Green Building Developments and Opportunities: Malaysia

Both the public and private sectors in Malaysia have started to adopt green building practices in recent years, partly to reap the benefit of lower energy costs but also because of the growing concern about the impact of the indoor environment on health. Green buildings are designed to save energy and resources, recycle materials and minimise the emission of pollutants[1]. The government has helped to encourage the spread of green buildings through fiscal incentives, and now increasing numbers of property developers and building owners are beginning to look for energy-saving solutions. The rising awareness of the benefits of green building in Malaysia represents a good opportunity for Hong Kong companies in related products and services, such as energy-saving technologies, consultancy and architectural services.

Strong Impetus for Building Green

The Malaysian government plays a key role in boosting the demand for green building solutions. In a bid to mitigate pollution problems and improve energy efficiency, the government has implemented an array of green buildings initiatives over the past decade, most notably the energy audit on government buildings, green tax incentives and the Green Building Index (GBI). The GBI is the country’s first green building rating tool and has become well-recognised by the Malaysian construction industry, property developers and building owners, thanks to the tax deductions available for green building projects and obtaining the GBI certificate. It is estimated that at present about 80% of new buildings in Malaysia are GBI certified.

GBI-certified buildings can achieve energy savings of at least 30% compared with a conventional building. Attracted by the savings in utility bills, growing numbers of building owners are refurbishing or upgrading their buildings to qualify for GBI certification. Currently about 15% of existing buildings – as opposed to new buildings – have been certified. The presence of tax incentives for green building projects and the growing pressure on businesses to enhance their corporate branding is likely to lead to more existing commercial properties being retrofitted as a green building in order to obtain GBI certification. Hong Kong green building companies looking to take advantage of rising demand in Malaysia should refer to the GBI rating system when looking to provide suitable solutions for the local market.

Solar Energy – the Hot Green Building Trend

Installing solar panels is one of the most popular green building activities in Malaysia. As it is in the Global Sunbelt region with year-round sunshine, Malaysia is highly suitable for solar energy generation. Solar energy accounts for more than 60% of Malaysia’s installed renewable energy capacity. The Malaysian government is aiming to increase the share of renewable energy in the country’s electricity generation mix from the current 5% to 20% by 2025. As a result, the deployment of solar energy is expected to expand significantly in coming years, which represents great potential for Hong Kong companies providing solar energy engineering, consulting and project design services.

Two fiscal incentives implemented in January 2019 have made it even more financially viable to install solar panels. Firstly, under the Supply Agreement for Renewable Energy (SARE) programme, residential, commercial and industrial users can enter a leasing agreement with a solar panel provider who will install and maintain the solar systems - an arrangement which removes the upfront cost barrier. Secondly, under the Net Energy Metering (NEM) scheme, any excess energy generated from solar panels can now be sold to the national electricity grid for credits which are offset against electricity consumed.

The Malaysian renewable energy industry is open for foreign participation. However, there are restrictions on management consulting services relating to non-conventional energy, covering advisory and operational assistance services. Hong Kong services providers who want to enter the Malaysian market can form a locally incorporated joint venture with Malaysian individuals or Malaysian controlled corporations, with a minimum 30% shareholding for the Bumiputera (Indigenous Malays) in the joint venture. When searching for a local partner, the Malaysian Photovoltaic Industry Association (MPIA) is an ideal first point of contact. MPIA is a non-profit organisation with more than 100 members, including manufacturers, subcontractors, equipment suppliers and consultants across the country.

Gaining Recognition for Green Products and Services

​Hong Kong companies may be able to find an edge in the Malaysian market by providing new products and services which are not currently available in Malaysia, while offering a price-competitive advantage. There is a plenty of room in Malaysia to adopt new green building technologies, such as rainwater harvesting systems for electricity generation, hydro-power devices and fibre optic solar lighting systems, which are still at an infant stage of development.

Hong Kong green product suppliers can partner with a Malaysian distributor to register for the MyHIJAU Mark, an official green certification endorsed by the government[2]. The MyHIJAU Mark scheme accepts other green certification schemes registered with Global Ecolabelling Network (GEN), including the Hong Kong Green Label Scheme. In order to obtain a MyHIJAU Mark, Hong Kong service providers are required to form a locally incorporated company, which employs at least one manager with recognised qualifications for providing green technology services/systems.

Certified green products and services are listed in the MyHIJAU Directory, which is an online reference for green procurement for both the private and public sectors, as well as being an ideal marketing platform for green businesses. At the end of 2019, there were 387 companies with more than 5,100 products and services certified with the MyHIJAU Mark. About 15% were related to the building sector.

Another advantage of getting the MyHIJAU Mark certification is that it qualifies companies for tax benefits. To encourage the supply and demand of green technology and services, the government provides tax incentives for companies that acquire green technology assets or undertake projects related to green building, renewable energy, energy efficiency, green data centre and waste management. Green technology service providers can also enjoy an income tax exemption of 70% until 2023[3].

[1] For more details, please refer to Green Building in ASEAN: The Opportunities for Hong Kong.

[2] For details, please refer to: MyHIJAU Registration

[3] For details, please refer to Malaysia Sustainable Energy Development Authority.