3 June 2008
PETALING JAYA: The Government is lifting the ceiling price on cement effective Thursday to ensure development projects in the country are not delayed due to the tight cement supply.
Prime Minister Datuk Seri Abdullah Ahmad Badawi said in a statement yesterday the move was necessary as global cement prices had risen above the government-controlled price.
Under the new structure, cement importers will only have to pay a flat rate of 10% import duty for ordinary Portland cement (HS 2523 29 900) and hydraulic cement (2523 90 000), which currently carry a 50% and 25% duty respectively. The import duty discount is only applicable to these two types of cement. Moreover, cement importers from Sabah and Sarawak would be exempted from having to obtain import licences.
An Aseambankers analyst said the easing of cement import would create competitive pricing among local players. "However, cement importers will have to consider other expenses such as handling charges in transportation. For example, cement from Thailand will need to be transported across the border by lorry to construction sites. This can be a hefty expense," said the analyst. He said contractors working on public jobs could pay for the transport cost but the situation could be difficult for private jobs.
Another local analyst said the lowering of cement import duty would help reduce cost and benefit the industry players. "Cement prices have increased 30% to 40% in past three to four years. The lowering of import tax on cement will overall be good for the local construction industry and help sustain cement supply as there are only five major players in the market," he said.
Lafarge Malayan Cement Bhd chief executive officer and president Bi Yong Chungunco said in the past, the industry had absorbed hefty production cost increases. She said the industry had been in constant dialogue with the Government on the implementation of the automatic pricing mechanism as an interim measure prior to liberalisation. Instead, "the Government has opted to accelerate the process of liberalisation. Liberalisation will be good for the industry," she said. However, Chungunco noted that it was important to ensure that the quality of cement, whether locally manufactured or imported, should conform to Malaysian standards.
Mah Sing Group Bhd group managing director and group chief executive Datuk Seri Leong Hoy Kum said scraping the ceiling price would ensure a fairer and more competitive environment for cement producers and users. "As a developer, the lifting of the cap on cement price benefits us as our contractors will have steady cement supply and will be able to import raw materials from regional producers should domestic supply be insufficient to meet demand," he said.