Dato Sri Haji Fadillah bin
Haji Yusof, Minister of Works launched
the enhanced QLASSIC logo while
pledging that QLASSIC will be given more
attention for the good of the industry.
The improved and updated CIS 7:2014
was also launched and topped with
MoU signing by 10 players (Sime Darby
Property Bhd, Sunway Construction Sdn
Bhd, Putrajaya Holdings, Naza TTDI, I&P
Group, Metro Kajang, Dynasty View Sdn
Bhd, Worldwide Holdings Berhad, MK
Land Holdings Berhad and DBKL)
November 2014 Media awareness
campaign on QLASSIC in Kuala Lumpur
created a better understanding of
QLASSIC and its importance for the
industry and the public
2015 - Plans to make QLASSIC mandatory
by 2020
February 2015 - Media awareness
of QLASSIC campaign in Sabah and
Sarawak, resulting in good coverage

To get a copy of the CIS 7:2014 for your

reference or for more information, contact
Safety & Health and Quality Division, CIDB at
03-4047 77317 or email qlassic@cidb.gov.my

19

SPECIAL REPORT

INGENIEUR

SERVICES SECTOR
BLUEPRINT
The Government has formulated the Services Sector Blueprint to
facilitate structural adjustment that is needed for the sector to move
up the value chain. This Blueprint focuses on four policy levers, namely,
internationalisation of service providers, effective investment incentives,
enhancing human capital development and promoting integrated sectoral
governance reform.
The Blueprint was developed by the Economic Planning Unit (EPU) and
released in March 2015. BEM has obtained approval to reproduce the
Executive Summary which provides an overview of the Blueprints
recommendations.

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
1.1 Background
Malaysia aspires to become a high-income advanced
nation by 2020. To fulfil this objective, the services
sector was identified as an important component
and one of the main pillars of Malaysias economic
growth.
In accordance with this aim, the Economic Planning
Unit (EPU) has developed a detailed blueprint
consisting of policy recommendations. This
Services Sector Blueprint will supplement existing
programmes and may be updated with the latest
developments in the sector as and when they occur.
In order to ensure certainty in its execution, the
recommendations encapsulated within this Blueprint
will be incorporated into the 11th Malaysia Plan (11th
MP).
As one of the major engines of growth in the nation,
the Government has targeted the services sector
to further drive economic growth and achieve the
lofty aim of advanced nation status by 2020. The
policy directions to be taken henceforth as well
as recommendations to strengthen the sector are
outlined in the sections to come.
These policy directions were formulated as a
solution to the following challenges that have thus far
prevented the services sector from fulfilling its full
potential and competing with service sectors from
more advanced economies. Challenges faced by the
sector are as follows:
Economic fundamentals: The services sector
faced setbacks in terms of talent procurement due
to skill shortages and skills mismatch between
the output of higher education providers and
industry needs. In addition, there is also lack of
access to soft technology for SMEs.

Policy ecosystem: The sector continues to be

highly regulated, which weighs down productivity
and adds to cost of doing business.
Active promotion policies: Majority of
service providers are domestically oriented.
Only 66 services firms export their services. In
addition, there is poor cross agency visibility in
incentives management.
This Blueprint identifies the challenges and proposses
four policy levers:
Internationalisation strategy: There is a
clear need for internationalisation of services
provider to remain competitive and penetrate
new markets.
Investment incentives: The effectiveness of
investment incentives can be further improved
with central coordination and management of
the various incentive schemes, a focus on quality,
transparency and a more robust evaluation of
current and future incentives scheme.
Human capital development: Investing in
talent is essential in ensuring the success of the
services sector. Recommended measures include,
accelerating human capital development, having a
more dynamic manpower planning and fostering
greater colloboration between industries and
education instituitions.
Sectoral governance reform: The need
to reform existing regulations is important to
further develop the services sector. Initiatives
inlude accelerating governance reforms and
improving the transparency of regulations to
provide an environment that is competitive and
supportive to business.

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INGENIEUR
Services Sector Blueprint

Policy Recommendations
The following is a series of policy recommendations across four Policy Levers:

Internationalisation
strategy

Investment
Incentives

Step up
internationalisation of services
providers

Effective
management
of incentive
framework

Improve market access

Proactive negotiating approach to open new markets (e.g. through

bilateral negotiations or GLC investments abroad)
Facilitation of cross-border transactions through harmonisation
of regulatory principles and mutual recognition of professional
qualifications

Capacity building

Enhance firm level skills and knowledge to increase export

effectiveness

Export promotion

Improve knowledge exchange especially on regulations

Consider usage of export matching grants

Review incentive
framework to be
more effective &
performance driven

Impact evaluation of current and new incentive schemes

Improve coordination of incentive schemes by consolidating under
single entity
Greater transparency through yearly tax publications and disclosures
Focus on incentive schemes that generate quality, vs. investment
amounts

Accelerate human
capital development

Increase availability of professionals for knowledge-intensive

sectors
Develop dynamic manpower planning tools to reduce skills
mismatch
Emphasise the skills most critical to success in the services sector

Facilitate access
to hard and soft
technologies

Promote partnerships between firms and universities, including,

foreign universities
Promote access to management technologies by facilitating access
to information on how successful SMEs acquired managerial knowhow

Design & implement

strategy for sectoral
governance reforms

Prioritise sectors, taking into account technical and contextual

considerations
Implementation timing to prioritise quality and direction of reforms
Consider common elements of individual sector-level strategies

10
3

Human
Capital
Development

Sectoral
Governance
Reform

Foster dynamic
enabling
environment
for knowledge
intensive services

Design and
implement reform
strategies at
sectoral level

Figure 1

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Ensure coherence with

domestic regulations
& practices

Mapping of regulations and regulatory governance

Reforming overall framework through which regulations are made

EXECUTIVE SUMMARY

Objectives of the Services Sector Blueprint

The Blueprint will :
Identify key impediments in further developing
the services sector.

Present a set of horizontal strategies and action

items for implementation.

1.2 Summary of Recommendations

29 action plan items have been identified across the four Policy Levers (refer to Figure 1). The action items
include enhancements to existing programmes and new initiatives that have been developed by benchmarking
against best practices observed globally.

The Internationalisation Strategy

The ultimate goal of the internationalisation
strategy is to significantly increase the number of
service providers in Malaysia as well as broaden
their reach. Doing so will require Malaysia
to address existing gaps in two areas, namely,
internal capabilities and external readiness.
Specific recommendations include:
Creating partnerships of strength to
increase competitiveness among services
providers
1. Large Corporation-SME partnership
programme
2. Consortium promotion programme
3. Subcontracting & partnership exchange
programme
Raising capabilities across a broad group
of services providers
4. Embed ICT programme
5. Training programme for new exporters
6. Account management programme
7. Enhanced franchise development programme
Opening up and harmonising markets
through G2G negotiations
8. Structured consultations, detailed
statistics, experienced negotiator
pipeline and quality implementation

Creating an export-oriented services

sector economy, in particular broader base
of SME services providers

Internationalisation
External readiness

Market
access

Market
knowledge

Marketing
& trade
support

Financial
resources

Internal capabilities

People
capabilities

Technology
&
infrastructure

Domestic
market
backing

Financial
resources

Figure 2
Addressing critical funding gaps
9. Services sector credit guarantee scheme
Enhancement of the Services Export Fund
10. Launching the enhanced Services Export
Fund
11. Enhancing delivery of training

23

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INGENIEUR
Services Sector Blueprint

Investment Incentives
The effectiveness of the incentive mechanism will
be enhanced by increasing tranparency, eliminating
duplication and linking to performance. The
following three components will be addressed:

Ensuring agencies prioritise quality KPIs

during the programme design process.
Systematically monitoring incentive
performance.

i) Improving coordination;
ii) Enhancing current programmes; and
iii) Emphasising quality and performance KPIs.

Raising the ROI on our current

incentives, ensuring most critical areas are
sufficiently supported

Specific recommendations include:

p
Im

Ensuring quality & performance through enhanced

pre-application, approval & monitoring.

Is

Enhance
programmes &
close gaps

KP

sis
ha
Emp

12

at
n
io

Improving the central coordination and

management of the provision of incentive
schemes.
Improving incentive coordination through the
establishment of the Incentive Coordination
& Collaboration Office (ICCO).

rove coordin

on
ce
qua
ma
lity & perfor

Figure 3

Human Capital Development

Human Capital Development aims at producing,
attracting and retaining skilled talent. This will
require Malaysia to address five important factors,
namely: i) graduate industry readiness; ii) enhancing
existing workforce; iii) tapping into alternative talent
pools; iv) dynamic manpower planning system; and
v) quality of the general education system of which
is addressed in the National Education Blueprint
prepared by the Ministry of Education.
Specific recommendations include:
Improving the industry readiness of
new graduates by :
Accelerating the delivery of general
employability skills.
Fostering greater collaboration between the
industry and HEI.*

Improving the impact of bridging

programmes
Raising the profile of the TEVT*pathway

Eliminating mismatch between demand

and supply in the labour market.
Providing an integrated planning approach to
national manpower planning.
Unlocking the potential of alternative
talent pools by:
Facilitating more access to highly-skilled
foreign talent.
Investing in development and training for all
employees.
Providing a conducive living environment.

* HEI - Higher Education Institute, TEVT - Technical Education and Vocational Training

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EXECUTIVE SUMMARY

Meeting the quality and quantity

demands of high knowledge, high
income services sector economy

Raising the bar for productivity and

capability of the current workforce by:
Encouraging SMEs to provide training for
their employees.
Addressing critical incentive gaps
especially with regard to human capital
Providing co-funded scholarships to ensure
supply of top talents to local services
providers
Research Incentive Scheme for Enterprises.

Enhancing
of current
workforce
Graduate
industry
readiness
Tapping into
alternative
talent pools

Dynamic manpower
planning system

13

Quality of general education

system1
1 Addressed in the National Education Blueprint

Figure 4

Sectoral Governance Reform

Ensuring the removal of structural barriers and outdated regulations in order
to create an efficient and flexible business environment for the private sector
Reform existing
regulations

Establishing best practices

for future regulations

Accelerating sectoral
regulatory reforms

Expanding and
accelerating NPDIR rollout

Introducing regulations portal

Figure 5

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INGENIEUR
Services Sector Blueprint

The objective of the Sectoral Governance Reform

is to cultivate an efficient, facilitative policy
environment and machinery that will provide a
thriving and competitive environment for the
services sector to develop positively. This will
require Malaysia to address two areas, namely,
reforming existing regulations and establishing a
body of best practices for future regulations.
Specific recommendations include:
Accelerating and increasing the efficiency of
sectoral governance reform.

Ensuring that the best regulatory development

practices are in place for new regulations by
expanding and accelerating the adoption of
the National Policy for the Development and
Implementation of Regulations (NPDIR).
Increasing the transparency, accessibility, and
user-friendliness of regulations by introducing
the MyRegulations portal.

Summary of overall recommendations

Policy lever

14
Internationalisation
Strategy

Investment
Incentives

Human Capital
Development

Sectoral
Governance Reform

Enhancements

1.1 | Large Corporation-SME partnership

programme
1.2 | Consortium promotion programme
1.3 | Subcontracting & Partnership Exchange
1.5 | New exporters training programme
1.6 | Account management system
1.9 | Replication of credit guarantee scheme in
services sector

2.2 | Instill quality and performance based KPIs

2.1 | Incentive Coordinating & Collaboration

Office (ICCO)

3.2 | Greater industry-HEI collaboration

3.3 | Improve impact of bridging programmes
3.4 | Raise the profile of TEVT pathway
3.5 | Enhance existing components of manpower
planning system
3.7 | Further facilitate access to foreign talent
immigration
3.8 | Invest in development / training across all
employees
3.9 | Provide suitable living environment
3.11 A | Expand STAR programme

3.1 | Improve delivery of general employability

skills
3.6 | Integrated planning approach to national
manpower planning
3.10 | Encourage SMEs to provide training to
their employees
3.11 | Co-funded scholarships
3.12 | Research Incentive Scheme

4.1 | Accelerate sectoral governance reforms

4.2 | Expand and accelerate adoption of NPDIR for
new regulations

4.3 | Portal to increase regulation transparency

Figure 6

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26

New ideas / programmes

1.4 | Embed ICT programme

1.7 | Enhancement of the franchise development
programme
1.8 | Opening up and harmonisation of markets through
G2G negotiations
1.10 | Enhancement of the Services Export Fund
1.11 | Enhancement of training delivery

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CROSS BORDER TRADE IN SCIENCE, ENGINEERING & TECHNOLOGY

By Ir. Rocky H.T.Wong

This article is based on points in a paper presented by the author at the 2nd ASEAN-Korea
Engineering Forum & Roundtable Meeting on June 16-17 2014, ASEAN Secretariat, Jakarta,
Indonesia. As there is extensive use of acronyms, a list of terms is provided at the end of the article.

his paper highlights the three accords, viz.

Washington Accord (WA), Sydney Accord (SA)
and Dublin Accord (DA), under the ambit
of the International Engineering Agreements/
Alliance (IEA) and how they contribute to the
overall Quality Assurance/Quality COntrol (QA/QC )
delivery system involving Trade in Services (TiS). In
particular this refers to Trade in regulated Science,
Engineering, Technology (SET) Professional/
Business Services identified in WTO/GATS context
defined as Engineering Services (CPC 8672),
Integrated Engineering Services (CPC 8673),
and Construction & Engineering Services (CPC
511 to CPC 518). Cross Border Trade in Services
(CBTS) flourishes/thrives within bi-lateral/plurallateral/multi-lateral rules centric environment
determined by participating nations/economies in
a democratic manner. In turn, the accreditation
process prescribed by the three accords [each
with its knowledge profile] encourages universal
human rights ~ democracy in education ~
with measurable outcomes based education
operating in a Quality System Framework with
companion CQI/OFI agenda. The win-win and
free, or freer market should embrace/promote
inclusiveness. Therefore, any follow-up Mutual
Recognition Arrangement (MRA) (after a Free
Trade Agreement or FTA has been inked in) should
deal with Engineering Services Professionals
(ESP) whereby prescribed accreditation of all three
accords WA, SA & DA should be encapsulated
in the benchmarking (equivalence) of engineering
team of the three grades of ESP ~ with room for
progression; more so if the TVET system was
adopted to run in parallel with academic (via IHL)
programmes. Its all a question of self-directed
and life long learning with the goal of remaining
competitive and being relevant which is key to be
successful in TiS.

Trade in Services:
Trade in services as per GATS/WTO; comprises
four modes of delivery:
1. Cross border delivery;
2. Cross border consummation;
3. Cross border mobility of capital/investment;
and
4. Cross border mobility of natural persons.

Free Trade Agreement:

Free Trade Agreement vis--vis Trade in
Services deals broadly with:

Market Access;

Commercial Presence ; and

National Treatment .

Modes 1 and 2 equate to Market Access ~

hardly regulated and no point regulating.

Mode 3 equates to Commercial Presence

~ regulations apply; including investment
policies.

Mode 4 equates to National Treatment ~

regulations on registration/certification/license
apply.

Domestic Regulations:
Most public interest professional/business
services are regulated by domestic regulations;
e.g. SET &/or Engineering and Construction
services.

Domestic regulations subject to Good

Regulatory Practices tests.

Various degrees of limitation applied to

Market Access, Commercial Presence and
National Treatment; depending how free the
FTA is; or negative list stated for those three
dimensions of market opening.

Regulated professional services ~ start with

duly accredited qualification by respective

27

SPECIAL REPORT

Professional Services

INGENIEUR

Profession Regulatory Authority (PRA) for

registration/licensing.
Regulated Business Services (e.g. Trades
delivered by skilled workers) begin with
certification of tradesmens competency by the
respective Regulator.

Engineering Services Professionals:

In cases of Engineering, Integrated Engineering,
and Construction Services, members of
Team delivering said services are known as
Engineering Services Professionals (ESP) ~
a term used in ASEAN MRAs on Engineering
Services.

International Engineering Agreements and the

three accords:

Under International Engineering Agreements/

Alliances, there are three tertiary qualification
benchmarks in engineering and technology.
WA (1989, for engineer); SA (2001, for
engineering technologist); and DA (2002, for
technician).
It started with the Washington Accord:
It began 1989 with Washington Accord; three
years after 1986 launch of GATTs eight-year
Uruguay Round (UR) that gave rise to WTO on
01/01/1995.

Under the influence of American Financial

Services Lobby, the 40 th President of USA
caused the US to introduce Trade in Services
at the start of UR.

Engineers played catch-up:

Professional engineering and construction &
engineering services had been traded as long
as financial services. But without projects
dealing with, or in engineering & technology,
there would be very few financial transactions
for financial services suppliers piggy backing
on multi-million dollar contracts.

Engineers realised when engineering services

are traded; the qualification and experience of
the natural person, the engineer, providing the
services matter.

WA therefore recognises substantial

equivalence in the accreditation of qualification
in professional engineering normally of four
years duration.

SA & DA; each of the three accords has its

prescribed knowledge profile.

The Team delivers SET services:

WA is for trade in science, engineering and
technology professional services (TiSET
services); so are SA and DA. All the three
accords cover ESPs who, as a Team, deliver
SET services.

GATT and accountants promoted Trade in

Services:

What is Trade in Services (TiS)? a question

many GATT member countries in 1986 had
little or no clue about at all.

Since 1947 GATT had been dealing with trade

in goods and merchandise whereby at the
border, tariffs (for import duties) could be
added/applied.

Before 1986 TiS was recognised by Malaysia

as invisible trade; measured by Balance of
Payments Account.

Others (besides American financial services

players) soon realised and learnt what it takes
to trade in services; amongst them Engineers
& Contractors.

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Inclusiveness for seamless trade:

For trade to take place, there should be
inclusiveness; more so for seamless trade as
covered by FTA as in the AEC, MPFTA, ASEANChina FTA, etc.

In any FTA there are chapters covering, among

others, Cross Border Trade in Services, Market
Access and Commercial Presence (as can be
found in Investments); whilst National Treatment
will be treated in a follow-up discipline specific
MRA that should be broad based to cover trade in
science, engineering and technology professional
services delivered by ESPs whereby all the three
IEA accords (e.g. WA, SA & DA) will be used to
determine the accreditation of qualifications of
the three grades of the SET team.

Democracy and human rights:

Trade flourishes in an open/free & fair market
underpinned by rules (improved with time)
determined by trading partners in a democratic
manner.

By extension of win-win inclusiveness for trade,

WA, SA & DA subscribe to the universal human

right concept of democracy in education as

against the old belief in elitism in education
(that breeds win-lose exclusiveness trade).
Outcome Based Education and KSA:
Democracy in education need not necessarily be
inferior to elitism in education. This is especially
so when an Outcome Based Education (OBE)
[with measurable objectives and outcomes] is
adopted to attain Blooms Taxonomy of KSA
(learning) domains in a triangulated Quality
based System Framework which aims to
produce wholesome graduates motivated/
inspired to pursue self directed and life long
learning with targeted attributes. [e.g., for WA,
12 attributes have been determined]. These
should be coupled to CQI and OFI to ensure the
bar can be raised - incrementally to be in tune
with the demands of the prevailing state of the
art for SET services thus remaining relevant.

Then there are Repair, Overhaul & Maintenance

Services:

SET professional services need not necessary

be for design and construct only they are
also/often employed for Repair, Overhaul and
Maintenance (ROM) services; to keep assets
at optimum condition for safe and efficient
performance.
Summary and Conclusion:

In summary: the three accords under IEA form

the accreditation benchmarks for ESPs of
an engineering team trained to perform SET
Professional Services: Engineering Services
(CPC 8672) and Integrated Engineering
Services (CPC 8673); together with a third set
of services as in: Construction & Engineering
Services (CPC 511 to 518). These three sets of
SET services are necessary for various other
SET sectors such as; Communication Services,
Environmental Services, Transportation
Services, Energy generation and distribution
services, etc.

The three accords are for Trade in Services.

Trade, especially free trade must be inclusive
instead of exclusive. Therefore any MRA (as
part of National Treatment for an FTA) being
framed (or already framed) should cover
all members of the engineering team who
collectively go by the term ESP.

Engineers realised when

engineering services are

traded; the qualification
and experience of the
natural person, the
engineer, providing the
services matter.
ACRONYMS
AEC

ASEAN Economic Community

CBTS

Cross Border Trade in Services

CQI

Continuous Quality Improvement

DA

Dublin Accord

ESP

Engineering Services Professional

FTA

Free Trade Agreement

GATS

General Agreement on Trade in Services.

GATT

General Agreement on Tariffs & Trade

IEA

International Engineering Alliance/

Agreements.

IHL

Institutions of Higher Learning

KSA

Knowledge, Skill, Attitudes

MPFTA

Malaysia-Pakistan Free Trade Agreement

OBE

Outcome Based Education

OFI

Opportunity for Improvement

PRA

Profession Regulatory Authority

ROM

Repair, Overhaul and Maintenance

SA

Sydney Accord

SET

Science, Engineering & Technology

WA

Washington Accord

WTO

World Trade Organisation.

TiS

Trade in Services

TVET

Technical & Vocational Education &

Training

29

INTERNATIONAL FORUM

INGENIEUR

Boao Forum for Asia Annual

Conference 2015
By Foo Mee Sim

he Boao Forum for Asia (BFA) Annual

Conference 2015 was held in Boao, Hainan
Province, China on March 27-29 ,2015. The
conference adopted the theme Asias New Future:
Towards a Community for Common Destiny and
was attended by 2,786 political, business and
academic leaders as well as journalists from
49 countries and regions. Among them were
seven presidents, four Prime Ministers including
Malaysian Prime Minister, Datuk Seri Najib bin
Abdul Razak who delivered the keynote address.
This was the 14th BFA Annual Conference.
The four-day conference focused on several key
areas such as the Silk Road Economic Belt and
a 21st century Maritime Silk Road as well as the
Asian Infrastructure Investment Bank (AIIB) and
ASEAN Economic Community. Among the sessions
were those on a Green Environment, Technology
and Innovation for a sustainable future, World
Investment Organisation & the Global Investment
Agenda, Energ y Resources, New Energ y
Vehicles, Asset Management boom and Internet
Governance.
As a short introduction to BOAO, BFA is a nonGovernmental and non-profit organisation founded
in 2001. BFA is committed to promoting regional
economic integration and bringing Asian countries
closer to their development goals.
The Boao Forum is the most prestigious and
premier forum for leaders in Government, business
and academia in Asia and other continents to
share visions on the most pressing issues in this
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dynamic region and the world at large. The Forum

is committed to promoting regional economic
integration and bringing Asian countries closer to
their development goals.
Initiated in 1998 by former President of the
Philippines Fidel V Ramos, former Prime Minister
of Australia Bob Hawke, and former Prime Minister
of Japan Morihiro Hosokawa, the Boao Forum for
Asia was formally inaugurated in February 2001.
Countries across the region have responded with
strong support and great enthusiasm, and the
world has listened attentively to the voice coming
from a tiny, quiet and scenic island located at the
southernmost part of China - Boao, the permanent
site of the Annual Conference of the Forum since
2002.
Background of The BOAO Forum for Asia
The last half century has witnessed the
remarkable progress made in economic and social
development by Asian countries. As a result, Asia's
influence in international and regional affairs has
been steadily increasing. The economic take-off
in East Asia over the past two decades, which is
perceived by the world as the East Asian miracle,
led to the rapid development of the overall Asian
economy. This has made Asia prominent among
the regions in the world, which have undergone
the most dynamic economic development.
Although Asian countries have participated in
many international conferences and organisations
such as APEC and PECC, Asia as a whole lacks

Against this backdrop, the Inauguration

Ceremony of the BFA was held on Feb 26-27, 2001
in Boao, Hainan province, China. Former leaders
from 26 countries also graced the occasion as
Guests of Honour by addressing the Ceremony.
The BFA was officially launched at the Ceremony.
Declaration of the BFA and Guidelines of the BFA
Charter were adopted during the Ceremony. The
Inauguration was a great success and gained
recognition from the international community.

Prime Minister of Malaysia Datuk Seri Najib Abdul

Razak delivering a keynote address

a Forum, led by Asians and guided from the

perspectives of Asian interests and views to
provide opportunity to discuss exclusively Asian
issues and enhance co-operation and exchanges
among Asian countries, and between Asian
countries and other parts of the world. Against this
backdrop, a proposal was put forward to establish
an Asian Forum, similar to the World Economic
Forum headquartered in Davos.
The idea, once it was put forward, was warmly
received by the other Asian countries. On Oct 8,
1999, Hu Jintao, Chinese vice-president at the
time, met with Fidel V Ramos and Bob Hawke who
came to China especially for the Asian Forum. After
the briefing by initiators of the proposed forum, Hu
Jintao said that the Chinese Government always
supported and attached importance to multilevel, multi-channel and multi-type of regional
co-operation and dialogue. The establishment
of the Forum would be conducive to promoting
understanding, trust and co-operation among the
countries of the region. The Chinese Government
would study the idea prudently and positively
and would provide all necessary support and cooperation. Meanwhile, Hu Jintao emphasized that
since the recognition, understanding and support
of the related Governments was vital to the
establishment of the Forum, China would wish to
get herself further acquainted with the responses
of other countries on this issue. This was followed
by positive responses from the 25 countries in
Asia.

Organisation Structure
The General Meeting of Members (GMM) is the
ultimate authority of BFA. The GMM should be
held once every calendar year.
The Board of Directors shall be the supreme
executive body of the GMM and shall be
responsible to the GMM. The members of the
Board of Directors shall be elected by a simple
majority of the Full Members at the GMM. A
meeting of the Board of Directors shall be held at
least once a year coinciding with the GMM at the
headquarters of BFA.
There shall be a Council of Advisors, consisting
of 26 chief representatives from 26 BFA Initial
Countries. The Council of Advisors shall meet
as the need arises to provide consultation and
suggestions on significant issues and matters
affecting BFA.
The Secretariat shall be the standing executive
body of BFA, responsible for the daily operation of
the BFA.
Research Institute
A Research Institute was formed to provide
important intellectual support of BFA. Its functions
include the following:

To identify the theme and sub-topics for the

annual conference;

To develop and provide economic forecasting

on issues consistent with the goals and policies
of BFA;

To provide intellectual resources for BFA

conferences, seminars, and workshops;

To provide human resource development

programmes for members and other partners
oof BFA;

To establish a virtual network and a clearing

house for other research and training institutes
in Asia and elsewhere.

31

UPDATE

INGENIEUR

Recent Amendment
to Uniform Building ByLaws on Demolition of
Buildings
By Amanda Lee Siek Hsia

he collapse of the Jaya Supermarket

building in 2009 during the demolition
stage that caused the death of seven
lives prompted the Government to commission
a Special Committee under the Ministry of
Housing and Local Government to investigate
and suggest recommendations to ensure safety
of the workers and the public. As a result of the
recommendations, the Uniform Building By-Laws
1984 (UBBL) was amended to introduce a new
provision to ensure the demolition of a building is
carried out in a safe and orderly manner.
The proposed amendment to UBBL on
Demolition of Buildings together with a few other
amendments were tabled in 2012 to the National
Council for Local Government (NCLG) whereby all
Menteri Besar and Chief Ministers of the states
are members of the Council under the provision of
Article 95A of the Constitution. The proposal was
approved by NCLG and it was then left to various
states of Peninsula Malaysia to adopt and gazette.
As at March 1, 2015, Selangor (Sel PU 142) and
Trengganu had gazetted the amendment.
Details of the amendment to UBBL on the
Demolition of Buildings are:
PART 1A DEMOLITION OF BUILDINGS
Application of this Part:
2A. This part shall apply to the demolition of a
building before reconstruction thereof.
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Jaya Supermarket collapse

Preparation of a submission of demolition plan etc.
2B. (1) Before the demolition is commenced, one
copy of the detailed demolition plan together
with a copy of the stability report prepared in
accordance with MS 2318:2010(P) shall be
submitted to the local authority.

(2) The detailed demolition plan shall bear
a certificate by the submitting person as in
Form A of the second Schedule to the effect
that the details are in accordance with
MS 2318:2010(P) and that the submitting
person accepts full responsibility.

Demolition of building in progress

Power of local authority to reject the demolition
plan and stability report.
2C. Notwithstanding paragraph (2) of by-law
2B, the local authority may examine and in
so doing may reject any demolition plan or
stability report which is not in accordance
with MS 2318:2010(P) and if it rejects such
plan or report it may require such submitting
person to resubmit a new demolition plan
or stability report in respect of the rejected
portion.
Notice of commencement or resumption of
building operations
2D. (1) Notice of the intention to commence or
resume the demolition of a building required
under subsection 70(9) of the Act shall be
made in Form B of the Second Schedule
and shall include particulars of the intended
work.

(2) If the work is not commenced or resumed
on the date given in such notice, a further
notice in Form B of the Second Schedule
shall be given before the work may be
commenced or resumed.
Method of demolition
2E. The demolition works shall conform to MS
2318:2010(P).
Duties of a submitting person
2F. (1) The submitting person certifying the plan

under paragraph (2) of by-law 2B shall be

responsible for the proper execution of the
demolition works and shall continue to be
so responsible until the completion of the
demolition works unless(a) with the agreement of the local
authority, another submitting person is
appointed to take over; or
(b) the local authority agrees to accept
his withdrawal or replacement at the
request of the owner provided that the
demolition works has not commenced.
(2) Where the local authority agrees to accept
the submitting persons withdrawal or
replacement under subparagraph (1)(b), the
demolition works shall not commence until
another submitting person is appointed to
take over.
(3) Where any submitting person who has
submitted the demolition plan has died or
become bankrupt or cannot be found or
has been deregistered from the register or
for any other reason ceased to practice, the
owner or occupier shall as soon as possible
appoint another submitting person to act for
him and to submit adequate evidence to the
local authority of the circumstances.
Exemption from this Part
2G. The local authority may if it deems fit
exempt any minor demolition work from the
requirements of this Part.
33

INGENIEUR

Where Engineers Excel

The Board of Engineers Malaysia (BEM),
formed in 1972, is a statutory body
constituted under the Registration of
of
Engineers Act 1967. BEM falls within the
ambit of responsibility of the Minister of
of
Works. Its primary role is to facilitate the
registration of engineers and regulate the
the
professional conduct and practice of
registered engineers in order to
safeguard the safety and interest of
of the
the
public.
Under BEMs registration record are
15,000 Professional Engineers and
81,000 Graduate Engineers in various
71,000
disciplines and industries throughout
Malaysia.
Published quarterly by BEM, The Ingenieur,
Ingenieur,
reaches out to the engineering community
via a 13,500 print version as well as to
to
other readers via an e-format.
Readership is estimated at 50,000.

The content in this magazine, written mainly

by the engineering community and
technical professionals, provides first-hand
and valuable knowledge. There is a wealth
of information on:
Infrastructure design and
development
Professional practice
Government policies and guidelines
Legal issues
Engineering personalities
Management
Continuous development of engineers.

For
For advertising
advertisingand
andsubscription
subscriptioninquiries,
inquiries,please
pleasecontact
contact
Board
of
Engineers
Malaysia
Board of Engineers Malaysia
Tingkat
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IbuPejabat
PejabatJKR,
JKR, Jalan Sultan Salahuddin, 50580 Kuala Lumpur
Jalan
Salahuddin,
Email Sultan
: publication@bem.org.my
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+603-2610
50580
Lumpur 7095/96/97/98
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Email
Fax : +603-2698
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5017 / 603-2610 2090
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2013
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35

INGENIEUR

GUIDELINES

INCHEON STRATEGY

Accessibility and Facilities for

the Build-Environment
for Persons with Disabilities
in the Asia-Pacific Region
By Pang Soo Moi

hen the Asian and

Pacific Decade of
Persons with Disability
1993-2002 was declared by UN
ESCAP, Malaysia was a signatory
to the Proclamation on the Full
Participation and Equality of
People with Disabilities in the
Asia Pacific Region on May
16, 1994. The (UBBL) Uniform
Building Bye-Laws 1984 was
amended to include by-law 34A
on the Building Requirements
f o r D i s a b l e d P e r s o n s .
Subsequently, three Malaysian
Standards namely MS1184:
Code of Practice for Access
for Disabled Persons to Public
Buildings, MS 1183: Code of
Practice for means of escape for
Disabled Person and MS 1331:
Code of Practice for access
for Disabled Persons outside
buildings were correspondingly
formed to assist the industry
for the implementation of
facilities of built-environment for
Disabled Persons.
In addition, several
guidelines on planning and
building requirements by the
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Incheon
Strategy
10 GOALS TO
MAKE THE RIGHT
REAL FOR PERSONS
WITH DISABILITIES
IN ASIA AND THE
PACIFIC, 20132022

Town and Country Planning

Department and the Local
Government Department of
the Urban Wellbeing, Housing
and Local Government Ministry
were also issued to guide
planners, architects, engineers,
builders, developers and local
Government officers.
INCHEON STRATEGY
Towards the end of the second
Asian and Pacific Decade of
Persons with Disability 2003
-2013, the Governments of
the ESCAP region gathered in

Incheon, Republic of Korea, from

October 29 to November 2,
2012 to chart the course of the
new Asian and Pacific Decade of
Persons with Disabilities for the
period 2013 to 2022. They were
joined by representatives of civil
society organisations, including
those related to persons with
disabilities. Also in attendance
were representatives of interGovernmental organisations,
development co - operation
agencies and the United Nations
system.
The Inche on S tr ateg y
provides the Asia-Pacific region,
and the world, with the first set
of regionally agreed disabilityinclusive development goals.
Developed over more than two
years of consultations with
Governments and civil society
stakeholders, the Incheon
Strategy comprises 10 goals, 27
targets and 62 indicators.
The Inche on S tr ateg y
builds on the Convention on
the Rights of Persons with
Disabilities and the Biwako
Millennium Framework for

Action and Biwako Plus Five

towards an Inclusive, Barrierfree and Rights-based Society
for Persons with Disabilities in
Asia and the Pacific.
The Incheon Strategy will
enable the Asia-Pacific region
to track progress towards
improving the quality of life, and
the fulfilment of the rights, of
the regions 650 million persons
with disabilities, most of whom
live in poverty. The ESCAP
secretariat is mandated to
report every three years until the
end of the Decade in 2022, on
progress in the implementation
of the Ministerial Declaration
and the Incheon Strategy.
General Assembly
Resolution 48/96 of December
20, 1993 adopted the Standard
Rules on the Equalization of
Opportunities for Persons with
Disabilities, in which persons
with disabilities are recognized
as both development agents
and beneficiaries in all aspects
of development.
The Beijing Declaration on
Disability-Inclusive Development
adopted on June 8, 2012 by the
Beijing Forum with the theme
removing barriers, promoting
integration, which, inter alia,
recognized the significance of
accelerating the ratification
and implementation of the
Convention on the Rights of
Persons with Disabilities, and
incorporating the disability
dimension in the United Nations
development agenda beyond
2015 in diverse sectors.
The development of the
Incheon Strategy to Make
the Right Real for persons
with disabilities in Asia and
the Pacif ic was derived
from the experience s in

the implementation of two

consecutive Asian and Pacific
Decades of Disabled Persons,
19932002 and 20032012,
as well as the historic adoption
by the General Assembly, in
2006, of the Convention on
the Rights of Persons with
Disabilities.
The responses of
Governments and organisations
of and for persons with
disabilities to the ESCAP
Disability Survey 20112012
on the final review of the Asian
and Pacific Decade of Disabled
Persons, 20032012, provided
a rich evidence base for
developing the IncheonStrategy.
INCHEON STRATEGY GOAL

1
Reduce poverty
and enhance work
and employment
prospects

The Incheon Strategy is

not intended to replicate the
comprehensive coverage of the
Biwako Millennium Framework
for Action and Biwako Plus Five
towards an inclusive, barrierfree and rights-based Society
for Persons with Disabilities in
Asia and the Pacific, and the
Convention on the Rights of
Persons with Disabilities, which
will all continue to serve as the
overarching policy framework
for regional work in the field of
disability.

The Incheon goals and

targets are time-bound for
accelerating implementation
by focusing particular attention
on the achievement of a set
of priority goals and targets
during the course of the new
Decade, 20132022, as well
as facilitating the measurement
of progress to be attained by
countries and territories in the
Asia-Pacific region.
KEY PRINCIPLES AND POLICY
DIRECTION
The Incheon Strateg y is
based on the principles of the
Convention on the Rights of
Persons with Disabilities:

Respect for inherent dignity,

i n d i v i d u a l a u t o n o m y,
including the freedom to
make ones own choices, and
independence of persons;

Non-discrimination;

Full
and
effective
participation and inclusion in
society;

Respect for difference and

acceptance of persons with
disabilities as part of human
diversity and humanity;

Equality of opportunity;

Accessibility;

Equality between men and

women; and

Respect for the evolving

capacities of children with
disabilities and respect for
the right of children with
disabilities to preserve their
identities.
In order to realize and
protect the rights of persons
with disabilities in the AsiaPacific region, the Incheon
Strateg y underscores the
following policy direction:

Legislative, administrative
and other measures

37

INGENIEUR

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38

supportive of rights fulfilment

are adopted, implemented,
reviewed and strengthened
so that disability-based
discrimination is eliminated;
Development policies and
programmes are disability
Ensure disabilityinclusive inclusive
and genderdisaster
sensitive and
harness the
risk reduction
and
potential management
of combining
univer s al de sign with
technological advancements
for enabling persons with
disabilities to fulfil their rights;
Development policies and
programmes address the
basic needs of persons with
disabilities and their families
who live in poverty;
Ef fec tive and timely
collection and analysis
of sex- disag gregated
disability data are pursued
for
evidence-based
policymaking;
N at io n al, sub - n at io n al
and local policies and
programmes are based
on plans that are explicitly
inclusive of persons
with disabilities and that
also prioritize the active
participation of persons
with disabilities, through
their
representative
organisations, in relevant
decision-making processes;
The necessary budgetary
support is provided at all
levels for disability-inclusive
development and tax policies
facilitate the inclusion of
persons with disabilities;
All national, sub-regional,
regional and international
entities concerned with
development include
disability dimensions in their
policies and programmes;
N at io n al, sub - n at io n al
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INCHEON STRATEGY GOAL

8
Improve the reliability
and comparability
of disability data

and local co-ordination,

with sub - regional and
regional linkages, ensure
that disability inclusion in
development policies and
programmes is strengthened
through intensification of
multi-sectoral consultation
an d c o ll ab o r a t i o n, to
expedite and review Decade
implementation and share
related good practices;
Community and familybased inclusive development
is promoted in order to
ensure that all persons with
disabilities, irrespective
of socio-economic status,
religious affiliation, ethnicity
and location, are able, on
an equal basis with others,
to contribute to and benefit
from development initiatives,
particularly poverty reduction
programmes;
Persons with disabilities
are included in mainstream
community life and are
supported with life choices
equal to those of others,
including the option to live
independently;
Persons with disabilities
h av e a c c e s s t o t h e
p hy s i c al e nv ir o nm e n t ,

p u b l i c t r an s p o r t a t i o n ,
knowledge, information
and communication, in a
usable manner, through
uni ve r s al d e s i g n an d
assistive technologies with
reasonable accommodation
provided, and taking into
consideration the need to
accommodate economic,
geographic, linguistic and
other aspects of cultural
diversity, which altogether
constitute a critical bridge to
fulfilling their rights;
Diverse disability groups
are empowered that include
but are not limited to the
following under-represented
groups: girls and boys
with disabilities, young
persons with disabilities,
women with disabilities,
persons with intellectual,
learning and developmental
disabilities, persons with
au t i s m, p e r s o n s wi t h
psychosocial disabilities,
persons who are deaf, hard
of hearing and deafened,
persons who are deaf/
blind, persons with multiple
disabilities, persons with
extensive disabilities, older
persons with disabilities,
persons with disabilities
living with HIV, persons with
disabilities arising from noncommunicable diseases,
persons with disabilities
affected by leprosy, persons
with disabilities caused
by medic al conditions
and intractable epilepsy,
persons with disabilities
caused by road traf fic
crashes, indigenous and
ethnic minority persons
with disabilities, persons
with disabilities who are

homeless and inadequately

hou se d, p er sons with
disabilities in situations of
risk, including situations of
armed conflict, humanitarian
emergencie s, and the
occurrence of natural and
human-made disasters,
persons with disabilities who
are victims of landmines,
persons with disabilities who
do not have legal status,
persons with disabilities
who are victims of domestic
violence, particularly women
and children, and family
advocacy groups, as well
as particularly marginalized
persons with disabilities
living in slums, rural and
remote areas and atolls;
Organisations of and for
persons with disabilities,
self-help groups and selfadvocacy groups, with
support, as required by
families and caregivers,
par ticipate in decisionmaking, as appropriate, to
ensure that the interests
of marginalized groups are
adequately addressed;
Action on raising awareness
is streng thened and
continued, including through
the provision of adequate
budgetary support, in the
Asian and Pacific region
during the Decade to improve
attitudes and behaviour and
mobilize effective multisectoral engagement in
implementation modalities.

INCHEON GOALS AND

TARGETS
The Incheon Strateg y is
composed of 10 interrelated
goals, 27 targets and 62
indicators.

The time frame for achieving

the goals and targets is the
Asian and Pacific Decade of
Persons with Disabilities, 2013
to 2022.
The 10 Goals describe the
desired end results. Targets are
aimed to be achieved within a
given time frame. Indicators
measure progress towards
the targets and verify that the
targets have been achieved.
There are two types of
indicators: core indicators and
supplementary indicators.
Among the 10 goals, the
goals related to accessibility and
build environment are:
GOAL 3 - Enhance access to
the physical environment,
public transportation,
knowledge, information and
communication
Ac c e s s to t h e p hy si c al
environment,
public
transpor tation, knowledge,
information and communication
is a precondition for persons
with disabilities to fulfil their
rights in an inclusive society.
The accessibility of urban,
rural and remote areas based
on universal design increases
safety and ease of use not only

INCHEON STRATEGY GOAL

3
Enhance access to the
physical environment,
public transportation,
knowledge, information
and communication

for persons with disabilities,

but also for all other members
of society. Access audits are an
important means of ensuring
accessibility and must cover
all stages of the process of
planning, design, construction,
maintenance and monitoring
and evaluation. Access to
assistive devices and related
support services is also a
precondition for persons with
disabilities to optimize their level
of independence in daily life and
live in dignity.
Ensuring the availability
of assistive devices for those
living in low resource settings
involves encouraging research,
development, pro duc tion,
distribution and maintenance.
Target 3.A
Increase the accessibility of
the physical environment in the
national capital that is open to
the public.
Target 3.B
Enhance the accessibility and
usability of public transportation.
Target 3.C
Enhance the accessibility and
usability of information and
communications services.
Target 3.D
Halve the proportion of persons
with disabilities who need but do
not have appropriate assistive
devices or products.
INDICATORS FOR TRACKING
PROGRESS
Core indicators
3.1 Proportion of accessible
Government buildings in
the national capital
3.2 Proportion of accessible
international airports
3.3
Propor tion of daily
c ap tioning and sig n language interpretation

39

INGENIEUR
of public television news
programmes
3.4 Proportion of accessible
and usable public
documents and websites
that meet internationally
recognized accessibility
standards
3.5 Propor tion of persons
with dis abilitie s who
need assistive devices or
products and have them
Supplementary indicators
3.6 Availability of a Government
access audit programme
that
requires
the
participation of experts with
disabilities
3.7 Availability of mandatory
technical standards for
barrier-free access that
govern the approval of
all designs for buildings
that could be used by
members of the public,
taking into consideration
internationally recognized
standards, such as those
of the International
Organisation
for
Standardization
3.8 Number of sign language
interpreters
3.9 Availability of mandatory
technical standards for
barrier-free access that
govern the approval of all
ICT-related services, such
as websites for the public,
taking into consideration
internationally recognized
standards, such as those of
the ISO
GOAL 7 - Ensure disabilityinclusive disaster risk
reduction and management
The Asia-Pacific region is the
region that is most adversely
affected by disasters, including

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INCHEON STRATEGY GOAL

7
Ensure disabilityinclusive disaster
risk reduction and
management

those caused by climate change.

Persons with disabilities and
other vulnerable groups are
at higher risk of death, injury
and additional impairments,
as a result of exclusion from
disaster risk reduction policies,
plans and programmes. Public
service announcements are
often issued in formats and
language that are not accessible
by persons with disabilities.
In addition, emergency exits,
shelters and facilities tend
not to be barrier-free. Regular
participation of persons with
disabilities in emergency
p rep are dne s s dr ill s and
other disaster risk reduction
measures at the local and
district levels could prevent or
minimize risk and damage when
disasters occur. Physical and
information infrastructure that
incorporates universal design
principles would improve the
chances of safety and survival.
Target 7.A
Strengthen disability-inclusive
disaster risk reduction
planning.
Target 7.B
Strengthen implementation of
measures on providing timely
and appropriate support to

persons with disabilities in

responding to disasters.
INDICATORS FOR TRACKING
PROGRESS
Core indicators
7.1 Availability of disabilityinclusive disaster risk
reduction plans
7.2 Availability of disabilityinclusive training for all
relevant service personnel
7.3 Proportion of accessible
emergency shelters and
disaster relief sites
Supplementary indicators
7.4 Number of persons with
disabilities who died or
were seriously injured in
disasters
7.5 Availability of psychosocial
support service personnel
that have the capacity
to assist persons with
disabilities affected by
disasters
7.6 Availability of assistive
devices and technologies
for persons with disabilities
in preparing for and
responding to disasters
GOAL 8 - Improve the reliability
and comparability of disability
data
Persons with disabilities tend
to be unseen, unheard and
uncounted. Increasingly in recent
years, when they have been
counted, definitions of disability
and persons with disabilities
that are used for collecting
disability data have varied
widely in the Asia-Pacific region.
Ta k e n
t o g e t h e r,
data
comparisons across countries
are frequently unreliable. The
Asia-Pacific region needs
more accurate statistics on
the population of persons with

diverse disabilities and on their

socio-economic status. The
adequacy of disability statistics
would enable policymaking to
be evidence-based to support
the realization of the rights of
persons with disabilities. The
Decade is an opportunity to
enhance data collection aimed
at generating comparable
disability statistics over time and
across borders. It is crucial that
baseline data for the Incheon
Strategy indicators are made
available to enable effective
progress tracking towards
the achievement of goals and
targets.
Target 8.A
Produce and dis seminate
reliable and internationally
comparable disability statistics
in formats that are accessible by
persons with disabilities.
Target 8.B
Establish reliable disability
statistics by the midpoint of the
Decade, 2017, as the source for
tracking progress towards the
achievement of the goals and
targets in the Incheon Strategy.
GOAL 9 - Accelerate
the
ratification
and
implementation of the
Convention on the Rights of
INCHEON STRATEGY GOAL

9
Accelerate the ratification
and implementation of the
Convention on the Rights of
Persons with Disabilities
and the harmonization of
national legislation with
the Convention

Persons with Disabilities and

the harmonization of national
legislation with the Convention
The Convention on the Rights
of Persons with Disabilities
is the first disability-specific,
international legal instrument
that provides a comprehensive
appro ach to re sp e c ting ,
protecting and fulfilling the rights
of persons with disabilities. The
Convention explicitly empowers
persons with disabilities as
holders of rights, as distinct
from being treated as objects of
charity. The ESCAP region played
an instrumental and historic role
in the initiation and drafting of
the Convention. As of October
30, 2012, 126 states globally
are parties to the Convention
and 154 are signatories, of
which, in the Asia-Pacific region,
35 Governments have signed the
Convention and 25 have ratified
the Convention or acceded to it.
GOAL 10 - Advance sub regional, regional and interregional co-operation
The experience of two Asian and
Pacific Decades underscores
the value of co-operation,
at sub - regional, regional
and inter-regional levels, for
facilitating mutual support,
including through sharing
lessons learned, good practices
and innovative solutions. The
Busan Partnership for Effective
Development Co-operation,
adopted on December 1,
2011 by the Fourth High-level
Forum on Aid Effectiveness
(Busan, Republic of Korea)
recognized the importance of
international commitments on
disability to form the foundation
of co-operation for effective
development. Civil society and

INCHEON STRATEGY GOAL

10
Advance
subregional,
regional and
interregional
cooperation

the private sector could play

important roles in catalyzing
innovative approaches to
reaching the Incheon goals and
targets.
CONCLUSION
As Malaysia progresses towards
a developed nation status by
2020, it is important that the
needs of the Disabled Persons
par ticularly acces sibilit y
and facilities for the build
environment are adequately
addressed. The physical build
environment for Disabled
Person in public areas is a
reflection of the level of national
development and civic society.
With this in mind, the Incheon
Strategy should be used as an
effective tool to achieve the
wishes of the Disabled Persons
for an inclusive society.
REFERENCE
UN ESCAP : Incheon Strategy
to Make the Right Real For
Persons with Disabilities in Asia
and the Pacific
Jabatan Kerajaan Tempatan
: Guidelines on Buildings
Requirements for Disabled
Persons

41

ENGINEERING & LAW

INGENIEUR

Employers
Rights to
Set-Off
Payment
Claims by
Contractor
By Teng Kam Wah,
Dr Rosli Said and
Dr Mohd Suhaimi Bin Mohd Danuri,
Faculty of Built Environment, University
of Malaya

n an engineering or construction situation,

when faced with a claim by a contractor for
payment, the employer will almost certainly
wish to set off such a claim by a cross-claim of
his own against the contractor for any sums owing
by the contractor to him. Such a cross-claim by
the employer may involve damages for defective
work and delayed performance. The advantage
of such a set-off device is that the contractor is
precluded from obtaining judgment to the full
extent of his claim. This leaves the employer with
the right to take legal action against the contractor
for recovery of the employers claim against the
contractor. If the contractor gets his money first,
there is no certainty that the contractor will be able
or will want to pay the employer in the event that
the employer succeeds in his action against the
contractor. Set-off is a general principle founded
in simple convenience and fairness.
There are two types of set-off available in
Malaysia: abatement and equitable set-off. The
exercise of a right of deduction or set-off is in
essence a provisional act. It does not decide
anything finally. It does not prevent either party
from subsequently proving his claim or cross6
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claim. It has no effect on the final outcome of the

dispute.
Unlike a set-off, a counterclaim is in effect an
action by the defendant against the plaintiff. It is
not restricted to debts or liquidated damages. It is
not necessary that the claim should be analogous
to that of the plaintiffs. A claim based on contract
may be opposed to one founded on tort, or viceversa (Stooke v Taylor (1880) 5 QBD 569).
A cross-claim which is accepted as a defence
of set-off has the effect of extinguishing either
the whole or part of the plaintiffs claim (In re A
Bankruptcy Notice [1934] Ch 431). In Permodalan
Plantations Sdn Bhd v Rachuta Sdn Bhd [1985]
1 MLJ 157, Salleh Abbas LP explained as follows:
A counterclaim on the other hand is also
a cross-claim which a defendant has
against a plaintiff but in respect of which
the defendant can bring a separate action
against the plaintiff if he wishes to do
so. Thus, to all intents and purposes a
counterclaim is a separate and independent
action by the defendant, which the law
allows to be joined to the plaintiffs action in
order to avoid multiplicity or circuitry of suits.
ABATEMENT
The doctrine of abatement or common law set-off
was developed by the courts to allow a party to a
contract for the purchase of goods or services or
both to obtain a reduction in the price payable to
the extent that the value of the goods or services
has been diminished by a breach of contract by
the seller. In Thornton v Place (1832) 1 M&R 218,
the plaintiffs claims for damages for slating work
done were resisted by a defence of defective work.
The court held that the plaintiffs were entitled
to the contract price less a deduction of a sum
necessary to alter the work to make it fit the
specification.
The principle laid down in Mondel v Steel
(1841) 8 M & W 858 was that when the buyer
of goods is sued by the seller for the price, it is
competent for the defendant not to set-off by a
proceeding in the nature of a cross-action, the
amount of damages which he has sustained by
a breach of the contract, but simply to defend
himself by showing how much less the subject
matter of the action was worth by reason of the
breach of contract.

In Dakin v Lee [1916] 1 KB 566, a builder

sued for payment for works done to a defendants
house. The builder was held entitled to recover
the payment, less an appropriate deduction
for the cost of remedial works. Duquemin Ltd
v Raymond Slater [1993] 65 BLR 124 was
another case in which the doctrine was applied.
There, a contractor carried out refurbishment
and extension works. The arbitrator awarded
the employer a larger sum by way of abatement
for defects than the value of the contractors
claim. The court decided that the arbitrator
had acted beyond his jurisdiction, and that the
greatest possible abatement was to reduce the
contractors claim to zero.
In Mellowes Archital Ltd v Bell Projects Ltd
[1997] 87 BLR 26, a sub-contractor sought
summary judgment for sums due on an interim
application. The Court of Appeal held that the main
contractor was not entitled to use its delay claim
as abatement and the sub-contractor was granted
summary judgment. Buxton LJ reviewed the law of
abatement at length in coming to such a holding.
He said that the measure of abatement must be
limited to the difference in value of the thing itself.
The cost of repairing damage to anything else
other than the thing itself is not recoverable.
ARE INTERIM CERTIFICATES SPECIAL?
In Dawnays v Minter [1971] 1 WLR 1205, Lord
Denning MR made some general observations,
which were not essential to the decision in the
case, and were therefore obiter dicta, in the
following terms: An interim certificate is to be
regarded virtually as cash, like a bill of exchange. It
must be honoured. Payment must not be withheld
on account of cross-claims whether good or bad except so far as the contract specifically provides.
It seems that Lord Denning was suggesting that
there was a special rule for cross-claims in building
contract cases which operated in the opposite
direction to the principle propounded in Mondel v
Steel. That would usher in a new paradigm.
The apparent rule of law in Dawnays was
overruled by the House of Lords in Gilbert-Ash
(Northern) Ltd v Modern Engineering (Bristol)
Ltd [1974] AC 689. Lord Morris answered Lord
Dennings suggestion as follows:
When parties enter into a detailed building
contract there are, however, no overriding

rules or principles covering their contractual

relationship beyond those which generally
apply to the construction of contracts.
Nor, if a contract provides for the issuing of
interim certificates, should it be supposed
that debts of a special class will come into
existence, i.e. debts in relation to which
there cannot under any circumstances be
any defence or set-off.
MODIFICATION BY CONTRACT
The crucial condition 14 in Gilbert-Ash provided
that if the sub-contractor was in breach of any
condition, the contractor could suspend or
withhold payment of any moneys due or becoming
due to the sub-contractor. The contractor also
reserves the right to deduct from any payments
certified as due the amount of any bona fide
contra accounts and/or other claims which he, the
contractor, may have against the sub-contractor in
connection with this or any other contract. There
could hardly be any doubt that that clause enabled
the contractor to set-off any cross-claims, even
those arising from other contracts.
The House of Lords held that the contractor
was entitled to set-off his claim for defects and
delays against sums certified as due to a subcontractor. In addressing the competing demands
of the laws remedies for breach of contract and
of businesss requirements for cash flow, Lord
Diplock restated the law on abatement derived
from Mondel v Steel and said:
It is, of course, open to parties to a contract
for sale of goods or for work and labour or
for both to exclude by express agreement
a remedy for its breach which would
otherwise arise by operation of law or such
remedy may be excluded by usage binding
upon the parties . But in construing such
a contract one starts with the presumption
that neither party intends to abandon any
remedies for its breach arising by operation
of law, and clear express words must be
used in order to rebut this presumption.
In Pembinaan Leow Tuck Chui & Sons Sdn Bhd
v Dr Leelas Medical Centre Sdn Bhd [1995] 2 MLJ
57, a builder claimed against the employer for the
sum due under the penultimate progress payment
certificate issued by the architect in respect of the
construction of a private hospital. The employer

43

INGENIEUR
had alleged defective work and challenged the
correctness of the certificate. The pivotal issue
that called for decision there was whether, upon
the true interpretation of the building contract,
an obligation rested on the employer to pay the
sum at once without regard to pending disputes
including cross-claims by the employer.
The Supreme Court had to consider whether
it was available to the employer to rely on his
claims for liquidated and non-liquidated damages
to defeat the builders claim. It is noteworthy that
the architect had not invoked his powers under
the building contract to direct the builder to do
rectification work in response to the employers
complaints of defective work, materials and/
or over-valuation. In the event, the builder was
under no obligation to remedy the deficiencies
complained of.
The court said that the express enumeration
of permitted set-offs in a contract or sub-contract,
can imply that a defendant builder or main
contractor, as the case may be, is limited to making
such deductions from the amounts claimed as fall
strictly within the scope of the permitted set-offs,
and nothing else, on the basis of the expressio
unius principle [a maxim of interpretation meaning
that the expression of one thing is the exclusion of
another].
Applying this principal, the contended set-off
by the employer did not fall into any of the seven
permitted categories of set-off in the contract. The
Supreme Court held that the employers alleged
right to a set-off had been extinguished, not
expressly but by clear implication.
In Dataran Rentas Sdn Bhd v BMC
Constructions Sdn Bhd [2008] 2 MLJ 856, the
appellant and respondent had entered into a
construction contract in the form of the PAM
Standard Form Building Contract 1969 Edition
(Without Quantities). The appellant failed to
make payment to the respondent for amounts
due under four interim certificates within the
stipulated time. The respondent then determined
the contract. The appellant alleged that the
determination was wrong and that there were
defective works.
Relying on the dictum in Pembinaan Leow Tuck
Chui that the right of set-off is restricted to those
expressly allowed under the contract, Zulkefli
JCA found that the appellant had no right of set-

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Engineers at a project site.

off under the PAM contract against the certified
sum. There was no architects instruction issued
under clause 2(1) that the works carried out by the
respondent were defective. In the unpaid interim
certificates, the architect had stated: Addition/
Deduction for works not in accordance with the
contract as being RM nil.
A widely drafted clause forbidding a set-off,
deduction or withholding may well be able to
exclude reliance on any claim to pay less than
the full amount, whether that claim is based
on a pure defence, abatement, set-off or
counterclaim (Totsa Total Oil Trading SA v Bharat
Petroleum Corp Ltd [2005] EWHC 1641 (Comm)).
EQUITABLE SET-OFF
It is generally agreed that the modern law of
equitable set-off dates back to Hanak v Green
[1958] 2 QB 9 with Morris LJs judgment being
described as authoritative by Dillon LJ in BICC
v Burndy Corporation [1985] 1 Ch 232 and
masterly by Lord Diplock in Gilbert-Ash. Under
this doctrine, the court could intervene to restrain
someone who had commenced an action at law
from proceeding with the trial of the action or
from levying execution of a judgment until further
order. The circumstances include the existence
of an un-liquidated cross-claim by the defendant
and regarded by the court as justifying the
protection of the defendant from the plaintiffs
claim. An equitable set-off operates in a litigation
to extinguish the claim and prevent its original
establishment, rather than to provide a sum to be
netted off against the claim once established.
Morris LJ in Hanak v Green identified two
factors as being critical in qualifying a crossclaim as an equitable set-off: it would have been

manifestly unjust for the claim to be enforced

without regard to the cross-claim; and there was
a close relationship between the dealings and
transactions which gave rise to the respective
claims. He did not elaborate on the degree of
closeness required in the relationship.
In that case, the plaintiff claimed against
a builder for non-completion of the works. The
builder had three counterclaims and relied
on them by way of a set-off. The first was a
claim under the building contract itself for loss
caused by the plaintiffs refusal to admit the
builders workmen. The second was a quantum
meruit claim for extra work performed outside
the contract. The third was for trespass to the
builders tools, and thus was founded in tort.
Morris LJ left the third item aside as the first
two already exceeded the plaintiffs claim. He
said that it seems to me that a court of equity
would say that neither of these claims ought to
be insisted upon without taking the other into
account. Sellers LJ was of the opinion that all
three items could be set-off because the first
arises directly under and affected the contract
on which the plaintiff herself relies, and the
other two were closely associated with and
incidental to the contract. Morris LJ added
that the question as to what is a set-off is to
be determined as a matter of law and is not in
any way governed by the language used by the
parties in their pleadings.
In Henriksens Rederi A/S v THZ Rollimpex (The
Brede) [1974] QB 233, Lord Denning MR said of
equitable set-off: It is available whenever the
cross-claim arises out of the same transaction as
the claim; or out of a transaction that is closely
related to the claim.
Federal Commerce & Navigation Co Ltd v
Molena Alpha Inc (The Nanfri) [1978] 2 QB 927
was the occasion for Lord Denning MR to make
a further elucidation of the doctrine of equitable
set-off:
But one thing is clear: it is not every crossclaim which can be deducted. It is only
cross-claims that arise out of the same
transaction or are closely connected with it.
And it is only cross-claims which go directly
to impeach the plaintiffs demands, that
is, so closely connected with his demands
that it would be manifestly unjust to allow

him to enforce payment without taking into

account the cross-claim ...
In the same case, Goff LJ took a similar stand
as to the requirement of fairness when he said
that the circumstances must be such as to make
it unfair for the creditor to be paid his claim without
allowing that of the debtor if and insofar as well
founded and thus to raise an equity against the
creditor or, as it has been expressed, impeach his
title to be paid. He also clarified that equitable
set-off which is really a defence, does not arise
from every cross-claim, or from every cross-claim
coming from the same contract.
In Bank of Boston Connecticut v European
Grain and Shipping Ltd (The Domique) [1989] AC
1056, Lord Brandon speaking of equitable set-off,
pointed to Rawson v Samuel (1839) 1 Cr & Ph 161
as the foremost authority in providing the relevant
test. However, he thought that the concept of a
cross-claim being such as impeached the title of
the legal demand was out of place in the modern
world. He was more receptive to a different version
of the relevant test suggested in Government of
Newfoundland v Newfoundland Railway Co (1888)
13 App Cas 199. In Newfoundland Railway, Lord
Hobhouse in the Judicial Committee of the Privy
Council, in deciding whether the governments
cross-claim for un-liquidated damages could be
set-off against the companys claim, did not apply
the criterion that the cross-claim impeached
the title to the legal demand, but rather that it
was a cross-claim flowing out of and inseparably
connected with the dealings and transactions
which also give rise to the claim.
Lord Brandon did not refer to Hanak v Green
or The Nanfri. Nor did he mention the element
of fairness. In Geldof Metaalconstructie NV v
Simon Carves Ltd [2010] EWCA Civ 667, Rix LJ
commented that the arguments in Newfoundland
Railway were such that there was no particular
need to emphasise the requirements of justice
and fairness. He noted that the set-off between
the original parties was undisputed and that the
disputed set-off as against the assignees was
debated on a more technical level based on the
assignment.
In Dole Dried Fruit & Nut Co v Trustin Kerwood
[1990] 2 Lloyds Rep 309, the Court of Appeal
referred to the test formulated by Lord Denning in
The Nanfri and held that the test approved by Lord

45

INGENIEUR
Brandon in The Bank of Boston case was the
same test in different language. Lloyd LJ held
that for all ordinary purposes, the modern law of
equitable set-off is to be taken as accurately set
out by the Court of Appeal in Hanak v Green. He
said that it is not sufficient that the cross-claim is
somehow related to the transaction giving rise to
the claim. The cross-claim and the claim must be
so closely connected that it would be manifestly
unjust to allow the plaintiff to enforce payment
without taking the cross-claim into account.
Simon Brown LJ in Esso Petroleum Co Ltd v.
Milton [1997] 1 WLR 938 was of the opinion that
the mere fact that both claim and counter-claim
arise out of a single trading relationship between the
parties is wholly insufficient to supply the close link
necessary to support an equitable set-off.
After saying that the modern law of equitable
set-off is to be found in Hanak v Green and The
Nanfri, he restated the test as follows:
For equitable set-off to apply it must
therefore be established, first that the
counterclaim is at least closely connected
with the same transaction as that giving
rise to the claim, and second that the
relationship between the respective claims
is such that it would be manifestly unjust to
allow one to be enforced without regard to
the other.
That test is very similar to Lord Dennings.
The correct test for equitable set-off has
recently gained the attention of the Court of Appeal
in Geldof. Rix LJ considered the formulation by
Lord Denning in The Nanfri, without any reference
to the concept of impeachment, as the best
statement of the test, and the one most frequently
referred to and applied, namely: cross-claims
so closely connected with [the plaintiffs] demands
that it would be manifestly unjust to allow him to
enforce payment without taking into account the
cross-claim.
In Permodalan Plantations, Salleh Abbas
LP said that if a cross-claim relied on by the
defendant as a set-off does not and cannot
absolve the plaintiffs claim because it arises
from a separate transaction, we agree that the
cross-claim is not necessarily a set-off, though it
is so described, and that such cross-claim could,
because of its nature and quality, only amount to
a counterclaim. He added:

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It is, therefore, clear that a counterclaim

is wider than a defence of set-off and that
whilst the former is a separate action by a
defendant against a plaintiff, the latter is
essentially a defence, although a defendant
is entitled to add it as counterclaim. Being
a defence to a plaintiffs action, the matter
sought to be set-off must essentially be
connected with or form part of the matter
upon which the plaintiffs action is founded.
In Bukit Cerakah Development Sdn Bhd v
LGrande Development Sdn Bhd [2008] 3 MLJ
547, an employer was the developer of a project
comprising two phases. It engaged the same
contractor for both phases. For each phase,
the employer and the contractor entered into a
contract in the PWD form. After disputes erupted
between the parties, the contractor filed two
separate suits against the employer in respect of
the two phases.
In the Phase 2 suit, the contractor claimed for
sums due under interim certificates. The employer
met this by a defence and counter-claim alleging
fraud, breach of contract and negligence by the
contractor. In his counterclaim, the employer
claimed a sum of RM46,210,924.68 for reason
that 243 out of the 331 units lacked structural
integrity and had therefore to be demolished. For
this purpose, it relied on interim certificate 14
issued by the architect.
In the Phase 1 suit, the contractor claimed for
the sum of RM3,665,582.94 purportedly due on
interim certificates. The employer put up a defence
and counter-claim to the contractors claim. Among
the pleas taken, the employer sought to set-off
monies owing from the contractor to the employer
under the Phase 2 contract against any sum that
might be due from the employer to the contractor
under the Phase 1 contract. The employer relied
on clause 50 of the Phase 2 contract for his right
to a set-off. The Court of Appeal stated as follows:
The starting point is the general law
regarding the defence of set off in the
context of a building contract. It is a
principle of general application that both
an employer and a builder have a right of
set off against each other in the absence
of a contrary intention expressed by the
parties. Such a contrary intention may
appear from express words used by the

parties or by clear implication from what

they said or did.
The relevant clause 50 was as follows:
The Government or the SO on its behalf
shall be entitled to deduct any money owing
from the Contractor to the Government
under this Contract from any sum which
may become due or is payable to the
Contractor under this Contract or any other
contracts to which the Government and
the Contractor are parties thereto. The
SO in issuing any certificate under Clause
47, shall have regard to any such sum so
chargeable against the Contractor, provided
always that this provision shall not affect
any other remedy to which the Government
may be entitled for the recovery of such
sums. [The terms the Government and
SO referred to the employer and architect
respectively.]
It was held that clause 50 expressly gave the
employer a right of set-off. The court noted that
the words shall be entitled to deduct any money
owing from the Contractor to the Government in
the clause supported such a conclusion. It further
noted that the right of set-off was not confined
to the particular contract but included any
other contracts to which the employer and the
contractor were parties. This necessarily meant
that the Phase 1 contract was also included.
On this point, the result should clearly be in
the employers favour. However, the contractor
threw some impediments in the way of such result,
one of which was that no liquidated sum had
been quantified by the employer. The contractor
contended that the requirement of any amount
owing in clause 50 had therefore not been met.
The court held that the phrase any money owing
did not refer to a liquidated sum. It was of the
opinion that if that was the intention of the parties,
then they should have been more specific in their
language.
In holding that the phrase any money owing
used in clause 50 did not have the effect of
depriving the employer of its right of equitable setoff, the court said, All that is required to maintain
a plea of equitable set off is a cross claim that
goes directly to impeach the plaintiffs demands,
that is, so closely connected with his demands
that it would be manifestly unjust to allow him to

enforce payment without taking into account his

cross-claim.
The court also adopted the observation in
Hiap Tian Soon Construction Pte Ltd & Anor v
Hola Development Pte Ltd & Anor [2003] 1 SLR
667 where the court had to deal with a clause that
employed the phrase money due. It was held
there that the phrase did not exclude an equitable
set-off. Lai Siu Chiu J, after citing the judgment of
Thean J in Pacific Rim Investments Pte Ltd v Lam
Seng Tiong & Anor [1995] 3 SLR 1 said as follows:
all that is required from the party
purporting to exercise the right of set-off is
that he seeks to quantify his loss in a bona
fide way by reasonable means. The party
does not actually have to produce a specific
and final figure, quantified by professional
quantity surveyors, contrary to what the
first plaintiff suggested. Similarly, the fact
that the estimated figure may eventually
turn out to be too high or too low is not, in
itself, sufficient to preclude a party from
relying on set-off as a defence.
CONCLUSION
In a contract for the provision of labour and
materials as in a construction contract, where
performance has been defective, the employer
is entitled at common law to maintain a defence
of abatement. The measure of abatement is the
amount by which the product of the contractors
endeavours has been diminished in value as a
result of that defective performance. The measure
of abatement can never exceed the sum which
would otherwise be due to the contractor as
payment.
If a contract is completely silent, whether
expressly or impliedly, as to the right of set-off,
then a default position must be presumed, which
is that there is a right of set-off. If the construction
contract prescribes set-off by the employer only
under certain circumstances, then such rights of
the employer shall be so circumscribed.
The authorities suggest that there are two
pre-requisites for an equitable set-off. First, there
must be a close connection between the claim
and cross-claim. The requirement of justice of the
case also cannot be ignored. It must be unjust to
enforce the claim without taking into account the
cross-claim.

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5S Five Keys To A Total

Quality Environment
FEATURE

By Ir. Dr Oh Seong Por, Samsung SDIEM

manufacturing oriented business is

very much like a team sport. There are
people who are managers, some who
are supporters and many are players. The best
team to stand a chance of winning is the one
whose members are committed to perform each
respective task to the required level. The key to
success is total committed participation to the
process and not only from management. Although
management is the main driver of the companys
initiatives or goals, focused effort by engineers,
technicians or line supervisors and dedicated
effort by shop floor operators must resonate with
each other to ensure success. However it is hard
to remain committed to the effort, if the workplace
environment is not right. This is where the 5S
movement comes in.
Toyota which has been ranked as the most
admired automobile manufacturer is considered
the champion in developing and implementing
a company wide 5S movement. It actually set
the right environment for its shop floor people
to focus on continuous improvement, leading to
the establishment of Toyota Production System
or TPS. Similarly, Nippon Denso the supplier
for Toyota adopted the 5S movement which
eventually became a solid foundation for the
development of the total preventive maintenance
programme or TPM, a powerful innovative tool to
eradicate machine breakdowns, prolong machine
operationing life and improve overall equipment
efficiency.
The success of 5S has attracted many
organisations in many varied fields besides
manufacturing to embrace 5S movement. 5S
which was originally geared towards improving
efficiency and productivity at the production
floor level, has now been adapted by many
organisations and applied as a management
technique to promote positive behaviour
change in employees that leads to better job
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performance, work responsibility, ownership spirit

and teamwork. It is no surprise to see that many
service and public sector organisations are also
actively engaging in the 5S movement.
What is 5S
5S is a series of teamwork activities to transform
and maintain an orderly, neat and clean
workplace that supports total quality environment
initiatives for higher productivity, output
and quality. It also promotes safe workplace
behaviour and encourages total participations
of team members to carry out continuos
improvements. The term 5S is derived from the
Japanese words representing the elements that
drive transformation in the workplace. They are
Seiri, Seiton, Seiso, Seiketsu and Shitsuke which
can be equally translated as Sort, Stabilize,
Shine, Standardize and Sustain. The words
have also been translated into Bahasa Malaysia
as Sisih, Susun, Sapu, Seragan and Sentiasa
Amal. In Europe, a similar 5S movement has
recently been established which is known as 5C,
representing similar transformational elements
called Clear, Configure, Clean, Conformity and
Custom. A pictorial description of 5S activities is
shown in Figure 1.
Objectives of 5S
Below are the major objectives of 5S:
i. Create a clean, neat and well organised
workplace for total quality environment
initiatives;
ii. Establish visual management to improve work
efficiency and eliminate waste;
iii. Promote positive behaviour change in
employees and encourage continuous
improvement;
iv. Promote good teamwork through total and
dedicated participations; and
v. Improve the safety factor at workplace

5S Movement
As stated above, 5S consists of five sequential
steps namely, Sort, Stabilize, Shine, Standardize
and Sustain which are the key elements of
transformation in the workplace. Each step has
its own purpose and method of implementation.
In addition, there are improvement circles, as
depicted in Figure 1, that must be executed
at every step in order to achieve desired and
sustainable results.
S 1 Sort (Seiri)
Purpose. To clearly distinguish between the
necessary and the unnecessary activities and
make hard decisions to get rid of the unnecessary
ones. This will create an orderly workplace, reduce
congestion and open up opportunities for the next
steps of improvement.
Method. The way to segregate the importance
of things (tools, materials, machines) is by using
stratification management based upon usage

frequency. Things which are used frequently

are considered essential and are placed in the
workplace, closer for users to retrieve. On the
contrary, things that are seldom used or are not
used at all must be removed from the workplace
and moved to a specific store or totally discarded.
While carrying out segregation, it is possible to
find essential things which are in poor condition,
such as damaged or defective items. They must
be restored to their normal condition and ready
for use. Also it is equally important to identify
the root cause of the damage or defect in order
to prevent recurrences. Sorted essential things
must be accurately inventoried and recorded. Only
sufficient inventory is allowed at the workplace to
avoid unnecessary congestion. Therefore usage
rate of essential thing must be accurately analyzed
or measured. With this information, safety stocks
can be decided and the remaining excessive
stocks, if any, can be moved to store. Figure 2
illustrates sorting step and general guidelines.

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INGENIEUR

S 2 Stabilize (Seiton)
Purpose. To locate sorted things (tools, materials,
equipment) in the right place or right layout so
they can be used in a hurry. This will eliminate
unnecessary search which is a waste of human
effort. Neatness or stability is achieved at
workplace once things are located in the right
place with quality, efficiency and safety in mind.
Method. The emphasis here is on functional
management and search eradication. Functional
management comprise s four executive
considerations:
1. To study how often things are utilized by users
the performance their jobs in the work place.
General guideline - things frequently used must
be placed near to the users.
2. To identify the right location to place things
so that users may retrieve them in the fastest
time, least distance for reaching and quick
application in perform jobs.
3. To decide the best method to place things so
that users can identify them easily without
having to search. Some useful methods
include; tool boxes to keep tools, racks
or shelves where different things may be
separately stored, portable trolleys with
identifiable compartments to keep variety of
things, shadow boards for tools, hangers which
longer things can be hooked to or wound on
and labelled container etc.
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4. To establish rules or guidelines so that users

must follow so that things are placed in their
designated places and locations at all times.
Visual management is required to constantly
keep users aware of the best approach.
Some practical examples are standard labels
naming the location of things, colour coding to
designate position, notice or signage to remind
users, special marking to identify designated
location etc.
Figure 3 shows the flow chart for executing the
above mentioned considerations and illustrates a
good example of S2-Stabilize.
S 3 - Shine (Seiso)
Purpose. Cleaning means more than just keeping
things clean. It is more a philosophy and a
commitment to be responsible for all aspects of
things that are used and for ensuring they are
maintained in tip top condition. Contaminants
are one of the main causes of defects to material
and sudden breakdowns in machines. Therefore,
by cleaning and removing contaminants, the
problems discussed above can be avoided. In
addition, while carrying out cleaning activities,
workers or users are directly in contact with
materials, tools or machines. As such, they can
indirectly inspect things and detect abnormalities
and get them corrected before serious problems
occur. Cleaning must never be considered as

a tiring task but instead it should be viewed

positively as an inspection function to detect,
solve and prevent problems. From the perspective
of behavioural science, cleaning is an easy way to
cultivate a sense of ownership and a caring feeling
among users. Finally effective cleaning can help to
eliminate safety hazards to users who are working
in the workplace. Removing oil spills on the floor,
or grease contaminants on tools can prevent
industrial accident at the workplace. Therefore
S3-Shine is considered a core essence of the 5S
movement and all users must be truly committed
to participation in order to gain desired results.
Method. In order to achieve the above cleaning
objectives maintaining tip top condition of
things, solving contaminant related problems
and meeting inspection functions (detection,
correction and prevention), cleaning must be
done in a systematic way as described in the
following:
1. Identify the things (tools, materials, machines)
or area which need to be cleaned. Depending
on the amount and scope, the right user or

a group of users can be assigned to do the

cleaning. Careful consideration is important
to avoid user over burden which may create a
negative attitude towards S3-Shine activities
and subsequently defeat the overall objective
of the 5S movement.
2. Set cleaning procedures. How to carry out
each task (step by step) which users can
follow and execute. Basic guidelines for area
cleaning start from top to bottom, inside to
outside and front to back. Some of the key
points to the correct cleaning of machines or
devices are shown in Figure 4. The procedure
must specify the appropriate cleaning tools
(eg. vacuum cleaner, mop, cloth, wiper, broom,
scrapper, air or water spray device, etc.) as well
as safety precautions, including the required
type of personal protective equipment or PPE
(eg. gloves, face mask. respirator, boot, apron,
goggles, visor etc.). The next step is to specify
the cleaning materials like detergent, solvent
or plain water. All the cleaning tools, PPE and
cleaning materials must be placed at strategic

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INGENIEUR
locations ever ready for use so that users can
retrieve and use them in a convenient manner.
Figure 5 shows a good example of strategic
location for cleaning tools inside a production
floor.
3. Improvement circle. Once a basic cleaning
activity is in order, users are encouraged to
contribute improvement ideas such as ways:
i. to eliminate contaminants and eradicate
the need to do constant cleaning;
ii. to ease cleaning tasks, especially hard-toclean things or areas, by designing special
cleaning tools or cleaning methods. Figure
6 exhibits few specially fabricated cleaning
tools for hard-to-clean applications; and
iii. to learn to recognize potential threats,
investigate problems and find root causes.
For example, recognizing abnormal odours,
noise, vibration or over heating in an
operating machine as a threat to potential
machine breakdown. Or finding loose bolts
or oil drips on the floor that may show users
that some things are not normal which
warrant further investigation.
4. Motivation. Identify the best cleaned things
or areas so that a token of appreciation can

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be awarded to the users. Also it is good to

provide rewards to users who detect and avert
potential problems while cleaning or users who
contribute best ideas for improvement. These
are good ways to encourage and motivate
users to engage actively in S3-Shine activities.
Figure 7 illustrates the S3-Shine steps.
S 4 -Standardize (Seiketsu)
Purpose. Standardize means to regulate the
previous three earlier S steps Sort, Stabilize
and Shine activities to ensure that the 5S status
is constantly maintained. Unless every step is
standardized, everybody will be carrying out
activities according to his or her own way and
making assessments based upon his or her
criteria. If this is the case, 5S movement will
not produce the desired results. Therefore S4 is
essential to control and lock the earlier S1, S2 and
S3 implementations.
Method. The key to standardization methods is to
apply visual control. It actual goes back to human
behaviour that seeing is believing, seeing triggers
actions and seeing generates abidance of rules.
Based on this, the objective of 5S movement visual
control is to create awareness and understanding

White colour normally associated with gas

(compressed air/air conditioned), clean area

Figure 8 summaries the S4-Standardization

steps.

Figure 8: S4 - Standardisation
of users and as such encourage internal voluntary
actions to implement guided activities (S1, S2 and
S3) and sustain tip-top condition of things (tools,
materials and machines) and workplace. Visual
control is achieved by using visual aids. Visual aids
must be designed to meet the above objectives
and below are some kinds of effective visual aids.
Instruction notices to guide user to operate
things or performing tasks;
Signage to aler t danger/hazard/safety
precaution;
Indications of where things should be placed;
Labels on equipments or tools that designate
name, application, specification;
Indications of material to inform type, category,
application, specification, and quantity; and
Signage indicating the correct place or location.
Colour coding is normally integrated into
visual aids to improve users attention. Each
colour associates with a specific expression of
importance that is focused to improve awareness.
For example,
Green colour good things, equipment in
normal operation, things can be moved;
Red colour reject things, equipment in
abnormal state or stop, safety hazard, hot area
or surface;
Yellow colour things under repair or rework,
temporary or transition state;
Blue colour normally associated with water;
and

S 5-Sustain (Shitsuke)
Purpose. Sustain is about instilling the discipline
and habit among members (users, workers) and
other stakeholders so that they are equipped with
the abilities to perform 5S activities according to
the given steps and guidelines. Through this, the
5S movement can be consistently sustained as
well as upgraded to accomplish the objectives.
Method. Top-down management approach is
essential to create the right discipline and habits.
Careful strategy is required which must be
executed across the organisation and progress
must be monitored closely. As such a coordinating committee is recommended to manage
the implementation of the 5S movement. The
committee may be supported by a 5S consultant
and together they conduct studies and prepare
strategies for S5-Sustain which actually oversees
the entire 5S movement. Basically there are three
important steps that must be incorporated into
the S5-Sustain strategy. They are:
1. L e a d e r s h i p by ex a m p l e . I t m e an s
management must take the responsibility
to lead and be committed to 5S movement.
As mentioned before, 5S is a teamwork
activity. Therefore the executives and
managers must be visible enough to be
included in 5S activities together with
their team members (users/workers). It
is also highly recommended that the 5S
movement is incorporated into the policy of
the organisation. These are crucial signals
to all members about the importance of
5S to the organisation and total committed
participations by all members will follow.
Continuous training programmes, including
practice is another effective way to instil the
right habit in members for 5S activities.
2. Monitoring. Emphasizes tracking and
assessing the overall 5S activities and ensuring
they are progressing in the right direction to
meet the objectives. An effective approach is
to conduct 5S audits by different categories of
auditors, serving different purposes.

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INGENIEUR

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54

Co-ordinating committee. Preferable audit

once a week. Focus on coaching the team
members to continuously enhance their
knowledge, discipline and right habit.
Overall assess the 5S activity performance
and write weekly reports.
Department manager. Preferable audit
twice a month. To meet and communicate
face to face with team members. Provide
support and remove any obstacle so that
members are able to perform and sustain
5S activities better. Also to review the best
practices or ideas contributed by members
while doing 5S.
Top management. Preferable audit once
a month. To meet and acknowledge the
participation of members in 5S movement.
During audit, members should be given the
opportunities to explain and demonstrate
improvements that stem from 5S activities
to the management. This is a useful way
to instil pride and confidence in members
of having contributed good deeds to
the organisation. The management can

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reciprocate by giving praise as well as

emphasizing the benefits and importance
of 5S to the organisation and to all
members who are involved in it. Indirectly
it creates positive interactions between top
and bottom ranking members.
Figure 9 and 10 show the 5S audit checklist
and tracking checklist respectively.
3. Encouragement. It is a powerful method to
develop internal passion to do 5S activities
to ones best ability. Management may decide
to give away rewards to the best 5S team or
the best improvement idea contributor. They
serve as appreciation and motivation to
team members. The co-ordinating committee
should also identify the best improvements or
ideas when doing weekly audits and promote
them by sharing the findings with members
throughout the organisation. This may create
a positive domino effect for members to stay
committed and continue to participate in the
5S movement.
Figure 11 describes the S5-Sustain steps and
the overall linkage of 5S movement.

Conclusion
5S is the five keys to establish a total quality
environment that emphasizes organised,
neat, clean and safe workplace. This requires
total participations of all members including
management of the organisation. Teamwork is
required to execute a systematic 5S movement,
so that a positive change in the discipline, habits
and behaviour of members can be cultivated.
Therefore the final essence of 5S is not only
creating a conducive workplace but more
importantly it is the development of a quality and
knowledgeable work force who are dedicated to
effective and productive jobs. This is essential
to drive the manufacturing and high technology
based industries as well as service sectors.

... the final essence of

5S is not only creating a

conducive workplace but
more importantly it is the
development of a quality

REFERENCE

and knowledgeable

Osada, T. (1991). The 5Ss Five Keys To A

Total Quality Environment, Asian Productivity
Organization.

work force who are

Or tiz, C.A.(2008). Lessons From A Lean

Consultant. Prentice Hall.
Oh, S.P. (2011). Lean Product Design Concept.
PhD Thesis, University Technical Malaysia, Melaka.
Carreira, B. (2005). Lean Manufacturing That
Works, AMACOM, New York.

dedicated to effective
and productive jobs.

Mckeown, M. (2008). Innovation, Pearson Prentice

Hall.
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Lean Product Design

FEATURE

By Ir. Dr Oh Seong Por, Samsung SDIEM

The lean production principle as mooted by Womack is aimed at eradicating waste or non valueadded activities and increase speed, thereby creating products that meet customer requirements.
By eradicating waste, it strives to improve the utilization of resources such as human effort,
material, machine, space and time while establishing product value for customers. From the
aspect of economy, the lean principle can be regarded as a business innovation tool to drive down
unnecessary cost, increase competitiveness, maximize profit and at the same time provide superior
products to meet endless growing customer preferences. Application of the lean production
principle, which was originally developed exclusively for manufacturing, has now been expanded to
non-manufacturing activities such as product design and customer service.
Lean product design was established using the lean principle. It is a systematic approach to
identify and eliminate non value-added design features embedded in a product with the objective
of saving resources and driving down cost while creating value for the customer. It consists of
seven steps in which a design engineer gathers valuable information about the product, translates
this into technical attributes with acceptable levels of leanness and integrates them into the
manufacturing process. The idea is not to create an entirely new product but more to identifying
superior designs and upgrading product value that is free from waste and excites customers.
This article has been prepared to illustrate the lean product design flow developed by Oh (2011).
It is organised into two sections. Section 1 describes the seven steps of lean product design while
Section 2 discusses a case study of a major electronic manufacturing company in the country that
enjoyed higher product competitiveness by applying the lean product design approach.

SECTION 1 LEAN PRODUCT DESIGN

The lean product design roadmap consists of
seven major steps which have been systematically
arranged to accomplish objectives discussed
below:
i. To identify customer requirements and
understand the function of components
and products so that design targets can
be accurately set. These align with the 1st
lean principle: value make products that
precisely match what customers want;
ii. To transform design targets into product
attributes with acceptable leanness; and
iii. To integrate the identified attributes into
product development.
The followings are the detailed descriptions of
each design step:
Step 1 Product Tear Down
It uses the product tear down technique to
completely dissect a product under study to its
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individual components or parts. The product tear

down process serves three primary purposes:
i. to gather baseline information pertaining
to the evolution of a product and its related
components;
ii. to understand how things work; and
iii. to exercise competitive benchmarking
whereby similar products or components
manufactured by competitors are
compared, measured and examined.
The results are used as the baseline to set
design targets.
Before beginning to dissect a product, several
important preparations are needed. First is
to determine the details of the sample to be
tested, such as quantity, type, model etc. Next
is to identify the best method of dissecting the
product. Non destructive testing is compulsory so
that components can be retrieved in their original
form for further comparative analysis. However if

this is not possible, incoming components can still

investigated before destructive testing.
The product tear down process also stresses
visual management. The intention is to have all
dissected individual components displayed in an
orderly manner and visible to the design team
members. This requires smart selection of location
and environment for displaying the components.
The components are exposed and should be easily
accessible for design team members to hold,
feel and examine. The idea here is to create a
conducive environment for design team members
to tap on human senses, such as sight and feeling,
to the fullest extent thereby allowing them to
generate creative and innovative new designs.
As the product is dissected, complete written
information on every component part such
as description and quantity is recorded. This
information is essential for constructing a bill of
material or BOM.
Step 2 Prioritization
If the number of blasted components is too
numerous, attempting to improve all of them is
not only difficult but also ineffective. Therefore
it is necessary to prioritize all components and
identify major ones for improvement. Since the
ultimate goal is to reduce cost, it is normal to
prioritize components according to the component
cost per unit of product. The Pareto Principle (also
known as the 80/20 principle) statistical method
is used in prioritization exercises to identify the
few vital components that contribute to 80% of the
total product cost. Focusing on re-designing the
vital few components is essential in lean product
design.
Step 3 Function Analysis
The objective of function analysis is for the design
team members to understand what and how
every vital component works in fulfilling specific
tasks. The Verb-Noun expression, originated from
value analysis is applied to describe what is the
use of a component and what it is designed
for. Another accompanying Adverb-Adjective
analysis, called the voice of the product or VOP,
which is also used in the Lean Product Design. It
is used to assess component functions from the
perspective of a customer. In addition a further
analysis, called the voice of customer or VOC

is used to determine customer expectations of

product performance. Three situations involving
the relationships between VOP and VOC can
occur which trigger different design improvement
approaches.
Case 1: VOP < VOC. Customer expectation is
higher than the component can achieve. Therefore
redesigning to improve or add better functionality
is the main priority.
Case 2: VOP = VOC. The component function fulfils
the requirements of the customer. New or added
functionality may not be necessary. However redesigning the component to reduce the cost of
creating the function is important. For example,
using alternative lower cost materials to make the
component but maintaining the same functionality
and quality level.
Case 3: VOP > VOC. The component functionality
of the product exceeds the needs of the customer.
In this case, there is an opportunity to seek out
excessive design parameters and remove them so
that the cost can be driven down. Example, instead
of using thicker material to make a component, a
thinner dimension could be sufficient to serve the
same purpose required by customers.
Step 4 - Comparative Analysis
Comparative analysis is adapted from the Tear
Down Design Concept. Here, the same product,
but made by rival competitors, is dismantled
to identify all the components similar to Step
1 above. The blasted components that are
identified as the vital ones are compared so that
new breakthrough improvements can be rapidly
developed. Four probing questions (Q) are used as
guidelines in comparative analysis.
Q1. Could any feature be reduced or removed
to cut down weight?
Q2. Could any design geometry be minimized
or simplified?
Q3. Are any alternative cheaper materials
available which could be used to replace
existing materials without degrading the
components basic function?
Q4. Could any alternative methods cut down
residual or scrap raw materials without
incurring high investment?

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Figure 1: Validation Phase
NG
NG

S tep 6 - Validation

NG
Creation
OK

Internal Matching
-Identify possible
failure when apply
to machine and
process
- Apply FMEA
-Take preventive
action
-Verify product
function and quality
requirement

Internal
Matching

OK

Safety
Assessment

Safety Assessment
Customer Approval
-Fulfillment of safety
-Confirmation of product
requirement as stipulated performance as applied
by the safety hazard
at the customer line.
regulatory body
-Gather VOC for
-Obtain Certificate of
improvement
Fitness for User.
-Obtain customer consent
-Feedback safety test
result for continuous
improvement

Comparative analysis studies are not carried out

merely to imitate rivals but to identify and develop
breakthrough design targets that are superior
than the competitors.
Step 5 Creation
This is the step where in which design targets
generated from comparative analysis studies
are put into practical design attributes of the
component. Every idea is thoroughly discussed,
debated and scrutinized before the final design is
decided upon for implementation. The decision is
mainly influenced by the following factors:
i. Four guiding questions related to the
reduction of weight, minimization of
geometry or shape, replacement with
alternative cheaper material and a more
effective manufacturing method to make
the component with minimal residual scrap;
ii. The ability of suppliers to manufacture the
proposed new component design
iii. Acceptance of customers to use the new
components in the product;
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OK

Customer
Approval

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OK

Standard

Standard
-Drafting, revising and
issuing of standard
operating documents.
-Finalizing specifications
for new design
component, process and
machine settings.

iv. Suitability of the proposed new design

using existing machines, processes and
method of productions; and
v. Whether minimal adjustments can be
made to existing processes or machine
settings to avoid tedious changeover tasks
and complications which may lead to big
variation in product quality. A brainstorming
technique is normally applied to generate
ideas.
Step 6 Validation
This is the design refine phase to validate the
design attributes. The results of the validation
conclude the integration of design attributes
into the product making at the manufacturing
processes. As such strict procedures have to be
observed such as:
i. Identifying or predicting ways in which the
new design may fail and prioritize action
plans to reduce the risk by using Failure
Mode and Effect Analysis or FMEA. Here,
FMEA is not only applied to anticipate the

Figure 2: Roadmap of Lean Product Design (LPD)

Formation of
GVE Council

-Dismantle parts
-Grouping / Organize into sub-assembly
-Display / Visual Management

Step 1
Product Tear Down

-First Who..then What

-Concurrent team approach
-Engineering, Production, Quality Control,
Purchasing, Sale, Maintenance,
Product Design

-Component cost analysis

-Sorting using Pareto Chart
-Identify Vital Component for improvement

Step 2
Prioritization

Step 3

-VOP : Verb-Noun function expression

-VOC : Adverb-Adjective function expression

Function Analysis

-Compare with competitors

-Idea generation using
4 guiding questions
Q1: weight reduce
Q2: geometry reduce
Q3: alternative cheaper material
Q4: lesser scrap residual
-Refine idea and select design
-Change and develop design

-Potential risk analysis FMEA

-Pilot test / Prototyping
-Quality evaluation (internal / external)
-Customer approval

Step 4
Comparative Analysis

Step 6
Validation

Step 5
Creation

NG

risk of component and product failure but

also any risks to the manufacturing process
and production line. FMEA can eliminate
excessive physical testing, hence reducing
unnecessary cost and speeding up product
development;
ii. Conduct pilot production using sample new
design components to build a prototype to
verify actual performance against design
performance; and
iii. Draft and finalize the specifications needed
to govern the effective usage of new design
components in the process and production
lines. The main specifications are:

A standard working manual to guide

operators in handling the product,

Pro c e s s and machine s e t ting

specifications for each work station,
and

Incoming quality control specifications

for newly designed components.
Verifications of real life prototype performance
data from both internal and external sources is
another important task in validation. Essential
internal data is quality reliability, defect rate,

OK

Step 7
Completion
-Follow up
-Financial effect
-Reporting

incoming quality (CpK value) of new components,

process specification and overall machine
efficiency. Important external data is fallout rate
at customer line. The above validation procedures
are illustrated in Figure 1.
Step 7 Completion
This is the final phase of the lean product design.
Two major tasks are required namely follow-up and
reporting. Main follow-up areas include:
i. Consistency of suppliers in producing new
components that comply with the new
design specifications;
ii Adaptability and suitability of components
used in the work stations producing
finished products; and
iii. Final product quality performance at the
customer side.
The completion of the project needs to be
documented and reported to the management.
The contents of the report include design changes,
appointed suppliers, financial impact gained
from product leaning, investment and quality
performance of the product. Figure 2 summarizes
the seven Steps of Lean Product Design.
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SECTION 2 CASE STUDY

Company A is one of the major electronic
companies in the country that used to manufacture
display component cathode ray tubes since 1991
before it restructured its business operation
in 2012. Since inception, its products enjoyed
high demand and were profitable until 2005
when customers started demanding major price
reductions and new innovative designs such as
flat screens, slimmer and lighter products. To fulfil
customer demands, the company embarked on
product redesign by applying Lean Product Design
concepts. Below is the summary of the product
development stages that correspond to the seven
steps of Lean Product Design.

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As demonstrated, Company A successfully

redesigned its product and improved product
competitiveness by:

Abolishing excessive (waste) design

features of components thus conserving
material and reducing material costs by
24%;

Achieving product leanness and creating

new value: slimmer and lighter flat screens
which customers preferred;

Reducing heating time and electric energy

consumption for heating since the product
was slimmer and lighter;

The production lead time was shortened by

2.5hrs;

Increasing container stuffing quantity of

finished goods delivered to customers

because the slimmer product occupied a

smaller space (1344 units 1512 units/
container);

Lower transportation costs;

Acquiring lower cost metal components

from suppliers because the slimmer steel

Components could be processed faster

and incurred less residual scrap.
As such Company A was able to offer better
price and improved value products for its
customers while continuing to enjoy profitability
until it changed its business structure in 2012.
Conclusion
Lean product design, which incorporates lean
principles to eradicate design waste and create
better value product for customers, is a noble
approach that not only strives to improve
business competitiveness but also supports
green technology initiatives by effectively utilizing
and conserving resources. It fits well with the lean
thinking adage does more and more, using less
and less while becoming closer to what customer
wants. Therefore, pursuing lean product design is
worthwhile.

REFERENCE
Gupta, P. (2005). The Six Sigma Performance
Handbook, McGraw-Hill, New York, pp 421- 450.
Fiore, C. (2005). Accelerated Product
Development, Productivity Press, New York.
Iyer, S.S. (2000). Value Engineering, New Age
International (P) Ltd. Publisher, Delhi, pp 24.
Nicholas, J. M. (1998). Competitive Manufacturing
Management. McGraw-Hill Singapore
Oh, S.P. (2011). Lean Product Design Concept,
PhD thesis, Universiti Teknikal Malaysia Melaka
Otto, K. & Wood, K. (2001). Product Design
Techniques in Reverse Engineering and New
Product Development, Prentice Hall, New Jersey.
Park, R.J. (1998). Value Engineering A plan for
invention, St. Lucie Press.
Womack, J.P. & Jones, D.T. (1996). Lean Thinking
Banish Waste and Create Wealth in Your
Organization, Simon & Schuster, London.

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FEATURE

District Cooling Systems

Industry: Is Regulatory
Framework the Answer?
By Ir. Arul Hisham bin Abdul Rahim, AHAR Consultants

Since the mid-1990s, district cooling (DC)

systems have gained popularity in many
commercial developments as well as in
public institutions. Whilst the primary
attraction of DC is to reduce energy costs,
these developments also develop an
energy services industry.
Various DC system owners/operators
have different engineering and operational
standards which create much confusion
among users. Some detractors claim
that these requirements are impractical
and impose unilateral conditions for
customers. These conditions of service
have resulted in additional financial
burdens for customers. In addition, these
operators have varying tariffs which
further complicate the market. These
factors have created misunderstanding
(or so-called disconnect) between DC
system operators and users which creates
ill-feelings and mistrust.
Whilst there are many bona-fide
established operators who strive to
provide a valuable cooling service to the
customers, there are also many newbies
who enter the industry without having a full
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understanding of the intricacies of the DC

market. In addition, some pseudo district
cooling consultants take advantage of the
varying complexity of DC market further
adding to the confusion.
There are many DC systems that are
successful and profitable; however, there
are also some which fall far short of
expectation. This article deals with some
of issues commonly encountered in the
development of a DC business. Also, the
article looks into key potential elements
for a regulatory framework for the DC
industry.

n Malaysia, DC systems have been installed

since the mid-1990s in many Government and
private developments such as the Kuala Lumpur
City Centre (KLCC) development, Putrajaya
Government Offices development, Cyberjaya
development, Kuala Lumpur International Airport
(KLIA) development, Kuala Lumpur Sentral
development and New Johore Administrative
Centre Nusajaya. In addition, Government
institutions such as universities and hospitals
have also adopted the DC technology. Installations
at universities include those at Universiti
Tenaga Nasional (UNITEN) in Bangi, Multimedia
University (MMU) Cyberjaya campus, Science and
Engineering Complex at Universiti Teknology MARA
(UiTM) Shah Alam and Puncak Alam campuses,
Universiti Sains Islam Malaysia (USIM) in Nilai.
Examples of DC installations at hospitals include
Hospital UKM, Cheras, Hospital Sungai Buloh and
Hospital Serdang. Examples of DC installation
at shopping centres and commercial buildings
include 1Utama and The Curve shopping centre.
The Malaysian experience includes DC
owner-operated installations and privatelyowned DC commercial operators. Whilst the
potential benefits of the DC are well publicised
and documented, there are also potential pitfalls
in the operation of a DC. There are DCs that are
successful and profitable; however, there are also
some DC operators who fall short of expectations.

CURRENT ISSUES FOR DISTRICT

COOLING OWNER-OPERATOR
Chilled Water Tariff & Cost Recovery
Amongst the thorniest issue in the DC market is
the tariff. Various DC operators impose different
tariff structures. Currently in Malaysia, chilled
water tariff structure is not regulated and each
DCSP is free to design and apply its own tariff.
Established DC players such as Gas District
Cooling (GDC), Pendinginan Megajana Sdn Bhd
(PMSB) and Malakoff Utilities Sdn Bhd (MUSB)
develop, design and charge their customers
based on their own-designed tariffs. In principal,
the chilled water tariff is developed based on the
following structure:

One-off connection fee;

Monthly contractual demand charge; and
Consumption energy charge.

Figure 1 Plant 4 Putrajaya Core Island

Basically, the DC tariff structure is modeled on
the electricity tariff. The tariff incorporates capital
recovery as well as operational and maintenance
cost and profits. From the developers and
customers perspective, ideally the CHW tariff has
to be competitive if not lower when compared to
an owner-operated conventional chiller system.
What developers tend to forget is that the
development of a DC is essentially a front-loaded
investment. For example, the chilled water pipe
reticulation distribution system requires laying
ahead of time of any development. These pipes
require high capital investment with a long period
of recovery. Although the plant construction
and equipment installation can be developed
modularly, it still requires some degree of frontloading. The plants pipe headers, electrical
infrastructure and equipment still need to be
adequately sized for future expansion.
Over-Estimation of Load and Under-Realization
of Development
Capital recovery for DC operators is made worse
by over-estimation of the cooling load density
of development parcels. Very often the building
design consultant over states the cooling load
density (Btuh/sq ft or kWh/sq m); thereby,
increasing the capital cost for the provision of the
service. Previous data have shown that the actual
cooling load densities are only 50-60% of the
declared cooling densities1.
DC operators also face the uncertainty of
cash-flow in the event of under-realization of

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development schedules. There are cases where
the DC operators complete the chilled water
distribution infrastructure many months ahead
of the completion of the development due to
delays in the building construction. In such a
case, the financial risk is borne entirely by the DC
operator. Other risks associated with the provision
of chilled water services is the cost of providing
stand-by provisions which may be required by the
customers.
Infrastructure Specifications
The DC business is a long-term service business.
Very often the service life of infrastructures
exceeds 50 years. The DC business also carries
greater financial risks in the event of disruption
of service compared with conventional in-house
chiller systems. Repairs and upgrades are more
difficult to undertake when the DC infrastructures
are buried under soft and hard landscapes.
These necessitate higher level of specifications
than in-building chiller systems. Therefore, higher
equipment and material specifications are needed
to ensure these risks are mitigated. Some building
designers fail to recognize this issue due to lack
of understanding of the DC requirements. As a
result, DC has been portrayed as more expensive
than owner-installed chiller system.
In short, failure to recognize front-loading
capital investments distorts any meaningful
comparison by the developers and building
designers.

CURRENT ISSUES ON BUILDING

DEVELOPER PRACTICES
Hidden Cost of Cooling
Common building developer practice is to
incorporate the capital and fixed operating
costs of owner-installed cooling system into the
purchase price or rental/management service
rate. Operating costs of cooling are normally
hidden due to the non-existence of sub-metering
for in-house cooling plants. In addition, usage or
energy costs may be recovered indirectly through
rent or management fees. Although this method is
simple, it discourages implementation of energy
efficiency practices by the tenants or building
owners.
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Some developers who subscribe to DC also

pocket the capital savings of DC through smaller
electrical distribution systems, extra rentable
floor areas due to savings in the plant room area,
and capital expenditures for the chiller plant and
power systems. These developers then pass the
entire operational costs for the DC cooling to
the tenants. Maintenance cost savings through
less equipment to maintain, fewer maintenance
personnel, overhauls and upgrade costs, etc. are
a benefit to the developers.
Acceptance by the Building Designer Team
To some building designers, connecting to a DC
system is not favourable option. This is because
lower construction costs of building will result in
lower remuneration to the designers. Hence, some
designers view DC operators with enmity due to
the lack of monetary incentives to them.
Lack of understanding and knowledge of
building designers further compounds the
complexity. DC interfacing requirements are
not fully understood which creates disconnects
between the DC operator and building designer.
The intricate linkage between buildings chilled
water pumping performance to the DC plants
performance is not sufficiently understood to
create a win-win situation. As a result, finger
pointing situations often result in hostile situations
which some detractors may condemn as a
condescending attitude by DC operators.
Building Operation
Building owners and developers normally employ
third-party building management contractors
to provide the entire facility management (FM)
services. These FM contractors, more often than
not, lack the required personnel with the proper
knowledge of the operation of the DC services.
As a result, disputes between the DC operator
and building owner/contractor arise because of
these diverging objectives. Common issues such
as low delta T returning to the plant, clogging
of heat exchangers on building sites, lack of
maintenance of the energy transfer station (ETS)
room (inadequate ventilation and high humidity),
inadequate measuring instrumentation, lack
of controllability of valve and pumps etc., have
been blamed on DC operators. There are hardly
any clauses in FM contracts that reward FM

contractors for meeting key energy performance

indicators (KPI) with regards to the performance
of the cooling system

DEVELOPMENT POLICY MAKING

Decision Making Process
Apar t from some developments such as
Putrajaya, KL Sentral and KLCC, township
development and engineering decisions are
made independently by different authorities, by
different decision makers, on different timelines
and with different design practices. Decisions on
DC are made without any proper guidelines and
more often are dictated by marketing trends and
commercial incentives rather than sustainability
objectives. Green technologies are marketed
with the objective to increase profitability; not
sustainable living.
Policy
Efforts by the Kementrian Tenaga, Teknologi
Hijau dan Air (KETTHA) through Low Carbon
Cities Framework (LCCF) have yet to bear fruit
as adoption by local authorities still leave much
to be desired. Lack of clear direction on energy
efficiency policies in Malaysia hampers the
growth of DC industry and exposes the players
and consumers to too many uncertainties.
Development of the DC industry should be put
on the same pedestal as the development of
other utilities such as, power distribution and
generation plants, telecommunication and water
supply scheme. DC requires integrated planning
to ensure viability and sustainability of the
business. DC investment is capital intensive with
a long gestation period. Therefore, without proper
planning during the project inception stage, a
DC provider may face financial difficulties in the
future and may not be able to provide quality
service to the customers. Examples of successful
integrated DC planning in township development
are KLCC, Putrajaya, Cyberjaya and KL Sentral.
Similarly, campus DC planning such as USIM and
UITM Puncak Alam benefit from savings in capital
expenditure and high utilization of assets by
using DC rather than having multiple in-building
chiller plants.

Figure 2 Shinjuku Tokyo DCS

plant

Sustainability Planning
Town planners often locate the DC plant at the
far-end corner for fear of unsightly cooling towers.
This practice further increases the capital cost
of serving the load due to distance. Practices in
other countries such as Japan Shinjuku DC Plant
(see Figure 2); have located the plant at the centre
of the township which helps ensure a sustainable
business.
Integrated planning between various utilities
also allows for resource efficiency. For example,
the DC plant may use treated water from a
waste treatment plant or drainage water from
the retention pond for the cooling tower use.
This encourages efficiency and conservation of
natural resources. However, without having proper
perspectives of planning these utilities, the lofty
ideals may come to nought.

IS A REGULATORY FRAMEWORK
THE ANSWER?
At this juncture, the DC business is unregulated
although it involves public safety, financial risks
and creature comfort. The current business model
is based on a willing buyer-willing seller basis.
Due to this, there are complaints of over-charging
by DC operators and poor quality of service or
the lack of it. On the other hand, the DC operator
relies entirely on the commercial contract with the

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customer without any form of risk management
through Acts or Laws.
Some form of regulatory framework is required
for DC industry to move forward. The regulatory
framework should address the issues as shown
in Figure 3.2
To facilitate economic efficiency, planning
policy must be in place to ensure sustainability of
the DC business. A comprehensive development
planning master plan that incorporates DC would
address this issue. Local authorities should
consider DC as part of the utilities services
during the planning stage. There should be proper
standards or guidelines for DC planning in urban
infrastructure planning. Issues such as rightof-way, service corridors and shared facilities
such as utility tunnels would facilitate economic
competitiveness.
Regulations can also address issues raised by
consumers. DC providers must comply with certain
Key Performance Indicators (KPI) pertaining to the
quality of service. Minimum standards for quality
of service must be defined similar to that of other
utilities service providers. A regulatory body can be
set up to provide supervision and enforcement as
well as medium for dispute resolution. Penalties
can be imposed on DC providers that fail to
achieve the desired quality of service. The KPIs
should spell out the obligations of DC providers on
utility efficiencies, supply and return temperatures,
metering accuracy, service reliability, quality and
availability. Similarly, customer obligations with
regards to delta T performance, non-payment,
unrealized load growth etc.; could ensure fairness
to all stakeholders.
Current practice of Chilled Water Purchase
Agreements (ChWP) is at best on an endeavour
basis. This situation does not help in convincing
future chilled water off-takers. Through regulation
of the DC business sector, some sort of "stick and
carrot" elements may be imposed on both the
supplier and off-takers in order to have a more
equitable ChWP agreement. A standard model of
the ChWP that clearly defines the customers rights
and DC provider obligations could be introduced to
address differences of ChWP agreements used in
current practice. This will reduce prejudices and
promote transparency in the industry.
In order to encourage growth, some incentives
should be provided by the Government to DC

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FACILITATE
ECONOMIC
EFFICIENCY

RESOURCES
EFFICIENCY

DISTRICT
COOLING

PROTECTION
TO
CUSTOMERS

ENCOURAGE
GROWTH OF
INDUSTRY

Figure 3 Needs to Regulate District Cooling

providers apart from existing TNB C2(TES) tariff.
As it is accepted worldwide that DC with thermal
storage is an excellent Demand Side Management
tool, DC providers should be provided with support
for front-loaded investments in DC systems. By
shifting considerable peak period power demand
to off-peak period, the electrical power distribution
system stands to gain. Power utility companies can
defer capital expenditure to meet ever increasing
peak load power demand.
Regulation of tariffs; whilst not to discourage
free market forces, should be sufficiently
regulated to ensure fairness and ensure
pricings reflect market conditions. This will avoid
misunderstanding of comparing actual cost of
cooling to the current prevailing use of slab floor
area rates. This will also protect the consumer
from unscrupulous DC concession holders from
unilaterally imposing unreasonable charges.

CONCLUSION
As the DC market in Malaysia continues to
grow, there is a genuine need for a regulatory
framework to further enhance DC services. In
the ASEAN region, only Malaysia and Singapore
have a significant DC industry. Whilst Singapore
has enacted the District Cooling Act in 2001 3;
Malaysia, although having a far larger number of
DC installations, has not done so till today.
A regulatory framework must not be used
primarily to regulate the tariff similar to the
telecommunication or electricity industries.

Competition between DC players should be

encouraged to enable the most efficient and
competitive player to provide the best solution
to the consumers. Regulations for DC should be
meant:

To exercise licensing and regulatory

functions with regards to DC services;

To protect interests of consumer in respect

of quality of services, tariff and other terms
of supply provisions of service;

To ensure continuity and reliability of DC

services and business;

To enhance and review code of practice

and other standards of performance in the
provision of DC services; and

To provide an avenue for dispute resolution.

In order for Malaysia to attain developed country
status, our current practices need to be worldclass. This includes the DC industry. Therefore, the
DC industry needs to move from being elementary
service provider practice into the following4:

Ensuring best practices in operation and

maintenance;

Practicing best practices in customer

service;

Managing the basics; metering, measuring

etc. and optimization;

Holistic synergy with water and energy

fuels;

Continuous regulatory and consumer

education on user-end performance; and

Supporting DC industry growth by managing

financial risks.
Only with proper regulatory structures and
Malaysia Governments support, would the DC
industry be able to play more prominent roles in
the reduction of greenhouse gas emission and
efficient use of energy and natural resources for
urban cooling.

REFERENCE
1 Putrajaya Core Island Capacity Planning Report; AHAR
Consultants; 2009
2 Key Issues in Regulating District Cooling; Mark Spurr;
IDEA District Cooling 2014 Conference, Dubai 2014.
3 District Cooling Act 2001; Attorney-Generals
Chambers Singapore
4 The Road Ahead; Rob Thornton, IDEA District Cooling
2014 Conference, Dubai 2014.

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CORPORATE WORLD

INGENIEUR

HUAWEI GLOBALISATION
By Yingying Li, Huawei Malaysia

lobalisation has several meanings. Within

the context of the product development
process, it refers to the superset of
internationalisation and localisation. It is a
superset because, in addition to localisation
and internationalisation, it includes providing
an entire organisational, technical and
operational infrastructure to enable the proper
internationalisation and localisation of products.
The term is also used to describe the process
of transforming an organisation, moving it from
a singularly-focused small team to an extended
enterprise that is a truly global organisation. A
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global organisation is one where all processes,

attitudes, and structures are unified in a strategic
response to the needs of the global marketplace.
Starting from 1996, Huawei has changed
from a Shenzhen-based home-grown leader in
telecommunication equipment manufacturing
into a China-based world-leading ICT solutions
provider. As of December 31, 2014, Huawei had
about 170,000 employees, of which, around
40,000 staff were local recruits. One of the key
elements in the Huawei globalisation strategy is to
integrate global talents. Huawei has 14 Regional
Headquarters, 16 R&D centres, 31 joint innovation

Huaweis Training Centre

centres and 45 training centres worldwide. Similar

products and solutions are applied in over 170
countries and regions worldwide. Through these
innovation centres and collaboration with partners
globally, Huawei is transforming its global value
chain into a larger global innovation platform,
enabling customers worldwide to leverage this
platform and the latest innovations from all over
the world in the shortest amount of time.
However, localisation is not just about hiring
local staff, paying local taxes, and developing
localised products. Our view is that the next level
of localisation is about collaborating with the
best local businesses in various disciplines and
specialised fields, and integrating their innovations
into our global value chain. By doing this, local
innovation can be promoted and utilised globally,
making local innovation truly valuable in the global
ecosystem.
The globalisation strategy is in line with
Huaweis corporate and product strategies. The
strategic target of Huawei is to become a worldleading ICT solution provider. To achieve this
target, Huawei expanded its businesses in the
global market to satisfy the needs of carriers
and customers all over the world. To achieve
strategic goals and expand overseas markets,
Huawei sharpened its differentiated competitive

edges in such aspects as product research

and development, content translation, and
management and organisational structures. It
improved the quality of its products and services,
and satisfied the localisation requirements of
customers all over the world.
In 2014, around 65%-70% of Huaweis US$47
billion revenue came from overseas markets.
More than 45 world-leading carriers have chosen
Huawei as their partner. This requires a quicker
response to global markets. To satisfy productspecific localisation requirements of customers in
different countries and regions, Huawei developed
pertinent globalisation strategies according to
product characteristics and target markets, and
designed and developed products in accordance
with Huaweis internationalisation requirements.
Huawei ensured that its products are equipped
with basic localised capabilities. That is to say,
Huawei products can be easily adapted to the
local requirements of customers from different
countries and regions without much modification
or even reengineering. In addition, the products
can be delivered in the shortest time possible.
Globalised de sign and development
are indispensable to satisfy the needs of a
global presence, market expansion and new
carriers. Huawei recognises that without clear-

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INGENIEUR
cut company-level globalisation strategies
and associated processes and technical
specifications, its software products may not be
able to process data in certain languages at the
same time, and hardware products may not satisfy
local environmental, safety, legal, and power
requirements. As a result, the company may fail
to grasp a lot of business opportunities and lose
its competitive edge in certain regional markets.
Huawei is now establishing its own
globalisation strategies and infrastructure by
referring to the globalisation model of some
world-leading enterprises. Huawei is developing
a global enterprise in a systematic manner,
though it is still at the preliminary phase of the
globalisation process. A better understanding of
the current product globalisation status can help
Huawei formulate appropriate strategies and
implementation plans for product globalisation,
and encourage Huawei to develop global products
to meet the demands of the global market and to
maximise value for its customers.
Huawei believes in today's business
environment, where capital, goods, talents and
knowledge move so fast across the globe, where
information technologies are highly advanced,
global companies and local companies are no
longer two different types of business, but are
becoming one unified concept. Huawei's business
practices strive to bring together globalisation
and localisation, integrate best global resources
to build a global value chain while helping local
innovations to maximise their global value.
In order to extend global success to local
markets, Huawei believes that any global company
should understand the unique needs of each
individual market and offer products and services
that are differentiated according to the respective
market needs. On the other hand, in this highlyglobalised economy, local culture, products and
services can also be expanded globally in a
much shorter timeframe. More and more local
companies will have the potential to expand their
businesses globally.
Huawei believes globalisation is not just about
the globalisation of operations and investment. It
is more about building a new business mentality
and the need to treat the global markets as a
single entity. We need to build a global value chain
just as we do in an individual market and integrate

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Huaweis R&D Centre

best resources into the global value chain. This

way, value created at any one point along the
global value chain can be shared globally.
Huawei is collaborating with many outstanding
companies globally, and Huawei's products and
solutions around the world have integrated the
capabilities from these partners. Therefore, when
Huawei's global business grows, the businesses of
Huawei's partners grow as well. This kind of winwin partnership is exactly how Huawei can bring
unique value as a global corporate citizen.
Practicing glocalisation is the way for the
best companies to contribute more, and it is
also the way for a country to better leverage its
comparative advantages and benefit from a strong
global value chain. More importantly, behind these
successful practices, there must be an open
business philosophy that is deeply rooted in a
company, and even in a nation.

By InvestKL

he year 2015 is of great

significance for Malaysia
in terms of foreign direct
investment (FDI) and in the
context of the Association
of Southeast Asian Nations
(ASEAN). On April 6, 2015, the
Government unveiled the details
on the Principal Hub incentives
to attract more multinational
companies (MNCs) seeking
to increase their presence in
Asia via the establishment
of regional headquar ter s
operations. The incentives
further reinforce Greater Kuala
Lumpurs (Greater KL) position
as a Principal Hub for MNCs key
regional command/nerve centre
in the region.
The new incentives,
effective from May 1, 2015,
are developed in recognition
of the changing trends in
regional headquarters, global
supply chain models, and the
implementation of the ASEAN
Economic Community (AEC).
These incentives aim to enhance
Malaysias competitiveness
as a regional base, allowing
for improved operations and
efficiency at reduced cost
for MNCs headquar ter s related business services in
ASEAN. They also reaffirm the
Governments commitment
to attract the worlds largest
companies as well as industry
leaders to Malaysia.

Combined with Malaysia

taking over the ASEAN chair
this year, the Principal Hub
incentives are game changers
for MNCs that take that step to
invest in Greater KL for the first
time or for expansion purposes.
PRINCIPAL HUB THE
CONCEPT
Principal Hub is a command
centre from which MNCs can
conduct and manage their
regional and global businesses
and operations across several
countries more cost effectively
and efficiently. It encompasses
component s such as an
Operational Headquarters (OHQ),
International Procurement Centre
(IPC), Regional Distribution
C e n t re (RD C), B u s in e s s
Process Outsourcing (BPO) and
Knowledge Process Outsourcing
(KPO).

From their Principal Hubs

in Greater KL, MNCs can
manage, control, and support
their key functions including
management of risks, decision
making, strategic business
activities, trading, finance, and
operations and human resource
management.This business
model helps to streamline
operations and a more effective
sharing of resources and
services, enabling MNCs to
maximise operating efficiency,
as well as improve quality and
speed at lower cost.
INCENTIVES FOR PRINCIPAL
HUBS
Principal Hub companies are
placed in a three-tier tax scheme
under which they pay tax rates
of 0% up to 10% over five-year
periods that may be extended by
another five years, depending on

Figure 1: Three-tier Principal Hub incentives for MNCs

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INGENIEUR
the number of high skilled jobs
they create and their business
expenditure.
A Tier 1 company that
proposes to hire 50 highly
skilled people and invests RM10
million in its business will pay
zero tax, while one that creates
15 such jobs and spends RM3
million will be taxed a maximum
10% under Tier 3. (see Guideline
2 by MIDA)
On top of the tax incentives,
approved Principal Hubs under
this scheme will also enjoy the
following additional operational
benefits:

Goods-based companies
can bring in raw materials,
components or finished
products with customs duty
exemption into free industrial
zones, LMW, free commercial
zones
and
bonded
warehouses for production
or re -packaging, cargo
consolidation and integration
before distribution to end
consumers.

The Government has relaxed

the guidelines on equity
ownership whereby Principal
Hubs will not be subject to
local equity and ownerships
conditions.

Principal Hubs can hire

expatriates based on their
busines s requirement s.
Expatriate staff will only
be taxed on the portion
of chargeable inc ome
attributable to the number of
days they are in Malaysia.

Principal Hubs will enjoy

flexibility in aspects such
as foreign exchange
administration in support
of business efficiency and
competitiveness of the
MNCs.

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To qualify for the incentives,

a Principal Hub must serve and
control network companies in
at least three countries outside
Malaysia, and carry out at
least three specified qualifying
services, of which one must
be strategic services. (see
Guideline 3.5 by MIDA)
WHY GREATER KL IS A
COMPELLING PRINCIPAL
HUB
1. Ease of Doing Business with
a Business-Friendly Ecosystem
The growing presence of MNCs
in Greater KL is a testament
to the areas thriving business
eco -system. This is made
up of the citys affordable
and
business-friendly
environment, good transport
and telecommunication
infrastructure, young and
educated workforce, ample
supply of talent, investor
protection, and a good quality of
living.
The World Bank Group
Report 2015 puts Malaysia 1st
among emerging economies
in East Asia for Ease of Doing
Business, while among 183
economies worldwide, its rating
in Doing Business 2015
improved to 18th from 20th.
The same report ranked
Malaysia 3 rd for Get ting
Credit, Investor Protection,
and Trading Across Borders
respectively in East Asia and the
Asia-Pacific region.
Greater KL is also a great
place to do business due to its
excellent air, road, rail connectivity
and world-class ports. It is home
to Port Klang, which is the 12th
busiest port in the world while the
countrys international airport,

KLIA, is Asias 10th busiest and

fastest growing.
To reduce business costs,
PEMUDAH the Special Task
Force to Facilitate Business
has shortened the time taken to
process applications for permits
and licences by cutting down on
bureaucracy. As a result, 405
or 52% of all licences have
been eliminated or simplified,
giving rise to an estimated
savings of US$227.8 million in
licensing costs.
2. Competitive Cost and
Attractive Tax Regime
The Global Competitiveness
Index (GCI) 2014-2015 ranks
Malaysia 20 th among 144
countries, 7th in terms of efficient
and competitive markets for
goods and services, and 4th for
a well developed and sound
financial market.
Rated 11 th in the GCI
for quali t y of tr an sp or t
infrastructure, Malaysia is also
ranked 21st for innovation factor
and 15th for sophistication factor
in the countrys private sectors.
MNCs will find that office
rental rates in Greater KL are
among the lowest in Southeast
Asia.
In its 2014 publication,
Greater KL: Striking the Right
Balance, KPMG said Greater
KLs monthly rental for prime
office space is about US$2.25
per sq ft, with rental cost per sq
ft in 2013 and 2014 being lower
than that in Singapore, Hong
Kong and Jakarta.
Malaysia also offers very
competitive tax incentives,
depending on type and scale
of activities, and has signed
72 Double Tax Agreements to
mitigate cross border taxation.

Greater KL is a highly vibrant and liveable city

3. Gateway to ASEAN and the

Asia-Pacific Region
Greater KLs strategic location
in the heart of ASEAN makes
it a natural gateway to the 630
million population and easy
access to other growing markets
such as China, India and the
Middle East. This potentially
offers MNCs opportunities to
access the regions increasing
affluent middle class market
with a GDP of US$ 2.4 trillion at
a growth rate of 5-7%.
We b e li eve t h a t t h e
combination of the enlarged
AEC market, Greater KLs appeal
as a competitive destination
and the attractive Principal
Hub incentives, offer MNCs a
compelling value proposition.
4. Wealth of Talent
Greater KLs well-educated
and highly skilled workforce
provides a stream of multilingual and multi-cultural talent
to MNCs regional operations
in the city. Named the second
most competitive global city

in Southeast Asia by the

Economist Intelligence Unit,
Greater KL is a magnet that
draws more than a third of the
countrys fresh graduates to the
area.
Ever y year, Greater KL
produces about 200,000
graduates from its 39 public and
private universities with degrees
in fields that include social
science, engineering, business
and finance, law, science and
mathematics, and computer
studies.
Talent in Greater KL is
also high proficient in English,
attested by Malaysias 11 th
placing in Education Firsts
English Proficiency Test 2014,
which is the best in Asia. The
country is also ranked as
the Most Talent-Competitive
Country in Asia by IMD World
Talent Report 2014.
5. A Vibrant and Highly
Liveable City
Greater KL is a vibrant, multicultural city that is recognised

as one of the worlds most

liveable cities. The area has an
abundance of dining and leisure
options, a thriving artistic scene
and a vibrant nightlife. Its wide
array of shopping malls and
vibrant retail scene have earned
CNNs vote as the fourth best
shopping city in the world.
Mercer ranks Greater KL
80 th among 200 countries in
its 2014 Quality of Living report
and 115th in its 2014 Cost of
Living report. These attest to
the fact that expatriates pay
packets can go a long way in the
capital city.
Greater KL also offers a
wide choice of accommodation
catering to different budgets,
ranging from studio and luxury
apar tments to houses in
guarded communities. It also has
excellent healthcare services,
20 international schools, 15
world-class golf courses, and
expatriate associations that help
newcomers and their families
settle in smoothly.
Going forward, several major
projects being planned under
the ETP are expected to make
Greater KL a cleaner, greener
and better-connected place to
live in over the coming years.
CONCLUSION
As the chair of ASEAN this year,
Malaysia is in a strong position
to take the lead in AEC-related
initiatives and leverage on
the potential of the enlarged
market. We hope MNCs will
take up this opportunity that the
Principal Hub incentives provide,
to grow their regional presence
in ASE AN with improved
operational efficiencies from
Greater KL.

73

INGENIEUR

GUIDELINES FOR
PRINCIPAL HUB INCENTIVE
By Malaysian Investment Development Authority

1. DEFINITION OF PRINCIPAL HUB

A locally incorporated company that uses
Malaysia as a base for conducting its regional
and global businesses and operations to
manage, control, and support its key functions
including management of risks, decision
making, strategic business activities, trading,
finance, management and human resource.
2. INCENTIVES FOR PRINCIPAL HUB
An approved Principal Hub company is eligible
for a 3-tiered corporate taxation rate as
follows:
3-tier
Incentive
Blocks
(years)
Tax rate

Tier 3
5

+5

Tier 2
5

10%

+5
5%

Tier 1
5

+5
0%

3. ELIGIBILITY CRITERIA FOR PRINCIPAL HUB

INCENTIVE
3.1 Local incorporation under the Companies
Act 1965
3.2 Paid-up capital of more than RM2.5
million.
3.3 Minimum annual sales of RM300 million
(Additional requirement for goods-based
applicant company).
3.4 Serves and control network companies in
at least three countries outside Malaysia

Network companies related companies
or any entity within the group including
subsidiaries, branches, joint ventures,
franchises or any other company related
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to applicants supply chain and business

with contractual agreements.
3.5 Carry out at least three qualifying
services, of which one of the qualifying
services must be from the strategic
services cluster as follows:
i. Strategic Services
a. Regional P&L/ Business Unit
Management
P&L Management focuses on
the growth of the company
with direct influence on how
company resources are allocated
- determining the regional/ global
direction, monitoring budget
expenditure and net income,
and ensuring every programme
generates a positive ROI
b. Strategic Business Planning and
Corporate Development
c. Corporate Finance Advisor y
Services
d. Brand Management
e. IP Management
f. Senior-level Talent Acquisition and
Management
ii. Business Services
a. Bid and Tender Management
b. Treasury and Fund Management
c. Re search, D evelopment &
Innovation
d. Project Management
e. Sales and Marketing
f. Business Development
g. Te c h n i c a l
Suppor t
and
Consultancy

3.6

3.7

3.8
3.9

4.0

h. Information Management and

Processing
i. Economic/ Investment Research
Analysis
j. Strategic Sourcing, Procurement
and Distribution
k. Logistics Services
iii. Shared Services
a. Corporate Training and Human
Resource Management
b. F i n a n c e
&
Accounting
(Transactions, Internal Audit)
c. General Administration
d. IT Services
Employment Requirement
i. Tier 3: 15 high value jobs, including
three key strategic/management
positions
ii. Tier 2: 30 high value jobs, including
four key strategic/management
positions
iii. Tier 1: 50 high value jobs, including
five key strategic/management
positions
Minimum monthly salary for high
value jobs is at least RM5,000
Minimum monthly salary of key
strategic/management positions
is at least RM25,000
Definition of High Value Jobs
Jobs that require higher and
more diverse set of managerial/
technical/ profe s sional skills
such as management, analytics,
communication, problem-solving, and
proficiency in information technology
iv. At least 50% of the high value jobs
must be Malaysian by end of year
three.
Annual Business Spending
i. Tier 3: RM 3 million
ii. Tier 2: RM 5 million
iii. Tier 1: RM10 million
Must have HR training and development
plan for Malaysians.
The applicant should be the planning,
control and reporting centre for the
qualifying services.
Malaysian-owned and incorporated

businesses are encouraged to provide

headquarters-related services and
expertise to their overseas companies.
4.1 Significant use of Malaysias banking
and financial services and other
ancillary services and facilities (e.g
trade and logistics services, legal and
arbitration services, finance and treasury
services).
4.2 Income tax exemption threshold received
from services/goods-based company
inside and outside of Malaysia is based
on the ratio of 30:70 (inside:outside).

Note: Each tier (Tier 1 Tier 3) can be
considered for an extension up to five
years within the tiers subject to fulfilling
the above criteria and:
a. Jobs: 20% incremental of the base
commitment; and
b. Business spending: 30% incremental
of the base commitment
5. FACILITIES ACCORDED TO PRINCIPAL HUB
An approved Principal Hub company will enjoy
the following facilities:
5.1 Bring in raw materials, components or
finished products with customs duty
exemption into free industrial zones,
LMW, free commercial zones and
bonded warehouses for production or
re-packaging, cargo consolidation
and integration before distribution to its
final consumers for goods-based
companies.
5.2 No local equity/ownership condition.
5.3 Expatriate posts based on requirements
of applicants business plan subject to
current policy on expatriates.
5.4 Use foreign professional services only
when locally-owned services are not
available.
5.5 A foreign-owned company is allowed to
acquire fixed assets so long as it is for the
purpose of carrying out the operations of
its business plan.
5.6 Foreign E xchange Administration
flexibilities will be accorded in support of
business efficiency and competitiveness
of companies under the Principal Hub.

75

INGENIEUR
3-tier Incentive

Tier 3

Blocks

High Value job by end of year 3 with

minimum monthly salary of RM5,000.00

15

High Value Jobs

Jobs that require higher and more
diverse set of managerial/ technical/
professional skills such as management,
analytics, communication, problemsolving, and proficiency in information
technology

Tier 2
+5

Jobs:
base
commitment
+20%

30

Tier 1
+5

Jobs:
base
commitment
+20%

5
50

+5
Jobs: base
commitment
+20%

At least 50% must be Malaysians by end

of year 3
Including key positions
- Minimum monthly salary of
RM25,000.00

Annual Business Spending

RM3M

Qualifying Services

Strategic + 2

Regional P&L + 2

Regional P&L + 2

Minimum Serving / Business Control of

no. of countries

Use of local Ancillary Services

Local Financial Institution Services (including finance and treasury),

logistics, legal and arbitration services, finance and treasury services)

Trading of Goods Annual Sales Turnover

(Additional requirement for goods-based
applicant company)

RM300 Million

4
Buss.
Spending:
Base
Commitment
+30%

6. MECHANISM
6.1 Incentives to be provided under section
127(3) (b) the Income Tax Act, 1967
and approved through the National
Committee on Investment (NCI).
6.2 Commitments on annual business
spending and high value jobs creation
will be given flexibilities to comply by
end of Year 3 of first block under each
tier. Failing to do so claw back on tax will
be taken from Year 1. This relaxation
is not applicable for existing company
who already enjoyed IPC/RDC/OHQ
incentives.
6.3 Company must submit yearly report to
MIDA for evaluation of performance.
Failing to do so, the incentive will be
withdrawn.
6.4 For existing companies that have
completed IPC, OHQ or RDC incentive
can be considered the Principal Hub
incentive by complying the criteria of Tier
1 for a maximum incentive period of five
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RM5M

Buss.
Spending:
Base
Commitment
+30%

RM10M

Buss.
Spending:
Base
Commitment
+30%

years with corporate tax rate of 10%.

Consideration is subject to the following
commitment under Tier 1.
20% incremental commitment of the
existing employment; and
30% incremental commitment of the
existing business spending.
7. EFFECTIVE DATE OF APPLICATION
7.1 New applications received by Malaysian
Investment Development Authority
(MIDA) from May 1, 2015 until April 30,
2018 is eligible to be considered for this
incentive.
7.2 Application for the extension of the
incentive period must be submitted to
MIDA six months before the expiry of the
initial incentive period.
7.3 The extended incentive period shall
begin from the date following the end of
the initial incentive period and continue
for a period of five years.

By Chan Fong Li
Photos courtesy of Zhu Tao, Zhaoxian County
Government, Hebei, China

The Zhaozhou Bridge in the Hebei Province of China was built during
the Sui Dynasty (AD 581-618). It is reputed to be the world oldest
single-span arch stone bridge which is still in use today. Built in the
Zhaoxian country of Hebei between AD 595 and 605, the bridge
was an important link between the northern and southern regions
of the Jiaohe River especially during flood seasons that were rather
frequent in those days.
It was designed and built by a craftsman, Li Chun. The bridge has
stood the test of time, wars, earthquakes, floods and traffic for nearly
1,400 years. In 1991, it was elected by the American Society of
Civil Engineers as the 12th International Civil Engineering Historical
Monument and given a memorial brand. It was designated by the
state as the provincial education base for patriotism in 1999.
The Zhaozhou Bridge is about 50.82m long with a central
span of 37.02m. It stands 7.23m tall and has a width of 9m in the

An imposing, solid and

magnificent view of the
Zhaozhou stone arch bridge
that sits in harmony with its
scenic surroundings and the
water ways.

77

ENGINEERING FEATURES

1400-year old Stone Arch

Zhaozhou Bridge, Hebei, China

INGENIEUR
Side view of the stone arch
bridge with the four smaller
arches that serve to reduce
the load and to allow more
sectional flow of water during a
flood season.

center and extends up to 9.6m

on both ends of the bridge.
The arch resembles a circular
segment with a radius of 27m
where the rise-to-span ratio is
about 0.197 and arch length to
span ratio is 1.1. These ratios
are comparatively small when
compared with the semi-circular
arch ratio of 0.5 and 1.57
respectively. Such a reduction
in ratio translates into savings in
materials and hence a reduction
in the load that the bridge exerts
on the supporting abutments on
both sides of the river. Li Chuns
ability to locate the rock base
of the river bank to support
the 2,800 tons stone bridge is
both a marvel and a mystery.
According to the records, the
abutments have only settled
about 5cm during the 1400
years since it was built.
There are four side arches
that serve to reduce the weight
of the structure. When the
water level reaches the top of
the bridge deck during a flood,
the four arches allow a greater
volume of discharge as well as
reducing the impact of the water
on the bridge.
The central arch was
constructed with 28 thin,
curved arch segments made
of limestone slabs which are
joined with iron dovetails. Five
iron rods go through the 28
arch segments to hold them
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together and form the main

spandrel arch. Dozens of
dovetails join the segments in
a tight and integrated manner.
The combined arches provide
an integrated structure in
sustaining the loads through an
even and effective distribution
of forc e s . This ef f icient
interlocking of forces prevents
the collapse of the structure
when one segment of the arch
is broken. It thus makes it
easy to repair the arch since
the individual segment can be
easily replaced.
The bridge floor is smooth
and flat with passages for
pedestrians on both sides,
while carriages and carts can
move along the middle. The
apex of the bridge is fairly high
to allow the boats to pass
through with ease. The bridge
is ingeniously designed with a
well-proportioned layout, solid
structure and a magnificent
appearance.
Guard slabs on either side
of the bridge are engraved with
delicate patterns of dragons,
which are a symbol of water
god in the Chinese culture. The
design of this arch bridge has
influenced the construction of
bridges in other parts of China.
The Zhaozhou Bridge is
an hours drive away from
Shijiazhuang, Hebei provincial
capital.

The plaque with inscription

of American Society of Civil
Engineering as the 12th
International Civil Engineering
Historical Monument endorsed
on September 4, 1991.

Statue of Li Chun : A true

craftsman 1,400 years ago
with the ability to design and
construct a 38m stone arch
bridge with the well engineered
abutment support and even
distribution of loads through
several stone arch segments
linked with wires that stood
the test of time, flood and
earthquakes.

79

ENGINEERING NOSTALGIA

INGENIEUR

RAJA LAUT ROAD 1967

By Cheo Hong Keyong

The old Raja Laut Road Kuala Lumpur was officially

opened by Tan Sri Sambanthan on March 6, 1967.
The surrounding was relatively undeveloped as the
business district then was centered around Jalan
Petaling and the Pudu area. The public flats in the
background were demolished to make way for new
development. The road was constructed with PWD
Departments heavy plants and operators as seen
in the background.

Photo courtesy of Jabatan Penerangan

What was
once an open
area is now a
busy district with
heav y traf fic
and a hive of
commercial
activities.

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Photos of Raja Laut Road taken in 2014.

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