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Malaysia’s construction sector is looking to Budget 2027 for a possible increase in transport spending, but no 2027 allocation had been announced in reporting dated 6 October 2026. RHB Investment Bank’s view is that higher funding could support new contract awards and replenish contractors’ order books; a lower-than-expected allocation would weaken that outlook.
Why transport spending matters to contractors
Transport projects can translate public development spending into tenders and construction contracts. RHB’s pre-budget thesis is that a higher 2027 transport allocation could create a stronger pipeline of awards for contractors. The link is not automatic: funding expectations are a catalyst, while the timing and value of actual contracts depend on project decisions and procurement.
For context, RHB said RM17.6 billion, or 21.6% of the RM81 billion initially budgeted for 2026 gross development expenditure, was allocated to the transport subsector. That is a 2026 baseline, not a forecast or allocation for 2027. Bernama reported RHB’s figures on 6 October 2026.
What a higher or lower allocation could mean
| Scenario | Potential effect on awards and order books | What it does not establish |
|---|---|---|
| Higher than expected | Could support a larger pipeline of transport tenders and improve the prospect of order-book replenishment for contractors positioned to win the work. | It does not confirm that specific projects will proceed, when they will be tendered, or which companies will secure them. |
| Lower than expected | Would weaken the spending catalyst underpinning RHB’s outlook and could limit the scope for transport-related awards. | It does not by itself show that every contractor’s order book will shrink; outcomes depend on each company’s other projects and awards. |
These are scenario implications of RHB’s reported sector thesis, not company-by-company forecasts. The distinction for contractors and investors is between budget room, a project entering procurement, and a contract actually awarded.
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Which projects could add to the pipeline?
RHB expected development expenditure to increase in the second half of 2026, consistent with historical spending patterns. Its report pointed to possible late-year opportunities including Segment 2 of the Penang LRT and potential new government hospitals, including Bandar Enstek Hospital in Negeri Sembilan. These were prospective opportunities in the reporting, not confirmed awards.
RHB also noted that RM32.5 billion in net development expenditure had been spent in the first half of 2026, against RM81 billion initially budgeted in gross development expenditure for the full year. These are different accounting measures and periods: the first figure is net spending during six months; the second is the initial gross annual budget. They should not be read as directly comparable portions of the same measure. Bernama’s 6 October report attributes both figures to RHB Investment Bank.
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Labor and materials remain important risks
Wages and a possible foreign-worker levy
RHB considered a potential increase in the minimum wage to RM2,000 manageable, citing Construction Industry Development Board data for Selangor: RM100 per day for a general construction worker, excluding overtime, or roughly RM2,400 per month on a six-day workweek. The daily and monthly figures are an attributed benchmark, not a wage estimate for every region, trade, or contractor.
Separately, RHB’s preliminary assessment was that a possible multi-tier foreign-worker levy could affect earnings by less than 1% at Kerjaya Prospek and Sunway Construction. That estimate applies only to those two companies as assessed by RHB; it should not be generalized to the wider contractor market. BusinessToday reported the estimate on 6 October 2026.
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Variation of Price for bitumen and industrial diesel
Contractors have called for broader Variation of Price (VOP) provisions on fixed-price work to help address changing input costs. RHB reported that the government was evaluating a VOP condition for bitumen and industrial diesel, with deliberation by the National Economic Action Council expected. The report did not say the condition had been approved or implemented. Any such relief would be particularly relevant to piling and other fuel- or material-intensive work.
RHB’s sector stance and named stocks
RHB’s reported stance on the construction sector was overweight, and it named Gamuda Bhd, Sunway Construction Group Bhd and Kerjaya Prospek Group Bhd as its top picks. These are the bank’s analyst views, not independent recommendations or a guarantee that the companies will benefit. The potential spending catalyst does not establish future share performance or project wins. BusinessToday reported RHB’s stance and picks on 6 October 2026.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Budget 2027 context and timing
Malaysia’s Ministry of Finance describes Budget 2027 as the fifth MADANI Budget and the second budget under the Thirteenth Malaysia Plan. Its stated priorities are raising the ceiling for national growth, raising the floor for living standards and driving governance reform. Those priorities frame the budget, but do not specify a transport allocation. The Ministry of Finance’s Pre-Budget Statement 2027 was published on 18 August 2026.
At the time of the 6 October reporting, Budget 2027 was scheduled to be tabled on 9 October 2026 at 3:30 pm, according to Bernama. Until the budget documents confirm the amount, higher transport spending remains a possibility rather than an announced outcome.
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