By WU VUIDE
KOTA KINABALU: The Sabah Builders Association (SBA) is appealing to the Federal Government to defer implementation of the new diesel subsidy policy for Sabah and Sarawak until global material prices stabilise.
Its president, Paul Luk, warned that continued cost escalation could delay or suspend major projects, including the Pan Borneo Highway, due to financial constraints faced by contractors.
He said disruptions to construction activities would not only affect project delivery but could also lead to job losses and weaken Sabah’s economic growth.
Luk made the call following the Federal Government’s decision to implement changes to the diesel subsidy mechanism in Sabah and Sarawak, effective July 1, 2026.
“Sabah’s economy is already lagging behind many other states in Malaysia.
“Any disruption to the construction sector, which is a key driver of economic activity and employment, will only widen the development gap and adversely affect the livelihoods of thousands of Sabahans,” he said.
SBA said it remains committed to working with the government and stakeholders to identify practical solutions that balance fiscal objectives with industry sustainability.
Luk said the new targeted subsidy policy was introduced with short notice and without sufficient consideration of challenges faced by small and medium-sized enterprises (SMEs) in the construction sector.
“The industry is already struggling with the sharp increase in construction material prices arising from ongoing geopolitical tensions and the US-Iran conflict.
“Most construction contracts are based on fixed-price arrangements, leaving contractors with very limited ability to absorb further cost increases,” he said.
SBA noted that the targeted subsidy mechanism excludes tipper lorries and ready-mixed concrete trucks, which is expected to result in higher transportation costs and increased prices of earthworks, quarry operations, aggregates, concrete and other related materials.
It said the additional cost burden comes at a time when many contractors are already fighting for survival.
“The implementation of the new diesel subsidy policy under current economic circumstances will place further strain on the industry and may jeopardise the viability of ongoing projects,” Luk said.
Luk urged the government to defer the new diesel subsidy mechanism.
