ECONOMIC FLUCTUATIONS AND PRODUCTIVITY IN THE MALAYSIAN CONSTRUCTION SECTOR Chia Fah Choy B App Sc (Hons), MSc Submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Faculty of Built Environment and Engineering Queensland University of Technology February 2011 Table of Contents Table of Contents ..................................................................................................................................... i Abstract .................................................................................................................................................. ix Keywords ................................................................................................................................................ xi List of Figures ....................................................................................................................................... xiii List of Tables .......................................................................................................................................... xv List of Abbreviations ............................................................................................................................ xvii Statement of Original Authorship ........................................................................................................ xix Acknowledgments ................................................................................................................................ xxi CHAPTER 1: INTRODUCTION........................................................................................................ 1 1.1 Background .................................................................................................................................. 1 1.2 Context ......................................................................................................................................... 1 1.3 Purposes....................................................................................................................................... 6 1.4 Scope and limitation .................................................................................................................... 7 1.5 Research Methodology ................................................................................................................ 7 1.6 Thesis outline ............................................................................................................................... 8 CHAPTER 2: MALAYSIAN ECONOMIC DEVELOPMENT AND THE CONSTRUCTION SECTOR .......... 11 2.1 Introduction ............................................................................................................................... 11 2.2 Economic Development in Malaysia .......................................................................................... 11 2.2.1 The economic status during 1960-1980 ......................................................................... 13 2.2.2 The economic status 1981-2000 ..................................................................................... 14 2.2.3 The economic status 2000-2010 ..................................................................................... 24 2.3 Productivity and efficiency......................................................................................................... 25 2.4 Malaysian construction sector ................................................................................................... 29 2.5 Construction sector and economic development ...................................................................... 37 2.6 Summary .................................................................................................................................... 39 CHAPTER 3: PRODUCTIVITY ....................................................................................................... 43 Economic Fluctuations and Productivity in the Malaysian Construction Sector i 3.1 Introduction ............................................................................................................................... 43 3.2 Concept and definitions ............................................................................................................. 43 3.2.1 Productivity .................................................................................................................... 43 3.2.2 Efficiency......................................................................................................................... 44 3.2.3 Effectiveness ................................................................................................................... 46 3.2.4 The triple-P model .......................................................................................................... 47 3.3 Productivity measures ............................................................................................................... 47 3.3.1 Single–factor productivity measures .............................................................................. 49 3.3.2 Multi–factor productivity measures ............................................................................... 54 3.3.3 Total-factor productivity ................................................................................................. 56 3.3.4 Relative productive efficiency ........................................................................................ 58 3.4 Gross output or value-added productivity measures? .............................................................. 61 3.4.1 Gross output ................................................................................................................... 61 3.4.2 Value-added ................................................................................................................... 63 3.5 Objectives of productivity measurement .................................................................................. 65 3.6 Problems of productivity measures ........................................................................................... 66 3.7 Summary .................................................................................................................................... 69 CHAPTER 4: PRODUCTIVITY OF THE CONSTRUCTION SECTOR .................................................... 71 4.1 Introduction ............................................................................................................................... 71 4.2 Determinants of construction productivity ............................................................................... 71 4.3 Nature of the industry ............................................................................................................... 72 4.3.1 the structure of the industry .......................................................................................... 72 4.3.2 Construction process ...................................................................................................... 74 4.3.3 Market structure ............................................................................................................ 80 4.4 Nature of work ........................................................................................................................... 89 4.4.1 Labour intensive ............................................................................................................. 90 4.4.2 Capital intensity .............................................................................................................. 92 4.4.3 Technological progress ................................................................................................... 95 4.4.4 Occupational safety and health .................................................................................... 107 ii Economic Fluctuations and Productivity in the Malaysian Construction Sector 4.5 The nature of environment ...................................................................................................... 109 4.5.1 Business cycles .............................................................................................................. 109 4.5.2 Government Regulations .............................................................................................. 113 4.5.3 Weather ........................................................................................................................ 119 4.6 Problems associated with the measurement of construction productivity ............................. 120 4.7 Productivity improvements ..................................................................................................... 122 4.8 Summary .................................................................................................................................. 126 CHAPTER 5: METHODOLOGY ................................................................................................... 129 5.1 Introduction ............................................................................................................................. 129 5.2 Types of research ..................................................................................................................... 129 5.3 Research Design ....................................................................................................................... 130 5.3.1 Philosophical worldviews.............................................................................................