Credit: Original article can be found here
The Construction Industry Development Board of Malaysia (‘CIDB’) recently issued two Circulars setting out new contractor registration requirements for foreign contractors. These new requirements took effect from 1 February 2023.
Foreign Contractor Government Employment Certificate
Pursuant to CIDB Circular No. 1 / 2023, foreign contractors that intend to participate in government works tenders are required to register for and obtain:
i. Foreign Contractor Registration, as discussed below; and
ii. Foreign Contractor Government Employment Certificate (‘SPKKA’).
Which Foreign Contractors are Eligible?
It is pertinent to note that a SPKKA will only be issued to foreign contractors from countries that have signed and ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (‘CPTPP’). As such, only foreign contractors from Australia, Canada, Chile, Japan, Mexico, Peru, New Zealand, Singapore and Vietnam will be eligible to apply for the SPKKA. Foreign contractors from Brunei Darussalam are presently ineligible to apply for a SPKKA as their country has yet to ratify the agreement.
Registration Requirements for SPKKA
In applying for a SPKKA, the foreign contractor must meet the following requirements:
- Has a valid Foreign Contractor Registration and is not presently subject to any disciplinary action by CIDB.
- Their shareholders must not have more than 5% equity in any other company that has a valid SPKKA or a Local Contractor Government Employment Certificate (‘SPKK’).
- Their directors must not be involved in any other company that has a valid SPKKA or a SPKK.
- The technical personnel/ competent person/ person named in the SPKKA are not involved in any other company that has a valid SPKKA or a SPKK.
- Has a valid CIDB SCORE (Contractor Competency and Capability Rating) with a minimum of three stars.
- There must be at least one Malaysian citizen named as the company representative(s) in the SPKKA.
- Has a valid Contractor’s Quality Management System (CMQS) or ISO 9001:2008/2015 certification.
The above requirements are largely similar to the requirements for local contractors to obtain a SPKK.
The SPKKA is an entirely new registration introduced by CIDB. Previously, in order to participate in government works tenders, a company would need to have a SPKK. However, as one of the requirements to obtain a SPKK was to have a valid Local Contractor Registration, this precluded foreign contractors from participating on their own in such tenders. They would instead have to collaborate with or enter into a joint venture with a local company that had a SPKK. However, with CPTPP coming into force for Malaysia on 29 November 2022, this has now changed. The Malaysian Government has issued Treasury Circular 1.3, which sets out their obligations as a participating country to the CPTPP with respect to government procurement. This includes ensuring contractors of participating countries receive equal treatment and that there are no foreign equity policies imposed on such contractors. Accordingly, CIDB’s previous requirements with regards the SPKK would have had to be amended in order to be consistent with these obligations under the CPTPP.
Foreign Contractor Registration
Aside from the SPKKA, CIDB has also revised their requirements for the Foreign Contractor Registration. Pursuant to Circular No. 2/2023, any foreign contractor that intends to carry out and complete, or undertake to carry out and complete, any construction works or hold themselves out as a contractor in Malaysia are required to obtain a Foreign Contractor Registration without the need to first have been awarded a project.
This is a significant change from the previous CIDB contractor registration requirement, whereby a foreign contractor is required to obtain two different types of registrations:
i. Provisional Foreign Contractor Registration, for participation in tenders; and
ii. Foreign Contractor Registration, which was issued on project-to-project basis.
In effect, this change aligns the Foreign Contractor Registration with the Local Contractor Registration – all contractors will now need to be registered with CIDB first if they intend to be involved in any construction works in Malaysia. Upon award of a project, they will then submit the relevant project declaration to CIDB for assessment of levy.
It is also worth highlighting that a Foreign Contractor Registration will now have a fixed validity period. Under the previous CIDB contractor registration regime, the validity of each Foreign Contractor Registration held by a company would vary based on the duration of each project that was the subject of such registration. This new requirement now takes away the need for a foreign contractor to register with CIDB for each and every project it is awarded.
New Registration Requirements for Foreign Contractor Registration
The existing registration requirements for foreign contractors largely remain. CIDB has introduced the following new requirements:
- Category and specialisation of the foreign contractor to be identified.
- Annual fee of RM1,400. This is lower than the previous Foreign Contractor Registration fee of RM5,000 per registration.
- Valid CIDB SCORE (Contractor Competency and Capability Rating).
- Requirement to obtain Continuous Contractor Development (CCD) points for renewal purposes.
- Requirement to attend Integrity and Construction Law in Malaysia course for renewal purposes.
Most of the above requirements are reflective of the requirements for Local Contractor Registration.
The changes introduced by CIDB for foreign contractor registration requirements will certainly be well received by foreign contractors, especially those from the nine countries (excluding Malaysia) that have signed and ratified the CPTPP. It has often been said that the previous regime caused extra procedural and administrative work for foreign contractors and the requirements were not easy to understand. This made their entry into the Malaysian construction market difficult and less attractive.
CIDB has in their announcement of the Circulars informed that these changes are part of their restructuring of foreign contractor registrations. It is possible that there may be more changes to come, and it will be interesting to see any further initiatives by CIDB to encourage the growth and progress of the construction industry in Malaysia.